Court Opinion

ID: 6407736
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:50:16.356936+00
Date Added: 2024-06-11T15:51:16.121372
License: Public Domain

Shaw, C. J.
The first question to be considered is, whether upon the facts stated in the report, the two loans of $ 1500, made by the plaintiffs to Frederick R. Bunker, were usurious. We have no doubt that this case is to be governed by the law of New York. Here the whole transaction took place in New York, except perhaps the single act of the defendant, in affixing his blank indorsement to certain papers. This does not distinctly appear not to have been done in New York. But were it otherwise, it would make no difference. Affixing blank indorsements made no contract; it was the filling up and delivering, pursuant to authority given by the defendant, which constituted the contract. New York therefore was the locus contractus. The statute of New York, (1 Rev. Sts. p. 772,) of which we have a transcript, in its terms differs very little from the old statute of Massachusetts ; perhaps not at all in its legal effect. By its provisions, § 5, “ all bonds, bills, notes, assurances, conveyances, and all other contracts and securities whatsoever, whereupon or whereby there shall be reserved or taken, or se*11cured or agreed to be reserved or taken, any greater sum, &c. shall be void.”
We are then to look at the transaction as it appears upon the evidence. The witness, who was himself the borrower, states that upon each of the loans of $ 1500 he agreed to pay the plaintiffs at the rate of $2 a day upon.$ 1000 ; that he gave his memorandum checks for the simple amount, without premium ; that he gave his verbal promise to pay the premium stated ; that the plaintiffs relied on his word, and took no security from him for the payment of this interest.
But afterwards, when he gave the note now in suit, he gave a like note for another sum of $ 1500, and he had already placed other securities in the hands of the lenders, and all as collateral securities for the payment of the notes, with the usurious interest.
By the law of New York, where a promissory note is given for the sum actually lent only, with a verbal agreement to pay usurious interest, the note is void. Merrills v. Law, 9 Cow. 65. Macomber v. Dunham, 8 Wend. 554. A different rule has been adopted in this Commonwealth. Butterfield v. Kidder, 8 Pick. 512.
It was intimated in the argument, that the usurious contract had been given up, before the note now in suit was taken, and that this note was only for the sum actually lent. But there is no evidence of this. On the contrary, it is stated, that on the second loan, the $ 3000 note was taken as collateral security for both loans, and that before and at the time when that note fell due, the borrower had placed in the hands of the plaintiffs notes, including the one now in suit, amounting to $ 3900, all as collateral security for these two loans. There is no appearance therefore of the usurious contract being rescinded.
It then appears, that the $ 3000 note was given as collateral security for those two loans, and when that note became due, tne witness wished for a further extension, which the plaintiff agreed to give, when the $ 3000 note was given up, and the note now in suit, was delivered to the plaintiffs as collateral security for the same loans. It is very clear, that all bills, notes, and securities, given in satisfaction, or in security of usurious debts, *12are avoided by the statute, because their design is to enforce payment of the usurious debt; and to give effect to them, would be directly contrary to the statute, and enable the lender to recover upon a security which the law declares void. Harrison v. Hannel, 5 Taunt. 780.
Supposing this to be a usurious transaction between Frederick It. Bunker, and the plaintiffs, does this constitute a good defence for the defendant ? He was a mere accommodation indorser ; his blank indorsement did not constitute a contract till filled up and delivered in pursuance of the authority given by the defendant to Frederick R. It then became a direct contract between the defendant and the plaintiffs, and was then a security first given to the plaintiffs, upon a usurious contract, and is declared void by the statute. Van Schaack v. Stafford, 12 Pick. 565.
Besides, the plaintiffs did not take this note as indorsees in the course of business ; they took it upon the usurious loan. We think it immaterial whether they knew it to be one of the blank indorsements, left by the defendant with Frederick R. Bunker to be filled up, as he should think fit or not. They knew it was an accommodation indorsement, because they took it of the promisor, upon a negotiation made exclusively with him, and for his use.
When one lends his notes or acceptances to another, and the latter negotiates them as security for a usurious loan, he may avoid them. Harrison v. Hannel, 5 Taunt. 780. Further, if the plaintiffs could recover against the defendant, he would have his remedy over against the maker, and thus a judgment for the plaintiffs in this suit would indirectly enable him, as a usurious lender, to recover against the borrower, contrary to the statutes.

Plaintiffs nonsuit.