Court Opinion

ID: 5459693
Source: CourtListenerOpinion
Date Created: 2022-01-09 19:31:13.779509+00
Date Added: 2024-06-11T08:32:49.504472
License: Public Domain

Johnson, J., (dissenting.)
I am entirely unable to see why the transaction of giving the $3000 note was not clearly usurious. It was given in renewal of former notes, about to fall due, and was in substance and legal effect but the extension of the time of payment of a pre-existing indebtedness. It was nothing more nor less than a forbearance of the day of payment twenty-two days, with the three days of grace to be added. The notes about to fall due were payable at the Albany City Bank, and as a condition of the forbearance, the plaintiff was required to make, and did make, the new note payable at the same place, and to pay the legal discount, and one half of one per cent in addition, which was called the exchange. This was repeated upon several subsequent renewals, and as long as the renewal notes continued to be made payable at the same bank. At some of these renewals, the extension of time was only fifteen days, when the payment of one half of one per cent called exchange would be at the rate of twelve per cent a year in addition to the legal interest. The result of all these renewals, through a period of several months, was to give the lender, for this forbearance, over fourteen per cent for the use of his money. If this is not usury the statute may as well be repealed at once, or declared inoperative and void by our courts. The case cannot fairly be distinguished from that of The Seneca County Bank v. Schermerhorn, (1 Denio, 133.) That was the case of the renewal of a note, and as a condition *96of the extension, the borrower sold to the lender a draft at par, which was worth one half of one per cent premium. The correctness of that decision has never, that I am aware of, been questioned, and it seems to me to apply with full force to the renewal notes from which the mortgage in question sprung. It was said upon the argument, that a note given in renewal of another note is an independent transaction, and not an extension, or forbearance of the day of payment. But this, as was said by Bronson, justice, in the case last cited, “ involves a distinction which I cannot see, and which I think none but a usurer can comprehend.” And unless I have entirely misapprehended the true character of this transaction, it would puzzle an individual of that character even, however skillful and astute in financial matters, to explain to the satisfaction of one of only common understanding, how there could be such a thing as a difference in exchange between two sums of money, or two obligations, payable at the same place, as were these several notes. There can be no such thing in fact, arid I think nothing of the kind exists in commercial usage, and calling it by that name is but a stale and transparent pretense, for an unlawful exaction. It is a common device, in such transactions, to endeavor to hide an unlawful .exaction, under some fair and harmless name. I cannot agree with my brethren in the opinion that this case falls within the principle established by the court of appeals in Oliver Lee & Co.’s Bank v. Walbridge, (19 N. Y. Rep. 134;) and feel constrained to protest against such an application of the rule there laid down. That case, as I understand it, was determined upon the ground that by the law of the contract, where the lender only required the borrower to pay the amount loaned to his' agent, at any other place within the state than that where the loan was made, with legal interest, nothing but legal interest was embraced in the stipulation, and usury could not be predicated upon it, although the sum paid might be worth something more at the place of payment, to parties residing at the place where the loan was made.
*97As a tender or payment of the precise sum agreed upon, with legal interest, by the borrower to the lender, wherever he might be found, in coin, would discharge the obligation the moment it became due, and nothing more could be recovered should the entire contract be enforced by action, it was held that there could exist no usurious element in such an agreement. It seems to have been considered by the court that any premium, or rate of exchange, existing in favor of one point, within this state, against another, at the period of the making and delivery of a time note, although such note might be made, and accepted, with a view and for the express purpose of securing this difference to the lender at the day of payment, yet such anticipated profit was so speculative and unreal in its character, and the course of exchange so uncertain in respect to its continuance in that direction, for any length of time in future, that the arrangement could not, legally speaking, be regarded as securing such premium to the lender, or any profit whatever beyond legal interest, irrespective, wholly, of the statute.
This is precisely what was decided by a majority of this court in Cuyler v. Sanford, (13 Barb. 339,) and which decision has ever since been followed in this district.
This must now be regarded by the profession, and by the-courts, in this state at least, as a settled and sound legal proposition, although we may still expect practical bankers and dealers in exchange to reason differently, and under the shield of this rule, to continue to accumulate large and substantial gains and profits, beyond the legal rate of interest, by practicing upon a theory directly opposite. But this is no such case. Ho room was left in the arrangement in this case, for the operation of any contingency, to defeat anticipated profits.’ The legal myth, or fiction, of the rate, or premium of exchange, as it seems to be regarded, when resting in expectation only, was here reduced to the palpable and unmistakeable reality of a cash payment, exacted and handed over in advance, and as a condition precedent to the forbearance. If this is not usury, *98I can scarcely conceive of á case that would be. In this respect the case at bar differs essentially, and radically, as I conceive, from the two cases above referred to. Had the plaintiff, in the case of the Oliver Lee & Co.’s Bank v. Walbridge, required not only that the note should be made payable in New York, but that in addition to advancing the legal discount, the borrower should also, as a condition of the loan, pay in advance the half per cent premium of exchange which was expected to accrue to the lender’s benefit at the maturity of the note, the case would have been precisely analogous to the renewal notes in question. In such a case, it seems impossible that the court of last resort could decide as they did in the case cited. Indeed the whole reasoning of the court, in that case, would inevitably lead to a conclusion just the reverse, in the case supposed. It is not pretended by my brethren but that the strong and controlling tendency of the evidence, before the referee, when the plaintiff rested his case, was to prove that the mortgage in question, although made to the defendant Sutton, was the direct offspring of these notes. They rest their decision exclusively, as I understand them, upon the authority of the decision referred to in the court of appeals. As that case, in my judgment, does not control, or in any respect affect this, I am of the opinion that, the judgment should be reversed, and a new trial ordered.
[Monroe General Term,
September 5, 1859.
Judgment affirmed.
T. R, Strong, Smith and Johnson, Justices.]