Klar v. Kostiuk

Gildersleeve, J. This action is brought on a promissory note for the sum of $1,500, payable in six months, with in [200] terest, made by the defendant Goodman Kostiuk to the order of the defendant Kamber, and indorsed by the said Kamber and the defendants Samuel Kamlet and Morris Kostiuk. The action was defended by Goodman Kostiuk, the maker, and Morris Kostiuk, an indorser. These defendants answered jointly and set up the defense of usury. A usurious agreement is alleged between Goodman Kostiuk and the defendant Samuel Kamlet, whereby $150 was paid by the borrower and received by the lender as interest on the loan in addition to the regular interest. A trial was had before a court and jury. The jury rendered a verdict for the amount claimed. From the judgment entered thereon against said defendants Goodman Kostiuk and Morris Kostiuk, and the order denying their motion for a new trial, the appeal herein is taken. The defendants offered ample evidence, if believed by the jury, to support findings that the plaintiffs were holders in due course and that there was usurious interest taken at the inception of the note.. The learned trial justice charged the jury that, if the plaintiffs were holders in due course, -the defense of usury was not available against them. To this instruction the appellants duly excepted, and they now claim it constitutes error that requires a reversal of the judgment. No other question is involved in the appeal. Until the enactment of section 96 of the Negotiable Instruments Law, in respect to notes having a usurious inception, and the decisions in Schlesinger v. Gilhooly, 189 N. Y. 1; Schlesinger v. Lehmaier, 191 id. 69, and Schlesinger v. Kelly, 114 App. Div. 546, there was no uncertainty about the law in this State in respect to notes usuriously given. It was plainly declared in Claflin v. Boorum, 122 N. Y. 385. The court said: “A note void in its inception for usury continues void forever, whatever its subsequent history may be.” Section 96 of the Negotiable Instruments Law provides as follows: “A holder in due course holds the instrument free from any defect of title of prior parties and free from defenses available to prior parties among themselves and may enforce payment of the instrument for the full amount thereof against all parties liable thereon.” [201] We think it was the purpose of the Legislature in enacting this provision to make a radical change in the law of this State affecting negotiable paper, and that the law now is that a tona fide holder in due course holds the note free from any taipt of usury. The Schlesinger cases, supra, unmistakably land specifically declare the law to be that a bank acquiring in good faith, for value, commercial paper, void between the parties for usury, may recover thereon. We see no reason why the provision under consideration does not apply to, and may not be invoked by, individuals as well as banks. In Wirt v. Stubbefield, 17 App. Div. 283, the court, in construing the same provision enacted by Congress for the District of Columbia as the Negotiable Instruments Law, took the view that we have adopted and made no distinction between individuals and banks. We think Mr. Justice Laughlin, in Schlesinger v. Kelly, supra, correctly stated the law of this State, when he said: “ The usury laws remain in full force, but to facilitate the free circulation of negotiable paper by protecting holders thereof in due course for value in their right to enforce the same, the usury laws are to that extent superseded by the provisions of section 96 of the negotiable Instruments Law.” We see that the alleged error in the judge’s charge affords no ground for reversal in behalf of the appellant, the maker of the note. An indorser cannot successfully raise the defense of usury against a holder in due course. Section 116 of the negotiable Instruments Law provides: “Every indorser who indorses without qualification warrants to all subsequent holders in due course * * * that the instrument is at the time of his indorsement valid and subsisting.” See Horowitz v. Wollowitz, 59 Misc. Rep. 520, and cases there cited. The charge in question was certainly correct as to the indorser. The judgment and order .should be affirmed, with costs to the respondent.