Condit v. Baldwin

The statutes of this state prohibit any person from taking or receiving for the loan of money more than seven per cent, per annum; they also provide that any person who shall pay or deliver in money, goods, &c., on such loan, any greater sum than is thus allowed, may recover, in an action against the person who shall kave taken or received the same, *the excess of interest so paid. It is also provided, that any person who shall receive any greater interest, discount or consideration than is prescribed, shall be deemed guilty of a misdemeanor, and on conviction shall be punished by fine or imprisonment, or both. (1 R. S. 772, &c. §§ 2, 3, 15.) And by § 5, all notes, &c., taken on such usurious loans are declared void. In the present case, it is not alleged or pretended, that the plaintiff has person

It is the essence of an usurious transaction, that there shall be an unlawful and corrupt intent, on the part of the lender, to take illegal interest, and so we must find,, before we can pronounce the transaction to be usurious. (Nourse v. Prime, 7 Johns. Ch. 77 .) In Bank of United States v. Waggener ( 9 Peters 399 ), Story, Justice, in delivering the opinion of the court, says, that to constitute usury, within the prohibitions of the law, there must be an intention knowingly to contract for or take usurious interest; for, if neither party intend it, but act bond fide and innocently, the law will not infer a corrupt agreement. When, indeed, the contract, upon its very face, imports usury, as by an express reservation of more than legal interest, there is no room for presumption, for the intent ■ is apparent, res ipso loquitur. But when the contract, on its face, is for legal interest only, then it must be proved that there was some corrupt agreement, or device or shift to cover usury, ‘-and that it was in the full contemplation of the parties. In support of these propositions, numerous authorities are cited.

In this cáse, there is nothing on the face of the contract, reserving more than legal interest. The real parties to the transaction are the plaintiff and the defendants;

If a master command his servant to do what is lawful, and he do an unlawful act, the master shall not answer, but'the servant for his own misbehavior; otherwise, it would be in the power of every servant to subject his master to what actions or penalties he pleased. (Bac. Ab., title Mast. & Serv. L.) In Middleton v. Fowler (1 Salk. 282), Holt, C. J., places the law upon its proper foundation, when he states it as a general position, that no master is chargeable with the act of his servant, but *when he acts in the execution of the authority . given him. In other words, when a servant quits sight of the object for which he was employed, and, with

The rule that when an agent commits a wrong in the transaction of the business of his principal, the principal is liable for the injury produced by such wrong, has no application to the present case. That rule cannot apply, where the agent, when committing the wrong, is bargaining on his own account, for his own private advantage exclusively, and this is known to the person with whom he is bargaining; it could only apply where the person dealt with is deceived or wronged, which in no sense is the present case. Baldwin's agent was not mislead or deceived by any act of the plaintiff’s agent; he well knew that in reference to the $25, Williams was acting and contracting on his own behalf, and for his own benefit exclusively ; he did not assume, in that matter, to act for or represent the plaintiff, or that what he was doing was in any manner to inure to her benefit or advantage. In this case, Williams availed himself of his position as the plaintiff’s agent, to make a contract on his own account and for his own individual benefit.' In thus dealing, he did not act or assume to act as the plaintiff’s agent; he required compensation for a service which he alleged he rendered to Baldwin. It was his individual affair, not that of the plaintiff, and if it was a shift or device on his part to take and receive usurious interest to himself on this loan, he has subjected himself to the penalties of the statute, ( 3 Hawks 28 ; Commonwealth v. Frost, 5 Mass. 53 .)

It was conceded on the argument, that the plaintiff had not subjected herself to an indictment for misdemeanor— that she was not liable criminaliter for these acts of her agent. Does-not this concede too much on the part of the defendants ? Is it not a concession that she has not

Again, by the third section of the statute cited {supra), it is provided, that if any person shall pay any greater sum for the loan of money than is allowed by law, he may recover such excess beyond the legal rate of interest, in an action against the person who shall have taken and received the same. Baldwin ‘ had an action, therefore, to recover this excess; but against whom could he have maintained it? Certainly not against the plaintiff. She never took or received it; her agent was never authorized to take and receive it. On no principle could the action have been maintained against her; and it is equally clear, that it could have been against Williams, if it was a shift to cover usury, for he was the person who took and received it, and retained it and applied it to his own use. We think, these tests conclusively show, that the plaintiff did not take or receive, or agree to take or receive, on this loan of $400, any greater sum than the legal rate of interest, and that the defence of usury is not sustained.

