63 Barb. 237 | N.Y. Sup. Ct. | 1872
This was an action on a promissory note. The defense was that the note was obtained of Wilson, the maker, by the fraud of one Nicholson, the payee, and one Scott. The plaintiffs claimed to be bona fide holders, without notice, for value, which claim has been sustained by the verdict; but in reaching this result, two rulings were made by the court at the circuit, which were- excepted to and are now claimed to have been erroneous. The note was for $1000, with interest. It was purchased by the plaintiffs, who are bankers and brokers, before maturity, for the sum of $900; and it is claimed by the defendant’s counsel that if the note was obtained from the defendant by fraud, so that the payee could not have recovered upon it from the maker, then that the purchase of it for less than the face was usurious; so that the plaintiffs cannot be bona fide holders, but are in fact holders under a usurious and void contract. Without doubt there is some difficulty in reconciling the language of some of the cases with the proposition that the plaintiffs are entitled to recover. It has been, held that a note made for the purpose of being discounted, if taken at a rate of discount greater than seven per cent per annum, by a party having no notice of the purpose for which the note was made, may nevertheless be attacked for usury. That a note made to be used in a certain manner, i. e., to be discounted at a certain bank, but diverted and sold at a discount greater than the legal interest, is usurious. (Munn v. Commission Co., 15 John. 44. Powell v. Waters, 8 Cowen, 669, &c.) It is also claimed to have been decided that a stolen note sold to a party having no notice of any defect in the title, if sold at a deduction greater than lawful interest, is, for that reason', invalid in the hands of the holder. (Hall v. Wilson, 16 Barb. 548.) In this class of
In the case of Ramsdell v. Morgan, (16 Wend. 574,) Mr. Justice Cowen says : “ There is a solecism in the expression, ' a bona fide purchaser upon usury.’ ” But in that case the contract was clearly usurious. The defendant had not assumed to purchase the property, but had made an usurious loan upon the pledge and security of the property. The case of Ramsdell v. Morgan was followed in Keutgen v. Parks, (2 Sandf. S. C. 60;) but in that case, also, the contract was clearly usurious, and the commercial paper taken by the party who advanced the money was not purchased by him, but taken merely as a collateral security for the loan. "Yet even these cases (Ramsdell v. Morgan and Keutgen v. Parks) are seriously questioned, and probably intended to be directly overruled in Williams v. Tilt, (36 N. Y. 319.) In the latter case it is held that “the term bona fide holder, or purchaser, has reference to the standing of the holder or purchaser in respect to the original owner ; that is, he shall be free from any privity with the fraud by having no part in it or notice of it, either actual or constructive and that “ the existence of usury in
Justice Allen, in the opinion in Hall v. Wilson, says: “ Although not necessary to the decision of this case, there is ground for saying that the consideration must be full and fair as well as valuable.” He apparently meant by this to suggest that, as a matter of law, the purchaser of a promissory, note, in order to be protected against a defense existing as against the payee, must have paid the full face of the note. This appears to us to be erroneous in principle and a misconstruction of the meaning of the authorities. Of course, we concede that the purchase of a note for much less than its value is a circumstance to go to the jury on the question of the good faith of the purchase, as a matter of fact. What is a full and fair consideration? Is it necessarily the face of the note? Is every man’s note fairly worth the amount purporting to be secured by it ? Manifestly not; and we apprehend the law can be guilty of no such absurdity as to declare peremptorily, that a purchaser has not paid a full and fair consideration for any note, who has not paid the face of it. Take the present case, for instance. The note in question
So manifest is it, as a matter of common sense, that all notes are not equally valuable fro rata, that the defendant sought to throw suspicion upon the transfer in this case, by showing that the plaintiffs had paid more than the reasonable value of the note in the market. We think the .price paid on the purchase of the-note may go to the jury on the question of good faith, but that it cannot as a matter of law be held to impeach the title of the holder, who is otherwise a purchaser in good faith, for value, and without notice.
The other exception is to the ruling of the judge, that the plaintiffs were entitled to recover the full face of the note, with interest, and were not limited to a recovery of the amount they had paid for the note, with interest. This presents the question whether the holder of a note in good faith, for value, which has been obtained from the maker by fraud, is entitled, as against that maker, to be protected beyond his advances, with interest. That question we have decided at this term, upon an examination of the authorities. (Huff v. Wagner.)
Johnson, J., concurred.
Mullin, P. J. I think the plaintiffs were entitled to recover the whole amount of the note, under the case of the Park Bank v. Watson, (42 N. Y. 490.) That case, it seems to me, reverses all the cases On which my brother Talcott relies.
Judgment reversed.
Mullin, Johnson and Talcott, Justices.]
Ante, p. 215.