Farish v. Corlies

By the Court.

Daly, F. J.

The application to set aside the judgment which was regularly taken by default, was properly denied. The defence set up by the answer was usury, which, though a defence, as a matter of strict right is regarded as one of the most unconscionable, because the party setting it up not only defeats the claim for usurious interest, but in this State, secures for his own benefit, the forfeiture of the entire debt. It is distinguishable in this respect from the defence of the statute of limitation, where, if the creditor is cut off by the statutory presumption of payment from lapse of time, it is in consequence of his own negligence or the defence of bankruptcy, in which a man unable to pay his debts is, by the operation of a humane and politic statute, discharged from them, upon giving up all his property to his creditors. Our statutes, with the view of preventing the making of usurious contracts, has deprived the party who loans money at usurious interest of all remedy for recovering back the principal. It does not merely render void the contract for the payment of usury, but allows a party to retain what is not his, because it has been loaned to him ,upon the expectation or promise that he will pay for the use of it more than the legal rate of interest; and although it is our duty to carry out the statute efficiently where such a defence is set up, with all the consequences that attach to it, our duty in that respect does not and cannot lessen the impression we must entertain, in conscience and in morals, of the man who is not even willing to give back what he has received, when he comes before the Court, and asks at our hands a favor.

As the judgment was regularly obtained, the defendants are not entitled, as a matter of right, to have the judgment set aside ; but it rests in the discretion of the Court, whether their application now to come in and defend, will or will not be granted ; and where- such an application has been made to" the Judge sitting at the special term, and he has, in. the exercise *277of his discretion, refused it, I should feel disposed to hold that his decision is not reversible at the general term. It was held by the Court of Errors in Rowley v. Van Benthuysen, 16 Wend. 369, that the decision of the Chancellor in refusing to vacate an order taking a bill pro confessa, and to allow a party to come in and defend, was not a proper subject of appeal, but a matter addressed -to the mere discretion of the Chancellor. And it was held by the Court of Appeals in Fort y. Bard, 1 N. Y. 43, where a defendant suffered a bill to be taken as confessed against him, and then applied upon affidavit excusing his default, and claiming to have a valid defence upon the merits to set aside the default, and for leave to come in and answer, that it was not an appealable matter, but a question of practice, addressed to the discretion of the Chancellor; and that it could not become a matter of inquiry what consideration governed his mind in denying the motion, and it was therefore immaterial whether his decision was right or wrong. This case was determined after a full review of the authorities, and Chief Justice Bronson, after remarking that this rule stands as strong upon principle as upon authority,, lays dowm the general principle in these words: Within certain prescribed periods, a party, who has been sued either at law or in equity, has a right to appear and make his defence. It is a strict legal right of which ho cannot he deprived. But when that time has expired, and his default has been taken, the legal right is at an end; and if he wishes to be heard he must ask it as a matter of grace and favor, * * * and whether his motion is granted or refused, it is final so far as relates to a court of review.” There is nothing in the Code affecting the application of the principle. The general term sits as a court of review to which the words of Chief Justice Bronson are as applicable as they were to the Court of Appeals. The Code provides for the review of an order where it affects a substantial right; but a party cannot, as has been said by Mr. Townshend in his notes upon the Code, have a right to what a court has the discretion to grant or withhold. Though this would of itself, in my judgment, be sufficient reason for dismissing the appeal, I have been disposed to go further,- and express my full approval of the order denying the defendant’s application.

*278The Court in Lovett v. Cowman, 6 Hill, 226, after characterizing usury as an unconscionable defence, remarked upon the authority of numerous cases, that if a defendant intends to rely upon it, he must take care to set it up at the proper time and in the proper way. He is not entitled to. any special favor for the purpose of enabling him to bring about a forfeiture of the debt,” though a distinction was taken in that case, which was a decision at special term, founded .upon another special term decision of the same Judge, (Allen v. Mapes, 20 Wend. 633,) between relieving a defendant who had setup the defence of usury from a judgment accidentally taken against him by default, and permitting a defendant to amend a pleading by setting up such a defence. This decision, as Judge Bronson admits, has frequently been found fault -with. It appears to have been followed by Judge Parker in another special term decision, (Grant v. Mc Caughin, 4 How. 216,) where, in opening a default he refused to impose as a condition that the defendant should not plead usury. In my mind this distinction, which lets in this unconscionable defence where a judgment taken by default is set aside, and excludes it when the favor is asked of amending a pleading, is a distinction more nice than meritorious. It is in either case a valid defence, and as both are applications made to the favor of the Court, the same healthy exercise of discretion which excludes it in the one case should be equally exercised to exclude it .in the other. In Fort v. Bard supra, the Chancellor refused to open the judgment and allow the party to set up as a defence a violation of the restraining act without paying back the money he had actually received; and a party who asks, as a favor, that a judgment obtained against him be set aside to enable him to establish the defence of usury, without giving back what he has received, asks the Court to'aid him to retain what is not his, after he has lost the legal right to insist that it is forfeited to him. This is going farther than a Court is called upon to go in giving effect to the statute against usury. It is a very severe statute, with the wisdom or policy of which we have nothing to do, and we discharge our duty when we see that it is strictly administered in cases where parties have the legal right to have its provisions applied, and we are not called upon to go beyond that. Fulton Bank v. Beach, 1 Paige, 427. The *279peculiar circumstances of this case furnish a good illustration of the propriety of adhering to the course of doing nothing as matter of favor to enable parties to establish s,uch a defence, and of leaving them, in all such cases, to their strict legal right. The action on this note was not between the original parties to the usurious agreement, but the plaintiff is an innocent holder for value, who bought the note before maturity, from a note broker, upon the assurance that it was a business note, and the defendants themselves, or at least one of them, were the instruments by which he was deceived into the purchase. Accompanying the note, in the hands of the broker, was a certificate signed by, and in the handwriting of, the defendant Corlies, declaring that it was a business note, and that it would be paid at maturity, in addition to which the plaintiff' took the further precaution of sending the note to the office of the other defendant Burr, at which place it was shown to a person who said it was business paper, and that the indorsement was in Burr’s handwriting. After the inquiry, which was all that a prudent man could be expected to make, the plaintiff bought the note at a discount, and now, when he seeks to recover the amount of it, he is met by the objection that it is void for usury. Even in adopting the rule that a judgment by default will be set aside to let in the defence of usury, Judge Bronson in Allen v. Mapes supra, admits that the nature of such a defence may be taken into consideration upon such application under very special circumstances. The eircmnstances of the case render it one eminently fitted to constitute such an exception, but I think the more satisfactory course and the better rule in all application to the favor of the Court, is to shut out such a defence altogether, if the party has lost the legal right to make it. The order below is affirmed.