Sheldon v. . Haxtun , 1883 N.Y. LEXIS 15 ( 1883 )

It is claimed that the note for $1,500 for the balance unpaid, upon which a new note was given in Illinois, was not usurious, because it comes within the principle that a usurious contract can be purged of the taint of usury and the money loaned upon a usurious contract can furnish a valid consideration for a promise to pay the money actually loaned. There is no doubt of the correctness of this rule, and the question here is whether any such case is established within the authorities which are cited to sustain it (Jacks v. Nichols, 5 Barb. 38; Houser v. ThePlanters' Bank, 57 Ga. 95; De Wolf v. Johnson, 10 Wheat. 368), and which it is claimed are specially applicable to the facts here presented.

In Jacks v. Nichols (supra), it appears that the contract for the new loan, which was made after the first usurious contract had been entered into and carried out, was made in the State of Connecticut between the parties to the same; that the Messrs. Jacks applied to the defendant in that State and asked him to surrender the securities which had been delivered to him upon the renewal of the original loan, and to receive, instead, the five new notes which had previously been agreed upon. The defendant agreed to do so, and did surrender the securities which he then held and received new ones, and gave further time for payment. Some of the makers resided in New York, one of them in New Orleans. One of the notes was dated in the latter place. It will thus be seen that here was a contract made by parties who were out of the State at the time, and a surrender of old obligations by a previous agreement. The entire arrangement was within the State of Connecticut, and in this respect the case differs from the one at bar.

In De Wolf v. Johnson (supra), the original contract, which was usurious, was made in the State of Rhode Island, and by the laws of that State was usurious. The subsequent contract, in which a mortgage was given, was executed in Kentucky, and had its inception from an intimation of the borrower of a design to avail himself of the plea of usury. Upon this the plaintiff repaired to Kentucky, instituted new negotiation with the obligee, having for its object to clear the contract from all usurious incidents and to take securities for the sum loaned at the legal interest in Kentucky, which, as well as in Rhode Island, was six per cent. Accordingly, all the instruments in writing which appertained to the old contract were surrendered and a new mortgage given to secure the balance, the original sum having been reduced by large actual payments. It will be noticed that here was a new agreement, entered-into for the very purpose of purging the original contract from the taint of usury, which was not usurious by the laws of the State in which it was entered into.

In Houser v. Planters' Bank (supra), the notes in suit were given in renewal of two notes previously given for which a usurious rate of interest was paid. Subsequently the usury laws were abolished. The court held that as the consideration was not wholly illegal, but void in part and good in part, and severable, the usurious part should be purged out, and that under the Code, which provides that if the consideration be good in part and void in part, and be severable, it may be sustained for the good part; and also held, that the promise was not illegal, because there was no law against usury at the time. This case does not affect the question whether a new contract, originally usurious, may be purged of the usury by a subsequent agreement.

As no authority exists which holds that the note in question was, under the circumstances, purged of the usury, I concur with the opinion of ANDREWS, Ch. J.

RAPALLO, DANFORTH and FINCH, JJ., concur with EARL, J., as to the $1,000 note; ANDREWS, Ch. J., and MILLER, J., dissent. All concur as to the other notes.

Judgment affirmed.