author: Davies, J. Mullin, J.

text:
    James W. Elwell and others, Appellants, v. Moses Chamberlin, Jr., Respondent.
    Where the defendant holds the affirmative of all the issues made in the pleadings, and opens the case by calling the first witnesses, he is entitled to the closing address to the jury.

      It seems, that the party who alleges the affirmative of any proposition, or of an issue of fact, must prove it; and the party who has to maintain or prove the affirmative, must begin the evidence.
    The credit of one person may be rendered available to another by gift, sale, or exchange, which is virtually a sale; and if not intended as a cover for usury, it may be the subject of a consideration to be agreed upon between the parties, the same as in the disposition of other commodities.
    The principals cannot enjoy the benefits of a bargain made by their agent, j without adopting the instrumentalities by which he consummated it.
    This action was brought in the Superior Court, of the city of Hew York, to recover the amount of a check given by the defendant, made and dated October 14th, 1856. The plaintiffs were the owners and holders of a promissory note made by the firm of Lane, West & Co., dated June 20th, 1856, and which was received by them from a broker, employed by that firm to raise money thereon,- in exchange for the plaintiffs’ note for the same amount. On such exchange the plaintiffs were allowed and received two and one-half per cent as a commission. This was the usual commission charged on similar transactions. In the early part of October, 1856, the plaintiffs put the note of Lane, West & Co. into the hands of a broker to sell, who employed for that purpose another broker by the name of Hills, and who, on the 14th of October, sold it to the defendant for $25 less than its face, taking the defendant’s check for it, and he passed the same to the plaintiffs, and this action is brought to recover its amount. When Hills applied to the defendant to purchase the note, the defendant declined to make the purchase, on the ground that he had then a note of Lane, West & Co. about falling due, and had enough of their paper, but said if their note falling due October 13th, held by him and deposited in the Hassau bank for collection was paid,

      then he would buy it. Mills, on the 14th of October, represented that the note of Lane, West & Go., falling due the day previously had been paid, and thereupon the defendant purchased the plaintiffs’ note, and gave therefor the check in suit. The answer admitted the giving of the check, but set up as defenses, that the note sold to him, for which the check was given, was an accommodation note, and was usuriously purchased by the plaintiffs. That the defendant had purchased the same upon a usurious contract with them, and that he had purchased the same upon the faith of the representation of Mills, that the other note falling due on the 13th of October, had been paid, and that ascertaining on the morning of the 15th of October that the sum had not been paid, he offered to the plaintiffs to return the note, and demanded a return of his check, and thereupon, on its being refused, stopped payment thereof.
    On the trial, the court gave to the counsel for the defendant the closing address to the jury, to which the plaintiffs’ counsel excepted. Under the charge of the court the jury found a verdict for the defendant, and judgment thereon was affirmed at the General Term. (/S'. O. 4 Bosw., 320.) The plaintiffs then appealed to this court.
   Davies, J.

The first point made by the counsel for the appellants is, that the judge erred in permitting the counsel for the defendant at the trial, to have the closing address to the jury. In this the learned judge was clearly correct. It appears from the case, that the defendant opened the case to the jury by calling the first witness. He had the affirmative of all the issues made by the pleadings, and if he had offered no evidence to sustain them, the plaintiffs would have been entitled, without adducing any testimony, to have a verdict and judgment for the amount demanded in their complaint. The party having the affirmative issue upon the record, is always entitled to begin. It was conceded in this case that the defendant had such affirmative, as he began, and as it would appear without objection. It generally follows that the party entitled to commence his evidence, is entitled to the close, and under our present system of pleading, it very frequently occurs that the defendant has the affirmative, and when he has, it has been also generally admitted that he was entitled to open and close the case to the jury.

Under our former system of practice, if the defendant did not plead the general issue, but admitted upon the record .the plaintiff’s cause of action, and sought to avoid it by some affirmative defense, the rule and practice of the courts in England prevailed in this State. (2 Dunlap Pr., 637; 1 Paine & Duer, 522; Gra. Pr. 289.) That rule is announced in an authoritative and able work on the practice of the Court of King’s Bench, where the author observes: “It has been laid down as a general rule, that the party who has to maintain the affirmative of the issue must begin the evidence. Where there are special pleadings, or where a special defense is not intended to be given in evidence under the general issue, it may, perhaps, be more accurate to say that the party who has added the similiter shall begin. If both parties, however, have added the similiter to the different sets of pleadings, in the same cause, then the plaintiff shall begin. * * When a special defense is intended to be given in evidence under the general issue, the party shall begin who would have been entitled to do so, if the defense had been specially pleaded. (1 Arch. Pr., 169, 170.) In Jackme v. Hesbeth (2 Stark. N. P., 518), it was held, that when the affirmative of the issue lay upon the defendant he had the right to begin. Bayley, J., after having consulted Wood, B., said they were both of them of the opinion that the defendant was entitled to begin. In the case of Revett v. Braham (4 T. R., 497), the question was who was entitled to the reply, in an action of ejectment when the lessor of the plaintiff claimed as heir-at-law, and the defendant as devisee, and the court (upon a trial at bar) decided that if the plaintiff proved his pedigree and stopped, and the defendant set up a new case, which the plaintiff answered by evidence which ultimately went to the jury, the defendant should have the general reply, and Bulles, J., said he had so ruled at Winchester in 1789. The general rule, prevailing in this country, and in England, is well stated in Bouvier’s Inst. 323, § 3043, as follows: “ That the party who alleges the affirmative of any proposition or issue of facts should prove it, because a negative does not in general admit of the simple and direct proof of which the affirmative is capable, and therefore the party who has to maintain or prove the only affirmative, or all the affirmatives, must begin the evidence.” See, also, the case of Huntington v. Conkey (33 Barb., 218), where in the opinion of Hr. Justice E. Dabwut Smith, the authorities are collected, and the doctrine clearly stated. In that case the action was upon a promissory note, which was set out in the complaint. The answer admitted the making of the note, and set up the defense of usury. The plaintiff in that case, as in this, was entitled to a verdict, if no evidence had been offered on the tria); and the judge at the circuit held that the counsel for the plaintiff had the right to open the case to the jury, and to reply. This the General Term held to be error, and granted a new trial.

In the case of Ayrault v. Chamberlain (33 Barb., 229), it was held that each party should be confined to a legitimate and proper opening of his own case, the plaintiff’s counsel to a statement of his cause of action, and the defendant’s counsel to a statement of his answer to the plaintiff’s case, and the evidence he proposes to give to sustain it. And it was held improper for the counsel of the plaintiff to state the case as made by the defendant in his answer, or the evidence he expects to give in reply to the defense set up in the answer. This ruling was affirmed by this court at the June Term, 1862. There was no error, therefore, in the ruling of the judge on the trial, directing the plaintiffs’ counsel to sum up to the jury before the defendant’s counsel, thus giving to the latter the reply. He had opened the case to the jury, and should consequently have had the reply.

The second point, made by the appellants’ counsel, that the verdict is against evidence, presents no ground for a review in this court. The Superior Court having refused to set aside the verdict, we assume it was sustained by the evidence offered on the trial, and we do not look into the evidence to see whether it is or not. That tribunal alone was competent to examine and decide that question, and their decision on that point cannot be questioned here.

