Tilden v. Blair - 88 U.S. 241 (1874)
U.S. Supreme Court
Tilden v. Blair, 88 U.S. 21 Wall. 241 241 (1874)
Tilden v. Blair
99 U.S. (21 Wall.) 241
1. The acceptance of a draft dated in one state and drawn by a resident of such state on the resident of another, and by the latter accepted without funds and purely for the accommodation of the former, and then returned to him to be negotiated in the state where he resides, and the proceeds to be used in his business there -- he to provide for its payment -- is, after it has been negotiated and in the hands of a bona fide holder for value and without notice of equities, to be regarded as a contract made in the state where the draft is dated and drawn, even though by the terms of the acceptance the draft is payable in the state where the acceptors reside.
2. It is accordingly to be governed by the law of the former state, and if by the law of that state the holder of it, who had purchased it in a course of business without notice of equities, is entitled to recover the sum he paid for it, though he bought it usuriously, he may recover such sum, though by the law of the state where the draft was accepted and made payable, and where usury made a contract wholly void, he could not.
3. A purchaser of a bill or note who purchases such paper as that above described, though a broker, is not a lender of money on it, and if he purchase honestly and without notice of equities -- there being nothing on the face of the draft to awaken suspicion -- he can recover the full amount of the draft.
4. Though this Court may be satisfied that a plain error has been committed in a judgment below against a defendant in error, and that he ought to have more than the court below adjudged to him, yet if he himself have assigned no error, the error of the court below cannot be corrected here on the writ of the opposite side.
On the 4th of August, 1869, W. T. Pelton, a resident of Chicago, Illinois, and doing business there, drew a draft on Tilden & Co., residents of New Lebanon in the State of New York, payable to his own order, for $5,000 at sixty days, dating it at Chicago. This draft Pelton sent to Tilden & Co., to the members of which firm he was nearly related, and they accepted it, "payable at the Bank of North America, New York," for his accommodation and in order to aid him in raising funds for carrying on his business, and without
any consideration or security therefor, and without any funds in their hands to protect it, the understanding being that the draft was to be discounted at a certain bank in Chicago and that Pelton should take it up at maturity. Having accepted the draft, Tilden & Co. sent it back to Pelton for the purpose of being negotiated in Illinois, and in order that the proceeds might be used in his business in that state and in Michigan. Pelton, having endorsed the draft, delivered it to one A. C. Coventry for the purpose of having him negotiate it for the benefit of him, Pelton, and Conventry, having endorsed it also, sold it through a note broker to one Blair at Chicago for $4,825, and no more, Blair, at the time when he discounted the draft, having no knowledge whatever of the understanding between Tilden & Co. and Pelton or that the draft was accommodation paper and accepted without any funds in the hands of Tilden & Co.
The draft, when it went into Blair's hands, appeared, of course, in this form:
"$5000] CHICAGO, August 4th, 1869"
"Sixty days after date pay to the order of myself five thousand dollars, value received, with exchange, and charge to account of"
"W. T. PELTON"
"TO MESSRS. TILDEN & CO."
"New Lebanon, New York"
"Accepted, payable at the Bank of North America, New York."
"TILDEN & CO."
"Endorsed: W. T. PELTON, A. C. COVENTRY"
By statute of New York, the exacting of greater interest than seven percent renders a contract illegal and void.
By the statutes of Illinois, ten percent interest is lawful. Any agreement for a higher rate forfeits all the interest. But the contract is not void, and the principal may be recovered.
And an act of Illinois (that of February 12, 1857), enacts as follows:
"Where any contract or loan shall be made in this state or between citizens of this state and any other state or country bearing interest at any rate which was or shall be lawful according
to any law of the State of Illinois, it shall and may be lawful to make the amount of principal and interest of such contract or loan payable in any other state or territory of the United States or in the City of London in England, and in all such cases such contract or loan shall be deemed and considered as governed by the laws of the State of Illinois, and shall not be affected by the laws of the state or country where the same shall be made payable."
The draft matured of course on the 6th of October, 1869, and the acceptors refusing to pay it, Blair sued them in assumpsit in the court below. Plea, usury.
The issue was tried by the court, which found the facts as already given and found conclusions of law as follows:
1st. That by accepting the draft and returning it to the possession of the drawer, the defendants empowered him to negotiate it and put it in circulation by any valid transfer.
2d. That the negotiation and transfer, having been made in Illinois, was valid except as to the interest reserved.
3d. That interest having exceeded the rate of ten percent per annum interest was forfeited, and could not be collected either from the drawers or acceptors. That as to the principal it was valid as to both.
4th. That the plaintiff was entitled to judgment for the sum of $4,825, being the principal less the interest illegally reserved, with costs.
The defendants excepted to the first, second, and fourth of these conclusions of law and to so much of the third as found that the contract, except as to interest reserved, was valid and was binding on the defendants as to the principal.
The plaintiff excepted to the fourth conclusion so far as it limited his right of recovery to the $4,825 and to the refusal of the court to allow interest.
Judgment being given for $4,825, the defendants, Tilden & Co., brought the case here on error, Blair, the plaintiff, not taking any writ or assigning any error.