New-York Fire Insurance v. Donaldson

The Vice-Chancellor :

The face of the mortgage does not appear to furnish any evidence of an usurious agreement. The clause declaring it to be lawful for the mortgagees to keep the buildings insured and that the mortgage should operate to secure the re-payment of the premium paid for effecting the insurance, was intended to benefit the mortgagor as well as the security of the mortgagees. It certainly does not appear, from the clause itself or from any other matter in the complainants’ bill, that it was intended, by the mortgagees, as a devise or means to evade the statute against usury or to obtain an interest greater than the law allows for the loan or forbearance of money.

The answer endeavors to show that this matter of premium of insurance is a mere shift or contrivance to cover an excessive or usurious rate of interest. This is new matter, not responsive ; and the answer being replied to, it should be proved, but no proof is given.

The case is, then, on the point of usury, within the decision of the Utica Insurance Company v. Cadwell, 3 Wend. 296, *201where the supreme court held that an insurance company, in making a loan, may lawfully have a condition that the borrower shall effect an insurance with the company and such insurance, being made at the usual rate of premium, is no evidence of usury: for the premium is not for the loan, but for the risk which the company incurs by the contract of insurance, while the borrower receives an equivalent for his premium independent of the loan.

There must be the usual decree, referring this case to a master to compute the amount due; and for a sale of the- mortgaged premises on the coming in and confirmation of the master’s report.