New England Mortg. Security Co. v. Gay

• Decision Date: 01 January 1888
• Citation: 33 F. 636
• Parties: NEW ENGLAND MORTGAGE SECURITY CO. v. GAY.
• Court: U.S. District Court — Southern District of Georgia

33 F. 636

NEW ENGLAND MORTGAGE SECURITY CO. v. GAY.

United States Circuit Court, S.D. Georgia.

January, 1888

Syllabus by the Court

The system of making loans on farms by the New England Mortgage Security Company and the Corbin Banking Company, through local loan agents, developed in evidence.

Where notes are given to one who is the president of a corporation for money loaned by the corporation, and are by him indorsed in blank, the maker is entitled to any defense against the corporation that he has against the payee.

Where property is conveyed to secure a debt, a stipulation that the borrower shall in addition to legal interest pay insurance premiums thereon is not usurious.

Usury may not be presumed, and must be shown by a preponderance of evidence.

A 'corrupt intent' to charge usury is an intent to get more for the use of the money than the law allows; and where the act is unlawful, and the lender did it or is responsible for it, the corrupt intent is sufficiently shown.

Under Code Ga. Sec. 3807, providing that receipts for money are only prima facie evidence of payment, defendant may show that he received less on certain promissory notes made by him than the receipt shows.

A written or printed contract signed by the borrower purporting to constitute a loan agent the agent of the borrower to negotiate a loan, is not conclusive where it is set up by plea that such contract was a device and contrivance to avoid the usury law, but evidence may be heard to show the real character and purpose of the instrument.

Where G. had 'territory' parceled out to him and other agents by the Corbin Banking Company, and contracted with their representative to work for them for 5 per cent. and to send the company 15 per cent. of all loans negotiated; they furnished him all blanks to carry on the business, required him to make them regular reports, to pay taxes on pledged farms, keep up a regular correspondence, report delinquents collect interest and loans, and to reject all applications where the borrower would not sign the contract constituting him the borrower's agent, the banking company furnishing blanks for such contracts,-- it was for the jury to say whose agent G. was.

Where plaintiff had made 13,000 loans through a banking corporation, paying it nothing for its services, but receiving the amounts loaned in full, with interest plaintiff is chargeable with notice of any usurious charges made by the bank; and the fact that the president of the bank is one of the plaintiff's directors is a fact to be considered.

Where an agent, in the loan of his principal's money, exacts for his own benefit more than the lawful rate of interest without authority from or knowledge of his principal, the loan is not thereby rendered usurious, nor is it usurious if the borrower truly and actually authorized the charge for expenses actually incurred or services actually rendered, if the charge is reasonable.

The courts of the United States, in suits between citizens of different states, are not bound by decisions of the state appellate court in the administration of a state statute where no question of construction is involved. This is especially true where the decision of the state court is not produced, and where the opinion has not been delivered or filed.

Code Ga. Sec. 2057, provides that 8 per cent. shall be lawful interest; that any excess charged shall be forfeited; and that no contrivance between the parties shall avoid such forfeiture, except a full payment of the amount forfeited. Plaintiff's agent charged $1,700 for a loan of $8,500 to defendant, plaintiff being chargeable with notice of his act. Held, that the jury should determine whether that amount was a reasonable charge, authorized by the borrower, or a mere cloak for usury, and to be forfeited by the plaintiff.

Simmons, Hammond & Son, for plaintiff.

E. H. Hawkins, Du Pont Guerry, and Bacon & Rutherford, for defendant.

SPEER, J., (charging jury.)

The plaintiff, the New England Mortgage Security Company, a corporation chartered by the state of Connecticut, has brought an action against Jacob M. Gay, a citizen of Georgia, and this district, upon certain promissory notes, of the apparent value of $8,500. These notes are for different amounts, and they mature on the dates therein stated, and are all of the same form, as follows:

'$2,000.

ELLAVILLE, GA., March 22, 1884.

