Hackettstown National Bank v. Rea

By the Court, Learned, J. This is an action of foreclosure. The defence is usury. The usury is alleged to consist in this; that a note dated and payable in Hew York was discounted at seven per cent by the plaintiff—a Hew Jersey bank ; the rate of interest being six per cent in Hew Jersey; and that the borrower paid the expressman seventy-five cents, being his proper charges for bringing the money. Another defence is, that the plaintiff, a foreign corporation, kept an office in Hew York for the purpose of issuing money, &c. And also that it was interested in a fund employed for making discounts, &c., in Hew York, in violation of the statute against unauthorized banking. As to the second defence, the referee has found that the plaintiff did not keep any office (except at Hackettstown,) for the purpose of discounting, &o., and did not employ its effects and was not interested in a fund, for such purposes, (except at Hackettstown.) [170] TMs is a question of fact; and we tMnk the referee found correctly. The case of Suydam v. The Morris Canal Company, (5 Hill, 491 n., and 6 id., 217,) shows that transactions like those in the present case are not necessarily violations of that act. It is not every loan made in this State by a foreign corporation which is prohibited. And there is no ground, upon the evidence, to disturb the referee’s finding. In the case of Jewell v, Wright, 80 N. Y. 259,) a note was made and dated in Hew York, and was payable . here. It was first negotiated in Connecticut. The court held that on the question of usury, the laws of this State applied. To the same effect is Cutler v. Wright, 22 N. Y. 472.) In the present case, therefore, where the maker and endorser of the note lived in Hew York, and where the notes were drawn, dated and payable here, the laws of Hew York must govern, as to the rate of interest. If drawn “with interest,” the rate would have been seven per cent. As they were without interest, the same rate of discount must be legal. We do not think, therefore, that the statute of Hew Jersey, limiting- interest to six per cent, made the notes in question usurious and void; when discounted at that rate. The charter of the plaintiff contains a clause that it shall not take more “than the legal rate of interest for the time being.” This undoubtedly is but a clause put in for greater security. It does not alter the legal rate, or make that illegal which would otherwise be legal. Indeed the expression, “for the time being” seems to imply that there might be transactions of- the bank in which interest might be taken lawfully at a rate greater than that usually authorized in the State. But however that may be, we see no reason to give to that clause in the bank charter any other effect than that which would result from the general law of Hew Jersey on the sub [171] ject of usury. And, as appears by the oases cited above, that law does not render these notes usurious. [First Department, General Term, at New York, November 4, 1872. Ingraham, Leonard and Learned, Justices.] The judgment entered on the report of the referee should be affirmed, with costs.