Court Opinion

ID: 5458272
Source: CourtListenerOpinion
Date Created: 2022-01-09 19:26:41.719435+00
Date Added: 2024-06-11T08:32:45.786798
License: Public Domain

Johnson, J. (dissenting.)
As I understand the charge of the judge in this cause, the usurious character of the transaction was made to turn exclusively upon the question whether the maker of the note, at the time of the discount, had funds at the place of payment, or expected to have funds there in the course of his business, to meet the note when it fell due. If the jury found the affirmative, then the transaction was not usurious, whatever the motive of the lender may have been, or the terms he may have imposed as a condition of the loan. But if, on the contrary, they should find that it was the expectation of both parties that the maker was to place the funds there for the express purpose of meeting the note, not having funds nor expecting them there, in the course of his business, then it would be usurious, whichever party proposed the arrangement.
I think it will be found exceedingly difficult to vindicate this as a legal proposition. The distinction taken is unsound, and without authority to support it. According to this rule the contract would derive its usurious character not from the advantage it secured to the lender over seven per cent, but from the disadvantage and inconvenience it imposed upon the borrower in making payment. It is obvious this is no test.
Usury is a question of fact of intent; and the true inquiry is whether the transaction secures to the lender any greater sum, or greater value, than seven per cent per annum for the use of his money; and whether such was the intent with which it was entered into.
It is quite clear, I think, in a case like the present, that the advantage to the lender would be just the same whether the borrower had funds at the place of payment at the time of making the loan, or placed them there afterwards. Nor can I see any material difference in the disadvantages to the borrower, *348in the two cases. Both parties resided at Palmyra, and in tie absence of all evidence to the contrary, I apprehend we are to assume that funds when placed at Tróy would be equally valuable to both parties, so that if the borrower had them there at the time of making the loan, they were worth just so much more to him as it would cost to transmit the same amount of other funds to the same point.
But the object of the statute is to prevent the lender of money receiving, or entering into any contract by which he is to receive, in any way, or in any form, any greater sum or value than seven per cent; and does not look at all to the trouble or inconvenience of the borrower in making payment. If the lender, by the contract, gets nothing more than legal interest, it is not usurious, whatever trouble or expense its performance may occasion him who is to make the payment.
The true point, as I conceive, presented by the request of the defendant’s counsel, to the judge, to charge the jury, and the exception to the refusal, is, whether the defense of usury can be predicated upon a contract for the loan of money and its repayment at a distant point, which is entered into with the intent and for the purpose of securing to the lender the difference in value, or in other words, the rate of exchange between the two points, and not for the convenience or accommodation of the borrower, or at his solicitation. Is this rate of exchange, or tax upon the transmission of funds from one point to another, which constitutes the difference in value, between the same nominal sums at different points, an essential thing, of any definite and real value in a legal sense ? Nothing can be more clear than that it is so. It is the daily and constant subject of. contract and negotiation in the business transactions of the country. And our courts have uniformly so regarded it. There are numerous decisions in our state upon this subject, and they all treat this rate of exchange as a thing of substantial value, as much as the rate of interest. If they are not utterly unsound in principle, it follows that any contract or agreement which secures to the lender of money- this difference, in addition to the seven per cent allowed by law, is usurious. The statute declares *349that all notes, and all contracts or securities whatsoever, with certain specified exceptions, whereupon or whereby there shall be reserved, or taken, or secured, or agreed to be reserved or taken, any greater sum or greater value for the loan or forbearance of'money, than at the rate of seven dollars for one hundred dollars for one year, shall be void. If a party by his contract gets the difference of exchange, that being a matter of substance and legal value, in addition to seven per cent, it is an agreement to pay a greater sum, or greater value than seven dollars on one hundred. It is perfectly immaterial by what shift or device, or in what particular thing or manner the “ greater value” is to be realized. Courts are to look at the substance and meaning of the arrangement, and see whether the Protean spirit is there embodied, whatever disguise it may have assumed, to escape detection.
