Condit v. Baldwin

Johnson, J. Upon the facts found by the judge at special term, was this transaction usurious per se 7 It was held to be so by the learned justice before whom the cause was tried, although the fact is distinctly found, that the plaintiff had no knowledge of the charge of $25 made by her agent, and never-received any portion of it. As the plaintiff never knew of the charge, and it was not made for her benefit, but for the exclusive benefit of her agent, she cannot be held to have sanctioned it by bringing the action to collect the note. The decision at special term goes further, I think, than any court has yet gone in this direction. At least I have been able to find no reported case which goes this length, and upon principle I do not see how it can be sustained. It was held by Lord Tenterden, in Meagoe. v. Simmons, (1 Moody & Malkin, 121,) that where the lender stipulates with the borrower that the latter shall pay a commission to the lender’s agent, it is usurious, although the lender himself retains nothing but the legal discount. And this is the rule laid down in Chitty. (Chitty on Bills, 105, 8th Am. from 8th Lon. ed.) To this doctrine I fully subscribe. In such a case, payment to the agent at the [188] request, and as a condition imposed, by the lender himself, is a payment to him. But where the agent of the lender and the borrower agree without the lender’s knowledge, and in no respect for his benefit or advantage, that such agent shall have a commission out of the moneys loaned, it must, I think, be held to be the agreement of the agent and the borrower only, or the private extortion of the agent, and he aloye, if any one, should be held answerable for the wrong. An agreement between the lender and his agent, that the latter may exact a commission from borrowers, may, I have no doubt, be proved, and where the fact is established, the inference may be drawn, that the lender authorized or sanctioned the exaction in any given case. And perhaps this agreement may be inferred from the course of dealing between the principal and agent. I am aware that the principal is liable for the fraud of the agent in the sale of property where the agent has a general authority to sell, although such principal is wholly ignorant of the deceit. But that is upon the ground that the agent in the sale was acting for the principal’s benefit, and an innocent person has suffered from the . deceit of the agents And then the rule is applied, that where one of two innocent persons must suffer from the acts of a third, the one who has put it in the power of such third person to do the wrong should sustain the loss. But the maker of the note here does not come within this rule. He has been in no respect deceived. The agreement, and the payment of the exorbitant commission, was his own voluntary act. If any one has been deceived, it is the plaintiff. In short the agreement as to the commission is in no respect her act¡ Of course no one would pretend that she could be made answerable criminaliter, although the excessive premium has been paid to her agent. The case of Hine v. Handy, (1 John. Ch. Rep. 6,) is authority to show that taking over seven per cent by the lender himself is not, under all circumstances, usurious in itself. In that case the lender charged $19.28 for his trouble in going from Oneida county to Schoharie to procure the amount loaned for the borrower, and this extra amount was included in the bond and mortgage. A bill was filed, after [189] proceedings to foreclose were instituted, to cancel the mortgage, on the ground of usury. The answer denied the usury; and it was held that the proof was not sufficient to overcome the denial, although it was clear that the extra premium was contained in fhe mortgage. A decree was however made, restraining the sale upon the mortgage foreclosure, upon the borrower’s paying the amount due, less the $19.25, on the ground that such a practice tended to usury and oppression. I have no doubt that the agent of the lender, whether his principal agrees to it or not, may lawfully take compensation of the borrower for any services actually rendered for the latter at his request. If the amount exacted is far beyond a fair compensation for the actual service, and it is shown to have been within the knowledge of the lender, and part of the agreement to make the loan, a question of fact would arise for the jury, whether the compensation exacted was not a mere cover for usury. Usury is a question of fact—of intent. In the present case there can be no pretense that the agent rendered any services to the borrower, or was acting in any sense as the borrower’s agent. In Hetfield v. Newton, (3 Sandf. Ch. R. 564,) and in Crane v. Hubbell, (7 Paige, 413,) the agent taking the commission was held to be the agent of the borrower; and it was held, as it has been ever since Dignall v. Wigley, (11 East, 43,) that a stipulation to pay an extra compensation to the borrower’s agent was not usurious. But these cases have no application here. All the plaintiff’s agent did was to receive the note and give his check for the $400, the amount of the note. It will be seen, therefore, that he acted wholly for the plaintiff. The borrower drew the money and paid the $25, afterwards, to the plaintiff’s agent, in pursuance of the agreement between them. And the case turns wholly tipon the question, whether this part of the agreement, for the commission or compensation to the agent, was the agreement of the plaintiff. It seems clear to my mind, that inasmuch as the plaintiff never authorized or sanctioned it, nor even heard of it, and derived no benefit or advantage whatever from it, it cannot be regarded as her agreement. Courts ought and will look with jealous scrutiny [190] upon all such practices by the agents of lenders, and see that the statute is not violated and its provisions evaded under the cover of an agency. But they should be equally careful to protect the honest and innocent lender from the secret and exorbitant exactions of grasping agents, and the secret and unauthorized agreements between such agent and the borrower. [Monroe General Term, December 3, 1855. . My conclusions are, that the note is a valid note, and never imbibed any taint of usury; and that the action is well brought. The judgment of the special term must therefore be reversed, and a new trial ordered, with costs to abide the event. Selden, J., concurred. Welles, J., dissented. New trial granted. Selden, Welles and Johnson, Justices.]