The third point is in substance that the judge erred in his second proposition submitted to the jury. The defendant had insisted, in his answer, that the plaintiffs had no legal title to the note sold to him, and that, therefore, there was an entire failure of the consideration for his check, for the reason that the note was an accommodation note, and had no legal inception before it was passed to the plaintiff) and that it was void for usury. The judge charged the jury that if they were satisfied, on the evidence, that the transaction of the exchange of the note of the plaintiffs for that of Lane, West & Co., on which the per cent commission was charged and received by the plaintiffs, was in fact a sale of the plaintiffs’ credit, and that the commission charged was a compensation for the sale of such credit, and that the transaction was not that of a loan, nor a cover for usury, then the reservation of these commissions, though exceeding in amount 7 per cent on the face of the note of Lane, West & Co. for the time it had to run, does not stamp the transaction with usury, nor make that note void in the plaintiffs’ hands on that ground; otherwise, if it was a cover for usury. This charge is unobjectionable in view of the decision of this court in the cases of The Dry Dock Bank v. The American Life Insurance and Trust Company (3 Comst., 344) and Leavitt v. De Launy (4 Comst., 364). In the former case Judge Gardner, in delivering the opinion of the court, said: “The credit of one person may be rendered available to another by gift, or sale, or in any other way. This may be done by a direct contract between the patties; as an exchange of notes, which is the sale of one promise for another; by an undertaking with third persons directly; or one to be used for the benefit and according to the discretion of the donee or vendee. Where the responsibility is incurred gratuitously, it is, in popular language, called a loan; and when for a consideration, a sale of credit.” He adds: “ It is sometimes asked, why should a man he permitted to receive ten per cent on an exchange of notes, when if he advanced money on the same security he would get but seven. The answer is, for the same reason, that he is permitted to receive $20 for six months’ use of furniture valued at $100. The one is prohibited, the other is not. Ho man can exchange his promise to pay $110, at the end of a year, for $100 in cash. 1st. Because he would thereby agree to refund m kvnd precisely what he had received, and this is the definition of a loan; and the $10 must, therefore, be a compensation to the vendee for the use of the money, whatever name may be given to the transaction. This the statute forbids. The legislature has fixed the interest of money at seven per cent. This includes a compensation for the use and the risk of its repayment. ¡Nothing more can be received by, or secured to, the vendee. The consequence is, that a promise to pay $107 one year hence, is, in law, an equivalent for $100 in money presently received, no matter whether the promise is made by a Rothschild or a pauper. This is legally true, because the legislature has so enacted. But they have not declared that a promise to pay money is money, or its precise equivalent, in any case except that of a loan. Hence upon an exchange of promises, as in an exchange of property, parties are left to their own judgment as to their relative value. They are sales, subject to the same rules, and their validity is tested in the same manner as other sales. Upon the sale of property on time, the purchase money becomes a debt, which is forborne for the period limited by the credit. The case of Leavitt v. De Launy (supra) is in harmony with this doctrine. The question there arose upon contracts relative to the purchase and sales of bills of exchange, and it was said, in the opinion of the court, that the most favorable aspect to the complainants was whether upon a sale of credit, made in good faith, the vendor can receive or secure to himself more than seven per cent without rendering the agreement usurious. It was said that this question was substantially decided in the affirmative in the Dry Dock Bank case (supra) and by previous adjudications, to which reference is then made. It is not denied that a sale of exchange in form may be adopted as a cloak for a usurious loan. But the party impeaching an agreement upon that ground must by evidence remove the covering from the transaction, and exhibit it as a loan of money. A brief reference to these authorities will illustrate the principles of these decisions and the grounds upon which they were decided. In Trotter v. Curtiss (19 Johns., 160), and in Suydam v. Westfall (4 Hill, 211), it was held that a commission of 2£ per cent for accepting, in addition to interest on the money advanced, was not usurious. So when a bond and mortgage was sold for $2,600, and the bond of the vendor given to the vendee, conditioned that the mortgagor should pay $3,000, the amount of the mortgage sold, it was held that the transaction was on its face a mere sale of a chose in action, unconnected with a loan, and, therefore, not usurious per se. (Rapelye Anderson, 4 Hill, 472.)

So the sale of an indorsement, at three per cent on the amount of the note indorsed, and which was" intended to be, and was discounted at the legal rate, was held to be valid. (Ketchum v. Barber, 4 Hill, 225,) affirmed in the court of errors. (7 Hill, 444.) In More v. Howland (4 Denio, 264), it was decided that the bona fide sale of one’s credit, by way of guaranty, or by making a note for the accommodation of another, upon an exchange of notes, though for a compensation exceeding seven per cent, is not usurious, if the transaction is unconnected with a loan between the parties. And it was said, in the Dry Dock Back ease, that the principle of these cases applies to every engagement direct or collateral, assumed in good faith, by one man for another, for a stipulated consideration. The exchange of notes for a premium greater than the legal rate of interest is no exception to the general rule. This was, in effect, determined in Dunham v. Dey (13 Johns., 40), where Dunham reserved 2-)- per cent on an exchange of notes, which was more than the legal rate of interest on the notes given in exchange for the time the same had to run, and it was left to the jury to determine from the evidence whether the transaction was a device or cover for usury; and they found, as a question of fact, that the exchange was a mere cover for a usurious loan, and the court sustained the verdict. In Ketchum v. Barber (supra), the referee reported that upon a fair construction of the testimony the transaction was a mere sale of indorsements, or, in other words, the giving of a conditional guaranty of the payment of the notes for which the plaintiff received a stipulated compensation, and that there was no loan of money or of choses in action within the meaning of the statute of usury. In Ketchum, v. Barber (supra), Bookee, senator, in the opinion of the court, says that the following is a very fair and proper test, and in strict harmony with all the adjudged cases on the subject of usury, namely, when the borrower of money or of any property, or thing in action in every contingency, pays more than the legal interest, and the lender of the money, or any property or thing in action, at the same time, directly or indirectly reserves and secures to himself a return of his principal, with more than legal interest, exclusive of any legal charge for commission or services, the transaction must be adjudged usurious, whatever may be its form. If such result is apparent on the face of the transaction, or on the facts appearing to the court, they will decide it to be usury, and it would be needless and improper to refer it to a jury to- determine the quo cmimo or intent of the parties. In other cases, when such result is not apparent, the subject is necessarily referable to a jury to ascertain whether it is a fair business transaction or a shift and device to cover an usurious loan.

In the light of these authorities, the judge at the trial properly left it to the jury to determine whether the exchange of notes, and the payment and receipt of the commissions agreed upon, were a fair business transaction or a shift or device to cover a usurious loan. If the latter, then the note was void in the plaintiffs’ hands, and there was consequently no consideration for the defendant’s check. Or, on the contrary, if it was simply a sale or exchange of credit, then the transaction was unobjectionable and free from the taint of usury, and the note of Lane, West & Go. was a va/id security in the plaintiffs’ hands, and the sale of it to the defendant vested a good title thereto in him. The requests by the plaintiffs’ counsel to charge the jury presented no material qualifications to the charge as made. We have seen that the charge was literally in compliance with the doctrine of many adjudged cases, and if the request implied a departure from them, a charge in conformity would have been erroneous.

Ho point is now made upon the exception taken at the trial upon the first proposition submitted by the judge to the jury. We must assume that the jury found the truth of the matter stated in the third proposition to the jury, namely, that if Mills told the defendant, at the time he made the sale on behalf of the plaintiffs of the note of Lane, West & Co. to the defendant, that the other note of Lane, West & Co., then in the Brooklyn Bank for collection, had been paid, and that such statement was not true in fact, and that the defendant gave his check for the note in question, relying upon the truth of that statement and not upon other sources or means of information of his own, then the defendant was entitled to a verdict, notwithstanding Mills may have had no fraudulent intent himself in making the statement. It is not material that the plaintiffs authorized or knew of the alleged fraud committed by their agent Mills in negotiating the sale of the note. They cannot be permitted to enjoy the fruits of the bargain without adopting all the instrumentalities employed by the agent in bringing it to a consummation.] They have ratified the sale by seeking to enforce payment of the check given for the thing sold. If an agent deirauds the person with whom he is dealing, the principal, not having authorized or participated in the wrong, may, no doubt, rescind, when he discovers the fraud, on the terms of making complete restitution. But so long as he retains the benefits of the dealing, he cannot claim immunity on the ground that the fraud was committed by his agent and not by himself. (Bennett v. Judson, 21 N. Y., 238.) The plaintiffs, therefore, stand in the same position as if they had made the representation or authorized it to be made, and they are equally guilty of a fraud, whether the representation was made without knowledge of its truth or falsity, or whether at the time it was made it was known to be untrue. (Bennett v. Judson, supra.) It is apparent that the defendant did not intend to purchase this note unless the other was paid, and as the jury have found that he relied upon the representation of the plaintiffs’ agent that it had been paid, when in truth and in fact it had not, the judge properly instructed them that if they found the representation as alleged was made, and that the defendant relied upon its truth in making the purchase, and that it was false, then they should find for the defendant. They did so find, and the judgment appealed from should be affirmed.

