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Statement of case.
Russel NEWELL, Appellant, v. REUBEN Dory and JOSEPH
Where a note was given without any consideration by the defendants and proper
indorsers procured, with a view of having the same discounted at the bank, and before the note had a legal inception, an arrangement was made between the plaintiff and the defendants by which plaintiff was to discount such noto at seventeen per cent, and such note was left with one of the indorsers thereof, who was to receive the money thereon and deliver the note to the plaintiff,
which he did, held, that the transaction was usurious and the note void. The fact that the plaintiff, at the time of discounting such note, withheld seven
teen per cent, and at the same time, without the knowledge or consent of defendants, gave his own note for ten per cent of the note discounted, which note dever came to the possession of the defendants, and which he nover paid,
does not change the character of the transaction. The 149th section of the Code requires the defendant to deny in his answer,
only such allegations in the complaint as he intends to controvert. It seems that an exception to the finding of the referee in general terms, as that
"the plaintiff excepts to each and every one of the decisions and rulings of the referee against the plaintiff on the trial of this action, severally, separately and distinctively," amounts to nothing.
APPEAL from the judgment of the General Term of the Supreme Court, Eighth District.
The action was upon a promissory note. The defense was usury. The action was referred to a sole referee, who reported as follows:
"That on the 24th day of June, 1857, the defendants, without consideration, and for the purpose of having the same discounted and raising money, made the promissory note mentioned in the complaint, and procured the firm of “Brown Brothers” (a firm composed of James V. Brown, Henry Brown, and Alfred Brown) and I. W. Fassett to indorse the same, for the accommodation of the defendants; and the said defendants had the said note sent to “the Chemung Canal Bank," at Elmira, to be discounted; and the same was returned on or about the first day of July, 1857, not having been discounted; that while said note was gone to Elmira, negotiations were had between plaintiff and defendant Joseph Doty, in regard to the plaintiff's discounting the
Statement of case.
same in case it should not be done at Elmira, and plaintiff proposed to discount it, if at all, at the rate of seventeen per cent; that after the return of said note, on or about the first day of July, aforesaid, it was agreed between plaintiff and defendants that the plaintiff would take and discount said note at the rate of seventeen per cent, and that defendants should leave said note with James V. Brown, at the store in Wellsville, and the plaintiff should pay the money to Brown for defendants, and receive the note.
That defendants did leave said note with James V. Brown for the sole and only purpose of receiving the money thereon, and delivered over to plaintiff the note on payment of the money.
That on the next day after such agreement, the plaintiff did pay to James V. Brown, for defendants, the sum of five hundred and twenty-seven dollars and forty-seven cents in cash, being seventeen per cent less than the amount of said note, and at the same time delivered to Brown, his (plaintiff's) note, for the sum of thirteen dollars and seventy-five cents, being ten per cent on the note mentioned in the complaint, and said Brown at the same time delivered to the plaintiff the note set forth in the complaint.
That there had been no previous agreement or conversation between plaintiff and defendants in regard to defendants receiving plaintiff's note, nor any other or different agreement than that they were to receive the amount of the note mentioned in the complaint, less seventeen per cent in cash, and James V. Brown had no authority to receive anything but cash from plaintiff for said note for defendants; that defendants never had any knowledge that said Brown had received the thirteen dollars and seventy-five cent note, until the summer of 1858, and never at any time received said note, or any avails thereof, or any benefit therefrom, or ratified said Brown's act in receiving the same.
That the plaintiff has not paid the thirteen dollars and seventy-five cent note, and it appears to have been lost or mislaid while in said James V. Brown's hands, and there was no proof showing to whom it was payable; that the note
Arguments for Appellant.
mentioned in the complaint was received and discounted by the plaintiff at a usurious rate, to wit, seventeen per cent, being ten per cent more than lawful interest, and that the defendant never received for said note more than the said sum of five hundred and twenty-seven dollars and forty-seven cents; and that the note given by plaintiff for thirteen dollars and seventy-five cents, being ten per cent on amount of the note in the complaint mentioned, was given as a device to avoid the effect of the statute against the taking of more than lawful interest.
The conclusion of law is, that the plaintiff has no cause of action, and that the note mentioned in the complaint is usurious and void, and that defendants have judgment for costs.
