Gaither v. The Farmers and Mechanics' Bank of Georgetown. 1 P.

was left to act according to the law merchant, a course of proceeding which did not discharge the drawer, could not render the agent liable to the principal. This prayer was, therefore, essentially the same with that which preceded it, with this difference. The third prays an instruction, whatever might be the usage of the bank; the fourth prays essentially the same instruction, provided the conduct of the bank conformed to its usage. This instruction, therefore, ought to have been given as prayed. Upon a review of the whole case, the court is of opinion that, if the bank acted in conformity with its established usage, in not noting the bill, and giving notice thereof, when the ineffectual attempt was made to present it for acceptance, this action could not be supported. With respect to this usage, the testimony is contradictory, and ought to have been submitted to the jury, in conformity with the last prayer made by the counsel for the bank. The court erred in not giving this instruction as prayed. The judgment, therefore, is to be reversed, and the case remanded for a new trial.

This cause came on, &c., on consideration whereof, this court is of opinion that the circuit court erred in refusing to instruct the jury, that if they believed that the defendants conformed to their former usage, in regard to such bills as the one in question, in calling on the drawee for acceptance, (the said drawee being from home,) and not noting the same as dishonored, and giving notice thereof to the parties on the said bill, then, their failure to treat the said bill as dishonored, and to give notice accordingly of non-acceptance, did not discharge the drawer thereof from his liability to the plaintiffs. It is therefore considered by the court that the said judgment be reversed and annulled, and that the cause be remanded to the said circuit court, with directions to award a venire facias de novo, and to proceed therein according to law.

6 P. 8; 14 P. 318; 4 H. 317.

GEORGE R. GAITHER, Plaintiff in Error, v. THE FARMERS AND MECHANICS' BANK OF GEORGETOWN, (for the use of Thomas Corcorran,) Defendants in Error.

1 P. 37.

If a valid promissory note of a third person be indorsed to secure, collaterally, an usurious loan, no action can be sustained upon it by the indorsee against the maker, even if the usurious loan has been paid.

THE case is stated in the opinion of the court.

Taylor and Key, for the plaintiff.

Jones and Coxe, contrà.

[ 41 ]

Gaither v. The Farmers and Mechanics' Bank of Georgetown. 1 P. *JOHNSON, J., delivered the opinion of the court. The plaintiff here was defendant in the court below, to an action instituted by the Farmers and Mechanics' Bank of Georgetown, on a note made by him to W. W. Corcorran and Co. and by them indorsed in blank to the bank.

The record makes out a case for this court, of which the following is a summary: That W. W. Corcorran and Co. discounted their own notes with this bank, at thirty days; the bank expressly stipulating, that in lieu of money they should receive what they call a post note of their own, payable at a future day, without interest. The evidence would make out that the post notes given for this discounted note, were at thirty-five days after date; that is, two days after the discounted note fell due; so that in fact there was no advance of money, although an interest of six per cent. per annum was taken from the Corcorrans, and the post notes of the bank were proved to be at a discount of one per cent., making one and a half per cent. for thirty days, or eighteen per cent. per annum. The note on which this suit was instituted was passed to the bank, as a colla

teral security for the discounted note, and was altogether [* 42 ] unaffected with *usury in its origin. The ground on which the right of the bank is resisted is, not that Gaither is discharged from his contract with W. W. Corcorran and Co., but that the indorsement to the plaintiff below, having been made to secure a note given on an usurious contract, could vest no interest or cause of action in the indorsee. In order to avoid the pressure of this defence in the court below, the plaintiffs there gave in evidence a writing, addressed by W. W. Corcorran and Co. to the bank, bearing date 17th February, 1823, prior to the institution of that suit, in these words: "Please deliver to Thomas Corcorran what notes of ours may remain in your possession, after the debt due the bank, for which they are left as collateral security, shall have been paid, or hold the same subject to his order." And it was further shown that a few days before the issue was tried below, an adjustment had taken place between the bank and Thomas Corcorran, (who was then indorser and assignee of W. W. Corcorran and Co.) upon which Gaither's note had been delivered to Thomas Corcorran; he then indorsed his name on Gaither's note, below that of W. W. Corcorran and Co., and thereupon the bank, before the jury were charged, had the name of Thomas Corcorran entered on the docket, as the cestui que use, for whom they were prosecuting their suit, and the jury, it appears, were charged with the cause, according to the exhibition of parties thus made upon the docket; that is, to try an issue between the bank, to the use of Thomas Corcorran, plaintiff, and Gaither, defendant.

t

Gaither v. The Farmers and Mechanics' Bank of Georgetown. 1 P.

This practice is familiar with the Maryland courts, and when the action originates in that form, the cestui que use is regarded as the real party to the suit.

It is now contended that, although substituted at the eleventh hour, Thomas Corcorran is to be regarded in that relation; and under that idea this cause has been argued, as though the question of usury had been raised between Gaither and an innocent indorser.

But it is obviously impossible, in the present action, to pay any regard to Thomas Corcorran's interest or claims. The arrangement which introduced his name into the cause, was too obviously con cocted for the purpose of rescuing the interests of the plaintiffs in the record, from the effects of the defence of usury. It therefore can pretend to no merit in the administration of justice. But if the effects of that transaction be examined, without reference to the motive, it is equally clear it can have no bearing upon the present action. The interest in or power over Gaither's note, was only inchoate and contingent, until all the debts due the bank should be paid, or they otherwise be induced to relinquish it to him; and this did *not take place until long posterior to the in- [ 43 ] stitution of the suit, and even after issue joined.

