Scottish Mortgage & Land Inv. Co. v. Mcbroom.

• Citation: 6 N.M. 573,30 P. 859
• Court: New Mexico Supreme Court
• Decision Date: 24 August 1892
• Parties: SCOTTISH MORTGAGE & LAND INVESTMENT CO., Limited.v.McBROOM.

6 N.M. 573

30 P. 859

SCOTTISH MORTGAGE & LAND INVESTMENT CO., Limited.

v.McBROOM.

Supreme Court of the Territory of New Mexico.

Aug. 24, 1892.

Error to district court, San Miguel county; JAMES O'BRIEN, Judge.

Action by W. H. McBroom against the Scottish Mortgage & Land Investment Company of New Mexico, Limited, to recover double the amount of usurious commissions on a loan made by defendant to plaintiff. From a judgment for plaintiff, defendant brings error. Reversed.

Comp.Laws, §§ 1737, 1738, provide that any corporation which shall hereafter “charge, collect, or receive from any person a higher rate of interest than twelve per cent. per annum * * * shall forfeit to the person of whom such interest was collected or received double the amount * * * upon any action brought for the recovery of the same; ” and that the provisions of this act shall apply to any corporation which “may charge, receive, or collect a higher rate of interest than twelve per cent. per annum by means of discount, commission, agency, or any other subterfuge.” Held, that an action to recover double the amount of usurious commissions contracted for, and retained by a loaning company out of the principal sum at the time the loan was made, would not lie until the principal and interest of the loan have been paid, since such amount may be applied to the reduction of the debt, and the lender has not yet “received” any such to which he may not be lawfully entitled.

Eugene A. Fiske and A. A. Jones, for plaintiff in error.

Frank Springer, for defendant in error.

FREEMAN, J.

This is a writ of error, brought to reverse a judgment rendered in favor of the defendant in error and against the plaintiff in error in the district court for the fourth judicial district for the county of San Miguel. The facts are substantially as follows: On the 23d of June, 1883, the Scottish Mortgage & Land Investment Company of New Mexico, Limited, a corporation organized under the laws of Scotland, filed in the office of the probate clerk of San Miguel county, N. M., its certificate of incorporation and articles of association, and a certificate designating Las Vegas as its principal place of business in New Mexico, and George J. Dinkel as its authorized agent, pursuant to the laws of the territory allowing foreign corporations to do business here. By articles of association it appears that the principal object of this company was the investment of money on loan on the security of real or heritable or other property in the United States. The directors were empowered to appoint managers and other necessary officers. Previous to filing these papers the company entered into a contract with George J. Dinkel, appointing him and one Browning local managers of the company. Article 4 provided that “all commissions on loans by the company, and all bonuses or penalties payable by borrowers from them in respect of such loans, shall belong to the company.” The general manager of the company was to have general charge of the company's business in New Mexico. On the 5th of February, 1886, the defendant in error made application to the company, though Dinkel, its general manager, for a loan of $65,000, to be secured by mortgage, and this offer was transmitted to the home office for instruction. The application was at first refused, for the reason that the amount was too large. On July 14th of the same year Dinkel again wrote to Carson & Watson, the general managers at Glasgow, the home office, stating that McBroom had renewed his application for loan, first proposing to pay a commission of $6,000 for securing the loan, and afterwards to give Dinkel a fourth interest in his entire ranch and stock, which interest Dinkel then estimated to be worth $50,000. In his letter transmitting this offer to the home company Dinkel said: “Now, such a proposition comes only once in a very great while, and I was anxious that the company should receive the benefit of this great commission, which would be in addition to the ten per cent. interest he proposed to pay.” A directors' meeting was held at the home office to consider this proposition, and it was also declined. On the same day, however, the president of the company wrote Dinkel, giving a full account of the meeting, saying: “In regard to the McBroom business, I very strongly urged on my colleagues that if we could get here the parties whom you have already interested to stand aside, we might give him the whole $65,000.00 at twelve per cent., and in that event perhaps McB. might still consider you entitled to a commission,” etc. On September 4th Dinkel cabled to the home office that McBroom had backed out; but later on, negotiations having been renewed, Dinkel cabled the home office as follows: “Will directors now loan McBroom $65,000. First year, six per cent.; after that, ten per cent., with quarter interest.” To this telegram the board replied by cable as follows: McBroom: The board sanction a loan of $30,000, first mortgage, ten per cent.; or $65,000, twelve per cent. Decline quarter interest, but get best cash bonus possible instead, or get third party to buy quarter interest, and pay us.” On the basis of this understanding the trade was consummated, the company advancing in checks, etc., to McBroom, the defendant in error, the sum of $65,000, and the defendant in error returning at the same time to Dinkel the bonus of $6,500.

