
    Condit v. Baldwin et al.
    
    
      Usury.—Commissions.
    
    If an agent for investment, without the knowledge of his principal, in making a loan, exact a commission for himself, from the borrower, this does not render the transaction usurious, nor affect the security in the hands of the lender.
    Condit 13. Baldwin, 21 Barb. 181, affirmed.
    Appeal from the general term of the Supreme Court, in the seventh district, where judgment was rendered for the plaintiff, in a case tried before the court, without a jury. (Reported below, on a former trial, 21 Barb. 181.)
    This was an action on a promissory note, made by the defendants (Baldwin being the principal debtor, and the other makers his sureties), for $400, dated the 2d May 1851, payable to George C. Mills or bearer, two years after date, with interest annually. The defendants, by their answer, set up the defence of usury.
    On the trial, it appeared, that the plaintiff, a resident of New Jersey, had placed in the hands of S. K. Williams, an attorney-at-law, of '"'Newark,- Wayne County, in this state, a smn of $400, to be invested for her, at lawful interest. Baldwin employed Mills to obtain for him a loan of $400, at two years; Mills applied to Williams for the money, and stated that the defendants would unite in a note for the same; Williams said, he had just that amount to invest for a lady; but that he preferred to loan on mortgage, on account of the attorney-fees he would receive for examining the securities, drawing the papers, &c., and that he ivas in the habit of charging the borrower a commission; Mills told him Baldwin was willing to pay for the accommodation. Williams thereupon agreed to make the loan, on the terms proposed, and Mills agreed to pay Williams $25 as attorney’s fees. The note was made; Williams gave Mills his check for $400; the money was handed to Baldwin, and out of it, he paid to Mills $40 for the charges; $25 of which the latter paid over to Williams, in accordance with his agreement. Baldwin did not know how the $40 was to be disposed,of, nor did the plaintiff know of the charge of $25, which was not entered to her account. Williams made no charge against her for investing the money.
    On a former trial of the cause, judgment was given for the defendants, at special term, on the ground of usury; but on appeal to the general term, the judgment was reversed, and a new trial ordered. (21 Barb. 181.) On a second trial, before the court, without a jury, judgment was rendered for the plaintiff for the amount of the note and interest; which having been affirmed at general term, the defendants took this appeal.
    
      Cornwell, for the appellants.
    
      Selden, for the respondent.
   Davies, J.

The statutes of this state prohibit any person from taking or receiving for the loan of money more than seven per cent, per annum; they also provide that any person who shall pay or deliver in money, goods, &c., on such loan, any greater sum than is thus allowed, may recover, in an action against the person who shall kave taken or received the same, *the excess of interest so paid. It is also provided, that any person who shall receive any greater interest, discount or consideration than is prescribed, shall be deemed guilty of a misdemeanor, and on conviction shall be punished by fine or imprisonment, or both. (1 R. S. 772, &c. §§ 2, 3, 15.) And by § 5, all notes, &c., taken on such usurious loans are declared void. In the present case, it is not alleged or pretended, that the plaintiff has personally taken or received any illegal interest on the loan made to the defendants, or that she had any knowledge, until the trial of this cause, of the secret arrangement made by Mills, the agent of Baldwin, the borrower, with Williams, her attorney and agent, whereby the latter received a douceur for his private and exclusive benefit. The plaintiff, a non-resident of the state, sends her money here to invest, according to the laws of this state; all the. authority given to Williams, as her agent and attorney, to< transact the business of his principal, must, in the absence-of any counter-proof, be construed to transact it according-to the laws of the place where it was to be exercised. The law will never presume that parties intend to violate its precepts. (Owings v. Hull, 9 Peters 607.)

It is the essence of an usurious transaction, that there shall be an unlawful and corrupt intent, on the part of the lender, to take illegal interest, and so we must find,, before we can pronounce the transaction to be usurious. (Nourse v. Prime, 7 Johns. Ch. 77.) In Bank of United States v. Waggener (9 Peters 399), Story, Justice, in delivering the opinion of the court, says, that to constitute usury, within the prohibitions of the law, there must be an intention knowingly to contract for or take usurious interest; for, if neither party intend it, but act bond fide and innocently, the law will not infer a corrupt agreement. When, indeed, the contract, upon its very 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 ipso loquitur. But when the contract, on its face, is for legal interest only, then 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. In support of these propositions, numerous authorities are cited.