Mullin, J.

The appellants’ counsel presents five points on which he relies to reverse the judgment. They are,

1st. That the plaintiffs’ counsel were entitled to close the smnming up.

2d. On the case the plaintiffs were entitled to recover. The verdict is against the weight of evidence.

3d. There was no usury proved in the case. ■ The burden of proving usury was on the defendant. It must be clearly proved, and cannot be presumed.

4th. The court erred in refusing to charge as requested, in each of the points excepted to’.

5th. The motion for a new trial was denied by a divided court, one of the judges dissenting. The question of usury was raised on the trial, and the plaintiffs were entitled to have the jury correctly instructed on the question of usury.

The second point cannot be considered by us. We cannot review the findings of fact. The court below had power to do so. If they had done so, we have a limited power of review, but not one extensive enough to set aside a verdict as against the evidence.

The fifth point presents no question of law; and hence oui examination of the case must be confined to the remaining three points presented by the counsel.

1st. Was the plaintiffs’ counsel entitled to close the sum-■mi-ng up ? The court held it belonged to the defendant; and the plaintiffs’ counsel excepted to the ruling.

It was said by Justice Willard in The People v. Cook (4 Seld., 77), that the right of counsel to address the jury is a matter resting in the sound discretion of the court, and he supports his opinion on the point, by reference to sundry cases in which the courts have either refused the right of counsel to address the court, oi limited it in such a way as to show that it was a right wholly under the control of the court. If the right to address the court or jury may be altogether withheld, it would seem to follow that the order in which counsel may sum up would also be in its discretion. If it rests in discretion, it cannot be reviewed in this court.

"Without stopping to inquire whether the learned judge was right in the position taken by him, an examination of the pleadings and proceedings on the trial will show that the court below was right in giving to the defendant’s counsel the closing address to the jury.

The answer admits the complaint; nothing was required to be proved by the plaintiff to entitle him to a verdict. In such ease the defendant is required to begin, and the party having the opening is entitled to close the argument. (Graham’s Pr., 289.)

2d. "Was usury proved in the case?

The answer alleges that the note for which the check in question was given was made by Lane, "West & Co. to be sold in the market, and that it was handed to a broker for sale and by him transferred to the plaintiffs for their note of the same amount, and a commission of 2-)- per cent. This 2l¿ per cent is alleged to be a discount of more than the legal rate of interest, and that the note was therefore usurious.

The answer also alleges that the said note was sold to the defendant for $25 less than its face, and that such sale rendered it usurious and void.

It is unnecessary to occupy time in an inquiry whether the transfer to the defendant was usurious, hfo court has ever permitted the usurer to take advantage of his own usurious agreement for the purpose of avoiding it, and I hope-no court ever will. While I am in favor of a rigid enforcement of the statute against usury, I am not in favor of shielding the usurer from the burthens of his contract into which his ava- _ rice has led him. (La Farge v. Horton, 5. Seld., 241.)

The question whether the transfer of the note to the plaintiff was usurious is not free from doubt. '

It would seem from the evidence of Hotchkiss that Lane, West & Co. had given the note in question to Van Olinda, who gave it to the witness, who was a broker, for sale. He took it to the plaintiffs and received from them their note for the same amount and the same time to run. He gave them

per cent commission for the sale, and paid it in cash, or a check. Did it because the plaintiffs’ note was more saleable,— more easily converted into money. Van Olinda wanted money. The exchange of notes with the plaintiffs was on the witness’ application and not on the plaintiffs’. He ap- ■ plied to the plaintiffs to huy the note. On cross-examination he stated that he tried to sell the note and could not. Then took it to the plaintiffs and proposed to exchange it for theirs, and then he sold the plaintiffs’ note and took the money to Van Olinda. The plaintiff Elwell testifies that Hotchkiss came to him and asked him if he wanted to purchase the note. He said no. He asked if he (Elwell) would not give the firm note for the same amount and time, on the usual terms. He (E.) hesitated, but at last told him he would, and gave him the company note which was paid at maturity, and . received 2J per cent commission which is the usual charge for advances of credit. He presumed the credit of Lane, West & Co. to be good till he went to Hotchkiss’ office that morning.

What was this transaction between Lane, West & Co. and the plaintiffs ? Was it a sale of the credit of the latter to the former, or was it in substance and effect, a loan of money ? It is considered that if it was a sale of credit it is not usurious, but if a loan of money, then the transaction was usurious and void. (Dry Dock Bank v. American Life Insurance cmd Trust Company, 3 Comst., 344; Schemerhorn v. Tolman,, 4 Kern., 93; Leavitt v. De Launy, 4 Comst., 364.)

If Lane, West & Co., or their agent, had taken their note to the plaintiffs and transferred it to them for the face of it in money, less a commission of 2-J per cent, it would have rendered the note void for usury. Why? Because the courts say it is a loan of money, and if the amount paid or agreed to be paid for the use of the money is more than at and after the rate of seven per cent per annum, the security is usurious and void. (Clark v. Sisson, 22 N. Y., 312; 1 Hall, 9; 2 Denio, 621; 8 Cow., 669.)

In Clark v. Sisson (supra), the action was against the acceptor and indorsers of a bill. It was proved that the acceptance was without consideration, and made to enable the drawer to raise money. The plaintiff discounted the bill at a usurious rate of interest. Judge Comstock says: It (the dealing in regard to the bill) was a loan, because it could not be anything else. The plaintiffs could not purchase a bill which had no legal existence until it came to their hands.” Judge Selden (Schemerhorn v. Tolman, 4 Kern., 116), after remarking that it was not usury for a bank to pay to the holder of a note discounted by it its own bills at par, but with less than par in the market, does not constitute usury, proceeds to say, prima facie, at least, such a transaction is a loan, because a bank cannot make sale of its own promises to pay, which are of no value so long as they remain in the possession of the bank. It is not until they have passed into other hands that they acquire a value and become possessed of the attributes of property. * * * It is plain that the giving one’s own promise to pay to another, for any consideration, cannot be brought within the definition of a sale. It is impossible to call such a transaction a transfer of property from one person to another, as a promise is not property in the hands of the promissor.. * * * If there is a sale, it is made by the same acts which create the thing sold. This is not only repugnant to every just definition of a sale, but logically absurd.

If, then, the transfer by Lane, West & Co. of their note to the plaintiff at a usurious rate of interest renders void the note for usury, and they could not sell their note because it was not the subject of sale, it becomes necessary to inquire whether the transaction can be sustained on any other theory.

It is said that because the plaintiffs delivered their own note to a broker in exchange for Lane, West & Co.’s note the transaction was not affected by usury; that the transaction was in effect a sale of the plaintiffs’ credit, which may be sold at any price without subjecting the transaction to the imputation of usury..

