Court Opinion

ID: 3588646
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:37:54.888773+00
Date Added: 2024-06-11T13:39:10.879408
License: Public Domain

[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 126 
The defense of usury was not established as to the four notes given for money collected by the defendant on the notes and mortgage owned by the intestate. The notes *Page 128 
so collected and the mortgage given to secure them, were transferred by the defendant to the intestate in the spring of 1875. They were Illinois contracts, and the notes were payable with interest at the rate of ten per cent, per annum. The intestate paid to the defendant as the consideration of the transfer, the full amount of principal and interest unpaid on the securities. When this transaction took place the parties were both residents of this State. But the defendant was then contemplating removing to Illinois, and did remove there prior to the maturity of the first note. By an arrangement between the parties, the defendant collected the first note when due from Hopkins and Roberts, the makers, and retained the money so collected, and in place thereof sent by mail to the intestate in this State, his own note for a similar amount, dated Kewanee, Ill., his place of residence, payable with interest at ten per cent per annum, that being the lawful rate of interest in that State. The same arrangement was made in respect to each successive note collected by the defendant. The defendant collected from the parties in Illinois, and instead of remitting the proceeds, sent his own note for the same amount, specifying the same rate of interest as was named in the note collected. The transaction was in substance a loan by the plaintiff's intestate, a resident of New York, to the defendant, a resident of Illinois, in the latter State, of funds there held by, and belonging to, the former, at a rate of interest lawful in Illinois. If the plaintiff's intestate had gone in person to Illinois, and collected the notes, and then lent the money to the defendant at ten per cent interest, there could we apprehend be no question as to the lawfulness of the transaction, although the notes were payable in this State. (Pratt v. Adams, 7 Paige, 616; RAPALLO, J., in Wayne Co. B'k v. Low, 81 N.Y. 572; 37 Am.Rep. 533.) Nor could it we conceive alter the case if the negotiation for the loan was made in this State, and afterward consummated and the transaction completed in Illinois, the transaction being bona fide, and there being no intent thereby to evade the laws of this State. The dealing, for the purpose of determining the question of usury, would be assigned to the *Page 129 
place where the funds were and where the loan was consummated. What occurred between the parties was equivalent to the plaintiff's intestate going to Illinois and there making the several loans to the defendant. The funds were there in possession of the defendant as agent. He was permitted to retain them, and became a debtor for the amount. Upon depositing the notes in the mail the transaction was complete. The money became the defendant's, and the notes the property of the intestate. The defendant became the borrower of the proceeds of the notes collected by him. The fact that one of the notes was expressly payable in this State does not distinguish it in the point of usury from the others. This was an incidental circumstances and does not overthrow the other decisive circumstances which make Illinois the place of contract. (Tilden v. Blair, 21 Wall. 241; Wayne Co. B'k v. Low, supra.) For these reasons we are of opinion that the defense failed, as to the four notes referred to.
The defense as to the note of September 21, 1876, for $1,000, being the fifth cause of action set forth in the complaint, is founded upon a different transaction, and as to this note we think the fact of usury was established. The note of September 21, 1870, for $1,500 was made and delivered in this State upon a loan of that amount made here at the time by the plaintiff's intestate to the defendant, both parties being then resident here. This was plainly a New York contract, and its validity is governed by the law of this State, and as such it was plainly usurious. The delivery of the note at Kewanee, Ill., did not make that the place of the contract, nor is it material that the borrower was about to remove to that State, or intended to use the money there. (Cope v. Wheeler, 41 N.Y. 303.) The sole consideration of the note of September 21, 1876, was the balance then unpaid on the note of September 21, 1870. It was given at the request of the plaintiff's intestate, because there was no room for more indorsements of payments on the original note. The surrender of the old note and the extension of time was ample consideration for the new note, but the substituted security was tainted with the vice of the original *Page 130 
transaction. We need not consider how the courts of Illinois would deal with the question if the suit had been brought in that State. The fact that the original loan was at a rate of interest lawful in that State, does not make the contract lawful here, nor does the fact that the new note was made in that State and prescribed a rate of interest lawful there, take it out of the operation of the well-settled doctrine that a new security for a usurious debt is affected by the usury in the original transaction. (Tuthill v. Davis, 20 J.R. 286; Reed v.Smith, 9 Cow. 648.)
But the majority of my brethren are of opinion, for the reasons stated in the opinion of EARL, J., that the note of September 21, 1876, is to be treated as an Illinois contract, and is not usurious.
The judgment of the General Term should therefore be affirmed, with costs.