Philo v. Butterfield

GrANTT, J. This is an action upon a note and mortgage which were executed by the defendants to the plaintiff, to secure the payment of a loan of money. The answer -admits two hundred and fifty dollars to be due to the plaintiff for money borrowed, but alleges that the plaintiff ought not to recover, because the note and mortgage were given on an actual loan of two hundred and fifty dollars, and that-the balance of fifty-four dollars expressed in the note was included therein as a bonus, and therefore made the loan usurious. Hence the plea' of usury is the only defense. All the evidence taken in regard to the charge of usury is substantially as follows: Lewis Butterfield testifies that he went to L. R. Wright to obtain a loan of money, and that Wright told him he could get some money for him if he could secure the payment by mortgage on real estate, but that he would have to pay a heavy interest, and then says: “we agreed that I should give a note, and mortgage for three hundred and four dollars with interest thereon, for the sum of two hundred and fifty dollars, which I did and received the two hundred and fifty dollars, and executed the note and mortgage to T. L. Philo.” [258] The plaintiff testified that he advanced of his own money the three hundred and four dollars stated in the note, and the loan was made through Wright; also that he was to receive twelve per cent, interest, and that fie had no knowledge of and had nothing to do with the individual transaction between Wright and the defendants. L. R. Wright testifies that Butterfield came to him to hire the money, and offered to secure it by mortgage, but that he told him he had no money to spare, and knew of no one from whom he would be likely to get it, except from a man in Des Moines, if he had it; that several days .after, the defendant called on him and said money was very hard to get, and that he would give fifty dollars to get it; but that he told the defendant to look around, and if he could not get the money, he would see what he could do for him; that the defendant came the third time and said it was impossible for him to get the money in Omaha; and that then the defendant agreed to pay him fifty dollars to get the money for one year at twelve per cent., and to secure it by note and mortgage. This witness also says that.he went to Des Moines, mainly, to .obtain the money for the defendants, and got from plaintiff six hundred dollars, and list the defendants have three hundred and four dollars, and defendants paid him fifty dollars for his time, trouble, and expense, and paid to Neville four dollars for making abstract of title and drawing papers; and further says that he acted at the request of, and as the agent for the .defendants; that he had previously loaned out money for the plaintiff. We think that this evidence as we find it in the record in this transaction, very clearly shows that Wright acted only as the agent of the defendants, and his testimony as to this fact is not contradicted by that of Butterfield. On the contrary, the testimony of Butterfield rather corroborates that of Wright. It is also clear from the evidence, as it appears by the [259] record, that at tbe several times wben tbe defendant applied to "Wright to negotiate tbe loan for him, be bad no money of tbe plaintiff’s in bis bands, and did not then know whether he could obtain tbe loan from tbe plaintiff. Now tbe question presented for our consideration on tbe facts of this case is: Will tbe lender of money at a lawful rate of interest, be affected witb tbe vice of usury, wben, without bis knowledge or consent, tbe agent of tbe borrower applies for and negotiates a loan, and receives from tbe borrower a sum. of money which tbe borrower previously contracted witb him to secure the loan? It is a settled rule of law which will not be questioned, tbat in all cases where a person employs another as bis agent to loan money for him, and places tbe funds in tbe bands off tbe agent for such purpose, tbe principal is bound by tbe acts of bis agent; and if tbe agent charges tbe borrower of such money unlawful interest, or even demands and receives from tbe borrower a bonus for such loan, and appropriates it to bis own individual use, either witb or without tbe knowledge of bis principal, tbe prim cipal is affected by tbe act of bis agent. * In contemplation of law, tbe acts of tbe agent in such transaction are the acts of tbe principal, because tbe nature of tbe business which be has placed in charge of bis agent furnishes the means of violating tbe law. In such business transaction by agency, there cannot be-an agreement between tbe lender through bis agent and tbe borrower, and a separate, distinct contract between tbe agent and tbe borrower, because it is in consideration of tbe loan tbat tbe unlawful interest or bonus is paid, and hence, tbe whole transaction must be a single indivisible proposition, it is but one contract only. It is said tbat, “in all cases ‘in which the frauds and injuries of servants, have been held to affect their employers, it appears tbat tbe employment afforded tbe means [260] of committing the injury.” Dunlap’s Paley's Agency, 306. But I apprehend, that when the person who negotiates the loan acts only as the agent of the borrower, who has employed him and contracted with him to pay him a stipulated price to secure the loan, the rule is different, and the lender, if he loans the money in good faith, at a lawful rate of interest is not affected by the vice of usury. I think, that in such a case, as between the borrower and his agent, there is a substantive, independent contract, entirely different from any unlawful contract for money; and to connect such contract with that of the loan, would be to connect distinct and independent transactions with each other, and thereby make two contracts, each one of which may be fair and legal in itself, into one which is prohibited by law. It is not the purpose of the law to inflict a loss or punishment upon an innocent person, who has not, by himself or Ms agent, participated in any transaction prohibited by law, nor by any employment on his part afforded the means of infringing the law. Hence, in accordance with these rules of law, and in their application to the facts of this case, as they appear from the record, I think that the question above propounded must be answered in the negative; and that the judgment must be reversed, and the cause remanded for a new trial. Reversed and remanded. Maxwell, J., concurs.