Opinion
04-01-1886
NICHOLS v. OSBORN and Wife.
Frank Bell, for complainant. Leslie Lupton, for defendant, Uzal M. Osborn.
On bill to foreclose. On final hearing on pleadings and proofs.
Frank Bell, for complainant.
Leslie Lupton, for defendant, Uzal M. Osborn.
RUNYON, Ch. The proof is that Osborn, the mortgagor, applied to Robert E. Chetwood, a counselor at law, for a loan of $0,000, which the latter had advertised. The money belonged to William E. Nichols, the complainant's father. Osborn obtained the loan, and agreed to pay Chetwood 10 per cent. for his commissions for making it. The mortgage was given for $6,000. Chetwood paid Osborn only $5,400. Nichols is dead, and the complainant holds the mortgage by assignment from Nichols' executors. Osborn, in his answer, sets up the defense of usury. The proof does not sustain it. According to his own testimony, Osborn agreed to pay Chetwood 10 per cent., or $600, for his commissions, and there is no evidence whatever that Nichols received any of that money, nor that he did not pay over to Chetwood the whole of the $6,000. There is no evidence to connect him in any way with the bargain for commissions, or to show that he had even any knowledge of either branch of the transaction. It is true, Chetwood says he only received 2 per cent. for his commissions, and does not deny that the agreement was that he was to receive 10 per cent., and admits that he paid Osborn only $5,400. But whether he received the rest of the 10 per cent., and paid it to Farnham, who also was the lender's agent in making the loan, does not appear. Nor does it appear whether Farnham got it from the lender directly or not. Farnham is dead. Osborn's testimony is that Chetwood retained $600 for his commissions, and that that was in accordance with the agreement between them. There will be a decree for the complainant for principal, interest, and costs.
NOTE.
Where illegal interest as bonus is paid to the agent of a mortgagee, under the terms of the contract between the agent and the mortgagor, with the knowledge of the mortgagee, the mortgage is tainted with usury. Bonus v. Trefz, (N. J.) 2 Atl. Rep. 309.
When an agent, who is authorized by his principal to lend money for a lawful interest, exacts for his own benefit more than the lawful rate, without authority or knowledgeof his principal, the loan is not thereby rendered usurious. Call v. Palmer, 6 Sup. Ct. Rep. 301.
When an agent, without the knowledge or consent of the principal, takes a bonus or commission to himself beyond the legal rate of interest, the usury of the transaction does not affect the loan of the principal. Bingham v. Myers, (Iowa,) 1 N. W. Rep. 613. And in this case—where the agent was the husband, and the principal the wife—the court hold that knowledge on her part of the usurious character of the transaction in her behalf could not be presumed from the relationship of the parties, as against their positive evidence to the contrary.
In Acheson v. Chase, (Minn.) 9 N. W. Rep. 734, C. made A. his agent to loan money at A.'s discretion, (land securities to be taken in C.'s name,) at the lawful rate of interest, which was then 12 percent. C. was to pay A. nothing for his services to him in and about making loans, but he authorized him to collect of the borrower a reasonable compensation for such services. A. made a loan to the plaintiff of $500, upon plaintiff's note and mortgage for that sum, drawing 12 per cent. interest, and received of plaintiff $50, either as a pure bonus, i. e., a gratuity, or partly as such bonus and partly as a reasonable compensation for his services to C. in and about making the loan. C. never authorized the taking of any bonus, or ratified or sanctioned it by receiving any part of it, or any benefit from it, either directly or indirectly. The court held that so far as the $50 was a bonus, in whole or in part, it was wholly the unauthorized act of A.; and that the taking of it by him was not usury on the part of C. See Strait v. Frary, (Minn.) 22 N. W. Rep. 295.
Upon a loan of money intrusted to an agent for such purpose by his principal, and which is secured by a mortgage for the full sum loaned, with lawful interest, the voluntary act of the agent in reserving a bonus for his own benefit, without any collusion with the mortgagee, who does not appear to authorize or ratify the act, or to derive any benefit from it, is not presumptively a cover for usury on the part of the lender, and does not make the loan usurious; and receiving the mortgage, and attempting to enforce it for the amount actually loaned, with lawful interest, does not amount to a ratification. Jordan v. Humphrey, (Minn.) 18 N. W. Rep. 450; Strait v. Prary, (Minn.) 22 N. W. Rep. 295.
If an agent, in good faith, makes a loan for another, and without the knowledge or authority of his principal, and for the agent's own benefit, exacts more than legal interest, the loan is not thereby rendered usurious. Palmer v. Call 7 Fed. Rep. 737. In this case Justice MCCRARY says: "Doubtless, in general, the intent of an agent acting within the scope of his authority may be imputed to the principal. But it is settled beyond question that if any agent in good faith makes a loan for another, and without the knowledge or authority of his principal, and for the agent's own benefit exacts more than legal interest, the loan is not thereby rendered usurious. In such case the law does not impute the knowledge and the intent of the agent to the principal. This doctrine is supported by numerous authorities both in England and this country."
Where an agent exacts a bonus for himself, without his principal's knowledge, and without the lender's participation in or deriving any benefit from such bonus, the loan is not thereby rendered usurious. Ballinger v. Bourland, 87 Ill. 513.
The supreme court of Nebraska held, in New England Mortgage Security Co. v. Hendrickson, (Neb.) 12 N. W. Rep. 916, that where an agent, intrusted with money of his principal to loan, exacts a bonus or commission from the borrower in addition to lawful interest, the contract will be tainted with usury. The court say: "The whole transaction is but one contract, and, being within the scope of the agency, the lender is bound by it."
Where one intrusts his money to another to loan, and the agent, without the knowledge of his principal, receives unlawful interest or a bonus, which he appropriates to himself, the transaction is usurious. Cheney v. White, 5 Neb. 261.
A loan made through the lender's agent, the lender understanding that the agent is to charge the borrower for the agent's services in procuring the loan, in addition to lawful interest, and the agent receiving pay therefor accordingly, is usurious. Payne, v. Newcomb, 100 Ill. 611.