The appellants' counsel presents five points on which he relies to reverse the judgment. They are,
1st. That the plaintiffs' counsel were entitled to close the summing up.
2d. On the case the plaintiffs were entitled to recover. The verdict is against the weight of evidence.
3d. There was no usury proved in the case. The burden of proving usury was on the defendant. It must be clearly proved, and cannot be presumed.
4th. The court erred in refusing to charge as requested, in each of the points excepted to.
5th. The motion for a new trial was denied by a divided court, one of the judges dissenting. The question of usury was raised on the trial, and the plaintiffs were entitled to have the jury correctly instructed on the question of usury.
The second point cannot be considered by us. We cannot review the findings of fact. The court below had power to do so. If they had done so, we have a limited power of review, but not one extensive enough to set aside a verdict as against the evidence.
The fifth point presents no question of law; and hence our examination of the case must be confined to the remaining three points presented by the counsel.
1st. Was the plaintiffs' counsel entitled to close the summing *Page 621 up? The court held it belonged to the defendant; and the plaintiffs' counsel excepted to the ruling.
It was said by Justice WILLARD in The People v. Cook (4 Seld., 77), that the right of counsel to address the jury is a matter resting in the sound discretion of the court, and he supports his opinion on the point, by reference to sundry cases in which the courts have either refused the right of counsel to address the court, or limited it in such a way as to show that it was a right wholly under the control of the court. If the right to address the court or jury may be altogether withheld, it would seem to follow that the order in which counsel may sum up would also be in its discretion. If it rests in discretion, it cannot be reviewed in this court.
Without stopping to inquire whether the learned judge was right in the position taken by him, an examination of the pleadings and proceedings on the trial will show that the court below was right in giving to the defendant's counsel the closing address to the jury.
The answer admits the complaint; nothing was required to be proved by the plaintiff to entitle him to a verdict. In such case the defendant is required to begin, and the party having the opening is entitled to close the argument. (Graham's Pr., 289.)
2d. Was usury proved in the case?
The answer alleges that the note for which the check in question was given was made by Lane, West Co. to be sold in the market, and that it was handed to a broker for sale and by him transferred to the plaintiffs for their note of the same amount, and a commission of 2½ per cent. This 2½ per cent is alleged to be a discount of more than the legal rate of interest, and that the note was therefore usurious.
The answer also alleges that the said note was sold to the defendant for $25 less than its face, and that such sale rendered it usurious and void.
It is unnecessary to occupy time in an inquiry whether the transfer to the defendant was usurious. No court has ever permitted the usurer to take advantage of his own usurious agreement for the purpose of avoiding it, and I hope no court *Page 622 ever will. While I am in favor of a rigid enforcement of the statute against usury, I am not in favor of shielding the usurer from the burthens of his contract into which his avarice has led him. (La Farge v. Horton, 5. Seld., 241.)
The question whether the transfer of the note to the plaintiff was usurious is not free from doubt.
It would seem form the evidence of Hotchkiss that Lane, West Co. had given the note in question to Van Olinda, who gave it to the witness, who was a broker, for sale. He took it to the plaintiffs and received from them their note for the same amount and the same time to run. He gave them 2½ per cent commission for the sale, and paid it in cash, or a check. Did it because the plaintiffs' note was more saleable, — more easily converted into money. Van Olinda wanted money. The exchange of notes with the plaintiffs was on the witness' application and not on the plaintiffs'. He applied to the plaintiffs to buy the note. On cross-examination he stated that he tried to sell the note and could not. Then took it to the plaintiffs and proposed to exchange it for theirs, and then he sold the plaintiffs' note and took the money to Van Olinda. The plaintiff Elwell testifies that Hotchkiss came to him and asked him if he wanted to purchase the note. He said no. He asked if he (Elwell) would not give the firm note for the same amount and time, on the usual terms. He (E.) hesitated, but at last told him he would, and gave him the company note which was paid at maturity, and received 2½ per cent commission which is the usual charge for advances of credit. He presumed the credit of Lane, West Co. to be good till he went to Hotchkiss' office that morning.
What was this transaction between Lane, West Co. and the plaintiffs? Was it a sale of the credit of the latter to the former, or was it in substance and effect, a loan of money? It is considered that if it was a sale of credit it is not usurious, but if a loan of money, then the transaction was usurious and void. (Dry Dock Bank v. American Life Insurance and TrustCompany, 3 Comst., 344; Schemerhorn v. Tolman, 4 Kern., 93;Leavitt v. De Launy, 4 Comst., 364.) *Page 623
If Lane, West Co., or their agent, had taken their note to the plaintiffs and transferred it to them for the face of it in money, less a commission of 2½ per cent, it would have rendered the note void for usury. Why? Because the courts say it is a loan of money, and if the amount paid or agreed to be paid for the use of the money is more than at and after the rate of seven per cent per annum, the security is usurious and void. (Clark v.Sisson, 22 N.Y., 312; 1 Hill, 9; 2 Denio, 621; 8 Cow., 669.)
