In re Canfield, 193 F. 934

193 F. 934 | 2d Cir. | 1912

COXE, Circuit Judge.

[1] The appellant contends that no testimony should have been taken showing that the parties intended to enter into a usurious contract, because the same contradicted the agreement of December 14th actually executed. We think that such testimony was admissible. The purpose of the usury law is to protect borrowers whose distress exposes them to be imposed upon. The debtor is always allowed to make this defense, notwithstanding that he thereby contradicts a written instrument, and so are his privies. Knickerbocker Insurance Co. v. Nelson, 78 N. Y. 137; Wilmarth v. Heine, 137 App. Div. 528, 121 N. Y. Supp. 677; In re Kellogg, 121 Fed. 333, 57 C. C. A. 547; Mudgett v. Goler, 18 Hun (N. Y.) 302; Rohan v. Hansen, 11 Cush. (Mass.) 44; 27 Am. & Eng. Cyc. of Law (2d Ed.) 540; Mercantile Trust Co. v. Gimbernat, 134 App. Div. 410, 119 N. Y. Supp. 103.

[2] We need not inquire into the jurisdiction of the court or the power of the receiver, because Burden instituted the reclamation proceedings and invited the court to pass upon his rights, to which the receiver assented. Bryan v. Bernheimer, 181 U. S. 188, 21 Sup. Ct. 557, 45 L. Ed. 814; Whitney v. Wenman; 198 U. S. 539, 552, 25 Sup. Ct. 778, 49 L. Ed. 1157.

[3, 4] Upon the merits, though the question of fact is an exceedingly close one, the majority of the court is not persuaded that the receiver (now trustee) has proved his contention, for the following reasons:

First. — The instrument being perfectly valid upon its face, and the taking of usury being a crime, the burden was strongly upon the trustee to prove his contention in that regard.

If the testimony be evenly balanced or doubtful, Burden is entitled to recover.

Second. — The usurious nature of the loan is sworii to by Canfield and one witness and denied by Burden and one witness. As to number and character of the witnesses, there is no preponderance in favor of the trustee.

We think of no valid argument for giving greater credence to Can-field and Herzoe' than to Burden and Koehler.

Third. — The advertisement in the paper by Burden contemplated just such an arrangement as the written agreement indicates. What he desired was employment and in order to secure it he was willing to lend from ten to twenty thousand dollars at the current rate of interest.

Fourth. — The examination of the books and accounts which Burden agreed to make would take five or six days a month and for it he was entiiled to some compensation.

If the holding of the District Court be correct, he was to do this work without any compensation whatever. It is hardly to he credited that Burden would consent to lend his money for the legal rate and do all this clerical work for nothing.

Fifth. — The testimony that Burden volunteered the statement, that the contract of December 14th was intended to avoid the usury laws, to the only person who could take advantage of those laws seems incredible.

Canfield was asked what he said to Burden regarding the clause relating to services to be rendered, and he answered:

“I asked Mr. Burden just what lie meant by that clause; why, he said that that was simply to get around the usury law; there were no services to he rendered at all; there were no services rendered.”

Of course bankruptcy was not contemplated at that time, at least by Burden. If Canfield did not enforce the usury law Burden had nothing to fear. If the agreement did not bind Canfield, it did not bind atiyone and yet Burden, if this testimony he true, made it absolutely useless to accomplish the object for which he says it was signed.

Why should Burden make an agreement to enable him to receive usurious interest and at the same time make it iifipossible for him to take such interest without placing him absolutely at the mercy of Canfield ?

There is no pretense that Burden was non compos mentis at the time, and yet it is difficult to believe that any rational being would have gone to the trouble and expense of having this elaborate agreement prepared for the purpose of avoiding the usury law and at the same time admit to the only man who could interpose the defense of usury that it was a void agreement. So far as the validity of the agreement is concerned, Burden might as well have stamped in red ink on its face the words “void for usury.”

We must assume that Burden is a man of ordinary common sense, but in order to find that he made the statement quoted, we must convict him of stupidity which is unique in its originality. It is difficult to imagine that a rational being would procure a safe to protect him from burglar)'- and immediately send the “combination” to the burglar whom he had most reason to dread.

Sixth. — There was nothing extraordinary in the endeavor of Burden to secure a place where he could obtain light work and be paid a reasonable sum therefor, neither is there anything illegal or suspicious in the fact that in order to get such work he was willing to lend $20,000.

Seventh. — We are unable to accept the-statement that Burden said that he would not render any services, or even that he contemplated such action. The bond made his rendering these services a condition and it is difficult to believe that he was so unintelligent as not to understand that failure to do what the bond required him to do would destroy an important -security which he held against loss.

Eighth. — The fact that Burden did little work is not of especial importance.

We are to test the contract as of the date of its inception and inquire what services he was required to do. If the business had run along for a year and he had complied with the condition he would have made examination of the books and assisted in making collections which would have taken a substantial amount of time and been worth a substantial compensation. The services were little because the failure came before the time of the first monthly “complete examination of books, accounts and vouchers.”

The order of the District Court is reversed with costs.