Griel v. Thompson — 13 N.Y. St. Rep. 725

Majority

p. 725

Ernst Griel et al. v. Charles H. Thompson et al.

(City Court of New York, General Term,

Filed January, 1888.)

Headnote

Promissory note—Assignment oe patents—Usury.

The defendant received $500 from the plaintiffs and gave them in return his promissory note for $1,000, payable in six months thereafter, together with a written transfer of two patents. The writing provided that if the $1,000 note was paid the transfer of the patents was to become void. Held, that while a transfer of property with the liberty (but not the obligation) of buying it back at an increased price, is not necessarily usurious, and the question in such case is one for the jury to determine, whether the arrangement was made in good faith and not as a disguise to cover usury, yet this rule has no application to the present case, for the reason that the transaction was in effect a loan of $500, and the transfer merely collateral to the payment of the $1,000 note given in return for the $500 loaned, and the transaction in question was, therefore, usurious perse., and a verdict in favor of the plaintiff properly set aside.

On the 8th day of November, 1886, Charles A. Thompson received from the plaintiffs $500, and at the same time the plaintiffs received from Thompson the latter’s note for $1,000. The transaction was evidenced by the following instrument:

“ Know all men by these presents, that I, Charles Albert Thompson, of the city of New York, for, and in consideration .of the sum of $500 to me paid by Henry Emil Bandell, of the same city, the receipt whereof is hereby acknowledged do hereby grant, assign and transfer to said Henry Emil Bandell, a certain patent of an apparatus for copying letters issued and granted by the government of the United States by letters patent Nos. 122,265, that is to say a moiety

p. 726

or one-half interest in said letters patent, to have and to hold said one-half interest in said letters patent and my right and interest in said oné-half part or portion thereof, and in the invention described therein and covered thereby, to have, hold and use in as full and ample manner to all intents and purpose as I might have, and hold same during the unexpired term thereof. Upon payment of $1,000 by note given this day myself to said Bandell, in six months this assignment shall be void.

“In witness whereof I have set my hand and seal this 8th day of November, A. D., 1886.

“CHAS. A. THOMPSON.”

Henry E. Bandell, mentioned in this agreement, is one of the firm of Oriel, Wilderman & Co., the plaintiffs herein.

A similar instrument, as to certain other patents, was also executed, containing like provisions. When the $1,0-00 note became due, the following agreement was executed.

This agreement made the twenty-first day of June, 1887, between Charles A. Thompson and Henry Emil Bandell, of the city of New York, as follows:

In consideration of the delivery by the said Thompson to the said Bandell of two promissory notes for $250 each, made C. IT. Thompson to the order of himself (dated June 14, 1887), and indorsed by said C. H. Thompson and John E. Ingersoll, payable in four and seven months from the date thereof, at 58 Beekman street; and of the delivery of two promissory notes for $375 each, made by .said Charles A. Thompson, dated June 21, 1887, and payable in ten and thirteen months from the date thereof, with interest.

And also in consideration of the extension of time granted by the said Bandell to the said Thompson, on his promissory note for $1,000, now held by said Bandell, for value received and which is due and unpaid, the said Bandell hereby agrees that when the said promissory notes above described shall be fully paid, he will deliver to said Thompson his said note for $1,000; and will also sell, assign, transfer and set over to the said Thompson, any and all right, title and interest he now has in letters patent, transferred by assignments, recorded November 10, 1886, Liber H. 35, page 363 of Transfers of Patents, and November 10, 1886, recorded Liber Q. 35, page 124 of Transfers of Patents, in the patent office, Washington, D. C. And that he will execute and deliver to said Thompson, any and all necessary instruments in writing, for that purpose.

Witness our hands and seals at the city of New York, the 21st day of June, 1887.

CHARLES A. THOMPSON.

HENRY EMIL BANDELL.

p. 727

The present action is on one of the $250 notes, referred to in the above agreement. The defense is usury in the original transaction. Upon the trial, the judge sent the question of intent to the jury, who found for the plaintiffs.

The defendants, thereupon, moved for a new trial, and the judge granted the motion, and from the order entered upon this decision, the present appeal is taken.

G. H. Machín, for app’lts;' H. E. Dickson, for resp’ts.

Usury permeates this case and the veil, which disguises it, is too thin to obscure its presence. The transaction was simply this: “ Charles A. Thompson received $500 from the plaintiffs and gave them a conditional transfer of certain patent rights. The transfers contained defeasances, by which they were to become void, on payment of $1,000 for the aforesaid $500. If there had been an absolute sale of the patents for $500, with the liberty of repurchasing them at a future time for $1,000, with no obligation on the part of the borrower to repurchase at that price, the transaction would not have been per se usurious. If the transaction had assumed this form, the question whether it was made bona fide, or as a mere disguise to evade the usury laws, might have been one for the jury, on which their finding might hava been conclusive. But that is not the form in which tho question arises hero.

If the present transaction had been like the one stated, it would have required but one document expressing the sale at $500, with tho liberty of repurchasing at $1,000. The plaintiffs would have held the legal title to tho patents, and the borrower the mere option of repurchasing. There would have been no debt or obligation existing on the part of the person making the transfer.

In the_ present case, tho plaintiffs exacted from the borrower his note of $1,000, which is evidence of a loan to him from them, and the transfer provides that if this note is paid, the transfer is to become void. But suppose the note is not paid, what then? Is it to be returned or canceled? No.

It is to be retained by the plaintiffs and enforced by them if they elect to enforce it and the transfer becomes in legal effect a mere security for its payment. If the transfer means anything more than this, it follows that the $500 given by the plaintiffs to Charles A. Thompson and the $1,000 promised in return for it, have been fully paid and satisfied by the transfer of the patents, which belong as of right to the plaintiffs. The plaintiffs do not proceed on this theory. They are after the $1,000, and view the transaction as you will, no other conclusion can be reached than this, that in the end the plaintiffs were to have $1,000 for

p. 728

the temporary use of $500. As before remarked, the transfers were mere securities for the payment of the $1,000. No particular form is necessary to constitute a mortgage, and whenever property has been transferred to secure a debt, the transferee takes merely as mortgagee. Smith v. Beattie, 31 N. Y., 542 ; Carr v. Carr, 52 id., 251. The subsequent renewal of the $1,000 note, by the giving of four smaller notes aggregating $1,050, the introduction of new parties, and the new agreement respecting them do not help the plaintiffs.

The transaction shows that they were usurers, and the statute condemns every act in the jiroceeding to the extent of avoiding all the securities given in furtherance of it.

No reasonable construction of the" transaction entitles the plaintiffs to a recovery, and the trial judge ought to have given a direction in favor of the defendants. The reason why the case was allowed to go to the jury, finds explanation in the circumstance, that no motion to dismiss was made and no direction for a verdict urged.

If the jury had made a proper disposition of the case, this course would have been justified by the result. .

But the jury found in favor of the plaintiffs, and the trial judge very properly set their verdict aside.

The order was properly made, and must be affirmed, with costs.

MoG-own and Pitshke, JJ., concur.