In Clark v. Sisson (supra), the action was against the acceptor and indorsers of a bill. It was proved that the acceptance was without consideration, and made to enable the drawer to raise money. The plaintiff discounted the bill at a usurious rate of interest. Judge COMSTOCK says: "It (the dealing in regard to the bill) was a loan, because it could not be anything else. The plaintiffs could not purchase a bill which had no legal existence until it came to their hands." Judge SELDEN (Schemerhorn v. Tolman, 4 Kern., 116), after remarking that it was not usury for a bank to pay to the holder of a note discounted by it its own bills at par, but with less than par in the market, does not constitute usury, proceeds to say, primafacie, at least, such a transaction is a loan, because a bank cannot make sale of its own promises to pay, which are of no value so long as they remain in the possession of the bank. It is not until they have passed into other hands that they acquire a value and become possessed of the attributes of property. * * * It is plain that the giving one's own promise to pay to another, for any consideration, cannot be brought within the definition of a sale. It is impossible to call such a transaction a transfer of property from one person to another, as a promise is not property in the hands of the promissor. * * * If there is a sale, it is made by the same acts which create the thing sold. This is not only repugnant to every just definition of a sale, but logically absurd.
If, then, the transfer by Lane, West Co. of their note to the plaintiff at a usurious rate of interest renders void the note for usury, and they could not sell their note because it *Page 624 was not the subject of sale, it becomes necessary to inquire whether the transaction can be sustained on any other theory.
It is said that because the plaintiffs delivered their own note to a broker in exchange for Lane, West Co.'s note the transaction was not affected by usury; that the transaction was in effect a sale of the plaintiffs' credit, which may be sold at any price without subjecting the transaction to the imputation of usury.
If it be true that Lane, West Co. could not sell their note, because it was not the subject of sale, it follows that the plaintiffs could not sell theirs to Lane, West Co. I am unable to understand how there could be an exchange of one note for another, by which either could obtain for his note more than the face of it and legal interest and escape the laws against usury. Each note, after transfer, is supported by a valid consideration, because the promise of the one party is a good and sufficient consideration for the promise of the other. But the question is not whether there is a valid consideration (because all usurious contracts have a consideration to sustain them), but the question is whether the transfer by way of an exchange takes them out of the operation of the usury laws.
In Chitty on Contracts, 374, it is said the difference between a sale and exchange is this, the former is a transferring of goods for money, the latter for goods by way of barter. In either case the same rules of law are prescribed for regulating the transaction.
In Domat's Civil Law, exchange is defined to be "a covenant by which the contractors give to one another one thing for another, whatever it be, except money; for in that case it would be a sale."
In exchanges of one kind of chattels for another, it is impossible to establish usury, because chattels have no fixed value; parties may call the value of them what they please, and so long as there is no standard by which to ascertain and determine their real worth, it cannot be said that usury is taken, even if it applied to any dealing except loans.
An exchange of notes must be governed by the same rules *Page 625 as the exchange of chattels, because an exchange is not a loan, although it may be a cover for a loan. But when A delivers his note for $100, payable three months from date without interest, to B, and, receives in exchange therefor B's note at three months without interest for $90, it is difficult to understand how this can be considered an exchange and not a loan. The note of A, in the case supposed, is presumed to be worth the number of dollars agreed to be paid by its maker. The same presumption applies to the note of B, and the court would award in the event of non-payment, the same amount of damages on each note. A promissory note then has a fixed value in contemplation of law, and is thus distinguished from chattels; and it is this distinction which renders the transaction in the one case usurious, and in the other not.
