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FOWLER V. EQUITABLE TRUST CO., 141 U. S. 384 (1891)
U.S. Supreme Court
Fowler v. Equitable Trust Co., 141 U.S. 384 (1891)
Fowler v. Equitable Trust Company
Nos. 32, 33
Argued April 16-17, 1891
Decided October 28, 1891
141 U.S. 384
Upon the rendition of a decree, a petition and motion for a rehearing was filed. At the succeeding term of the court, an order was entered granting a rehearing, which order was entered as of a previous term. The record contained no order showing the continuance of the motion and the petition for rehearing to the succeeding term. Held that the presumption mast be indulged, in support of the action of a court having jurisdiction of the parties and the subject matter -- nothing to the contrary affirmatively appearing -- that the facts existed which justified its action, and therefore that the court granted the application for a rehearing at the previous term.
The question of usury, in a loan made in 1873 to a citizen of Illinois by a Connecticut corporation, the loan being evidenced by notes of the
borrower payable in New York and secured by mortgage upon real estate in Illinois, is to be determined by the laws of the latter state pursuant to its statute providing, in substance, that where any contract or loan shall be made in Illinois or between citizens of that state and any other state or country at a rate legal under the laws of Illinois, it shall be lawful to make the principal and interest payable in any other state or territory, or in London, in which cases the contract or loan shall be governed by the laws of Illinois, unaffected by the laws of the state or country where the same shall be made payable.
It is settled doctrine in Illinois that the mere taking of interest in advance does not bring a loan within the prohibition against usury, but whether that doctrine would apply where the loan was for such period that the exaction by the lender of interest in advance would, at the outset, absorb so much of the principal as to leave the borrower very little of the amount agreed to be loaned to him is not decided.
A contract for the loan or forbearance of money at the highest legal rate is not usury in Illinois merely because the broker who obtains a loan -- but who has no legal or established connection with the lender as agent and no arrangement with the lender in respect to compensation for his services -- exacts and receives, in addition to the interest to be paid to the lender, commissions from the borrower.
If a corporation of another state, through one of its local agents in Illinois, negotiates a loan of money to a citizen of the latter state at the highest rate allowed by its laws, and the agent charges the borrower, in addition, commissions for his services pursuant to a general arrangement made with the company at the time he became agent, that he was to get pay for his services as agent in commissions from borrowers, such loan is usurious under the law of Illinois, although the company was not informed, in the particular case, that the agent exacted and received commissions from the borrower.
In Illinois, when the contract of loan is usurious, the lender, suing the borrower for the balance due, can only recover the principal sum, diminished by applying as credits thereon all payments made on account of interest. In such cases, whatever the borrower pays on account of the loan goes as a credit on the principal sum.
A trust deed covering real estate provided that in the case of a sale by the trustee at public auction upon advertisement, all costs, charges and expenses of such advertisement, sale and conveyance, including commissions, such as were at the time of the sale allowed by the laws of Illinois to sheriffs on sale of real estate on execution, should be paid out of the proceeds. Held (1) that this provision did not impose upon the borrower the burden of paying to a lender a solicitor's fee where a suit was brought for foreclosure; (2) that the commissions referred to in the deed are allowed only where the property is sold, upon advertisement, by the trustee, without suit.
The Court stated the case as follows:
By deed bearing date November 1, 1873, and acknowledged and filed for record February 23, 1874, Edwin S. Fowler -- his wife, Sophie Fowler, uniting with him -- conveyed to Jonathan Edwards, in fee simple, certain real estate in the City of Springfield, Illinois, in trust to secure the payment of the principal and interest of nine bonds, of one thousand dollars each, executed by Fowler to the Equitable Trust Company, a Connecticut corporation, and payable, principal and interest at its office in the City of New York, the principal five years after date and the interest semiannually at the rate of seven percent per annum.
The deed recited that the bonds were given to secure a loan of nine thousand dollars, payable five years after date thereof, with interest at ten percent per annum, of which seven percent per annum was secured by the deed of trust, and was to be paid as in the bond provided, and the balance, to-wit, three percent per annum, was "discounted," and paid at the time of the execution of the deed. In case of default in paying the principal or interest as each matured, or of failure to keep and perform the covenants of the deed, or any of them, the trustee was authorized to sell at public auction, after advertisement, to the highest bidder for cash, and with or without previous entry upon the premises, the right and equity of redemption of the grantors, and out of the proceeds of sale to pay the costs, charges, and expenses of the advertisement, sale, and conveyance, "including commissions, such as are at the time of such sale, allowed by the laws of Illinois to sheriffs on sale of real estate on execution," all sums paid by the trustee for insurance and taxes, with ten percent interest thereon from time of payment, the principal and the accrued interest remaining unpaid at the time of sale, and to Fowler any balance remaining.
The present suit was brought October 26, 1882, to foreclose the defendants' right and equity of redemption, and for a sale of the mortgaged property to raise such sum as might be due the mortgagee.
Fowler, by his answer, put the plaintiff upon proof of the averments of the bill, and made defense upon several grounds.
But the original answer is important only as alleging that the loan was usurious and was consummated in the manner it was with intent to evade the statutes of Illinois relating to interest.
The plaintiff filed a general replication and subsequently the defendants, by leave of the court, amended their answer, stating more fully the grounds upon which they based the defense of usury. They also alleged that the contract of loan was and is a New York contract, and that by the statutes of that state, it was usurious in that the interest contracted to be received by the plaintiff, having regard to the amount actually advanced by it, was in excess of seven percent per annum, the rate established by the laws of New York. Of those statutes they claimed the benefit.
[The facts proved, and which were relied upon to establish that the contract was usurious under the laws of New York, are stated in the opinion of the Court, post, pages 141 U. S. 397-399.]
By a decree passed October 20, 1884, the court below found the amount due from Fowler to be only $2,980.67 on the bonds, and $270.94, insurance and taxes paid by the plaintiff, with interest thereon -- in all, $3,251.61. At the foot of that decree were these orders:
"And thereupon the complainant entered its motion for a rehearing before a full bench."
"Whereupon, on said 20th day of October of the year last aforesaid  came the complainant by its solicitor and filed in the clerk's office of said court its motion and petition for a rehearing in this cause, which motion and petition are as follows,"
Following the above in the transcript are the written motion and petition for rehearing.
On the 8th of June, 1885 -- the succeeding term -- the cause was set for hearing on the 29th of that month before what is called a full bench. Then appears an order, under date of June 30, 1885, entered as of October 31, 1884, granting the rehearing asked. To that order the defendants excepted.
By the final decree of January 11, 1887, the sum of $8,150.79 was adjudged to be due the trust company, of which $7,809.69 was found to be the sum actually advanced by it to Fowler,
and $341.10 was the amount of insurance and taxes on the property paid by the company, with interest on each sum, from date of the decree at the rate of six percent per annum. The mortgaged property was ordered to be sold to raise the above aggregate amount found to be due, with such interest, and the costs of the suit. From that decree, each party has prosecuted an appeal, the defendants insisting that no decree for any amount should have gone against them, while the plaintiff insists that the decree should have been for a larger amount.
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