
    The Mercantile Trust Company, as Trustee under the Last Will and Testament of Jules R. Gimbernat, Deceased, Plaintiff, v. Jules R. Gimbernat, Appellant, Impleaded with Henry M. Black, Respondent, and Clara L. Gimbernat and Others, Defendants.
    First Department,
    November 5, 1909.
    Usury — assignments of trust fund—form.
    Where upon making a loan of §3,000 to the beneficiary of a trust fund, which was to be paid over to him at certain ages, the lender as security took an assignment of the trust funds to the extent of $3,000 and interest, and gave to the borrower only $2,073, retaining among other amounts $500 for legal expenses and brokerage, although no legal expenses were incurred, and upon the making of a certain loan for §5,000 took a similar assignment and deducted from the amount loaned the carrying charges of the first loan, part of which were already covered therein, and, finally, after making all the deductions he could think of, paid §816 less than the remaining value, so that the borrower received but §2,984, and upon a third loan for §2,000 with the same security the borrower received but $1,000, the assignments of the trust fund are void for usury.
    Appeal by the defendant, Jules E. Gimbernat, from part of a judgment of the Supreme Court in favor of the defendant Henry M. Black, entered in the office of the clerk of the county of New York on the 25th day of August, 1908, upon the decision of the court rendered after a trial at the New York Special Term.
    
      Harry Eckhard, for the appellant.
    
      Alfred G. Reeves, for the respondent.
   Scott, J.:

This action is brought to determine conflicting claims to a fund amounting to about $11,000 now held by the plaintiff as trustee under the last will and testament of Jules R. Gimbernat, deceased. By the judgment appealed from the respondent Henry M. Black has been awarded substantially the whole sum by virtue of three certain assignments made by the appellant Jules B. Gimbernat. The elder Gimbernat, father of the appellant, had by his will created a trust fund for the benefit of the appellant, with a provision that the principal should be paid over to him at certain ages, one-fourth being payable when he should arrive at the age of twenty-five years. Soon after he came of age the younger Gimbernat, being desirous of raising money, applied to the respondent Black for a loan of $3,000, and after some negotiations Black agreed to make the loan, and took from Gimbernat as security therefor an assignment dated May 27, 1901, of all of the assignor’s right, title and interest in the aforesaid fund to the extent of $3,000, with interest until paid, to be paid from the legacy which would become due on -December 2, 1904. The document also directed plaintiff as trustee to pay the said principal sum when payable, and to pay the interest and the annual life insurance premium upon a policy on Gimbernat’s life out of the income payable to Gimbernat under his father’s will. This paper named as assignee one Bichard M. Bell, through whom Black now claims by assignment. Out of this sum of $3,000 Gimbernat received only $2,073.50, the balance being retained by Black to cover the expenses of the loan, including a wholly unexplained charge of $500 for “legal expenses” and “ brokerage,” although it is made perfectly clear that no legal expenses whatever were incurred. It is true, as claimed by respondent, that under the terms of the trust the direction to the trustee to pay the interest as it accrued out of income was ineffectual, hut the assignment was of $3,000 and interest, and it is by no means clear that the lender might not have collected the interest as well as the principal when the legacy became payable. On January 31, 1902, Gimbernat applied for a further loan of $5,000. Black refused to advance the money in the form of a loan, but offered to purchase an interest in the legacy to the extent of $5,000, and the transaction took this form. The assignment of $5,000 was identical in form with the former assignment of $3,000 except that it did not provide for the payment of interest. It was also made to Bell, although' Black testified that he and Bell were joint purchasers, he contributing $3,000 and Bell contributing $2,000. Gimbernat received $2,984, being charged about $1,200 for the advance.

Black testifies that he made this amount up as- follows: “ $240.50 premium on the first policy issued, * * * $180 interest each year on the $3,000 (first loan), and then we would have to pay the premium of $159 on the Equitable policy to take care of this fund, * * * making a total of in the neighborhood of $1,200 and leaving $3,800 for Mr. Gimbernat to sell. This amount he desired to sell would not mature for two years, and we were willing to pay $2,984.” The Equitable policy was one taken out to secure the second assignment. After the legacy became due Black allowed the policy to lapse, collecting the surrender value. Thus Black required Gimbernat to pay out of the second advance the carrying charges on the first loan, part of which at least seem to have been deducted from the $3,000 covered by the first assignment, and then after making every deduction he could think of paid $816 less than the remaining value.

The third assignment was dated March 5,1902, and was identical with the second, being in form an absolute assignment of $2,000 out of the legacy when due. This was also made to Bell, although Black testifies that he was the sole purchaser, paying $1,000 for it. On January 16, 1905, Bell assigned to Black all his interest in the legacy represented in these three assignments. It is impossible to doubt that all these transactions were similar, and whatever their form, were nothing less than loans, although two of them are now said to have been sales. This view is confirmed by three releases prepared to be given to the trust company and signed by Gimbernat, Black and Bell. These were prepared by Black, or at his direction, and each one recites that the assignments were given as security for the payment to him (Bell) by the said Ginibernat of the sums of $3,000, $5,000 and $2,000 respectively.” It is conceded that Gitnbernat received only $6,057.50 for the assignments of a $10,000 interest in the legacies.

On December 3, 1904, Gimbernat, through his attorney, while asserting that the assignments were void for usury, offered to allow them to the extent of the money he received, with interest and necessary disbursements. This offer was refused.

It seems to us that it is quite impossible to find that these transactions were other than covers for -usurious loans. It would serve no useful purpose to review the testimony and point out the reasons which lead to this conclusion. The devices and methods by which it was sought to cover up the real nature of the transactions have been used many times before, and have seldom if ever successfully passed the scrutiny of the courts. They have not even the merit of novelty or of plausibility. It follows that the judgment must be reversed and a new trial granted, with costs to the appellant against the respondent Henry M. Black to abide the event.

Patterson, P. J., Ingraham, McLaughlin and Laughlin, JJ., concurred.

Judgment reversed and new trial ordered, costs to appellant against respondent Black to abide event.  