Judge SELDEN in Schemerhorn v. Tolman (supra), illustrates the principle thus: Whenever the question of usury arises, no value can be put upon the promises or obligations of either party different from that which they import on their face. This is universally conceded in respect to the obligations of the borrower. If a lender advances $90 in money, and takes a note for $100 with interest, he cannot defend himself against the charge of usury by showing that the responsibility of the borrower is doubtful, and that his notes would be worth less than par in the market. The question is to be determined on the face of the transaction. It is usury per se. Upon what principle, then, can one who instead of the $90 in money, gives his note for $90, allege that the note he takes in return is worth less than its face. * * * So if the borrower choose to receive the promissory notes of the lender instead of money, he cannot, I think, upon the question of usury, take the ground that such notes are depreciated in the market. If he gives his own obligations for no greater nominal amount than that for which he receives the obligations of the lender, there can be no usury. To constitute usury, the lender must take or receive, or contract to take or receive more than the legal rate of interest; and such a project cannot be predicated upon the assumption that he will fail to redeem his own obligation. *Page 626
It would seem to follow, and such was the opinion of Judge SELDEN in the case cited, that while the exchange of notes is called an exchange as distinguished from a loan or sale, yet for the purposes of the usury law it must be considered one or the other, and it resembles a loan more than a sale. The parties exchanging notes must have in contemplation the raising of money, and each desires the note of the other in order to enable him the more conveniently to obtain it, and it is in legal effect a loan of the amount evidenced by the face of the note. The amount of each note is as definitely ascertained as if the parties were exchanging bank notes, or gold, for silver coin. Chattels to which, properly speaking, the term exchange applies, has no such value, and hence no means is furnished to determine which has the best of the bargain.
Judge GARDNER, in the Dry Dock Bank v. The American LifeInsurance and Trust Company (3 Comst., 344), declares it as his opinion that usury cannot be predicated of an exchange of notes, no matter what the terms of exchange may be. It may, however, he considers, be shown that such an exchange is a cover for usury. The opinion of Judge GARDNER, in respect to the point alluded to, was not necessary to a decision of the case; yet it may be said that if an exchange of notes may be, per se, usurious, as when they are not for the same amount, or at different rates of interest, the plaintiffs' obligations given to the defendants were, per se, usurious. But the court refused to follow Judge CADY, who was of the opinion that the exchange was usurious; and Judge GARDNER was designated to write an opinion repudiating that view of the law, and deciding the case on the ground that the transaction was a cover for usury.
The case of Schemerhorn v. Tolman presented a state of things substantially similar to that of the Dry Dock Bank v.The Life Insurance and Trust Company; and in that Judge SELDEN, as I have shown, repudiates the whole reasoning of Judge GARDNER, and declares it to be his opinion that such an exchange as either of the cases presented was, per se, usurious, and I do not find that the other judges dissented *Page 627 from him on this point. But in regard to his opinion, it may be said that the point under consideration need not have been decided in order to dispose of the case, and that each isobiter. But I think the point was fairly before the court in each case, and in each it was decided differently.
If the question is to be considered an open one, it seems to me when one party to an exchange of notes, receives from the other a note by which he is entitled to demand either a larger amount of principal and interest, or a higher rate of interest, or a commission which is greater than the interest would be for the time the note has to run before maturity, the transaction is perse usurious.
When the transaction is, on its face, a mere exchange of one note for another, at the same rate of interest and payable at the same time, it is not per se usurious, and it is incumbent on the party alleging usury in the transaction to prove it. But if I am wrong in this, and if, in all cases of exchange, it is incumbent on the party assailing the transaction to prove that it was a mere cover for usury, it then becomes necessary in this case to inquire whether the question was submitted to the jury with such instructions as the law required to be given, and as the plaintiffs had the right to require to be given to the jury on the question of usury.
The court below instructed the jury that if they were satisfied, on the evidence, that the exchange of notes between the plaintiffs and Lane, West Co., for which the plaintiffs charged a commission of 2½ per cent, was in fact a sale of the plaintiffs' credit, and that the commission charged was a compensation for the sale of such credit, and the transaction was not a loan nor cover for usury, then the reservation of a commission, though exceeding seven per cent for the time Lane, West Co.'s note had to run, does not stamp the transaction with usury, nor make it void in the plaintiffs' hands on that ground. The defendant's counsel excepted to this branch of the charge, but the plaintiffs' counsel did not. The instruction must therefore be taken as correct, and the finding in favor of the plaintiffs disposes of the question of *Page 628 usury. The transaction is found to be a loan or a cover for usury.
If the plaintiffs have any escape from the consequence of this finding, it must be because of some error of the court in refusing to charge as requested by their counsel. The first request was to charge that an exchange of notes for a commission of 2½ per cent on the face of the note is not within the statute of usury. The court refused to alter his charge, and the plaintiffs' counsel excepted.
In my opinion the court should have charged that such a transaction was usurious. But upon no principle could the proposition, as stated by the counsel, be given to the jury as the law of the case, without the qualification that the transaction was not in fact a loan or a cover for usury.