But it is urged with great earnestness and ability, that the plaintiff, by accepting the note and commencing this

When an act is done for another, by a person not assuming to act for himself, but for such other person, though without any precedent authority whatever, it becomes the act of the principal, if subsequently ratified by him. In that case, the principal is bound by the act, whether it be for his detriment or his advantage, and whether it be founded on contract or tort, to the same extent and with all the consequences as if done by previous authority. But when the agent did not assume to act for another, but acted for himself and for his own benefit, a subsequent ratification does not bind the principal. (Wilson v. Tumman, 6 Man. & Gr. 238.) Whore a landlord authorized a bailiff to distrain for rent due from his tenant, directing him not to take anything except on the demised promises, and the bailiff distrained cattle of another, supposing them to be the tenant’s, beyond the boundary of the .farm, and the cattle thus taken were sold, and the landlord received the proceeds, the landlord was held not to be liable in trover for the value of the cattle, unless it was found that he ratified the act of the bailiff, with knowledge of the irregularity, or chose, without inquiry, to take the risk upon himself and to adopt the whole act; and it was also held, that by adopt

In Bush v. Buckingham (2 Vent. 83), the plaintiff made a loan of 50l., at a legal rate of interest; she referred the borrower to her scrivener, who would draw the bond to secure the loan, and the scrivener, in error and against her will, included therein more than lawful interest. In a suit on the bond, the defendant interposed the defence of usury, but it was overruled, as there was no intent on her part to take or receive more than lawful interest; and WaS ^le^’ commencing suit on the bond, *she did not ratify the act of her agent, in providing for the payment of more than legal interest, but that she might recover the amount loaned with lawful interest.

In Buckley v. Guildbank (Cro. Jac. 678), it was resolved, that a bond given on the 23d of May 1617, on loan oi 120Z., conditioned for the payment of 132Z., upon the 24th of May next ensuing, was for the payment of that sum on the next day, and, therefore, on its face, usurious, and it was held, that forasmuch as the agreement is found to be to make the loan for a year, and that the assurances were for the payment at the end of the year, and as by the scrivener’s mistake, it is made payable the next day, it is not usury within the statute, for there was not any corrupt agreement betwixt th,em, and the act of a stranger shall not bring him within the danger of the statute, especially, it being found that he did not require payment until the end of the year.

Neveson v. Whitley (CrO. Car. 501), was an action of debt ■ on bond for 100Z., dated 12th July, with condition for the payment of 58Z., at' the end of six months. The defendant pleaded the statute of usury, and that the obligation was void; the plaintiff replied that he lent the money for a year, and that the defendant should pay 8Z. for the forbearance for a year, and that the plaintiff would not demand it until the expiration of a year, and by the scriv

In any view which we have taken of this case, we do not see that the $25 paid to Williams was for the benefit of the plaintiff, or that she had any interest whatever in it. While we intend to uphold the law prohibiting the taking of usury, in its integrity, so long as it remains on the statute book, we are not called upon to punish the innocent, at the call of a confessedly guilty party, who has enticed her agent into a violation of the statute, which is now sought to be availed of, to defraud her of money undeniably hers, and loaned, so far as she is personally concerned, in good faith, and upon such an agreement upon her part “ as stood with the law.” The judgment appealed from should be affirmed.

(Dissenting.)—While the statutes of usury are in force, they ought to be faithfully interpreted and administered *by the court. The decision of this case will, I am apprehensive, go far to overthrow them. I, therefore, dissent, and proceed, briefly as may be, to state my reasons.

The plaintiff loaned her money, through her agent, Williams; he was wholly and exclusively her agent, because he performed no service whatsoever for the borrower; ho. performed, indeed, no act which is not involved in every loan. He formed the mental conclusion to accept the note of the borrower and his sureties; he accepted the note and advanced the money; there was simply a process of the mind or will, and the act of lending; without these circumsiances, no loan was ever made. If $25, or any other sum beyond lawful interest, can be charged to the borrower, in such a case, there is very little left of the laws against usury.

It is too plain for argument, and, indeed, it is not denied, that the contract was usurious, provided the plaintiff had authorized her agent to contract precisely as

It is equally plain, that the validity or invalidity of the contract cannot depend on the mere mode and form in which the business was closed. In fact, the $400 was advanced, being the full face of the note, and the borrower afterwards paid the bonus of $25, as he had agreed. The legal as well as the practical effect of this was precisely the same, as if the $25 had been retained in the first instance, and only $315 advanced; the result was, that the borrower received only the last-mentioned sum for his note. I am not able to see, that the possession of the whole sum, for a few moments or a few hours, could „ benefit him, so long as he was to pay back a part of it. The usury was in the agreement to pay a bonus over and

