A bill of exchange, in payment of a debt due on a protested
bill, was taken in New York from one of the parties to the
protested bill. The exchange between Mobile, on which the bill was
drawn, was stated to be ten percentum, and was added to the bill,
and the damages on the protested bill, with interest, at the rate
of interest in New York, from the time the first bill was
protested, were added to the bill. It was sent to Mobile and was
placed to the credit of the drawees by the endorsee, who received
it before it came to maturity. The bill was afterwards protested
for nonpayment. An action was brought in Alabama against the
endorsers of the bill, one of whom was in New York when the bill
was drawn, and who, being liable to suit on the protested bill,
gave the second bill to prevent suit being brought against him. The
defendants alleged usury in the second bill, the rate of exchange
allowed on the bill, being ten percentum, was given, and it being
alleged that the highest rate of exchange on Mobile did not exceed
five percentum.
Although the transaction, as exhibited, appears, on the face of
the account for which the bill was drawn, to be free from the taint
of usury, yet if the ten percentum charged as exchange, or any part
of it, was intended as a cover for usurious interest, the form in
which it was done and the name under which it was taken will not
protect the bill from the consequences of usury, and if the fact be
established, it must be dealt with in the same manner as if the
usury had been expressly mentioned in the bill itself. But whether
the charge of ten percentum for exchange between New York and
Mobile was intended as a cover for usury or not is a question
exclusively for the jury. It is a question of intention.
In order to enable the jury to decide whether the usury was
concealed under the name of exchange, evidence on both sides ought
to have been admitted, which tended to show the usual rate of
exchange between New York and Mobile, when the bill was
negotiated.
There is no rule of law fixing the rate which may be charged for
exchange. It does not depend on the cost of transporting specie
from one place to another, although the price of exchange is no
doubt influenced by it.
The general principle in relation to contracts made at one place
to be executed at another is well settled. They are to be governed
by the laws of the place of performance, and if the interest
allowed by the laws of the place of performance be greater than
that permitted at the place of the contract, the parties may
stipulate for the higher interest without incurring the penalties
of usury.
When a contract has been made without reference to the laws of
the state where it was made or to the laws of the place of
performance, and a rate of interest was reserved forbidden by the
laws of the place where the contract was made, which was concealed
under the name of exchange in order to evade the law against usury,
the question is not which law is to govern in executing the
contract; unquestionably it must be the law of the state where the
agreement was entered into and the instrument taken to secure its
performance. A contract of this kind cannot stand on the same
principles with a
bona fide agreement made in one place to
be executed in another. In the last mentioned cases, the agreements
were permitted by the
lex loci contractus, and will even
be enforced there if the party is found within its jurisdiction.
But the same rule cannot be applied to contracts forbidden by its
laws and designed to evade them. In such cases, the legal
consequences of such an agreement must be decided by the law of the
place where the contract was made. If void there, it is void
everywhere.
A person who takes a bill which on the face of it was dishonored
cannot be allowed to claim the privileges which belong to a
bona fide holder without notice. If he chooses to receive
it under such circumstances, he takes it with all the infirmities
belonging to it, and is in no better condition than the person from
whom he received it. There can be no distinction in principle
between a bill transferred after it is dishonored for nonacceptance
and one transferred after it has been dishonored for
nonpayment.
Page 38 U. S. 66
If, in consideration of further forbearance, a creditor receives
a new security from his debtor for an existing debt, he cannot
enlarge the amount due by exacting anything, either by way of
interest or exchange, for the additional risk which he may suppose
he runs by this extension of credit, nor on the opinion he may
entertain as to the punctuality of payment or the ultimate safety
of his debt.
The plaintiff in error instituted a suit on a bill of exchange,
dated at New York on 11 March, 1837, drawn by D. Carpenter on
Sayre, Converse & Company, Mobile, Alabama, for $7,287.78 in
favor of the defendants, Pond, Converse & Company, payable and
negotiable at the Bank of Mobile sixty days after date.
The plaintiff in error was a citizen of New York, and the
drawers and endorsers of the bill were citizens of Alexandria,
Alabama.
