Botsford v. Sanford

| Conn. | Nov 15, 1817

Swift, Cb. J.

In regard to the first note given by Sanford the defendant, to Botsford the plaintiff, I am of opinion, that it was usurious. It appears from the facts stated, that Botsford held a note against Platt, indorsed by Sanford as surety, which had been given on an usurious consideration. Sanford applied to Botsford, and offered to give him his own note for that note, for the purpose of securing it out of the estate of Piatt, who was in failing circumstances : to which jjotsford assented. This note, then, was given by a party to the original usurious contract, to the original promissee, the party to the usury, and in consideration of giving up the usurious note, without the privity or consent of the real debtor. Here was the same usurer, and the same usury: there was no-new consideration to the plaintiff; it • was a mere substitution and exchange of notes, which has never been deemed sufficient to purge the usury.

it lias been contended, that this was a purchase of the note by Sanford, for the purpose of securing it from Platt. But Sanford is to be considered as a party to the original note. He might have avoided a claim against him on his indorsement, on the ground of the usury contained in it. It might as well be said, that giving a new note by Platt for the old note would have been a purchase. The substance of the transaction is the substitution of one note for another, as between the parties to the original usury.

In respect of the last note, the one now under consideration, the plaintiff offered to prove, that the defendant, at the time it was given, acknowledged that by a suit on the former note, he had obtained a sufficient sum to pay it, from Platt, with his assent, and that he was indemnified. This would, in effect, have been a payment of the note by Platt to Sanford. No demand could ever have been made by Sanford on Platt; and the case stood precisely on the same footing as if Platt had actually paid the money to Sanford, and taken up his note. A man who has given a note, void on account of the usury contained in it, may waive taking advantage of the statute, and pay the money. In such case, it is said in Massachusetts, he cannot recover it back. 9 Mas. Rep. 48. And it has been decided in England, that no part but the unlawful interest can be recovered back. 1 Term Rep. 154. Gowp. 792.

Now. it would be a manifest absurdity to say, that a person who had received the whole money from the debtor, and. in consideration thereof, had given a new note, could avoid it. on account of usury in a prior note, when the debtor himself, who made and satisfied the usurious tontract, could recover nothing, or, at any rate, no more than the unlawful interest. Indeed, the object of the statute is, to protect those persons only, of whom an oppressive advantage has been taken, and not those who have made contracts on adequate consideration. Here no advantage was taken of Sanford; there was no usury in his note to Botsford; he received the full amount from the actual debtor; and then promised to pay it to Botsford. Here, then, was a new consideration j and the note given m consequence of it, was not infected, by the usury in the original note given by Platt to Botsford: for it cannot be permitted, when a man who has given a note void for usury, waives the statute, and pays the whole money to another, to be paid to the creditor, and the person to whom the money is so paid, instead of paying it over to tise creditor, gives a new note for it, that such new note should be void for the usury contained in the prior note. It may then be considered as a settled principle, whenever a man, whether the surety or a stranger, receives the amount of a usurious note from the debtor, and, in consideration thereof, gives a new note to the creditor, that there is no usury in the last contract, and it cannot be avoided on account of usury in the first, unless such arrangement was originally made with an intent to defeat or evade the statute ; and of this there is no pretence in the present case. Scott v. Lewis, 2 Conn. Rep. 132. is decisive.

⅜ The evidence offered by the plaintiff, and w hich was re-Sjected, conduced to prove, that Platt had made payment to Sanford of the note for which he was surety, and liad waived | taking advantage of the statute against usury ; and the jury ⅜ might have found, that Sanford, the defendant, in considera- | tion thereof, gave the note in suit. This testimony would ⅜ have been relevant, and ought to have been admitted ; and I on this ground I would advise a new trial,

With respect to the objection to the testimony, that the plaintiff ought to produce the record, execution and written documents, I think it ought not to prevail. The plaintiff relied on the acknowledgment of the defendant, that he liad received payment and indemnity for the note he had given as surety for Platt. This was the material part of the testimony. Whether he received it by a judgment and execution, or in any other mode, was wholly immaterial : and the plain till" was not hound to produce proof that he had received it in the manner he had acknowledged.

Trumbuxx, J., was of the same opinion, Edmond, J.

thought, that Sanford was to be considered as a purchaser of PlatPs note, and though indorser on it, not a party, but a stranger ; it not appearing that lie knew that such note was usurious at the time he indorsed it: Con* sequently, the first note given by Sanford was not usurious. As to the second note given by Saifurd, he concurred in the opinion delivered by the Chief J ustice.

Smith, J.

On trial of this cause in the superior court,, the defence relied upon was usury : and to obviate the defendant’s testimony, the plaintiff offered certain evidence, which was rejected by the court as being irrelevant, and a verdict was consequently found for the defendant.

