Brown v. Fletcher

253 F. 15, 165 C.C.A. 35, 1918 U.S. App. LEXIS 1517

• Court: Court of Appeals for the Second Circuit
• Decided: May 10, 1918
• Docket: No. 191
• Status: Published

Opinions

HOUGH, Circuit Judge

(after stating the facts as above). That the defendant Braker is an incompetent spendthrift, of no judgment whatever, may be quite true. His father’s opinion of his wisdom is plainly inferable from the will giving rise to this (and much other) litigation. But when in 1901 he either borrowed from or sold to the dummy Rabe, at rates which gave Rabe’s principals the chance or certainty of profits at the rate of five to one, he was of mature years, not impoverished, except temporarily and by his own extravagances; he was no raw and needy youth. To such a man we are agreed that the doctrine of catching bargains, has no application. A majority of the court do not find it necessary io express, as to the New York decisions above referred to and relied on below, either general assent or dissent. It is preferred, to dispose of these appeals on narrower grounds.

[1, 2] In the suit for the $10,000 fund we hold that, both the judgment of the Supreme Court of this state and the Surrogate’s decree are good defenses in bar of any such claim as is here advanced against Braker, and unless plaintiffs can have decree against Braker they can never recover, if for no other reason than that their title flows from him alone. The trustee, Fletcher, is a stakeholder only.

In 231 Fed. 92, 145 C. C. A. 280, this court had not Braker before it; he was not then served. When he was brought in the Surrogate’s decree was years old, and upon the trial of this case he proved a chain of connections between Burr, who was to all intents the New York Finance Company, and these plaintiffs, which convince us that Brown et al. are not bona fide pruchasers of or lienors upon anything the New York Finance Company had from or through Braker; on the other hand, they are hut the cloak or cover for Burr, who from the beginning has been and still is in control of this litigation. There were not even purchasers “pendente lite,” as was supposed ; they are not purchasers at all, but tools of ■ Burr. This is a finding of fact on the evidence now before us.

[3] As to the suit for the $17,500 fund, it is undoubtedly true that the paper title given to Rabe, and lying at the foundation of plaintiff’s claim, contains no words of loan, nor any intimation of a borrowing by Braker. It is in terms a contract of sale and in the present tense. But this fact does not prevent investigation of the circumstances attending its execution and delivery, in order to test the transaction for usury. One who really buys an expectant estate, by the very nature of his purchase takes a risk, which explains and justifies the small price he pays. The value on vesting, the worth when danger of loss is past, is no criterion of value when bargain made.

[4] If Braker gave up or forewent no more than his chance of living long enough to reduce to possession liis father’s bounty, he should be held to his bargain, ill-advised and foolish as it may have been.

[5] In this instance, however, two things occurred which in the judgment of a majority of this court gave a different aspect to the transaction. Braker wanted $5,000, he got $3,500 (out of which he paid a broker $500 for introducing him to Rabe et al.), and it was substantially agreed that the difference between request and receipt was so great that the Ra.be-Burr party agreed to pay the premiums on such life insurance as they wanted and for which Braker agreed to-apply. This was a part of the agreement, and as much a part as was the document of sale on which plaintiffs must and do rely. Policies were accordingly obtained, and assigned to Rabe, “creditor” of Braker. He certainly was no creditor, if there was a bona fide present sale made.

The second matter deemed important is that the assignment or document of transfer, after vesting in Rabe as fully as words could do it Braker’s rights in and to the fund in question, continues thus:

“I do by these presents, for myself, my heirs and executors and administrators, covenant, grant, and agree to and with the said Frank L. Rabe, his heirs, executors, administrators, and assigns, that he, the said Frank L. Rabe, his heirs, executors, administrators, and assigns, shall and will as hereinbefore declared and set forth receive the net sum of [$17,500] when and as soon as [the fund of which the amount in suit is a part] shall become due and payable under and by virtue of the provisions [of Braker, Sr.’s, will], to have and to hold the .same unto the said Frank L. Rabe, his heirs,” etc.

Thusi (first) by insurance at Braker’s expense (the difference between his paying direct and having h'is price or advance abated in consideration of Rabe’s paying being nil) covering the period of suspense when Braker might by dying prevent vesting, and (second) by Braker’s covenant to pay out of whatever he had whencesoever procured, if the estate of Braker, Sr., proved valueless, the $3,500 principal of plaintiff’s assignors was placed beyond the hazard of every contingency, except inability to collect out of Braker or his insurers, as the case might be. This avoidance of legal (as distinguished from natural) contingencies or dangers is one of the oldest marks of usury, when such elimination of genuine hazard secures gains above lawful usance. . Chesterfield v. Janssen, 2 Vesey, 125; Colton v. Dunham, 2 Paige (N. Y.) 272. And as to the effect of such superadded personal liability as that of Braker’s, see Leavitt v. Enos, 155 App.Div. 584, 140 N. Y. Supp. 862.

It is said that Braker’s covenant is no more than the guaranty considered in Orvis v. Curtiss, 157 N. Y. 657, 52 N. E. 690, 68 Am. St. Rep. 810. We cannot think so, for there was in that case no advance or transfer of money from plaintiff to defendant, but (as definitely found) a joint venture or “contract of partnership,” with a guaranty against positive loss by one partner to the other. Here any personal responsibility is utterly inconsistent with that present -sale of a real contingency on which alone plaintiffs can securely rest.

It follows that, without considering the wholly contradictory and irreconcilable tale told by Braker on one side and Burr et al. on the other, as to what was contemporaneously said, we find the written or admitted words evidencing the contract made, such as to show something more than and different from the purchase of a contingency, viz. an avoidance of all hazard except that of being paid by Braker or his insurers, whose obligation was held by Braker’s “creditor” — i. e., Rabe or his assignees. From this apparatus of papers plaintiff cannot escape. The “treaty was for 'a loan.” Every effort was made to avoid that word by those furnishing the money, but when it was furnished the would-be borrower had in substance and effect agreed to “return the capital at all events” with unlawful additions. This is usury. Dowdall v. Lenox, 2 Edw. Ch. [N. Y.] 274.

Decrees affirmed, with one bill of costs.