In this cáse, there is nothing on the face of the contract, reserving more than legal interest. The real parties to the transaction are the plaintiff and the defendants; and to render the transaction usurious, there must have been a corrupt agreement—an aggregatio mentium. It is not sufficient, that the defendants intended to make it usurious, so that when called on to return the money thus ■obtained by a fraudulent device, they could pay it by availing themselves of the protection of the statute. The intention to take the usury, must have been in the full ■contemplation of the parties, not of one party, hut of both, to the transaction. Now, we have seen, that the plaintiff never intended to violate the law; never authorized any ■such violation, and never knew or had any intimation that ■her agent or attorney had violated it. Can it be truly said, that the plaintiff has ever made the usurious agreement, which it is essential to find was made by her, before we can sustain the defence in this cause? It is not pretended, she made it herself, but. it is said, it was made by ■her agent, and, therefore, it is her agreement, and she must suffer the consequences of his acts; this is upon the trite maxim, qui facit per álium,facitper se. The authority given to the agent was, as has been shown, to loan her money at legal interest and according to the laws of this ■state; but the agent, instead of adhering' to his instructions, at the solicitation of the defendant Baldwin’s agent, •departs from these instructions and violates the law. Is this the act of the principal, by which she can be bound?

If a master command his servant to do what is lawful, and he do an unlawful act, the master shall not answer, but'the servant for his own misbehavior; otherwise, it would be in the power of every servant to subject his master to what actions or penalties he pleased. (Bac. Ab., title Mast. & Serv. L.) In Middleton v. Fowler (1 Salk. 282), Holt, C. J., places the law upon its proper foundation, when he states it as a general position, that no master is chargeable with the act of his servant, but *when he acts in the execution of the authority . given him. In other words, when a servant quits sight of the object for which he was employed, and, without reference to his master’s business or orders, commits, from his own malice, some wilful and independent act, he is no longer presumed to be acting in pursuance of his general authority as a servant, and his master is not responsible for the act which he does.

The rule that when an agent commits a wrong in the transaction of the business of his principal, the principal is liable for the injury produced by such wrong, has no application to the present case. That rule cannot apply, where the agent, when committing the wrong, is bargaining on his own account, for his own private advantage exclusively, and this is known to the person with whom he is bargaining; it could only apply where the person dealt with is deceived or wronged, which in no sense is the present case. Baldwin's agent was not mislead or deceived by any act of the plaintiff’s agent; he well knew that in reference to the $25, Williams was acting and contracting on his own behalf, and for his own benefit exclusively ; he did not assume, in that matter, to act for or represent the plaintiff, or that what he was doing was in any manner to inure to her benefit or advantage. In this case, Williams availed himself of his position as the plaintiff’s agent, to make a contract on his own account and for his own individual benefit.' In thus dealing, he did not act or assume to act as the plaintiff’s agent; he required compensation for a service which he alleged he rendered to Baldwin. It was his individual affair, not that of the plaintiff, and if it was a shift or device on his part to take and receive usurious interest to himself on this loan, he has subjected himself to the penalties of the statute, (3 Hawks 28; Commonwealth v. Frost, 5 Mass. 53.)

It was conceded on the argument, that the plaintiff had not subjected herself to an indictment for misdemeanor— that she was not liable criminaliter for these acts of her agent. Does-not this concede too much on the part of the defendants ? Is it not a concession that she has not taken and received any usurious interest on this loan ? If so, how can it be contended, that she has forfeited her money I°ane(fi 80 far as she is concerned, ^'legally? The agent has taken and received the gratuity or usury, and not the principal. To render the transaction usurious as to this plaintiff, we have to establish that she took and received the unlawful interest, and from this fact we infertile corrupt intent. Now, in the present case, it is undeniable, that Williams himself took and received the $25, paid for alleged services rendered by him. If he took it and received it as the plaintiff's agent, then he took and received it for her and as her money. But on the facts disclosed in this case, can it be for a moment contended, that the plaintiff could have recovered this money from Williams, as so much money paid to him for her use ? Clearly not.