S. A. Givens, for the appellant.
I. The action is upon a promissory note, made by defendants, June 24th, 1857, and thereby the defendants, for value received, promise to pay to the order of Brown Brothers, $550, at the People's Bank, N. Y., three months from date; and they delivered the said note to Brown Brothers, who thereupon indorsed it to the plaintiff, who is the lawful owner and holder, and the sum has not been paid, or any
part of it.
There is no general or specific denial in the answer, and the above facts alleged in the complaint stand admitted.
The answer does not overcome this plain, legal admission or confession, that plaintiff obtained the note in regular course of business from Brown Brothers, who indorsed it to plaintiff.
The first defense in the answer is no defense. It asserts that before this note had an existence plaintiff usuriously agreed with the Dotys, that plaintiff would lend them $527.47 on three months' credit, and for so doing the Dotys should pay plaintiff $22.53, being more than lawful interest; that plaintiff did, about the 1st of July, lend the Dotys $527.47, and said $22.53 was paid by the Dotys to the plaintiff for forbearance.
Arguments for Appellant.
There is no assertion or allegation that the transaction detailed in the answer is the same transaction as the note declared upon. It may all be true, and yet afford no defense to the note which the Dotys have by their admissions in pleadings confessed they gave to Brown Brothers a week before, for value received, and which Brown Brothers indorsed to plaintiff, who is the lawful owner and holder. The transaction in the complaint, and that in the first defense in the answer, are obviously different and disconnected. The former is between the Dotys and Brown Brothers, who indorsed the note to plaintiff; the latter is between the Dotys and plaintiff, and not connected with any note whatever.
The second detense is no better. Defendants assert that on the day the note declared on is dated, they made it; and on or about July 1st and before it was discounted, it was corruptly agreed by the plaintiff and the Dotys that plaintiff should lend them the amount of the note, less seventeen per eent, on three months' time, and plaintiff should pay to plaintiff the seventeen per cent, that being more than the lawful interest, and plaintiff did lend to defendants $527.47, and the balance of the note, $22.53, was paid to plaintiff for the loan,
Even though the agreement was made as alleged, still the second defense does not assert that this note ever was discounted for the defendants, and there is no allegation that the loan by plaintiff to defendants was on the note declared upon, or was the same transaction; on the contrary the second defense, by omitting to deny, conclusively admits that plaintiff did not receive the note declared upon from the Dotys; but they delivered it to Brown Brothers, and the latter indorsed it to plaintiff; which admitted facts do not taint the note with usury.
“The answer of the defendant must contain a general or specific denial of each material allegation of the complaint controverted by the defendant.” (Code, $ 149.)
“Every material allegation of the complaint, not controverted by the answer, as prescribed in $ 149, shall for the purposes of the action be taken as true.” (Code, $ 168.)
Arguments for Appellant.
A judgment contrary to an admission in the pleadings is erroneous. (Brige v. Paydson, 5 Sandf. S. C., 217, opinion; Levy v. Bend, 1 E. D. Smith, 169, last note; Bacon v. Cropsey, 7 N. Y., 198, opinion; Walrod v. Bennet, 6 Barb., 144; Wood v. Whitney, 21 id., 190.)
It is nowhere alleged in the answer that the note declared upon was taken for the money loaned by plaintiff to the Dotys, or that it was in any way the subject of the usurious agreement; while the pleadings amount to a conclusive admission by defendants that the note in question is not usurious.
II. For the reasons stated in our first point the referee erred in not excluding the evidence and pretended defense of the defendants.
The plaintiff's right to recover upon the note was conclusively admitted by the confession arising out of the allegations in the complaint, not denied in the answer, and which the 168th section of the Code declares shall for the purposes of the action be taken as true." No amendment was asked for or granted.
III. The plaintiff took the note under the assurance and belief that it was business paper in the hands of Brown Brothers, to whom he paid the money.
The note was in Browns' hands, and by them sent to Elmira; it was returned to the Browns; plaintiff received the note of them; they never paid the money over to the Dotys..
This note in fact took the place of a business note before given to the Browns. At all events the minds of the parties never met upon
the real character of the paper, and there is no corrupt or usurious agreement to be implied from receiving more than seven per cent. As plaintiff understood it no usury could exist. He had been in the habit of buying business paper of them, as he did this of the Browns.
IV. The note was not in fact taken by plaintiff at a usurious rate, even if it was accommodation paper.
It would seem that plaintiff became suspicious that the