Tassell v. Wood

Gilbert, J.: The plaintiff, on or about July 13, 1875, agreed to loan to the defendant Purdy $5,000 upon the security of the bond and mortgage of the latter, set forth in the complaint, and Purdy agreed to pay the plaintiff $400 as a compensation for his trouble and expenses in raising said sum of money and for the sacrifice he would have to' make in the sale of securities for the purpose of raising said money. The parties to the transaction were both residents of the county of Westchester. The only trouble and expense to which the plaintiff was put consisted of a journey between Tarrytown where he lived and White Plains where he kept his bank account, for the purpose of getting a note discounted, and of a journey between Tarrytown and New York for the purpose of disposing of his securities. When the plaintiff and Purdy met to complete the transaction, the plaintiff retained the sum of $400, and gave to Purdy, on account of the loan, only the sum of $4,600. The bond and mortgage in suit were then delivered. They are for $5,000, and bear interest at the rate of seven per cent. [390] The court below found that the compensation so paid to the plaintiff was a reasonable one, and that the agreement between him and Purdy was made for the purpose of paying the plaintiff such compensation, and not as a device to avoid the usury laws, or with intent, on the part of the plaintiff, to take interest at a greater rate than seven per cent per annum upon said loan. We think that finding is not warranted by the evidence. It has not yet been established, as a rule of law in this State, that the lender may exact from the borrower compensation for a loss which he may sustain by the sale of securities which have become depreciated in the market, or for such efforts to obtain the money loaned as were made in this case. If the plaintiff, as a condition of the loan, had required Purdy to take his depreciated securities at par, the transaction would have been usurious per se. (Seymour v. Strong, 4 Hill, 255; Schermerhorn v. Talmam, 4 Ker., 93.) What difference does it make to the borrower whether the lender transfers the securities to him in lieu of money, or sells the securities and gives him the proceeds only \ If such a transaction should be sustained, the limit to the oppression, which holders of depreciated securities might practice on needy borrowers, would be merely the greed of the lenders. Nor is the case, in our opinion, brought within the principle decided by the Court of Appeals in Thurston v. Cornell (38 N. Y., 281). To authorize a lender to charge for his trouble and expense in procuring the money to loan, there must be an agreement made in good faith for that purpose only, and not for the purpose of giving to the lender a usurious compensation for the loan. We think the agreement in this case was one of the latter kind. It is our duty to review the questions of fact presented and to give effect to our own conclusions upon the evidence. We are in no sense concluded by the findings of the court below. (Finch v. Parker, 49 N. Y., 1; Smith v. Ætna Life Ins. Co., id., 211; Godfrey v. Moser, 66 id., 250.) It appears that in December, 1816, the plaintiff repaid to Purdy the sum of $400, so usuriously taken by him at the time of the loan. The defendants, Millard and Wood, had recovered judgments against Purdy, and the same were docketed and became liens on the mortgaged premises before such repayment was made. Such [391] repayment did not render the bond and mortgage valid. Tbe statute had made them void, and they remained void, notwithstanding tbe effort of tbe parties to purge them of tbe usury. (Miller v. Hull, 4 Den., 104; Brackett v. Barney, 28 N. Y., 333.) Tbe defendant Purdy abstained from defending tbe action. Tbe defendant Millard did not appeal from tbe judgment therein. It only remains, therefore, to determine tbe rights of tbe defendant Wood. He bolds a judgment which is a lien on tbe mortgaged premises. He has a right, therefore, to have tbe usurious mortgage avoided, so far as it affects tbe lien of bis judgment. (Dix v. Van Wyck, 2 Hill, 522; Thompson v. Van Vechten, 27 N. Y., 568; Mason v. Lord, 40 id., 476-486.) But be has no right to have it avoided m loto. The judgment must be modified by striking out tbe direction as to costs, as against tbe defendants Millard and Wood, by inserting a declaration that Wood is entitled to a priority of lien over tbe mortgage, and directing that tbe said judgment be paid out of the proceeds in accordance with such order of priority, and that be recover of tbe plaintiff bis costs of tbe action. Such modification is in accordance with tbe prescribed practice. (Code of Civil Procedure, § 1317; Simar v. Canaday, 53 N. Y., 298.) Judgment accordingly. Barnard, P. J., concurred; Dykman, J., not acting. Judgment modified in accordance with tbe opinion by Gilbert, J.