First National Bank v. Bentley

| Minn. | Aug 4, 1880

Gilfillan, C. J.

Laws 1877, c. 15, (Gen. St. 1878, c. 23,) limits to 12 per cent, the rate of interest which parties may contract for. Section 3 (Gen. St. 1878, c. 23, § 4) declares all contracts and transactions wherein a greater rate is received shall be void, “except as to bona-fide purchasers of negotiable paper, as hereinafter provided, in good faith, for a valuable consideration, before maturity: * * * provided, further, that nothing herein shall be construed to prevent the purchase of negotiable mercantile paper, usurious or otherwise, for a valuable consideration, by an innocent purchaser, free from all equities, at any price, before the maturity of the same, where there has been no intent to evade the provisions of this act, or where said purchase has not been part of the original usurious transaction. In any case, however, where the original holder of an usurious note sells.the same to an innocent purchaser, the maker of said note, or his representatives, shall have the right to recover back from the said original holder the amount of principal and interest paid by him on said note.”

One Stow held two notes of these defendants, and in July, 1878, endorsed and transferred one of them, with other notes, to plaintiff, as collateral security for a loan then made by plaintiff to him. In October, 1878, these two notes having become due, the defendants, supposing that Stow still held them, applied to him for a renewal and extension for a year, which he agreed to give if they would pay interest at the rate of 18 per cent, per annum. This they agreed to, and executed a new note for each of the old notes, taking for the principal of each of the new notes the principal and interest then due on the old note for which it was given, and also a third note for the excess of interest agreed on over 12 per cent, per annum on the other two notes. Each of the three notes, by its terms, bore interest at the rate of 12 per cent, per annum. Stow then exchanged with plaintiff, for the note it held as collateral, the note which defendants had executed to take it up, and endorsed and delivered the new note to it, to be held by it as collateral security for the loan instead of the old note, which plaintiff, in consideration thereof, delivered to Stow, who surrendered it to defendants. This new note is the note now in suit, and is in the usual form of a negotiable promissory note. The plaintiff knew nothing of the usurious agreement between Stow and defendants.

We do not see how it can be claimed that in this usurious transaction Stow was plaintiff’s agent. It neither knew in advance what he was going to do, nor afterwards what he had done, beyond the fact that he produced to it a note of defend¡ants, which he proposed to substitute as security in the place ■of the note then held by it; and the note thus offered to it does not include any of the fruits of the usury, nor has it derived, nor does it now claim, any advantage from the usury. The sole question is: was the plaintiff a bona-fide purchaser," such as is excepted in the act from the operation of the provision declaring usurious transactions void? From the confused manner in which the statute employs terms and phrases which have always had well-settled legal signification, there is some difficulty in arriving at its precise meaning. But we 'think the intent was to preserve, in favor of negotiable paper, in respect to the defence created by the statute, the same privileges and immunities accorded to it at common law in respect to defences generally, and that in an action on such paper the defence of usury may be interposed only where any ■other defence, if it existed, might be interposed.

Whether an endorsee of negotiable paper, transferred to him before its maturity, and without notice, as collateral .security for a debt, holds it free of defences on the part of the maker, depends on the sufficiency of the consideration of the transfer to him to make him a purchaser for value. If the debt is created at the time of the transfer, and upon the ■credit of it, there can be no question of its sufficiency. That the existence of an antecedent debt, as security for which the note is transferred, is or is not, of itself, a sufficient consideration, the authorities are not agreed. There can be no doubt, however, either on principle or authority, that the surrender of other securities for the antecedent debt is a sufficient •consideration. Goodman v. Simonds, 20 How. 343" court="SCOTUS" date_filed="1858-04-26" href="https://app.midpage.ai/document/goodman-v-simonds-87159?utm_source=webapp" opinion_id="87159">20 How. 343. The plainiiff comes within this rule.

Order affirmed.