Call v. Palmer

• Decision Date: 14 December 1885
• Citation: 29 L.Ed. 559,116 U.S. 98,6 S.Ct. 301
• Parties: CALL v. PALMER. Filed
• Court: U.S. Supreme Court

6 S.Ct. 301

116 U.S. 98

29 L.Ed. 559

CALL v. PALMER.

Filed December 14, 1885.

This was a suit in equity brought by Henry H. Palmer, the appellee, against Asa C. Call, the appellant, to foreclose a mortgage on the land of the latter given by him to secure his note for $11,000. The record disclosed the following facts: Albert C. Burnham, residing in Illinois, was a partner in the firm of Burnham, Ormsby & Co., bankers, at Emmetsburg, Iowa. He had in his hands for investment $10,000 belonging to his relative, one Mrs. Davidson. Call applied in writing to Burnham, Ormsby & Co. for a loan of $10,000. Soon after the application was made, Call met Burnham at Emmetsburg, Iowa, and they entered upon a treaty for the loan. Burnham, thinking Call's proposition to be a favorable one, decided to accept it for Mrs. Davidson, and, after his return to Illinois, sent the money to Burnham, Ormsby & Co., at Emmetsburg, to be lent to Call on the terms proposed by him. Burnham, Ormsby & Co. took the note of Call dated in November, 1872, for $10,000, payable to A. C. Burnham, or order, on November 1, 1875, with 10 per cent. interest, payable semi-annually, which Call secured by a mortgage on certain of his real estate in Iowa. Call received from Burnham, Ormsby & Co. $8,000 for his note; they retainining $2,000 as a compensation for their services in negotiating the loan. No part of this sum was paid to Mrs. Davidson did not know that it had been deducted from the $10,000 lent by her to Call, and she never authorized Burnham or Burnham, Ormsby & Co. to lend her money at a greater rate of interest than 10 per cent., or to retain any commission or bonus out of the sum lent. In short, she received no benefit from the usury, and had no knowledge of it. A. C. Burnham held the note as the agent and trustee of Mrs. Davidson, but subject to her control. Afterwards the appellee, Palmer, who lived in New Jersey, bought of Burnham the $10,000 note of Call, with five coupon notes of $500 each, not then due, given by the latter for interest thereon. The notes were indorsed by Burnham to Palmer in September, 1873, and Palmer paid therefor in cash to Burnham for Mrs. Davidson the face of the principal note, $10,000, and the accrued interest. In this purchase Palmer acted for himself without the intervention of any agent whatever.

On November 13, 1875, the principal note being past due, Call, in order to raise money to pay it, applied in writing to Burnham, Ormsby & Co. to lend him $11,000 for five years. They, as agents of Palmer, agreed to loan Call the money. They took his note, dated November 1, 1875, for $11,000, payable to the order of Palmer on November 1, 1880, with 10 per cent. interest, payable semi-annually, secured by a mortgage executed by Call on his lands in Iowa. The consideration for the note was as follows: Palmer delivered up to Call the $10,000 note, which he had purchased from Mrs. Davidson, and released on the record the mortgage made to secure it, and he sent to Burnham, Ormsby & Co. $1,000 in cash for Call. Five hundred dollars of this 1,000 was returned to Palmer through Burnham, Ormsby & Co., in payment of one of the coupon notes, for interest due on the Davidson note, and Call consented that Burnham, Ormsby & Co., who, through Ormsby, had procured for him the loan from Palmer, might retain the remaining $500 as a bonus for their services. Palmer had no notice or knowledge that Call had not received the full amount of the $10,000 for which he gave his note to Burnham for Mrs. Davidson, until after the bringing of this suit; nor any notice or knowledge that the said $500 had been re- tained by Burnham, Ormsby & Co. for their services in procuring the loan for $11,000, and did not in any manner authorize its retention of Burnham, Ormsby & Co.

Call set up the plea of usury to the suit brought by Palmer to foreclose his mortgage. The circuit court overruled the defense, and entered a decree against Call for the amount due on the note, and for the foreclosure of the mortgage. The appeal of Call brings that decree under review.

Jo. H. Call, for appellant, Asa C. Call.

M. F. Morris, for appellee, Henry H. Palmer.

WOODS, J.

The contention of Call is that the note given to Burnham for Mrs. Davidson was infected with usury in her hands and in the hands of Palmer, her indorsee, and that the note given by Call to Palmer was also usurious, by reason of the retention by Burnham, Ormsby & Co. of the $500 as a bonus for effecting the loan for Call. The note which is the basis of this suit was nade in Iowa, and the contract must be governed by the laws of Iowa. De Wolf v. Johnson, 10 Wheat. 367; scudder v. Union Nat. Bank, 91 U. S. 406.

The Code of Iowa of 1873, tit. 14, c. 2, § 2077, provides: 'The rate of interest shall be six cents on the hundred, by the year, on * * * money due, or to become due, when there is a contract to pay interest and no rate is stipulated. In all the cases above contemplated parties may agree in writing for payment of interest, not exceeding ten cents on the hundred by the year.' 'Sec. 2079. No person shall, directly or indirectly, receive in money, goods, or things in action, or in any other manner, any greater sum of value for the loan of money, or upon contract founded upon any bargain, sale, or loan of real or personal property, than is in this chapter prescribed. Sec. 2080. If it shall be ascertained in any suit brought on any contract that a rate of interest has been contracted for greater than is authorized by this chapter, either directly or indirectly, in money or property, the same shall work a forfeiture of ten cents on the hundred, by the year, upon the amount of such contract, to the school fund of the county in which the suit is brought, and the plaintiff shall have judgment for the principal sum, without either interest or costs. * * * Sec. 2081. Nothing in this chapter shall so be construed as to prevent the proper assignee in good faith, and without notice of any usurious contract, recovering against the usurer the full amount of the consideration paid by him for such contract, less...