The plaintiff brought, suit to recover the face value of the following promissory note:
$2,500. Fort Valley, Ga., December 28, 1883.
On the first day of December, 1888, I promise to pay to J. K. O. Sherwood, or order, at the office of the Corbin Banking Company, New York city, twenty-five hundred dollars, with interest from this date at the rate of 8 per cent, per annum, payable annually, as per five interest notes hereto attached, value
No. 34,342. Rebecca A. RouNdtree.
Also the face value of the five coupons, as follows:
$208.33. Fort Valley, Ga., December 28, 1883.
For value received, I promise to pay J. K. O. Sherwood, or order, at the office of the Corbin Banking Co., New York city, two hundred and eight dollars and'thirty-three cents, on December 28, 1888, being interest to that date on my note given to said payee with interest from maturity at eight per cent, per annum. Rebeoca A. RouNdtree.
No. 34,342.
The remaining coupons are in the same form as that here printed, but are for different amounts, and are of different dates. Among other pleas,, the defendant presents the plea of usury. She avers th.at Duncan & Miller, attorneys at law, were the agents of the plaintiff, and they withheld the sum of $500 at the time the loan was negotiated, this being 20 percent. of the face value of the note; an’d while she executed the note for $2,500, in truth, her husband, for whom the money was borrowed, did not receive this amount, but the balance, after deducting 20 per cent., as above stated, was appropriated to pay her husband’s debts, and she herself did not receive a dollar of the fund. The case was tried before a jury, and a verdict was rendered for the plaintiff, with 10 per cent, attorney’s fees; the jury deducting from the plaintiff’s demand all the excess of the interest over and above 8 per cent., which is the regular interest rate in Georgia. The plaintiff is dissatisfied with the verdict, and has made a motion for a new trial, and insists that certain instructions to the jury relative to the plea of usury were erroneous. There are other grounds of the motion, but as to them the court has no doubt or difficulty, and they are overruled.
On account of the great importance of the main question here involved, I embody in full that portion of the charge which relates to the plea of usury:
Now, what was the law of Georgia at the time of this contract? Code of Georgia, § 2050: “The .legal rate of interest shall remain seven per cent, per annum, where the rate per cent, is not named in the contract, and any higher rate must be specified in writing, but in no event to exceed eight per cent, per annum. ” It, therefore, is illegal to charge more than eight per cent, per annum in this state where this contract was made. It has been, and is the policy of this state to render void usurious contracts, to the extent of the usury, it being thought by the law-making power of the state that sxich contracts are injurious to the best interests of the people. The law of the state
You now understand the law, gentlemen, and I call your attention to the evidence of the witnesses, both for plaintiff and defendant, relating to this subject. Mr. Roundtree, the husband of the defendant, testified that Duncan & Miller, who were the agents with whom the contract of loan was made, retained $500 as commission, and that this was 20 per cent, of the amount borrowed. Mr. Duncan, one of the attorneys for the plaintiff, testifies that he, with his partner, were the agents of the Corbin Banking Company, from whom the money was directly received; that he don’t know the plaintiff, Sherwood, at all. That Sherwood, ho didn’t think, had made more than ten or twelve loans of this character in Houston county. That most of the loans he and his firm had made went to the American Freehold Mortgage Company. lie did not know how many, but thought the loans went to eight or ten different parties. He was questioned further, and I will read his evidence as reported by the stenographer: “Question. You represent the Corbin Banking Company ás their agents ? Answer. We represent the borrower. Q. Don’t you also represent the Corbin Banking Company? A. They never paid us anything. Q. Didn’t you say at the last court that you were the agents of the Corbin Banking Company? A. I said, in that way we send to them and negotiate. Q. The Corbin Banking Company are the agents of Sherwood? A. I don’t know; my understanding is that they simply put these loans on the market. Q. Didn’t I understand yon, last court, to say that you were the agents, and that they were the agents for Sherwood? A. I don’t know anything about that. I only know that we represent the borrowers, and we receive applications and send them on, but don’t know where they go. Q. Yoiz didn’t get the $500 commission for yourself? A. No, sir; wo got only 5 percent. Q. What became of the balance? A. I don’t know. Q. You retain a commission of 20 per cent., and only 5 per cent, comes to you? A. Yes, sir; tlxat is all. Q. And tlie other 15 per cent, is retained and sent to the Corbin Banking Company and to Sherwood? A. 1 don’t know who it is retained by. Q. In addition to your services in making out the application and receiving the money, don’t you always collect the interest and send it forward as it falls due? A. No, sir; sometimes a man comes in and gives us tlie interest, and we send it forward, but it is not our business, and we do it very seldom. Q. Ain’t it your business to keep watch over the property, and seo that it is not sold for taxes? A. No, sir; we don’t watch anything. Q. You are under no such obligation as that to the Corbin Banking Company? A. No, sir. Q. You don’t have to inform them when the property goes for taxes? A. No, sir; but they generally send out a list with a request that we mark all the taxes paid and those unpaid. They send a request each year, and we write a statement. Wo do that. Q. For that sort of work, do you got no
