24th, the date of the insurance policy and of the affidavit; for I am satisfied by Depue's method of doing business he did not give up any of the money until he had all the papers signed, sealed, and delivered. Kline, the agent of the insurance company, says that the premiums were paid to the company, not by Hellfrich, as he testified, but by its general agent, Mr. Abernathy, and this on May 24, 1901. However, the giving of the policies was originally arranged for, the applications for the policies were signed April 17th, the medical examination had and the risk approved on the 18th, and the same day the application was modified to two $7,500 policies, so that, even if $500 was paid on the 18th, nothing remained to be done to put the policies in force but the payment of the premium. There was the approval of the insurance risk, and there was the delivery of the policies at the time of the payment of the $3,500. The premium was paid out of Braker's $3,500, so that, in fact, he received only $3,000.

[2] The plaintiff's contention that a delay of a few days in the actual issuance of the policies actually arranged for as part of the transaction would prevent the transaction being a loan rests on the misapprehension of the part played by insurance in such transactions. The matter of taking out insurance does not affect transactions as a matter of law, but as a matter of evidence and intent of the parties, and that intent is as fully shown by a positive arrangement for life insurance to be given at once as by actual issuance and delivery of the policy. The insurance was an integral part of the transaction.

Between April 18th and April 24th Rabe borrowed $5,000 from Charles E. Bushnell, Burr's client, on the half interest of the $35,000 charge so obtained from Braker. Rabe also borrowed $10,000 some two months afterward from Mrs. McCollum on the security of the other half interest in the $35,000 and the other fund here involved in the $10,000 suit in action No. 2. This indicates that Burr was in fact the principal in the transaction. It appears, therefore, that Depue's story that he could not obtain a loan of $5,000 was not truthful, and that a loan of $5,000 was procured from Bushnell on the half interest covered by the assignment in action No. 1. The result of the language of the instrument called the assignment is that security was given to Rabe of seven-tenths of the $50,000 fund, and also in the other sum due Braker from his father's estate, assuring to Rabe $35,000.

[3] While the assignment under these circumstances purports to sell, assign, transfer, and set over unto Rabe, $35,000, it is perfectly clear that the transaction was a loan of money, and that the pretended assignment was a mere cloak for usury. The case is similar to Wetzlar v. Wood, 143 App. Div. 311, 128 N. Y. Supp. 501; Mercantile Trust Co. v. Gimbernat, 134 App. Div. 410, 119 N. Y. Supp. 103; Hall v. Eagle Insurance Co., 151 App. Div. 815, 136 N. Y. Supp. 774, and Brown v. Robinson, 173 App. Div. 583, 160 N. Y. Supp. 287.

At the time this loan was secured Braker was in a fit condition for imposition. He was pressed for money, his wife was suffering from nervous prostration, and he was in urgent need of money to pay doctors' bills. His father evidently realized his weakness; for he tied up

his money so that he would not enjoy the benefits of it until he reached the age of 55 years.

I therefore hold that this transaction was a loan, and not a sale, of Braker's seven-tenths interest in his legacy of $50,000 as claimed by the plaintiffs.

The second loan to Braker was in June, 1901. Hellfrich acted as the broker in this transaction, and received the fee which covered a portion of the usurious charge. Why business was not transacted directly by Depue is not explained. Hellfrich brought him to Burr. At this time there was about due the $50,000 under the fourteenth clause, $20,000 of which had already been paid to Braker. There remained to be paid him $20,000 on the 21st of July, 1905, and $10,000 on the 21st of July, 1910. Braker had already borrowed from Loeb and Sage and promised to repay them out of the $20,000 installment due July 21, 1905, $5,000 and $8,000, respectively. Out of this $20,000 installment due July 21, 1905, these payments were made, leaving $7,000 unappropriated. Braker asked to borrow $3,000 or $3,500, agreeing to assign the $7,000 maturing in 1905. Burr refused to advance more than $2,500, and asked for an assignment, not only of the $7,000, the balance of the $20,000 payment, but also of the $10,000 installment maturing July 21, 1910. Thus he was to have $17,000 for a loan of $2,500. Braker testified that he said to him:

"Mr. Burr, you have already $15,000 worth of insurance in the Equitable Life Insurance Society, which will cover you for the loans that you have loaned me."

Burr said there was still $5,000 on his life subject to the assignment of Loeb, and demanded that he put up this and also the other $8,000 life insurance, subject to Sage's claim. Burr offered then to advance $2,500, and Braker says "as a loan." Burr's version is that it was talked of as a sale, and not a loan. A similar assignment of the interests in the estate and affidavits that the transaction was a sale and an assignment of the Loeb policy was taken. This transaction was disclosed by Cockran on the 13th of June, 1901. Braker received $750, Cockran saying that the balance of the money would be received in a few days and paid. Braker waited for about ten days, telephoned to Burr in Philadelphia, and Depue came over in the afternoon with $1,600 more and paid Braker; the remaining $150 Braker says he never received. It was about this time that a loan was made by Mrs. McCollum on the half interest in the $35,000. This transaction was adjudicated as usurious by Judge Greenbaum in the state court in an action against the New York Finance Company, but the plaintiffs herein were not parties to the action. The whole transaction is robed with the same cloak of usury. There was no opportunity for loss in any case or under any possible circumstances, and the principal must be repaid in either transaction.

