[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 167 The court below, in reversing the order for a new trial made by the judge at circuit, distinguished this case from Condit v.Baldwin (21 N.Y., 219), and held that neither the charge as given nor the request to charge raised the point involved in that case. The conviction of the learned justice, by whom the opinion of the court below was pronounced, that "the doctrine of Condit v. Baldwin is somewhat novel and difficult to sustain, and for that reason should not be applied to cases not clearly falling within it," led him, it is apprehended, to seek for a distinction where no real difference exists. In Condit v. Baldwin, the plaintiff had left in the hands of her agent, $400, to be loaned for her. In the absence of any proof to the contrary, the court assumed that the authority of the agent was to invest according to the laws of the State. "All the authority, says DAVIES, J., 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 *Page 169 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 Pet., 607.)
Williams, the agent, loaned the money upon a promissory note, reserving on its face interest at seven per cent. Between him and the party who effected the loan, it was agreed that he should have $25 for his fees; and this sum was paid to him out of the moneys loaned. This court held that this did not constitute usury in the principal, nor affect the security in her hands. In the case now before us, the plaintiff delivered $1,000 to her agent to be loaned upon the note in suit, which was precisely for that sum, with lawful interest. The particular note had been described to her; and she had been "argued," as the case states, into a consent to loan the money upon it by the agent's representation that "it was as good as a mortgage." She had no knowledge of any agreement by which the agent was to receive the fifty dollars. It stands uncontradicted in the case that the fact that fifty dollars was to be, and was paid to the agent, was wholly unknown to her till after she brought her suit upon the note. The facts, therefore, in this case are stronger even, for saying that the authority she gave her agent was to invest her money according to the laws of the State. The presumption arises not simply on the absence of proof of any intent to violate the law, but upon affirmative proof that she was informed that a note which, upon its face, conforms to the law, was to be the security for the loan, and was, in fact, totally ignorant of the alleged agreement to pay her agent fifty dollars. The distinction made by the court below between this case and the one cited is based upon the suggestion that neither the charge nor the request to charge presented the idea that the agent was to receive the fifty dollars for himself and not for the plaintiff. This suggestion is true, so far as the charge that was made, is concerned. In that the justice stated to the jury that "if the agent of the plaintiff claimed and took the fifty dollars for the plaintiff as her agent," the plaintiff was bound by his act, although she had not specially authorized it, and was ignorant of the fact. The court further charged that the *Page 170 principal is bound by the acts of the agent in loaning money at a usurious rate of interest, although the same be done without the knowledge or consent of the principal, to which plaintiff also excepted. The plaintiff's counsel then asked the court to charge "that if Glover took or received the fifty dollars without the knowledge or consent of the plaintiff, it was not usury, and the plaintiff would be entitled to recover upon the note in suit." This the court refused, and plaintiff excepted. Glover, it is true, was the agent, but it is manifest from such a request following such a charge, that Glover, the person, and not Glover, the agent, was meant by the request. Otherwise the request simply asks the court to negative, by a further charge, the exact proposition just presented to the jury and excepted to by plaintiff. Besides, it is manifest that the judge himself understood the request to mean "if Glover, for himself, took and received the bonus," for in deciding the motion for a new trial on his minutes, he says: "The case of Condit v. Baldwin (19 N.Y., 219), has never seemed to me to be sound law; but it is very clear that this court is bound by it until it shall be reversed by the court of last resort. The evidence on the part of the plaintiff warranted her in asking the court distinctly to put the proposition to the jury whether Glover "exacted the bonus for himself as a condition of making the loan without the knowledge or authority of his principal." This, it seems to me, was the substance of the request to charge; and under the rule laid down in Condit v. Baldwin, I think the court committed an error in refusing to charge as requested. There was, therefore, no misleading of the court at the trial by any absence of explicitness in the request; and where that fact palpably appears by a ruling of the judge who tried the cause, this court is not called upon to exert any severity of criticism to condemn the form of the request. But it further appears in this case, as it seems to me, that the only agreement the evidence tended to prove, so far as it went to uphold the defendant's case, was, that the fifty dollars was to be paid to Glover as a bonus to himself for making the loan. He bargained for himself; he received the money; he kept it and lost it; the plaintiff remaining *Page 171 all the while in complete ignorance of his agreement and of his acts in respect to it. The request to charge is, therefore, properly referable to these facts, and should be construed to mean "if Glover took and received the money, as the evidence tends to show," then it was not usurious. A careful examination of this question brings me to the conviction that so far as relates to the question presented by the request to charge, this case is not justly distinguishable from Condit v. Baldwin; and if that case be conclusive evidence of the law, the judgment in this should be reversed and a new trial granted.
