Opinion
October Term, 1852
W. Betts, for appellants.
J.L. Curtenius, for respondents.
If the consideration of the bond and mortgage in question was a loan from the appellants to the respondents, and the transaction is to be treated in that light, it can not be legally upheld, for two reasons:
First — Seventy-five per cent of the amount of the loan of $3000, for which the bond and mortgage were given, consisted in a trust certificate issued by the company, by which they certified that the sum of $2250 had been deposited with them for the period of twenty years and irredeemable within that time; interest to be paid thereon by the company half yearly at the rate of 4½ per cent per annum, and the principal to be paid at the end of the twenty years.
The revised statutes declare that no corporation created or to be created and not expressly incorporated for banking purposes, shall by implication or construction be deemed to possess the power of discounting bills, notes or other evidences of debt,c., or of issuing bills, notes or other evidences of debt,c., upon loan or for circulation as money (1 R.S. 600, § 4). And the 21st section of the act incorporating the New York Life Insurance and Trust Company, provides that the said company shall not in any case or for any purpose issue its own bills, notes or other evidences of debt for loan or for circulation as money ( Sess. L. of 1830, p. 80, ch. 75, § 21).
The certificate in question was clearly an evidence of debt. By it the company bound themselves to pay interest semiannually, and at the end of twenty years to pay the principal. If it was issued on a loan it was manifestly in violation of both the statutes referred to.
Second — Assuming the right of the company to loan their certificates of deposit, and the transaction a loan, it was illegal and void for usury. The bond and mortgage bore interest at seven per cent and the certificate only 4½ per cent, making a difference in favor of the company of 2½ per cent or $57.25 per year on the amount of the certificate. It is not doubted that if the certificate were actually worth in money its nominal amount at the time it was loaned, notwithstanding it bore a rate of interest less than the respondents agreed to pay for the forbearance of the amount, the transaction would have been exempt from the imputation of usury. But this was not attempted to be proved; on the contrary, there is evidence in the case which is uncontradicted, showing that the certificate was not intrinsically worth and would not sell in market for its nominal or par value, which was known to the appellants. It is proved that they were in the habit of purchasing similar certificates issued by themselves at a discount. If they were loaned as money at their nominal amount, according to a well settled principle, it was usury ( Far. L. Tr. Co. v. Carroll, 5 Barb. S.C. Rep. 654, and authorities there cited; Eagleson v. Shotwell, 1 J.C.R. 536; Bank U.S. v. Owen, 2 Peters R. 527; The Dry Dock Bank v. The Am. Life Ins. Tr. Co. 3 Comst. 344).
There can be no doubt from the evidence that the bond and mortgage were given by the respondents and intended by them as security for a loan, nor that they received the proceeds thereof as a loan from the appellants. This was scarcely denied upon the argument. It was in point of fact a loan and nothing else.
But it is contended on behalf of the appellants that the respondents are estopped from alleging that the transaction was a loan. That the bond and mortgage were sold to them by Schermerhorn as his own property, under representations made by him at the time that they had been given to secure a debt due from the respondents to him, and that it was part and parcel of the arrangement entered into between the appellants and Schermerhorn, detailed in the evidence, by which the latter was to sell bonds and mortgages to a large amount to the former and receive in payment the trust certificates of the company.
It can not be pretended that there is any evidence to show that the respondents knew of the alleged representations of Schermerhorn or that they ever authorized him to make them, or to pass off the bond and mortgage as his own property.
Schermerhorn swears that he was the agent of the respondents in procuring this loan for them; and the counsel for the appellants contends that the respondents are concluded by his acts and representations the same as if they were their own, upon the principle which pervades all cases of agency, that the principal is bound by all acts of his agent within the scope of his agency which he holds him out to the world to possess; and that where the acts of the agent will bind the principal, there his representations, declarations and admissions respecting the subject matter will also bind him if made at the same time and constituting part of the res gestæ.
The declarations or representations of the agent when not expressly authorized by the principal must, in order to bind him, be within the scope of his agency. But that was not the case here. Schermerhorn's agency was to obtain a loan for the respondents from the appellants. His alleged declarations, which are relied upon, were entirely without the scope of such or any other agency. Instead of acting as the respondents' agent he represented himself as acting in his own name and right and on his own account; in effect denying any agency whatever; and on that ground solely the appellants allege they dealt with him. Under such circumstances it is impossible to perceive how a rule can be applied which relates to the liability of an individual in consequence of the acts or declarations of his agent
The natural inference from the fact, that the bond and mortgage were drawn directly to the appellants was, that the transaction was between them and the respondents, and such is the aspect presented by the bill of complaint, and it is inconsistent with the idea that they were given for a debt due to Schermerhorn; and if the appellants have listened to a totally different and unauthorized statement of facts made by him and have acted upon it they did so at their peril and must abide the consequences ( Story on Agency, § 78; 5 Ves. 211; 7 Wend. 446) The judgment of the supreme court should be affirmed.
Judgment affirmed.