Chatham Bank v. Betts

Chatham Bank v. Betts. Usury. The payment of a consideration by the maker of a note for the indorsement of the same and procuring its discount at bank, does not render the note usurious ; the bank which discounted the same in good faith may recover the amount thereof from the maker. Chatham Bank v. Betts, 9 Bosw. 552; s. c. 23 How. Pr. 476, affirmed. Appeal from the general term of the Superior Court of the city of New York, where a judgment entered upon a verdict in favor of the plaintiff had been affirmed. (Reported below, 9 Bosw. 552; and at special term, 23 How. Pr. 476.) This was an action by the Chatham Bank against Frederick B. Betts and others, the makers and indorsers of a promissory note for $2350, dated t&e 18th September 1862, made by the defendant Betts, payable three months after date, at the Mechanics’ Bank, to the order of A. A. Thomas, and by him indorsed, and also by Samuel B. Potter, for whom it was discounted by the plaintiff. Betts, the maker, alone defended. Two defences were set up by the answer: 1. That Potter was the real party in interest, having paid the amount of the note to the plaintiff: 2. That the note was an accommodation note, made for the benefit of Thomas, for the purpose of enabling him to raise money; that Thomas delivered it to Potter upon a corrupt and usurious agreement, that Potter should reserve to himself for the loan of money thereon, a greater sum than seven per cent, per annum, to wit, a little over twenty-five and one-half per cent, per annum; and that said Potter did receive for the loan of the amount of said note for the space of three months, the sum of $150. On the trial of the cause, before Bobertson, J., the learned judge charged the jury (inter alia), that the main question for them to determine was, whether, at the time of the negotiation between Thomas and Potter, in regard to the note, there was an unlawful, usurious agreement made respecting the discount of that note. If Mr. Potter agreed to discount the note at two and one-half per cent, a month, and did discount *it, deducting at that rate $150 for three months, such a contract was usurious, and the note would he void in the hands of the plaintiff. The mere fact of Mr. Potter retaining in his hands $150, without any agreement on the part of Thomas and Potter that that should be the interest or compensation for the loan, would not of itself render the transaction usurious. If there was such an agreement between Potter and Thomas, respecting the discount of the note, then the fact that the bank had discounted the note for Mr. Potter at the rate of seven per cent, per annum, would not render the note good in the hands of the bank, because, in that case, it would have passed from Mr. Thomas to Mr. Potter under a usurious contract. If the jury found there was such an usurious agreement between Thomas and Potter, then the defendant would be entitled to a verdict. If there was not such an usurious agreement, notwithstanding all the other facts might be true, which had been proved, the plaintiff would be entitled to a verdict for the amount of the note, with interest. To this charge, no exception was taken by either party. The court also charged, that if Mr. Thomas parted with the note to Mr. Potter, upon an usurious agreement, as to the rate of interest, it was then usurious and void in any person’s hands. To this portion of the charge, the plaintiff’s counsel excepted. The defendant’s counsel then requested the court to charge the jury, that the facts in the case, as they were disclosed by the evidence, rendered the note usurious and void, and the defendant was entitled to a verdict. The court refused so to charge, and the defendant’s counsel excepted. The jury rendered a verdict in favor of the plaintiff, and a motion for a new trial was denied; and the order and the judgment entered on the verdict having been affirmed at general term, the defendant Betts appealed to this court. Warren, for the appellant. Chester, for the respondent. [MAJORITY — Davies, C. J.] Davies, C. J. (after stating the case.)—The exception to the refusal to charge as requested by the defendants, presents the principal question for the consideration of this court upon this appeal. Upon the testimony adduced upon the trial, it is clear, that Potter acted as the agent of Thomas & Betts in procuring the discount of the note by the plaintiff. It is equally clear, that the bank discounted *it at a lawful rate of interest and passed the proceeds of the note to the credit of Potter, who was a dealer with the bank and kept an account there. The circumstance that Potter did not pay over to Thomas & Betts the whole sum he received from the bank, on the discount of the note, does not impair or impeach its title, nor does it tend in any degree to show that the bank made a corrupt and usurious agreement, upon the discount of the note. The only ground of defence set up was, that Potter had discounted the note upon an usurious and corrupt agreement, before he transferred it to the bank, and though the testimony failed to establish that, yet there was sufficient in the testimony on the part of the defendant to send the case to the jury. If it had not been discounted by Potter, before he transferred it to the bank, there was no pretence of any defence to the note in the hands of the bank. If it had been so discounted by him, then the note was void in the hands of Potter, and he could not have transferred a good title to the bank. If the judge had, therefore, directed the jury to find a verdict for the defendant, he must necessarily have withdrawn this question from their consideration, and this would have been error. It was not erroneous, therefore, to refuse to instruct the jury, as requested, to find a verdict for the defendant. The case of Van Duzer v. Howe (21 N. Y. 532) is like the case at bar. There, this court held, that where the drawee of a bill of exchange for $1200, paid fifty dollars to an accommodation indorser for indorsing it, and procuring another indorser and obtaining its discount, the draft was not affected by the usury, and that the bond fide holder could recover thereon. The same state of facts exists in the present case, and the exception to the refusal to charge that the defendant was entitled to a verdict, is untenable. The conversation between the witness Potter, and the cashier of plaintiff, at the time he presented the note for discount, was wholly unimportant to any issue in the case. What the cashier said had no significance, and was wholly immaterial to the issue submitted to and passed upon by the *jury. It, therefore, worked no injury to the defendant, and the exception taken to its admission affords no ground for a reversal of the judgment and granting a new trial. Judgment should be affirmed, with costs.. Judgment affirmed.