But I am not without hope that this court is prepared to revoke its decision in Condit v. Baldwin. The error of that case has not become so inveterate, that to adhere to it is better than to return to sound principles. The circumstances of the times since its promulgation, owing to the inflation and character of the currency, have been such, that the usurer's "occupation's gone." It has wrought, therefore, little if any of the evil that ordinarily would attend a practical annulment of the statute against usury. To retract the decision now, will be in time to guard to some extent against the ills of a future revulsion, in which avarice may prey upon necessity, through the wide breach that case has opened in the law of usury. After the clear and forcible dissenting opinion of COMSTOCK, Ch. J., in Condit v.Baldwin, it borders on arrogance in me to assume to discuss the question. The few suggestions to be made, can hardly escape the censure of being unnecessary repetitions.
In this case (as in Condit v. Baldwin), the plaintiff delivered her money to her agent, to be loaned for her at lawful interest. Such, as we have already seen, is the necessary legal inference in the absence of other instructions. The agent entered into a contract with the borrower for loaning the money, whereby it was agreed as a condition of making the loan, that he should secure to the principal the amount lent, with lawful interest, and pay to the agent for his own benefit the sum of fifty dollars. By the very terms of the contract, the fifty dollars is stipulated to be for *Page 172 the use of the agent. This contract is a manifest departure from and abuse of the authority of the agent. A vital error ofCondit v. Baldwin, lies in assuming that the agent can make this contract, so that the bonus will belong to him, and not inure to the benefit of his principal. But that is an impossibility both at law and in equity. To hold the contrary is to assert, that an agent, by violating his duty, can secure gains to himself greater than its performance could give him. It is a principle too well settled to be shaken, that an agent cannot so deal with the subject matter of his agency, whether within or without the scope of his authority, that the profits therefrom shall inure to himself. "Not only interest," says Paley, "but every other sort of profit or advantage clandestinely derived by an agent from dealing or speculating with his principal's effects, is the property of the latter, and must be accounted for, so that if an agent who has purchased goods according to order, sell them again to advantage, with a view of appropriating the gain to himself, although he should have answered the loss, if any, yet his employee is entitled to the profits. For such conduct is a fraud from which no advantage can be derived to the person practicing it." (Dunlap's Paley on Agency, 51.) The learned judge who delivered the prevailing opinion in Condit v.Baldwin, says: "But on the facts disclosed in this case, can it be for a moment contended, that the plaintiff could have recovered this money (the bonus) from Williams, as so much money paid to him for her use? Clearly not." No authority is cited for this position, and it would be difficult to find one. To hold that a party employed to loan money for another, may make it the condition of a loan that the borrower shall pay to him a sum of money in which his employer shall have no interest, is to subvert the fundamental principles upon which the doctrines of principal and agent, trustee and cestui que trust rest. It would soon overthrow all agencies, if the courts were to settle, that an agent could, by departing from his authority, stipulate for and hold advantages for himself. The personal gain of the agent would become the primary motive of his conduct, and thus thwart the policy of the *Page 173 law, which has ever been to preserve his truth and faith toward his employer, by denying him all possibility of advantage, by fraud or treachery, or departure from the plain line of his duty. If there were no statute of usury in existence, who would be embarrassed by the question to whom belonged all sums paid, as a condition of an agent's loaning his principal's money, left in his hands, as was the case of Mrs. Condit, no matter in what form or in whose name they were paid, or by what name called?