Mr. Miller, another member of the firm of Duncan & Miller, and an attorney for the plaintiff, testifies pn this subject: “Question. In representing these loans it is your usual rule to charge 20 per cent, and you retain only 5 per cent, for your services? Answer. The rule has varied somewhat about that. The rate of commission has varied; it has steadily fallen off. At the time this loan was made I think it was 20 per cent. Q. You had a good many of these transactions, and that was the invariable rule up to that time, and since that time it has been the invariable rule to take out considerable sums, of which you get a portion? A. At one time Nelson &.Barker had the general busi-nrss, and we were subagents, and the portion that reached us was small; and afterwards, when Robinson was the agent, dealing with the banking company, until we established a direct agency between us and the Corbin Banking Company, — then they got 15 per cent, and we got 5 per cent. Q. The Corbin Banking Company gets part of this commission? A. We do not know anybody but the Corbin Banking Company in this transaction. Q. You don’t gel all this commission? A. No, sir; so far as I know, the Corbin Banking Company divides the commission; and, taking the commission at 20 per cent, the Corbin Banking Company gets 15 per cent., and we get 5 per cent. And at a commission of 15 per cent., which is the rate now, the Corbin Banking Company gets 10 per cent., and we get 5 per cent. Q. The Corbin Banking Company represents Sherwood in making a good many loans in Houston county? A. I don’t know what the connection is between the Corbin Banking Company and Sherwood, but occasionally Sherwood’s name appears as the lender, and sometimes the American Mortgage Company, and sometimes oth
From this evidence it is apparent, gentlemen, that a sum largely in excess of 1 lie legal rate of interest was held back by the lender or his agent from the borrower. Sow, where the agent who is authorized by his principal to lend money for the lawful rate of interest, exacts for his own benefit more than the lawful rate of interest, and does so without the authority of the principal lender, or without his knowledge, the loan is not thereby rendered usurious. Where, however, the agent is authorized to loan the money for usurious interest, or where the lender, that is the principal, had knowledge that the loan was usurious, then the contract is in violation of law, and, in a suit on an instrument like this, the plaintiff can only recover the legal rate of interest. Tlús loan would unquestionably have been usurious if made by the principal lender. It is usurious if made by his agent with his consent, knowledge, or acquiescence. I charge you, further, that if the circumstances are such, either from the numher of the transactions, the importance of the amounts involved, or the continuous nature of the business carried on through the same agency, that, from one or all of those reasons, it is reasonably inferable that the principal lender knew the character of the contracts his agents were making, he will be chargeable with knowledge of the usurious interest and the usurious character of the contract, the law presuming that he would not carry on a business of a continuous and important character without understanding the nature of the contracts made by his agents in its conduct. To summarize what I have said upon this subject: If these usurious commissions were retained by the agents for their own benefit, without the knowledge, consent, or acquiescence of the principal, the principal lender would not be affected by the usurious nature of the transaction, and he would be entitled to recover without deduction on account of usury. If, on the other hand, these contracts were made and these commissions were withheld with his consent, knowledge, or acquiescence, he would be chaigeable with the usurious character of the transaction, and he could not recover any siun in excess of the legal rate of interest. which, in this state, is eight per cent. And furthermore, if from the nature of the business, its extent, the importance of the amounts involved, the continuous character of the transactions, it would be reasonably inferable that a man of business of ordinan intelligence, carrying on such a business, would understand the nature of the contracts that his agents were making, he would he presumed to understand the nature oí the contracts, and, therefore, the presumption that lie is chargeable with the usurious interest, and with its consequences, in lessening the amount of his demands, would obtain; and in the absence of proof on his part to rebut such knowledge, acquiescence, or consent, the jury would be obliged by their verdict to deduct all sums of the plaintiff’s demand over and above the amount actually paid to the defendant, with the legal rate of interest calculated thereon.
