Opinion
(August Term, 1851.)
1. Persons may change notes for their mutual accommodation, with a view to raise money by having them discounted, and they will respectively constitute a consideration, which will make them all binding on the makers: provided, however, that they be not made with a view to their being illegally discounted. But a note made to the intent of being legally discounted for the accommodation of the maker or the payee, or both of them, would not be obligatory between the parties, and is void in the hands of one who discounts it at a rate exceeding 6 per cent; and there is no difference between a man's making his own note to the lender and getting a friend to make a note to himself and his passing that to the lender.
2. Whether the lender was cognizant of the intention of the parties to the note or not is not material in a question of usury, for the statute has no provision in favor of the assignee, and it is the fact and not the assignee's knowledge of it which determines the validity of the instrument.
APPEAL from Battle, J., at IREDELL Spring Term, 1851.
Debt on a bond for $1,500, and the defense was usury. On the trial the defendant gave evidence that in 1840 he and his brother, (335) Henry Fullenwider, executed to each other several promissory notes for the purpose of raising money thereon by having them shaved or discounted at a greater rate of interest than 6 per cent, and that three of the notes for $500 each thus made by the defendant to Henry were passed by the latter to the plaintiff at 15 per cent discount. One Miller also deposed that about ten years before the trial the plaintiff delivered to him three notes for $500 each which had been made by the defendant to Henry Fullenwider, with the words "Satisfied by note" written in the face of them by the plaintiff, and directed him to give them to the defendant, and that he did so on the same day, at the door of the defendant's house, and the defendant said when he took the notes he would burn them, and immediately walked towards the fire for that purpose, and, returning, he said he had burned them, and he was sorry he had settled them by giving his bond with a surety for them. The declarations of the defendant were objected to by the plaintiff, but were admitted by the court. The defendant gave further evidence that the bond now sued on was given in place of the three notes passed by Henry Fullenwider to the plaintiff.
The counsel for the plaintiff insisted that, supposing the evidence to to true, it did not make out a case of usury: first, because the plaintiff took the defendant's notes from Henry Fullenwider without notice of any unlawful agreement between the maker and payee; second, because Henry and William, the defendant, exchanged notes for the same amount, so that the set of notes of the one was a good consideration for those of the other, and each of them had a right to part from those payable to him upon what terms he pleased without making the transaction usurious as between the purchaser and the maker; and, thirdly, because the defendant took up the original notes and gave the present bond in lieu thereof, and the latter security is not infected with usury, though the notes might have been. The court refused to give those instructions and directed the jury that if the facts were true as (336) stated by the witnesses, the bond was usurious. The jury found the issue for the defendant, and the plaintiff appealed from the judgment.
Guion, Thompson, and Osborne for plaintiff.
Craig, Boyden, and Alexander for defendant.
The objection to the evidence is untenable. The defendant had to account for the nonproduction of the notes at the trial, and his declaration contemporaneous with the delivery of them to him and his going, apparently, to burn them, was proper evidence as tending to establish their destruction. It is said, however, that the other part of the declaration ought not to have been received, because the effect was to raise an inference that those notes form the consideration of the bond sued on, and the party ought not to be allowed thus to fabricate evidence for himself. But that is not a proper view of the subject. The witness Miller had stated that it appeared on the notes themselves, under the plaintiff's own hand, that another security had been taken in satisfaction of them. The defendant, then, did no more than express regret at having given the note thus admitted by the plaintiff. His declaration introduced no new matter in respect to giving another security, but amounted to his admission merely that, as stated by the plaintiff, he had given some security in lieu of those then delivered to him. It still lay on him to connect the present bond with the notes by the other evidence which he offered to that point.
Upon the main question there seems to be no doubt. Assuming the evidence to be true, it very clearly establishes the usury. It is true that persons may exchange notes for their mutual accommodation with a view to raise money by having them discounted, and they will respectively constitute a consideration which will make them all binding (337) on the makers, provided, however, they be not made with a view to their being illegally discounted, but a note made to the intent of being usuriously discounted for the accommodation of the maker or payee, or both of them, would not be obligatory between the parties, and is void in the hands of one who discounts it at a rate exceeding 6 per cent. It is plain, when a man wants to borrow money at an illegal rate, that within the mischief and the meaning of the act there is no difference between making his own note to the lender and getting a friend to make a note to himself, and his passing that to the lender. The friend's note is, in truth, as much made for the borrower's use as his own would be, and it is not the less so because at the same time he made to his friend a note for the same amount to be used by the friend for a like purpose of his own. Each note is, in its concoction and in the use made of it, in contravention of the statute, and is avoided by it. The purposes of the act require that, whatever shape may be given to the dealings, the contract should be held void if in reality there was a lending and borrowing. It follows that every case is open to evidence of the intent and purpose with which the security is made. If the transaction appear upon the evidence to be a contrivance, under color of doing a different and lawful thing, of effecting in fact an illegal borrowing and lending, it is vicious, for the statute applies as well to indirect as to direct modes of dealing, and no shift for the purpose of veiling the intention can make the case different from a borrowing and lending in the simplest form, provided that in substance there was a borrowing and leading. That was the fact here, for the defendant's notes, being made for the accommodation of his brother Henry, had no vitality, according to the intention of those parties, until they passed into the plaintiff's hand for the money advanced by him to Henry. It is, therefore, in substance, a borrowing by the party who was intended to get, and did get, the money from the plaintiff upon the discount of the note thus made for (338) the accommodation of that party. Whether the plaintiff was cognizant of the intention of the two Fullenwiders in making the notes is not material to the question under consideration, for the statute has no provision in favor of the assignees, and it is the fact, and not the assignee's knowledge of it, which determines the validity of the instrument. That is, a fortiori, true of an instrument made for the express purpose of being usuriously discounted in the hands of the person who thus discounts it, though he may not be privy to the making of the instrument or to the intent with which it was made. If it were not so held, the most flimsy device would be allowed to defeat this important statute, and, indeed, it might be considered as judicially repealed. These positions are fully sustained by numerous adjudged cases, and they are decisive of this controversy. Floyer v. Edwards, Cowp., 114; Ruffin v. Armstrong, 9 N.C. 411; Dunham v. Day, 13 John., 40; Munn v. Commission Co., 15 John., 44, 56; Bennet v. Smith, 15 John., 355. Of course, the taking of a new bond by the usurer himself cannot remove the taint in the original transaction. It was an inherent vice in it and attaches itself to every security taken by the lender, including the illegal interest or any part of it.
PER CURIAM. No error.
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