Again, by the third section of the statute cited {supra), it is provided, that if any person shall pay any greater sum for the loan of money than is allowed by law, he may recover such excess beyond the legal rate of interest, in an action against the person who shall have taken and received the same. Baldwin ‘ had an action, therefore, to recover this excess; but against whom could he have maintained it? Certainly not against the plaintiff. She never took or received it; her agent was never authorized to take and receive it. On no principle could the action have been maintained against her; and it is equally clear, that it could have been against Williams, if it was a shift to cover usury, for he was the person who took and received it, and retained it and applied it to his own use. We think, these tests conclusively show, that the plaintiff did not take or receive, or agree to take or receive, on this loan of $400, any greater sum than the legal rate of interest, and that the defence of usury is not sustained.

But it is urged with great earnestness and ability, that the plaintiff, by accepting the note and commencing this suit upon it, has ratified all the acts of her agent connected with the loan and attendant upon its inception. We have looked carefully at all the authorities cited by the learned counsel for the defendants, and we think they" fail to sustain the proposition contended for. The plaintiff, by receiving and accepting the note for the amount of her money, and which she loaned through her agent, *only ratified the contract of loan at the rate of interest expressed in the note. She had no knowledge of, and cannot be held to have ratified the payment, by Baldwin’s agent to Williams, of the $25, usuriously by him taken, as is said. We think the cases fully sustain this view of the plaintiff’s act, in receiving the note and commencing suit thereon.

When an act is done for another, by a person not assuming to act for himself, but for such other person, though without any precedent authority whatever, it becomes the act of the principal, if subsequently ratified by him. In that case, the principal is bound by the act, whether it be for his detriment or his advantage, and whether it be founded on contract or tort, to the same extent and with all the consequences as if done by previous authority. But when the agent did not assume to act for another, but acted for himself and for his own benefit, a subsequent ratification does not bind the principal. (Wilson v. Tumman, 6 Man. & Gr. 238.) Whore a landlord authorized a bailiff to distrain for rent due from his tenant, directing him not to take anything except on the demised promises, and the bailiff distrained cattle of another, supposing them to be the tenant’s, beyond the boundary of the .farm, and the cattle thus taken were sold, and the landlord received the proceeds, the landlord was held not to be liable in trover for the value of the cattle, unless it was found that he ratified the act of the bailiff, with knowledge of the irregularity, or chose, without inquiry, to take the risk upon himself and to adopt the whole act; and it was also held, that by adopting and ratifying what he had authorized, he did not adopt and ratify the unauthorized acts of'his agent.

In Bush v. Buckingham (2 Vent. 83), the plaintiff made a loan of 50l., at a legal rate of interest; she referred the borrower to her scrivener, who would draw the bond to secure the loan, and the scrivener, in error and against her will, included therein more than lawful interest. In a suit on the bond, the defendant interposed the defence of usury, but it was overruled, as there was no intent on her part to take or receive more than lawful interest; and WaS ^le^’ commencing suit on the bond, *she did not ratify the act of her agent, in providing for the payment of more than legal interest, but that she might recover the amount loaned with lawful interest.

In Buckley v. Guildbank (Cro. Jac. 678), it was resolved, that a bond given on the 23d of May 1617, on loan oi 120Z., conditioned for the payment of 132Z., upon the 24th of May next ensuing, was for the payment of that sum on the next day, and, therefore, on its face, usurious, and it was held, that forasmuch as the agreement is found to be to make the loan for a year, and that the assurances were for the payment at the end of the year, and as by the scrivener’s mistake, it is made payable the next day, it is not usury within the statute, for there was not any corrupt agreement betwixt th,em, and the act of a stranger shall not bring him within the danger of the statute, especially, it being found that he did not require payment until the end of the year.

Neveson v. Whitley (CrO. Car. 501), was an action of debt ■ on bond for 100Z., dated 12th July, with condition for the payment of 58Z., at' the end of six months. The defendant pleaded the statute of usury, and that the obligation was void; the plaintiff replied that he lent the money for a year, and that the defendant should pay 8Z. for the forbearance for a year, and that the plaintiff would not demand it until the expiration of a year, and by the scrivoner's mistake, it was made payable at the half year’s end, and he, not knowing thereof, accepted the bond. It was objected, that this allegation was against the words of the bond; but the whole court held, the plaintiff might-well make the allegation, for it is showing the true agree-meet, that no interest was to be paid by said agreement but such as stood with the law.

