Court Opinion

ID: 7809588
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:11:13.084952+00
Date Added: 2024-06-11T16:30:24.208503
License: Public Domain

McCULLOCH, C. J., (dissenting). The facts are undisputed and the case made out in the record is one where borrowers, by contract with their own agent, agreed to pay the latter a commission of $15 as compensation for procuring a loan of $300 from some third party or parties ; the agent applied to the lender and agreed to divide the commission, which the lender accepted in addition to charging the borrower the highest legal rate of interest. The contract between the borrowers and their agent for payment of the commission was an independent one to which the lender was not a party; and the subsequent contract between the lender and the borrowers’ agent to divide the commissions was also an independent one to which the borrowers were not parties. In other words, the payment to the lender of a portion of the commission was a mere gratuity on the part of the borrowers ’ agent. He paid his own money which he earned under his valid contract with the borrowers, and it was, therefore, not the borrowers’ money which the lender received in addition to the interest. There is not the slightest evidence in the record of collusion between the borrowers ’ agent and the lender to exact from the borrowers, by secret device or scheme, a sum in addition to the legal rate of interest, nor is there any evidence that the agent who procured the loan was the agent of the lender. Does this state of facts constitute usury? The question is plainly answered in the negative by Mr. Webb in his work on Usury (Sec. 97) in the statement that “where a loan is negotiated through a broker, who, by arrangement with the borrower, received commissions for effecting the loan, the fact that the broker allowed the lenders to share in such commissions, in order to induce them to take the loan, will not brand the transaction as usurious, when it is shown that such action on the broker’s part was a mere gratuity, and not part of a scheme to avoid the laws against usury. ’ ’ The following cases are cited, and they fully support the text: Eslava v. Crampton, 61 Ala. 507; Dickey v. Brown, 56 Iowa, 426; Collamer v. Goodrich, 30 Vt. 628. The same author makes this further statement: “In this, class of cases, as in all others, usury may be concealed in an apparently legal transaction. If by any secret arrangement between the borrower’s agent and the lender, the latter is to receive any portion of the commissions paid by the borrower to his agent, the transaction is tainted with usury. ’ ’ This means, of course, that where there is a secret arrangement between the borrower’s agent and the lender that a commission is to be exacted from the borrower and a portion of it paid over to the lender, this constituted a mere cloak for usury and renders the contract usurious. The authorities cited in the opinion of the majority are instances where the lender has received from the borrower a sum in excess of the legal rate of interest as a bonus or commission, but none of the cases cited involve a state of facts where a commission was paid by some person other than the borrower himself. It is unimportant that the borrower’s agent paid it out of his own commission, for in that case it was the agent’s money and not the borrower’s which was paid in excess of the legal rate of interest. I understand the usury laws to mean that a contract between the borrower and lender for payment of interest in excess of the legal rate is usurious and void, and that a contract whereby the lender is to take or receive from the borrower by any device or cloak whatever a sum of money in excess of the legal rate of interest is likewise void. The transaction now under consideration does not fall within the ban of the law, for the reason that there was neither a contract between the borrower and the lender for the payment of excessive interest, nor did the lender take or receive from the borrower any sum of money in excess of the legal rate of interest.