The evidence in the circuit court proved that Lewis W. Pond, one
of the defendants, was in New York in March, 1837, and being
indebted to the plaintiff in the sum of six thousand dollars on a
bill which had been returned protested from Mobile, and on which
suit was about to be brought by the plaintiff, agreed to pay ten
percent, the legal damages on the bill, and ten percent in
addition, with the legal interest of New York on the bill for the
time of its return, being eighteen days, and the charges of protest
and postage, by a bill of exchange on Mobile. The bill was drawn in
New York, being for the sum of $7,287.78, and was endorsed by Mr.
Pond, in the name of the firm, the defendants in error. The bill
was endorsed by the plaintiff in error and was remitted by the
plaintiff to S. Andrews, at Mobile, and was by him set to the
credit of H. A. Andrews & Company, of New York. It was received
by S. Andrews, with the endorsement of the defendants, before its
maturity, and it was a cash credit in the account current between
H. M. Andrews & Company and S. Andrews. The defendant offered
evidence under the issue the statute of New York against usury and
certain depositions to prove that the bill of exchange was
usurious.
One of the witnesses stated that the consideration for this bill
was made up by the following account:
E. Hendrick's draft on Daniel Carpenter,
Montgomery, Alabama, protested, dated
at New York, December 20th, 1836, at
sixty days, for . . . . . . . . . . . . . . . . $6,000.00
Damages at 10 percent . . . . . . . . . 600
Interest 18 days, at 7 percent. . . . . 21
Protest and postage . . . . . . . . . . 4.25
------- 625.25
Exchange, 10 percent, being difference
of exchange between Mobile and New
York on 11 March 1837 . . . . . . . . 662.53
---------
$7,287.78
John Delafield, President of the Phoenix Bank, examined on the
part of the defendant, stated that the exchange between New York
and Mobile on 11 March, 1837, was from three to five per
Page 38 U. S. 67
cent. This knowledge of exchange was acquired from having dealt
an exchange during the period for the Phoenix Bank.
Robert White, cashier of the Manhattan Company, stated that by a
reference to the books of the company, the exchange between New
York and Mobile was, during the month of March, 1837, from five to
seven percent, and Morris Robinson agent for the Bank of the United
States in the City of New York, said that during the month of
March, 1837, he found by a reference to the books the dealers with
the bank were charged from three to five percent -- three for
short, and five for long paper.
The plaintiff excepted to the reading of the statute and laws of
New York against usury, and in order to disprove the allegation of
usury in the transaction, as the contract was not made subject to
the statute laws of New York, and the contract was subject only to
the laws of Alabama as to its obligatory form and solidity, and was
or was not usurious according to these laws. The plaintiff then
offered to prove by Joseph Wood that the banks purchased bills at a
far less exchange than others; that they never bought any other
than undoubted paper; that from the facility of collecting,
remitting &c., they had many advantages over the citizens at
large, and that the exchange of the banks was therefore much lower
than that of the community at large; that there was no fixed rate
of exchange between Mobile and New York; that it varied from one to
twenty percent, according to the solvency, punctuality, risk,
&c., of the parties; that exchange was ever fluctuating, and
was high or low as the risk was great or small. The court refused
to admit this testimony, and the plaintiff excepted.
The plaintiffs asked the court to instruct the jury that if it
was satisfied that the excess over legal interest retained in this
bill was taken and contracted for innocently by the parties,
without intending to violate the laws against usury, it might find
for the plaintiff. The court refused to give this instruction, and
the plaintiff excepted.
The plaintiff moved the court to instruct the jury that the
contract expressed in this bill of exchange, if to be executed in
Alabama, was subject alone to the laws of Alabama against usury,
and that the usury laws of New York had no force or anything to do
with this investigation; this was refused by the court, and
plaintiff excepted.
The plaintiff next requested the court to charge the jury that
if it believed S. Andrews received the bill before maturity, for a
valuable consideration, without any notice of usury, and that the
plaintiff received it from S. Andrews, without notice of usury, and
before maturity, that the plaintiff might recover notwithstanding
plaintiff offered no proof of the consideration he gave for it. The
plaintiff excepted to this refusal of the court.
The plaintiff next moved the court to charge that the variance
between the bill declared on and the one set up as the same bill by
defendant's deposition was fatal in a plea of usury, to which the
court refused, and the plaintiff excepted.
