Majority
p. 60Levenia Ehrgott, Resp’t, v. John S. Forgotston, App’lt. (New York Superior Court, General Term, Filed January 11, 1892.) The following is the opinion at special term : Mo Adam, J.—Motion by plaintiff to continue temporary injunction.
Headnote
Injunction—Usury.Defendant, who does business under the name of the Lincoln Loan & Gurantee Association, endorsed plaintiff's notes for $300, taking back a chattel mortgage to the association for $405 to secure the amount of the. notes and its fees for endorsing and guaranteeing them. In an action to restrain the foreclosure of the mortgage on the ground that the transaction was a mere device to cover usury, Held, that upon the facts in the case plaintiff was entitled to an injunction restraining foreclosure until the trial of the action.
Appeal from order of special term sustaining an injunction.
The defendant conducts what he calls the Lincoln Loan & Guarantee Association, and makes loans to persons in financial needs and straits. The plaintiff applied to him for a loan of $300, and this followed: Two notes were made by the plaintiff, one for $100, payable in two months, and the other for $200, payable in four months. The defendant endorsed on the back of the notes the Lincoln Loan & Guarantee Company, the name under which, he does business, and gave the plaintiff a letter to the Mount
p. 61Morris Bank, and that institution discounted the notes at lawful rates and gave the plaintiff $800, less the discount Before endorsing the notes the defendant took unto the so-called Lincoln Loan & Guarantee Company a mortgage for $405 to secure $300' on the notes and $105 in fees in endorsing and guaranteeing the notes. After maturity the notes were not paid and were taken up by the Loan & Guarantee Company, which now holds them. The so-called company undertook to. foreclose the chattel mortgage,, and the present action is to enjoin the foreclosure on the ground of usury, alleging that the defendant was really the lender of the' money, and the circumlocutory scheme a mere subterfuge adopted, to hide the offense. It is familiar law that a person may, under-circumstances similar to those stated, loan his credit and charge-what he pleases for it. 4 Denio, 264 ; 1 Edmond’s Select Cases,. 371; 4 Hill, 224 ; 7 id., 444. And it is equally well established that if the transaction (no matter what form it assumes) is a mere-device to cover usury, courts will not allow the drapery of form to hide the truth, but deal with the matter in its true light according to the fact. There are circumstances in this case significantly strong which entitle plaintiff to the temporary equitable-relief she seeks. The sum charged was outrageously excessive. The plaintiff was imposed upon, advantage was taken of her circumstances, and her worldly goods were mortgaged to make sure the payment of over 100 per cent interest, in addition to principal. At this-rate the borrower is verily the slave of the lender. (2) There is no such entity as the Lincoln Loan & Guarantee Company; it is neither a corporation nor joint stock company. It is an alluring name to invite the needy. It means J. S. Forgotston, nothing else; the mortgagee having no legal existence is mythical, cannot legally foreclose a mortgage or authorize others to foreclose it. Nor can the defendant foreclose it, as the mortgage was under seal and not made to him. (3) The name used by the defendant is notice to the world that-he makes loans as well as gives guarantees, and it is a question here whether he did not in point of fact make the loan, using the bank as his medium or agent merely. (4) If the defendant is allowed to foreclose the mortgage the plaintiff’s home will be broken up and an injury done not easily estimated in dollars and cents. On the other hand, enjoining the foreclosure until the facts can be determined at the trial can do the defendant no great harm, and he has certainly received enough in way of interest to compensate him for the delay. The plaintiff has given security to pay all damages the defendant may sustain, and the mortgage continues upon the property as before. To dissolve the injunction might imply that courts look with favor upon 100 per cent loan and guarantee offices, when they are in fact a growing evil calculated to make the poor poorer by engulfing them in debt The motion to continue, the injunction until the trial will be granted.
C lark Bell, for resp’t; Jas. G. Be La Mare, for 'app’lt
The order appealed from is affirmed, with ten dollars costs and disbursements, upon the opinion of the court ■below, excepting only the statement “Nor can the defendant foreclose it, as the mortgage was under seal and not made' to him,’! and as to the correctness of this proposition no opinion is expressed.
Freedman and Gildersleeve, JJ., concur.