Woodard v. Madsen

Per Curiam. On January 26, 1923, the plaintiff loaned to the defendant the sum of $2,000 and took back as security the defendant’s promissory note for $4,000, payable one year from date. Before the due date the defendant paid $1,200 on account of said loan. Plaintiff thereupon returned the $4,000 note and took from the defendant a renewal note for $2,800 representing the balance unpaid on the $4,000 note. The plaintiff instituted this action to recover the remaining sum of _$800 which represents the balance due on the amount actually loaned to the defendant. The defendant’s note for $2,800 outstanding and in possession of the plaintiff was not produced at the trial nor surrendered to the defendant before the trial. In fact, plaintiff declined to produce it. Yet the court below granted judgment to plaintiff. We may assume that a payee of a note may sue the maker upon the debt instead of relying upon the security providing, of course, that the day of maturity has arrived. But such an action cannot be successfully maintained unless the note is produced and surrender proffered upon liquidation of the debt or its non-production accounted for and excused. The necessity for such a rule is too manifest to require further comment. If the transaction in which the note was given as security was infected with usury, the usury will defeat recovery whether the suit is based on the debt or the security. The security is void where usurious interest is exacted even in the hands of a holder in due course. (Sabine v. Paine, 223 N. Y. 401; General Business Law, § 373.) In the instant case the defense of usury was interposed. In granting judgment to plaintiff the court stated no grounds for its conclusion. The complaint should have been dismissed for failure of proof because of plaintiff’s failure to produce the note given as security. We also have reached the conclusion that the defendant by convincing proof established that the transaction involved in this litigation was infected with usury and a contrary finding by the court below is against the weight of the evidence. The plaintiff’s claim that the $2,000 in addition to the actual loan was given as a commission to her husband for services in persuading her to [21] loan the money to defendant strains credulity to the breaking point. An exaction of 100 per cent interest by whatever name it may be called, is unconscionable, the transaction illegal and the security given a nullity. Judgment reversed, with thirty dollars costs, and complaint dismissed on the merits, with costs. All concur; present, Wagner, Lydon and Levy, JJ.