Gillett v. Averill & Seymour

By the Court, Whittlesey, J.

The presentment for payment was sufficient. It is understood to be the custom of banks holding promissory notes, payable at their own counter, to wait, on the day of the maturity of the note, until the close of business hours, and then if the maker has no funds, to give notice of non-payment, without making any other demand of payment. This custom is sanctioned by judicial decisions. (Bank of the United States v. Carnead, 2 Pet. 543 ; Berkshire Bank v. Jones, 6 Mass. 524 ; Ogden v. Dobbin, 2 Hall’s Rep. 112.) It may be usual for the teller, or other officer, to inquire of the book-keeper if the maker has any funds; but in this case such inquiry was unnecessary, as the teller swore that he knew there were no funds in the bank to pay the note. No formal demand or unmeaning proclamation at the close of banking hours for the day was necessary, or is ever necessary in such cases. The objection here only goes to the sufficiency of the demand; and that is the only objection connected with the protest of the note which it is necessary to consider.

It is insisted that the first of the series of notes was usurious, and if this be so, the note in suit, being a substitute for that, is *89 likewise void for usury. If that note and the certificate of deposit which furnished the consideration for it had been paid according to their terms, the result of the operation would have been that the bank, at the expiration of seventy-five days, would have received nearly $1015 from the borrower and would have paid him nothing until the expiration of ninety days, and then less than $1013. Thus the very money which the bank would have paid its borrower, would have been received from such borrower and used by the bank some fifteen days before paying it over to him, and the bank would have pocketed a small difference in addition to the use of the money for fifteen days. Such a transaction would seem to present, on the face of it, a case of usury. The contracts were both payable at the same place. There was therefore no difference of exchange between the place of payment of the two obligations to justify and legalize the addition of the fair premium on such exchange to the legal discount, as may be safely done where such additional premium is not made a mere cover for usury. (Ontario Bank v. Schermerhorn, 10 Paige, 109 .) Upon the testimony of the maker, the taking of the certificate was imposed upon him by the bank as a condition to the discounting of the note, which would render the transaction usurious within all the cases; but the other side introduced testimony to show that the offer to take the certificate came from the borrower; that he represented that he wanted, it for remittance, and that a certificate would answer the purpose as well or better than the notes of the bank. Thus there is testimony on both sides, and though in any aspect in which the case is placed with all the testimony, it is impossible not to see that the taking the certificate of deposit by the borrower was the inducement to discount his note, yet it was, perhaps, a proper case for the jury. We have then to see whether the instructions of the court contained any error. The charge indicated a natural sympathy for the creditors of this bankrupt institution, represented by the receiver, as plaintiffs, and a leaning against the defence of usury set up by the defendants, who were parties to a note discounted for one who was a director and the vice president of *90 the bank. The legal features of the case probably required of the judge a leaning in the other direction, if it did not justify him in taking the case under his own control. At least this seems to me to be a stronger case against the plaintiff than that of The Seneca County Bank v. Schermernorn, ( 1 Denio, 133 ,) in which the court held the note, infected with usury. In all such cases we are to inquire whether by the agreement previous to discounting the note and to induce the discount, the borrower was to have any thing less valuable to him than the legal proceeds of the note. If by the agreement on an application for a loan, the borrower was to take uncurrent money, a draft at an exorbitant premium, or any similar thing beyond its true value, the note would be infected with usury and void. But if there was no such, preliminary agreement—nothing which would prevent the borrower from receiving the proceeds of his note in cash—lie could, after the discount, take from the lender uncurrent money, or drafts, or certificates of deposit, and it would not affect the validity of the note. (Cleveland v. Loder, 7 Paige, 557 .) What is necessary to the validity of a note, in such case is, that there should be nothing in the agreement previous to the discount, to restrain the borrower from receiving the full legal proceeds in cash or what is equivalent to cash. Hence the instructions of the circuit judge in the commencement of his charge were substantially correct when he advised the jury that if it was made a condition of the discount by the bank, that Gilbert should take the certificate of deposit, instead of money, the transaction was usurious. But the direction in the closing part of the charge was erroneous, or might have led the jury to erroneous impressions, where he advised them that if Gilbert took the certificate with his own consent, and it was not forced upon him, the transaction was not usurious. It can make no difference whether the offer to take the certificate came from the maker of the note or the bank. If the maker of the note in his proposition for a discount offered to take such a certificate, and this offer was accepted by the bank, it would equally avoid the note, as if the maker had offered to pay eight or ten per cent discount. If *91 Gilbert had offered to take the certificate after the transaction of discount had been closed, then indeed the taking it by his own consent would not affect* the note.. But the judge’s instructions were not so limited, and they convey the idea that if the proposition to take the certificate came from Gilbert it would relieve the case from the imputation of usury. This was erroneous. If the certificate was taken in persuance of an agreement or understanding made or had, at the time of the agreement to discount the note, with a view to procure the discount, it would avoid the note from whichever party to the transaction the proposition emanated; and under all the circumstances of the case such was the proper instruction to have been given to the jury. It is very apparent that the certificate of deposit was by no means equal in value for any of the purposes of the maker of the note, whether for remittance or otherwise, to the cash, or even the circulating notes of the bank. This is very distinguishable from the case of Knox v. Good win, ( 25 Wend. 643 ,) where the professed object of obtaining a certificate for remittance was evidently an honest one and carried out in an honest and business like method, leaving" no room to infer an usurious intent.

It does not seem to me so evident that the circuit judge erred in refusing to charge specifically as the counsel for the defendants requested; but he did err in his instructions before referred to, and that error furnishes, a sufficient, ground for a new trial.

New trial granted.. -