I think it material next to observe, that only one contract was made, which embraced the whole transaction. There was no agreement, between the plaintiff, through her agent, and the borrower, to lend $400 at lawful interest, and then a separate and distinct agreement between the "agent and the borrower for the extra $25; it was all included in one contract. The agent said, in substance, •‘I will lend you the $400, if, besides the legal interest which you pay to my principal, you will pay to me the sum of $25.” This was a single indivisible proposition, and as such it was accepted by the borrower; in consideration of the loan, he agreed to repay it at a certain day with interest, and he agreed also to pay $25 more to the lender’s agent. Here was one consideration and one agreement. That agreement might all have been expressed in one or in two writings, or it might have been without any writing; in fact, one of these promises was evidenced by a promissory note, the other rested in paroi. These circumstances are immaterial; there was but one original agreement, which included the whole subject. *Where there is usury at the root of a transaction, it ha's never before been thought that the merely formal separation of the borrower’s contract into different parts could take the case out of the statute. If the business had not been done through an agent, not a doubt would be entertained, because nothing is clearer in principle, or better settled by authority, than that contracts are equally usurious, whether the excessive interest be paid down, or only agreed to be paid, and whether the payment be promised in the same instrument with the principal debt, or in a collateral agreement, oral or written. The test question always is, whether the agreement for the loan includes more than lawful interest, to be re

The contract in question, therefore, had all the elements of usury, unless it can be saved from condemnation, by the single circumstance that the agent fiad no authority from his principal to lend her money at a higher rate of interest than is allowed by the law of the state; upon this precise ground, the whole argument of the plaintiff rests. There is no evidence in the case, that she authorized her money to be lent in violation of the statute; and, I admit, such an authority ought not to be presumed, from the mere act of the agent himself. But what I have to say on this point is, that the assumed defect in the agent's power to make just such a contract as he did make, does not alter the contract itself. Such a circumstance cannot transform that into an innocent and valid agreement, which, in its own essential nature and judged by its own terms, was usurious and void. The agreement was the same, whether we regard it as made with or ivithout due authority; it was a plain contract for more than seven percent. interest, and it does not become a different contract, although we admit that the plaintiff did not authorize it to be made just as it was in fact made. If her agent exceeded his authority, and thereby subjected her to loss, she has a plain remedy against him. So, on the same ground, she may, I do not doubt, repudiate the contract altogether, and demand and recover from the borrower her money, *which went into his hands without her consent. This remedy was open to her, the moment the borrower got possession of the fund in this unauthorized manner; it is a remedy open to her now. But such is not the theory of her action; she sues, not in repudiation of the unlawful contract, but upon the very contract itself, and she claims to hold, not only the principal maker of the note, but four other persons who were sureties merely, and, therefore, never had any money

It is argued, however, that as the agent's exaction of $25 was not authorized by the plaintiff, she can disavow that part of the transaction, and still recover on the note, which represents, it is said, the sum actually lent. But the note represents more than the sum lent. It is true, that the borrower, in form, received the $400 expressed in the note, but this was subject to a condition that he should presently pay back to the agent the sum of $25, and he paid it back accordingly; the sum really loaned was, therefore, only $375. That, stripped of all disguise, was the true consideration of the promise made by the borrower and his sureties, to pay $400 and the interest thereon.

But again, how can the plaintiff divide an entire contract, as this was, into two parts, and so adopt one part, while she rejects the other. If an agent contract in excess of his authority, the principal is not bound at all, and may repudiate the whole; but if he adopt a part, he adopts the whole. Mr. Justice Story lays down the rule thus, and he cites many authorities to support it:—“ The principal cannot, of his own mere authority, ratify a transaction in part, and repudiate it as to the rest; he must either adopt the whole or none. And hence the general rule is declared, that where a ratification is established as to a part, it operates as a confirmation of the whole of that particular transaction of the agent.” (Story on Agency, § 250.) The result of this rule is, that the if she insists upon *the contract at all, must take it with all its vices and infirmities; she is not permitted to say, that the usury is one particular part or clause of the agreement, which she disavows, and that she will take the benefit of the residue which is in

Very little need be said in regard to the authorities cited in support of this transaction; in general, thej^ do not bear upon the question. For example, the case of Bush v. Buckingham (2 Vent. 83), turned upon a mistake of the scrivener in preparing the bond by which the loan was secured. The bond sued upon reserved, on its face, more than lawful interest on the sum loaned, and the obligor pleaded that it was corruptly agreed, &c.; the replication took issue on the corrupt agreement, "and showed that the agreement as made between

Denio and Welles, JJ., also dissented; but the rest of court concurred with Davies, J.

Judgment affirmed.[1]