Claflin v. Boorum

• Decision Date: 28 October 1890
• Citation: 122 N.Y. 385,25 N.E. 360
• Parties: CLAFLIN et al. v. BOORUM et al.
• Court: New York Court of Appeals Court of Appeals

122 N.Y. 385

25 N.E. 360

CLAFLIN et al.

v.BOORUM et al.

Court of Appeals of New York, Second Division.

Oct. 28, 1890.

Appeal from a judgment of the general term of the supreme court in the first judicial department, affirming a judgment entered upon the verdict of a jury, and also affirming an order denying a motion for a new trial. This action was brought upon two promissory notes for $5,831.92 each, dated, respectively, August 12 and August 26, 1882, made by the defendants under their firm name of Boorum & Pease, and payable to their own order, four months after date. The defenses interposed were fraudulent diversion, and usury. Upon the trial, it appeared that said notes, although bearing the dates above mentioned, were not in fact made until September 5, 1882, when they were delivered by the defendants to one Alonzo Follett, a note broker, for sale at a rate of interest not exceeding 6 per cent. per annum. Evidence was given tending to show that Follett discounted the notes himself by agreeing to lend to the defendants the amount thereof, less legal interest, and crediting the same in an account that he had with them upon his books. The jury found, however, upon a conflict of evidence, that he never owned the notes, and that his only connection therewith was as a note broker. Follett sold the notes to one Seney, before they had had an inception, at a discount which made the interest reserved amount to 10 per cent. per annum, and shortly afterwards failed, owing the defendants not only the entire proceeds of the notes in question, but also the proceeds of several others, aggregating a large sum, that had been intrusted to him for sale under similar circumstances. It also appeared that he had been employed for several years by the defendants, and many other firms in good credit, to sell their accommodation paper on the best terms that he could, but not to exceed the legal rate of interest. He opened accounts with his principals, in which he credited to them the proceeds of notes when sold, less his commissions, and charged to them the checks which they drew upon him. Before he failed, he had become largely indebted to those who thus employed him, and, in order to keep up his credit, and induce them to let him have more notes to sell, he frequently credited the proceeds of notes as if sold at or under the legal rate, when he had been compelled to sell them at a usurious rate. He even credited paper that he had disposed of at 24 per cent. as sold at from 3 1/2 to 5 per cent. He paid the difference himself as long as he could, but was soon forced to make an assignment.Henry Thompson, for appellants.

John E. Parsons, for respondents.

VANN, J., ( after stating the facts as above.)

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 N. Y. 83, 85;Eastman v. Shaw, 65 N. Y. 522, 530;Tiedemann v. Ackerman, 16 Hun, 307, 84 N. Y. 677;Miller v. Zeimer, 111 N. Y. 441, 444, 18 N. E. Rep. 716. The notes in question had no legal inception when sold to Seney, and the transaction, therefore, was a loan...