Page 38 U. S. 68
It appeared that before the bill was delivered by S. Andrews to
plaintiff, it had been, while in the hands of S. Andrews, protested
for nonacceptance, which appeared on the face of the bill. There
was no evidence of any settled account between H. M. Andrews &
Co. and S. Andrews or which was creditor or debtor upon the
statement of accounts. It was also proved that the expense of
transporting specie from New York to Mobile, including insurance
and interest, would not exceed one and one-half percentum on the
sum transported.
Upon the whole case and the several points stated, the court
charged the jury that if it believed from the evidence that by the
usages of trade between New York and Mobile, there was an
established rate of exchange between those places, the drawers and
drawees of the bill of exchange here sued on, had a right to
contract for such rates of exchange, and that even a higher rate to
a small amount, if under the circumstances it did not appear to
have been intended to evade the statute against usury might be
allowed by them; but if it believed that no such usage existed, the
parties had no right to contract for more than the actual expense
of transportation of specie from one place to the other, including
interest, insurance, and such reasonable variations therefrom as
above stated, and further, if it believed from the evidence that
the drawers of the bill of exchange contracted with the drawers in
the State of New York, at the time the bill was drawn, for a
greater rate of interest than seven percentum per annum for the
forbearance of the payment of the sum of money specified in the
bill, although it may have been taken in the name of exchange, the
contract is usurious, and unless it believed from the evidence that
the plaintiff took the bill in the regular course of business and
upon a fair and valuable consideration
bona fide paid by
him and without notice of the usury, it ought to find for the
defendant; otherwise for the plaintiff, to which opinion and charge
of the court the plaintiff by his counsel excepted. The jury found
a verdict for the defendants, and the plaintiff prosecuted this
writ of error.
Page 38 U. S. 73
MR. CHIEF JUSTICE TANEY delivered the opinion of the Court.
The action was brought by the plaintiff as endorsee, against the
defendants as endorsers of a bill of exchange in the following
words:
"Exchange for $7,287 78/100 New York, March 11, 1837"
"Sixty days after date of this first of exchange, second of same
tenor and date unpaid, pay to Messrs. Pond, Converse &
Wadsworth or order seven thousand two hundred and eighty-seven
78/100 dollars, negotiable and payable at the Bank of Mobile, value
received, which place to the account of"
"Your obedient servant"
"D. CARPENTER"
"To Messrs. Sayre, Converse & Co."
"Mobile, Alabama"
The case as presented by the record appears to be this. The
defendants were merchants residing in Mobile, in the State of
Alabama. H. M. Andrews & Co. were merchants residing in New
York, and before the above mentioned bill was drawn, the defendants
had become liable to H. M. Andrews & Co. as endorsers upon a
former bill for $6,000 drawn by E. Hendricks on Daniel Carpenter,
of Montgomery, Alabama. The last mentioned bill was dated at New
York, and fell due on 21 February, 1837, and was protested for
nonpayment. The defendant Pond, it seems, was in New York in the
month of March, 1837, shortly after this protest, when H. M.
Andrews & Co. threatened to sue him on the protested bill, and
the defendant Pond, rather than be sued in New York, agreed to pay
H. M. Andrews & Co. ten percent damages on the protested bill
and ten percent interest and exchange on a new bill to be given,
besides the expenses on the protested bill.
According to this agreement an account, which is given in the
record, was stated between them on 11 March, 1837, in which the
defendants were charged with the protested bill and ten percent
damages on the protest and interest and expenses, which amounted
altogether to the sum of $6,625.25, and ten percent upon this sum
was then added, as the difference of exchange between Mobile and
New York, which made the sum of $7,287.78, for which the defendant
Pond delivered to H. M. Andrews & Co. the bill of exchange upon
which this suit is brought, endorsed by the defendants in blank.
The bill was remitted by H. M. Andrews & Co. to S. Andrews at
Mobile for collection. The drawees refused to accept it, and it was
protested for nonacceptance, and after this refusal
Page 38 U. S. 74
and protest, it was transferred by S. Andrews to J. J. Andrews,
the present plaintiff. It is stated in the exception that after
this transfer it was a cash credit in the account between H. M.
