Summary
In Bliven v. Lydecker, 130 N.Y. 102, cited by the defendant, the borrower agreed to pay the intermediate party, the agent of the lender, $400 to secure a loan.
Summary of this case from Hopkins v. FlowerOpinion
Argued October 19, 1891
Decided October 30, 1891
Irving Brown for appellants.
Garrett Z. Snider for respondent.
The judgment rendered by the Special Term was not reversed upon a question of fact (Code C.P. § 1338), but the order of reversal was based upon the assumption that there was no evidence to support the finding that the mortgagee either authorized or acquiesced in the exaction of the bonus of four hundred dollars.
She does not appear to have been present when the usurious agreement was made by her husband and agent, nor during any of the negotiations that resulted in the execution of the mortgage. The business was all done by Mr. Schuler, who made the agreement for the loan, apparently in his own name, and advanced the several installments and took notes therefor payable to his own order, as if the money belonged to him. After three thousand dollars had been advanced, Mr. Schuler and Mr. Lydecker met to arrange for the mortgage and made a statement of the sums constituting the principal thereof, which was read in evidence, and is as follows, viz.:
"Memoranda of acc't for mortgage of Mrs. S.
$1,800, int. 1 mo. 10 days, $14.00 ............. $1,814 00 1,000, " 3 " 13 " 20.03 ............. 1,020 03 200, " 2 " 7 " 2.59 ............. 202 59
Discount for cashing mortgage .................. 400 00 _________ $3,436 72
$4,000 mortgage ................................ 4,000 00 _________ $3,436 cash paid in. $563 38
$564 cash rec'd from Mr. Schuler."
At the bottom of the memorandum were the computations by which the three sums of interest above mentioned were arrived at. Up to this time Mr. Lydecker did not know that Mrs. Schuler had any connection with the matter, but supposed that he was dealing exclusively with Mr. Schuler, who, moreover, then told him that "he put this mortgage in his wife's name so that he would not have to pay any taxes on it." After the mortgage was given Mr. Schuler collected the interest until his death in September, 1887. When Mrs. Schuler assigned the mortgage to the plaintiff in November, 1888, she covenanted that there was due thereon "four thousand dollars and interest," and is hence presumed to have had the benefit of the four hundred dollars of usury. There was no evidence tending to show that any other person had the benefit of it, or that Mr. Schuler retained that sum as his compensation from money furnished by his wife. Except as stated it did not appear to whom the money lent belonged. Thus we have a case where the exaction of usury was part of the contract by which the loan was made. Pursuant to that contract but $3,600 was advanced, while a bond and mortgage for $4,000 was required and given. The mortgagee accepted the mortgage and through her agent collected the interest on the entire principal thereof for more than eight years. Although the business was done by her agent it was done for her benefit and it was a permissible inference from the evidence that she knew when she received the mortgage that it was for a larger sum than she had advanced, and hence, in the absence of explanation that she thus had notice that usury had been taken. After accepting the usurious security under such circumstances and receiving the benefits of it for year after year, she could not insist that it was valid because her agent had no authority to take usury for her. Acceptance of the mortgage with knowledge of its unlawful origin, or with such notice as would cause a prudent person to make inquiry, was a ratification of the usurious contract and equivalent to prior authority to make it. ( Hyatt v. Clark, 118 N.Y. 563; Hoyt v. Thompson, 19 id. 207; Ingalls v. Morgan, 10 id. 178; Story on Agency, § 140; 1 Am. Eng. Encyc. of Law, 429; Hovenden on Fraud 144, 145; Dunlop's Paley, 172.)
The cases cited by the learned counsel for the respondent, of which Condit v. Baldwin ( 21 N.Y. 219) is a type, are not analagous, because in that case the agent was held to have made two contracts with the borrower, one in behalf of his principal by making the loan, the other in behalf of himself by providing for his own compensation in procuring the loan. The principal had no benefit from the sum thus exacted and as the security taken was for the precise amount of the loan, there was nothing on the face thereof importing usury. The court said that as "the agent did not assume to act for another, but acted for himself and for his own benefit, a subsequent ratification did not bind the principal."
But where, as in this case, an agent authorized to lend, but not to take usury, lends the money of his principal at a usurious rate and both the sum lent and the usury exacted are secured by the same instrument, which the principal, knowing that it is for a larger amount than the sum loaned, without explanation, accepts and has the benefit of, she adopts, ratifies and is bound by the act of her agent the same as if it had been done by herself. ( Dempsey v. Chalmers, 44 A.L.J. 333, and cases there cited.)
If the mortgage was void for usury in the hands of the mortgagee, it is void for the same reason in the hands of the plaintiff, her assignee.
It may be that if Mr. and Mrs. Schuler had been living, so as to testify at the trial, a different state of facts would have been disclosed, but we think that the evidence as it stands is sufficient to sustain the findings of the trial court, even under the stringent rule applicable to proof of usury, and that the findings required a dismissal of the complaint.
The order of the General Term should be reversed and the judgment of the Special Term affirmed with costs.
All concur, except HAIGHT, J., not voting.
Order reversed and judgment affirmed.