In Stillman v. Northrup (109 N.Y. 473), the court said (at p. 478): "The defense of usury involving crime and forfeiture cannot be established by mere surmise and conjecture, or by inferences entirely uncertain.Summary of this case from Heller v. Yaeger
Argued April 20, 1888
Decided June 5, 1888
Scripture Backus for appellant. Charles H. Searle for respondents.
If the note made by Thomas Bishop and indorsed by the defendants for the money borrowed of the plaintiff was void on account of usury, then the substituted security, the mortgage given to secure the same debt, was tainted with the same infirmity and also void.
There is no proof or claim that the plaintiff received any part of the $50, which was exacted by her brother as a condition of the loan to Thomas Bishop, or that she had any benefit whatever therefrom. It is undisputed that she actually loaned and advanced to Bishop $1,000, the full amount of the note, that the money loaned belonged to her, and that her brother acted as her agent in making the loan. There is no proof whatever that she authorized him to take or exact more than the legal rate of interest, and it is undisputed that he took and exacted it for himself and that he had the sole benefit of it.
To render the note void for usury, it was not sufficient for the defendants merely to show that plaintiff's agent took and exacted the $50 as a condition of the loan. But it was incumbent upon them to show that he took the $50 with the knowledge and assent of the plaintiff, so that she, at least by acquiescence, became a party to the usurious exaction. ( Condit v. Baldwin, 21 N.Y. 219; Estevez v. Purdy, 66 id. 447; Van Wyck v. Watters, 81 id. 352; Philips v. Mackellar, 92 id. 34.) And the burden of establishing such knowledge and acquiescence on the part of the plaintiff rested upon the defendants, and they were bound to sustain that burden by satisfactory evidence. The defense of usury involving crime and forfeiture cannot be established by mere surmise and conjecture, or by inferences entirely uncertain. If, upon the whole case, the evidence is just as consistent with the absence as with the presence of usury, then the party alleging the usury has failed; and so it has been repeatedly held. ( Booth v. Swezey, 8 N.Y. 276, Valentine v. Conner, 40 id. 248; Matter of Accounting of Consalus, 95 id. 340; Morris v. Talcott, 96 id. 100)
It is not sufficient in this case for the defendants to show that the plaintiff knew of the usurious exaction after she had made the loan and the note had been given; she must have known of it at the time. Nor is it sufficient to show that she supposed that her agent was to receive some compensation for services which he rendered to the defendants. There is evidence that, at the request of Thomas Bishop, the borrower, he went from his home in Oneida county to Madison county to look at a farm with the view of taking a mortgage on it as security for the loan, and that he spent some time in negotiating the loan, which ultimately culminated in the note; and if the plaintiff supposed that the borrower was to pay her agent something for the trouble and services which he rendered to him in effecting the loan, that would not be sufficient to show that she had knowledge of any usurious exaction.
We have carefully read and scrutinized the evidence in this case and we think there is a total failure of proof to show that the plaintiff had any knowledge whatever of the exaction made by her agent, or that at the time of the loan she assented thereto or acquiesced therein.
Nelson F Stillman, as a witness, testified positively that, so far as he knew, the plaintiff had no knowledge or information whatever that he had received the fifty dollars, and that he did not tell her anything about it; and she testified that she had no knowledge or information whatever as to the payment of the fifty dollars. She was not present at the time the note was taken by her agent or the money drawn upon the check given by her, and she denied most emphatically that she had any knowledge whatever of the alleged usurious exaction. Upon her cross-examination, conducted with great persistence and skill, she was made to testify that she supposed her brother was getting some compensation for his trouble from the borrower. Even if she knew that, it was not sufficient to show that she knew he was taking more than legal interest for the loan of the money, or that he was making any usurious exaction. But it does not appear when she supposed that, nor does it appear that she had any knowledge upon the subject. It was a mere supposition that he was to have compensation for his labor. The only other evidence was that of one of the defendants, Orville B. Northrup, who testified that he had a conversation with the plaintiff more than three years after the money was loaned and the note taken as follows: "I asked Mrs. Stillman if she knew Nelson F. Stillman took fifty dollars; she said she knew it but that she did not receive any of it." It does not appear from this when she learned that her agent took fifty dollars. Her answer to the inquiries does not necessarily or properly imply, in view of her entire evidence and all the other evidence in the case, that she knew it at the time of the loan. Her answer to the question put by Northrup, that "she knew it," is just as consistent with the claim that she knew it afterward as with the claim that she knew it at the time, and it cannot be said upon this evidence that these defendants have sustained the burden of showing that she knew of the alleged usury and acquiesced in it at or before the time it was taken and exacted.
