
    LOUIS HEIDENHEIMER, Plaintiff and Appellant, v. DAVID MAYER, Defendant and Respondent.
    I. USURY.
    
    1. COMMISSIONS AND CHARGES FOR EXPENSES.
    
      (a) Device to cover usury, when.
    1. Charges of specific sums or certain percentages for pi'ospectivc commissions and bsses or expenses on and for the anticipated borrowing, by the creditor, of the sum forborne during the period Of forbearance, the debtor agreeing to pay such charges at all events, whether the commissions be earned or not, or whether the losses and expenses occur' or not, constitutes usury.
    
    
      (a) Example. A creditor, upon giving time for payment of a present indebtedness to be paid in four installments, one at the end of twelve months, one at the end of eighteen months, one at the end of twenty-four months and one at the end of thirty months, took notes of the , debtor, having those periods to run respectively, and in each note included the legal interest for the period the note had to run, and two and a half pet' cent, commission for each six months, and one and a half per cent, for each three months the note had to run, the percentages being calculated on the portion of the principal indebtedness for which the note was given; the two and a half per cent, was charged for commissions for the anticipated borrowing each three months during the running of the notes respectively of the amount of the principal indebtedness secured thereby for the use of the creditor, and the one and a half per cent, for anticipated losses, charges, and expenses in so borrowing. There was no evidence that, the creditor had been obliged to borrow by reason of this extension of time, or had in fact borrowed, or had been put to any loss, charges or expenses in and about borrowing.
    Held
    
      a device or cover for usury.
    
    3. GOVERNING LAW.
    (a) The notes being dated and payable at the city of New York, and having been delivered to the payee in the State of New York, by being mailed by the maker at the city of New York" to the payee by his direction,
    Held
    
      the contract was not only made, but to be performed in the State of New YorTc, and the usury law of that State governs.
    
    3. GUARANTY.
    
      (a) Effect on, of usury in that which is guaranteed.
    1. If the notes or other obligations, the payment whereof is guaranteed, are void for usury, then if the guaranty has no other or different consideration than such notes or obligations, it necessarily fads with the notes or obligations.
    
    Before Speir and Freedman, JJ.
    
      Decided June 25, 1877.
    The action is brought upon the defendant’s guaranty of four notes of Joseph Bernhard, two of which had been paid. The defense is usury. The four notes are all dated March 11, 1873, at the city of New York, and are payable there. The guaranty was delivered simultaneously with the notes by Bernhard, to the plaintiff, by mailing the same to him in a letter at the city of New York, by his direction.
    The action was tried before the court without a » jury by consent of parties, and judgment was ordered for the defendant against the plaintiff, with costs.
    
      R. W. Townsend, attorney, and A. R. Dyett, of counsel, for respondent, urged:
    1. The four promissory notes, being not only dated, but payable at the-city of New York, were New York contracts,, and their-validity is to be determined by the laws of this State (Lee v. Silleck, 33 N. Y. 615 ; Jewell v. Wright, 30 N. Y. 259; Hildreth v. Sheppard, 65 Barb. 265; Jack v.. Nichols, 5 N. Y. 178; Cope v. Wheeler, 41 N. Y. per Woodruff, J., at foot of page 311; Coook v. Litchfield, 9 N. Y. 280; Newman v. Kerson, 10 Wis. 338; Consequa v. Fanning, 3 Johns. Ch. 587, 610 ; 17 Johns. 511, 520, 521; Story on Confi. of Laws, 7th Ed. §§ 279, 280). If there be any cases apparently in conflict-with these cases they will be found on examination not to be so; but if otherwise they must all yield to the superior authority of the above cases of Lee v. Silleck and Jewell v. Wright.
    II. The four notes were not only payable at the city of Hew York, but those notes and the guaranty having been sent to the plaintiff by Bernhard, by mail, at and from the city of Hew York, by the plaintiff’s direction, were delivered in this State (Barry v. Eq. Ins. Co., 59 N. Y. 587 ; at pages 589 and 594). They were contracts, therefore, not only to be performed, in this State, but were executed and delivered there.
    III. But if the notes and guaranty were otherwise valid, the plaintiff knew the usury laws of this State, and that the notes and guaranty were for that reason void, and the plaintiff is not protected by that comity which otherwise would aid him to enforce them in this State (Miller v. Tiffany, 1 Wall. 298 ; Merchants’ Bank v. Spaulding, 5 Seld. 53; in which the notes were both payable in New Jersey, at foot of page 62).
    IV. The defendant had the right to set up usury in the four notes (Paschall v. L’Amoureux, 37 Barb. 189 ; Price v. Lyons Bank, 33 N. Y. 55; Rosa v. Butterfield, Id. 655). The guaranty had no independent consideration from, and was delivered simultaneously with the notes, and when they fell, the guaranty fell with them (Same cases).
    
