Chase v. New York Mortgage Loan Co.

49 Minn. 111 | Minn. | 1892

Vanderburgh, J.

The case, as presented on this appeal, is simplified by the findings of fact in defendant’s favor, which substantially dispose of the case. From these it appears that the defendant is a corporation engaged in the business of negotiating and making loans upon mortgage security. That on September 22,' 1890, the plaintiff John W. Chase, then the owner of the certain lots of land described in the complaint, negotiated a separate loan with defendant on each lot, pursuant to the following plan, as found by the court, clearly understood and voluntarily entered into by the plaintiff: The amount loaned to him by the defendant was $1,675 on each lot, which he received in cash, less $10 to cover expenses of making the loan. The plaintiff at the same time, and as a part of the same transaction, bought of the defendant an investment bond, so called, in connection with each loan, for which he agreed to pay the sum of $250 premium, and the face value of which was $1,925, and also to make a monthly payment thereon of $11.17 for ten years, when the bond should mature; and by the terms thereof the defendant agreed to pay the plaintiff the sum of $1,925 upon the condition that the monthly payments aforesaid were continued. The case turns chiefly upon the validity of the purchase of the bond in connection with each loan.

The plaintiff, in consideration of the loan on these terms, executed a separate mortgage on each lot for $1,925, to secure his note for that sum, with interest at seven per cent, semiannually, payable in five years, with the privilege of renewal for five years longer, according to the terms of the application for the loan made by the plaintiff in writing, accepted and approved by the duly-authorized agent of the company. The court further finds that the plaintiff in this action had previously applied to the defendant company for a loan of money upon the houses and lots in question, desiring the sum of $1,675 on each lot; that the defendant refused to loan him so large a sum on the security of the lots alone, but offered to loan the amount asked in case he would invest in the bonds as proposed, and turn them over to the defendant as additional security, (because of the additional hazard,) which was done, and it does not appear that plaintiff had any other security to give. The defendant, however, offered to make a loan for a less sum upon what they termed “ a straight mortgage;” that is, upon his note secured solely by mortgage upon the premises.

The court, moreover, expressly finds that the bonds were made in good faith, .and were not used in the transaction as a shift or device to evade the usury laws, and to require plaintiff to pay more than ten per cent, interest on the money actually received, and that the plaintiff was fully advised of the nature of the bonds and the security required. The record supports these findings. The burden rested upon the plaintiff to show the transaction usurious. Thomas v. Murray, 32 N. Y. 612. Upon the argument the plaintiff urged that the execution and transfer to plaintiff of the bonds' in question were ultra vires, but, as this point is not raised by any of the assignments of error, we cannot consider it. The objection to the reception of the evidence does not suggest it. The only assignment of error which it is material to consider is the tenth, which is that “the court erred in considering the bonds at all” in connection with the loan.

The difference between the amount received ($1,675) and the face of the note and bond ($1,925) is about $86 more than the difference between seven and ten per cent, for five years upon $1,675, if we add interest at seven per cent, upon the $250. So that, if the purchase of the bond is not to be considered, there was intentionally included in the note a sum in addition to the amount actually loaned in excess of what the law permits, and the loan was usurious. Holmen v. Rugland, 46 Minn. 400, (49 N. W. Rep. 189.)

But if the bond is a bona fide and valuable consideration for .the plaintiff’s obligation, and a part of the transaction for securing, a loan, voluntarily entered into by him, as the court finds, then the transaction is not necessarily usurious, and this court will not declare it so in opposition to the finding of the trial court of the good faith of the parties, and the absence of any intent on their part to evade the usury law.. There can be no presumption that the obligor is not responsible, or that the bond will not be paid according to its terms, or that it was not a valuable security. The monthly payments would amount, in ten years, to $1,3-±0, when the plaintiff would be entitled to $1,925, as fixed in the bond, or the proportionate amount named in case the monthly payments were suspended after two years. The bond promised a secure investment for the premium, and for the small monthly payments, with a moderate .interest thereon, and also furnished the additional security which enabled him to procure a seven per cent; loan for a larger sum than he could otherwise procure on the lots. It was a question for him to determine whether, as a business transaction, it was wise and profitable for him to make the purchase, and for the trial court to determine whether it was Iona-fide or intended as an evasion of the usury law. Speculative schemes, in connection with the loan of money, should be very carefully scrutinized by the courts. But, if the bonds were lawfully issued and binding on the company, it afforded a consideration for the contract and the money paid by him, and, under the findings of the, court,.the mortgage is valid.

(Opinion published 51 N. W. Rep. 816.)

Whether the purchase of securities or other property, or the execution of a collateral contract in connection with a loan, as a part of the consideration and inducement therefor, is in fact a cover for usury, must ordinarily be determined as a question of fact. Thomas v. Murray, supra; Valentine v. Conner, 40 N. Y. 248.

If provision is made for full compensation to the borrower for all he may do under a collateral contract, the transaction is not presumptively usurious. Clarke v. Sheehan, 47 N. Y. 195.

Judgment affirmed.

Mitchell, J., did not sit.