Collier v. . Nevill , 14 N.C. 30 ( 1831 )

Plea — the statute of 1741 (Rev., ch. 28), "for restraining the taking of excessive usury." On the trial before his Honor, Swain, J., at ORANGE, on the last spring circuit, a verdict was entered for the plaintiff, subject to the opinion of the court, upon the following case: The defendants executed the bond on which the action was brought, upon abona fide consideration, moving from Mitchell and Cheek to them. Afterwards the obligees, Mitchell and Cheek, sold the bond to the plaintiff at a greater discount than six per cent per annum, and by their endorsement, bound themselves for its full amount.

His Honor, upon this case, set the verdict aside, and entered a (31) nonsuit, and the plaintiff appealed. The Court does not entertain a doubt that the transaction between the plaintiff and Mitchell and Cheek is usurious. The discounting of a bill or bond, and taking the general endorsement of the holder, does ex vi termini constitute a loan; and if the rate of discount exceed that fixed by the statute, it is an usurious loan. It is said, nonconstat, that these parties knew that the endorsers were bound thereby; without which there was no corruption. It is to be taken they knew it, and that the endorsement expresses their contract, until the contrary, as a mistake in the writing, or the like, be shown. If a person misconstrues the statute or the law, he must abide by his error. If he mistakes the fact, as the amount reserved, he may show it. But here there was no attempt to show even a misapprehension of the liability created by the endorsement.

Taking the endorsement to be usurious, another question arises, namely, whether the defendants can avail themselves of it. The Court does not disguise that upon this question very serious difficulties exist, and that notwithstanding the authorities cited, doubts, not at all light, are yet entertained. But upon the strength of the authorities, and the opinion heretofore generally received by the country at large, (32) and the profession, the Court feels constrained to decide that the defendants cannot avail themselves of any intermediate illegality. The bond was available between the obligor and obligees. The former is not privy to the usurious agreement between the latter and the present holder. If the security be in its origin usurious, it is void, into whose hands soever it gets, by the words of the statute. If it be good in its origin, a subsequent usurious agreement between the same parties does not avoid it, though it may subject the one party to the penalty if anything be received under the corrupt agreement. And if it be good in its origin, the subsequent transfer of it, usuriously, does not affect it as against the maker. No redress can be had on the endorsement as between the parties to it. The very object of the statute is to protect the borrower, as an oppressed man. But there is no oppression on the obligor who is a true debtor. The law was not introduced for his protection. It is for the interest of the party injured, and the advancement of justice, that the transfer should be held valid, because where the assignee receives the money, the borrower can recover from him the excess above the principal advanced, and legal interest. But unless the obligor be obliged to pay, the endorser may be without remedy, without first paying to the endorsee the principal borrowed and interest. At least, it has been so decided. Fitzroyv. Gwillim, 1 T. R., 153. However, general reasoning on the subject, it is admitted, is not entirely satisfactory either way. And the Court would feel much hesitation in coming to a conclusion were there not adjudged cases in point. Munn v. The Commission Company, 15 John., 44, is direct. The decision is that a note valid between the maker and payee, so that the latter could maintain an action on it, is also valid as against the maker in the hands of an endorsee, who has discounted it at a higher rate than is legal, and the endorsee himself may recover the whole amount from the maker. This goes the full length of the present case. So, also, (33) does the case of Bush v. Livingston et al., 2 Caines' Cas. in Er., 66, which is very strong, inasmuch as the endorser himself was a party. It was a bill for foreclosure by the assignee of a mortgage against the mortgagor, to which, of course, the mortgagee was made a defendant. The mortgagor relied in his answer upon the usury committed by the plaintiff in getting his assignment. It was held that it did not lie with him, and that his obligation to make payment of the original debt was not impugned by it.

A great number of cases were cited from the English books on the part of the defendant. But they are all nisi prius cases, except that of Parrv. Eliason, 1 East, 92, and are subject to this observation, that none of them state the facts in such a way as to show whether the security was an accommodation bill or note and intended originally to be usuriously discounted, or real paper usuriously discounted for the payee. Lawesv. Mazzaredo, 2 E. C. L., 438, is an exception, for in that the plaintiff was a remote and bone fide endorsee, and the usury was committed in discounting for an intermediate endorser. But that case is contradicted by Parr v. Eliason, in the King's Bench. It is true this last case was also one of a remote bona fide holder, and Lord Kenyon, as he is made to express himself, relies much on that. But it seems to me that gives up the question. For however honest the holder is, he must claim through the usurious endorsement, and it is a rule in relation to contracts void by statute that they must remain void to all intents and purposes. If the usurious endorsee could not recover against the maker by reason of his title being void, he cannot transfer a power of recovery to another. The right of the latter can only be sustained upon the ground that the consideration upon which the holder transferred his note, valid in the holder's hands, is collateral to him, the maker, altogether independent of his contract, and not affecting it. And this presses upon the Court the consideration of the futility of the rule contended for on the part of the defendants. For it is worth nothing if it and the statute can be evaded by an endorsement for (34) value to an innocent party. And again a suit in the maker's name would set up the obligation, purged of the usury.

This case is altogether different from that of Ruffin v. Armstrong, 2 Hawks, 411, which was a suit against the endorser upon the usurious endorsement itself, and the Court purposely avoided going out of that question, though the whole doctrine had been discussed at the bar.

Without interfering, therefore, with the rights and liabilities of the endorser and endorsee, as between themselves, it appears to us that these defendants cannot allege this usury in discharge of themselves. They are like persons who have received money to the use of another on an illegal contract. They are not allowed to retain it, but must pay it to him for whose use it was received. Tenant v. Elliott, 1 B. and P., 3; Farmer v.Russell, ibid., 296.

PER CURIAM. Judgment reversed.

Cited: McElwee v. Collins, 20 N.C. 352; Ballinger v. Edwards,39 N.C. 452; Ray v. McMillan, 47 N.C. 229; Bynum v. Rogers,49 N.C. 400; Ward v. Sugg, 113 N.C. 490; Sedbury v. Duffy,158 N.C. 433.