Case Name: Bernard Cohen, Pl'ff, v. William B. Waldron, Def't
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1896-07
Citations: 74 N.Y. St. Rep. 642
Docket Number: 
Parties: Bernard Cohen, Pl'ff, v. William B. Waldron, Def't.
Judges: 
Reporter: New York State Reporter
Volume: 74
Pages: 642–644

Head Matter:
Bernard Cohen, Pl'ff, v. William B. Waldron, Def't.
(Supreme Court, New York Special Term,
Filed July, 1896.)
1. Usury—Purchase.
The purchase of a valid, subsisting security, at auy discount, may be made with impunity.
2. Same.
In such case, a loan of money by the plaintiff to the defendant,, with the security as collateral under the guise and color of a purchase and sale, must be shown by clear and satisfactory evidence.
3. Same.
Parties have a perfect right to deal with each other with the-usury laws before their eyes, and to so shape the transaction as to escape the condemnation of such laws.
4. Same—Burden oftrooe.
In establishing usury, the defendant assumes the burden by affirmative proof, as all the presumptions are in favor of the legality of the contract.
John Frankenheimer, for pl’ff; Frederick E. Anderson, for def’t.

Opinion:
PRYOR, J.
To avert a threatened foreclosure of a mortgage on his property, defendant had this transaction with the plaintiff: Upon payment of the mortgage debt, less ten per cent, discount,, plaintiff took an assignment of the mortgage. With the knowledge of plaintiff, defendant paid the mortgagee the ten per cent, balance, whereupon plaintiff extended the mortgage for another year. In the action to foreclose, defendant pleads usury. Upon its face the transaction is clear of usury. In form, it is a purchase of a valid, subsisting security; and by all authorities,, such a.purchase, at any discount, may he made with impunity. Denham v. Cudlipp, 94 N. Y. 129; Saving Inst. v. Wilmot, Id. 221. In every circumstance the case is identical with Siewert v. Hamel, 91 N. Y. 199, and unless it appear that the ostensible sale of the mortgage was "a mere contrivance to evade the statute of usury, and was in fact a loan by the plaintiff to" Waldron (page 201), no defense to the action was developed. It is not .enough that "the plaintiff entered into the transaction for the purpose of securing more than the legal rate of interest on his capital" (page-201), but "a loan of money by the plaintiff to the defendant, with the bond and mortgage as collateral under the guise and color ol a purchase and sale of -a chose in action" (page 201), must he shown by "clear and satisfactory evidence." White v. Benjamin, 138 N. Y. 623; 52 St. Rep. 151. In Seiwert v. Hamel, supra, a test of the illegal character of the transaction, as propounded by Andrews, C. J., is that "it originated in an agreement for a loan;" but here the fact is not clear upon the proofs. By the testimony of Hirsch—the only witness not open to suspicion of bias—it appears that the plaintiff contemplated a purchase from the beginning of the negotiation with the defendant. The defendant himself, in his original answer, alleged that he "did request the plaintiff to purchase the aforesaid mortgage, and take an assignment thereof." notwithstanding the explanatory evidence introduced to extenuate the effect of this admission, I cannot bin regard it as credible and cogent proof of the intended transaction. Assuming, however, that the parties originally contemplated a loan by plaintiff and a new mortgage to him for security, the proof is quite conclusive that they abandoned the project, and substituted instead a purchase and assignment of the mortgage. "Ho doubt the plaintiff wanted to get more for his money than simple interest. But he knew the statute of usury, and did not intend to come within it. Ho doubt, also, there was then suggested a plan whereby he might keep outside of the statute, and still obtain a return for his° investment greater than the rate allowed by it. There is no law against that." Dunham v. Cudlipp, 94 N. Y. 135. "In one sense the transaction took this form for the purpose of escaping usury. But the parties had a perfect right to deal with each other with the usury laws before their eyes,- and to so shape the transaction as to escape the condemnation of those laws." Saving Inst. v. Wilmot, 94 N. Y. 221, 227. The assent of defendant to the substituted arrangement is,apparent from the execution of the agreement of Hovember 2, 1894, and other evidence. Defendant's position, then, is this: He does not impugn the legality of the actual transaction, but urges that the agreement between the parties was for another and illegal transaction, vffiich, though renounced and unexecuted, pevertheless invalidates its substitute, the actual and legal transaction. The bare statement of the proposition suffices for its refutation. In Wyeth v. Braniff, 84 N. Y. 627, the authority upon which defendant relies, the loan was indisputable,—an essential fact, absent from the case under review. "If there was no loan, and no corrupt agreement for forbearance, there can be no usury." Sweeney v. Peaslee (Sup.), 42 St. Rep. 485; Meaker v. Fiero, 145 N. Y. 165; 64 St. Rep. 579; Siewert v. Hamel, 91 N. Y. 201. The case is not free from doubt, but. mindful of the proof requisite to show usury, I am not content that the defense is established. "The defense of usury being an affirmative proposition to be established by the defendant, he assumes the burden of establishing it by affirmative proof, as all the presumptions are in favor of the legality of the contract; and if, upon the whole case, the evidence is as consistent with the absence as the presence of Usury, the party alleging the usury must fail." Sweeney v. Peaselee (Sup.), 42 St. Rep. 485; Stillman v. Northrup, 109 N. Y. 473; 16 St. Rep. 417.
Judgment for plaintiff, with costs.