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Statement of the Case.
borrower payable in New York, and secured by mortgage upon real estate in Illinois, is to be determined by the laws of the latter State pursuant to its statute providing, in substance, that where any contract or loan shall be made in Illinois, or between citizens of that State and any other State or country, at a rate legal under the laws of Illinois, it shall be lawful to make the principal and interest payable in any other State or Territory, or in London, in which cases the contract or loan shall be governed by the laws of Illinois, unaffected by the laws of the State or country where the same shall be made payable.
It is settled doctrine in Illinois that the mere taking of interest in advance does not bring a loan within the prohibition against usury: but whether that doctrine would apply where the loan was for such period that the exaction by the lender of interest in advance would, at the outset, absorb so much of the principal as to leave the borrower very little of the amount agreed to be loaned to him is not decided.
A contract for the loan or forbearance of money at the highest legal rate is not usury in Illinois, merely because the broker who obtains a loan - but who has no legal or established connection with the lender as agent and no arrangement with the lender in respect to compensation for his services exacts and receives, in addition to the interest to be paid to the lender, commissions from the borrower.
If a corporation of another State, through one of its local agents in Illinois, negotiates a loan of money to a citizen of the latter State, at the highest rate allowed by its laws, and the agent charges the borrower, in addition, commissions for his services pursuant to a general arrangement made with the company, at the time he became agent, that he was to get pay for his services as agent in commissions from borrowers, such loan is usurious under the law of Illinois, although the company was not informed, in the particular case, that the agent exacted and received commissions from the borrower.
In Illinois, when the contract of loan is usurious, the lender, suing the borrower for the balance due, can only recover the principal sum, diminished by applying as credits thereon all payments made on account of interest. In such cases, whatever the borrower pays on account of the loan goes as a credit on the principal sum.
A trust deed, covering real estate, provided that in the case of a sale by the trustee, at public auction, upon advertisement, all costs, charges and expenses of such advertisement, sale and conveyance, including commissions, such as were at the time of the sale allowed by the laws of Illinois to sheriff's on sale of real estate on execution, should be paid out of the proceeds. Held, (1) that this provision did not impose upon the borrower the burden of paying to a lender a solicitor's fee where a suit was brought for foreclosure: (2) that the commissions referred to in the deed are allowed only where the property is sold, upon advertisement, by the trustee, without suit.
THE Court stated the case as follows:
Statement of the Case.
By deed, bearing date November 1, 1873, and acknowledged and filed for record February 23, 1874, Edwin S. Fowler — his wife, Sophie Fowler, uniting with him- conveyed to Jonathan Edwards, in fee simple, certain real estate in the city of Springfield, Illinois, in trust to secure the payment of the principal and interest of nine bonds, of one thousand dollars each, executed by Fowler to the Equitable Trust Company, a Connecticut corporation, and payable, principal and interest, at its office in the city of New York; the principal, five years after date, and the interest, semi-annually, at the rate of seven per cent per annum.
The deed recited that the bonds were given to secure a loan of nine thousand dollars, payable five years after date thereof, with interest at ten per cent per annum, of which seven per cent per annum was secured by the deed of trust, and was to be paid as in the bond provided, and the balance, to wit, three per cent per annum, was "discounted," and paid at the time of the execution of the deed. In case of default in paying the principal or interest as each matured, or of failure to keep and perform the covenants of the deed or any of them, the trustee was authorized to sell, at public auction, after advertisement, to the highest bidder for cash, and with or without previous entry upon the premises, the right and equity of redemption of the grantors, and out of the proceeds of sale to pay the costs, charges and expenses of the advertisement, sale and conveyance, "including commissions such as are, at the time of such sale, allowed by the laws of Illinois to sheriffs on sale of real estate on execution," all sums paid by the trustee for insurance and taxes, with ten per cent interest thereon from time of payment, the principal and the accrued interest remaining unpaid at the time of sale, and to Fowler any balance remaining.
The present suit was brought, October 26, 1882, to foreclose the defendants' right and equity of redemption, and for a sale of the mortgaged property to raise such sum as might be due the mortgagee.
Fowler, by his answer, put the plaintiff upon proof of the averments of the bill, and made defence upon several grounds.
Statement of the Case.
But the original answer is important only as alleging that the loan was usurious, and was consummated in the manner it was with intent to evade the statutes of Illinois relating to interest.
The plaintiff filed a general replication; and subsequently, the defendants, by leave of the court, amended their answer, stating more fully the grounds upon which they based the defence of usury. They also alleged that the contract of loan was and is a New York contract, and that by the statutes of that State it was usurious, in that the interest contracted to be received by the plaintiff, having regard to the amount actually advanced by it, was in excess of seven per cent per annum, the rate established by the laws of New York. Of those statutes they claimed the benefit.
[The facts proved, and which were relied upon to establish that the contract was usurious under the laws of New York, are stated in the opinion of the court, post pages 397-399.]
