
    Frank W. Hawley, Respondent, v. Herman Kountze and Others, Appellants.
    
      Usury — an option to purchase stock below its value — demand loans of over 85,000 secured by a pledge of negotiable instruments are exempt from the usury laws.
    
    A borrower gave a note by which he promised to pay §15,000 on demand, with interest at six per cent, and pledged as collateral thereto fourteen shares of the capital stock of the Cataract General Electric Company, at the same time giving to one of the parties lending the money an agreement to sell him, at his option, to be exercised within a specified period, four shares of the stock at §2,000 a share, which it was claimed was less than its actual value.
    
      Held, that the transaction was not unlawful as it came within chapter 237 of the Laws of 1882, which withdrew from the operation of the general usury laws all demand loans of §5,000 and upwards secured by a pledge of negotiable instruments;
    'That the givirig of the written option agreement, by acting under which a sum of money could ultimately be obtained by the lenders in addition to six per cent interest, was equivalent to an express agreement by the borrower in writing to pay such additional sum of money.
    Appeal by .the defendants, Herman Kountze and others, from an order of the • Supreme Court, made at the Kings County Special Term and entered in the office of the clerk of the county of Kings on the 10tli day of April, 1896, continuing a preliminary injunction during the pendency of the action.
    The action was brought to restrain the defendants from selling, ■fourteen shares of the stock of the Cataract General Electric Company, which had been pledged to them as collateral security for - a loan of $15,000, and which they proposed to sell in order to repay themselves a-balance alleged to be due upon the loan. The complaint alleged that the pledge as made was usurious.
    
      
      George W. Van Slyck, for the appellants.
    
      James McKeen, for the respondent.
   Willard Bartlett, J. :

The plaintiff borrowed $15,000 from the defendants, constituting the firm of Iiountze Brothers, and gave them a note therefor, whereby he promised to pay that amount on demand, with interest at six per cent. The payment of this note was secured by the pledge of fourteen shares of the capital stock of the Cataract General Electric Company. At the time the loan was thus made the plaintiff gave to William H. Hollister, one of the defendants, an agreement to sell to him at his option, to be exercised within a specified period, four shares of such stock at $2,000 a share. The plaintiff claims that the stock was then worth more than $2,000 a share, and that the giving of this option to Mr. Hollister, who was acting in behalf of the defendants’ firm, madetho transaction usurious.

It seems to us, however, that it falls within the purview of chapter 237 of the Laws of 1882, and is not void or in any respect illegal on account of usury.

That act provides as follows : In any case hereafter in which advances of money, repayable on demand, to an amount not less than five thousand dollars, are made upon warehouse receipts, bills of lading, certificates of stock, certificates of deposit, bills of exchange, bonds or other negotiable' instruments pledged as col- . lateral security for such repayment, it shall be lawful to receive or to contract to receive and collect, as compensation for making such advances, any sum to be agreed upon, in writing, by the parties to such-transaction.”

The learned judge at Special Term held that the act of 1882 had no application to the present case, because the exaction in excess of interest was not a sum of. money, nor ivas it provided for by a written agreement. We think that the statute should receive a more liberal construction.

The payment in excess of six per cent was whatever amount over $2,000 a share should be realized by the defendants upon the exercise of the option to purchase the four shares of Cataract General Electric stock.' The giving of a written instrument (the option agreement), by acting under which a sum of money could ultimately be obtained in addition to the statutory rate of interest, was equivalent to an express agreement in writing to pay such sum of money.

But in the view which we take of the act of 1882, the only importance of an agreement in writing, as to the sum to be received by the lender, is to enable the lender to collect more than six per cent as his compensation. The effect of that enactment was to remove from the operation of the usury laws of the State all loans, of money payable on demand, where the amount lent or advanced is not less than $5,000, and where warehouse receipts, bills of lading, certificates of stock, certificates of deposit, bills of exchange, bonds or other negotiable instruments are pledged as collateral security for such repayment of the money borrowed. If the agreement is merely oral, as to the compensation to be received by the lender in such a transaction, we think that the statute, nevertheless, makes the loan non-usurious; though it would seem that a contract in writing is necessary in order to enable the lender to collect more than six per cent.

In 1850 a statute was enacted in this State (Laws of 1850, chap. 172) which provided that no corporation should thereafter interpose, the defense of usury, and it was held that its effect was to repeal the Statute of Usury so far as it applied to corporations. (Curtis v. Leavitt, 15 N. Y. 85-155.) The condition of this class of beings, becomes the same,” said Brown, J.", “ as if the usury laws never existed.” (See, also, Belmont Branch Bank v. Hoge, 35 N. Y. 65.) A similar effect, we think, was produced by the enactment of chapter 237 of the Laws of 1882 upon all demand loans of $5,000 and upwards, secured by the pledge of negotiable instruments. Such loans were thereby withdrawn from the operation of the General Usury Law of the State. As to them the General Usury Law then ceased to exist. If these views be correct, there was nothing usurious in the transaction which forms the subject-matter of the present suit, and the plaintiff is not entitled to any injunction.

The order continuing the preliminary injunction should be reversed and the injunction vacated, with ten dollars costs and disbursements.

All concurred.

Order reversed and injunction vacated, with ten dollars costs and disbursements.  