If it be true that Lane, West & Co. could not sell their note, because it was not the subject of sale, it follows that the plaintiffs could not sell theirs to Lane, West & Co. I am unable to understand how there could be an exchange of one note for another, by which either could obtain for his note more than the face of it and legal interest and escape the laws against usury. Each note, after transfer, is supported by a valid consideration, because the promise of the one party is a good and sufficient consideration for the promise of the other. But the question is not whether there is a valid consideration (because all usurious contracts have a consideration to sustain them), but the question is whether the transfer by way of an exchange takes them out of the operation of the usury laws.

In Ohitty on Contracts, 374, it is said the difference between a sale and exchange is this, the former is a transferring of goods for money, the latter for goods by way of barter. In either case the same rules of law are prescribed for regulating the transaction.

In Domat’s Civil Law, exchange is defined to be a covenant by which the contractors give to one another one thing for another, whatever it be, except money; for in that case it would be a sale.”

La exchanges of one kind of chattels for another, it is impossible to establish usury, because chattels have no fixed value; parties may call the value of them what they please, and so long as there is no standard by which to ascertain and determine their real worth, it cannot be said that usury is taken, even if it applied to any dealing except loans.

An exchange of notes must be governed by the same rules as the exchange of chattels, because an exchange is not a loan, although it may be a cover for a loan. But when A delivers his note for $100, payable three months from date without interest, to B, and receives in exchange therefor B’s note at three months without interest for $90, it is difficult to understand how this can be considered an exchange and not a loan. The note of A, in the case supposed, is presumed to be worth the number of dollars agreed to be paid by its maker. The same presumption applies to the note of B, and the court would award in the event of non-payment, the same amount of damages on each note. A promissory note then has a fixed value in contemplation of law, and is thus distinguished from chattels; and it is this distinction which renders the transaction in the one case usurious, and in the other not.

Judge Selden in Schemerhorn v. Tolman (supra), illustrates the principle thus: Whenever the question of usury arises, no value can be put upon the promises or obligations of either party different from that which they import on their face. This is universally conceded in respect to the obligations of the borrower. If a lender advances $90 in money, and takes a note for $100 with interest, he cannot defend himself against the charge of usury by showing that the responsibility of the borrower is doubtful, and that his notes would be worth less than par in the market. The question is to be determined on the face of the transaction. It is usury per se. Upon what principle, then, can one who instead of the $90 in money, gives his note for $90, allege that the note he takes in return is worth less than its face. * * * So if the borrower choose to receive the promissory notes of the lender instead of money, he cannot, I think, upon the question of usury, take the ground that such notes are depreciated in the market. If he gives his own obligations for no greater nominal amount than that for which he receives the obligations of the lender, there can be no usury. To constitute usury, the lender must take or receive, or contract to take or receive more than the legal rate of interest; and such a project cannot be predicated upon the assumption that he will fail to redeem his own obligation.

It would seem to follow, and such was the opinion of Judge Sblden in the case cited, that while the exchange of notes is called an exchange as distinguished from a loan or sale, yet for the purposes of the usury law it must be considered one or the other,' and it resembles a loan more than a sale. The parties exchanging notes must have in contemplation the raising of money, and each desires the note of the other in order to enable him the more conveniently to obtain it, and it is in legal effect a loan of the amount evidenced by the face of the note. The amount of each note is as definitely ascertained as if the parties were exchanging bank notes, or gold, for silver coin. Chattels to which, properly spealdng, the term exchange applies, has no such value,- and hence no means is furnished to determine which has the best of the bargain.

Judge Gardner, in the Dry Dock Bank v. The American Life Insurance and Trust Company (3 Comst., 344), declares it as his opinion that usury cannot be predicated of an exchange of notes, no matter what the terms of exchange may be. It may, however, he considers, be shown that such an exchange is a cover for usury. The opinion of Judge Gardner, in respect to the point alluded to, was not necessary to a decision of the case.; yet it may be said that if an exchange of notes may be, per se,. usurious, as when they are not for the same amount, or at different rates of interest, the plaintiffs’ obligations given to the defendants were, per se, usurious. But the court refused to follow Judge Cadt, who was of the opinion that the exchange was usurious; and Judge Gardner was designated to write an opinion repudiating that view of the law, and deciding the case on the ground that the transaction was a cover for usury. ■

The case of Schemerhorn v. Tolman presented a state of things substantially similar to that of the Dry Dock Bank v. The Life Insurance and Trust Company; and in that Judge Sblden, as I have shown, repudiates the whole reasoning of Judge Gardner, and declares it to be his opinion that such an exchange as either of the cases presented was, per se, usurious, and I do not find that the other judges dissented from him on this point. Bat in regard to his opinion, it may be said that the point under consideration need not have been decided in order to dispose of the case, and that each is obiter. But I think the point was fairly before the court in each case, and in each it was decided differently.

If the question is to be considered an open one, it seems to me when one party to an exchange of notes,, receives from the other a note by which he is entitled to demand either a larger amount, of principal and interest, or a higher rate of interest, or a commission which is greater than the interest would be for the time the note has to run before maturity, the transaction is per se usurious.

When the transaction is, on its face, a mere exchange of one note for another, at the same rate of interest and payable at the same time, it is not per se usurious, and it is incumbent on the party alleging usury in the transaction to prove it. But if I am wrong in this, and if, in all cases of exchange, it is incumbent on the party assailing the transaction to prove that it was a mere cover for usury, it then becomes necessary in this case to inquire whether the question was submitted to the jury with such instructions as the law required to be given, and as the plaintiffs had the right to require to be given to the jury on the question of usury.

The court below instructed the jury that if they were satisfled, on the evidence, that the exchange of notes between the plaintiffs and Lane, West & Co., for which the plaintiffs charged a commission of 2J per cent, was in fact a sale of the plaintiffs’ credit, and that the commission charged was a compensation for the sale of such credit, and the transaction was not a loan nor cover for usury, then the reservation of a commission, though exceeding seven per cent for the time Lane, West & Co.’s note had to run, does not stamp the. transaction with usury, nor make it void in the plaintiffs’ hands on that ground. The defendant’s counsel excepted to this branch of the charge, but the plaintiffs’ counsel did not. The instruction must therefore be taken as correct, and the finding in favor of the plaintiffs disposes of the question of usury. The transaction is found to be a loan or a cover for usury.

If the plaintiffs have any escape from the consequence of this finding, it must be because of some error of the court in refusing to charge as requested by their counsel. The first request was to charge that an exchange of notes for a commission of 2£ per cent on the face of the note is not within the statute of usury. The court refused to alter his charge, and the plaintiffs’ counsel excepted.

In my opinion the court should have charged that such a transaction was usurious. But upon no principle could the proposition, as stated by the counsel, be given to the jury as the law of the case, without the qualification that the transaction was not in fact a loan or a cover for usury.

And within several cases which have never been questioned, the commission charged must not exceed the interest for the time the note has to run. (Dey v. Dunham, 2 Johns. Ch., 182; Fanning v. Dunham, 5 id., 122; Dunham v. Dey, 13 Johns., 40.)

The next request of the plaintiffs to charge, was that the harden of proving the note of Lane, West & Co. void for usury, lies upon the defendant, and he is bound to prove it clearly; and that usury cannot be presumed. The court refused to vary the charge, and the plaintiffs’ counsel excepted.

The charge as given, was that if the jury were satisfied that the transaction was in fact a sale of the plaintiffs’ credit, and the commission was a compensation for such sale, and it was not a loan or cover, then, though the commission exceeded 1 per cent, it was not usurious. In other words, they were told in substance that if they were satisfied that the transaction was what it appeared to be on its face, it was not usurious. This put upon the defendant the burden of proof, and it was all the plaintiffs could fairly call on the court to say to the jury.

