Gaul v. Willis

• Citation: 26 Pa. 259
• Parties: Gaul versus Willis.
• Decision Date: 01 January 1856
• Court: United States State Supreme Court of Pennsylvania

26 Pa. 259

Gaul versus Willis.

Supreme Court of Pennsylvania.

ERROR to the District Court of Philadelphia.

Wm. L. Hirst, for plaintiff in error.—The plaintiff in error contends that he is only bound to pay the amount advanced on the note, and that the court will not confirm a judgment entered for the excessive or usurious interest demanded of him.

It is not supposed that the defendant in error denies the general proposition that the first discounter could not recover the usurious excess, but it may be urged that as he passed the note to the plaintiff below before its maturity, the doctrine does not apply.

This would be so, if the party now suing for the note had paid full value for it, but as he paid no more than the first discounter, he stands on no better ground.

Charles E. Lex, for defendant in error.—The affidavit and supplemental affidavit show clearly that the note was purchased in the market by Mr. Willis, the present holder; nor is there an allegation that he discounted it for the parties on the note, or ever heard of them. The supplemental affidavit expressly says: "the note was discounted for William C. Rudman by Drexel & Co., and by them passed to the plaintiff." If there is a complaint of usury, therefore, it cannot be against the present holder, who obtained it by a fair purchase from the parties who originally discounted it. The doctrine always has been, that a note can be fairly purchased in the market at a more than legal rate of interest without incurring the dangers of usury. This point is ruled in Musgrove v. Gibbs, 1 Dall. 216, and in Wycoff v. Loughead, 2 Dall. 92. The present holder is therefore in a better situation than Drexel & Co., and is entitled to the full value of the note. However Drexel & Co. might be liable to an abatement for usurious interest, they having passed away the note, that liability cannot attach to Mr. Willis, to whom they passed the note as an independent transaction after they had discounted it for Messrs. Rudman and Gaul.

The opinion of the court was delivered by LEWIS, C. J.

Frederick Gaul, the defendant below, loaned his note to William C. Rudman, for the purpose of enabling the latter to raise money by the sale of it. The note was drawn in the usual form of negotiable instruments, and expressed on its face to have been given for "value received," although there was in fact no debt due from Gaul to Rudman. Rudman endorsed the note, and sold it to Drexel & Co. They, in turn, disposed of it to Benjamin B. Willis, at a discount equal to 1½ per cent. per month. Neither Drexel & Co. nor Willis had any knowledge of the purpose for which the note was given. They had a right to put faith in the representation, on the face of the paper, that it was given for a valuable consideration. As against the parties who made that representation the note must be held to be as they represented it. This is a principle of equity applicable to all business transactions; but it is so indispensable, in the transfer of negotiable securities,...