By a decree passed October 20, 1884, the court below found the amount due from Fowler to be only $2980.67 on the bonds, and $270.94, insurance and taxes paid by the plaintiff with interest thereon; in all, $3251.61. At the foot of that decree were these orders:
"And thereupon the complainant entered its motion for a rehearing before a full bench.
"Whereupon, on said 20th day of October, of the year last aforesaid  came the complainant, by its solicitor, and filed in the clerk's office of said court its motion and petition. for a rehearing in this cause, which motion and petition are as follows," etc.
Following the above, in the transcript, are the written motion and petition for rehearing.
On the 8th of June, 1885, the succeeding term, the cause was set for hearing on the 29th of that month before what is called a full bench. Then appears an order, under date of June 30, 1885, entered as of October 31, 1884, granting the rehearing asked. To that order the defendants excepted.
By the final decree of January 11, 1887, the sum of $8150.79 was adjudged to be due the Trust Company, of which $7809.69 was found to be the sum actually advanced by it to Fowler,
Argument for the Equitable Trust Co.
and $341.10 was the amount of insurance and taxes on the property paid by the company, with interest on each sum, from the date of the decree, at the rate of six per cent per annum. The mortgaged property was ordered to be sold to raise the above aggregate amount found to be due, with such interest and the costs of the suit. From that decree each party has prosecuted an appeal; the defendants insisting that no decree, for any amount, should have gone against them, while the plaintiff insists that the decree should have been for a larger amount.
Mr. William L. Gross,' for the Equitable Trust Company, argued as to the defence of usury:
I. Usury is a local question. It is the lex loci contractus which governs in respect of usury. De Wolf v. Johnson, 10 Wheat. 367; Andrews v. Pond, 13 Pet. 64; Cromwell v. County of Sac, 96 U. S. 51, 62; Call v. Palmer, 116 U. S. 98; Latrobe v. Hulbert, 6 Fed. Rep. 209.
II. Allegata et Probata. The rule is general, and without exception, that an averment or plea of usury, must be proved as laid. Ewing v. Howard, 7 Wall. 499; Drake v. Watson, 4 Day, 37; Wilmot v. Monson, 4 Day, 114; Brown v. Mortgage Co., 110 Illinois, 235; Kihlholz v. Wolf, 103 Illinois, 362; Phillips v. Roberts, 90 Illinois, 492; Telford v. Garrels, 132 Illinois, 550; Beach v. Fulton Bank, 3 Wend. 573; Smith v. Brush, 8 Johns. 84. And if the defendant fails in proving the usurious contract in the way and manner in which he has charged it in his plea or answer, the defence must fail. Vroom v. Ditmas, 4 Paige, 526.
III. Intent is an essential ingredient. If the transaction, says the court, in Bank v. Owens, 2 Pet. 527, was in violation of the restriction in the bank's charter limiting its power to "take" more than 6 per cent interest, "it could only have been upon the ground of an intention" to evade the statute. So also: "In construing the usury laws, the uniform construc
1 This case was argued with Fowler v. Equitable Trust Co., post 408, and Fowler v. Equitable Trust Co., post 411.
Argument for the Equitable Trust Co.
tion in England has been, (and it is equally applicable here,) that to constitute usury within the prohibitions of the law, there must be an intention knowingly to contract for or to take usurious interest; for if neither party intend it, but act bona fide and innocently, the law will not infer a corrupt agreement. Where, indeed, the contract upon its face imports usury, as by an express reservation of more than legal interest, there is no room for presumption; for the intent is apparent; res ipsa loquitur. But where the contract, on its face, is for legal interest only, there it must be proved that there was some corrupt agreement or device, or shift, to cover usury; and that it was in the full contemplation of the parties. The quo animo is, therefore, an essential ingredient in all cases of this sort." United States Bank v. Waggener, 9 Pet. 378, 399. See also Hotel Co. v. Wade, 97 U. S. 13, 23; Lloyd v. Scott, 4 Pet. 205; Palmer v. Call, 7 Fed. Rep. 737.
IV. Commissions by agent or broker. When an agent, authorized to loan money at lawful interest, exacts for his own benefit more than the lawful rate, without the knowledge or authority of his principal, the loan is not thereby rendered usurious. The loaner of the money must not only be a party to the usurious contract, but he must take the usury. Call v. Palmer, 116 U. S. 98. And when the evidence fails to show that the commission was paid to the loaner, the defence of usury, based thereon, will not be sustained. Grant v. Phoenix Life Ins. Co., 121 U. S. 105, 117.
Agent's commissions, as an element in usury defences, has often been before the Supreme Court of Illinois:
Ballinger v. Bourland, 87 Illinois, 513. There the agent procured a loan and charged a commission and expenses to borrower, but without the lender's knowledge and not for the lender's benefit, and the court said it was not usury. See also Colehour v. State Sav. Ins., 90 Illinois, 152; Boylston v. Bain, 90 Illinois, 283; Phillips v. Roberts, 90 Illinois, 492.
Payne v. Newcomb, 100 Illinois, 611. There the loan agent was required to learn the situation of the property offered as security, to examine and ascertain the title, and became per