In determining whether the evidence is relevant, it will he proper, at present, to assume Ihe. fads as being proved, and if those lads will deliver the c ase from usury, the cause ought to go back for another trial. From these facts it ap pears, that on the 24th of October, 1814, tin' plaintiff held a note against Jarvis Platt, indorsed by the defendant, which was usurious.^(a) At this time, Platt being in failing circumstances, the defendant, who does not appear to be privy to the usury, applied to the plaintiff, and requested the note against Platt, that he might secure its contents out of his óslate. That note was accordingly delivered to him for the purpose aforesaid, in consideration whereof, the note of the 24lh of October was given by the ueleridanl. Now, the lies*, question presented by this record, is, whether the note, so given by the defendant, is usurious. If not, it puts an end to the case j but if this note is usurious, then a farther question arises.

1 have formed a dear opinion, that the note in question was not usurious. I cannot view this transaction in any other light than as a purchase of the note against Platt. If the. defendant had paid in rash, or exchanged other property for it, the purchase would not have been more, manifest. Giving his own note was payment, as much so as to have paid in cash. And Ihe defendant did not take the note, as one, taken np and paid hv an obligor ; hut the case states expressly, that lie received it for the purpose of securing its coni cnts out of the estate of Plait. He received it, then, as a purchase, and paid a valuable consideration in his own note. Had Platl availed himself of a defence on the ground of usury, the defendant’s remedy, if any, would be for the deceit practised in concealing the usury.

It has been said, that this case stands on the same ground as though the defendant had signed his name as co-obligor, and that he is virtually such ; but to my mind there is a manifest distinction. The indorser is not necessarily a party to the usury, and in a suit on the note, he cannot be permitted to appear and plead it. It has been said, indeed, and truly said, that in a suit against the indorser, founded on bis indorsement, he may be permitted to avail himself of the nsury. But this is not because the indorser is to be viewed in the light of a co-obligor, but it is because the defendant, in an action on an indorsement, has a right to defend on the ground of any defect in the plaintiff ’s cause of action. Were it duress, or any other defect, he would have the same right. This point was decided in the case of Lloyd v. Keach, ante. 175. and on these principles.

If I understand the argument, it is this, that an obligor, taking up a note, and giving a new one, cannot be viewed as a purchaser of the old note ; and that an indorser is in the same situation wish an obligor. Hence, his note given for the old one must be viewed as a substitute for the old one. But will any gentleman seriously contend, that an indorser is not as much a distinct person, for the purpose of purcha*-sing a note against the obligor, as any other ? Can he not own the property in a note indorsed by him, and bring forward a suit upon it as well as any other person ; and in case he gives his own note on such purchase, will it be seriously questioned whetbertliis purchase is not on a new consideration entirely distinct from the old one ?

1 am also perfectly clear, that on the supposition that the note I have been commenting upon was usurious, the usury was purged by the facts which occurred afterwards ; but on this point, as the Court appear to be unanimous, it becomes unnecessary for me to make any remarks.

Baldwin and Goddard, Js. were of the same opinion. Brainard and Hosmer, Js. concurred in the opinion given by the Chief Justice. Gotnr.n, J.

I think, that that part of the plaintiff’s evi-clenre, which was offered to show, that the defendant had obtained satisfaction upon Flail’s note, before the note now in suit was given, ought to have hern received But that the first part of 1 lie testimony, explaining the views, with which the defendant gave his first note (of October 24, 1814,) furnishes no answer to the defence, and was, therefore, properly rejected. For I am decidedly of opinion, that that note was usurious.

It is admitted, that the prior note, given by Platt, and indorsed by the defendant, was infected with usury ; but the plaintiff contends, that the, first note, given by the defendant, was not so. Perhaps, no rule in the law is better established, than tisis : That if an instrument, contaminated with usury, is taken up, and a new one substituted by the parties, to secure to the lender, or creditor, the original loan, or debt ; the substituted, as well as the original, security, is usurious and void. This rule was laid down as clear law' by Lord Kenyon, in. Tate v. Wellings, 5 Perm Rep. 537., and Cuthbert v. Haley, 3 Esp. Ca. 22. ; and afterwards, by all the judges of the King’s Bench, in the latter case. 8 Term Rep. 390. The question, then, as to the defendant's first note, given on the 24th of October, 1814, is, whether it was a mere substituted security, for Platt's last note ; or, as the plaintiff contends, an original security, given in consideration of a purchase of that note, by the defendant. To show that the transaction was, in substance, a purchase of Platt's note, the plaintiff’s counsel stated, and offered evidence to prove, that Plait's note was taken up, and the defendant’s first note given, at the request of the defendant himself, that he might secure himself against any eventual loss, as indorser, by enforcing the collection of the former note, out of Plait's property. I should hold, however, for this "very reason, that the first note, given by the defendant, was but a substituted security, (wliirh was, of course, void ;) and therefore, that this part of the evidence ought to have been rejected, ns it was. For what was the object of this arrangement ? To secure the defendant, as surety, or indor-ser, upon a note, confessedly usurious, by compelling Plait to pay it ,- i. e. by enforcing a usurious contract against the borrower, the very mischief, which the statute was intended to prevent. And when, in connexion with this fact, we consider the relation, in which the defendant stood, to the oilier parties, there appears to me to be but little ground for dispute, as to the nature of the transaction. For he was not a stranger, volunteering in the purchase of an obligation ; but a party to it, a guarantee for the payment of it. For the purpose of the argument, he stood precisely in the condition of a co-promissor, or a surety, who had underwritten his principa!. As a party to Platt's note, he was in the plaintiff’s power ; and lie gave his own, in exchange for it, by way of subslitniin" one form of liability for another, with a view, indeed, to his own ultimate indemnification, but still, by seen-ring anew the original usurious debt. lie gave his first note, then, solely in consideration of the plaintiff ’s delivering up to him another, to which he was a party, and by which he was already as much bound as Platt himself; that is, as far as any parly is ever bound, by an illegal contract. He was not, as to Platt's note, a payee, who had indorsed it to a stranger ; but, as l have said already, a surety, and virtually a co-promissor, guaranteeing the payment of it. to the usurious lender. And if he had been sued upon that note, lie might, unquestionably, have pleaded usury, as an original party to the instrument. This, if I understand the argument at the bar, is conceded : but whether it is, or not, the rule is undeniable, that a surety, or guarantee, underwriting, indorsing, or lending his name in any other way, may take advantage of the defence of usury, whenever his principal might do it. This rule was established, by the superior court, many years ago, in the case of Cowles v. Munson ; and has been so repeatedly adopted since, that a reference to individual cases would be useless. The English doctrine is the same. Button v. Downham, Cro. Eliz. 643. Robinson v. May, Id. 588. Potkin's case, 3 Leon. 63. Button v. Droman, Mo. 398. Young v. Wright, 1 Campb. 141. There is, then, no similarity between this transaction, and that of purchasing a third person’s obligation. The defendant did not buy another man’s note ; but took up one, which was virtually given by' himself and Plait, by substituting a sole security of his own. And it might as well be said, as in this case, that; if Platt, instead of the defendant, had given the note of October 24th 1814, upon t he same consideration ; it would have been only a purchase of his own note.