    V. The position that the “ commissions ” and “ charges” which went to make up the notes were for services or expenses, within the cases allowing such items, is hardly tenable. Indeed, the finding of the judge that they were fictitious, and mere pretexts for usury, is conclusive ; and it was fully sustained by the evidence. The intent which is essential, is not an intent to violate the statute, but an intent to take more than seven per cent., and is to be deduced from the facts (Fiedler v. Darwin, 50 N. Y. 437 ; Hall v. Earnest, 36 Barb. 325). If, however, it be thought necessary to refer to the cases where such items have been allowed, it will. be seen that they differ toto ocelo from the present. Some of these cases are Elwell v. Chamberlain, 31 N. Y. 611; Smith v. Morris, 27 Id. 138; Trotter v. Curtis, 19 Johns. 160; Seymour v. Marvin, 11 Barb. 80. See also the following cases : Dry Dock B’k v. Am. Life Ins. Co., 3 Comst. 344 ; Clark v. Sheehan, 47 N. Y. 194,197 ; Harger v. McCullogh, 2 Denio, 121; Steel v. Whipple, 21 Wend. 105; Cleveland v. Loder, 7 Paige, 557 ; Brown v. Vredenbergh, 43 N. Y. 195; Bank of Salina v. Alvord, 31 Id. 473; Tyler on Usury, (1873), 329-338. In all the cases where such charges have been allowed, they were for service actually rendered in good faith. In Williams v. Hand, 7 Paige, 582, a charge for anticipated trouble and expense was condemned as usurious, and .the case is exceedingly like the present.
    
      Sigismund Kaufman, attorney, and Lewis Sanders, of counsel for appellant, among other things urged:
    I. The original contract between Kapp, Bernhard & Einstein was made in- Germany, for money to be advanced in Germany; the money was advanced in Germany, and in March, 1873, the debt was held in Germany by third parties, there to be repaid.
    II. The release of Bernhard from his liability to pay the other two-thirds of the debt due Heidenheimer, is ample consideration for the guaranty in suit (Woodcock v. Bennett, 1 Cow. 733; Waydell v. Lauer, 3 Denio, 417; Livingston v. Radcliff, 6 Barb. 206).
    III. The release of Kapp and Einstein from their liability to pay the one-third guaranteed by the defendant. Mayer, is a valuable consideration which will support the guaranty.
    IV. The guaranty, being given at the same time as the notes, is valid and binding, if the consideration of the notes was legal (Bickford v. Gibbs, 62 Mass. 155-6 ; McLaren v. Watson’s Exrs., 26 Wend. 435 ; Emmott v. Kearns, 5 Bing. N. C. 559 ; Leonard v. Vredenberg, 8 Johns. 29). 2. The guaranty is binding, if it have an independent valuable consideration to support it, as it is an independent contract (Baily v. Freeman, 11 Johns. [m. p.] 221; Veazie v. Willis, 6 Gray [Mass.] 93 ; Leonard v. Vredenberg, Bickford v. Gibbs, cited supra). 3. The guaranty expresses a consideration and its receipt. Defendant estopped from denying the receipt after plaintiff accepted and acted upon it, without showing plaintiff knew the money had not been paid (Continental N. Bank v. Ntl. Bank Com., 50 N. Y. 580; Watson’s Exrs. v. McLaren, 19 Wend. 563, and cases cited ; Duchess Kingston’s Case, 2 Smith L. C. [End. ed.] 873).
    V. The defense of usury fails, because the money was advanced in Germany—on a contract made in Germany, on a promise to repay in Germany—and in Germany there is no usury law or forfeiture of contract. The notes and guaranty were delivered in Germany on a contract accepted there, and the guaranty expressly states: “I herewith guarantee to Mr. Louis Heidenheimer, in Frankfort-on-Main, Germany, th% punctual payment of the following notes.” The usury laws of New York do not govern the contract in suit, and cannot avoid a contract valid by the laws of Germany, and not against the public policy of the lex fori. The notes were negotiated in Germany, though payable with current rate of exchange in New York, and come within the rule laid down in Tilden v. Blair (21 Wall. U. S. 247), where a draft was accepted and made payable in New York, but first negotiated in Chicago, 111.—held: “It is plain, therefore, that the contract is an Illinois contract, and the rights and liabilities of the parties must be determined according to the law of that State” (Held in Miller v. Tiffany, 1 Wall. 310). “If the rate of interest be higher at the place of the contract than at the place of performance, the parties may lawfully contract in that case, also, for the higher rate.” This principle is.considered and affirmed in Chapman v. Robertson (6 Paige, 634, citing Depau v. Humphreys, 20 Mart. 1. See Bank of State of Georgia v. Lewin, 45 Barb. 343).
    VI. The letter of Heidenheimer, offered by defendant, claims that the expenses and the 7 per cent, cover all the additions to the principal, except a small commission for services—services rendered in keeping up or carrying the loans originally obtained for the firm of Kapp, Bernhard & Einstein. Mr. Heidenheimer claims to have done this; no one with any knowledge on the subject was called to contradict it; it was defendant’s evidence, and Hiedenheimer is unimpeached. Onus proband,i is on defendant to show that charges, and commissions and expenses for raising or carrying loans in Germany, are exorbitant or unusual, or a mere cover, to constitute usury (Trotter v. Curtis, 19 Johns. 160, where commissions of 2½ per cent, were charged on drafts for advances ; Elwell v. Chamberlain, 31 N. Y., 615; Seymour v. Marvin, 11 Barb. 87; The Dry Dock Bank v. Am. Life Ins. Co., 3 N. Y. 355 ; Smith v. Marvin, 27 Id. 137; Tyler on Usury, 3d ed. 128).
   By the Court.—Speir, J.

