
    E. W. Clark and others v. Loomis and Sisson.
    When a note or bill is sold at its inception, at a discount exceeding the legal rate of interest, having°no validity except that which such sale imparts, it is usurious and void.
    This rule has been acted upon in this state so long and so uniformly, that the courts are not at liberty to treat it as an open question.
    The fact, that it contains the words "value received,” does not estop any party to it from showing that it was usurious at its inception.
    The delivery to the parties, who discounted such a bill usuriously, of another bill made by the parties to the first one, and made and delivered merely as security for the payment of the first, and having no other consideration to support it. renders the second bill equally void as the first.
    (Before Duer, Boswobth and Slosson, J.J.)
    March, 1856.
    This action came before the court, on a motion made by the plaintiffs for á new trial. It was tried before Chief Justice Oakley and a jury, on the 21st of Hovember, 1855. After the evidence on both sides was closed, the Chief Justice dismissed the complaint, and the plaintiffs excepted to his decision. The case presenting only questions of law, an order was made at the trial, that they be heard in the first instance at the General Term.
    The complaint, first, alleged that Loomis, at the city of New York, on the 14th of July, 1851, drew a bill of that date, on Sis-son, directed to him at Poughkeepsie, New York, payable to order of Loomis at the Bank of Poughkeepsie, on the 2d of August then next, without grace, for $2,000, its acceptance by Sisson, and its endorsement by Loomis to J. J. Stewart & Go., and by the latter to the plaintiff, its nonpayment at maturity, and the acts necessary to charge the defendant Loomis as drawer and endorser.
    The complaint then proceeded and concluded as follows:—■
    “And the plaintiffs further say, that afterwards, and on or about the 5th day of August, 1851, said defendants, or one of them, came to said plaintiffs and represented that they were not then able to pay said bill, but promised that if said plaintiffs would extend the time for thirty days, they would pay the same in full, to which proposition the plaintiffs readily acceded, and thereupon the defendants drew and accepted their certain, other bill of exchange, for the said sum of $2,000, dated said 5th day of August, 1851, and payable on the 1st day of September next ensuing, to the order of said defendant, Loomis, at said Bank of Poughkeepsie, and by him duly endorsed to said plaintiffs; which said last-mentioned bill was also in due form presented for payment at said bank, and payment thereof duly demanded; but said defendant Sisson then and there wholly failed and refused to pay the same, or any part thereof, whereof also the defendant Loomis had due notice.
    “ And the plaintiffs further say, that they are now the lawful owners and holders of said bills, and that the said defendants, and each one of them, are justly indebted to them thereupon in the sum of $2,001.50, principal and expense of protest, together with interest thereupon from the said 4th day of September, A. d. 1851.
    “ Wherefore, the plaintiffs demand judgment for the said principal sum, expense of protest, interest, and the costs of this action.” Loomis and Sisson for answer to the complaint, said, “ That the bill of exchange therein mentioned, was drawn by Loomis, to raise money for his own benefit, and was accepted by Sisson solely for his consideration, and was placed in the hands of J. J. Stewart & Go., as agents of Loomis, to procure a loan upon it. That plaintiffs agreed to, and did loan upon it $2',000, for which it was agreed they should be paid, and for which they were paid $20 interest, for the loan of 2,000 for fifteen days. That the transfer of it to the plaintiffs, on this loan was its first inception.”
    On the trial, the plaintiffs produced the two bills of exchange, and proved that the interest on $2,000, fw from the 4th day of September, 1851, to the time of the trial, was $590 x<nr and rested.
    The defendants proved that the bill of the 14th of July, 1851, was drawn by Loomis, to be negotiated for his own benefit, and was endorsed by Sisson, for his accommodation. That Mr. Loomis carried it to Mr. Canfield, one of the firm of J. J. Stewart & Co., and asked Canfield to try and sell it for him, who said he would do so. On, or about, the 19th of July, 1851, he sold it to the plaintiffs for $20 less than its face, and before delivering it and receiving the money, endorsed it with his firm’s name, that being required by the plaintiffs.
    That the bill of the 5th of August, 1851, was left with the plaintiffs for collection, by Loomis, “ and, if paid, the proceeds were to be applied to the first bill, the plaintiffs holding that.”
    The second bill was offered to the plaintiffs as a renewal of the first. They refused to receive the second draft other than for collection. They assigned, as a reason, that they had J. J. Stewart & Co. as endorsers of the first draft, and they would do nothing to lose their endorsement.”
    The bill of the 5th of August was also accepted by Sisson, solely for the accommodation of Loomis.
    When Loomis took the bill of the 14th of July to Canfield, nothing was said by either to the other about its being business paper, and no statements were made by Canfield to J. J. Stewart & Co., nor did the latter inquire in relation to the character of the paper.
    The two bills read as follows:
    “ $2,000. “ New York, July 14th, 1851.
    “ On the 2d of August next, no grace, pay to the order of myself, at the Bank of Poughkeepsie, two thousand dollars, value • ' received, and charge the same to account of
    “ Freeman Loomis.
    “Isaac Sisson, Esq., Poughkeepsie, N. Y.”
    
