Slosson v. Duff , 1 Barb. 432 ( 1847 )

Harris, J.

It was settled in the case of Post v. The Bank of Utica, (7 Hill, 391,) that a creditor having a junior lien upon real estate cannot maintain a bill to set aside a prior incumbrance alleged to be void for usury, without paying, or offering to pay, the amount actually due upon the prior lien. I think the same principle is applicable in the present case; and that the plaintiff in the junior judgment is not in a position to set up the defence of usury against the claim of the plaintiffs in the prior judgment to the surplus moneys arising from the sale of premises upon which both judgments were a lien. But in the view I have taken of the case it is unnecessary to decide the question; for I think the allegation of usury in the loan from Burtus to Duff & Ivers, included in the prior judgment, is not sustained. The only evidence relied upon for this purpose is in the examination of Burtus himself before the master. From his testimony it appears that he kept an exchange office, and was in the habit of lending uncurrent money, to be paid in current funds; that from time to time he had loaned to Duff & Ivers uncurrent money; and the condition of the loans was generally that they should be repaid in current money, in a week; that the discount upon the money thus loaned would not average over three-fourths of one per cent, and that it. would pass current in the market, in the way of trade.

I do not think these facts furnish sufficient evidence to justify the court in attaching to the transaction the taint of usury. There certainly is nothing upon the face of the transaction that imports usury, nor do I think the evidence warrants the conclusion that there was any corrupt agreement or device to receive, or take, more than the legal rate of interest. There is nothing in the case to show that the uncurrent money received by Duff & Ivers was not the bills of solvent specie-paying banks. Indeed the small discount at which these bills might be converted into specie furnishes satisfactory evidence that the bills were such as would be promptly redeemed, when presented at the counter of the banks by which they were issued. Such bills, it is well known, are, for all the ordinary purposes of money, equivalent to the same amount of specie. And unless there is something in the transaction from which it is to be inferred, as a matter of fact, that the transaction was a mere contrivance to obtain more than the legal rate of interest, by loaning bills which were not intrinsically worth their nominal amount, the statute.has not been violated. In the case of Cleveland v. Loder, (7 Paige, 557,) relied upon by the counsel for the junior judgment creditor as an authority to show the transaction between Burtus and Duff & Ivers to be usurious, the chancellor lays down the rule as follows: “ If it was a part of the agreement for the loan that the complainant should take uncurrent bills at a higher rate than their actual value, and for more than they were worth to either party in cash or current funds, the loan was usurious.” Although it may be that the bills which Duff & Ivers received upon this loan were not receivable by the banks in the city of New-York at par, and could only be converted into gold and silver by presenting them at the counter of the banks issuing them, yet it does not appear, that they were not worth, to both parties, the amount at which they were received by Duff & Ivers. Applying the rule laid down by the chancellor in the case referred to, the transaction ought not to be held usurious.

In the case of Stewart v. The Mechanics' and Farmers' Bank, (19 John. 496,) the loan consisted of $1500 current money, and $5000 in the bills of the Niagara Bank, which had then suspended payment. Stewart had previously applied to the same bank for a loan upon the ordinary terms, and finding he could not obtain such a loan, he proposed to receive the Niagara Bank bills; and assigned as a reason, that he owed the Niagara Bank $1000, which he could pay in the bills of that bank, and the residue he could disburse in the vicinity of Buffalo in the purchase of provisions, fuel, and other articles for his steamboat.' It was shown that at Buffalo, where the bank was located, the bills were generally taken by merchants, for goods, at par, and some received them in payment of debts. These facts were deemed material in determining the question whether the loan was contrary to the statute ; whether, under the device of lending part in their own bills and part in the bills of the Bank of Niagara, the bank making the loan had not intentionally and knowingly taken more than the legal rate of interest. “I say knowingly and intentionally,” said Chief Justice Spencer, in delivering the opinion of the court of errors in that case, “for it cannot be pretended that unless the bank knew that the bills of the Niagara Bank were depreciated and not intrinsically worth their nominal amount, and intentionally put them off at their nominal value, with such knowledge, it would be a case of usury." See also the Bank of the U. S. v. Waggoner, (9 Peters, 378.)

I think the transaction under consideration may fairly be regarded as a mere exchange of credits. Burtus held the notes of certain banks which to him were of par value, because payment could have been enforced, and which to Duff <fc Ivers were equal in value to gold and silver, because they would pass current in the payment of their debts. The exchange was a mutual accommodation to both parties. The effect of it was to give to Duff & Ivers the immediate use of what was equivalent in value to specie, with a saving of one week’s interest. while Burtus, by nieans of the transaction, would be enabled to obtain current funds for his bank bills with less inconvenience, and perhaps with less expense, than by presenting them for redemption to the banks by which they were issued. There was no disguise in the transaction. It was in fact what it purported to be, a' mere exchange of bank bills, held by one of the parties, whose marketable value was a little less than par, for the check of the other party payable at a future day—an exchange in which both parties supposed they had obtained an equivalent value. I can seé no ground upon which a legal objection to the transaction can bé founded.

The exceptions to the master’s report are therefore allowed, and an order must be entered, directing the application of the surplus moneys to the payment of the judgment in favor of Burtus, Morris and Duff.