Ballinger v. Edwards, 39 N.C. 449, 4 Ired. Eq. 449 (1847)

June 1847 · Supreme Court of North Carolina

39 N.C. 449, 4 Ired. Eq. 449

JOHN BALLINGER vs. WILLIAM E. EDWARDS.

The purchase of a negotiable security for less than-the real value is valid.

But that is subject to this qualification, that it must be merely a purchase of the security and at the risk of the purchaser; and, therefore, if the person, who claims to be such, purchaser, holds the person, to whom the money is advanced, responsible for the payment of the debt, it is not, in law and fact, a purchase of the security, but a loan of money upon the security, and, if the sum advanced be less than the amount of it, deducting the legal interest for the time until maturity, the loan is usurious.

The Statute of Usury is as binding .in a Court of Equity as at law, except in cases were the borrower asks the assistance of a Court of Equity, and them the Court will compel Him to do equity, by paying the principal and the legal interest.

Cause transmitted by consent from the Court of Equity of Guilford County, at the Fall Term, 1846.

The bill was filed in October 1843, and states, that itr November 1842, the defendant Lane, purchased from the defendant Edwards, a bond given him by the defendant Boykin, for $175, payable on the 1st of January 1843, and that Edwards transferred it to Lane by delivery only.; that afterwards, Lane transferred and delivered1 the bond to the plaintiff, in satisfaction of a debt to a larger amount, which he owed to the plaintiff. It is further stated, that Lane was unacquainted with Boykin, who resided' in a distant county, and was unwilling to-take the bond without the endorsement of Edwards, and that Edwards,, under the pretence of not wishing to offend Boykin, was unwilling to endorse the bond ; but, instead-thereof, he, with another person as his surety, executed to Lane a bond for the sum of $175, which was-accepted by Lane as collateral security for the payment' of Boykin’s bond, and that, in like manner, Lane bad transferred to the plaintiff the latter bond also. The plaintiff instituted an action at law in the name of Edwards to his use against Boykin and Edwards,dismissed it, and claimed Boykin’s bond as his own. The prayer of the bill is, that the plaintiff’s right to Boykin’s bond may be established and that Edwards may be restrained from receiving the money or releasing the debt and Bo3rkin decreed to pay it to plaintiff.

The answer of Edwards states, that, being in want of money, he applied to Lane to lend him the sum of $175, on the bond of himself and another person as his surety payable to Lane, and that after some treaty Lane agreed to advance to him, and did advance, the sum of $120 and that sum only, and took therefor the said bond of Edwards for $175.

He further states, that, after the transaction was closed, Lane mentioned to him, that he was going down the country on business and would pass near the residence of Boykin, and that Edwards then requested Lane to take Boykin’s bond and present it for him, in the hope that, although it lacked a few weeks of being due, Boykin might have the money and be willing to accomodate him by then making: payment, in part at least, and Lane agreed to oblige him by doing so ; and he avers that, in that manner and for that purpose only, did he put Boy-kin’s bond into the hands of Lane, and he positively denies that he sold it to Lane, or transferred, or intended to transfer, any interest whatever in the same to Lane.

Boykin answers, that, in December 1842, Lane presented the bond for payment, and that he declined making any payment as it was hot due, and it was not convenient to him. He says that Lane professed to act as the agent of Edwards, and did not intimate that he had himself any interest in the debt, and that afterwards, Edwards gave him notice that the bond belonged to him, and forbade him from paying it to Lane.

Lane’s answer admits the transfer of the two bonds to the plaintiff as stated in the bill. It also sots forth, that he purchased Boykin’s bond from Edwards, and paid him therefor the sum of $120, and required Edwards to assign the bond to him by endorsement, bat that Edwards preferred guaranteeing the payment by giving a bond made by himself, and his father a surety to Lane for $175 as collatteral security, for the payment of the sum mentioned in Boykin’s bond, and that finally he acceded to Edwards’ proposition, and took Boykin’s bond, without endorsement as his own property, and the other bond as collateral security. The plaintiff, in support of the bill, took the depositions of Lane and of an attesting witness to the bond of Edwards to Lane; and they state the contract and transaction to have been as they are set forth in Lane’s answer.

Morehead, for the plaintiff.

No counsel for the defendant.

Ruffin, C. J.

The difference between the accounts given by Lane and Edwards of their dealings is not material to the determination of the present suit. The latter says the advance . of money to him was by way of loan, secured exclusively by the bond of himself and his father to Lane for $175, and that Boykin’s bond was do* livered to Lane, upon a distinct agreement for collection for him, Edwards: while Lane states the money to have been advanced upon and for Boykin’s bond and the payment of that bond, instead of being secured by Edwards’ endorsement, was secured by the bond to Lane of Edwards and his father, as a collateral engagement, but they agree in this, that Lane advanced to Edwards upon these papers only the sum of $ 120, instead of that of $175, less the interest for the time the bond of Boykin had to run. Now that is a case of plain'usury, and the contracts of Edwards touching it are void by the statute. The bill indeed does not enter into the particulars of the contract, but the- plaintiff is content to state, in general, that Lane “ purchased” Boykin’s bond and it is laid down that a purchase of a negotiable security for less than, the real value is valid. But that is subject to this qualification that it must be merely a purchase of the security and at the risk of the purchaser, and therefore if the person, who claims to be such purchaser, holds the person to whom the money is advanced responsible for the payment of the debt, it is not in law and fact a purchase of the security, but a loan of money upon the security ; and if the sum advanced be less than the amount of it, deducting the legal interest for the time until maturity, the loan is usurious. Collier v. Neville, 3 Dev. 30. McElwee & Collins, 4 Dev. & Bat. 209. The latter case expressly and correctly lays down the rule that the ordinary case of discounting a note, with an endorsement or guaranty of the receiver of the usury is a lending within the statute.

Now according to the plaintiff's own proof and taking the case most strongly for him, Lane took an obligation of Edwards and his father to himself for $175, as a collateral security and guaranty of the payment of the whole sum due on Boykin’s bond, and that constituted usury.

Such being the nature of the contract, as established by the plaintiff himself, he can have no relief in this Court. The statute is as binding in this Court as at law. If indeed the borrower asks for assistance from equity, it may be referred, unless he deal equitably by paying the principal money borrowed and legal interest. But the lender has no ground on which he can come into and stand in a Court of Equity. He cannot ask this Court to restrain the other party from taking advantage of the statute at law, for example, by pleading it to an action against him for usury. And the borrower has just the same right to insist on the statute in any other form as in that. This defendant Edwards says, that the transfer of Boykin’s bond to Lane, as claimed by the plaintiff', was void at law upon the ground of usury, and therefore that he has a right to treat the bond still as his own, as in law it is¿ and receive the money on it from Boykin, or release it and dismiss all suits brought in his name on it. That is just as true, at law, as that he might plead the statute of usury to a suit brought by Lane against him for the money on his bond or his guaranty of Boykin’s bond. Lane, in whose shoes the plaintiff stands, has no equity, on which he can ask this Court to enjoin Edwards from asserting his legal rights; for the equitable assignment, on which the plaintiff insists, being founded on usurious lending, gives him no right to assistance here. McBrayer v. Roberts, 2 Dev. Eq. 75. State Bank v. Knox, 1 Dev. & Bat. Eq. 50.

The bill must therefore be dismissed with costs.

Per Curiam.

Bill dismissed with costs.