Barcalow v. Sanderson

17 N.J. Eq. 460

• Court: Supreme Court of New Jersey
• Decided: March 15, 1864
• Status: Published

Opinions

The opinion of the court was delivered by

Elmer, J.

The appellants, who were the defendants in the Court of Chancery to a common mortgage bill, have set up the defence of usury, and insist that their mortgage, dated November 18th, 1854, to secure the payment of $20,-000, on the first day of January, 1858, with lawful interest, is for that reason void. Both parties were examined as witnesses, and as so often happens, tell entirely different stories. That the testimony of Barcalow ought not to be relied on as sufficient, of itself, to sustain his defence, is evident, not only because of the great danger of permitting a debtor to swear himself clear of a large debt, for which he has given his bond, but because iji this case, it appears that after swearing in his answer to certain important statements, he reiterated them on his examination and cross-examination, in the most positive manner, and was subsequently compelled to admit that he was mistaken, and this mistake, if a mistake it v/as, as we may charitably believe, was in reference to transactions, it seems almost incredible that he could have forgotten.

As to the testimony of the appellant’s hired man, who swears that he was hidden in the upper story of his office, wrapped in a buffalo skin, for the purpose of listening to a conversation between these parties through a scuttle-hole in the ceiling, so far from being entitled to credit, in my opinion, taints the whole defence with strong suspicion.

But it is insisted for the appellants, that the statements of the complainant himself, taken in connection with the testimony of Gaston and McGraw, who are unimpeached witnesses, are sufficient to show that the transaction between the parties was, in fact, usurious, and this is the important question to be decided. That the mortgage was given to secure a loan of money is clear. The complainant held the defendant’s paper, upon which there was due between six and seven thousand dollars. The latter was engaged in carrying on the lumber business at Somerville, in partnership with one Lindsley, and was desirous of purchasing out his interest in the concern, or of procuring some other person to do so, who had sufficient capital to enable him to go on with the business. It was proposed that the complainant should become the purchaser, and should make a loan to the defendant of $20,000, which, it would seem, he agreed to do.

The bond and mortgage in controversy were executed at the office of Mr. Gaston, in Somerville, on Saturday, November 18th, on which day they bear date. Gaston was the attorney employed by the defendant, but acted in this business for both parties. He states that the papers were left in his office, as the parties had to go to New York to do something connected with the business. On Monday, the 20th, they met in New York, and the manner in which the loan should be made was arranged. Notes of Barcalow himself were given, payable to the order of complainant, dated January 22d, 1854, and payable at from ten to fourteen months, for the aggregate amount of about $11,527, which complainant endorsed, and defendant retained or made use of. Instead of the complainant becoming the purchaser of Lindsley’s interest in the partnership business, the defendant purchased it himself, and on the same day he made six promissory notes to the complainant, for eight hundred and fifty dollars each, bearing different dates, but payable, one on the first day of January, 1856, and the others at the expiration of each succeeding six months.

It is alleged by the defendant, that these notes were given as a bonus for the loan of the $20,000, while the complainant insists they were in lieu of the profits of the partnership into which he expected to enter with Barcalow, and which he had. been assured would, judging from the past, much exceed their amounts.

Lindsley, who had conveyed to Barcalow his interest in half the real estate owned by the partnership, at Somerville, on the 16th of November, two days before the execution of the mortgage, and who made him a bill of sale for the lumber, &c., on the 20th, was not examined. McGraw, who had been the partner of Barcalow in the business at one time, and sold out to Lindsley, who seems to have been largely indebted to him, and in whose office much of the negotiation took place, gives us but little precise information, and is indeed accused by the counsel on both sides, of not willingly disclosing what he really knew. The result of his statements of what Sanderson told him, as summed up by himself, is, “ that Mr. Sanderson had talked of going into the business as a partner, and preferred to furnish this amount of money and let him have the business himself. These notes, as I understood it, were for anticipated profits in the business.”

That the complainant was originally induced to make the loan, not only because he was the friend of Barcalow and accustomed to lend him money and held his paper, but also in consideration of the profit he then anticipated from the business of the partnership into which it was proposed he should enter, appears to be highly probable, and may be safely assumed. This, however, if he was intended to he truly a partner, and that relation was not to be a mere sham to cover a usurious bargain, of which there is no sufficient proof, was not usurious. The more important question is, did the substitution of the notes make the contract usurious ? In my opinion it did not, if the transaction was, in fact, a bona fide purchase by Barcalow of the complainant’s right or intention to interfere with his desire of obtaining Lindsley’s interest in the partnership, on terms he considered advantageous. While it is the duty of the court to maintain the law against usury, and carefully to prevent its evasion by any shift, covin, device, contrivance, or deceit, we are not called on to •enforce its severe penalties, without evidence entirely satisfactory and free from doubt. The strong probability in this case is, that while Sanderson was willing to lend his money if he could participate in the profits of the lumber business, Barcalow was willing to pay him the amount of the notes, to get rid of competiton for the purchase from Lindsley, and that Sanderson preferred this arrangement. There is no satisfactory evidence that Sanderson made it a condition of the loan, that he should have these notes, or that they were necessarily connected with it. Sanderson, himself, says the notes were given to him for Lindsley’s interest, and to assist Barcalow by way of lending him money at times, if he had any to spare. This statement, it is urged, is of itself proof of usury, inasmuch as when the notes were given, he had not advanced all the money to complete the loan for which the mortgage was given. It is clear, however, I think, that taking all he says on this subject together, which for the fair understanding of his- statement we ought to do, he did not mean that the notes were in consideration of any part of the loan then agreed upon, but as an inducement for him to make future loans.

After their return from New York, the parties met again at the office of Mr. Gaston, and the complainant signed an agreement respecting some mortgages assigned to him as collateral securities, and an engagement to pay the notes of Barcalow, which he had endorsed in New York, as they should successively mature, and they adjusted the balance due and the interest and rebate on the several notes and debts between them, and closed the transaction. The defendant alleges that the interest was then calculated at seven per cent., and that this infected the whole loan with usury. But how this calculation was made does not appear. It certainly will not do to rely upon imaginary figures on either side, especially as both parties insist upon mistakes, and cannot otherwise produce the desired result.

In my opinion, the decree of the Chancellor should be affirmed.