Jacks v. Nichols

The defendant’s motion to suppress the testimony of William A. Woodruff, must be granted with costs. The assignee is prosecuting this suit for the recovery of the note of $5300, made by Tyler & Jacks, and if he succeed, the fund in his hands will be increased accordingly. Woodruff is a creditor, whose debt is to be paid out of the assignment. His debtor is insolvent, and although he is a preferred creditor, there is no evidence that his debt will be paid without the aid of the note of Tyler & Jacks. He is therefore directly interested in the event of the suit; independent of the consideration, that he is an indorser of one of the notes which the bill impeaches as usurious.

The case itself is one of unmitigated usury. The loan was made in this city, in 1840, and the borrowers agreed to pay Mr. Nichols, for the use of the money, seven per cent, interest, five per cent, more under the denomination of “ the exchange from Savannah,” and two and a half per cent, upon all sales of watch movements made by them.

The money loaned was here. True it had been remitted to *318this city, from Savannah in Georgia some time before, and upon this fact the defence is founded. It is said that the charge of five per cent, was for “fixing out the fund," by transferring it from Georgia, in order to make the loan, exchange on New York at Savannah, being at the rate of nine per cent, premium ; and that the legality of the charge is sustained by the decision of the Chancellor, and the supreme court in Suydam v. Bartle, (10 Paige, 94,) and Suydam v. Westfall, (4 Hill, 211, 219.)

If it were material, I suppose it would be my duty to take notice of the fact as matter of history, that in 1840, the great price which exchange upon this city bore in Georgia, was occasioned by the refusal of the banks in that state, to redeem their circulation in specie. The funds paid there for the exchange, were irredeemable bank notes, which were at a discount of several per cent, from the specie standard. The funds payable here on the bills of exchange, were equivalent to specie. If Mr. Nichols had offered gold or silver in Savannah, for a bill of exchange on New York, he would undoubtedly have had it furnished to him at half the rate per cent, which P. and H. Jacks agreed to pay him for the use of his money, under the name of exchange from Savannah. Therefore if he had actually remitted the sums loaned from Savannah, in order to furnish it to P. and H. Jacks, it would not relieve him within the decisions to which his counsel referred.

But there is no foundation whatever for the charge of any exchange. Not only was the money already here, but it had been sent here without the slightest reference to this loan. The circumstance that it had come here from Savannah, made it worth no more to the borrowers. Even if it had cost the defendant twenty per cent, to bring it here, it would buy for him no more property after it arrived ; nor did our statute permit him for that ■cause to loan it at a greater profit than seven per cent.

As well might a merchant who had brought Mexican dollars from the interior of Mexico, at an expense of ten per cent, paid for insurance, freight and protection from robbers, insist on loaning them here, that the borrower should pay him those expenses in addition to the interest.

The case cited from 2 Hill, 635, (Cayuga County Bank v. *319Hunt,) is not applicable. There the borrower from a country bank, wanting to use the loan in this city, instead of taking the notes of the bank which were equal to specie at its counter, or taking specie and remitting it, received from the bank a draft at sight on New York, for which he paid three fourths of one per cent. If he had brought the bank notes to New York, he would have been obliged to sell them at a discount equal to what he paid for the draft, and the transmission of specie would have been nearly or quite as expensive. The decision there was that the sale of the exchange was a distinct transaction from the loan, and of itself fair and reasonable.

The case is not aided by the giving of separate notes for the use of the money. It is one contract, and all the securities alike infected. Nor is it material, to show that any illegal interest was actually paid. The agreement to pay it is enough. It is admitted however, that the two first notes given for the interest and exchange were paid.

it is true that there must be an intent to reserve or take more than seven per cent. In this instance the lender reserved twelve per cent, for the use of his money, and he intended to obtain it. The statute declares that to be usury, however ignorant he may have been of its provisions, or deceived by the use of the word exchange.

There is no escape from the conclusion that the notes given in June, 1840, were usurious and void. The securities now in existence are mere renewals of the original notes, and equally void, and the transfer of Tyler & Jacks note, is also invalid; unless the latter, together with the renewals in June, 1842, are new contracts, made in another state, the laws of which are not proved.

The notes of that date were made in this city, and sent from: here to the defendant at Bridgeport, in Connecticut., The renewal had been negotiated previously, but it does not appear at what place this occurred. The answer states that the defendant was-then staying at Bridgeport, and it is particular to state that the new notes were received, and the notes of 1841, delivered up, at that place ; but it does not allege that the negotiation for the renewal was at Bridgeport. If the defendant relied upon a changer *320in the lex loci, to affect the continuity of this usury, he should have made the point clear beyond a doubt. As it stands, the original transaction was here, the renewal in 1841, was here ; the notes in 1842, were made and executed here ; and they were payable here, because it was necessary to demand them of the makers, in order to charge the indorsers. I do not think that their delivery to the defendant in another state, where he was abiding temporarily, affects the law of the contract. But if the negotiation had been made, and the new notes signed and delivered in Bridgeport, it would not in my view have altered the case in the least. It was simply a continuation of the original loan, for a longer period. Whether new securities were taken, or a covenant executed to give forbearance on the old securities, the substance of the thing is the same. There was no new loan ; no new consideration, save the forbearance, and for that interest was to be paid. When these new notes are brought before the courts of this state, and it is made to appear that they were renewals of securities, executed in New York, and void for usury, or were given in consideration of such securities ; I apprehend that we have no alternative but to hold them void on account of the original taint; whether the new notes were executed here, or in one of the neighboring states.

The complainants are entitled to the relief prayed for in their bill.

Decree accordingly.