Executors of Williams v. Williams , 15 N.J.L. 255 ( 1836 )

Hornblower, C. J.

This action was brought on a promissory note, given by the defendant to the testatrix, for three thousand five hundred dollars, bearing date the 1st of May 1824, and payable one j’ear after date, with interest. It was proved, and the fact established on the trial, that the note, although dated before the 4th of July 1824, was not in fact made and signed, until the latter part of August in that year ; that it was so antedated that it might not be affected by the act of the legislature, then recently passed to change the rate of interest from seven to six per cent, and that the consideration of the note, was the amount of principal and interest due on a prior note, between the same parties. It further appeared in evidence, that the defendant at first, objected to signing the note, on account of the rate of interest which it would carry; but at length consented to do so, and did sign it, upon the testatrix threatening him with a suit for the debt which was the consideration of the note, unless he signed the same.

The cause was tried at the Essex Circuit, before Mr. Justice Ryerson — and a verdict taken for the plaintiff, for the amount of principal due on the note, with interest at 6 per cent, subject to the opinion of the court, upon the above facts. And whether this was an usurious contract or not, is the question to be decided.

It is insisted on the part of the plaintiff, that the transaction was not usurious : 1st, because the note was taken for an antecedent debt, which was carrying seven per cent, interest. And

2dly. Because, whatever was the intention of the parties, the legal effect of the new note, was only to secure interest at the rate of six per cent, since it was in fact, a note made and signed after the 4th of July 1884.

If prior to the period, when the rate of interest was lo be reduced, the defendant stood indebted to the testatrix upon a note or other security, carrying seven per cent, interest, she had a right to require him to make payment, or to liquidate the amount due, and give her a new security therefor, while yet the lawful interest was seven per cent. If therefore it had appeared on the trial, that prior to the 4th of July 1824, the parties had agreed to come to an account, and that the defendant should prior to that day, and while it was yet lawful to contract for seven per cent, give her a new note for the aggregate amount of principal and. interest that might be found due, it would have been a lawful agreement; and if by any accident, it had not been carried into effect prior to the 4th of «July 1824, it might have been lawfully executed at any time afterwards, convenient to the parties. It would not then, have been a security given in pursuance of a corrupt agreement, but the fair execution of a contract, lawfully made when it was made, though such contract could not now be entered into, by the parties.

But no such previous agreement was proved on the trial. The note in question was.given on a contract made and entered into between the parties after the 4th of July 1824, and rvhen it was unlawful to contract for more than six per cent, interest. What then was the contract entered into, between the parties, when the note in question was actually given? The defendant was indebted to the testatrix in the sum of three thousand five hundred dollars — she agreed to lend him that money for one year; or, which is the same thing, Comyn on Usury, Law Lib. No. 15, folio 59; Cowp. 112, 113; Dewar v. Spann, 3 T. R. 425, to permit him to retain it for that period, on condition that he would give her such a note, as would bear seven per cent, interest. He at first resisted, but under the influence of threats, and more probably his necessities, he at last complied— and actually gave her a note, which upon the face of it bears seven per cent, interest. It does not indeed contain the words “ with seven per cent, interest,” but thatcan make no difference, for a note dated to-day, payable with interest from date, is under the existing law, as much a note payable with six per cent, interest, as it would be, if in very terms it was so written. The note in question then, is a note on which a higher interest is “ reserved,” than is allowed by law, and is therefore void. Rev. Laws, 269, Section 2, Harr. Comp. 45.

It has been said, that though the testatrix intended to take a note at seven per cent, she in fact took one which can be made effectual only for six per cent. That is, she thought the rate of interest, would depend upon the written date, whereas in legal operation, it depends upon the time when the note was actually made. But this is to make the question of usury, depend upon the form or contents of the instrument, instead of the purity or corruption of the agreement on which it was given. Besides, the proposition is not correct; she did take a note on which she might recover seven per cent, interest, by the judgment of the court, if the defendant did not interpose and defend himself by proving the truth of the transaction. Suppose she had taken a note dated after the 4th of July 1824, piayable with seven per cent, interest, she would still have failed to take a note, on' which she could recover that rate of interest. True, such a note would have been prima facie usurious; but not conclusively so. If she could have proved that the note had been so written by mistake, and that the interest reserved by agreement, was only six per cent, she might still recover with that interest. And so in this case, it was as competent for the plaintiffs to prove that the note was actually given, and intended to be dated in August, as it was for the defendant to show, that it was not made on the day it bears date. Hence it follows, that whether usurious or not, does not depend on the form or legal efficacy of the instrument; but on the intention and agreement of the parties. That intention and agreement in this case, having been unlawful, the note was consequently void, and no recovery can be had upon it.

I do not say, l^hat taking this note, by which it was intended to secure a premium bejmnd lawful interest, for the extended credit, vitiates and destroys the antecedent debt. I think it does not. Grey v. Fowler, 1 H. Bl. 402; Floyers v. Edwards, Cowp. 112; Comyn on Usury, Law Lib. No. 15, folio 75; Swartwout v. Payne, 19 Johns. R. 294; 1 Saund. 295 a., and authorities there cited. But "the verdict in this case, having been rendered on the note, must be set aside, and a judgment be entered for the defendant.

Fobd, J. and Ryebson, J. concurred.

Judgment for defendant.

Cited in Muir v. Newark Savings Institution, 1 C. E. Gr. 540.