The case of Bearce v. Barslow, 9 Mass. Rep, 45., is en» tirely foreign to the question. The transaction in dispute in that case, was neither the purchase of an obligation, nor the substitution of a new security, by a party to the original notes. The defendant was a stranger to the original securi-j 1\' : and the note, upon which he was sued, was given to secure the consideration of a purchase of land by himself, from the borrower, it was, in short, the common case of an obligation, given for land purchased. In that case, however, the ruléis expressly recognized, that a new security, given, by “ a party, otherwise liable,” upon the prior usurious obligation, would be void. The Nisi Prius case of Turner v. Hulme, 4 Esp. Ca. 11., before Lord Kenyon, has been strongly pressed for the plaintiffs. But that case was manifestly determined, upon the ground, that a party, who, upon being sued, pays or secures the debt demanded, instead of contesting it as illegal, is afterwards estopped to deny the legality of it, precisely as he would have been, if the suit had proceeded, and a judgment had been given against him.. This is apparent from the reasons given for the decision : And the point had been twice before decided by the same judge, where, in one case, a defendant on being sued, and in the other, a party threatened with a distress, had respectively paid the demand, and afterwards attempted to call it in question. Knibbs v. Hall, 1 Esp. Ca. 84. Brown v. M’Kinally, Id. 379. Upon no other principle, at any rate, can the case of Turner v. Hulme be reconciled with the established and admitted rule, that a new security, substituted by the parties to a prior one, that is usurious, in consideration of the creditor’s delivering up the original instrument, is itself infected with the usury'. That case, therefore, is plainly irrelative.

With respect to the note now in suit, I was misled at the, trial, bv a mistake as to dates, having understood, that this note, like that of October 24th, 1814, was given before the defendant was claimed to have obtained Platt’s property, i, therefore, considered both of them, as standing upon the same footing. Rut as I now find, that the evidence, relating to this part of the case, was offered to prove, that the note in suit was given after the defendant had received the property ; I am clear, that the question is the same, as that in Scott v. Lewis. For this last note must be considered, as having been given, in consideration of a fund, received beforehand by the defendant, for the purpose of satisfying Platt's second note ; which fund, as between the present parties, must be regarded as having been, virtually, tlx o. piiiatijf’s property, in the defendant’s hands. Upon this ground it is, that the plaintiff’s evidence, as to this part of the case, ought, in my opinion, to have been received.

As to the defendant’s objection, that the record evidence of his title to the land, which he is said to have obtained from Platt, ought to have been produced, it is sufficient to say, that the fact of his having obtained payment, or satisfaction of Platt’s note, is legally provable by his own corif. ssion. The manner of obtaining it, is not material. In 1 bat con fession, according to the statement of the evidence offered, no specific property was mentioned ; but his declaration was, merely, that he had obtained satisfaction, by the levy of an execution upon Platt’s “ real and personal estate.” By what court the execution was issued $ or in what place— whether in this state, or another — the property was found, the declaration of the defendant, as stated, did not point out. Where, then, is the plaintiff to seek for the record-evidence! It would be too much to require such evidence at his hands.

New trial to be granted.

(a) A former note had been given, and the then existing note had been sub. stituted in its place ; but this circumstance makes no difference in the case, and may be laid out of it.