Robinson v. Smith, s. 9365-9366 - (214-215).

• Citation: 62 Minn. 62
• Decision Date: 10 July 1895
• Docket Number: Nos. 9365-9366 - (214-215).,s. 9365-9366 - (214-215).
• Parties: LESLIE J. ROBINSON v. JOHN T. SMITH and Another.<SMALL><SUP>1</SUP></SMALL>
• Court: Supreme Court of Minnesota (US)

62 Minn. 62

LESLIE J. ROBINSON v. JOHN T. SMITH and Another.¹

Nos. 9365-9366 - (214-215).

Supreme Court of Minnesota.

July 10, 1895.

Appeals by defendants from an order of the district court for Jackson county, P. E. Brown, J., denying a motion for a new trial, and from a judgment in favor of plaintiff for $5,141.11. Affirmed.

Wilson Borst and Lorin Cray, for appellants.

J. W. Seager and J. G. Redding, for respondent.

START, C. J.²

Action upon four negotiable promissory notes, each for $1,000, dated October 1, 1883, due October 1, 1888, executed by the defendants, and payable to James S. Parsons, or bearer. They are a part of a series of notes secured by a mortgage which was decided by this court to be usurious and void, in the case of Smith v. Parsons, 55 Minn. 520, 57 N. W. 311. Cause tried by the court; judgment directed for plaintiff for the amount of the notes; motion for new trial by defendants; denied; judgment entered; and defendants appeal from the order and from the judgment.

1. The answer denied the transfer of the notes to the plaintiff, and upon the trial the plaintiff produced the notes, and introduced them in evidence, and rested. Thereupon the defendants moved to dismiss the action because there was no proof that the plaintiff was the owner of the notes. Denied, and defendants excepted. The ruling was correct, for the possession of a negotiable promissory note payable to bearer is prima facie evidence of ownership, and such is the rule whether the note was transferred before or after its maturity. Such a note is assignable by delivery in accordance with the custom of merchants. 1 Daniel, Neg. Inst. § 729; Murray v. Lardner, 2 Wall. 110.

2. The trial court found that before the maturity of the notes, and on December 13, 1883, James S. Morgan, in good faith, and without any notice or knowledge of any rights or equities in favor of the defendants, or either of them, purchased, for full value, the notes, with no intent to evade the usury laws of the state, and that his purchase was no part of any usurious transaction; that after the maturity of the notes, and in August, 1892, Morgan, for a valuable consideration, sold and delivered the notes to the plaintiff, who has ever since been the owner of the notes. These findings, eliminating all incompetent and immaterial evidence, are fully sustained by the evidence.

Assuming, then, that the notes were usurious, as between the original parties to them, we reach the vital question in this case, viz. did Morgan take the notes freed from the vice of usury; and, if so, did the plaintiff, by his purchase of them, acquire all of the rights and equities of Morgan in and to the notes, notwithstanding he himself was not a bona fide purchaser of the notes before maturity? The answer depends on the construction to be given to the proviso to G. S. 1894, § 2214, declaring all usurious notes, contracts, and securities void, which reads as follows: "Nothing herein shall be construed to prevent the purchase of negotiable mercantile paper, usurious or otherwise, for a valuable consideration, by an innocent purchaser, free from all equities, at any price before the maturity of the same, when there has been no intent to evade the provisions of this act, or where said purchase has not been a part of the original usurious transaction. In any case, however, where the original holder of an usurious note sells the same to an innocent purchaser, the maker of said note, or his representatives, shall have the right to recover back from the said original holder the amount of principal and interest paid by him on said note."

Manifestly, this proviso was enacted in view of the fact that negotiable paper enters into the channels of commerce, and constitutes a large addition to the medium of exchange in the business world, and that its free circulation as such medium ought not to be hampered. The statute, therefore, makes no attempt to repeal the law merchant, as to usurious negotiable paper, but expressly provides that after the paper has passed into the hands of an innocent purchaser for value, before maturity, it is need from the vice of usury. The maker has no longer any defense, as against the purchaser; but the law, in such cases, gives him a right to recover from the original holder, who transferred the paper, the amount of the usurious paper he is required to pay. An "innocent purchaser," as the term is used in this statute, means a bona fide indorsee or bearer, within the law merchant. Fredin v. Richards, 61 Minn. 490, 63 N. W. 1031; First Nat. Bank v. Bentley, 27 Minn. 87, ...