      “$2,000. “ New York, August 5th, 1851.
    “ On the first of September next, pay to the order of myself, at the Bank of Poughkeepsie, two thousand dollars, value received, and charge to the account of
    “ Freeman Loomis.
    “ Isaac Sisson, Esq., Poughkeepsie, N. Y.”,
    Each bill was endorsed by Loomis, and accepted, in due form, by Sisson.
    At the conclusion of the evidence given, the plaintiff’s counsel offered to prove that the current rate of exchange betwéen New York and Poughkeepsie, on or about the 19th day of July, 1851, and also on or about the 5th' day of August, 1851, was one half of oné per cent. The court rejected the evidence, to which plaintiff’s counsel excepted.
    The court refused to allow the case to be submitted to the jury, to which the plaintiff’s counsel excepted. The court thereupon dismissed the complaint as to both defendants, to which the plaintiff’s counsel excepted.
    The court then made an order, that the questions of law presented by the case, be heard, in the first instance, at the General Term, and that the entry of judgment, in the mean time, be suspended.
    
      M. S. Bidwell, for plaintiffs,
    insisted, among other considerations, that the following rules and principles of legal and equitable jurisprudence and practice, are applicable to this case.
    The burthen of proof was upon the defendants. If the proof of the facts stated in the answer was insufficient, or left the case doubtful, the plaintiffs were entitled to a verdict in their favor.
    Where a party sets up the defence of usury, he is bound to allege the facts exactly according to the truth; or, in other words, he must prove the facts exactly as they are stated in his answer. (State v. Willing, 3 T. R. 538; Curtis v. Masters, 11 Paige’s R. 16; Vroom v. Ditmas, 4 Paige’s R. 526, 533; N. Orl. G. & B. Co. v. Dery, 8 Paige’s R. 458; Rowe v. Phillips, 2 Sandf. Ch. Ca. 14.)
    In this case the defendants have alleged in their answer, and in order to sustain their defence, are bound to prove that the plaintiffs agreed to, and did, loan two thousand dollars upon the first-mentioned bill of exchange, and receive for such loan for the space of fifteen days twenty dollars.
    
