Argued October 8, 1890
Decided October 28, 1890
Henry Thompson for appellants. John E. Parsons for respondents.
The sale of accommodation paper is merely a loan of money, the purchaser being the lender and the seller the borrower. ( Clark v. Sisson, 22 N.Y. 312, 316; Newell v. Doty, 33 id. 83, 85; Eastman v. Shaw, 65 id. 528, 530; Tiedemann v. Ackerman, 16 Hun, 307; 84 N.Y. 677; Miller v. Zeimer, 111 id. 441, 444.)
The notes in question had no legal inception when sold to Seney, and the transaction, therefore, was a loan by him to the defendants, through the agency of Follett. On or about the 5th of September, 1882, Seney, the lender, delivered $5,668.30 to Follett for the defendants, the borrowers, and received therefor their promise to pay $5,831.92 on the fifteenth of December following, and thus the note of August twelfth was disposed of. At about the same time Seney delivered $5,645.62 to the agent of defendants for them, and received therefor the note of August twenty-sixth, which was a promise to pay $5,831.92 on the twenty-ninth of December then next. Seney thus exacted a promise to pay interest at a prohibited rate, and the promise, by force of the statute, was void. (4 R.S. [8th ed.] 2513, § 5.) Upon the delivery of the notes to Seney and the payment by him of said sums, the transaction was complete. It was either innocent or guilty then, independent of what might afterward transpire. Even if Follett had subsequently paid the excess of interest to the defendants from his own funds, it would not have rendered valid that which the statute had already condemned as void. An agreement to do so, whether expressly made or implied from a previous course of dealing, could have no greater effect than actual payment. The loan, when made, was a violation of the statute, and the notes were thus rendered absolutely void and no subsequent transaction could make them valid. Even if, as the plaintiffs claim, they purchased the notes before maturity for value and without notice, they cannot enforce them, because the vice of usury follows a promissory note into the hands of a bona fide holder. A note void in its inception for usury continues void forever, whatever its subsequent history may be. It is as void in the hands of an innocent holder for value as it was in the hands of those who made the usurious contract. No vitality can be given to it by sale or exchange, because that which the statute has declared void cannot be made valid by passing through the channels of trade. ( Powell v. Waters, 8 Cow. 669; Wilkie v. Roosevelt, 3 Johns. Cas. 206; Bennet v. Smith, 15 Johns. 355, 357; Miller v. Hull, 4 Den. 104, 107; Miller v. Zeimer, 111 N.Y. 441, 444.)
Even the principle of estoppel, when applicable, does not render such a note valid, although it may prevent one who has represented it to be valid from asserting that it is void, to the injury of those who have acted in reliance upon the representation.
After examining all the exceptions contained in the record, we find none that should reverse the judgment, which must, therefore, be affirmed.