Court Opinion

ID: 5382813
Source: CourtListenerOpinion
Date Created: 2022-01-08 09:09:41.375421+00
Date Added: 2024-06-11T08:30:10.017558
License: Public Domain

Cohn, J. (dissenting).
In my opinion the guilt of the four defendants-appellants of the crime of conspiracy (Penal Law, § 580, subd. 1) as charged in the first count of the superseding indictment was not established beyond a reasonable doubt.
This count alleged that defendants from November 1, 1935, to March 1, 1940, unlawfully conspired to cause the corporation, Madison Personal Loan, Inc. (hereinafter referred to as “ Madison ”), to charge and receive interest in addition to the legal maximum rate prescribed by section 352 of the Banking Law, and that the usurious interest took the form of “ a fee in the guise of a premium for insurance ” which Madison would obtain from its borrowers and forward to an insurance company, and which would be returned to Madison under the pretext of payment of insurance losses based on false proof of claims.
Madison made loans to borrowers who owned automobiles. The borrower would sign a note and execute a chattel mortgage on the car to Madison. In addition to paying the interest rates permitted by statute, the borrower was required to pay the insurance premiums to cover the cost of insuring the auto for Madison’s benefit generally for fire, theft, collision and conversion. The prosecution’s theory was that the four defendants conspired that Madison should receive, and that it actually did receive, more compensation than that permitted by statute (Banking Law, § 352) by payments from the United American Lloyds (an insurance company) upon false insurance claims presented through Wilten Agency.
As a condition of making a loan, Madison had the right to require the borrower to insure for its benefit the automobile pledged as collateral. (Martorano v. Capital Finance Corp., 289 N. Y. 21, 24.)
Madison charged and collected the rates of interest permitted by statute on all loans. Only the lawful insurance premiums were paid. All premium moneys received by Madison were transmitted to United American Lloyds up to July 5, 1938, and thereafter to Fidelity-Phenix Insurance Company, a nationally known insurance corporation. There was involved no scheme whereby under the guise of insurance an additional charge was made without actually placing the insurance. Upon the alleged false claims, Madison never received more than the unpaid balance of the loans plus interest and repossession expenses. The sums so recovered by Madison on insurance claims were always credited to the borrower’s account. Whether losses claimed by Madison were recoverable under the terms *226of the policy or not, the losses themselves were not fictitious but real and the amounts received by Madison from the insurance companies never exceeded the amount due on the loan from a given borrower. In my view there was no proof that Madison, the lender, ever received compensation in excess of that authorized by statute.
As was stated in the Martorano case, supra, 24: “ The test, then, is whether the lender has placed upon the borrower the burden of an additional charge in order to give to the lender ‘ compensation in excess of that contemplated by the statute. ’ * * * Under no circumstances can the lender receive more than the principal amount of the loan and the compensation expressly permitted by the statute.” Madison never received more than the principal amount of its loan in any case.
The conspiracy count in the indictment should have been dismissed.
To determine whether there were false entries and forgeries as claimed in the felony .counts upon which defendants were-convicted, it was necessary to show that the alleged false entries were in fact false. In the absence of proof of the terms of the open policy of insurance existing between the insurance companies and Madison, there could be no showing that any claims for insurance paid by United American Lloyds to Madison were false. In any event, the felony counts upon which defendants were convicted, as the court correctly charged, could not stand if the conspiracy count had not been established.
It is not denied that the Banking Department examined and licensed Madison annually throughout the period of the alleged conspiracy. Admittedly, too, the United American Lloyds, owned by defendant Schwartz, was duly licensed by the Superintendent of Insurance of this State and was thereafter under his supervision. The crimes alleged were not based upon any complaint of the State Banking Department or of the State Department of Insurance. Testimony which formed the basis of the charges was supplied by a former employee who herself had been indicted in 1938 for larceny of a large sum of money from Madison and forgery in connection therewith. Before these defendants, each of whom appears to have borne a good reputation, may be convicted and imprisoned for the misdemeanor and felonies charged, their guilt should be established beyond a reasonable doubt. This, in my opinion, the proof adduced did not do.
*227For the foregoing reasons I vote to reverse the judgment of conviction and for a dismissal of the indictment as to each defendant.
Townley and Dore, JJ., concur with Martin, P. J.; Cohn, J., dissents in opinion in which Glennon, J., concurs.
Judgments and orders affirmed.