Overton v. Hardin

• Citation: 46 Tenn. 375
• Parties: John Overton v. W. F. Hardin.
• Decision Date: 30 April 1869
• Court: Tennessee Supreme Court

46 Tenn. 375

John Overton

v.W. F. Hardin.

Supreme Court of Tennessee.

April Term, 1869.

FROM MEMPHIS.

At the April Term, there was a verdict and judgment in favor of the plaintiff; from which the defendant appealed to this Court. Judge THOMAS G. SMITH, presiding.

GEORGE GANTT, for Overton.

YERGER, HERRON, HANSON and WM. M. RANDOLPH, for Hardin.

H. T. ELLETT, Special Judge, delivered the opinion of the Court.

Hardin sued Overton as indorser of a note made by W. A. Blythe, payable to, and indorsed by Overton, dated June 1, 1860, for $1,490, payable twelve months after date.

On the trial, the defendant proved that the note, indorsed as aforesaid, was sold by the maker to the plaintiff, in the latter part of March, 1861, before maturity, for twenty-two bales of cotton, which were sold at the same time by Blythe, for $771, and that the plaintiff was a professional note shaver.

It was also proved, that Overton was a man of large fortune, and first rate credit, and that the note of Blythe, having three or four months to run, could have been readily discounted in bank, in Memphis, if it was all right, at the usual banking rates.

It was also proved that one Johnson held a note of Blythe for $5,555, due in 1858, on which Overton and three others were bound as sureties; and that about the 1st of June, 1860, Blythe proposed to take it up, by giving Johnson four new notes, each indorsed by one of the said sureties; that he forwarded these notes to Johnson, in North Carolina, who declined to take them; and that Overton's was on one of the four notes so sent.

Two letters of Blythe to Overton were read in evidence by defendant. In the first, which is dated June 13, 1860, he explains the arrangement with Johnson to take up the large note by giving smaller ones, each to be signed by one of the sureties on the original paper, and encloses one of the new notes for Overton's signature.

The other letter, dated August 20, 1860, returns this note to Overton, and encloses another for him to indorse, saying that Johnson requests that the notes be indorsed instead of being signed by the sureties on their face. It also states, that the time of maturity is changed from six to twelve months, and interest included for the additional six months.

The note thus returned, was a note dated June 1, 1860, for $1,433, payable six months after date, signed by Blythe and Overton, and payable to Johnson.

The defendant proved that Blythe died in February, 1865; and further, offered to prove, that, after he sold the note to plaintiff, and before its maturity, Blythe declared to a witness, that Overton was an accommodation indorser for him on the note in question; that the note was made to enable him to take up the Johnson note, and that he had no right to use it for any other purpose, but that he had misapplied it, and let Hardin have it.

Evidence of these declarations was objected to by the plaintiff, and was excluded by the Court.

There can be no doubt that the possession of an indorsed note by the maker, is presumptive evidence that it was indorsed for his accommodation: Edwards on Bills, 317, 318, and notes; Brown vs. Taber, 5 Wend., 566; Erwin vs. Shaffer, 8 Ohio State R., 43.

It is equally clear, that an accommodation note is invalid in the hands of the person for whose benefit it was made; and, that if it be sold or discounted by him at a greater loss than legal interest, such transaction is usurious and unlawful: Edwards on Bills, 352, 372; Chitty on Com., 611; 3 Parsons Con., 145; 2 Yerger, 464;2 Hum., 102, 546;4 Hum., 244;7 Hum., 450;15 Johns. 55; 3 Campb., 119.

Then, when Hardin purchased the note in question from Blythe, he not only had notice that Overton was an accommodation indorser, but he actually purchased it for an unlawful and usurious consideration. The most hackneyed device to conceal the nature of a usurious transaction, is, to give it the form of a sale of property, which the borrower takes at an exorbitant price. The simultaneous sale of the cotton received by Blythe from the plaintiff, at a price but little exceeding one-half the face of the note, leaves no doubt as to the character of this transaction. In this view of the case alone, it is difficult to see how the plaintiff could have recovered more than the value of the cotton with interest.

But the purchase of a note, under the circumstances detailed, is not a purchase in due course of trade, and can not invest the plaintiff with the rights of a bona fide holder; but he takes it, subject to all the equities existing against it.

These equities, in the present...