Andrews & Co. and S. Andrews. The bill was not paid at
maturity, and this suit is brought to recover the amount.
There is no question between the parties as to the principal or
damages of ten percent charged for the protested bill of $6,000;
nor as to the interest and expenses charged in the account
hereinbefore mentioned. The defendants admit that the principal
amount of the protested bill, the damages on the protest which are
given by the act of assembly of New York, and the interest and
expenses, were properly charged in the account. The sum of
$6,625.25 was therefore due from them to H. M. Andrews & Co. on
the day of the settlement, payable in New York. The dispute arises
on the item of $662.53, charged in the account as the difference of
exchange between New York and Mobile, and which swelled the amount
for which the bill was given to $7,287.78. The defendants allege
that the ten percent charged as exchange was far above the market
price of exchange at the time the bill was given, and that it was
intended as a cover for usurious interest exacted by the said H. M.
Andrews & Co. as the price of their forbearance for the sixty
days given to the defendants. This was their defense in the circuit
court, where a verdict was found for the defendants under the
directions given by the court.
Many points appear to have been raised at this trial, which are
stated as follows in the exception taken by the plaintiff.
The defendant offered evidence:
1. To prove that the said bill of exchange was usurious
according to the statute and laws of the State of New York. The
plaintiff objected to the reading of the statute and depositions
aforesaid because the contract was not made with a view of the
statute or laws of New York. But the bill of exchange was usury or
not by the laws and statutes of Alabama, and that the contract was
subject only to the laws of the State of Alabama as to its
obligatory force and validity, and he further objected that if this
contract were to be decided by the statute of New York, that this
proof could not be given under this issue, but the court overruled
all these objections and permitted the depositions and statute to
be read to show the bill of exchange to be void by the laws of New
York, to all which plaintiff excepts.
2. Plaintiff then offered to prove by Joseph Wood that the banks
purchased bills at a far less rate of exchange than others; that
they never bought any than undoubted paper; that from the facility
of collecting, remitting, &c., they had many advantages over
the citizens at large, and that the exchange of the banks was
therefore much lower than the community at large; that there was no
fixed rate of exchange between Mobile and New York; that it varied
from one to twenty percent according to the solvency, punctuality,
risk, &c.; that exchange was ever fluctuating, and was high or
low as
Page 38 U. S. 75
the risk was great or small. The court rejected this testimony
also, to which plaintiff excepts.
3. Plaintiff asked the court to instruct the jury that if it was
satisfied that the excess over legal interest retained in this bill
was taken and contracted for innocently by the parties, without
intending to violate the laws against usury, that they might find
for plaintiff, but the court refused this also, and plaintiff
excepts.
4. Plaintiff moved the court to charge the jury that the
contract expressed in this bill of exchange, if to be executed in
Alabama, was subject alone to the laws of Alabama against usury,
and that the usury laws of New York had no force or anything to do
with this investigation. This was refused by the court, and
plaintiff excepts.
5. Plaintiff next requested the court to charge the jury that if
it believed S. Andrews received the bill before maturity for a
valuable consideration without any notice of usury, and that
plaintiff received it from S. Andrews, without notice of usury and
before maturity, that the plaintiff might recover notwithstanding
plaintiff offered no proof of the consideration he gave for it. To
this refusal there was also an exception.
6. Plaintiff next moved the court to charge that the variance
between the bill declared on and the one set up as the same bill by
defendants' deposition was fatal in a plea of usury, to which the
court refused, and plaintiff excepts.
7. It appeared that before the bill was delivered by S. Andrews
to the plaintiff, it had been, while in the hands of S. Andrews,
protested for nonacceptance, which appeared on the face of the
bill. There was no evidence of any settled account between H. M.
Andrews & Co. and S. Andrews, or which was creditor or debtor
upon the statement of accounts. It was also proved that the expense
of transporting specie from New York to Mobile, including insurance
and interest, would not exceed one and one-half percent on the sum
transported. Upon the whole case and the several points stated, the
court charged the jury that if it believed from the evidence that
by the usages of trade between New York and Mobile there was an
established rate of exchange between those places, the drawers and
drawees of the bill of exchange here sued on had a right to
contract for such rates of exchange, and that even for a higher
rate to a small amount, if under the circumstances it did not
appear to have been intended to evade the statute against usury,
might be allowed by them.
