Boyd v. Engelbrecht

| N.J. | Mar 15, 1883

The opinion of the court was delivered by

Dixon, J.

The bill is filed to foreclose a bond and mortgage, given by the defendant to the complainant May 1st, 1877, for the payment of $4,000 in three years, with interest semi-annually, at seven per cent, per annum.

The answer avers that these instruments were given upon a usurious agreement for the loan of $3,680, being $4,000, less eight per cent., which the mortgagee was to retain as a bonus.

The defendant’s evidence is to the same effect as his answer.

The complainant admits that he received $300 out of the $4,000 loaned, and says that it was paid to him for two months and twelve days’ interest, while the money lay idle in bank, before May 1st, 1877, for the expenses of drawing papers and making the search of title, and for his own services (he being a lawyer) in aid of the search.

The proof shows that the search and abstract were made, and the papers drawn by a third person, to whom the complainant paid therefor $10; that the other expenses of search amounted to about $5; and that the defendant paid the complainant $15 to meet these outlays, besides the $300 or $320 already mentioned. The alleged interest was $54.90; so that there remained, according to the complainant, for his services, about $255. These services appear to have consisted of two or three visits in an office near his own, in order that he might make some inquiries from the son of a former owner of the mortgaged premises. He says that the defendant paid him this compensation, without objection, as a “ fair professional fee.” We are not able to believe this assertion. We think it manifest that what he received or retained, he got as a usurious bonus for the loan. Under the circumstances, we regard the amount as most reliably ascertained by the answer and evidence of the defendant. The bond and mortgage must, therefore, be treated as usurious securities for the loan of $3,680.

The defendant has paid three years’ interest at seven per cent, on $4,000, being $840, and one year’s interest at six per cent, on $4,000, being $240; in all, $1,080. The four years’ interest at these rates, on the true principal, $3,680, would be $993.60. The difference, $86.40, was illegal interest, which the statute requires to be deducted from the amount actually lent. The balance, $3,593.60, without interest, is the sum due on the bond.

In May, 18S0, six months’ interest being apparently in arrear, the complainant filed a bill to foreclose the mortgage, incurring costs, he says, to the amount of $46.53. In a few days the defendant paid up the interest, and thereupon the complainant discontinued his suit, without requiring payment of the costs, and agreed to reduce the rate of interest to six per cent, and extend the time for paying the principal one year. The complainant claims that this arrangement purged the bond of usury. But it is settled that, as between the parties to a usurious loan, the original taint attaches to the transaction, and all substituted obligations or securities, however remote, until the usurious element is expunged. Taylor v. Morris, 7 C. E. Gr. 606. Forgiving a debt of $46.53, and consenting to demand six per cent, interest instead of seven per cent., when no interest whatever is due, cannot expunge the vice of exacting usury to the amount of $320.

The defendant contends that in May, 1881, in consideration of his paying interest for the preceding six months, the complainant agreed to extend the time of payment of the principal for another year, and that the present suit, begun immediately after this payment of interest, is, therefore, premature.

We do not think that the evidence establishes such a contract.

Our conclusion is that the decree of the chancellor, giving the mortgagee principal, interest and costs, must be reversed, with costs, and the record remitted, with directions to enter a decree for the complainant for $3,593.60, without costs in the court below.

Deoree unanimously reversed.