This action was brought under the statute to recover double the amount of this bonus or commission. The action was brought under sections 1737 and 1738 of the Compiled Laws, which are as follows: “Sec. 1737. Any person, persons, or corporation, who shall hereafter charge, collect, or receive from any person a higher rate of interest than twelve per cent. per annum, shall be guilty of a misdemeanor, and, upon conviction thereof before the district court or a justice of the peace, shall be fined in a sum of not less than twenty-five dollars, nor more than one hundred dollars; and such person, persons, or corporation, shall forfeit to the person of whom such interest was collected or received, or to his executors, administrators, or assigns, double the amount so collected or received upon any action brought for the recovery of the same within three years after such cause of action accrued. Sec. 1738. The provisions of this act shall also apply to any person, persons, corporation, or officer of the same, who may charge, receive, or collect a higher rate of interest than twelve per cent. per annum by means of discount, commission, agency, or any other subterfuge.”

The first contention of the plaintiff in error is that the transactions out of which the cause of action arises were not tainted with usury in a way to affect the rights of the company; that, in order to constitute usury, there must be intention knowingly to contract for usurious interest, and that both parties must participate in this corrupt agreement; that there must be an aggregatio mentium. It insists that if there was usury in the transaction it was participated in alone by its agent, Dinkel. The record shows that the $6,500 claimed to be usurious were paid by defendant in error to Dinkel, the local manager of the company for New Mexico, for his services in procuring the loan. It is insisted, therefore, that the transaction falls within the rule laid down by the supreme court of the United States in the case of Call v. Palmer, 116 U. S. 98, 6 Sup. Ct. Rep. 301, wherein that court says: “It is settled that when an agent, who is authorized by his principal to lend money for lawful interest, exacts for his own benefit more than the lawful rate, without authority or knowledge of his principal, the loan is not thereby rendered usurious.” In reply to this contention, the defendant in error insists - First, that the doctrine of agency has no application to the facts in this case, that Dinkel was not an agent, but an officer of the corporation, that a corporation can act alone through its officers, and that a transaction with Dinkel was a transaction with the corporation itself; and, second, that the corporation knowingly participated in the usurious transaction by authorizing Dinkel, its local manager, to get “the best cash bonus possible,” and that it cannot protect itself from the consequences of its corrupt transaction by showing that it allowed its local manager to retain the fruits thereof. In the view that we have taken of the matter, it is immaterial to determine whether Dinkel was an agent, or whether, as an officer, he was a part of the corporation, so that a transaction with him was a transaction with the corporation itself; for the fourth article of the agreement between him and the home office, as already shown, provided that all such commissions and bonuses should inure to the benefit of the company. In view of this provision of his contract, and of the fact that the company had knowledge of each step taken by him, it is to be presumed that he was acting for the company. The facts in this case bring it clearly within the rule laid down by the supreme court of the United States in the case of Fowler v. Equitable Trust Co., 141 U. S. 384, 12 Sup. Ct. Rep. 1, wherein a foreign corporation (whose agent in the state accepted a commission from the borrower on loans procured from such foreign corporation) was held to have received the proceeds of the usurious transaction, the commission paid to the agent being in excess of the highest rate of interest allowed by law. Now, does it afford any protection to the company to show that it was ignorant of the law of this territory, and was not therefore aware that the transaction was usurious and unlawful? Lloyd v. Scott, 4 Pet. 205.

Conceding, therefore, the correctness of the position of the defendant in error that the transaction was with the plaintiff in error, we are next to inquire into the legal effect of the contract as it relates to rights and liabilities of the contracting p...