Defendant applied for a loan to an investment broker to whom he gave a mortgage and a promissory note payable to, and subsequently endorsed in blank by, a third party. The broker, whose name appeared on neither instrument, then sold the 6,000 dollar note at a six per cent discount to plaintiff after deducting a commission of 890 dollars. Defendant received only 4,750 dollars for his note. Plaintiff did not know that his money constituted the original consideration for the note, which bore ten per cent annual interest. After defendant's default, plaintiff brought this action to foreclose the mortgage. The trial court concluded that the transaction was in substance a usurious loan and sustained the defense of usury. On appeal, the Washington Supreme Court affirmed in a five-four decision. Held: The defense of usury is available to the maker of a note for which no value has previously been given if it is discounted at a rate which, when added to stated interest, exceeds the statutory maximum, even though plaintiff holder did not know that he furnished the original consideration. Baske v. Russell, 67 Wash. Dec. 2d 264, 407 P.2d 434 (1965).
Purchase of Note Constitutes Usurious Loan,
Wash. L. & Rev.
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