Cleveland v. Loder

| New York Court of Chancery | May 7, 1839

The Chancellor.

If it was a part of the agreement for the loan in this case, that the complainant should take uncurrent bills at a higher rate than their actual value, and for more than they were worth to either party in cash or current funds, the loan was usurious; although the complainant intended to impose upon his workmen by paying them in a depreciated currency. But if the facts were as stated in the answer, that the defendants intended and expected to loan him current funds, and that the uncurrent bills were received in lieu thereof by the complainant, for his own accommodation, when they were willing to let him have current money if he would wait until the bank was open, I do not see that the paying him the loan in these eastern bills was a violation either of the letter or the spirit of the usury laws.

The agreement, however, which forms a part of the written contract between the parties in relation to the loan, that the defendants should have the privilege of taking the stock at $25 a share, would render the transaction clearly usurious, according to the English decisions on the subject of usury. It was a stipulation in behalf of the lenders, that they should have the benefit of any rise in the value of the stock beyond the amount of the loan by the first of May, in case the improvements then in progress should result favorably to the stockholders so as to increase the value of the stock; but without subjecting the lenders to the loss, even of the interest on the loan, if the value of the stock was not enhanced so as to make it an object for them to retain it in lieu of the money loaned and the interest thereon. Whenever the lender stipulates even for the chance of an advantage beyond the legal interest the contract is usurious, if he is entitled by the contract to have the money lent with the interest thereon repaid to him at all events. (Barnard v. Young, 17 Vesey, 44. Chippendale v. Thurston, 4 Car. & Payne, 101. White v. Wright, 3 Barn, & Cress. 276. 5 Dowl. & Ryl. 116, S. C.) That the defendants intended to stipulate for this chance of a greater profit than seven per cent for the use of their money is evident, as it is made a part of the written agreement showing the terms upon which the loan was made; and there is no allegation that there was any mistake in drawing that agreement. They intended therefore to make a contract which the law declares to be usurious. And however unconscientious it may bea for the complainant to resist the payment of the money lent and also to claim a return of the whole stock, this court, under the present laws of the state, is bound to lend him its aid to enforce the forfeiture.

The motion to dissolve, the injunction is therefore denied, with eight dollars costs.