From the evidence contained in this portion of the charge of the court, it is plain that there is an ox tensivo business carried on in the slate of Georgia, to which the plaintiff was party, by which it is the unvarying custom to charge inordinate and extravagant rates of interest. In this case the note sued on bore 8 per cent, per annum, the highest legal interest permissible. The plaintiff’s agents withheld 20 por cent, in the outset. Thus, 28 por cent, is imposed on the necessities of the borrower; in addition, 10 per cent, attorney’s fees are charged. It is superfluous to say that no business, howsoever prosperous, can survive the exactions of these fearful and unconscionable interest charges. To correctly ap-
“I hereby constitute you my agent, and request and authorize you as such to negotiate for me a loan of $2,500 on five years’ time, with interest at 8 per cent, per annum, payable annually at such place as you may name. Said loan to be evidenced by my note of the form used by you, and said note and loan to be secured by mortgage on, or an absolute deed (consented to by my wife) to my farm consisting of 607| acres situated about six miles of the town of Perry, in Houston county, Georgia.”
Among other stipulations, the agreement contains this:
“I further agree to payyou for negotiating said loan a commission of $500, to be paid at the time of closing the loan, and, if I decline to accept the loan for any reason, I agree to pay said commission at once. I also authorize you to pay off all liens, including taxes due against said property, and I hereby certify that the total amount of indebtedness against the said property does not exceed-dollars. I hereby authorize you to insure said property for -dollars for- years, in such company as you may select, to pay the premium out of the loan,” etc.
The application is also written on a printed blank, viz., on “South Form No. 1.” This is also careful to state that the agent is agent of the applicant, Mrs. Roundtree. This agent, who is designated on form No. 1 by the Corbin Banking Company as their “correspondent,” forwards the application. If the loan is accepted, a draft is sent by the Corbin Banking Company. The agent withdraws 20 per cent., 5 per cent, he retains for himself, and the 15 per cent, he remits to the Corbin Banking Company. The borrower executes a note for the full amount of the loan, but one-fifth of the amount in this case was never paid to him. Now, it will be observed from the agreement quoted above that Mrs. Roundtree promises to pay the subagent, who in this case was one John W. Robinson, the predecessor of Duncan & Miller, $500 for his services in negotiating the loan. Nothing was said in the agreement to notify her that 15 per cent, or $375 would go to the Corbin Banking Company, and yet this was true, and Duncan & Miller testify that it is invariably true. To use Miller’s language, “the Corbin Banking Co. gets 15 per cent.; we get 5 per cent.; and at a commission of 15 per cent., which is the rate now, the Corbin Banking Co. gets 10 per cent., and we get 5 per cent.”. This witness is asked this question: “The Corbin Banking Co. represents
Duncan & Miller, no doubt, had heard the application of the borrower, but their business in this connection was that of loan agents, and for a particular company, and for certain individuals; and they represent the lenders in placing the loan, examining the titles, releasing the property from liens, insuring the property, and paying the taxes. It was their regular business to invest safely the money of the lender, and thereafter protect the investment. They are now seeking to collect the money, and it appears that all their actions in the premises have been ratified by the lender. They were the agents of the plaintiff; and this is manifest notwithstanding the sedulous attempt to make it appear that they were the agents of the defendant. The fact is, this attempt is strongly indicative of the illegal character of this business. The quo animo-oi the parties is of the first importance. Is it not perfectly evident that this entire scheme is a device or shift to dodge the usury law's of the state of Georgia? If not, why so careful to state that the subagent and correspondent of the Corbin Banking Company is the agent of the borrower? Look at the testimony of Duncan, one of the subagents, who is likewise the attorney of the plaintiff: “ Question. Who represent the Corbin Banking Company as their agents? Answer. We represent the borrower. Q. Don’t you also represent the Corbin Banking Company? A. They never paid us anything. Q. Didn’t yon say at the last court that you were the agents of the Corbin Banking Company? A. I Said, in that way we send to them and negotiate.” Again: “You didn’t get the $500 commission for yourself? Answer. No, sir; we got only 5 per cent. Question. What became of the balance? A. I don’t know.” Again: “You have a regular correspondence with the Corbin Banking Company? An
It is true that there must be an intention knowingly to contract for or to take usurious interest, for if neither party intend it, but act bona fide and innocently, the law will not infer a corrupt agreement. Where, indeed, the contract upon its very face imports usury, res ipsa loquitur, the thing speaks for itself. This distinction was laid down as early as the case of Button v. Downham, 2 Cro. Eliz. 643; Bedingfield v. Ashley, Id. 741; Roberts v. Trenayne, 3 Cro. Jac. 507. The same doctrine has been acted upon in modern times, as in Murray v. Harding, 2 W. Bl. 859, where Gould, J., said that the ground and foundation of all usurious contracts is the corrupt agreement. Floyer v. Edwards, Cowp. 112; Hammet v. Yea, 1 Bos. & P. 144; Doe v. Gooch, 3 Barn. & Ald. 664; and Solarte v. Melville, 7 Barn. & C. 431. Vide opinion of Mr. Justice Story in Bank v. Waggener, 9 Pet. 399.
