First National Bank v. Morris — 8 N.Y. Sup. Ct. 680

Majority

p. 680

THE FIRST NATIONAL BANK OF NEW YORK, Respondent, v. THEODORE W. MORRIS and another, Appellants.

Headnote

Accommodation draft accepted to be used in another State—when usurious — Sureties of corporation — usury cannot be pleaded by.

The Lenox Glass Company, a corporation residing and doing business in the State of Massachusetts, drew a draft on the firm of D. S. Schank & Sons, of which the defendants are members, which firm then resided and carried on business in the city of New York. The draft was accepted by the firm for the accommodation of the drawer, and subsequently discounted by it in Massachusetts, at a rate which was, according to the laws of New York, usurious.

The draft was subsequently transferred to the plaintiff, which brought this action thereon. Held, that it was entitled to recover; that the defendants, by accepting the draft for the accommodation of the drawer, became simply sureties for its payment, and hence neither they, nor their principal, the corporation, could, under the laws of this State, interpose usury, as a defense in an action upon the draft.

Semble,'ihai, by the acceptance of the draft for the accommodation of the drawer, the inference would seem to be natural and proper, that it must have been intended that the drawer could use it in any manner which might be lawful at the place of its residence, and that the fact of its being discounted at a rate, lawful there, but usurious here, would not affect its validity.

Jewell v. Wright ( 30 N. Y., 359 ) criticised and doubted; Bank of Georgia v. Lewin ( 45 Barb., 340 ) and Bowen v. Bradley (9 Abb. [N. S.], 395) approved.

Appeal from a judgment in favor of the plaintiff, entered upon the trial of this cause by the court without a jury. The facts are stated in the opinion

Wm. A. Beach and A. C. Brown, for the appellants.

The draft was usurious. (Lee v. Selleck, 33 N. Y., 615 ; Curtis v. Leavitt, 15 id.. 227; Jewell v. Wright, 30 id., 259; Cope v. Alden, 53 Barb., 350 .)

p. 681

Charles A. Peabody, for the respondents,

cited Balme v. Womb ough ( 38 Barb., 352 ); Hyde v. Goodnow ( 3 N. Y., 266 ); Merchants’ Bank v. Spalding ( 12 Barb., 302 ); Chapman v. Robertson (6 Paige, 627); Miller v. Tiffany (1 Wallace, 298).

The judgment in this action was for the recovery of the amount due upon a draft, drawn by the Lenox Glass Company, in Massachusetts, on the firm of D. S. Schank & Sons, then residing and carrying on business at the city of New York, and accepted by them, for the accommodation of the drawer. The defendants were members of that firm, and defended the action on the ground that the drawer of the draft procured it to be discounted for its benefit, at what, under the laws of this State, was a usurious rate of interest. But the draft was discounted by a banking institution in the State of Massachusetts, at a rate of interest which, by the laws of that State, was legal and valid; and that institution transferred it to the plaintiff. The point in the case is, whether the defense of usury was, under the circumstances, sustained.

By the acceptance of the draft for the accommodation of the drawer, the inference would seem to be natural and proper, that it must have been intended that the drawer could use it in any manner which might be lawful at the place of its residence; for, without that privilege, it is obvious that the drawer could not be secured the full benefit of the paper accepted. Its business was in another State, and the presumption would be, that the acceptance was procured to be used where that was transacted, and its ordinary corporate functions were exercised; and from such a design, a valid use of the paper there, ought to be maintained by the courts of this State. The usury laws of this State were in no way in force there, and, properly speaking, had no relation to the use there made of the paper. It was accepted to be used by the drawer, carrying on its corporate operations there, and no restriction imposed as to what should be done with it. The drawer was entitled to make any lawful use which it could of the acceptance,^[7] and one mode of making such use of it, was, to render it available for the drawer’s benefit, in any way in which that could be done cousist

p. 682

ently with the laws of the place, under which, as a corporation, it existed. But it is claimed in behalf of the appellants, that the right of the drawer to use the acceptance, was subject to the disability imposed by the usury laws of this State, because the acceptance was made in this State, and hy its terms rendered the bill payable here; and the decision made in the case of Jewell v. Wright,^[7] is a direct authority in favor of the correctness of that position. Under ordinary circumstances, it would be the plain duty of this court to follow that authority, while it remained apparently in force, although differing from the propriety of the conclusion maintained hy it. But, since it was made, the learned justice who prepared the opinion upon which the case was decided, has, with the concurrence of his associates at General Term, silently disregarded its authority,^[3] The same thing was done upon a full consideration of the case, by the Superior Court of Buffalo, at General Term.^[4] The doctrine on which the case stood, was there fully examined by the late Judge Hasten, with his accustomed learning and ability, with the result that it was opposed to the preceding authorities on the subject, and probably decided under a clear misapprehension. When that case was decided, Judge Davies prepared an adverse opinion, characterized by his usual thoroughness, learning and ability, in which he maintained the principle, since acted upon in this court and the Superior Court of Buffalo, under the preceding authorities applicable to it. This opinion is published in a note to Bowen v. Bradley,^[5] and is entitled to consideration and weight in the disposition of this case. Still, it may well be doubted whether a proper sense of decorum is consistent with the position that the decision in Jewell v. Wright, as long as it has not been overruled by the court pronouncing it, can properly be disregarded by this court.

But as the defendants, now complaining of the .judgment, accepted the draft for the accommodation of the drawer, they became simply sureties for its payment.^[6] The drawer appears to have been a corporation, and as such could not defend an action upon the draft drawn by it, on the ground of usury, under the laws

† † Bank of Georgia v. Lewin, 45 Barb., 340 .

‡ ‡ Bowen v. Bradley, 9 Abb. (N. S.), 395.

§ § 9 Abb. (N. S.), 400.

ǁ ǁ Pitts v. Congdon, 2 Com., 352, 354.

p. 683

of this State; and the same disability affected the defendants as its sureties.^[7]

The judgment appealed from was right, and it should be affirmed.

Davis, P. J., concurred.

Judgment affirmed.

* Rosa v. Butterfield, 33 N. Y., 665 ; Belmont Branch Bank v. Hoge, 35 id., 56.

Footnotes

* Seneca Co. Bank v. Neass, 3 Com., 443.
* 30 N. Y., 259 .