The next request was to charge that for aught that appears, Van Olinda or Hotchkiss might sell this note to Elwell & Co. at any price. The court refused to alter the charge, and the plaintiffs’ counsel excepted.

This was only another mode of asking-the court to instruct the jury that the note was not usurious. This it could not do on the facts proved. The jury did find on the facts that it was usurious, and there is no court that would feel itself at liberty to set aside the verdict as against evidence.

There are two other requests to charge in reference to the effect of the exchange, under the pleadings, and the interest of Yan Olinda in the notes, which do not require any further comment.

I cannot doubt that the case was presented to the jury most favorably to the plaintiffs, and that there is no error in the refusals to charge as requested.

I cannot leave the case without a brief reference to a point already incidentally alluded to, but which is entitled to a somewhat fuller examination. I refer to what was called by Chancellor Kent, in Dey v. Dunham, (2 Johns. Ch., 182), and again in Fanning v. Dunham (5 id., 122), as a loan of credit, and by Judge Gardner, in Dry Dock Bank v. The American Ins. and Trust Co. (3 Corns., 344), as a sale of credit. Both mean the same thing, and the difference is only in the words used to designate it. Judge Gabdhee is of the opinion, in the case cited, that there can be no such thing as a loan of credit, and hence he used the words sale of credit.” And he uses the phrase in defining the effect of an exchange of notes, that it is in effect a sale of credit, and for which the seller has a right to receive what sum he may deem his own worth, and give to the other for his note what he considers it to be worth. If this is the law, the openings in the statute against usury are so. large that usurers can drive through it in coaches gilded with the gold extorted from their victims.

There is such a thing as a sale of credit, and when credit is sold, the seller is entitled to a commission by way of compensation for his risk. Thus a man may receive a commission for indorsing or guaranteeing my note, for his draft or bill of exchange upon another. In these cases I receive the benefit of the indorsement, guaranty or draft, he becomes responsible for me, and in all the cases supposed he is secondarily not primarily liable. In case of the indorsement or guaranty I am myself bound to protect him against loss, and, in case of the draft or bill, the drawee, if he has become a party to the paper.

But when a person delivers to me his promissory note for a consideration moving between us, the paper is mine; he is the principal debtor; there is no sale of credit about it. I hold his legal obligation, which, at maturity, I may enforce against him. This is not true of his indorsement or guaranty of my paper. If there is a sale of anything it is a sale of the obligation itself; and this Judge Selden demonstrates not to be the subject of sale.

If I borrow A.’s note, to be used by me to raise money, it is right and just that he should be entitled to receive a commission for his risk. Although I am bound to pay the note at maturity as I would a note endorsed by him, yet in either or both he incurs a risk, for which he should be compensated.

If A. should call upon B. for the loan of $100, and the latter not having the money should deliver to A. a horse'with authority to sell it, raise the $100 and return B. the excess; if A. should give B. -his note for the $100 when he receives the horse, he would not be a purchaser of the horse; he would be a mere agent of B. to sell as a means to raise the $100. How, this is the real transaction when parties exchange notes. Each wants money, neither has it, but each can make a better use of the other’s note than he can of his own, and each has to go into the market and sell the notes in order to get the money. It is a loan of the money, and is neither a loan nor a sale of credit.

I have under the second point disposed of the fourth point of the plaintiffs’ counsel. In no aspect of the case can I discover any ground on which to disturb the judgment of the court below.

The judgment must, therefore, be affirmed with costs.

Wright, J., was for affirmance, on the grounds assigned by Davies, J. All the other judges being in favor of affirmance,

Judgment affirmed.


source: Caselaw Access Project

author: Denio, Ch. J. Johnson, J.

license: Public Domain

text:
    John Becker v. Cyrenius C. Torrance.
    A judgment creditor, having levied his execution upon chattels of the debtor, has a claim superior to another creditor who has only obtained an order for the examination of the debtor in proceedings supplementary to execution.
    Where a judgment creditor is pursuing his legal remedy by execution, something more than a notice, or a lis pendens, is required to prejudice his levy.
    The receiver of the debtor’s property, appointed in supplementary proceedings, and after the goods had been levied upon by another creditor, holds subject to such levy; and will be liable upon his promise made to the officer to sell and apply proceeds, &c., upon the execution levied.
    The plaintiff in execution, acquiescing in the promise made to the officer, &c., may maintain an action upon the same.
    The title of the receiver only relates back to the date of the order appointing him.
    The issuing and service of an order instituting proceedings supplementary to execution create no lien against other creditors who, in the meantime, discover property subject to execution, and levy upon the same.
    This action was brought on an alleged parol promise made by the defendant to an under sheriff of Cattaraugus county for the benefit of the plaintiff. The plaintiff was a judgment creditor of Thomas J. Parker, a merchant of that county, who, on the 11th July, 1854, being insolvent, made an assignment to his brother, F. B. Parker, of all his personal property for the benefit of his creditors, with preferences. The assignment was fraudulent and void on account of a provision permitting the assignee to sell the goods on credit, and because no possession under it was taken; but the assignee was permitted to sell as he had done before it was executed.
    The plaintiff recovered his judgment in the Supreme Court, on a debt existing before the assignment, on the 13th of October following; and on the 16th day of the same month, an execution thereon was delivered to Gardner, a deputy sheriff, who, on the same day, levied upon the stock of goods of the debtor, and gave him notice of such levy.
    Prior to the recovery of the plaintiff’s judgment, but subsequent to the assignment, two other judgments had been recovered against T. J. Parker, by other creditors, for $738.65 and $185.57 respectively. Executions were issued on both these judgments, which were returned unsatisfied, no levy having been made under either of them.
    . On the 4th October, the plaintiff in the larger one of the prior judgments, obtained an order from the county judge, requiring the debtor to appear before him and answer concerning his property, and the order forbade him to transfer or interfere with any part of it, not exempt from execution. This order was served on the debtor the 12th day of the same month. A similar order was made upon the application of the plaintiffs in the other of those judgments. Both orders were returnable on the 24th October. The debtor appeared and was examined pursuant to the orders, and on the 25th October, the county judge, by orders made in the two actions, appointed the defendant in the present action a receiver of the property of the debtor, who was directed to assign his property and effects to such receiver, and was enjoined against disposing of or interfering with it. The same order enjoined F. B. Parker, the assignee of T. J. Parker, from disposing of the assigned property for twenty dhys, to enable the receiver to bring an action to set aside the assignment.
    The goods remained in the store of the debtor until April, 1855, when the defendant, as receiver, took possession of them. While he was making out an inventory, Gardner, the deputy sheriff, who held the plaintiff’s execution, came to the store, when the conversation took place between them upon which the plaintiff relied to establish the promise upon which this action was based. The complaint claimed it to be an undertaking by the defendant to the deputy sheriff, that if the latter would relinquish his levy on the goods, he, the defendant, would pay the amount of the execution to him, for the plaintiff. According to the witness—Parker, the debtor—the deputy claimed that he had a lien on the goods by virtue of his levy, and so stated to the defendant, who answered that he would inquire, and if the levy was good he would pay the amount. According to the testimony of the deputy sheriff, the defendant said to him that he would make inquiries, and if he became satisfied that the levy would hold in preference to his claim as receiver, he would pay the execution out of the moneys the goods should bring, and save his, the deputy’s, selling them; or, he would act in accordance with the decision of the court. The testimony of the defendant, on his examination as a witness, was substantially to the same effect.
    The defendant was the attorney of the present plaintiff in recovering his judgment against Parker; and, about the time of making the alleged agreement, he directed the deputy to hold on to the execution, which direction he repeated after-wards. ISTo further steps were taken to enforce the levy. The defendant testified that it was his impression that the plaintiff, at the time, understood the arrangement which had been made between him and the deputy sheriff.
    The defendant subsequently sold the goods as receiver, and received the proceeds of the sale, about §1,100.
    F. B. Parker, the assignee, did not abandon his claim under the assignment, but asserted rights under it. The defendant, soon after his appointment, attempted to commence an action in his own name as receiver against the judgment debtor and the assignee, but failed to obtain an injunction; it being then considered that the action should be in the name of the judgment creditor. The plaintiffs in the two judgments, by the present defendant as their attorney, then commenced a suit against the Parkers to set aside the assignment. A judgment in that suit was obtained in April, 1855, by which the assignment was declared fraudulent and void, and the present defendant was appointed receiver, and directed to sell the goods and apply the proceeds to the satisfaction of the two judgments. The complaint in that action set up the supplementary proceedings before the county judge and the appointment of the plaintiff as receiver in these actions, and under these proceedings. The goods appear to have been sold under this judgment.
    The referee, before whom the present case was tried, at the conclusion of the evidence, nonsuited the plaintiff, who excepted. The judgment having been affirmed, at a General Term, the plaintiff appealed to this court.

