Keyes v. Moultrie — 16 N.Y. Super. Ct. 1

Majority

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Seth C. Keyes v. William Moultrie and Thomas Palmer.

Headnote

1. Where a person, desiring to borrow money, applies for a loan to one who has, at the time, no money, but who has an accepted bill of exchange which can be discounted at the legal rate, and the holder of such bill, solely with a view to accommodate the applicant, consents to procure the bill to be discounted, and permit him to use the proceeds until the bill matures, the latter agreeing to pay the face of such bill at its maturity; and thereupon, in pursuance of such arrangement, the holder of the bill procures it to be discounted at the legal rate, and pays over to such applicant a part only of such proceeds, but all that he then desires to receive, and holds the residue until the maturity of the bill, subject to the call of such borrower; and the borrower, at the time of receiving the money, gives his note, payable when such discounted bill matures, for the sum so received and the sum paid on discounting said bill, such note is not usurious, although the sum included in it for the discount of the bill amounts to more than legal interest on the sum actually received by the person for whose benefit and accommodation the bill was procured to be discounted, there not having been any intention of the borrower to pay, or of the lender to reserve, more than seven per cent interest on the sum loaned.

2. The terms of the contract entitled the borrower to the use of the whole proceeds of the bill until its maturity; it was not the lender’s fault that he did not have the use of the whole proceeds, and the lender should not be deprived of -the benefit of the contract because he held a part of the proceeds subject to the call of the borrower, instead of the borrower’s holding them without any occasion to use them, or without making actual use of them until the maturity of the draft.

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3. Although such a transaction will be held usurious when it is shown to have been intended as a shift or device to evade the statute, and to reserve more than seven per cent on the amount actually intended to be, and, in fact, loaned, yet, when the transaction was, in the honest intent of the parties, such as the terms of such a contract import, it will not be held usurious because the borrower did not take and use the whole proceeds of the discounted bill, he having no occasion to use the whole proceeds, and they being held for him, and at all times subject to his order during the period for which, by the terms of the contract, he was entitled to use them.

(Before Hoffman, Slosson and Pierrepont, J. J.)

Heard, April 5th;

decided, April 10th, 1858.

This is an appeal, "by the plaintiff, from a judgment dismissing his complaint with costs. The action was tried in June, 1857, before Mr. Justice Hoffman, without a jury.

The complaint sought to recover a judgment against the defendants, as joint makers of a note, for $1,015, dated October 6th, 1856, payable to their own order, fifteen days after its date, and alleged to have been indorsed by them in blank, and to have been delivered by them to the plaintiff for money loaned by him to them, on which it was alleged only $800 had been paid. It prayed, as further relief, on allegations contained therein, that the defendant Moultrie should execute and deliver to the plaintiff his bond and his mortgage of certain described real estate as security for the payment of so much of said note as remained unpaid, and that he should be, in the meantime, enjoined from disposing of or incumbering the real estate, which it was sought to compel him to mortgage to the plaintiff.

The allegations of the complaint are stated more in detail in 1 JBosw. H., 629.

It does not appear, from the printed case, that the defendant Palmer was either served with the summons or appeared in the action.

Moultrie put in an answer, in which he stated, among other things, that on or about the 3d of May, 1856, it was agreed between the plaintiff &nd the defendants that he should loan them $1,000 until the 15th of July, 1856, and that they should pay him $37.50 interest on such loan for that period; that, under this agreement, he made them such loan, and they gave him their note therefor, dated May 8th, 1856, for the sum of $1,037.50, payable on the said 15th of July; that such note was not paid at maturity; that on the 6th of October, 1856, they

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paid him said $37.50, in pursuance of said agreement, and on that day Palmer made and delivered to the plaintiff the note in suit, and before doing so it was corruptly agreed between Palmer and the plaintiff that the. latter should extend said loan eighteen days from the said 6th of October, and that for such forbearance the defendants should pay the sum of $15; and that in pursuance of last said agreement the note in suit was made and delivered to the plaintiff and accepted by him, and such note is alleged to be usurious and void. It appears that the trial was commenced in April, but was not concluded until the 3d of June, 1857.

The judge;1 before whom the action was tried, found the facts substantially as they are stated in the complaint, and held the note usurious, and gave a judgment dismissing the complaint.

The plaintiff excepted to his decision, and appealed from the judgment to the General Term.

The opinion delivered at the General Term, contained a statement of the facts, which, in the judgment of the Court, the evidence established.

That statement is in these words, viz.:

“Prom a careful examination of all the evidence, we deduce the following conclusions of fact:

“In April, 1856, the plaintiff and the defendants were on the most intimate terms. Moultrie was the plaintiff’s lawyer, and the plaintiff was daily in the defendants’ office and kept his check-book in their drawer; Palmer, one of the defendants, applied to the plaintiff, in the latter part of April, and stated that the defendants expected a draft upon them from an Insurance Company, and did not know how they were to raise the money to meet it. James De Gray, another friend of the plaintiff, was also in want of money at this time. The plaintiff, wishing to help them out of their difficulty, and having a draft from California (for $15,000, in amount), accepted by Duncan, Sherman & Co., which would mature on the 15th of July following, offered to get the draft discounted, if he could, with a view to let the defendants and De Gray use the proceeds of the draft until its maturity, when he expected to be paid the face of the draft. The plaintiff got the draft discounted, and the discount, at legal rates, amounted to $227. On the 3d of May, the defend

