Payne v. Newcomb

• Decision Date: 10 November 1881
• Citation: 100 Ill. 611,39 Am.Rep. 69,1881 WL 10677
• Parties: MARY M. PAYNE et al.v.GEORGE W. NEWCOMB et al.
• Court: Illinois Supreme Court

100 Ill. 611

1881 WL 10677 (Ill.)

39 Am.Rep. 69

MARY M. PAYNE et al.

v.GEORGE W. NEWCOMB et al.

Supreme Court of Illinois.

Filed at Ottawa Nov. 10, 1881.

OPINION TEXT STARTS HERE

WRIT OF ERROR to the Appellate Court for the Second District;-- heard in that court on appeal from the Circuit Court of Livingston county; the Hon. FRANKLIN BLADES, Judge, presiding.

Mr. E. F. BULL, and Mr. L. G. PEARRE, for the plaintiffs in error:

This court has frequently held, where accounts involve large sums of money and are intricate, that the case must be referred to the master to render a concise and accurate statement, and it will not be permitted that this labor be imposed upon the court, even by stipulation of the parties. Moshier v. Norton, 83 Ill. 523; Moss v. McCall, 75 Id. 190; Steere v. Hoagland, 39 Id. 264; Bressler v. McCune, 56 Id. 475; Riner v. Touslee, 62 Id. 266; Groch v. Stenger, 65 Id. 481.

The testimony of Newcomb is of itself sufficient to condemn this transaction as usurious. That when the agent making a loan, with the knowledge or consent of the lender, takes from the borrower pay for his services, the transaction is usurious, counsel cited Philo v. Butterfield, 3 Neb. 259; Cheney v. White, 5 Id. 261; Rogers v. Buckingham, 33 Conn. 81.

Mr. CHARLES H. WOOD, for the defendants in error:

If a party voluntarily pays a principal sum and usury upon it, the matter is ended, and no recovery can be had as to the usury paid. Hadden v. Jones, 24 Ill. 381; Tompkins v. Hill, 28 Id. 519.

So, when an old transaction is settled and closed, and a new loan made, the borrower will not be allowed to set up usury in the former transaction as against the new loan. Puterbaugh v. Farrell, 73 Ill. 213. As Newcomb, in making the various loans, was acting for the borrower, he had the right to charge the commissions, and his retention of the same will not make the contract usurious. Phillips v. Roberts, 90 Ill. 493; Ballinger v. Bourland, 87 Id. 513.

If a borrower, without an original agreement, instead of paying the legal interest agrees to pay interest thereon, as well as on the principal, for further forbearance, it is legal, and not usurious. Haworth v. Huling, 87 Ill. 23; Rodes v. Blythe, 2 B. Mon. (Ky.) 335.

A note given for interest upon arrears of interest is not usurious. Stewart v. Petrie, 55 N. Y. 621; Camp v. Bates, 11 Conn. 487; Wilcox v. Howland, 23 Pick. 167.

Mr. JUSTICE WALKER delivered the opinion of the Court:

Complainant Mary M. Payne was the owner of about 400 acres of land in Livingston county, and in July, 1867, she and her husband wishing to procure a loan of $2000, applied to Newcomb, a loan agent in Chicago. He loaned them the money, took their note, payable to Herrick Stevens in two years, with ten per cent interest, semi-annually. To secure the loan they executed a trust deed for the land to one Pierce, with the usual power of sale. Complainants subsequently procured other loans from Newcomb, and gave similar notes and trust deeds on the land. When each loan was made, Newcomb deducted from the amount five per cent, which he claimed as a commission for procuring the loan. There were several extensions of the time for payment, and when they were made he charged two and a half per cent, as he claims, for procuring them. When interest was not promptly paid it was compounded at the rate that the notes bore. Complainants claim to have borrowed no more than $6630, and Payne so testifies, and to have paid in all $5800, and yet Newcomb, on the 1st of November, 1877, furnished a statement in which he claimed there was still due $11,967.17. It is claimed that Newcomb, in making these loans, was Stevens' regular agent; that being such, he made the loans and retained the commissions with the knowledge and approval of Stevens.

The bill was filed to enjoin a sale of the land under the power in the trust deeds, and for an account to ascertain what is equitably due after deducting usury and illegal charges. On a hearing the court dismissed the bill, and complainants appealed to the Appellate Court for the Second District, where the decree was affirmed. They thereupon bring the record to this court on error, and urge a reversal.

