Court Opinion

ID: 3608967
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:53:41.945994+00
Date Added: 2024-06-11T14:07:30.691043
License: Public Domain

[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 607 
[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 608 
The borrower and the lender were both sworn on the trial. Their versions of the transaction were widely different. If that of the borrower was entitled to credit, it was a plain case of usury. If that of the lender be accepted *Page 609 
as the truth, the jury were authorized to find, as they did, that there was no usurious agreement or intent. As no motion was made for a new trial upon the facts, the appellant cannot claim that the verdict, in which to this extent he acquiesced, was not fully warranted by the evidence. He is entitled to be relieved from it only for error of law.
The only legal questions in the case arise on the defendant's exceptions to the instructions of the judge to the jury, and to his refusal to instruct them as requested. These will be briefly considered in their order.
It was claimed that if at the time of the loan, Morrow 
Chaphe, the parties to the lumber note, were insolvent, this rendered the transaction usurious per se, whether the fact of their insolvency was known or unknown to the lender. The case really presented no such question. Morrow, it is true, was then insolvent; though Wood was not aware of it, and never heard such an intimation until more than six months after he sold the note. As the note was not negotiable, Chaphe, though in form an indorser, was liable in fact as a maker, under the rule settled by this court in the case of Richards v. Warring, decided at the last December term. It appears that he had been previously good, and that he ceased to be so in the fall of 1857; but it did not appear that he was insolvent when the note was transferred by him to the defendant. But if the question could be considered as fairly raised by evidence, there was no error in the charge on this subject. The judge instructed the jury, in substance, that though the transfer was coupled with the loan, and though the note finally proved uncollectible, by reason of the insolvency of the maker and indorser, this would not render the loan usurious, if Wood at the time believed the parties to be perfectly solvent, and if the transfer was made in entire good faith and without any usurious intent. This was a correct and accurate statement of the law applicable to the facts. (Stuart v. Mechanics' andFarmers' Bank, 19 Johns., 508, 510, 511; Nourse v. Prime, 7 Johns. Ch. 69, 77; Aldrich v. Reynolds, Barb. Ch., 43;Sizer v. Miller, 1 Hill, 226.) *Page 610 
In the case of Stuart v. The Mechanics' and Farmers' Bank,
the decision mainly turned on the precise question now under consideration. The suit was brought to foreclose a mortgage. The defense was, that it was executed to secure among other things a usurious loan of $6,500. The alleged usury consisted in a stipulation that the borrower should receive $5,000 of the amount in bills of the bank of Niagara. That bank had suspended specie payments more than a month before the loan. Its bills were greatly depreciated, and were commonly refused on any terms for business purposes. These bills had been turned out by that bank, with other collaterals, to secure its own indebtedness to the Mechanics' and Farmers' Bank. The officers of the latter, at the time the bills were sent to Stuart, still hoped that the Niagara bank might retrieve its affairs. Soon after the loan, it proved to be insolvent. The chancellor held, that though there was a stipulation that the borrower should receive the money in these bills, and though they proved in the end to be worthless, the burden was upon the borrower to show that the lender knew this at the time of the loan; and as he had not established this, the transaction could not be regarded as a device to cover a usurious exaction. His decision was unanimously affirmed by the Court of Errors; Chief Justice SPENCER, who delivered the opinion, said: "The question is, whether this was a loan of money, contrary to the statute; whether the respondents, under the device of lending part in the bills of their own bank, and part in the bills of the Bank of Niagara, have, in effect, intentionally and knowingly taken more than at the rate of six per cent interest for the loan and forbearance of money. I say knowingly and intentionally,
for it cannot be pretended that unless the respondents knew that the bills of the Niagara bank were depreciated, and not intrinsically worth their nominal amount, and intentionally put them off at their nominal value with such knowledge, it would be a case of usury." After reviewing the evidence, he added: "I cannot find in this case evidence warranting the court in saying, that the respondents knew, or had reason to believe, when this loan was effected, that *Page 611 
the Bank of Niagara was insolvent, because it had refused to redeem its bills in the winter preceding, or because their negotiation for a loan had failed." (19 Johns., 508, 511.) The other authorities cited, illustrate the uniformity with which this rule has been applied in cases of alleged usurious exaction.
