Summary
In Siewert v. Hamel et al., 91 N.Y. 199, the holding of the court is as follows: (We quote for convenience from the syllabus.)
Summary of this case from O.A. Graybeal Co. v. CookOpinion
Argued December 14, 1882
Decided January 23, 1883
S. Jones for appellants. Edgar Whitlock for respondent.
The counsel for the defendant Hamel correctly states that the question presented in this case is whether the transaction in question was a bona fide purchase of the bond and mortgage, at a discount, or a loan of money by the plaintiff to Hamel, with the bond and mortgage, as collateral, under the guise and color of a purchase, and sale of a chose in action, whereby the lender reserved or secured to himself a greater rate of interest than is allowed by law. The learned trial judge found that the transaction was a purchase of the bond and mortgage by the plaintiff, from Mrs. Bergen, the assignee. This finding is conclusive against the defendant, unless it is wholly unsupported by evidence. We think the evidence justified the conclusion of the trial judge. The form of the transaction was a purchase from Mrs. Bergen, and not a loan to Hamel. The alleged vice in the transaction consists in the fact that Hamel procured the plaintiff, through Clegg, to become the purchaser of the bond and mortgage at a discount of eleven per cent, which, by arrangement between Hamel and Mrs. Bergen, known to the plaintiff, was paid by Hamel, so that she received on the assignment of the bond and mortgage the full amount due thereon. If this was a mere contrivance to evade the statute of usury, and was in fact a loan by the plaintiff to Hamel upon the security of the bond and mortgage, under the guise of a purchase, then undoubtedly the plaintiff cannot recover. But what the real nature of the transaction was, was a question of fact and not of law. There can be no usury unconnected with the loan or forbearance of money, and a purchase of a debt by another at the instance of the debtor for less than its face, the debtor himself paying the creditors the discount, is not, we think, per se, usury. It may be very cogent evidence of usury, and under some circumstances, as for example, where the transaction originated in an agreement for a loan by the alleged purchaser to the debtor, the conclusion that the form which the transaction finally took was a mere device and cover for usury, might be well nigh irresistible.
Here there was no negotiation for a loan of money between the plaintiff and Hamel. The plaintiff, having funds on hand for investment, desired to purchase a bond and mortgage, and was informed that Clegg had a mortgage for sale, and Clegg, who in fact was acting as Hamel's agent without disclosing for whom he was acting, offered to sell, or procure an assignment to him of the bond and mortgage in question, at the discount stated. The verbal negotiation was concluded between the plaintiff and Clegg, without any knowledge on the part of the plaintiff of Hamel's relation to the transaction. Assuming that the plaintiff by subsequently constituting Clegg his agent to search the title and to see to the execution of the necessary papers, was chargeable with notice of what Clegg knew, viz.: that Mrs. Bergen was to receive the full amount of the bond and mortgage, and that Hamel was to advance the necessary sum beyond the amount to be paid by the plaintiff, this did not impress a new character upon the transaction, and turn into a loan of money to Hamel, what was intended as a purchase of a security against him. It is found in substance that the plaintiff entered into the transaction for the purpose of securing more than the legal interest on his capital. But the purpose was not unlawful. The expectation of large gains is the great motive which prompts and stimulates business enterprise. The purchase of an existing security for money, at a discount, is a common and legitimate transaction, and the purchaser may enforce it for its full amount. The question in this case is, was the transaction a purchase of the mortgage, or a loan of money on the security of the mortgage? The question has been decided adversely to the defendant, upon sufficient evidence.
The judgment should therefore be affirmed.
All concur.
Judgment affirmed.