And within several cases which have never been questioned, the commission charged must not exceed the interest for the time the note has to run. (Dey v. Dunham, 2 Johns. Ch., 182; Fanning v. Dunham, 5 id., 122; Dunham v. Dey, 13 Johns., 40.)
The next request of the plaintiffs to charge, was that the burden of proving the note of Lane, West Co. void for usury, lies upon the defendant, and he is bound to prove it clearly; and that usury cannot be presumed. The court refused to vary the charge, and the plaintiffs' counsel excepted.
The charge as given, was that if the jury were satisfied that the transaction was in fact a sale of the plaintiffs' credit, and the commission was a compensation for such sale, and it was not a loan or cover, then, though the commission exceeded 7 per cent, it was not usurious. In other words, they were told in substance that if they were satisfied that the transaction was what it appeared to be on its face, it was not usurious. This put upon the defendant the burden of proof, and it was all the plaintiffs could fairly call on the court to say to the jury.
The next request was to charge that for aught that appears, Van Olinda or Hotchkiss might sell this note to Elwell Co. at any price. The court refused to alter the charge, and the plaintiffs' counsel excepted. *Page 629
This was only another mode of asking the court to instruct the jury that the note was not usurious. This it could not do on the facts proved. The jury did find on the facts that it was usurious, and there is no court that would feel itself at liberty to set aside the verdict as against evidence.
There are two other requests to charge in reference to the effect of the exchange, under the pleadings, and the interest of Van Olinda in the notes, which do not require any further comment.
I cannot doubt that the case was presented to the jury most favorably to the plaintiffs, and that there is no error in the refusals to charge as requested.
I cannot leave the case without a brief reference to a point already incidentally alluded to, but which is entitled to a somewhat fuller examination. I refer to what was called by Chancellor KENT, in Dey v. Dunham (2 Johns. Ch., 182), and again in Fanning v. Dunham (5 id., 122), as a loan of credit, and by Judge GARDNER, in Dry Dock Bank v. The American Ins.and Trust Co. (3 Coms., 344), as a sale of credit. Both mean the same thing, and the difference is only in the words used to designate it. Judge GARDNER is of the opinion, in the case cited, that there can be no such thing as a loan of credit, and hence he used the words "sale of credit." And he uses the phrase in defining the effect of an exchange of notes, that it is in effect a sale of credit, and for which the seller has a right to receive what sum he may deem his own worth, and give to the other for his note what he considers it to be worth. If this is the law, the openings in the statute against usury are so large that usurers can drive through it in coaches gilded with the gold extorted from their victims.
There is such a thing as a sale of credit, and when credit is sold, the seller is entitled to a commission by way of compensation for his risk. Thus a man may receive a commission for indorsing or guaranteeing my note, for his draft or bill of exchange upon another. In these cases I receive the benefit of the indorsement, guaranty or draft, he becomes responsible for me, and in all the cases supposed he is secondarily not primarily liable. In case of the indorsement or *Page 630 guaranty I am myself bound to protect him against loss, and, in case of the draft or bill, the drawee, if he has become a party to the paper.
But when a person delivers to me his promissory note for a consideration moving between us, the paper is mine; he is the principal debtor; there is no sale of credit about it. I hold his legal obligation, which, at maturity, I may enforce against him. This is not true of his indorsement or guaranty of my paper. If there is a sale of anything it is a sale of the obligation itself; and this Judge SELDEN demonstrates not to be the subject of sale.
If I borrow A.'s note, to be used by me to raise money, it is right and just that he should be entitled to receive a commission for his risk. Although I am bound to pay the note at maturity as I would a note endorsed by him, yet in either or both he incurs a risk, for which he should be compensated.
If A. should call upon B. for the loan of $100, and the latter not having the money should deliver to A. a horse with authority to sell it, raise the $100 and return B. the excess; if A. should give B. his note for the $100 when he receives the horse, he would not be a purchaser of the horse; he would be a mere agent of B. to sell as a means to raise the $100. Now, this is the real transaction when parties exchange notes. Each wants money, neither has it, but each can make a better use of the other's note than he can of his own, and each has to go into the market and sell the notes in order to get the money. It is a loan of the money, and is neither a loan nor a sale of credit.
I have under the second point disposed of the fourth point of the plaintiffs' counsel. In no aspect of the case can I discover any ground on which to disturb the judgment of the court below.
The judgment must, therefore, be affirmed with costs.
WRIGHT, J., was for affirmance, on the grounds assigned by DAVIES, J. All the other judges being in favor of affirmance,
Judgment affirmed. *Page 631