8. But if they believed that no such usage existed, the parties
had no right to contract for more than the actual expense of
transportation of specie from one place to the other, including
interest, insurance, and such reasonable variations therefrom as
above stated.
9. And further, if it believed from the evidence that the
drawers of the bill of exchange contracted with the drawee in the
State of New York, at the time the bill was drawn, for a greater
rate of interest than seven percentum per annum for the
forbearance
Page 38 U. S. 76
of the payment of the sum of money specified in the bill,
although it may have been taken in the name of exchange, the
contract is usurious, and unless they believe from the evidence
that the plaintiff took the bill in the regular course of business
and upon a fair and valuable consideration
bona fide paid
by him and without notice of the usury, it ought to find for the
defendants; otherwise for the plaintiff.
From the manner in which the points are arranged in this
exception and the similarity of the questions presented in some of
them, we shall be better understood by expressing our opinion on
the whole case as it appears before us, without regarding the order
in which the questions are stated in the exception and without
examining separately each one of the instructions asked for by the
plaintiff and refused by the court.
The transaction, upon the face of it, does not profess to charge
any interest for forbearance. It is a bill of exchange in the usual
form, and in the account stated at the time, and which formed the
basis of the bill, the only item in relation to interest is the
small sum charged for the eighteen days which intervened between
the time when the first bill became due and the present one was
given. This interest is charged at seven percent, which is the
legal rate of interest established in New York. The transaction,
taken altogether, was indeed a ruinous one on the part of the
defendants. A debt of $6,000, payable at Mobile on 21 February, was
converted into a debt of $7,287.78, payable at the same place on 25
April following, being an increase of $1,287.78 in the short space
of eighty-one days. Yet if the defendants brought it upon
themselves by their failure to take up the first bill at maturity,
and the transaction was not intended to cover usurious interest,
they must meet the consequence of their own improvidence. The sum
of $6,625.25 was undoubtedly due from them to H. M. Andrews &
Co. on the day the bill in question was drawn. They were entitled
to demand that sum in New York, or a bill that was equivalent to it
at the market price of exchange, and if ten percent discount was
the usual price at which others purchased bills of this description
in the market of New York, they had a right to take the bill at
that rate, in satisfaction of their debt. There is nothing,
therefore, upon the face of the papers from which the Court can
undertake to say that usurious interest was exacted.
But although the transaction, as exhibited in the account,
appears on the face of it to have been free from the taint of
usury, yet if the ten percent charged as exchange, or any part of
it, was intended as a cover for usurious interest, the form in
which it was done and the name under which it was taken will not
protect the bill from the consequences of usurious agreements, and
if the fact be established, it must be dealt with in the same
manner as if the usury was expressly contracted for in the bill
itself. But whether this item was intended as a cover for usury or
not is a question exclusively for the jury. It is a question of
intent. And in order to
Page 38 U. S. 77
enable the jury to decide whether usury was concealed under the
name of exchange; evidence on both sides ought to have been
admitted which tended to show the usual rate of exchange between
New York and Mobile when this bill was negotiated. There is no rule
of law fixing the rate which may be lawfully charged for exchange.
It does not altogether depend upon the cost of transporting specie
from one place to another, although the price of exchange is no
doubt influenced by it. But it is also materially affected by the
state of the trade, by the urgency of the demand for remittances,
and by the quantity brought into the market for sale, and sometimes
material changes take place in a single day, although no alteration
has happened in the expenses of transporting specie. The Court
therefore can lay down no rule upon the subject. H. M. Andrews
& Co., when about to take this bill in payment of an existing
debt, had a right to include in it a fair allowance for the
difference in exchange. Whether they exacted more or not for the
forbearance of their debt is a question for the jury to decide, and
in order to enable them to decide it correctly, they must be
allowed to hear the evidence which either of the parties may offer
as to the rates of exchange for such a bill as this, which was
payable in specie and not in any depreciated currency. Taking this
view of the subject, we think the court below erred in rejecting
the testimony of Joseph Wood, who was offered by the plaintiff to
prove the rate of exchange and also in the direction given to the
jury that if there was no fixed rate of exchange, the creditor had
a right to take no more than the actual expense of transporting the
specie, or a small amount more, where the addition was not intended
to cover usury.
