Rock County Bank v. Wooliscroft

By the Court, Cole, J.: We think the answer was sufficient to admit the proof offered, showing that the note sued on was usurious and void. It appeal’s from the evidence that there was a succession of notes, given as they became due, the last one of which was the one sued on; but we are inclined to the opinion, that it was not necessary to state all these matters in the answer. It is alleged with precision and directness, that this note is usurious, and the corrupt agreement which entere d into the original usurious no1e, is fully disclosed. It is stated that the bank agreed to forbear the payment of the note of Smith given on the 4th of June, 1857, upon which the respondent had become liable as indorser, upon condition that he should obtain another note from Smith for a like amount, payable in thirty days, and indorse the same, and pay for such forbearance the sum of nineteen dollars and fifty cents; and that the note sued on was given to take up the last mentioned note, and for no other consideration. The proof showed, it is true, that the note sued on was the last of several notes given [27] by tbe respondent in renewal of tbe one wbicb he gave for tbe Smith note, and which he had transferred by his usurious in-dorsement. But still we think it was not necessary to state in the answer, the giving of all the intermediate notes, in order to render the defense of usury available. That the contract of indorsement was usurious, does not admit of a doubt. The evidence upon this point is clear and un-contradicted. The bank exacted nineteen dollars and fifty cents upon the loan of six hundred dollars for thirty days. This is far in excess of the rate of interest which the bank was permitted to take. It appears that a portion of this sum was for the premium on exchange on New York. But even admitting that the bank had a right to demand, as a condition of the loan, exchange on New York and legal interest, still the evidence shows, that a considerable amount above interest and premium was exacted and taken. It does not appear that any of the notes were made payable in New York';'and demanding premium on that city in addition to the legal interest, was undoubtedly a device resorted to for obtaining usury. In Towslee v. Durkee, 12 Wis., 480, such a transaction is held to be usurious. But even if the premium were not exacted as a cover for usury, and it was lawful to take it, still it appears that the bank demanded and received five dollars more than legal interest and premium united. So that there can be no doubt that the contract of indorsement was usurious and void. Cowles v. McVickar, 3 Wis., 725. In that case it was expressly decided, that when a person transfers a note for a sum less than its face and legal interest, and endorses or otherwise becomes liable for its payment, it is a transaction by which the indorsee gets more than the legal rate of interest, and is therefore, as betiveen the immediate parties to the contract of indorsement, usurious. This doctrine appears to be fully sustained by the cases which Justice Smith cites in his opinion. It is likewise held that a note may be sold in the market for less than its value, and may be indorsed so as to pass the title, with im [28] punity. But when the note is indorsed by the payee in the usual manner, in consideration of a sum paid or advanced by the indorsee, the transaction is essentially a loan, and exacting a higher premium than the legal rate of interest, renders the contract void for usury. It is suggested that the original note given by Smith, was valid in the bands of the payee and in-dorser, and therefore could not be rendered void by any corrupt contract of indorsement. Whether the bank could recover against the maker, Smith, the full face of the note, it is not necessary to decide. The action is riot against the. maker, but against the indorser, with whom the corrupt and illegal agreement was made. It was argued that the respondent gave bis note for that of Smith, and that this transaction was in the nature of a sale or exchange of securities. We are unable to concur in this view of the matter. The first note given by the respondent, was to take up the Smith note which be bad transferred by bis usurious indorsement. This note be renewed from time to time as it became due. But the taint of usury in the original agreement is carried forward and enters into all subsequent securities taken for the same debt Steele v. Whipple, 21 Wend., 103; Bell v. Lent, 24 id., 230; Reed v. Smith, 9 Cowen, 647. Upon tbe whole case we are clear that the judgment of tbe circuit court is right, and must be affirmed.