      W. Woodbury, for the appellant.

      C. C. Torrance, defendant, in person.
   Denio, Ch. J.

I am of the opinion that the plaintiff was entitled to recover, upon the proof before the referee, provided his title under the levy upon his execution was superior to that of the defendant as receiver in the actions of the other judgment creditors. The substance of the arrangement proved was, that if the deputy sheriff would not proceed to a sale under the plaintiff’s execution, but would suffer the defendant to make sale of the goods as receiver, he would pay the plaintiff, or the deputy sheriff, for his use, the amount of the plaintiff’s executions, if the plaintiff’s levy was the prior lien. The deputy performed the conditions which formed the consideration of the defendant’s promise, by virtually relinquishing the levy and allowing the defendant to sell the property. According to some of the witnesses, it was made a condition to the payment, that the defendant should be satisfied of the priority of the plaintiff’s lien; but this could scarcely have been the understanding, according to the testimony of the defendant himself, who swore that he contemplated having the question of priority determined in some manner by the courts. It cannot be supposed that either the plaintiff or the deputy sheriff would have consented to permit the validity of the levy to depend wholly upon the judgment of the representative of the other creditors. One of the witnesses, Mr. Parker the judgment debtor, understood the arrangement to be that if the levy was good in law, as against the receiver, the defendant should pay the execution. I am well satisfied that this was the true character of the arrangement.

The promise was one which the plaintiff was entitled to ‘ the benefit of. Indeed, it may be considered as having been made to him, through the deputy as his agent. The plaintiff was informed of the agreement, and assented to the conditions by suffering the levy to be relinquished in favor of the title of the defendant as receiver.

The only question discussed in the opinion of the Supreme Court is the relative priority of the title of the plaintiff under the levy on his execution, and of the defendant under his appointment as receiver; and this, in my opinion, is the only disputable point in the case. The decision of the referee must have proceeded upon that view, as he nonsuited the plaintiff instead of passing upon the terms of the agreement, which it would have been his duty to do, if he had not found what he considered a decisive answer to the action in the supposed superiority of the defendant’s title over that of the plaintiff.

It is to- be considered certain that the assignment to F. B. Parker was fraudulent and void. It contained on its face a provision which the courts hold to be incontrovertible evidence of fraud; and it had, moreover, been determined to be fraudulent and inoperative by a judgment which the defendant himself gave in evidence, and which concluded him upon that question. (Chautauque County Bank v. Risley, 19 N. Y., 369.) The assignee, however, did not concede the invalidity of his title, but set up the instrument as operative.

The property being personal chattels, and being the property of the judgment debtor as respects his creditors, was liable to be seized and sold under the execution; but it having been transferred by an instrument, valid as between the parties to it, it was competent for a judgment creditor, instead of causing it to be seized under the fi.fa-., to bring the parties into court, with a view to procure a judgment against the title of the assignee, and then to have the judgment executed through the instrumentality of a receiver. The proceedings supplementary to the execution may be considered as the commencement of a process in equity, in the nature of the former suit by creditor’s bill. The county judge had no right, it is true, to try the validity of the title of the assignee. His order, however, would invest the receiver with the rights of the creditor, and thus make him the formal party to the subsequent proceedings. The plaintiff elected to pursue the direct legal remedy, by seizing the goods on his execution, while the other judgment creditors suffered their executions to be returned unsatisfied, preferring to resort to appropriate proceedings in the nature of a suit in equity, to procure a judgment against the claims of the assignee, and then to have his judgment executed according to the forms applicable to that proceeding. One of the judgment creditors commenced his process a few days prior to the plaintiff’s levy, by obtaining an order for the examination of the debtor. The other instituted his proceeding a few days after the levy. As to the latter, there is no doubt as to the plaintiff’s priority. Whatever judgment should have been given as to the creditor who first proceeded before the county judge, the plaintiffs’ rights were superior to those of the other creditor, and there ought, at all events, to have been a recovery against the defendant for the balance of the proceeds of the sale of the goods, after the payment of the judgment upon which the supplementary proceedings were first taken, if those proceedings established a priority in favor of the other creditors. There was no well founded formal objection to this. The defendant undertook to pay the plaintiff’s judgment if his levy gave him superior claims over the creditors whom he represented. If that levy was prior to one of them and not to the other, there was no difficulty in regulating the recovery according to the merits of the case.

But I am of opinion that the plaintiff by his levy established a priority over both the other judgment creditors. The subject out of which the debts were to be collected was tangible personal property, generally liable to seizure and sale under the ordinary legal process of fieri facias, and it was none the less liable because the debtor had undertaken to screen it from the pursuit of his creditors by a fraudulent transfer. The plaintiff caused it to be seized under that process. The other creditor whose case we are now considering, had, just prior to that seizure, commenced proceedings, looking towards a suit in the nature of a creditor’s bill. Those proceedings were only preliminary to a suit, for the officer could do nothing except to appoint a person who should represent the creditors by commencing and prosecuting such a suit. He could make no order subjecting property to a sale, where it was held adversely to the debtor. That proceeding was authorized by law, for the purpose of enabling a judgment and execution creditor to institute a suit to subject to the payment of his debt, property not vendible on execution, such as moneys due the judgment debtor, stocks, choses in action, or the like. As to these, the writ of fieri facias was inapplicable and powerless. As to such subjects, it was reasonable that the law, or the courts, should fix upon some stage of the creditor’s process when the property which the debtor had in the subject should be affected with an equitable lien, so as to prevent a subsequent disposition of it to the prejudice of the creditor. One of the earliest judicial notices upon this point which I have met with in oiu’ courts was in (Hadden v. Spader, 20 Johns. 554, 571,) where Hr. Justice Woodworth, in the prevailing opinion of the court for the correction of errors, assimilated the case to that of a suit against a trustee for a breach of trust. There the filing the bill and service of the subpoena, would affect the trustee with notice, and prevent any further dealing with the subject to the prejudice of the. plaintiff. One owing another, or having moneys or property of his in his hands, is in some sense his trustee. This appears to me to be the foundation of the doctrine which attributes to the commencement of a creditor’s suit, something in the nature of a lien upon the debtor’s choses in action. It was a necessary supplement to the principle that such subjects might be reached in chancery by the creditor. The- object of the suit of Hadden v. Spader, was to subject moneys owing by Hadden to Davis, the judgment debtor, to the payment of the plaintiff’s judgment. Hadden was made a defendant with the judgment debtor, when the case was before Chancellor Kent, from whose decree the appeal was taken to the court of errors; he called the debt which it was sought to subject trust moneys, belonging to the debtor in the hands of the defendant Had-den, and he declared that all payments of the same by Hadden to Davis, subsequent to the filing of the bill containing notice of the creditor’s right, and of his claim in pursuance of it, were made in his own wrong, thus putting it upon the ground of legal notice to the trustee not to deal further with the cestui que trust, and that the interest of such cestui que trust was claimed by his judgment creditor. The same doctrine is dedueible from the case of (Weed v. Pierce, 9 Cow. 722, 728-9.) The complainant, a judgment creditor of the defendant Pierce, sought to subject money which the other defendants owed him, to the payment of their judgment. The point decided was that the issuing of execution-on the complainant’s judgment did give a lien on the fund, but that it required the filing of a bill or some other decisive act, showing an intention to pursue the fund. The Judge (the late Chancellor Walworth, then circuit Judge,) considered that the giving notice of the claim by the plaintiff, and of his intention to pursue what he called the trust fund, would have the same effect to prevent the trustee disposing of it as a suit in equity. But such a notice certainly would not affect another judgment creditor who was pursuing a legal remedy. Something more than a notice, or a lis pen-dens, equivalent to actual notice, would be required to prejudice the levy of an execution. (Edmeston v. Lyde, 1 Paige, 637), reiterates the principle laid down in the last mentioned case. (Corning v. White, 2 Paige, 566), only decides that the judgment creditor who first files his bill in chancery obtains a priority in relation to the property and effects of the defendant, which cannot be reached by execution at law.