But the statute of usury does not at all embarrass the question, for it is well settled, that if the money has actually come to the agent's hands, the illegality of the transaction of which it is the fruit, does not affect the right of the principal to recover it of the agent. (Dunlap's Paley, 62.) "For though the law would not have assisted the principal by enforcing the recovery of it from the party by whom it was paid, because it is the policy of the law not to aid the completion of an illegal contract, yet, when that contract is at an end, the agent, whose liability arises solely from the facts of having received money for another's use, can have no pretense to retain it." InTenant v. Elliott (1 B. P., 3), a broker had effected an insurance upon a ship engaged in a trade forbidden by statute, and having received a loss, refused to pay it over to his employer, alleging the illegality of the transaction as his defense. The court upheld a verdict against him. In Farm v.Russell (1 B. P., 296), the defendants received money as the price of counterfeit coin which they had been employed to carry, and procure payment for, from parties who had purchased it; it was held, that the illegality of the transaction furnished no defense to them in an action for money had and received. (And seeArmstrong v. Toler, 11 Wheat., 258.) The same rule has been laid down in courts of equity (7 Ves., 473; 13 Ves., 313.) And there is no difference in this respect between a transaction that is malum prohibitum, and one that is malum in se. (Dunlap's Paley, 64.) In this case, Mrs. Earle, I think, would have had no difficulty in forcing her agent to disgorge the fifty dollars he had extorted for himself, at any time after the facts came to *Page 174 her knowledge. What effect her doing so might have upon the original contract as a ratification, is another question. It is a mistake, therefore, to assume that the law will see in a transaction of this character, two contracts, one of which belongs to the principal and the other to the agent. The law discerns but one contract, as in point of fact there was but one, between the lender and the borrower, of which the stipulated condition of an illegal bonus, was as much a part as any other of its terms.
But it is argued there can be no violation of the statute against usury without an intent to violate it; and that the intent, in this case, pertains solely to the agent, and in no sense affects the principal, because of her total ignorance of the illegal condition of the contract. This position is undoubtedly sound, so far as the question of intent affects the plaintiff, criminaliter. She could not be prosecuted criminally until she had knowingly ratified the transaction by receiving the stipulated usurious premiums. Until then the crime is the agent's alone. But in considering this question of intent we must not confound the personal intent, which is the essential ingredient of crime, with the legal intent which the law deduces from the acts of the parties, independently of any guilty motive on their part. This may be well illustrated by the two propositions that arose in this case. Mrs. Earle was totally ignorant of everything done by her agent in regard to the fifty dollars. It is obvious that he never designed that she should know aught of the fifty dollars paid to him, but intended to keep it wholly for himself. Now, the court charged that if the contract of the agent was, that the fifty dollars should be paid to him for Mrs. Earle, the transaction was usurious, notwithstanding it was made without her authority or knowledge, and she was utterly ignorant of that portion of it. This is assumed to be sound, and a distinction is attempted to be drawn between the case of Condit v. Baldwin and this one, on the ground that the secret condition stipulated the bonus for Mrs. Earle, and not for the agent. But is it not manifest that the total ignorance of Mrs. Earle, in either view, shields her equally from the *Page 175 imputation of an intent to violate the statute? She could have no such personal, actual intent, in the one case more than in the other; and so, if the absence of actual intent, on her part, to take usury, enables her to enforce the note in one case there is no reason why it does not in the other. We may exclaim, in the language of the opinion in Condit's case: "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 defense in this cause? It is not pretended that she made it herself, but it is said that 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 facitper alium facit per 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 the 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?" It is not perceived why the force of this reasoning is not equally applicable to the case where the contract of the agent stipulates the usurious premium for his employer, he being ignorant of the fact, and the act being an excess of authority. There is no difference, because the same absence of a supposed necessary intent to violate the statute exists in both cases. One fallacy of the argument is in supposing an intent to violate the statutenecessary to avoid a contract which is contrary to its provisions. Usurers never act on such an intent; their intent is not to violate but to evade the statute; but whenever they do the act or make the contract which, directly or indirectly, accomplishes a reservation of the forbidden interest, the law adjudges the statute to be violated, and does not hear them say they did not mean to break the law. It is always enough to design to do the act which the law holds to be a violation of the statute. So if *Page 176 parties, in total ignorance of the statute, give and receive a note, bearing, on its face, ten per cent interest, payable in this State, the law declares it to be usurious, notwithstanding their mutual ignorance of the statute, because they designed to make the note as it was made. They may show that the note was so written by mistake, the intent being to write it differently; but not their ignorance of the law and consequent freedom from intent to violate it.
