Froese v. Prosnitz — 34 N.Y. St. Rep. 9

Majority

p. 9

Robert Froese, Pl’ff, v. William Prosnitz et al., Def’ts.

(City Court of New York,

Trial Term,

Filed December 3, 1890.)

Headnote

Ustjby.

The taint of usury attaches to the whole family of consecutive obligations, however remote. But. an obligation valid in its inception is not in

p. 10

validated by an usurious agreement for the extension of the lime of payment; but the sum paid on the agreement for forbearance will be applied as payment.

Trial by the court without a jury.

Gvggenheimer & Untermyer, for pl'ff; John O' Connell, for def’ts.

The taint of usury undoubtedly attaches to the whole family of consecutive obligations and securities growing out of a transaction originally vicious, and none of the descendants in the line of liabilities, however remote, can be deemed to be free from the original taint if the family descent can be traced. Dunning v. Merrill, Clarke’s Ch., 257; National Bank v. Lewis, 75 N. Y., 524 ; Claflin v. Boorum, 33 N. Y. State Rep., 640. While tins is so, it is also true that' an obligation, valid in its inception, is not invalidated by an usurious agreement for the extension of the time of payment; but the sum paid on the agreement for forbearance will in equity be applied as payment. Real Estate Trust Co. v. Keech, 69 N. Y., 248 . The case at bar falls within the rule last stated. Kraus owed Bendheim $21,500. He gave him in payment certain outstanding book accounts, a bond and mortgage and certain promissory notes made by him, in all aggregating the amount of the debt ($21,500.) No usury entered into the creation of the original obligation. The usury arose afterwards. It appears that at the maturity of the original notes the time of payment was extended by the delivery of renewal notes, of which the note in suit is one. It was agreed as a consideration for the extension of time that a sum exceeding six per cent, was to be reserved and taken as interest, and this is said to invalidate the renewed notes. It does not. No part of the usury went into the renewed obligations, but into an independent obligation not the subject of this action. No counterclaim for the usury exacted is set up. Upon the pleadings and admissions of counsel, the plaintiff as the holder of the note in suit by transfer for Bendheim is entitled to judgment so far as the defense of usury is concerned. The defendants will be permitted to prove (if they can) the third defense pleaded in their answer, and for this purpose the trial will proceed on December 4th at 11 A. M.