Mechanics' Bank of Williamsburgh v. Foster

It is very clear that if the defendants had set up the defence of usury in the answer, they would have succeeded ip their defence.. The note was made for the accommodation of one of the defendants, and was sold by him at an usurious rate of interest. It was, therefore, clearly void for usury, not only in the hands of Furman, but of any other subsequent holder. But as the defendant has not pleaded this mattter as a defence, it is equally clear that he cannot now defeat the plaintiffs’ recovery for this cause. The defence now relied on is, . that the note, so far as it purports to be made by the firm, is an accommodation note, or rather a note without consideration, and that the plaintiffs are not bona fide holders without notice, and, therefore, cannot recover. It can hardly be said that the note, in any sense, is an accommodation note. If it was issued for the purpose of raising money for S. H. Foster, then, although the other member of the firm might not be liable, still he would be if the note was bought by Furman, and would be, as to that defendant, free from any defence except that of usury. And as to Charles W. Foster, he would not be liable on it unless it was passed to a bona fide holder, who paid value for it, without notice of the facts under which it’was made, or under circumstances which warranted the belief that it was used for the purpose of raising money for the firm.

It is not necessary for us to decide whether Furman was or was not a bona fide holder. If he knew when he took the note, of the circumstances under which it was put in circulation, he might be considered as the immediate usurious purchaser, and he would not come into possession of the note in the fair course of trade. His purchase with knowledge, of such facts, might not be bona fide. (Rams- dell agt. Morgan, 16 Wend. 515 ; Keutgen agt. Parks, 2 Sandf. 60 .)

The usury, if there was any, was in the first purchase by Furman from Nelson, and that usury would taint the note

But the plaintiffs are not in the same condition, and do .not stand in the same relation to the defendants. They had no knowledge that the note was sold for the benefit of the defendants, or either of them, and they cannot be charged with any usurious intent. The sale of a note by a stranger to the plaintiff, at a sum less than it would have been if only legal interest was deducted, was no't necessarily usurious. The note had previously been put in circulation. The presumption was that it was issued for value. If the original sale to Furman had been free from usury, the subsequent sale to the plaintiff, although at a less sum, would not be an usurious transaction. After the note has thus passed into circulation, usury cannot be predicated upon the dealings in regard to it by subsequent holders. It is only necessary to defeat the charge of usury, to show in the first sale the payment of the whole sum except the "legal discount: Transactions in regard to the same paper, between the party to whom it was first sold and a subsequent purchaser, cannot be the subject of usury to excuse the makers from payment.

The plaintiffs had a right to take the note, and as between them and Furman they were not limited to a legal rate of ■discount. -The mere fact that the owner of the note was willing to sell it for a less sum, was not sufficient to throw on the plaintiffs the responsibility of inquiring as to the character of the note. This is the only ground on which the bona fides of their purchase can be assailed, and if it did not require them to make inquiry as to the character of the note before they purchased it, it becomes immaterial. (Steinhart agt. Boker, 34 Barb. 436 ; Holmes agt. Williams, 10 Paige, 326.)

The judgment should be affirmed.

Clerke, J., concurred.