"It is not necessary to the offense, says SUTHERLAND, J., inN.Y. Fireman's Ins. Co. v. Ely (2 Cow., 706), that there should be an actual intention to violate the statute. It may be committed by one who, in point of fact, never heard of the statute. Whether the party intended to take more than seven per cent, by way of interest, is a question of fact for the determination of the jury. If it be found that he did, it is an invariable inference of the law that it was taken in pursuance of a corrupt agreement, which constituted the offense." And see cases cited by Judge SUTHERLAND, ubi supra, et seq.) So where an excess of interest was intentionally taken upon a mistaken supposition that banks were privileged in this respect, to a certain extent, it was held that it was a corrupt agreement in the sense of the law; for ignorance of the law will not excuse." (Maine Bank v. Butts, 9 Maine, 55, 2 Cow., 706.) And so, also, where an erroneous mode of computation was adopted, under claim of a right so to compute the interest, the effect of which gave more than seven per cent, it was held to be usury. (2 Cow.) The absence, therefore, of personal intent to violate law is of no importance where the question is whether the agreement, which was in fact made, is in conflict with the statute and therefore void. The only questions are, did the parties designedly make this agreement, and what is its legal effect.
In this case it is not doubted (nor was it in Condit's case) that the agreement made by the agent was a plain violation of the statute on his part. He designed to make the agreement reserving the fifty dollars to himself as a condition to the loan. The language of the statute is clear and explicit that all contracts whatsoever, whereupon or whereby *Page 177 there shall be reserved or taken, or secured to be reserved or taken, any sum or value for the loan and forbearance of money greater than the prescribed rate of interest, shall be void. (1 R.S., 772, § 5.)
The contracts Glover Williams made are within the plain letter of the statute, and the evidences to secure the money loaned under those contracts were void in their hands. It is of no consequence that the excessive interest or bonus was reserved to be paid to them. The statute covers every case of unlawful reservation of interest, whether payable to the lender or to any other party. Will it be contended that the agents could enforce the notes if, instead of returning them to their principals, they had by some mode become owners of them? I do not think the learned judge, in Condit v. Baldwin, intends to go so far as to affirm that position, for he asserts the guilt of the agent in decided terms, holding him to be liable to an action under the statute for the recovery of the usurious bonus, and to an indictment for receiving it. As between the makers and the agent then, the note was void for usury. By what process is it freed from that consequence and made valid? By a fraud upon the law on the part of the agent in delivering the void note to his principal and concealing from her the contract under which it was made. A grievous wrong he undoubtedly commits; but does that act give vitality to paper void in his hands, for violation of the statute? If it does, then "every agreement" forbidden by the statute is not void, but only such as are made by principals directly, or by agents having authority to reserve usury. The question of the agent's authority is quite independent of the character of the agreement. The agreement is, as it is in factmade, whether made with or without authority; neither the ignorance of the principal of its terms, nor the want of authority to make them, can change its real form and substance. If its form and substance be against the statute, the contract is void, no matter who makes it, nor how much or how little power he possesses to make it. Every part of the contract is equally void. It is an entire and indivisible thing, though one part has been executed by the *Page 178 payment of the fifty dollars and the residue remains evidenced by the note. Now is it possible that the principal can divide such a contract and enforce the security given for the loan? If that can be done, it must be on the ground that the loan itself was not usurious. But there can be no usury without a loan; and if the loan be not usurious, then there is nothing to base the idea of usury upon, and it is absurd to say that any part of the contract is obnoxious to the statute. That is saying that a usurious premium has been taken upon a loan not usurious within the statute, which is a legal impossibility and absurdity. The agent who effected the loan cannot be chargeable with usury, unless he made a usurious loan; and if he made such an one, then the evidences of it are void by statute, into whose hands soever they may come. It may be said the principal makes the loan, and the agent takes the usury; but the usurious premium is the consideration of the making of the loan, no matter who makes it; and as that fact cannot be expurgated by any argument, the taint of usury affects the loan, or there is no usury. It would have been better to have boldly said the transaction is not within the statute of usury at all, but mere extortion, than to uphold the loan as not void for usury, and condemn the bonus as evidence of crime, under the statute, against the agent.