      Upon the facts in this case the plaintiffs were entitled to recover upon the first-mentioned bill of exchange.
    1. If a bill of exchange is a valid instrument between the parties thereto, and not a mere nudum pactum, it may lawfully be sold for any sum; such sale will not be an usurious or unlawful transaction, although the bill may be sold at a greater deduction than the legal interest from the face of such bill. (Rice v. Mather, 3 Wend. R. 62; Cameron v. Chappel, 24 Wend. R. 94.)
    2. When a bill of exchange is disposed of under a representation that it has been accepted for value received, the defence of usury cannot be sustained to an action by the holder to recover the amount of the bill.
    There is no ground for charging a party with usury if he makes the contract and advances the money in ignorance of the facts which constitute usury. (Holmes v. Williams, 10 Paige’s R. 326, 333; Aldrich v. Reynolds, 1 Barb. Ch. R. 43, 279; Jackson D. Walsh v. Colden, 4 Cow. R. 266; Ramsey v. Clark, 4 Humph. R. 244; Taylor v. Bruce, 1 Virginia, Gilmer’s, R. 42; Whitworth v. Adams, 5 Rand. R. 333; Law v. Sutherland, 5 Gratt. R. 357, 360, 361; Smith v. Beach, 3 Day’s R. 268; Middletown Bank v. Jerome, 18 Conn. R. 448; Murray v. Harding, 3 Wils. R. 395, 396; Davison v. Franklin, 1 B. & Ad. R. 142.)
    3. If a party, by his silence, allows another to act upon a mistake of facts, he is thereby estopped from setting up those facts afterwards to the prejudice of the person who has been misled. His silence binds him upon the same principles as if he had by express misrepresentation misled the other party. He is estopped in both cases upon equitable principles from denying the truth of the facts upon which the other had been induced, by such misrepresentations or silence, to rely. (1 Story’s Eq. Jur., sec. 385; Picard v. Sears, 6 Adol. & El. 474; Town v. Needham, 3 Paige’s R. 555; Watson's Executors v. McLaren, 19 Wend. R. 563, 564; 1 Cow. & Hill’s Notes, 204.)
    4. There may be a misrepresentation by actions as well as by words. (Chisholm v. Gadsden, 1 Strobh. Law. Rep. 210.)
    5. In this case, there was a legal presumption raised by the mere fact of acceptance, that the acceptor had in Ms hands funds of the drawer, to the amount of the bill, and, of course, third parties, unless informed to the contrary, had a right to presume that such was the fact. (Griffith v. Beed, 21 Wend. R. 504, 505; Suydam v. Westfall, 4 Hill R. 216.)
    6. The defendants had joined in a written representation that Sisson had accepted the bill for value received. This representation was shown to the plaintiffs at the time when they purchased the bill. It was not the less to be relied upon, because it was contained in the bill itself, than it would have been if it had been in a letter or a certificate. (Mandeville v. Welch, 5 Wheat. R. 277.) On the contrary, it was more credible and less suspicious, than if it had been formally stated in such certificate.
    7. There was nothing in the circumstances in the transaction to involve suspicion. It was taken by them in the usual course of business. From one who had frequently sold notes and bills to them. It was brought to them as a thing for sale. They were not asked to make a loan; did not intend to make a loan; did not suppose they were making a loan. It had the appearance of business paper; it bore a prior date; was drawn on a different place; payable in a short time, and without grace. It was endorsed by J. J. Stewart & Co. The contract of Canfield, under the circumstances, amounted to a virtual representation, that the bill was a valid subject of sale.
    The evidence offered, to prove the rate of exchange between the city of New York and Poughkeepsie, was pertinent and admissible.
    1. It is not usurious, for a person, upon a loan of money, to receive, in addition to the lawful interest, the difference of exchange between the place of loan and the place of payment. (Merritt v. Benton, 10 Wend. R. 116; Cayuga Co. Bk. v. Hunt, 2 Hill, 635; Ontario Bank v. Schermerhorn, 10 Paige’s R. 109; Buckingham v. McLean, 13 How. IT. S. R. 151.)
    If it be alleged, that the charge for such exchange is a mere pretext, to cover usury, the court cannot determine the question, but must leave it to the jury. (Andrews v. Pond, 13 Pet. R. 65-76; Carstairs v. Stein, 4 Mau. & Sel. R. 192, 202.)
    2. The defendants ought, in equity and good conscience, to refund to the plaintiffs the money, which they received from them, and the interest thereon. (Early v. Mahon, 19 J. R. 149; Roger v. Rathbun, 1 J. C. R. 367; Tupper v. Powell, 1 J. C. R. 439; Beach v. Fulton Bank, 3 Wend. R. 573; Livingston v. Harris, 11 Wend. R. 330; 1 Story’s Eq. Jur. sec. 301.)
    
      3. The defence of usury, was a personal privilege of the defendant.
    They could waive it, if they saw fit to do so, and, in such a case, neither the court nor any third party could object to their doing so. (Stoney v. Am. Life Ins. Co., 11 Paige R. 635; Churchill v. Hunt, 3 Denio R. 325; Spingler v. Snapp, 5 Leigh. B. 478; Littel v. Hord, Hardin’s R. 81, 82; Campbell v. Johnston, 4 Dana R. 182.)
    4. Where there has been an usurious loan, a new contract between the parties, for the repayment of the sum actually advanced, and the lawful interest thereon, is valid and binding: it is a promise, founded on a sufficient consideration. (Early v. Mahon, 19 J. R. 149.)
    5. The evidence, thus offered and rejected, was sufficient to have established the validity of the second bill of exchange, if the first were void for usury, as such second bill was for less than the money received by the defendants, and lawful interest thereon, to the time of payment, added to such exchange.
    Amount of bill,.............$2j000 00
    Less discount of.....■........ 20 00
    $1,980 00
    Int. on this amt. from 19 July to 4 Sept., 1 mo. 16 ds., 17 71
    Exchange between New York and Poughkeepsie, . . 10 00
    $2,007 71
    The case ought to have been submitted to the jury.
    The judgment should be set aside with costs.
    