The case of Baxter v. Buck (10 Vt. 548), is not unlike the present. The plaintiff, as administratrix of William Baxter, held a note of $250, made by the defendant, and the same was presented to him" for payment, by her son, Portus B ixter. On that occasion, a new note was given by the defendant, for the same amount, and the time of payment was agreed to be extended, by Portus Baxter, on the defendant agreeing to pay twelve per cent, interest on the amount of the note, which he did, by giving his note to Portus *Baxter for such interest. The court held, that this note for the usurious interest was taken by Portus, without the consent or knowledge of the plaintiff, and inasmuch as there was a bond fide debt due to her, and the note in suit was only for the just amount due, it would not be void, if Portus Baxter, without her consent, received a note to himself for any further sum.

The appellant’s counsel relies with much confidence upon the case of Austin v. Harrington (28 Vt. 130). A careful examination of that case will show that it is not in conflict with what was decided in Baxter v. Buck (supra). In this case, the court affirm the rule laid down in that, and say, it was a case of a limited or special agency, in which the employment was only for that single transaction, and where the. principal was not bound by any act of the agent, not expressly authorized by her. The court say, they have no occasion to question the soundness of that decision, as the case then under consideration was not one of that character; it was, that of the dealings of a general agent, in the transaction of her business, and being such general agent, the plaintiff, with full knowledge of all the facts, had ratified his act.

In any view which we have taken of this case, we do not see that the $25 paid to Williams was for the benefit of the plaintiff, or that she had any interest whatever in it. While we intend to uphold the law prohibiting the taking of usury, in its integrity, so long as it remains on the statute book, we are not called upon to punish the innocent, at the call of a confessedly guilty party, who has enticed her agent into a violation of the statute, which is now sought to be availed of, to defraud her of money undeniably hers, and loaned, so far as she is personally concerned, in good faith, and upon such an agreement upon her part “ as stood with the law.” The judgment appealed from should be affirmed.

Comstock, C. J.

(Dissenting.)—While the statutes of usury are in force, they ought to be faithfully interpreted and administered *by the court. The decision of this case will, I am apprehensive, go far to overthrow them. I, therefore, dissent, and proceed, briefly as may be, to state my reasons.

The plaintiff loaned her money, through her agent, Williams; he was wholly and exclusively her agent, because he performed no service whatsoever for the borrower; ho. performed, indeed, no act which is not involved in every loan. He formed the mental conclusion to accept the note of the borrower and his sureties; he accepted the note and advanced the money; there was simply a process of the mind or will, and the act of lending; without these circumsiances, no loan was ever made. If $25, or any other sum beyond lawful interest, can be charged to the borrower, in such a case, there is very little left of the laws against usury.

It is too plain for argument, and, indeed, it is not denied, that the contract was usurious, provided the plaintiff had authorized her agent to contract precisely as he did. The agreement in brief was, that the agent should lend $400 on the note of the borrower, with four other signers as sureties; that the note should be given on interest; and that the agent should be paid the sum of $25, under the name of an attorney’s fee. The loan was consummated on these terms; the note was delivered, the $400 advanced, and $25 was paid back to the plaintiff’s agent. It is not pretended, that the name given to this exaction alters the nature of the transaction; it was called a fee, but the agent earned no such fee; he did nothing which is not done by every person who lends money on a note. I fully concede, that the agent of a money-lender may also be employed to perform services for a borrower, and that such services may be lawfully compensated; the examination of a borrower’s title, where landed security is given, is a familiar example of this sort. But not a single authority can be found, which holds that compensation can be claimed for services, where the lender or his agent simply accepts a note and advances the money. More need not be said on this point, because, in the very full and able argument before us, no. attempt was made to sustain the contract on this theory; no plea of services has *been interposed, to shield the transaction from the condemnation of the statute.

It is equally plain, that the validity or invalidity of the contract cannot depend on the mere mode and form in which the business was closed. In fact, the $400 was advanced, being the full face of the note, and the borrower afterwards paid the bonus of $25, as he had agreed. The legal as well as the practical effect of this was precisely the same, as if the $25 had been retained in the first instance, and only $315 advanced; the result was, that the borrower received only the last-mentioned sum for his note. I am not able to see, that the possession of the whole sum, for a few moments or a few hours, could „ benefit him, so long as he was to pay back a part of it. The usury was in the agreement to pay a bonus over and above lawful interest; whether it should be deducted out of the fund loaned, at the moment of the loan, or should be paid another day, could make no difference. Devices of this sort never before deceived any court.