Now, the agreement by which Mrs. Roundtree promised to pay 20 per cent., in addition to the 8 per cent, per annum interest, to pay all premiums of insurance, all taxes, and to pay off all liens, is part of the plaintiff's case; it is an essential part of the contract, and was put in evidence by the plaintiff. Unquestionably it is the rankest usury. It is not disputed that one who negotiates a loan may be allowed reasonable compensation for his expenses and trouble, in addition to interest. But where there is no expense, and no trouble, there cannot properly be charged any such remuneration. Tyler, Usury, 335. And no decision can be found where a court of justice has sustained a charge of 20 per cent., where any knowledge of such charge was traceable to the money lender. But here is 20 per cent, in addition to 8 per cent, per annum. Indeed, Lord Tenterden, in Meagoe v. Simmons, 1 Moody & M. 125, held that, where the lender stipulates with the borrower that the latter shall pay a commission to the lender’s agent, it is usurious, although the lender himself retains nothing but the legal discount. This, Mr. Tyler says, is a well-considered cáse. The truth is, the enormous commissions charged are merely intended as a mask thrown over the transaction. The statute of Georgia quoted above is intended to defeat schemes of this character, and a fraud upon a statute is a violation of the statute. Bank of U. S. v. Owens, 2 Pet. 527. The services rendered in the negotiation of this loan, had they been rendered the defendant, when in fact they were not, would not have been worth at the most more than a tenth of the sum charged. Nor is this, under the circumstances, a question for the jury. It is usurious on its face; and, in the absence of explanatory proof, it was the duty of the court to say so. Steele v. Whipple, 21 Wend. 103. This is especially true, as a matter of practice, in a court of the United States. Hathaway v. East Tennessee, V. & G. R. R., 29 Fed. Rep. 489.
The plaintiff relies with great apparent confidence upon the case of Call v. Palmer, 116 U. S. 98, 6 Sup. Ct. Rep. 301. There Burnham had $10,000 belonging to a relation, Mrs. Davidson. Call applied in writing for a loan; and Burnham, thinking Call’s proposition a favorable one, decided to accept it for Mrs. Davidson, and afterwards sent
It will be observed that in the case of Call v. Palmer there was but a single transaction. Here tliere is a continuous and settled business, with an elaborate system, with printed forms, classified with reference to the different sections of the country, correspondents, and subcorrespondents, and printed, instructions to correspondents, with usually a charge of 20 and always a minimum charge of 15 per cent, above the rate of interest allowed by the laws of the land. Under such circumstances, one who lends money by this system will be chargeable with knowledge of all the facts which he could have ascertained by inquiry. It appears from the evidence that Sherwood made many loans within the confines of one county, and certainly it is presumable that he knew the terms upon which, under those circumstances, his money was loaned. This has been expressly held by the supreme court of Connecticut, a tribunal whose judgments are entitled to high consideration, in the case of Rogers v. Buckingham, 83 Conn. 81. The doctrine is there announced in these words: “Authority to make a usurious loan will not be presumed where the agency is special, and limited to a single transaction. It may be presumed where the agency is general, and embraces the business of making, managing, and collecting the loans of a moneyed man.” A fortiori will it be presumed where it constitutes a great and comprehensive business, covering entire states, and especially where the courts have rendered decisions making-public and evident the nature of the business carried on by the Corbin Banking Company through which all the loans are placed? Vide New England Mortgage Security Co. v. Addison, 15 Neb. 336, 18 N. W. Rep. 76. The action of this loan agency, in withholding 20 and 15 per cent, commissions, is a matter of public notoriety. It will be presumed that they had authority to do as they did. It will be inferred from the general manner in which they have been allowed to proceed for a period sufficiently long to establish a settled course of business. Martin v. Webb, 110 U. S. 14, 3 Sup. Ct. Rep. 428; Merchants’ Bank v. State Bank, 10 Wall. 604. If it were not true, however, that the plaintiff was engaged in the business of a usurer, certainly the circumstances were such as would put a man of ordinary business intelligence, lending his money by this system, on inquiry. Let us suppose that the first loan was legitimate so far as
