Caldwell v. Commercial Warehouse Co.

Davis, P. J. It is not necessary in determining this appeal that the court should pass upon the question whether or not the several agreements between the parties do not bear upon their face conclusive evidence of violations of the statute against usury. The complaint avers (and the answer denies) that the contracts in relation to commissions were designed to be, and were, mere covers for usury, the intent being, on the one hand, to pay, and, on the other, to exact and receive a greater rate of interest than that allowed by law. A fair issue of fact for a jury, or for the court, if the issue be tried without a jury, whether the charges of eight per cent upon loans for four months over and above lawful interest, and all expenses and disbursements, ostensibly as commissions, were not merely a device to evade the prohibitions of the charter and the usury laws, is presented by the pleading. There can be no question, we think, but that the defendant is subject, notwithstanding the language and character of its charter, to the laws against usury, and their penalties. “ In point of law it is entirely immaterial in what manner or form, or under what device or pretense usury is taken, the ingenuity of man has been taxed in vain in the effort to avoid the laws in relation to the subject; and whenever a court or [181] jury can clearly see that any contract, whatever may be its form, is really intended as a cover for talcing usury, such contract will be declared void.” See White v. Stillman, 25 N. Y. 541. It is not an answer to say, as urged by the court below, that the defendant’s charter authorizes commissions for merely “taking the custpdy of property ” pledged as collateral to the loan, for this is only begging the question whether the eight per cent commissions charged for custody in this case was not really excessive interest christened by another name for an illegal purpose. The decision of the General Term of this department, in Tyng v. Commercial Wareh. Co., is not controlling of the question in this case. In that case (as said by Learned, J., in the prevailing opinion), “ there is no allegation that an evasion of the usury laws was intended.” And the judge lays much stress upon the absence of such averment and of proof to establish it. Here the averment is distinctly made; and although denied, we think it is our duty, in determining whether the injunction should be retained till the trial of the issue, to look so far into the transaction as to pass at least upon the probabilities of the truth of the averment. In addition to seven per cent for interest and all the expenses and disbursements attending the care and custody of the collaterals, and eight per cent on the gross proceeds of a sale, if sale is made, a sum equal to twenty-four per cent per annum on the loan, payable in monthly installments, is charged-as commissions for care and custody of the. bonds and stock certificates pledged as collateral, and this upon an agreement which devolves all risk of loss of the securities from any cause, except gross negligence, upon the borrower. It seems to us impossible to say that a jury would not be justified, from the extortionate character of these charges under the name of commissions, in finding that the transaction was a cover for excessive interest rather than a compensation to bailees for the care and safe-keeping of valuables. We think the question should, go to a trial, and that, in the meantime, the sale of the collaterals should be restrained. The order of the court below should be reversed, with costs, and an order entered continuing the injunction. Daniels and Brady, JJ., concurred. Ordered accordingly.