It appears from the evidence in the case, that the firm of Kapp, Bernhard and Einstein, owed the plaintiff §13,387.90, for money advanced by him in Frankfort-on-Main in Germany, by his drafts on them payable in the city of New York, but they did not pay the drafts. This sum of $12,387.90, included interest and commissions for advances. The plaintiff’s right to these commissions is not in dispute. Subsequently, when the four notes were given, the indebtedness of the firm was divided into three equal parts of $4,129.30 each, and each member assumed one of said parts, as his share.

The plaintiff agreed with Bernhard to give time for payment by him of his said share, amounting to $4,129.30, as follows; on $1,129.30, part thereof, for 12 months from March 11, 1873, on $1,000 thereof, for 18 months from March 18, 1873, $1,000 thereof, for 24 months from March 11, 1873; and on $1,000, balance thereof, for 30 months from March 11, 1873, upon his giving his four several promissory notes: one.at 12 months from March 11,1873, for $1,321.77, gold ; one at 18 months from March 18,1873, for $1,255.00, gold ; one at 24 months from March 11, 1873, for $1,340.00, gold ; one at 30 months from March 11, 1873, for $1,425.00, gold. Such notes to be guaranteed by defendant.

The notes and guaranty were given.

The amount of these notes was arrived at by the following statement:

Total amount of indebtedness of Kapp, Bernhard &

Einstein, divided into three parts, 9831.40 ) ^ qs each one-third M, ' - - - -)

fl. at 42 cts. gold, - - $4,129.30 being amount due by each individual party, March 18th, 1873, in gold.

DIVIDED INTO FOUR PAYMENTS.

$1,129.30, at 12 mos. from March 11th, 1873.

79.05 interest at 7 per cent.

56.46 commission each 6 months 2¿á per cent, making 5' per cent.

56.46 charges 1m per cent, each 3 mos., 5 per cent.

$1,321.27 in gold, first payment.

$1,000.00 at 18 mos. from date of maturity, March 18th, 1873.

105.00 Int. at 7 per cent., for 18 months.

75.00 2m per cent, commission in each 6 mos. 7M i

75.00 charges lM per cent, each 3 mos. 7m per cent.

$1,255.00 in gold.

$1,000.00 at 24 mos. from March 11th, 1873.

140.00 Int. at 7 per cent, for 24 months.

100.00 2M per cent, commission for each 6 mos. 10 %

100.00 charges lM each 3 mos., 10 per cent.

$1,340.00 in gold.

$1,000.00 at 30 months from March 11th, 1873.

175.00 Int. at 7 per cent, for 30 months.

125.00 2m per cent, commission each 6 mos. 12m #

125.00 lM- per cent, charges each 3 mos. 12m i

$1,425.00 in gold.