      John Van Burén and A. L. Pinney, for defendants, made and argued the following points:—
    I. The draft in question was drawn by Loomis, and accepted by Sisson, for the accommodation of Loomis in obtaining a loan. It had no legal inception until passed to plaintiffs. It was not, then, the subject of a sale, but the instrument of a loan, and, having been received at an usurious rate of interest, was void in their hands.
    II. There was no representations made, to the plaintiffs, by the defendants, or their agent, that would authorize a jury to find they were estopped from setting up the defence of usury.
    HI. ■ The second bill did not belong to plaintiffs; but, if it did, it is equally with the first infected with usury.
    IV. The evidence offered, as to the current rate of exchange, was wholly irrelevant.
    1. There was no pretence that it entered into the contract of the . parties: the evidence shows that it did not.
    2. Even deducting this exchange, the contract is usurious.
    V. There was no question of fact to submit to the jury, and no evidence, on which a verdict for plaintiffs, if found, could be upheld.
    VI. The motion for a new trial should be denied, with costs.
   By the Court. Bosworth, J.

The bill, of the 14th of July, 1851, had no legal inception, before it was transferred to the plaintiffs.

The purchase, or a discount of it, on a deduction, from its amount, of a sum, which exceeded the legal interest on the money advanced, for the time the bill had to run, made the transaction usurious, and the bill void in the plaintiffs’ hands. (Arby v. Rapelye and others, 1 Hill, 9; Williams v. Storms, 2d Duer, 52; Dowe v. Schult, et al., 2 Denio, 621; Powell v. Waters, 8 Cowen, 669.) We consider this rule to have been uniformly acted upon, judicially, for too long a period, to leave us at liberty to treat it as an open question.

Interest, to the maturity of the bill, on the sum paid for it, and the amount of exchange, at one half of one per cent., and such sums, added together, are less, by some dollars, than the face of the bill. There can be no pretence, that it was the understanding, or intent of the parties, that only legal interest, and exchange, at the current rate,' should be deducted, and that too much discount was taken, by an error in computation,' and unintentionally.

The bill, of the 5th of August, 1851, was delivered to, and received by the plaintiffs, as collateral to that of the 14th of July. The plaintiffs refused to receive the former, except for collection. If paid, the proceeds were to be applied to the latter bill.

The bill of the 5th of August was not accepted, as a substitute, for that of the 14th of July. Having no consideration, to support it, except such as arises from forbearing the payment of the bill of the 14th of July for thirty days, and having been given to the plaintiffs, the parties who discounted that usuriously, to secure the payment of that bill, it is also void, on the plaintiffs’ hands. (Tuthill v. Davis, 20 J. R. 285; Dowe v. Schult, 2d Denio, 621; Mitchell v. Ostrem, 2 Hill, 520.)

The fact that the bill contains the words, “ value received,” does not make the mere offering of such a bill for sale or discount, a representation, by Sisson or Loomis, that it was actually accepted for value, received by the acceptor, which will preclude, or estop, either of them from proving the contrary to be true, as against a party who discounted it usuriously, without any inquiry into the consideration on which it was founded. It is not essential that a bill or note should contain such words, but such has been their common form from their earliest use. Treating such words as a representation that the actual truth is such as they import, and giving to them the effect of an estoppel, would virtually operate as a repeal of the statute against usury.

If the possession of the bill by Canfield, and the endorsement of his firm’s name upon it, was evidence that Canfield’s firm then owned it, there could be no pretence that the plaintiffs supposed him authorized, as the agent of Loomis or Sisson, to make any representation concerning its business character, nor could such a representation, if made by him, affect them. (Dowe v. Schult, et al., 2 Denio, 621.) But he did not, in fact, make any such representation.

The plaintiffs are not entitled to recover on either note. The complaint was properly dismissed, and the defendants are entitled to judgment.  