'On the first day of December, 1885, I promise to pay Charles L. Flint, or order, at the office of the Corbin Banking Company, New York city, two thousand dollars, with interest, from this date at the rate of eight per cent. per annum, payable annually as per two interest notes hereto attached, value received. And I hereby waive and renounce my right to the benefit of the exemptions provided for by the constitution and laws of Georgia in all the property I now have, or may hereafter acquire, as against the payment of this note, and the interest notes hereto attached. Should any of said interest not be paid when due it shall bear interest at the rate of eight per cent. per annum from maturity, as stipulated in said interest notes, and upon failure to pay any of said interest within thirty days after due, said principal sum may, at the option of the holder of this note, be declared due without notice, and may thereupon be collected at once, time being of the essence of this contract, and in case this note is collected by suit I agree to pay all costs of collection, including ten per cent. of the principal and interest as attorney's fees.

'No. 35,144.

JACOB M. GAY.'

The coupons are in the following form:

'$110.

ELLAVILLE, GA., March 22, 1884.

'For value received I promise to pay Charles L. Flint, or order, at the office of the Corbin Banking Company, New York city, one hundred and ten dollars, on December 1, 1884, being interest to that date on my note given to said payee, with interest from maturity at 8 per cent. per annum.

'No. 35,145.

JACOB M. GAY.'

These notes are secured by deeds of the defendant to his farm lands of the value of $22,000. The notes are made payable to the order of Charles L. Flint, and are indorsed in blank by him, and belong to the New England Mortgage Security Company. The plaintiff, however, with proper explanatory averments, could sue these notes if they bore no indorsement, because it is clear that they were originally and immediately on their execution the property of the plaintiff company; its money was given for them, and Charles L. Flint testifies that he is the president of the New England Mortgage Security Company, and made the loan for them. Charles L. Flint, in this transaction, and the plaintiff company are, therefore, identical, and are properly to be considered as one person. He testifies that he loaned no money but the money of the company. Whatever may have been his motive in taking the notes payable to his order, it was done in his official capacity as president, and the rights of the parties are in no measure complicated by the indorsement and apparent transfer before maturity, and the defendant, so far as those features are concerned, is entitled to make any defense that can be made to an action on a note in the hands of the payee. In this case Gay is the maker of the note, and, in view of the evidence, the New England Mortgage Security Company is the payee, and if the note truly expressed the transaction, it would read 'payable at the office of the Corbin Banking Company to the New England Mortgage Security Company. ' This, therefore, was not a loan, as it appeared to be upon the face of the papers, made by Flint to Gay, with notes and deed made by Gay to Flint, completed, and then offered to the New England Mortgage Security Company, and bought by them as you might buy a note payable to bearer, but it was an application for a loan made through the Corbin Banking Company to the New England Mortgage Security Company and granted by that company.

Now, as I have said, the plaintiff is a corporation of the state of Connecticut. It is organized to lend money upon the security of mortgages upon improved farms, and for similar purposes. The transaction, so far as it may be held legal, is within the scope of the plaintiff's corporate powers. The New England Mortgage Security Company, by that principle of comity existent among the states of the Union, is entitled to carry one its business with citizens of other states, and by means of contracts signed and to be enforced in other states; with this proviso, always, that should they extend their transactions to embrace contracts made in other states, they must take care to observe the laws of the state, made by its government for the welfare of its people. It is perhaps not improper to remark that, in the exercise of a lawful business, a foreign corporation is entitled to the same protection of the law, and the same even-handed justice, that self respecting courts and upright jurors accord to all men. There should be nothing but contempt for that juror who would deny to a corporation, because it is a corporation, any right that the law accords it. Upon the other hand, it is entitled to no immunity nor exemption from the penalties of the law, if by dishonoring the law it has deserved them. It has the same right to the fair and impartial administration of the law with every other citizen-- no less and no more. I have said this much because the argument of counsel suggested it.

Now, to the rights of the parties in this dispute. When the plaintiff company exhibited to you and to the court the notes sued on it became entitled to your verdict for the full amount, with interest, and 10 per cent. upon the principal and interest as attorney's fees. By that evidence, the plaintiff made what is...