It was urged in Condit v. Baldwin that the plaintiff, by accepting the note and commencing suit upon it, ratified all the acts of her agent connected with the loan and attendant upon its inception. It was answered by the learned judge, in substance, that those acts "only ratified the contract of loan at the rate of interest expressed in it;" that "she had no knowledge of, and cannot be held to have ratified, the payment by Baldwin's agent to Williams, of the $25 usuriously taken by him, as is said."
The true answer was that the accepting of the note and commencing suit upon it, were a ratification of nothing. Those acts being done in ignorance of the fact of the usurious agreement, cannot be held to ratify what was unknown to her. They were only evidence that she supposed she possessed *Page 179 a valid note, made upon an authorized loan; and that was something which, if true, needed no ratification. The commencing of a suit, under such circumstances, put her in no position where she could not abandon it on the facts becoming known to her, and repudiate the unauthorized acts of her agents, and pursue the moneys actually loaned, or prosecute the agent for his violation of duty. The true question was not whether she had ratified anything, but whether, for the purposes of that suit, she could deny the authority of her agent to make the contract, while insisting upon seeking to enforce a portion of the very contract he had made. The rule is well stated by Mr. Hovenden, thus: "Though an agent act gratuitously in exceeding his authority, subsequent approbation adopts his acts; and this approbation will be inferred whenever the principal avails himself of any advantage derived from his acts, for he will not be permitted to avow his agent's negotiation as to part, and disavow as to the residue." (Hov. on Fraud, 144, 145; 1 Ves., Sr., 510; 1 Atk., 128.) If her agent had exceeded his authority in making the contract, the law gave her an election of remedies: To repudiate the contract and pursue her money into the hands of the party who had received it; to prosecute her agent for a violation of duty, and recover such damages as she had sustained by his misconduct; or to insist upon the contract he had made, taking it as in fact made, and, of course, in that proceeding, estopping herself from raising the question of his authority. Until Condit v.Baldwin, I think there was no case entitled to be regarded as authoritative that held she had any further rights. "I am not aware," says BEARDSLEY, J., in Dexter v. Davis, 2 Denio, 651, "of any exception to the principle that one who endeavors to turn to his own advantage what others have assumed to do for his benefit, although without authority, is as to such act, deemed to stand in their place and if what the assumed agents had done was fraudulent as to themselves, it is equally so as to him who thus adopts and assumes it." This question is so fully discussed by COMSTOCK, J., in the case under review, that to follow it further seems to be mere supererogation. (See Story on Agency, § 250; *Page 180 Dunlap's Paley, 172; Benedict v. Smith, 10 Paige, 127;Corning v. Southland, 3 Hill, 552; 5 Hill, 137, cases there cited, c.
But this case should be determined upon the point that a usurious agreement made by any person or agent, with or without authority, in violation of the statute, can, under no circumstances, be divided so that any portion of the securities received under it can be enforced.