The defendant places a good deal of reliance on Porter v. Williams (5 Seld., 142), which affirmed a judgment in the Supreme Court reported in 5 How., 141. The debtor Williams, before the plaintiff’s judgment was recovered, had assigned his property, real and personal, for the benefit of his creditors according to certain classes of preference, and had authorized the assignee to sell the goods on credit. After the plaintiff had obtained his judgment, Williams executed to his assignee an instrument directing him to sell for cash only; but two days before the execution of that instrument the plaintiff had obtained an order for the examination of Williams in proceedings supplementary to execution. If that instrument was ineffectual to reform the assignment and to render it valid from the time the instrument was executed, that was nothing to preclude the plaintiff from prevailing in the action. If it had been held that the instrument had the effect to validate from the time of its execution the assignment which was unquestionably void, it would then become necessary to pass upon the effect of the order made in the supplementary proceedings; and the question would then be, whether that order so affected the debtor’s title to his property that he could not subsequently assign it, so as to give the assignee a title superior to that of the plaintiff who, as a judgment creditor, had instituted the proceedings. All the judges who gave opinions in the two courts held that the instrument was wholly void and did not affect the title to the property in any way. The other principal question discussed in the case, whether the receiver, who was appointed sometime after the execution of the instrument, represented the creditors in such a sense as to entitle him to disaffirm the act of the debtor in executing the fraudulent assignment; and it was held that he did so represent them. Thus far it would seem that nothing was decided adverse to the pretensions of the plaintiff in the present case. But when the case was before the Supreme Court, Judge Harris, by whom the opinion was prepared, expressed an opinion that the order for the examination of the debtor, created a lien upon his property which he could not divest by the instrument executed to the assignee, even if it had been otherwise effectual; and there is an expression to the same effect in the opinion of Judge Willard when the case came here. After stating his opinion that by the original assignment the debtor had divested himself of all control over his property, and that he could neither revoke nor alter it, he adds : “ and certainly not to the prejudice of a creditor whose lien on the property had attached by the institution of supplementary proceedings under the Code.” But I am confident that this court did not intend to pass upon the effect of the order for the examination of the debtor; for we were all perfectly confident that the instrument by which it was intended to correct and validate the assignment, was ineffectual. The case, as it was disposed of here, is more fully reported in 12 Howard’s Practice Reports under the name of Porter v. Clark and Williams. An opinion is there printed which does not appear in Hr. Selden’s reports, in which the judgment is placed wholly on the invalidity of the subsequent instrument, and on the power of a receiver, after he was appointed, without any suggestion that a retrospective effect could be given to the appointment so as to create a lien from the time the first order was made.

I am of opinion that, as regards chattels subject generally to seizure on execution, the making of an order for the examination of the debtor in proceedings supplementary to execution, has not any effect to preclude another judgment creditor from levying his execution on such chattels; and that such levy confers a right prior and superior to any acquired by the creditor obtaining that order. If the opinion expressed by Judge Harris should be considered correct, it would only show that the debtor could not volvntarily do any act to impair the rights acquired under the order, but it would be very far from establishing that other creditors, proceeding in irmitnm to enforce their legal remedies according to the ordinary course of justice, could be defeated by the granting of such an order. It is unnecessary to determine whether such an order has any effect to qualify the debtor’s own voluntary disposition of his chattels, for the reason that no such question is now presented, and also-because an amendment of the Code, passed in the year 1862, declares that the receiver shall, in such cases, be vested with the property and effects of the judgment debtor from the time of filing and recording the order for his appointment. This definite provision for changing the title of the debtor’s property by a just intendment, puts an end to the principle of relation by which an effect upon the property has been attributed to the preliminary order.

I am of opinion that the judgment in this case should be reversed, and a new trial ordered.

Johnson, J.

The plaintiff’s execution having been placed in the sheriff’s hands, and actually levied upon the goods, before the appointment of the defendant as receiver in the proceedings supplementary to execution, the sheriff acquired thereby a right to such goods superior to that of the defendant, by virtue of his appointment. (Van Alstyne v. Cook, 25 N. Y., 489.) The right of the defendant, when he had perfected his appointment by the filing of his bond, only related back to the date of the order appointing him.

The issuing and service of the order requiring the judgment debtor to appear and be examined touching his property, created no lien or interest in the property discovered by such examination, in favor of the party who instituted and carried on the proceeding, as against other creditors who might in the meantime discover property liable to execution, and cause the same to be actually seized by such process. ( Voorhees v. Seymour, 26 Barb., 569.)

The proceeding supplementary to execution, is a proceeding for the discovery and sequestration of the debtor’s property, for the purpose of satisfying and discharging the judgment. But no right is acquired, as against other creditors pursuing different remedies, until the appointment of the receiver.

When the receiver is appointed and has filed his bond, he becomes vested with the title to the property, for the purpose of paying and discharging the debt. He then acquires a right analogous to that of a sheriff, who has taken property in execution; a right to sell and transfer the title for the purpose of raising money to pay off and satisfy the indebtedness. If his appointment as receiver is. subsequent to a valid levy by a sheriff, at the instance of another creditor of the debtor, the receiver takes, subject to the right acquired by such levy. That was clearly the case here. The promise was to pay the plaintiff’s execution out of the proceeds of the sale of the property, provided the levy was valid and would hold as against the proceedings supplementary.

It did not depend upon the defendant’s belief, or mental assent, as to the existence of the right created by the levy, but upon the existence in fact and 'in law of such right, which, as we have seen, is entirely clear. There can be no doubt that the consideration for this promise is abundantly sufficient. It was the relinquishment by the sheriff of a clear legal right, which gave to the defendant a complete and perfect title to the goods which he had not previously, and thus enable him to dispose of them, free and clear of such prior and superior claim. The promise is not affected in the least, by the statute of frauds. It is not a mere promise to pay the debt of a third person, but a promise to pay off and satisfy a valid lien and claim upon property, on condition that the party promising may take and sell the property discharged from such lien and claim. I do not perceive that the question of the validity of this promise is in any way affected by the circumstance that the creditors whom the defendant represented had proceeded by action, and caused the assignment to be set aside and declared void. That action did not affect the plaintiff’s levy. He was not a party to the action, and might have proceeded to sell had he seen fit while it was pending. The promise was made, and the right under the levy relinquished, after the decree declaring the assignment fraudulent and void as to creditors had been obtained. Ho question was then raised by the defendant, as to whether the plaintiff had not lost his right by having slept too long upon it, or anything of that nature. The only question was whether any legal right could have been acquired by taking the property in execution, between the time of the issuing and' service of the order for the examination of the judgment debtor, and the order for the appointment of the defendant as receiver. The promise was made to depend upon the existence of that right only, and it is too late now to raise the question of laches in not proceeding to sell under the execution. But there was in truth no laches which affected "the plaintiff’s rights under his execution. The goods were locked up safely in the store, and the sheriff insisted upon his right to sell, and control them, the moment the defendant undertook to exercise his rights as receiver. The sheriff was not prevented by the injunction in the order for the examination of the judgment debtor, from proceeding to sell the goods. That order did not enjoin him from proceeding as a public officer to execute his process. The defendant cannot insist that it had that effect, because that would be fatal to the argument that the plaintiff’s rights had been affected by the laches. So far as appears, the delay was the mere voluntary act of the sheriff, which affected no one’s rights injuriously.