We are, therefore, of opinion that the defendants, within the rules of law above alluded to, have failed to establish the defense of usury which they alleged in their answer.
Upon the trial of the action the defendants claimed that their guaranty was personal to Nelson F. Stillman, and was, therefore, not assignable, and they offered to show what the conversation was at the time the mortgage was assigned and the guaranty given, which, being objected to on the part of the plaintiff, they asked to amend their answer "by setting up the fact that this guaranty was directed to be drawn to Nelson F. Stillman, personally; and that was the intention of the parties at the time, that it should be drawn to Nelson F. Stillman, personally; and we ask that it may be reformed in that respect, if it don't already read so, to conform with the intention of the parties at the time." Plaintiff's counsel objected to the allowance of the amendment, and the objection was overruled and the amendment was allowed. The answer, however, was not amended, and appears in the record as it was originally drawn. Some evidence was thereafter given tending to show that it was the intention of the parties that the payment of the mortgage should be guaranteed to Nelson F. Stillman. There was no evidence that the guaranty as written did not express the true intention of the parties. But the referee held that the assignment, as written, was personal to Nelson F. Stillman, and was, therefore, not assignable. He did not order the guaranty to be reformed, and we are therefore to construe its language as we find it in the record. It does not appear in the evidence that there was any reason for limiting the guaranty to Nelson F. Stillman. The note which the plaintiff held, and which at the time of the guaranty was in the hands of her agent, was perfectly good, the defendants being entirely solvent and able to pay. The land mortgaged was represented by the defendants to be ample security, and they were asked to guarantee the payment of the mortgage and did so. There was no agreement and no conversation that the effect of the guaranty was to be lost in case Nelson F. Stillman assigned the mortgage. It is true that a guaranty could be so drawn as to be personal and to have force and effect only as to the person to whom it is given, and so as not to be transferable or assignable to any other person. But in order thus to limit a guaranty the language should be plain and peculiar, and the intention of the parties should not be left in uncertainty. Here, by the plain language, there is an absolute guaranty of the payment of the mortgage, and it is described as a mortgage assigned to Nelson F. Stillman, and there is no limitation of the guaranty to him personally. But even if the guaranty should be construed as a guaranty of payment to Nelson F. Stillman, it would yet be a guaranty which he could assign with the mortgage. Like any other promise made to him, it could be assigned and could be enforced by any party to whom it was assigned.
The case of Smith v. Starr (4 Hun, 123), is much relied upon by the defendants to sustain their contention. We do not yield to the authority of that case and are not satisfied that it was well decided. It rests upon no authority and is not well supported by reason. This is not like a bond conditioned for the honesty or fidelity of a clerk or agent. Such bonds are personal to the obligees, and cannot before breach be transferred so as to inure to the benefit of other parties. Therefore, the cases of Wright v. Russell (3 Wilson, 530), Barker v. Parker (1 Term R. 287), and other cases cited in Smith v. Starr, are not applicable to such a guaranty as this. There is nothing personal about the guaranty of the payment of a mortgage, and it can only be made so by very express and plain language.
Instead of guaranteeing the payment of the bond the defendants guaranteed the payment of the mortgage, and the claim is now made that the guaranty is inoperative, as the mortgage was a mere security for the principal debt represented by the bond. But the question is, what did the defendants mean by the language which they used? They assigned both the bond and mortgage and intended to give an effectual guarantee of the debt secured by the mortgage, and the language must be so construed. There was no intention to give an inoperative guaranty, but the intention was to give one which should be in the hands of the party to whom it was given an effectual security, and the guaranty must be applied to the debt secured by the mortgage.
It is further claimed that the first assignment of the bond and mortgage by Nelson F. Stillman to the plaintiff did not convey to her the guaranty. Even if that were so, we think the subsequent assignment of the bond, mortgage and guaranty to her was effectual to vest the guaranty in her. If, by mistake, when the first assignment was made, the parties omitted to assign the guaranty, that mistake could certainly be corrected by a subsequent assignment so as to convey to the plaintiff what it was originally intended she should have. And this is more clearly so as Nelson F. Stillman was all the time her agent, took the guaranty as her agent, and intended to do what the law would have compelled him to do, namely, to vest in her the entire security which he had taken for her debt. But it is well settled that the assignment of a bond and mortgage carries with it the guaranty of payment or collection, although not mentioned in the assignment. ( Craig v. Parkis, 40 N.Y. 181.) The transfer of the debt to the plaintiff carried with it, as incident thereto, all the securities for its payment.
We are, therefore, of opinion that the action was not well defended and that the judgment should be reversed and a new trial ordered before a new referee, costs to abide event.