I am not able to see that the authorities cited by the leading opinion in Condit v. Baldwin sustain the position that the principal can repudiate the usurious agreement under which a note is given, on the ground of want of authority, and so enforce the security taken. A brief review of these authorities seems to me to show that they fail of that end. In Wilson v. Truman (6 Man. G., 238), a landlord authorized a bailiff to distrain for rent, expressly directing him not to take anything except on thedemised premises. The bailiff distrained cattle of another, on another farm, supposing them to be the cattle of the tenant. The proceeds were paid to the landlord without any knowledge of the acts of the tenant. Held, that trover would not lie against him, because the act of the bailiff was a direct violation of his express orders, and the receiving of the proceeds in total ignorance of what the bailiff had done, did not amount to a ratification of his tortious acts. This is an authority for saying that the receiving of the note by Mrs. Condit, in ignorance of the usurious agreement, was no ratification thereof, to which all will agree; but, in the case cited, what would the ruling have been if, after the bailiff had wrongfully distrained the cattle, the landlord had, with notice of the act, prosecuted the distress to a sale. His position would then have been analogous to one who is seeking with notice to enforce a demand taken in violation of authority by his agent.
In Bush v. Buckingham (2 Ventris, 83), the plaintiff made a loan at a legal rate of interest. The scrivener who drew the bond inserted, by mistake, an illegal rate, and the plaintiff was permitted to show the mistake, to overthrow all presumption of intent to violate the law. I am at a loss to *Page 181 see how this is an authority for enforcing securities taken on a usurious agreement where there was no mistake, but a palpable and clear intention in the party to make the agreement as it appeared.
So in Buckly v. Guildbank (Cro. Jac.), a bond was executed May 23d 1617, on a loan of £ 120, conditioned to pay £ 132 on the 24th day of May next ensuing. The court misconstrued the bond to be payable the next day after its date, but as the mistake was that of the scrivener, the loan having been in fact for one year and the interest lawful for that period, and for which the plaintiff had waited, it was more wisely held that there was no corrupt intent and therefore no usury. Nevesar v. Whilly (Cro. Chas., 501), is another case bearing wholly on the mistake of the scrivener in preparing a bond different from the agreement of the parties, and turning, therefore, on the absence of the corrupt intent.
In Baxter v. Buch (10 Verm., 548), an agent who was authorized to settle a debt due to an estate, took a note from the debtor to the administrator for the sum due, and another for a further sum to himself, payable at a future day. The court said, "inasmuch as there was a bona fide indebtedness to the estate of which plaintiff was admistratrix, and the note received by plaintiff was only for the just amount due, the note in suit would not be void if Porteus Baxter (the agent), without her consent, received a note for himself for any further sum." The court gave the point no further discussion and the case seems to have gone upon the idea that an original valid indebtedness, which the note represented, would not be avoided by a subsequent usurious agreement. This is the only case I have seen that seems to uphold the validity of the note to the principal in such a case; and although the same court, in Austin v. Harrington (28 Verm., 130), endeavor to distinguish the case, they seem to me necessarily to have overruled it. In that case, the defendant borrowed of plaintiff's agent a sum of money for which he gave his note, and on the same occasion, but without the knowledge of the principal, purchased a span of horses belonging to the agent, at a price much beyond their value, for the purpose of procuring *Page 182 the loan. The court held this to be usury, and that the principal could not enforce the note to herself without deducting the usury received by the agent. "She claims," said the court, "the benefit of the contract, and is now seeking to enforce payment of the note." * * * The contract, as made by her agent, is thereby adopted and assented to; and she is and should be subject to all the legal consequences resulting from it." I think this decision of necessity overturns the other, although the court seek for a distinction in some fancied difference between a general and special agent as to the effect of the adoption. These are the cases cited by the learned judge to sustain the proposition that the plaintiff could enforce so much of her agent's contracts as conformed to the authority given, and reject the residue. But it is submitted they do not uphold the position; nor indeed add any force to the ingenious and able argument of the judge who pronounced the opinion of the court in Condit v. Baldwin. Let it not be understood that in throwing out these suggestions, light skirmishers as it were, I am abandoning the "fortress and rock of my defense," the dissenting opinion in Condit v.Baldwin. For the reasons assigned there, rather than here, I am in favor of disapproving the decision of that case, and consequently of affirming the judgment in this case.