Utica Insurance v. Bloodgood

By the Court, Sutherland, J. It was decided in the case of The People v. The Utica Insurance Company, (15 Johns. R. 358,) that the act of incorporation did not confer upon the company banking powers, and in The Utica Insurance Company v. Scott, (19 Johns. R. 1,) it was held as it had also been in the previous case, that the restraining act, (2 R. L. 134, § 2) was applicable to incorporated companies, as well as other associations, or individuals who carried on banking operations without legal authority; and that the notes and securities given to this company for the purpose of being discounted, and actually discounted by them, were null and void as being within the express provisions of the restraining act. But it was also held that there was a distinction between the security and the contract of lending; and that as the lending of money was not declared to be void, wherever money was lent, it might be recovered under the common counts, although no action could be sustained upon the security itself. The plaintiffs, therefore, cannot recover in this case under the count upon the note. But the note, though illegal and incapable of being the foundation of an action, may still be used as evidence; it is void only as a security; but I apprehend it is competent evidence under the money counts. There is, however, other evidence of the receipt of the money by the defendant. It [655] was proved that whenever any note was discounted for the accommodation of any of the directors or stockholders, the avails were placed to his credit, and were subject to his checks as in ordinary cases; that the money produced by this note was applied by the defendant in payment of a. former note given to the company and an instalment due on his stock. He therefore received the money and appropriated it to his own use. Was there any usury in the transaction? The book keeper in the plaintiff’s office in 1818, and whose duty it was to calculate interest on all notes discounted by the company, testified, that where a note was drawn like this payable in six months, his habit was to cast the interest for half a year and the three days of grace, estimating them as one tenth of a month. Upon examining the note he further testified, that there was a memorandum upon it consisting of the figures $67,12, in his hand writing, which he sup posed were intended to indicate the amount of interest retained on the note; that the interest upon this note for six months, calculated upon the principle which he had stated, would amount to $67,72, sixty cents more than was actually received. The principle stated by him was correct, except as to the days of grace; and his testimony, taken together, I think warrants the conclusion, that something less than seven per cent, was in fact taken in this case. The retaining the interest or taking it in advance did not render the note or loan usurious. This was expressly decided, in relation to negotiable paper discounted by a company not possessing banking powers,, in the cases of the New-York Fireman Insurance Company v. Sturges and The same v. Ely, (2 Cowen, 664, 678, 703.) The defendant is estopped by his stipulation from availing himself of the statute of limitations. This stipulation is not confined to an action upon the note itself; it was undoubtedly intended to apply to the debt or loan of which the note'was the evidence. Suppose- there, was no usury in the case, and, that the count upon the note had not been sustained upon, the trial on account of the variance between the note described and that produced, in evidence, it- would hardly have been [656] contended, because the recovery was not upon the note specifically, but on the money counts, that the defendant was as liberty, under this stipulation, to avail himself of the ^aPse °f time. Such a construction I am pursuaded would do violence to the intention and understanding of the parties. The note was spoken of only as the evidence of the debt. The set-off of the 25 shares of stock offered by the defendant was properly rejected. The letter from the committee of the company to the defendant did not contain any definitive proposition which was to become a binding contract between the parties upon its being accepted by the defendant. It merely informed him that they were authorized to accept his stock in part payment of his note at a fair and reasonable price; and expressed a wish that he would communicate with them on the subject without delay. It was merely the opening of a negotiation, not "a formal and distinct proposition. Neither the amount which would be received, nor the price of the shares was specified. It is evident that nothing more was intended than to inform the defendant that his note must be paid, and that his stock, to a certain amount, would be taken by the company. If it were to be considered a proposition to receive a portion of the defendant’s stock in part payment, the very proposition, in connection with the general scope of the letter, implies that the residue of the note must be paid also and at the same time. But there was nothing definite or binding upon the plaintiffs. They had a right to add the condition which they subsequently insisted upon. Nor was the defendant upon the evidence in the case entitled to compensation by way of set-off for the services rendered by him as a director, to the company. All his extraordinary services were rendered prior to 1818, and he never presented to the company any account, or made any claim against them for compensation. There was no express contract on the part of the plaintiffs to pay him any thing; and 1 think, under the circumstances of the case, none can be implied. Motion to set aside report of referees denied,.