Bird Finance Corp. v. Lamerson

I cannot agree with the conclusion reached by Mr. Justice BOYLES, because that portion of the note in suit that represents usury is void for want of consideration. The note, therefore, at the time of its delivery to the original payee, was not free from infirmities.

The statute (2 Comp. Laws 1929, § 9301 [Stat. Ann. § 19.94]) provides in part,

"A holder in due course is a holder who has taken the instrument under the following conditions: * * *

"Fourth, That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it."

Justice BOYLES' findings, which are amply supported by the record, are to the effect that the plaintiff at the time it acquired the note had knowledge that at least a portion thereof was void for want of consideration, being the amount of the usury included therein. Therefore, plaintiff had notice of this infirmity in the instrument.

In view of Justice BOYLES' findings, the note in suit in the hands of the plaintiff is subject to the same defenses as if it were a nonnegotiable instrument, or as if the suit had been instituted by the original payee. This is in accordance with 2 Comp. Laws 1929, § 9307 (Stat. Ann. § 19.100), and cases decided in other jurisdictions having this same statute. The following cases all hold that a purchaser for value with notice of the usury is not a holder in due course. Bowen v. Mount Vernon Savings Bank, 70 App. D.C. 273 (105 Fed. [2d] 796); Mollohan v. Masters, 45 App. D.C. 414, certiorari denied, 242 U.S. 652 (37 Sup. Ct. 245, 61 L.Ed. 546); Newcomb v. Niskey's Lake, Inc., 190 Ga. 565 (10 S.E. [2d] 51); Bolen v. Wright, 89 Neb. 116 (131 N.W. 185); Daniels v. Bunch,69 Okla. 113 (172 P. 1086); Keene v. Behan, 40 Wn. 505 (82 P. 884).

We, therefore, hold that a note given for a usurious amount should be treated as being subject to an infirmity, and that a purchaser of such note with notice or knowledge of this infirmity should not be held to be a holder in due course so as to be entitled to protection against the equities and defenses which would be available against the original payee, but that he takes the instrument subject to such equities, defenses, setoffs and counterclaims as would be available as between the original parties.

The rule is well established that if the purchaser of the instrument is not a holder in due course, other defenses than that of which he had knowledge are available. 2 Comp. Laws 1929, § 9307 (Stat. Ann. § 19.100).

Entertaining this view, the judgment is reversed and the case remanded for a new trial, with costs to appellants.

NORTH, STARR, BUTZEL, BUSHNELL, and SHARPE, JJ., concurred with CHANDLER, C.J. WIEST, J., did not sit.