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ants received $1,500 out of the proceeds of the draft; and the plaintiff expected them to receive, in all, some six thousand dollars of the proceeds. The draft appears to have been originally discounted for the accommodation of De Gray and the defendants, with each of whom the plaintiff was on the most friendly terms. Of this money De Gray received six thousand dollars, and there is no satisfactory evidence that the plaintiff used any portion of the proceeds of the draft; and the evidence is positive that he did not want the draft discounted for his own use. There was a repayment, by the defendants, of a part of this money, and on the 8th of May the defendants gave their note to the plaintiff, on demand, without interest, for $1,037.50, and out of this note grows the alleged usury. It is claimed, on the defendants’ part, that this note, though on demand and without interest, was, by agreement, to be paid on the 15th of July, when the plaintiff’s California draft of $15,000 matured, and that the $37.50 is for interest, and that such sum is more than at the rate of seven per cent per annum. It is apparent that $37.50 is more than the legal rate of interest upon $1,000 from May 8th to July 15th.

“It was in evidence that $37.50 bore the same ratio to $1,000 that $189.50 bore to the amount of the money which De Gray received; and that the intent of all parties in this case was to place the plaintiff, on the 15th of July, when his draft would mature, in the same situation as though the proceeds had not been anticipated; and so far as the evidence shows, if De Gray and these defendants had, on the 15th of July, paid the plaintiff so much of the proceeds of the discounted draft as they had received, without any interest, and the sum paid by him as the discount of the draft, the plaintiff would not have been benefited by the transaction, but' would have stood precisely as though he had retained the draft in his poclcet until its maturity. It appears, in fact, that De Gray and the defendants did not actually withdraw from the plaintiff but about one-half of the proceeds of the draft; but he seems to have been ready, and to have expected them to use the rest as they needed it. The plaintiff does not appear to have used the balance himself in any other way; but it seems to have remained in his hands as though he were the defendants’ banker. ”

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D. D. Field for plaintiff and appellant.

William Moultrie defendant and respondent, in person.

By the Court.

All that is necessary to be considered, is the question of usury.

According to the statute of 1837, “ No person or corporation shall, directly or indirectly, take or receive in money, goods or things in action or in any other way, any greater sum or greater value for the loan or forbearance of any money, goods or things in action, than seven dollars for the use of $100 for one year, and after that rate for a greater or less sum, or for a longer or shorter time.”

The party who violates this provision of the act, is liable, not only to lose his entire debt, but is guilty of a misdemeanor, and may be punished by a fine of one thousand dollars, or by imprisonment for six months, or both.

The fair import of the contract between the plaintiff and the defendants is, that the defendants and De Gray should have the use of the proceeds of the plaintiff’s California draft, from the time of its discount until the 15th of July following, when the draft would mature—that the discount upon the draft which at the legal rate amounted to $227, should be deducted from the face of the draft, in order to ascertain the nett proceeds; and that the plaintiff should receive on the 15th of July the face of his draft, maturing on that day; so that the plaintiff was not by the terms of the contract to receive any rate of interest, or any gain or advantage by the transaction; and it was understood that the discount of $227 was to be borne by the defendants and De Gray severally, in proportion to the amount, of the proceeds of the said draft, which each of them used.

Such a contract is not per se usurious. It is usurious if done with intent to evade the statute, and to enable the plaintiff to receive more than lawful interest for the use of his money. Nor would the mere fact, that the plaintiff had at times drawn his bank account below the amount of the balance of the proceeds of this draft, thus left with him, necessarily make the transaction usurious. The usury in such a case depends upon the intent of the parties; it is not created by an error in computation, nor

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induced by an accident or a mistake, into which no corrupt intention has entered. Nor can a borrower by an act of- generosity, real or contrived, render that corrupt and usurious, which was not so by its terms, and which was not so designed by the lender.

The object of the statute is, to prevent the lender from receiving more than the legal rate of interest for the loan of his money. But it would be a monstrous doctrine to hold, that a borrower who induces a friend’to pay $200 for the legal discount of a draft in order to accommodate him, with the use of its proceeds until its maturity, can take advantage of the statute of usury to defeat a recovery, because the borrower did not immediately withdraw the proceeds of the draft, and therefore, had not, according to strict computation, been in actual possession of the money the entire time for which his note bears interest, or because not wanting to use but half the money borrowed, he had suffered the rest to remain in the lender’s bank, or because the borrower from a feeling of generosity or justice afterwards wished the lender to derive some uncertain advantage from the balance thus remaining. To make the transaction usurious, there must have been an intent on the part of the lender to receive, and on the part of the borrower to pay, more than legal interest. In any given case, all the circumstances are to be considered, in order to arrive at the corrupt intent, and any and every contrivance and subterfuge will be unavailing if the corrupt intention appears.

In this case, we. find no sufficient evidence that the plaintiff intended to receive any rate of interest, or to do anything more than accommodate his trusted friends, who agreed to place him on the 15th of July just in the same condition as though he had not caused the draft to be discounted, but had retained it in his own hands until its maturity on that day.

New trial ordered with costs to abide the court.