The other instruction to the jury, of which the defendants complain, had relation to the fact proved by Murray, that when the arrangement for the loan and transfer was made, Wood promised to guaranty the Mallory note, and that he indorsed a guaranty which failed to state a consideration. It is erroneously assumed that Wood could not be compelled to correct the guaranty and make the promise good. As this was not a negotiable note, in the commercial sense, it may well be doubted whether Wood could not be charged as maker, within the rule settled in the case above referred to of Richards v. Warring. But in any view of the matter, it is quite clear that he could be compelled to reform the guaranty in conformity with the agreement, whether the omission to acknowledge a consideration was inadvertent or fraudulent. If the defendant's remedy has been exhausted against Chaphe as well as Morrow, the guaranty of Wood can be reformed and enforced in the same action. (Bidwell v. Astor InsuranceCo., 16 N.Y., 263; Malleable Iron Works v. Phœnix InsuranceCo., 25 Conn., 465; Collett v. Morrison, 12 Eng. Law  Eq., 171.) As the guaranty was of the collection of the demand, Wood will of course be chargeable with the costs of the proceedings against the other parties to the note, as well as of those taken against himself, if he refuses to conform the writing to the agreement sworn to by Murray and not denied by him. Indeed, the intention to guaranty the collection of the note is so obvious from all the circumstances, that a denial of it, under the pretense that he intended to commit a fraud, would be unavailing before any intelligent tribunal. The hypothesis on which the instruction was given, was that the defendants were without recourse against Wood. As this is not well founded, the proposition would have been harmless, even if it had been wrong; but it was clearly right. *Page 612 
The substance of the charge was, that the fraudulent omission of an acknowledgement of consideration, though it might have been cause for rescission, would not render usurious a contract otherwise valid, when there was no usurious intent.
The judge was requested in substance to instruct the jury, that if the loan by Wood was coupled with the condition that Murray should purchase the Morrow note, the onus was upon the plaintiff to show that the note was in fact worth the amount for which it was given; or, in other words, that the parties to that paper were solvent. There is a report of an English case at nisiprius, in which the burden of disproving the very fact, from which alone the usurious intent could be inferred, was cast upon the party denying it. (Davis v. Hardacre, 2 Campb., 375.) That decision has not been accepted as authority. Since the case of Stuart v. The Mechanics'  Farmers' Bank, it has been held in this State, as the settled rule of law, that the onus is upon the party alleging this defense, not merely to establish a usurious intent, but to prove the facts from which that intent is to be deduced. (19 Johns., 505, 506; 4 Seld., 276; 22 N.Y., 472.)
The judge also declined to charge, that if the purchase of the Morrow note was a condition of the loan, the transaction was usurious, even though Wood at the time supposed that security to be perfectly good. The authorities already cited show that the request was properly refused.
The foregoing are the only questions of law properly before us for consideration. We have not, however, overlooked the claim of the defendant's counsel, that the transaction was necessarily usurious, as it appears that the loan and transfer occurred on the 16th of September, and that in making up the account at the time, interest was computed on the Morrow note from that date, although it did not become due until fifteen days later. This was an error of eighty cents. The amount was so trivial as to warrant the application of the maxim, de minimis non curat lex. It obviously arose from mere inadvertence in making the computation, and it seems to have been so understood by the defendants, as they raised no question of law in regard to it, and made no allusion to *Page 613 
the fact in the propositions which they requested the judge to submit to the jury. It furnishes no ground for reversing the original judgment. (8 Wend., 533; 1 Seld., 492; 4 Seld., 276; 2 Kern., 223; 22 N.Y., 425.)
The decision at the General Term should be reversed, and the judgment on the verdict should be affirmed.