The 2m per cent, mentioned in the statement was called and intended by the plaintiff as commissions, and the lM per cent, therein mentioned was called and intended by him as contingent expenses to be incurred fur raising and borrowing money for the plaintiff’s use during the said period. „

An agreement is not necessarily usurious which provides a commission on advances made by a factor, or where money has been advanced by factors to pay drafts, and the commissions have been earned. Nor is it per se usurious for an agent or factor to agree for a reasonable commission to be paid by the principal for accepting and paying bills with funds furnished by the latter. The rule extracted from the English cases clearly defines the distinction which exists in these cases. It is, wherever the lender stipulates even for the chance of an advantage beyond the legal interest, the contract is usurious, if he is entitled by the contract to have the money lent, with the interest thereon, repaid to him at all events (Barnard v. Young, 17 Vesey, 44; Chippendale v. Thurston, 1 Car. & Payne, 101). In cases of this kind it becomes a question of intent which is essential to constitute the offense of usury. But the intent must be deduced from and determined by the facts. Knowingly and intentionally taking or reserving a greater interest or compensation for a loan than that allowed by law is per se usurious. The intent is manifest in this case. The transaction was a mere pretense or cover to take more than seven per cent, for the use of the- money during the term of the loan, and so the court below has found. The plaintiff writes:

“I have to say, Gents, that the proposition which you make, and according to which it would take three years until I would be paid off by you, is not quite reasonable. You know not and cannot judge about the trouble it gives me, to raise and provide the large amount advanced to you. If I would have been prepared for it, or if I had made arrangements before with you accordingly, it would be different; but instead of that, and as 1 have no cash to my disposition, but have to borrow the money from three to three months, or raise the amount by drafts on my friends and relations living out of the city, it is great trouble to me ; three months is the longest time allowed in this country for such transactions, and then it can only be done with more or less expenses, such as loss on exchange, brokerage, commission, stamps, etc. Regarding the interests offered by you, I will not accept the same, and I have charged you only, as you will seeo by my account, the regular interest of seven per cent. But as the transaction as it now stands gives ine considerable more work and trouble as if I would transact for you in a regular business way, I have to charge you the same commission as if this would be the case, and which is

two and a half per cent, for each six month, or for twelve months twice two and a half per cent., or five per cent., and so on. (The time for closing np your transactions before took always about six months, and I charge you two and a half per cent, for it.)
“Besides this, however, I have to charge you for each three months one-quarter per cent, to raise and cover the amounts by borrowing and as described above, and which scarcely covers my loss and disbursements, and for which you have also to come up. You can surely also not object against this, or I would be compelled to sell some of my American securities, and where I would lose none, and under the present horrid state of money matters and difficulties on all European exchanges, perhaps ten to twenty per cent., and which I would then have to charge to you. Since I wrote you last on this subject, it has changed yet considerably to the worse in this direction. By my actions you see that 1 do all in my power, and with so much trouble to assist you, and at the same time to save you from losses so much as possible, but above that I cannot go. Consequently the charges are seven per cent, for interests; five per cent, for commissions, and five per cent, for losses and disbursements, which makes altogether seventeen per cent.”

There was no evidence that the plaintiff had been obliged to borrow by reason of the extension of time, or had in fact borrowed, or had been put to any loss, charge or expense over and above borrowing.

The debtor agrees that commissions might possibly be earned, and were proper, although they had never been earned, and by the terms of Ms obligation agrees to pay them at all events, whether earned or not, and the stipulated percentage for prospective losses and disbursements which may be met in the future, whether they actually occur or not. It is evident that the plaintiff intended to stipulate for this chance of a greater profit than seven per cent, for the use of his money, as it is made a part of the written agreement showing the terms upon which the use of the money was made, and it does not appear there was any mistake or misunderstanding in making the agreements If agreements of this character are carried out and tolerated by the courts the most oppressive exactions of usury would become legalized, because the necessitous and indigent debtor had agreed to the extortion.

The appellant’s counsel contends that the original contract was made in Germany for money to be advanced in Germany. It cannot be denied that a contract is to be governed by the laws of the place where it is made, if it is not to be performed according to the terms of the contract elsewhere (Story on Conflict of Laws, § 282). The four notes are dated and payable at the City of New York, and they were delivered in this State, as they were mailed in this city by Bernhard to the plaintiff, and by his directions. I am unable to appreciate the view taken by counsel between the notes and the guaranty as separate existing contracts. If these notes are intrinsically usurious, and therefore in violation of the statute, the guaranty is equally so. It had no different or other consideration than the notes. They were delivered at the same time and identical in their consideration, and the contracts are not independent (Rosa v. Butterfield, 33 N. Y. 665).

An examination of the requests by plaintiff for additional findings of fact shows that they were properly refused; and the exceptions to the facts found, and conclusions of law, were properly overruled.

The judgment appealed from must be affirmed, with costs.

Freedman, J., concurred.  