The bank sue on their own interest, declared on their own right, and acknowledge no participation with Thomas Corcorran in the interest or the action, until the moment when the cause is going to trial. It was surely then too late to permit them to assume a new character or interpose a new party, however liberally this court might be disposed to sacrifice the forms and rules of law to the Maryland practice.

We will, therefore, put Thomas Corcorran's interest out of view, and will consider the parties, at the commencement of the action, as the parties at its close.

This puts the question on the right of an innocent indorser out of the cause, since the indorsee of Gaither's note received the usurious interest, and the indorser paid it. The only questions on the point of usury, then, are,

1. Whether Gaither, in the relations in which he stood to these parties, could set up the usury in his defence.

2. And whether that defence could be set up, after payment of the note on which the usury had been received.

The objection in the first point is that, as there was no usury in the concoction of Gaither's contract, he ought not to be permitted to avail himself of the usurious contract between the indorser and indorsee, to avoid a debt which he justly owes.

And this is unquestionably true; for the rule cannot be doubted,

Gaither v. The Farmers and Mechanics' Bank of Georgetown. 1 P. that if the note be free from usury, in its origin, no subsequent usurious transactions respecting it, can affect it with the taint of usury. Nor does Gaither propose, by this defence, to relieve himself from paying the note; it goes only to his liability to pay it to this individual; and reason, analogy, and adjudged cases will sustain the defence. Suppose a note given to a woman, who marries, and then indorses it without her husband's authority; such indorsement would be void; 1 East, 432, and the indorsee could not recover, yet the husband and wife may recover.

In a comment on the case of Jones and Davison, in Holt's Reports, 1 Holt, 256, an usurious note is likened to a bill of exchange on a bad stamp. If a stamp were necessary to give validity to an indorsement, it cannot be doubted that none who claim through such an indorsement could maintain an action against the drawer. The indorsement, though actual, was ineffectual for the purpose of transferring an interest in the note. It was a void act.

This case is governed by the laws of Maryland: and the Act of Maryland against usury is in the words of the statute of [*44] Ann. It declares, "All bonds, contracts, and * assurances whatever, taken on an usurious contract," to be utterly void. Now the indorsement of a negotiable note creates several contracts; and if, in this case, it could give a right of action against Gaither, the drawer, it ought also to sustain an action against W. W. Corcorran and Co. the indorsers; but against them, it is perfectly clear that an action could not be maintained, for they were parties to the usurious loan. It follows that their indorsement was a void act, and the property, and of consequence the right of action, never passed to these plaintiffs.-There is a very strong case There is a very strong case on this subject, which we believe was not quoted in argument, to be found in the books to which we usually refer. We mean the case of Harrison and Hamell, in Taunton's Reports, (5 Taunt. 780,) in which the rights of a collateral surety to avail himself of usury in the original transaction, is distinctly recognized, when the contract of the collateral was wholly unaffected by usury. The case was reserved for argument, and the whole court concurred in the legality of the defence. The language of the judges is strong, and applies to the case before us. One of them remarks: "That if a man lends 1,000 pounds on an usurious interest, and gets from a third person a collateral security for 800 pounds only, without usurious interest, I hold that bond is void, not because it is given for securing usurious interest, but because it is given for enforcing a contract for usurious interest." And another says: "That, if giving these collateral acceptances would alter the case, it would be a shift or device by which the statutes of usury would be defeated."

Minor v. The Mechanics' Bank of Alexandria. 1 P.

With regard to the second point, it is necessary to see the force of the argument which would deduce from the payment of the discounted note, a cure to the taint with which the contract of indorsement was affected. The law declares it absolutely void. By what operation, then, is it to be rendered valid by the payment of the discounted note? It is argued, by the payment and extinguishment of the latter note, the usury is extinct, and as if it had never existed. We cannot perceive how this reasoning can prevail, either in point of fact or inference. In point of fact, the crime was only consummated by the payment of that note, since the bank thereby incurred a liability under the statute, to be sued for three times the sum paid them; and as to the inference, it seems very difficult to conceive how the payment of the usurious note should operate to confirm or give birth to a contract which the law declares never had existence, and was ab initio, utterly null and void. There have been cases in which usurious contracts have been cancelled, the usury refunded, and new contracts substituted free from the taint of usury; and the law gives to the offender this locus penitentiæ. But there is no analogy between such a 'transaction and that here presented, in [* 45 ] which the money loaned has been paid by the borrower,

and only passed into the vaults of the bank, to be deposited with the usurious interest previously taken. We have not heard of the refunding of this usury; and this, at least, would have been indispensable to removing the taint. But even that would never have given validity to an indorsement, which, in the eye of the law, was as though it had never existed.

As the decision on this point disposes of the right of action, and leaves no probability that the cause will be again brought up to this court, we deem it unnecessary to notice any other of the points made in argument.

The judgment was reversed, and the cause remanded to the circuit court, with directions to award a venire facias de novo.

7 P. 103.

GEORGE MINOR, PHILIP H. MINOR, DANIEL MINOR, WILLIAM MINOR, and SMITH MINOR, Plaintiffs in Error, v. THE MECHANICS' BANK OF ALEXANDRIA, Defendants in Error.

1 P. 46.

The subscription of the whole amount of the capital stock of a bank is not a condition precedent to its corporate existence, unless made so by the terms of its charter.

A replication to a plea of general performance, in an action on a bond, should assign a special breach; but, after verdict, the omission to do so cannot be taken advantage of.