Opinion
July 6, 1970
Appeal by plaintiff (by permission) from an order of the Appellate Term of the Supreme Court, 2d and 11th Judicial Districts, dated June 18, 1969, which (1) reversed a judgment of the Civil Court of the City of New York, Kings County, entered September 19, 1968 upon a jury verdict of $4,000, and (2) ordered a new trial. Order of the Appellate Term reversed, with costs; verdict reinstated; and judgment of the Civil Court affirmed, with $25 costs. The plaintiff sued defendants, who are partners, on their unpaid promissory note for $4,000, which she claimed they had given her as partial security for an $8,000 balance owing on a loan she made to defendant Balkoff out of her own money after the death of her husband. Defendants claimed she had given them nothing and that the note represented her compromise of a $10,000 loan which her deceased husband had made to them (necessarily before his death) at usurious interest. Plaintiff's testimony at the trial supported her claim. Defendant Balkoff testified that plaintiff never had given or lent him any money at all, and the court excluded, under CPLR 4519, defense testimony as to defendants' transactions with plaintiff's deceased husband. Plaintiff obtained judgment in her favor, which the Appellate Term by a vote of 2 to 1 reversed, ordering a new trial and holding that the proffered testimony was not barred by CPLR 4519. In our opinion this was error. If, as plaintiff claimed, the note in suit was given as security for money she herself loaned to Balkoff after her husband's death, it necessarily follows that the note was not given to secure a usurious loan made by the husband before his death to Balkoff. Thus, the defense of usury automatically falls if the defense of lack of consideration fails. If the defense of lack of consideration were to succeed it would defeat plaintiff's cause of action on the note, thus rendering academic the defense of usury. Consequently, the defense of usury is irrelevant, as the dissenting opinion at the Appellate Term points out, and the sole issue at the trial was, as the trial court charged the jury, whether plaintiff loaned her own money to Balkoff. The testimony of the parties was in sharp conflict on this issue; and the truth hung upon their credibility (cf. Amend v. Hurley, 293 N.Y. 587, 594). The jury resolved the credibility issue in favor of plaintiff and we find nothing in the record to warrant disturbing the verdict (cf. Barnet v. Cannizzaro, 3 A.D.2d 745, 747). It is true, as the majority opinion at the Appellate Term points out, that plaintiff is suing defendants on the note in her individual capacity and that she does not claim to derive her interest from her deceased husband. However, to the extent that defendants seek to show that the consideration for the note was a usurious loan made to them by plaintiff's deceased husband, they seek to establish that plaintiff derived her interest from, through or under her deceased husband. Consequently, any testimony by defendants in this regard as to their personal transactions with plaintiff's deceased husband would be excludable under CPLR 4519. As the dissenting opinion points out, it would be "illogical to permit defendants to offer evidence in this action for the very purpose of casting plaintiff in such derivative or representative status and at the same time seek to prevent her from invoking the Dead Man Statute". In Ehrlich v. American Moninger Greenhouse Mfg. Corp. ( 26 N.Y.2d 255) the plaintiff sued the defendants on a $40,000 note in her individual capacity and did not claim to derive her interest from her deceased husband. There the proffered testimony as to the individual defendant's dealings with the plaintiff's deceased husband, if believed, would have established that the plaintiff had given her check for $40,000 to the corporate defendant for investment, and not as a loan as plaintiff claimed. Thus the proffered testimony in no way tended to establish that the plaintiff had derived her interest from, through or under her deceased husband, and in this respect Ehrlich ( supra) is distinguishable from the case at bar. Christ, P.J., Rabin, Hopkins and Munder, JJ., concur; Martuscello, J., dissents and votes to affirm the order of the Appellate Term, with the following memorandum: In this action instituted by plaintiff upon a promissory note, the Appellate Term held it was error for the trial court to have excluded defense testimony under CPLR 4519 as to defendants' transactions with plaintiff's deceased husband. Initially, it must be noted that plaintiff instituted this action in her individual capacity and does not claim to derive her interest from, through, or under her deceased husband. Consequently, defendants' testimony as to their transactions with plaintiff's deceased husband should not have been excluded ( Ehrlich v. American Moninger Greenhouse Mfg. Corp., 26 N.Y.2d 255). Moreover, the exclusion of this testimony was extremely prejudicial to the defense. The key issue at the trial was whether plaintiff had loaned her own money to defendants, for which she received the promissory note. As to this issue, the testimony was in sharp conflict. The exclusion of this testimony in effect limited the defense to a general denial of the loan. Yet, the whole thrust of the defense was to show by way of new matter that (a) plaintiff's deceased husband had made usurious loans to defendants before his death and (b) the note sued upon by plaintiff in her individual capacity was merely a disguised compromise settlement of her husband's usurious loan to defendants. The truth rested on the credibility of the parties before the jury. It is readily apparent that the excluded testimony, relating to the alleged usurious loans made by plaintiff's deceased husband to defendants, was vital to the defense of this action and should have been heard by the jury. It related directly to the credibility of plaintiff, since she claimed throughout the trial that she was suing upon the note in an individual capacity. Moreover, it could have crystallized the defense of lack of consideration for the loans allegedly made by plaintiff to defendants in her individual capacity. For the above-noted reasons, I would affirm the order of the Appellate Term.