Another question presented by the exception and much discussed
here is whether the validity of this contract depends upon the laws
of New York or those of Alabama. So far as the mere question of
usury is concerned, this question is not very important. There is
no stipulation for interest apparent upon the paper. The ten
percent in controversy is charged as the difference in exchange
only, and not for interest and exchange. And if it were otherwise,
the interest allowed in New York is seven percent, and in Alabama
eight, and this small difference of one percent per annum upon a
forbearance of sixty days could not materially affect the rate of
exchange and could hardly have any influence on the inquiry to be
made by the jury. But there are other considerations which make it
necessary to decide this question. The laws of New York make void
the instrument when tainted with usury, and if this bill is to be
governed by the laws of New York, and if the jury should find that
it was given upon an usurious consideration, the plaintiff would
not be entitled to recover unless he was a
bona fide
holder without notice and had given for it a valuable
consideration, while by the laws of Alabama he would be entitled to
recover the principal amount of the debt, without any interest.
The general principle in relation to contracts made in one
place
Page 38 U. S. 78
to be executed in another is well settled. They are to be
governed by the law of the place of performance, and if the
interest allowed by the laws of the place of performance is higher
than that permitted at the place of the contract, the parties may
stipulate for the higher interest without incurring the penalties
of usury. And in the case before us, if the defendants had given
their note to H. M. Andrews & Co. for the debt then due to
them, payable at Mobile in sixty days with eight percent interest,
such a contract would undoubtedly have been valid, and would have
been no violation of the laws of New York, although the lawful
interest in that state is only seven percent. And if in the account
adjusted at the time this bill of exchange was given it had
appeared that Alabama interest of eight percent was taken for the
forbearance of sixty days given by the contract, and the
transaction was in other respects free from usury, such a
reservation of interest would have been valid and obligatory upon
the defendants and would have been no violation of the laws of New
York.
But that is not the question which we are now called on to
decide. The defendants allege that the contract was not made with
reference to the laws of either state and was not intended to
conform to either. That a rate of interest forbidden by the laws of
New York, where the contract was made, was reserved on the debt
actually due, and that it was concealed under the name of exchange,
in order to evade the law. Now if this defense is true and shall be
so found by the jury, the question is not which law is to govern in
executing the contract, but which is to decide the fate of a
security taken upon an usurious agreement which neither will
execute. Unquestionably it must be the law of the state where the
agreement was made and the instrument taken to secure its
performance. A contract of this kind cannot stand on the same
principles with a
bona fide agreement made in one place to
be executed in another. In the last mentioned cases, the agreements
were permitted by the
lex loci contractus, and will even
be enforced there if the party is found within its jurisdiction.
But the same rule cannot be applied to contracts forbidden by its
laws and designed to evade them. In such cases, the legal
consequences of such an agreement must be decided by the law of the
place where the contract was made. If void there, it is void
everywhere, and the cases referred to in Story's Conflict of Laws
203 fully establish this doctrine.
In the case of
De Wolfe v.
Johnson, 10 Wheat. 383, this Court held that the
lex loci contractus must govern in a question of usury,
although by the terms of the agreement the debt was to be secured
by a mortgage on real property in another state. And the case of
Dewar v. Shaw, 3 T.R. 425, shows with what strictness the
English courts apply their own laws against usury to contracts made
in England. In the case under consideration, the previous debt for
which the bill was negotiated was due in New York; a part of it --
that is to say the damages on the protest of the first bill --
Page 38 U. S. 79
were given by a law of that state, and the debt was then bearing
the New York interest of seven percent, as appears by the account
before referred to. And if in consideration of further indulgence
in the time of payment the parties stipulated for a higher interest
and agreed to conceal it under the name of exchange, the validity
of the instrument, which was executed to carry this agreement into
effect, must be determined by the laws of New York, and not by the
laws of Alabama.