The argument that because money is frequently, if not uniformly, loaned in Troy or New-York at lower rates than in Palmyra or Rochester, it must therefore be worth less at the former points, to persons residing at the latter, is unsound and fallacious. Money may be worth much less to a person residing in New-York, for the purposes of loan or other investment, than the same amount to one residing at Rochester, for loan or investment at the latter place, while at the same time, owing to the demands’ of business and the uniform course of trade, money in New-York is worth a premium to the merchant or banker of Rochester. Courts can scarcely shut their eyes to the notorious fact that thousands of dollars are paid daily in premiums or rates of exchange by business men in the country for money in deposit at the great commercial centers where the purchases for the country are chiefly made. But if they could, and are only permitted to look at the evidence on the trial, in regard to questions of this character, the proof here is clear and undisputed as to the exchanges between Palmyra and Troy, and the difference in value, or the premium, that funds in the latter place bore in the former. It is said, however, that here the payment was to be made at a future day, in Troy, and although the evidence establishes the fact of a difference in favor of funds at Troy at *350the date of the loan, it does not follow that it would remain so up to the time of payment, or that the parties entered into the contract with any such expectation, and that such an assumption is too speculative and uncertain to prevail in a court of justice. It seems to me, however, that the general and prevailing tendencies of the business of the country are far more certain and uniform than this view of the case supposes. Until some extraordinary and unlooked for revolution occurs in the domain of trade and commerce, we may look for the current of money to flow from the country to the great marts, where the merchandise of the world is purchased and distributed, with about the same certainty that we may for the streams to seek the ocean. But, independent of this, it seems to me where it is clearly shown that at the time of the loans, and at the place where the lender resided, and the loan was made, funds at some distant point bore a premium, and the lender made it a condition of the loan that payment should be made there, the law will presume that the condition was imposed in reference to such advantage, and for the purpose of securing it by the arrangement. It can hardly be presumed that the lender would impose conditions to his own injury, or which might operate injuriously, owing to the uncertainty and shifting nature of the foundation upon which they were based. The established rate of exchange between two points connected by regular channels of communication and reciprocal trade, is neither speculative nor uncertain. An element which enters into the calculations and touches the interest of every business man in the community, ought not to be treated as too shadowy and unr.eal for the cognizance and grasp of a court of justice. It is a stubborn reality, and the tribunal that would interpose any shield between the rapacity and artifice of the usurer and the needy borrower, must deal with it as an existing and undoubted fact. And I have no doubt that the rate of exchange between two points, in the usual course of business, is as much the subject of judicial notice as the course of trade between the same points.
The legislature struck at the very principle here involved when they prohibited moneyed corporations, receiving the pre*351minm on drafts made by them, which were used in payment of notes due to, or discounted by, such corporation. (Sess. Laws of 1835, ch. 307, § 1.) What the legislature thus prohibited, these plaintiffs did in regard to the first note, of which the note in question was in fact, though not in form, but a renewal. Although it was clear that the practice was plainly against the policy of the law, this court held that the statute did not apply to the plaintiffs, who were individual bankers and not a moneyed corporation. The practice in that case, so nearly connected with the note in this) if any thing were needed, might afford a sure index to the design in making this note payable at the same place, and convince us that the plaintiffs at least did not regard the existing rate of exchange as fictitious or uncertain.
It is plain to be seen that if this practice is sanctioned and individual bankers and moneyed corporations are permitted to annex, as a condition to every loan, that payment shall be made in Mew-York or London or Paris, or wherever the premium may range highest, the legislative prohibition will be completely nullified in its spirit and purpose, and there will be a sheer end to all loans and discounts payable at the counters where they are made.
The plaintiffs’ counsel contends that to render the contract usurious, it must be such that the plaintiffs could have recovered more than seven per cent by action, but for the statute. But I apprehend the true inquiry is what will the lender receive in case the contract is performed according to its true intent and meaning, and not what damages will the courts award in case it is broken? Would the lender, by the strict performance of the contract according to its spirit, receive a greater sum or greater value than seven per cent ?
I confess I am unable to perceive why the cases of Seneca Gounly Bank v. Schermerhorn, (1 Denio, 133,) and Bank of U. S. v. Davis, (2 Hill, 451,) are not directly in point and ensirely decisive of this case. These are conceded to be clear eases of usury. In the first case Schermerhorn, as an inducement to the bank to renew the notes and extend the time, transferred to it, at their nominal amount, two drafts on New-York *352amounting to $3000. Why was this usurious? The drafts would only enable the bank to demand and receive $3000 in gold and silver, at the place of payment in New-York, and that was precisely what the bank paid for them at Waterloo. It was usurious because, at the time, the drafts were worth some $22,50 more than the nominal amount at Waterloo, in the rate of exchange. In New-York the drafts were worth only the nominal amount, but not so at the place where the loan was renewed or extended. Suppose instead of transferring these drafts at the time, it had been agreed as a condition of the renewal, that Schermerhorn should pay the notes thus renewed, at their maturity in ninety days, in these same drafts, without exacting any premium? Would that have altered the character of the transaction ? Could it then have been said it was so doubtful whether at the end of ninety days drafts on New-York would bear any premium at Waterloo, that no taint of usury attached? Clearly not. It would be clearly, seen in such a case that the parties, at least, did not regard the advantage they bargained for as a doubtful one. Nor would the principle be altered a single tittle had the condition been to pay gold or silver in New-York, and the notes been made payable there. It is enough that courts can see that the lender contracts for an unlawful premium; that it is reserved or taken, or agreed to be, by the terms of the contract, in a value of some kind, to authorize them to declare such contract void. It is not necessary to establish the fact that the lender will inevitably realize the unlawful premium which he has bargained for.
[Monroe General Term,
June 3, 1851.
Welles, Taylor and Johnson, Justices.]
For these reasons, amongst others, I am constrained to dissent from the conclusions of my brethren who were present at the argument.
I am of opinion that the justice erred in his charge to the jury, and that he should have charged substantially as requested by the defendants’ counsel, and that a new trial should therefore be granted.
New trial denied.