Duquesne Bank's Appeal , 74 Pa. 426 ( 1874 )

The opinion of the court was delivered, January 5th 1874, by

Agnew, J. —

The fact that the judgment and mortgages of the Cowens were usurious is proved beyond a doubt. The Cowens received from Brady & Co. but $28,800 for their judgment in the sum of $40,000, and mortgages to secure the same, due in eight years, with annual interest. The Duquesne Bank, as assignee of Brady & Co., stood in no better position than they, these securities not being negotiable. The bank, however, sets up certificates given by the Cowens to Brady & Co., a part of the machinery to enable them to effectuate the usury, declaring that they have no set-off of defence to the payment of the judgment and mortgages, and that the whole sum is justly due and payable. The bank alleges that the Cowens are estopped by the certificates from setting up the usury. The Cowens in reply prove that the bank itself paid , but $30,690 to Brady & Co. for the debt of $40,000, and allege that it had notice of the fact of usury, and therefore has no equity.

Tbe master finds actual notice to tbe bank, or rather actual knowledge of the usury of Brady & Co. He finds this from a variety of circumstances: the relation of James Brady as president of the bank; the intimacy of Campbell, the treasurer, with the firm of Brady & Co., his frequent visits there; the practice of Brady & Co. in selling their claims to the bank, and the discount at which Brady sold this claim; the testimony of Brady that when the mortgages-were offered by him to the bank, the matter was fully and elaborately discussed in the board of directors, and the hesitation on part of some of the members; his telling them he did not care whether they took the mortgages or not, and their final agreement to purchase at three per cent, per annum discount off, allowing Brady & Co. for the use of the money while they held the mortgages; the price paid by the bank to Brady & Co., $30,690 ; Brady & Co.’s profits, $607.18, and the additional interest paid them, making a profit of about $1000. These are significant facts, making it highly probable the bank knew that Brady & Co. had advanced on these securities a sum less by their profits than the sum paid by the bank. Looking at the relations between Brady and Brady & Co. and the bank, the discussions about the purchase, the difficulty among the members of the board, the amount of the securities, $40,000, the time the debt had to run, and the sum paid by the bank, $30,690, and allowing Brady & Co. for the use of the money while they held the securities, included in a calculation of the profits of Brady & Co., it cannot be believed that the bank supposed for a moment Brady & Co. had advanced to the Cowens the full $40,000. The master has found the knowledge of the bank, and the court has confirmed his finding. We cannot say there was plain mistake in this finding ; indeed the probabilities are with it; and we must take the fact to be true that the bank knew of the sum paid to the Cowens by Brady & Co., and consequently knew of the usury. The defence is one under a statute which lays its hands upon the usury as an illegal act; contrary therefore to equity also; and it becomes the duty of all courts to maintain the law. The bank taking the securities with a knowledge of the usury, it cannot set up the certificates given to Brady & Co. as an estoppel. If by such a device the usury can be upheld, the law may be avoided in a most easy manner.

The decree of the Common Pleas is affirmed, with costs.