I think it material next to observe, that only one contract was made, which embraced the whole transaction. There was no agreement, between the plaintiff, through her agent, and the borrower, to lend $400 at lawful interest, and then a separate and distinct agreement between the "agent and the borrower for the extra $25; it was all included in one contract. The agent said, in substance, •‘I will lend you the $400, if, besides the legal interest which you pay to my principal, you will pay to me the sum of $25.” This was a single indivisible proposition, and as such it was accepted by the borrower; in consideration of the loan, he agreed to repay it at a certain day with interest, and he agreed also to pay $25 more to the lender’s agent. Here was one consideration and one agreement. That agreement might all have been expressed in one or in two writings, or it might have been without any writing; in fact, one of these promises was evidenced by a promissory note, the other rested in paroi. These circumstances are immaterial; there was but one original agreement, which included the whole subject. *Where there is usury at the root of a transaction, it ha's never before been thought that the merely formal separation of the borrower’s contract into different parts could take the case out of the statute. If the business had not been done through an agent, not a doubt would be entertained, because nothing is clearer in principle, or better settled by authority, than that contracts are equally usurious, whether the excessive interest be paid down, or only agreed to be paid, and whether the payment be promised in the same instrument with the principal debt, or in a collateral agreement, oral or written. The test question always is, whether the agreement for the loan includes more than lawful interest, to be reserved or taken in any manner whatsoever. Authorities need not be cited in support of a proposition so well understood.

The contract in question, therefore, had all the elements of usury, unless it can be saved from condemnation, by the single circumstance that the agent fiad no authority from his principal to lend her money at a higher rate of interest than is allowed by the law of the state; upon this precise ground, the whole argument of the plaintiff rests. There is no evidence in the case, that she authorized her money to be lent in violation of the statute; and, I admit, such an authority ought not to be presumed, from the mere act of the agent himself. But what I have to say on this point is, that the assumed defect in the agent's power to make just such a contract as he did make, does not alter the contract itself. Such a circumstance cannot transform that into an innocent and valid agreement, which, in its own essential nature and judged by its own terms, was usurious and void. The agreement was the same, whether we regard it as made with or ivithout due authority; it was a plain contract for more than seven percent. interest, and it does not become a different contract, although we admit that the plaintiff did not authorize it to be made just as it was in fact made. If her agent exceeded his authority, and thereby subjected her to loss, she has a plain remedy against him. So, on the same ground, she may, I do not doubt, repudiate the contract altogether, and demand and recover from the borrower her money, *which went into his hands without her consent. This remedy was open to her, the moment the borrower got possession of the fund in this unauthorized manner; it is a remedy open to her now. But such is not the theory of her action; she sues, not in repudiation of the unlawful contract, but upon the very contract itself, and she claims to hold, not only the principal maker of the note, but four other persons who were sureties merely, and, therefore, never had any money which belonged to her. In short, she asserts the validity of the contract; if she fails in that assertion, she cannot recover. We have shown that it was an illegal and void contract,judged by its own nature and terms, and according to every test Iiitherto known.

It is argued, however, that as the agent's exaction of $25 was not authorized by the plaintiff, she can disavow that part of the transaction, and still recover on the note, which represents, it is said, the sum actually lent. But the note represents more than the sum lent. It is true, that the borrower, in form, received the $400 expressed in the note, but this was subject to a condition that he should presently pay back to the agent the sum of $25, and he paid it back accordingly; the sum really loaned was, therefore, only $375. That, stripped of all disguise, was the true consideration of the promise made by the borrower and his sureties, to pay $400 and the interest thereon.