In the presence of the presumption which arises from the settled character of this business, and the facts which should put the plaintiff on inquiry, having shown the usury, the defendant may rest his case; and the plaintiff is then called upon to show that he did not know, or authorize, or consent to these usurious charges; otherwise the defendant is entitled to a deduction therefor. Maine Bank v. Butts, 9 Mass. 55; Roberts v. Trenayne, 3 Cro. Jac. 508; Childers v. Deane, 4 Rand. (Va.) 406; New York Fireman’s Ins. Co. v. Sturges, 2 Cow. 676. The evidence of the plaintiff is strangely silent upon this damaging accusation. Certainly, if he is not connected with the usurious transactions, it is competent for him to show it. The effect of the evidence of the plaintiff was to withhold from the court and jury the identity of the person or persons by whom the 15 per cent, was appropriated, after Duncan & Miller were paid 5 per cent. This does not commend the plaintiff’s case to the court. I repeat this is clearly a device to avoid the law of Georgia. In Bank v. Owens, 2 Pet. 527, Mr. Justice Johnson, upon a question of this character, said: “Courts of justice cannot be made the handmaids of iniquity. Courts are instituted to carry into effect the laws of the country. How can they, then, become auxiliary to the consummation of violations of the law ? ” The usury laws are made for the protection of the needy; and, in the language of Mr. Justice Field, in Cromwell v. Sac Co., 96 U. S. 60, “courts will look with disfavor upon the devouring character of the interest stipulated.” In that case it was far smaller than that stipulated in this case. Chief Justice Taney, in Brewster v. Wakefield, 22 How. 118, declares: “Where the party desires to exact from the necessities of the borrower more than three times as much as the legislature deems reasonable and just, he must take care that the con
It would be difficult to devise contracts which, in their operation and effect, would more completely defeat the object of the usury laws than the contract now before the court. In its inception 20 per cent, of the entire capital is withdrawn. In addition to this, he must pay 8 per cent, on a sum he never received, as regular interest. No amount of industry in ordinary and legitimate business can compensate the borrower for so great a deduction. This is especially true of those engaged in the pursuits of agriculture. The courts, ordinarily, have nothing to do with the results of the contracts which people make; but the direful effects of such contracts, as that upon which the plaintiff has brought his action, well illustrates the wisdom of the laws of Georgia upon this subject. Many families, who otherwise would have enjoyed all the comforts of home and adequate support, have been turned out homeless and landless. The head of the family has been induced by the hope of speculative gain to enter into contracts to pay those exorbitant and extravagant rates of interest for the use of money. Not only does ho find that the product of his farm is insufficient to pay the principal, but he cannot support Ills family and pay the interest coupons as they fall due. It is then optional with the creditor to foreclose his mortgage, or to sue his notes for the entire amount. The judgment of foreclosure is obtained; the sheriff or the marshal brings the land of the debtor to the block; and a family, with all its productive capacity to the state, and all of its contentment and happiness within its own circle, is destroyed and scattered. The money lender is compelled to purchase the farm which he obtains for a mere moiety of its value. Unacquainted with the conditions of our climate, the character of our soil, and the methods of our agriculture, he is unable to cultivate his acquisition in a manner profitable to himself, or beneficial to the stale. Persisted in, this monstrous system would reduce the agricultural population of the state to tire condition of a landless tenantry, with all of the degradation of manhood, and all the wretchedness and pauperism, this is known to entail.
In every possible view, therefore, the system is absolutely ruinous, and well bas the experience of those who have observed the effect of this business justified the declaration of Mr. Justice Johnson, in De Wolf v. Johnson, 10 Wheat. 385, where he declares that “usury is a moral taint wherever it exists.” He continues: “No subterfuge shall be permitted to conceal it from the eye of the law.” This is the substance of all the cases, and they only vary as they follow the detours through which they had to pursue the money lender.
Nor is this experience confined to our own state, or our own times. In an important case in the court of errors of the state of New York, involving the question of usury, the illustrious Chancellor Keot has given
In this case the plaintiff must be content, so far as the action of this . court is concerned, with his principal actually paid to the defendant and 8 per cent, interest thereon, with attorney’s fees. The verdict by which he has been deprived of the 20 per cent, so-called commissions, included in the face of the note, but never received by defendant, is sustained, and the motion for a new trial is overruled.