33 Barb. 103 | N.Y. Sup. Ct. | 1860
“ This action is hy a mortgagee, to have several mortgages given by him cancelled as usurious and void. One of the mortgages is a fair sample of the others. The plaintiff borrowed $1985, and agreed to pay $35 a month until each share of the association should he worth $600, and in case of default in making any monthly payment, then to pay the further sum of $2.25 for the first month, $2.50 for the second month, $3.75 for the third, and $5 for the fourth month, and for each succeeding month. At the time each share was estimated at about $193. If the plaintiff were charged simple interest on the $1490, and had
Whatever aversion may be naturally felt to declaring a contract void for usury when the excess is but small, there should be no hesitation in pronouncing such a contract as this, within the law against usury. It would be more agreeable (as was held in cases where the contract was made with similar institutions after they were incorporated under
The nature of the articles of association leads to the conclusion that the very object of this association was to evade the usury laws, and to enable such of the members as were able to lend money and to pay their dues, to take advantage of the poor who were compelled to borrow, and too ignorant to comprehend the nature of the bargain made by them.
The defendants must surrender the bonds and mortgages and cause them to be cancelled of record. The costs are in the discretion of the court, and may be left to each party to bear his own.”
From the judgment entered in pursuance of the above decision the defendants appealed.
By the Court,
The plaintiff by his complaint alleges that certain agreements made between him and the association (now corporation) called the “ American Benefit Building Association,” under which he received certain sums of money, and several mortgages made by him pursuant to such agreements, are usurious; and he demands to have such agreements and mortgages adjudged to be void and to be delivered up and cancelled, and to have the money which he has paid thereon, repaid to him with interest. The defendants deny that there is any usury in the transactions referred to, and insist that said agreements and mortgages are valid.
There is no controversy as to the facts of the case. The
The articles of association of The American Benefit Building Association, adopted in April, 1848, (among other things,) provide'—that there shall be a meeting of the association on the third Tuesday in each month ; that the members of the association shall be those who subscribe the articles and hold one or more shares ; the number of which is not limited : that every member of the association, at the first regular meeting after the adoption of the articles, and at each regular meeting thereafter, shall pay for each share subscribed by him $2.50 as monthly dues, during the continuance of the association, and for any neglect in so doing, shall be fined for non-payment of such monthly dues on each share as follows: for the first month 12|- cents, second month 25 cents, third month 37|- cents, fourth and each succeeding month 50 cents; and when the fines charged shall be equal to the monthly dues paid on every share, such share shall be forfeited, and jts holder considered as yielding up all interest therein : that, until the third regular meeting of the association, after the articles shall go into effect, every new member shall pay an entrance fee of fifty cénits per share ; after which time new members, or members subscribing for additional shares, shall, in addition to the entrance fee and monthly dues from
The plaintiff became a member of the association by subscribing the articles, and being elected on 19th June, 1849 ; and he then purchased two shares of James Boach, on which Boach had paid $40. On 17th July, 1849, the plaintiff subscribed for four additional shares, and, at the regular meeting held on that day, he agreed to redeem three of his shares at $191 each, and his remaining three shares at $195 each, amounting in the aggregate to $1158. On 18th July, in pursuance of this agreement, he made the first mortgage now in question; on 25th July this mortgage was accepted by the standing committee; on 27th July plaintiff received on account of the redemption of said six shares, $950, and then paid the back dues on the four additional shares subscribed by him, and on 14th August he received $208, the balance of said redemption.
By said mortgage, dated 18th July, 1849, the plaintiff, in consideration of said $1158, thereby expressed and admitted to have been received, conveyed by way of mortgage the premises in the mortgage described, upon condition that if he or his representatives or assigns should pay the sum of $21 per month, commencing on the 3d Tuesday of August, 1849, and continuing until the termination of “■ The American
On or about 21st August, 1849, the plaintiff subscribed for ten additional shares in said association; and, at the regular meeting of the association on that day, agreed to redeem five shares at $198 each, and five shares at $199 each, amounting to the sum of $1985, which was afterwards paid to him, and he paid the bonus and back dues on each of the ten shares, and then executed the second mortgage, now in question, purporting to be made for the consideration of $1985, and conditioned for the payment of the sum of $35 per month, commencing on the third Tuesday of September, 1849, until the termination of the association pursuant to its articles, and all fines which should be charged against him, &o.
The third mortgage or agreement, dated 22d December, 1849, was made upon a similar transaction for redemption of five shares of $199 each, amounting to $995; and the fourth mortgage or agreement, dated 19th January, 1850, was made upon another similar transaction for redemption of three shares of $185 each, amounting to $555. The considerations-specified in said four mortgages and agreements amount in the aggregate to $4693'; but the amount of money actually received by the plaintiff, over and above the fees, monthly dues, &c. on said shares, allowed and paid by the plaintiff, was only about $3500, and the payments by said agreements and mortgages agreed and secured to be paid by the plaintiff were, in the aggregate, $84 per month, until the termination and winding up of the association.
The redemption first above mentioned comprised all the
By calculations which have been made and submitted, it is shown that under no circumstances could the association be terminated, pursuant to its articles, in less than from five to eight years from the time when these mortgages and agreements were made ; and that it might, and probably would, continue longer than eight years ; and that the payment of $84 per month would pay the whole amount of money actually received by the plaintiff, with interest thereon, at the rate of seven per cent per annum computed, and said payments applied according to law, in about four years.
Upon these facts I am forced to the conclusion that these several transactions between the plaintiff and the Building Association, upon which the said mortgages and agreements were made, were intended to be loans of money to the plaintiff at a rate of interest exceeding seven per cent per annum, and that such mortgages and agreements are consequently usurious and void.
The plan of the association is such, and its articles are so framed, as necessarily .to give to every holder of shares who pays his dues, and so invests money in the concern, a larger interest than seven per cent, on the amount of his investment; at the expense of those members who may obtain (in effect borrow) money of the association by means of shares redeemed, as by said articles of association provided; and I must therefore presume that such was the purpose and intent with which the association was formed. If the object and expectation of the persons forming the association were not
The English cases which have been cited by the defendant’s counsel are distinguishable from the present, in that all those cases arose out of transactions of associations formed under and authorized by statute. (Act of 4 and 5 Will. 4, ch. 40. Silver v. Barnes, 6 Bing. New Cases, 180. Burbridge v. Cotton, 8 Eng. L. and Eq. 57. Seagrave v. Pope, 15 id. 477.)
In the case of Johnson y. Olarlce et al. in the U. S. circuit court for the district of Columbia, the calculations showed that there was in fact no usurious interest reserved by the agreement complained of. To some of the legal conclusions stated in the opinion in that case, furnished to me in manuscript, I cannot assent. The case before us is in nowise
Sutherland, Bonney and Hogeboom, Justices.]
In my opinion the júdgment rendered at special term should be affirmed, with costs.