But again, how can the plaintiff divide an entire contract, as this was, into two parts, and so adopt one part, while she rejects the other. If an agent contract in excess of his authority, the principal is not bound at all, and may repudiate the whole; but if he adopt a part, he adopts the whole. Mr. Justice Story lays down the rule thus, and he cites many authorities to support it:—“ The principal cannot, of his own mere authority, ratify a transaction in part, and repudiate it as to the rest; he must either adopt the whole or none. And hence the general rule is declared, that where a ratification is established as to a part, it operates as a confirmation of the whole of that particular transaction of the agent.” (Story on Agency, § 250.) The result of this rule is, that the if she insists upon *the contract at all, must take it with all its vices and infirmities; she is not permitted to say, that the usury is one particular part or clause of the agreement, which she disavows, and that she will take the benefit of the residue which is innocent and lawful. I have shown, I think, the unity of this contract. Its substance and nature were the same as though the borrower had, by the very terms of his note, promised not only to pay the $400 and interest, but also the $25 which the agent received. Could the principal recover on such a note, by rejecting from the contract one of its clauses which contaminated the whole? If usury can thus be eliminated from contracts, borrowers are henceforth at the mercy of agents, to whose exactions no limits can be assigned; The principal has only to disavow the extortion, and the contract, which, in its very letter, is condemned by the statute,-becomes a lawful one. The legislature has declared, that “ all contracts whatsoever, whereupon or whereby there shall be reserved or taken, or secured to be reserved or taken, any sum or value for the loan or forbearance of money,” greater than the prescribed rate of interest, “ shall be void.” (1 R. S. 772, § 5.) This enactment makes no distinction between the principal and the agent, and none can be found in the analogies of the law. We have, held, at this very term of the court, that a principal is liable for the representa- • tians of his agent made in the course of a negotiation for the sale of land, although they were made without- his authority or knowledge. We thought it plain, that the principal could escape the consequences of his agent's conduct only by disavowing the transaction altogether which he had not done. (Bennett v. Judson, post, p. 238.)

Very little need be said in regard to the authorities cited in support of this transaction; in general, thej^ do not bear upon the question. For example, the case of Bush v. Buckingham (2 Vent. 83), turned upon a mistake of the scrivener in preparing the bond by which the loan was secured. The bond sued upon reserved, on its face, more than lawful interest on the sum loaned, and the obligor pleaded that it was corruptly agreed, &c.; the replication took issue on the corrupt agreement, "and showed that the agreement as made between the parties was free from usury; that a scrivener was employed to draw the bond, and that too large a sum was inserted ex erorre scrvptoris, that is, by the scrivener’s mistake; the replication was held good. Now, no one ever supposed that usury could be alleged, where the excessive interest was reserved in the security, or deducted from it, in consequence of an innocent mistake, either of the principal parties or an agent. Several of the -cases relied upon belong’ to this class, and they do not require any additional comment. Other authorities have been referred to, for the purpose of showing that principals are not bound by the unauthorized acts of agents; that to constitute usury there must be a corrupt agreement; that there must be an aggregaiio mentium, or meeting of the minds of the parties, &c. These are truisms which no one disputes; but they have little to do with the question before us. There can be no question about an agent’s authority, when the principal himself insists upon the contract. If the agent is guilty of fraud or usmy, the principal must either disavow the dealing, or take all the consequences; he cannot make a different contract by ex-scinding the vices which enter into and form a part of it. This is the difficulty which has not 'been overcome by argument or authority. Believing that this is a plain case of usury I think the judgment should be reversed and a new trial granted.

Denio and Welles, JJ., also dissented; but the rest of court concurred with Davies, J.

Judgment affirmed. 
      
       Though the soundness of this decision has been frequently doubted, it may now be regarded as the settled law of the state. It was followed by a majority of the court of appeals, though with a strong dissent on the part of Davis and Brown, JJ., upon the principle of strvre decisis, in Bell v. Day (1865), 32 N. Y. 165; was re-affirmed by the same court in Lee v. Chadsey (1866), 2 Keyes 543; and again, in the recent case of Estevez v. Purdy (1876), 66 N. Y. 446: and see Guardian Mutual Life Insurance Co. v. Kaskaw, Ibid. 544, Stout v. Rider, 12 Hun 574. As a mere question of pure logic, it is difficult to answer the dissenting opinion of Ch. J. Comstock; but the law maybe considered to be finally settled the other way, upon authority. The courts, however, do not appear to be willing to extend it. See Algur v. Gardner, 54 N. Y. 360; Porter Mount, 45 Barb. 422.
     