Cobb v. Hartenstein
Decision Date | 07 October 1915 |
Docket Number | 2772 |
Citation | 47 Utah 174,152 P. 424 |
Court | Utah Supreme Court |
Parties | COBB v. HARTENSTEIN |
Appeal from District Court, Third District; Hon. Geo. G. Armstrong Judge.
Action by Rufus K. Cobb, as sole surviving partner of the firm of R K. Cobb & Co., against Emanuel A. Hartenstein.
Judgment for plaintiff. Defendant appeals.
REVERSED and REMANDED.
Van Cott, Allison & Riter, Howat, Macmillam & Nebeker, and Dickson, Ellis, Ellis and Schulder for appellant.
APPELLANT'S POINTS.
Since usury laws are quasi-penal, the courts will not hold a contract to be in violation of the usury laws, unless upon a fair and reasonable construction of all its terms, in view of the dealings of the parties, it is manifest that the intent of the parties was to engage in such a transaction as is forbidden by those laws. If two reasonable constructions are possible, by one of which the contract will be legal and valid, while by the other it will be usurious and invalid the court will always adopt the former. In short, the general rule of interpretation and construction of such contracts may be said to be, that the contract is not usurious when it may be explained on any other hypothesis. (39 Cyc. 917-18; Gillette v. Ballard, 25 N. J. Eq. 491; Insurance Co. v. Crane, 25 N. J. Eq. 422; Lusk v. Smith, 81 P. 173, 175, Hamilton v. Fitch (Kirby), 260, 262; Steptoe v. Harvey, 7 Leigh 501, 538-9; Gilpin v. Enderly, 5 Barnwell & Adolphus, 954 (7 Eng. C. L. R.); White v. Benjamin (N.Y.), 33 N.E. 1037.) To constitute the offense of usury, there must be an intent to violate the statute. (39 Cyc., p. 919; United States Bank v. Wagner, 9 Pet. 378, 399; Kline v. Title Guaranty & Surety Co., 166 F. 365, 368-9; same case on appeal 178 F. 689, 691; Thurston v. Cornell, 38 N.Y. 281; Orvis v. Cartin, 52 N.E. 690 (N.Y.); Call v. Palmer, 116 U.S. 101.) As a matter of law the transaction was a loan. The buyer sixty imposed upon Cobb the absolute obligation to pay the money at the end of sixty days. (Nichols v. Bishop, 136 Mass. 349; Vance v. Newman, 80 S.W. 574.) Hartenstein therefore took no chances. His only risks were the depreciation of the security or the insolvency of the debtor. These were the ordinary risks upon loaning money and are not such hazards as destroy the usurious character of the transaction. A loan may be made though neither the lender or the borrower have ever heard the word "loan," "lend" or "borrow." Usury may be taken though the usurer never heard of the word "usury" or "interest." As said by the Court of Appeals of New Jersey in Freeman v. Brittin, 17 N.J.L. 191, 206:
It is not possible in this transaction that Hartenstein when purchasing the stock from Cobb was bargaining for the use of the stock, because, as shown by the testimony of Mr. Badger and as provided by the rules of the Exchange, Hartenstein would be prohibited from using the stock in any manner. He merely held it as escrow holder to return the specified shares. Such a contract is usurious on its face. (Hall v. Haggart, 17 Wend. 280; Colton v. Dunham, 3 Paige 272; Delano v. Rood, 6 Ill. 690; Knox v. Black, 1 A. K. Marshall 200; Heytle v. Logan, 1 A. K. Marshall 529; Bright v. Wagle, 33 Ky. 252; Starkweather v. Prince, 1 McArthur, D. C. 144; Stockwell v. Richardson, 5 N.E. 45; Baker v. Arnot, 67 N.Y. 448; Tillan v. Cleveland, 47 Ark. 287; Wormley v. Hamburg, 46 Iowa 144; Dale v. Duryea, 96 P. 223.) Nor did the ignorance of both Cobb and Hartenstein (assuming Hartenstein to have been ignorant) as to the rate of interest charged or the legal phases here involved, affect the transaction. The intent of the parties is to be determined by the act, which the circumstances show the parties intended to accomplish. (Fielder v. Darrin, 50 N.Y. 437; Nelson v. Satre, 126 N.W. 339; Hagan v. Barnes, 99 N.W. 415.) Nor does the custom of the brokers change the situation. (Dunham v. Dey, 13 Johns 39; Dunham v. Gould, 16 Johns 367; N.Y. Fireman Ins. Co. v. Ely, 2 Cowan 678; Niagara Co. Bank v. Baker, 16 Ohio St. Rep. 68, 69; Greene v. Tyler & Co., 39 Penn. St. 361, 367; Carolina Sav. Bank v. Parrott, 8 S.E. 199, 202; Cowgill v. Jones, [Mo. 1903], 73 S.W. 995.)
Ball, Mulliner & McCarty and Dey, Hoppaugh & Fabian for respondent.
On October 15, 1913, the plaintiff commenced this action against the defendant to recover certain sums of money which, the plaintiff alleged, he had paid to the defendant as principal and interest upon two contracts alleged to be usurious and which are hereinafter set forth. Two causes of action, one upon each of the contracts were stated in the complaint. The defendant appeared in the action, and in his answer, after admitting the matters of inducement, denied generally the other allegations of the complaint.
The action was based upon Comp. Laws 1907, sections 1241x, 1241x1, 1241x2. Section 1241x, in substance, provides that parties may enter into a contract "for the payment of interest, for the loan or forbearance of any money, goods, or things in action, not to exceed twelve per cent. per annum." Section 1241x1, Laws Utah 1909, p. 180, prohibits the taking of "any greater sum or greater value for the loan or forbearance of any money, goods, or things in action than is prescribed in section 1241x"; and any violation of the statute is declared a misdemeanor, and is punishable as such. Section 1241x2, so far as material here, reads as follows:
"Every person who, for any such loan or forbearance, shall pay or deliver any sum or value (greater) than is above allowed to be received, or the principal or any part thereof of said usurious loan or forbearance, and his personal representatives, may recover in an action against the person who shall have taken or received the same, and his personal representative, the amount of money so paid or value delivered, both as principal and interest, if such action be brought within one year after such payment or delivery."
There are several other sections in which all notes, bonds, mortgages, etc., wherein more than twelve per cent. interest per annum is reserved are declared void.
The contract declared on in the first cause of action reads as follows:
E. A. Hartenstein, Seller.
"R. K. Cobb & Co., Buyer."
The one on which the second cause of action is based reads as follows:
E. A. Hartenstein, Seller.
"R. K. Cobb & Co., Buyer."
Those portions italicized were written in the contracts with pen and ink, while the other portions were printed matter. There were several extensions of time indorsed on the backs of both of said contracts, but those may be passed by for the present. There is also another writing which, it is contended, is material in determining the question at issue to which we shall refer again later.
In the first cause...
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