The promise being a valid one, I do not see why this action for the money may not be maintained upon it. The defendant has sold the property and realized a sum of money for it much more than sufficient to pay and satisfy the plaintiff’s judgment. It was this money which he promised to pay, when he should sell the property and obtain it. The promise was for the plaintiff’s benefit exclusively, and although not made to him directly, is available to him upon the principle established in Lawrance v. Fox (20 N. Y., 268), and Brown v. Beers (24 id., 178). Having adopted it he may maintain his action upon it instead of proceeding against the sheriff.

I am of the opinion, therefore, that the action was properly brought, and the plaintiff entitled to recover. The judgment should consequently be reversed and a new trial granted, with costs to abide the event.

Davies and Hogeboom, JJ., were for affirmance. All the other judges being in favor of reversal,

Judgment reversed.


author: Ingraham, J. Denio, Ch. J.

text:
    Theodore P. Sheldon et al. v. Daniel Chapman and Chas. Demmon.
    Where the drawer of a bill of exchange requests the payee thereof to hold it' during an indefinite period, without presentation to the drawee, for the alleged reason that the payee “knows the draft to be good,” he releases the payee from the diligence required by the law-merchant.
    By such request, the drawer takes upon himself the risk of the drawee’s insolvency ; and assumes the responsibility of watching his circumstances.
    Where the request was, that the payee should hold on to the draft without presentation until he had made a purchase of laird contemplated, Held, that a delay of two months in the presentation of the draft to the drawee was not unreasonable.
    Appeal from a judgment of the Supreme Court.
    The action was brought to recover on two drafts payable at sight. The drafts were dated July 27, 1857, and were sent by mail on that day to the payee, Dickerson, by his order.
    The drafts were presented for payment on the 26th September, 1857, two months after, they were received, and payment was refused. Dickerson had money in the hands of the defendants, and requested them to forward it to him by draft on Hew York, as soon as they could, stating “that he had a chance to buy some .land.” The defendants sent to Dickerson the two drafts in suit in a letter, in which they said, “ Hold on to the drafts until you make your purchase, as you know they are good.” The drafts were indorsed to the plaintiffs, but at what time does not appear. The judge, before whom the case was tried without a jury, rendered judgment for the plaintiffs, which was affirmed by the General Term, and defendants appealed;

      Clark & Wood, for the appellants.

      T. R. Strong, for the respondents.
   Ingraham, J.

The defense in this case is that the delay of the holder in presenting the drafts for acceptance discharged the drawees. Independent of the question whether there was an unreasonable delay in presenting these drafts that, under ordinary circumstances, would discharge the drawer, there is enough in the facts proved, as to the' request of the defendants, to delay presenting them to relieve the case from all difficulty on that account. Dickerson asked for his money in the defendants’ hands. For the purpose of paying it, they' sent him drafts on New York, with a request that he would hold on to the drafts until he made the purchase of the land he contemplated buying, giving as a reason for it that he knew they were good. This, clearly, was a sufficient excuse for not presenting the drafts as soon as under ordinary circumstances would have been necessary. While the delay was not obligatory upon Dickerson, still he might comply with the defendants’ request, and if he did so, they could not complain of it. There is nothing in the case to show that, even when presented, Dickerson had purchased the land. On the contrary, the want of proof of any such purchase would leave the case open to the presumption that, he had not completed it, and that the drafts were retained in compliance with the defendants’ request. The evident wish on the part of the defendants was to postpone the presentment of the drafts to as late a day as possible, and the defense of delay in presentment comes from them with a very ill grace, especially when it does not appear that they had sustained any injury or loss by the non-presentment, or even that they had any funds in the hands of the drawee from which the drafts might have been paid.

The judgment should be affirmed.

Denio, Ch. J.

There is no doubt that the letter of the defendants to Dickerson, the payee of the drafts, dispensed to a certain extent with the obligation of promptly forwarding them for presentment to the drawee. The precise question is whether it was incumbent upon the plaintiffs in this action to show that Dickerson proceeded promptly with his negotiation to purchase land, and forwarded the drafts immediately after the purchase had been consummated, or after it had fallen through, if the contemplated purchase did not take place. There was in fact no evidence on that subject, and. about two months elapsed before the presentment was actually made. ■ I am of opinion that it was not necessary for the plaintiffs to give such evidence. The letter of Dickerson, to which the plaintiffs’ was an answer, did not refer to a concluded bargain on land, where nothing remained but the payment of ,the price, but to a eJumoe to purchase some land. The understanding of such an expression would be, that the negotiation was yet to be made, and that Dickerson, wanted the money so as to be prepared on his part. The defendants so understood the matter, as is apparent from their request that he should hold on to the drafts until he should have made the purchase. The words which are added, “as you know they (the drafts) are good,” imply that the writers knew, or understood, that the transaction in which the money was to be employed would require time for its completion, and from the nature of the case that time would' .be indefinite and incapable of present ascertainment, and that they left that time to the convenience and the discretion of Dickerson. It implies further, that the drawees considered it for their advantage that the collection of the drafts should be postponed as long as would consist with the convenience of the payee. Otherwise the request would have been without motive, and would have been idle. The letter is equivalent to a suggestion that the payee would be safe in keeping the drafts out of circulation as long as his affairs or his convenience might require, because he knew that the parties to them were good, and that they, the drawees, desired, for reasons of their own, that he would do so. By thus writing, the defendants took upon themselves the hazard of the insolvency of the drawees. By agreeing that the payee might delay the collection for any indefinite period which his business might require, they assumed the duty of watching, so far as it might be .necessary, the condition and pecuniary circumstances of the drawees, and of giving notice to the holder if anything should occur to require an early presentment. At the outset they released the payee from the obligation of diligence which the law-merchant imposed upon him; and if he was guilty of any want of diligence which was imposed upon him by the substituted conventional arrangement, it was for them to show it.

I do- not say that the payee could have held the bills without presentment for any conceivable length of time. The holder would probably be considered chargeable with laches if he had kept them beyond the time for which commercial paper is most usually drawn, say from sixty to ninety days. If within that time the drawers desired to accelerate the collection, they should have given notice to the holder. The decision of the judge, who tried the case without a jury, is equivalent to a verdict. If, therefore, it should be conceded that the question of diligence was a matter of fact to be passed upon in the way such questions are determined, we could not say that the delay was unreasonable. Investments in land always imply the consumption of more or less time. The premises frequently require to be examined, records to be searched, questions of title to be settled and conveyances to be drawn. We cannot pronounce that the trial court allowed too long a time, when they admitted two months not to be excessive. Such transactions frequently require a period as long or longer.

I think the defense was without merits, and that the judgment appealed from should be affirmed, with an allowance of damages for the delay.

Judgment affirmed.