In this aspect of the case another question arose in the trial
in the circuit court. By the laws of New York as they then stood,
usury was no defense against the holder of a note or bill who had
received it in good faith, and to whom it was transferred for a
valuable consideration and without notice of the usury. The present
plaintiff claims the benefit of this provision. But upon the
evidence in the case, it is very clear that he does not bring
himself within it. The bill of exchange was protested for
nonacceptance while it was in the hands of S. Andrews, the agent of
H. M. Andrews & Co., to whom it had been sent for collection,
and this fact appeared on the face of the bill at the time it was
transferred to the plaintiff. Now a person who takes a bill, which
upon the face of it was dishonored cannot be allowed to claim the
privileges which belong to a
bona fide holder without
notice. If he chooses to receive it under such circumstances, he
takes it with all the infirmities belonging to it, and is in no
better condition than the person from whom he received it. There
can be no distinction in principle between a bill transferred after
it is dishonored for nonacceptance and one transferred after it is
dishonored for nonpayment, and this is the rule in the English
courts, as appears by the case of
Crossley v. Ham, 13 East
498. Now it is evident that no consideration passed between
Carpenter, the drawer of the bill, and the defendants, who are the
payers and endorsers. The bill was made and endorsed by the
defendants, for the purpose of being delivered to H. M. Andrews
& Co. in execution of the agreement for further indulgence. And
if that agreement was usurious, then the bill in question was
tainted in its inception, and that taint must continue upon it in
the hands of the present plaintiff.
There is one other direction given by the circuit court which
remains to be considered. It is the third, as stated in the
exception. The vagueness and generality of the terms in which this
instruction was asked for by the counsel for the plaintiff
justified the court in refusing it. It will be seen from what we
have already said that if the rate of exchange taken upon this bill
was a fair one, and was not intended to cover usurious interest,
the plaintiff is entitled to recover, and if the payer means
nothing more than this, there could be no objection to it. But if
it was intended to maintain that although a higher rate of exchange
was allowed than the fair market price, and that this was done in
consideration of the forbearance of payment, under the belief that
the law would not in that shape regard it as usury, the mistake of
the parties in this respect
Page 38 U. S. 80
will not alter the character of the transaction. The instruction
as asked for was framed in such general terms that it might have
misled the jury, and the court therefore was not bound to give
it.
In fine, if the parties intended to allow no more than a fair
rate of exchange, testing it by the market price of good bills of
this description, it was not usury and the plaintiff is entitled to
recover. If, on the contrary, more was intended to be taken, it was
usury and the plaintiff is not entitled to recover. It is true that
after this bill had been negotiated between H. M. Andrews & Co.
and the defendants, other persons might have lawfully purchased it
at a much greater discount than the market rate of exchange, and
might have considered and estimated in the price they gave for it,
the known embarrassments, the want of punctuality, and the loss of
credit of the defendants, whose former bill had already been
protested. But as between the debtor and his creditor, no
difference in the rate of exchange can be made on that account. If,
in consideration of further forbearance, the creditor receives a
new security from his debtor for an existing debt, he cannot
enlarge the amount due by exacting anything either by way of
interest or exchange on account of the additional risk he may
suppose he runs by this extension of credit nor on account of any
doubts he may entertain as to the punctuality of payment or the
ultimate safety of his debt.
It is hardly necessary to add that the right of the defendant to
offer in evidence, under the plea of
nonassumpsit, that
the instrument was given upon an usurious contract has been too
well settled to be now disputed, and we see nothing in the record
upon which a question for the court could be raised upon the
supposed variance between the bill mentioned in the testimony
produced by the defendants and the bill declared on by the
plaintiff.
Upon the whole, we dissent from the circuit court in the second
and eighth points in the exception, as we have already mentioned,
and we concur with them in the residue.
The judgment of the circuit court must therefore be
Reversed with costs.
This cause came on to be heard on the transcript of the record
from the Circuit Court of the United States for the Southern
District of Alabama, and was argued by counsel.
On consideration whereof it is ordered and adjudged by this
Court that the judgment of the said circuit court in this cause be
and the same is hereby reversed with costs, and that this cause be
and the same is hereby remanded to the said circuit court with
directions to award a
venire facias de novo.
