189 N.E. 485 | NY | 1934
Plaintiff's assignor, Kentucky Holding Co., Inc., held a purchase-money mortgage on real estate belonging to defendant but recorded in his wife's name. The bond and mortgage had been executed by a predecessor in title but, when defendant's wife had acquired the record title, neither she nor defendant assumed liability for the debt. On June 11, 1929, the sum of $20,700 was due and on that date the mortgagee and defendant's wife entered into an agreement whereby she assumed the indebtedness represented by the bond and mortgage and the mortgagee extended the payment of her indebtedness to January 1, 1932. On the same day defendant made this agreement: "In consideration of Kentucky Holding Co., Inc., extending the payment of *441 the above described mortgage to my wife, Lily R. Toney, I, Charles E. Toney hereby guarantee payment of the balance due on the bond and mortgage described herein, to wit, the sum of $20,700 with interest from May 15, 1929." In addition the mortgagee demanded and defendant executed notes for $1,500. Defendant's wife defaulted and this action is brought on defendant's guaranty of the debt which his wife had assumed. The defense is usury. The trial court and the Appellate Division have unanimously sustained this defense.
Section
The purchase-money mortgage was concededly valid. The issue is whether the extension and guaranty agreements were usurious. (Real Estate Trust Co. v. Keech,
Prior to the execution of the agreements neither defendant nor his wife was indebted to plaintiff or her assignor. Defendant was merely the owner of real estate incumbered by a mortgage and his wife was merely the holder of the record title. By these agreements the mortgage lienor forebore for a time the payment of a money debt which was then due and which would have discharged the lien and it forbore the existing right in foreclosure. Defendant's wife personally assumed the debt and agreed to pay it and defendant made himself secondarily liable. The consideration for forbearance of this money and of the present right to enforce the debt was the assumption of that debt by defendant and his wife and the agreement by defendant to pay more than the legal rate of interest *442
on the debt. Unless a distinction, never heretofore recognized by this court, respecting the charge of excessive interest for the extension of the payment of a debt secured by a purchase-money mortgage and one secured by another kind of mortgage, is now to be created, the reasoning on the facts in Ganz v. Lancaster
(
Appellant's argument is based largely upon the proposition that where there is forbearance of money but no loan there can be no usury and that, since a purchase-money mortgage is not given as security for a loan but merely represents security for a deferred payment, cases of forbearance of money where there is the assumption of a debt other than a debt represented by a purchase-money bond and mortgage and the extension of its payment, have no application. The contention is that in the original transaction, resulting in a purchase-money mortgage contract, are involved no loan and no forbearance; no one borrows and no one desists or refrains from collecting money then due.
Although instances of usury occur more often in loans than in other transactions, a loan, as that term is generally understood, is not a prerequisite of usury. In Van Schaick v. Edwards (2 Johns. 355, 364), a case involving the validity of notes given for the purchase of land, distinguished judges interpreted a usury statute which forbade excessive interest "for the loan or forbearance of moneys, or other things actually lent or sold." In the opinion rendered by KENT, J., occurs this summary of the law: "Usury is taking more than the law allows, for forbearance of a debt; and whenever a debt is created, and there is an agreement to pay more than legal interest for forbearance of payment of it, such agreement is usurious (1 Ves. Jun. 531; Cowp. 115). If a loan be *443
necessary to constitute a usurious contract, yet it is not necessary to the creation of a loan, that the money should be paid on one hand, and received on the other; for the circumstance of a man's money remaining in another's hands, in consequence of an agreement for that purpose, will constitute a loan (Cowp. 113). In the cases of Floyer v. Edwards (Cowp. 112) and ofSpurrier v. Mayoss (1 Ves. Jun. 527) no doubt seems to have been entertained in the court of K.B. or by the commissioners in chancery, but that upon the sale of lands or goods, an agreement reserving excessive interest for forbearance of payment of a debt might be usurious. To make an agreement usurious, it was held necessary only that there should be a debt created, on such sale, and a corrupt agreement, to take illegal interest thereon, for forbearance of payment," (p. 364). Another judge expressed the opinion that "the forbearance, or giving time of payment for a debt, is in substance a loan," (p. 357). A third member of the court assumed that "the statutes of usury extend to cases of forbearance, where there has been no loan," (p. 369). The mortgage which was the subject of litigation in Church v.Maloy (
Appellant's counsel quotes many excerpts from judicial opinions in which the subject of loans is discussed, and cites them as authority for a contrary doctrine. In those opinions, however, and in the actual decisions the emphasis is placed upon loans of money as distinguished from loans of goods. Loans of money and forbearance of money are the things affected by our usury statute. "To excerpt a single sentence from a judicial opinion and construe and interpret it apart from the context of the opinion in which it is found, and without regard to the subject matter under discussion, is not only unreasonable, but, at times, leads to erroneous conclusions." (Fealey v. Bull,
The effect of these decisions, from the opinions in which appellant quotes, is certainly not the establishment of a rule that there can be no usury unless there is an actual loan. The authors of the opinions could not have been unmindful of the type of constructive loan which, within the purview of Van Schaick
v. Edwards (supra), is presumed to be created by the forbearance of a debt. This thought runs through all the cases. The statute renders void any contract for the "forbearance of any money" *447
whereby is reserved or taken any sum greater than the legal rate of interest. No statute and no decision by this court have been called to our attention by which forbearance of money must, in order to constitute usury, be preceded by an actual loan. The contrary is true. (Church v. Maloy,
The judgment should be affirmed, with costs.
POUND, Ch. J., LEHMAN and CROUCH, JJ., concur; CRANE and HUBBS, JJ., dissent; KELLOGG, J., not voting.
Judgment affirmed.