Hill v. Hawes
| Decision Date | 30 June 1944 |
| Docket Number | No. 7844.,7844. |
| Citation | 144 F.2d 511,79 US App. DC 168 |
| Parties | HILL v. HAWES et al. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Mr. Henry Lincoln Johnson, Jr., of Washington, D. C., for appellant.
Mr. John B. Gunion, of Washington, D. C., for appellee Hawes.
Before GRONER, Chief Justice, and EDGERTON and ARNOLD, Associate Justices.
This is a suit for the cancellation of a note and deed of trust on the ground that if payments of usurious interest are credited to the plaintiff the note has been fully paid. The complaint also asks for the return of usurious payments in excess of the amount of the note. After a trial by the court without a jury, judgment was given for the defendant, from which plaintiff appeals.
The evidence showed that in 1926 defendant Hawes advanced to the account of plaintiff's intestate, Bertha Byrd, and her husband the sum of $2,286.80. In return he received a note for $3,600 secured by a trust deed on real property owned by the Byrds. During the next three years interest was paid on the $3,600 note and in addition the principal was reduced to $2,116.95. Then, in 1929, defendant foreclosed the property under the trust deed, buying it in for $2,300. Immediately thereafter defendant sold back the property to Bertha Byrd for a new note of $3,000 secured by a trust deed on the same property. No new money was advanced to Bertha Byrd as a result of this transaction, which fictitiously increased the indebtedess by another 30%. Payments of principal and interest were made over the next ten years reducing the amount owing on the inflated basis to $914.77.
The net result of the whole series of transactions is the Byrds received $2,286.80. In addition to paying interest on a much larger sum they have repaid about $3,600 on account of principal. Yet in 1939 they still owed about 40% of what they originally received.
The defense is that the $2,286.80 was advanced by the defendant, not as a loan, but as the purchase price of a previously executed $3,600 note which he testified he bought in due course at a 40% discount from a man named Robinson. This note was signed by the Byrds and secured by a trust deed on the same property. Robinson was the payee. Defendant testifies that he did not know either the Byrds or Robinson but bought the note through a man named McKinley, who represented himself to be the agent of Robinson.
We do not consider this evidence sufficient to show that the defendant was a holder in due course of the original note which he claims to have purchased. The circumstances surrounding the transaction constitute a badge of fraud which is not rebutted. Competent businessmen do not purchase notes in substantial sums executed by parties unknown to them whose credit they have not investigated. This circumstance, coupled with the fact that the defendant claims to have bought a note which was amply secured at the outrageous discount of about 40%, makes a prima facie showing of usury which must be explained before the purchaser can be found to be a holder in due course.1 Victims of usury are usually ignorant people who have no access to reputable credit agencies. A common device to conceal usury is the pretended bona fide purchase of a note at a large discount. Transactions of this character out of the normal course of business must be viewed with suspicion by the court if any real protection is to be offered to the victims of usurious moneylenders.
In addition to this presumption the records of the only transaction in which money was actually advanced further rebut the inference that the defendant was a holder in due course. Before the defendant paid out any cash he insisted on a new note from the Byrds secured by a trust deed with friendly trustees. A reputable title company acted as a settlement agent for both parties in distributing the $2,286.80 which the defendant loaned. Its records show that the money was not paid to Robinson, as seller of the note, but instead distributed to the account of the Byrds and to Robinson as attorney. This evidence makes it impossible to support the finding of the trial court that the defendant was the owner in due course of a previous note from the Byrds.
We now come to the colorable foreclosure in 1929 by virtue of which the property was bought in by the defendant for the $2,116.95...
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...point at issue supports the view that a declaration of non-liability is not barred by the statute of limitations. In Hill v. Hawes, 79 U.S.App.D.C. 168, 144 F.2d 511 (1944), suit was brought for the cancellation of a note and deed of trust on the ground that if payments of usurious interest......
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