Court Opinion

ID: 3618668
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:01:05.849962+00
Date Added: 2024-06-11T14:25:06.546338
License: Public Domain

This action is brought to recover a promissory note bearing date March 25th, 1859, for one thousand dollars, with the interest six months after date, made payable to Charlotte S. Earle, or bearer, and signed by the defendants. The defense was usury. The jury found a verdict for the defendants, which was set aside by the judge, at Special Term, whose judgment was afterward reversed by the General Term of the Supreme Court for the eighth district. The plaintiffs then appealed to this court.
I find myself unable to extract any general principle from the case of Condit v. Baldwin (21 N.Y., 219), which will aid us in applying the statute of usury to contracts for the loan of money. We cannot with safety accept it as an adjudication that usurious contracts made by an agent for his principal, and without special authority in regard to the rate *Page 183 
of interest, are free from the consequences denounced by the statute, and may be enforced in the courts at the suit of the principal. The consequences of such a rule would be to deprive the statute of any real vitality and living power, and reduce it to a mere brutum fulmen. There are no legal analogies to sustain it, for where the contract sought to be enforced is that made by the agent, it is either good or bad, legal or illegal. If the agent had power to make it, and it transgresses no rule of law, it is legal and may be enforced; but if he had no power from his principal to make such a contract, and especially if it be tainted with an element forbidden by law, the principal is not bound to accept it, and it cannot be enforced as an obligation against him — if in terms it creates an obligation — nor can he be affected or prejudiced by the consequences resulting therefrom. This is the most that can be said. He may repudiate and reject it so soon as its illegality comes to his knowledge — he may treat it as a nullity, and occupy the same position he would have been in had it never been made, and seek his remedy for what he has lost or been deprived of in some other form or against some other person. He cannot, however, accept a part of it and reject another part. It is entire and incapable of separation. If it be plainly usurious, if it reserve to the lender a greater rate of interest than that allowed by law, it is none the less usurious because the agent had no authority to make it. It is still a contract prohibited by law, and cannot be enforced. When the agent has authority to do a particular, specified act, and does another, as where he is directed to seize the goods of A. in satisfaction of an execution, and seizes the goods of B.; or, where he is directed to make a distress for rent upon the demised premises, and makes his levy elsewhere, of course the principal is not bound, because he gave no such authority. The measure of authority is co-extensive with the act, and the entire act done either is or is not within the scope of the authority given. There is little analogy between cases of this kind and the case of an agent loaning money at interest for his principal. His authority to prescribe the terms of loan, the *Page 184 
time of credit, the sureties to be given, and to part with the money, is not questioned. His authority is ample and complete in all things, except to fix a rate of interest greater than that allowed by law. In the cases which I have supposed, the entire act is wrongful, and no part or portion of it authorized by the principal. I am therefore unable to discover any analogy between them and a contract of loan by an agent, at a rate of interest greater than that named in the statute. No one would doubt, I think, that if the agent himself was the party to the contract in the place of the principal, that it would plainly be usurious. It does not cease to be so because the principal is the party and not the agent. It remains the same identical contract in all its essential particulars, and usury is of its essence whichever may be the contracting party. Suppose the note or bond taken by the agent reserves upon its face interest at a rate greater than that allowed by law. Could the payee or obligee uphold and enforce it upon the argument that it was taken by an agent who had exceeded his authority in regard to the rate of interest? This he could not do for the presence of the usurious rate of interest taints and subverts the whole transaction, and it is of no moment to the validity or invalidity of the contract how it came there. The same result must ensue when the illegal interest is not incorporated in the instrument, but exists outside of it. In such a case the action would not be against the principal to enforce a contract made by his agent. Then the question of power, the agent's authority to bind the principal and do what he has done, would arise and become the principal issue. But it would be an action by the principal himself against another to enforce a contract made by his agent which he confesses to be usurious and illegal, but seeks notwithstanding to uphold because the vicious element was put into it without his authority. This, to my understanding, is an absurdity pure and simple.
The judgment in Condit v. Baldwin, treated as an exposition of the law, strictly resulting from the facts upon which it was rendered, does not impair the force of the argument I *Page 185 
have sought to make. The plaintiff, a woman residing in New Jersey, had placed in the hand of Williams, a lawyer, residing in this State, the sum of $400, to loan out for her upon bond and mortgage, and was applied to by Mills, the agent of Baldwin, to loan the money upon a note. Nothing was said about the rate of interest, and no negotiations were had in regard thereto. Williams proposed to loan it on bond and mortgage, as, in that event, he would be benefited and receive his compensation for drawing the bond and mortgage, searching and examining the title. To indemnify him for the loss of this business, it was agreed, if he would loan the money upon a note in place of the bond and mortgage, he should be paid $25, which would have been about the amount of his compensation derived from a loan on bond and mortgage. This arrangement was effected, and Mills, the agent of the defendant, Baldwin, paid him the money. This constituted the usury. The plaintiff had no knowledge of the transaction. The money, it will be observed, was already in the hands of the agent Williams. He had been retained, and had incurred a responsibility in regard thereto, and had doubtless acquired some right to compensation therefor. If he might legally be paid this compensation, then it was a transaction which was separable from the contract of loan, and in which he might act for himself without prejudice to his principal. I think, in the present case, the facts are materially different in their character and justified the jury in regarding the contract as usurious and void.
The judgment of the General Term should be affirmed.
All the judges, except BROWN, J., concurred in the opinion that this case is not distinguishable from Condit v. Baldwin; and that the judge at the Circuit erred in not charging the jury as requested. DENIO, Ch. J., and PORTER, J., expressed their concurrence in the views of DAVIS, J., but acquiesced in a reversal on the authority of Condit v. Baldwin, on the principle of stare decisis. POTTER, J., concurred with DAVIS, J., both in his views and conclusions.
Judgment reversed and new trial granted. BROWN and DAVIS, JJ., dissenting. *Page 186 
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