Braswell v. Tindall

Mr. Justice TomliwsoN

delivered the opinion of the Court.

There was usury to the.amount of approximately $975 in the promissory notes which Braswell executed in the principal amount of $2,500, and delivered to one Ben Block Jones. Tindall acquired these notes before maturity. As a defense to Braswell’s bill seeking to recover such amount already paid as was usury, and to cancel the last note of $700, all of which was usury, Tindall insists that there is no evidence in the record to overcome the prima facie presumption that he is the holder in due-course of these notes, Section 47-159, T.C.A.; hence, entitled to collect the face amount thereof, to-getter with the interest for which they provide, without regard to the fact that these notes were executed and delivered as a result of a usurious transaction.

-■ The same code section, Section 47-159, T.C.A., which provides that every holder of a negotiable instrument obtained before maturity is deemed prima facie to be a holder in due course further provides this:

“but when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that, he or some person under whom he claims acquired the title as holder' in due course. ’ ’

Tindall, did not testify. Nor did he offer any evidence to prove, that he acquired title as-holder in due course. .

■" The Chancellor, however, observed that in none of our cases “has it been held that usury in a transaction occasioned a defect in title”; hence, that the prima facie presumption that Tindall was the holder in due course must apply with the result that Braswell’s suit was dismissed. The Chancellor did express the opinion that “usury should so affect the title”, but thought that such -.result should be brought about by legislative enactment.

The Court of Appeals concluded from the evidence

“that Tindall was familiar with the whole scheme and plan, thus taking the notes in bad faith and with full knowledge, that same was a pure money-raising usurious transaction.”

Accordingly, the Chancellor was reverse^., judgment rendered for the amount of usurious interest already paid, hnd-collection of the outstanding note of $700 was permanently enjoined. Tindall’s petition for certiorari insists that there is no evidence to support this finding of the Court of Appeals.

This “no evidence” insistence of Mr. Tindall makes necessary a determination first as to whether under our Negotiable Instrument Law the burden was upon Tindall to show that he was a holder in due course before maturity, rather than the burden being upon Braswell to show that he was not such a holder. If there was a defect in title, then Section 47-159, T.C.A., heretofore quoted expressly places this burden upon Tindall, since Braswell has clearly established the grossly usurious transaction.

That which is a defect in title within the meaning of the Negotiable Instrument Law is, as aforesaid, declared by Section 47-155, T.C.A., reading as follows:

‘ ‘ The title of a person who negotiates an instrument is defective within the meaning of this law when he obtained the instrument, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud.”

The question here, then, is whether the obtaining of these notes as a result of a usurious transaction comes within this code section.

This usurious transaction was unlawful. It was by means of such unlawful act that Ben Block Jones acquired title. On principle, therefore, it would seem clear that Ben Block Jones acquired title by unlawful means and for an unlawful consideration; hence, that his title was defective within the meaning of this code section.

. The text of 8 American Jurisprudence, section 1028, pages 613-614, in discussing this very question as. applied to the Negotiable Instrument Law is as follows:

‘ ‘ * * * And the authorities are generally agreed that where usury in a transaction for which a negotiable instrument is given is proved, the holder has the burden of proving that he was a bona fide purchaser before maturity without notice”, citing numerous authorities. .

The annotation on this question in 17 L.R.A., page 328, is to the same effect. That annotation, citing many cases in support, is this:

“If the party primarily liable proves fraud or illegality in the inception of the instrument, or if from the circumstances a strong presumption of fraud is raised, the holder must ■ then show that he acquired bona fide for value, under circumstances creating no presumption that he knew the facts which impeach its validity. ”'

The Florida case of Tucker v. Fouts, 73 Fla. 1215, 76 So. 130, L.R.A.1917F, 916, 920, is to the same effect.

The Oklahoma case of State v. Emery, 73 Okla. 36, 174 P. 770, 773, 6 A.L.R. 234, 239, is exactly the case at bar. That case, after quoting the provision of the negotiable instrument law, with which this opinion is now dealing, to wit, Section 47-155, T.C.A., concludes with the following holding:

“Under the evidence here and under the finding of the court the total consideration for the note in question was usury and illegal. That being true, then, under the statute above quoted, the title .of Givens to said note was defective within the meaning of said statute. And under section 4109, Revised Laws 1910 [48 O.S. 1951 sec. 129], when the title is defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as a holder in due course.”

This Court concludes both on principle and persuasive precedent that a promissory note obtained by reason of a usurious transaction falls within Section 47-155, T.O.A., rendering the title defective in the person who thereby acquired it from the maker.

Ben Block Jones acquired these notes from Bras-well by reason of the usurious transaction mentioned. His title was, therefore, defective. He necessarily negotiated the notes directly to Tindall, or to some one under whom Tindall claims. Since all this was made to appear by the evidence introduced by Braswell, it follows that by reason of the express provision of Section 47-159, T.C.A,, heretofore quoted “the burden is [was] on the holder [Tindall] to prove that he, or some person under whom he claims, acquired the title as a holder in due course.” As stated, Tindall did not testify, nor offer any evidence. Thus he failed completely in this respect. And having so failed, the Court of Appeals correctly entered against him the aforesaid judgment.

Since that which has just been determined requires a denial of the petition for certiorari, it is not necessary to prolong this opinion with a discussion of the evidence by reason of which the Court of Appeals found as a fact that Tindall took the notes in bad faith with full knowledge that they were usurious.

The petition for certiorari will be denied.