Defendants in error insist Newcomb was not the agent of Stevens when the several loans were made, but was the agent of plaintiffs in error, and had a legal right to charge them for such services,--that Stevens is in nowise responsible for such acts. Newcomb testifies that at the time these several loans were made, it was a part of his business to loan money for different persons upon commission. He further testifies: “In making loans in this State, in the usual course of business, a loan agent, for the commission he gets, has to first find the money, learn and know all about the property, often go on it, examine the title, and see to the collection of the interest and principal, when due. If the title proves defective, and it is shown that the agent has not been careful enough, or should have known about the defects before making the loan, or if the property is valued too high, whereby losses ensue, it is understood that the agent makes himself personally liable. * * * I had to submit to him the applications for every one of these loans, and afterwards sent him Payne's letters. I became his agent immediately after he agreed to make the loan, in looking after it. I stated in my direct examination that if I made any mistakes in examining the title he would have held me for it. As for the value of the property, I submitted to him all the evidence I had, and he decided for himself. So far as drawing the papers and examining the title is concerned, he entrusted the matter to me. All moneys were delivered through me to the borrower. I often made extensions without consulting Stevens at all, and if he had objected to the extensions, I would have been compelled to borrow the money from other parties and protected Mr. Payne. Don't think I ever consulted with Stevens in regard to those extensions. Don't know whether he ratified what I did in that particular or not. Don't know whether he ever knew that the extensions were made. I took the responsibility myself. In a considerable degree he left these matters with me, to deal with according to my own judgment. * * * In making these loans Herrick Stevens never agreed to and never did pay me anything, and it was always understood that I was to get my money from the borrower.” He further testified that he had been a loan agent since 1854; that he commenced making loans for Stevens in that year, and had so continued up to the time he testified--more than twenty years.

This evidence of Newcomb establishes the fact that he was Stevens' agent, beyond all dispute. He, however, says he was the agent of Payne before the loan, and of Stevens afterwards; that an agent has to find the money, learn the situation of the property, examine and ascertain the title, and see to collecting the principal, interest, etc; that if the title proves defective, or the property is valued too high, and loss ensues, it is understood the agent renders himself personally responsible. We may ask, liable to whom? To his principal, of course. If the agent of the borrower, when making the valuation and examining the title, over-values the property, or the title proves defective, what possible loss can result to the borrower? Then he must be liable to the lender, and if so, it can only be because he is his agent. And Newcomb proves this by his own testimony. He says he had to submit the application to Stevens, and if he had made any mistakes in examining the title, that Stevens would have held him liable. Why should Stevens hold him liable for such losses if he was the agent of Payne until the loan was completed, and the agent of Stevens afterwards, as he testifies? If liable to Stevens for such mistakes, it was because, and only because, he was his agent; and that he was, in the examination of the property, fixing its value and determining the character of the title, we entertain no doubt. It would be absurd to suppose Stevens would loan his money on the valuation fixed and the title reported by Payne's agent.

From all of this testimony we are compelled to believe that Newcomb was the agent of Stevens from the time the application was made for the loan. The whole transaction is not susceptible of any other construction. It is apparent that Stevens regarded and relied on Newcomb as his agent, and would have held him liable for loss growing out of neglect of duty. Newcomb testifies that Stevens would have held him liable for a mistake in examining the title. If so, then he was Stevens' agent as well before as after the loans were made, and no such distinction can be reasonably drawn as that Newcomb was Payne's agent before and Stevens' after the loans were made.

Did Stevens know that Newcomb was charging for his services, and collecting it from the borrower? Newcomb says that it was the understanding he was to get it of the borrower, and that establishes the fact beyond all cavil. Were these payments of commissions of benefit or profit to Stevens? They unquestionably were, as they paid his agent for long continued and valuable services rendered by Newcomb for him. No one will believe that Newcomb thus incurred liability to Stevens, and rendered skillful and valuable services for him for more than twenty years, as a mere gratuity. It was not so understood. Newcomb says he was to get his pay from the borrower. Stevens then paid what he owed to Newcomb by requiring the agent to impose it on the persons to whom loans were made. The arrangement amounted to no more or less than requiring the agent to loan for a per cent sufficiently high to yield Stevens the highest rate of interest allowed by the law, and to pay the agent for his responsibility, labor, skill and trouble. In effect the transaction is the same as had the loan been made at fifteen per cent, and ten had been paid to Stevens and five to...