Rabe had already $15,000 insurance on Braker's life in the Equitable which was an enforceable obligation from the time the money was advanced, and was so intended by the parties. He had also an equity in the policies held by Sage, and he had an additional assignment of the policy to Loeb subject to Loeb's claim, so that he had $28,000 of life

insurance subject only to the claims of Sage and Loeb for $13,000 to protect advances to Braker of $3,500 and $2,500. After the New York Finance Company was organized, Rabe assigned this assignment as well as the first to it. When the payment was made on July 20, 1905, of $20,000 under the fourteenth clause of the will, $5,000 was paid to Loeb, $8,000 to Sage, and $7,000 to the New York Finance Company. While the Sage and Loeb transactions were usurious, payment thereof will not affect the determination of the question in this transaction.

A question similar to the one here involved came up before Judge Hand of this court in Provident Life & Trust Co. v. Austin B. Fletcher et al., 237 Fed. 104. This was an assignment under the fifteenth and sixteenth clauses of the will. There it was held that the transaction was an assignment, and not a loan, but there is very strong intimation in the opinion that, if the plaintiff there was fully protected by insurance, the result would have been different. Judge Hand said:

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"I think it clear that the life insurance policies should not be taken as applicable to the transaction of February 25, 1902, and yet it is only if they were so intended that they may be considered upon the question of usury. Moreover, if they had intended the policies to stand as security for the transactions at bar, their intent would have been ineffectual, because the Rabe transactions were void for usury, and with them fell the policies."

The plaintiffs loaned $10,000 to the New York Finance Company and received, as security, an assignment of these two alleged assignments to Rabe, and claim that they received absolute title thereto by reason of the sale at public auction in Philadelphia under a foreclosure of their lien. A note was given by the New York Finance Company for $10,000 maturing July 20, 1910. The collateral agreement was executed extending the maturity of the note to February 15, 1913, in consideration of which extension a further note of $3,333 was given by Brown and Schermerhorn. There seems to be considerable excess interest or charge for this extension in payment of the note. In other words, this transaction had its secret agreement to pay $3,333 extra and indicates that clients of Burr, the plaintiffs, were participating in the proposed usurious benefits. They had notice that the original transaction was not had at sale, that the papers attempted to make it out to be, though the customary separate receipt for the consideration of $1 was given. They do not seem to have made any inquiry from Braker to find out the nature of the transaction or to learn anything about the nominal consideration of $1 mentioned in the receipt. They seem to have been connected with Burr and employed him as attorney for Brown and Schermerhorn to collect from the New York Finance Company, in which he was largely interested. When an action was started in the state court, Burr asserted that the New York Finance Company was the real party while he was acting as attorney for Brown and Schermerhorn in foreclosing on the New York Finance Company, and concealment by Brown and Schermerhorn of their foreclosure sale from Braker indicates that they were not bona fide purchasers. Indeed, Burr seems to be financing the litigation and to be the real party in interest.

[4] I think the rule may be fittingly applied that the papers, being usurious at inception, are corrupt instruments into whosever hands they come. Miller v. Zeimer, 111 N. Y. 441, 18 N. E. 716; Thompson v. Berry, 3 Johns. Ch. 395. There is no claim that the plaintiffs saw the affidavits of Braker and his wife, which accompany the assignments, nor is there any claim of estoppel.

Plaintiffs claim that they placed the matter in Burr's hands to collect from the New York Finance Company (and this really meant to collect from Burr). No payment was made for 32 years. Mr. Crummey, counsel for Braker, wrote a letter to Brown on April 29th advancing the claim that the assignment was not a sale, but a loan and usurious. This caused activity on the part of the plaintiffs. They did not discuss it with Mr. Crummey by letter or in person, but it resulted in Mr. Burr, representing his clients, foreclosing on these claims and offering them for sale in Philadelphia, and Wolf, a dummy for Burr, purchased at this sale, and this for the plaintiffs. This seems to have been done without notice to Mr. Crummey or Mr. Braker; the advertising was in the Philadelphia papers and Braker, and his attorney lived in New York. I think that, instead of trying to give publicity to this sale, the effort was to guard against notice being received by Braker and to carry it on in secrecy as against him. The relations of Brown and Schermerhorn with Burr in previous transactions in the lending of money satisfies me that the plaintiffs were not innocent purchasers, and cannot rest upon the claim that they did not know the real transaction at the time of the advancing of the money to Braker and the drawing of the instruments in question.

I am satisfied upon all the evidence that the moneys so advanced were loaned to Braker, that a usurious interest was charged, and that they are void. The money lenders here were protected from all loss under all possible circumstances; they were sure to have the principal repaid. This the policies of insurance gave to them. Wetzlar v. Wood, 143 App. Div. 311, 128 N. Y. Supp. 501; Id., 214 N. Y. 639, 108 N. E. 1111; Hall v. Eagle Ins. Co., 151 App. Div. 815, 136 N. Y. Supp. 774; Id., 211 N. Y. 507, 105 N. E. 1085; Hartley v. Eagle Ins. Co., 167 App. Div. 230, 152 N. Y. Supp. 686; Braker v. New York Finance Co., 155 App. Div. 894, 139 N. Y. Supp. 1117; Id., 214 N. Y. 683, 108 N. E. 1090.

The defendants may have a decree dismissing the bill.

HAGLER et al. v. SECURITY MUT. LIFE INS. CO.

(District Court, N. D. Texas. June 11, 1917.)

No. 697.

1. INSURANCE 18-FOREIGN INSURANCE COMPANIES-RIGHT TO DO BUSINESS CONDITIONS.

A state may impose upon a nonresident life insurance company such conditions precedent to its doing business in the state as it may see fit; and hence statutory provisions requiring the filing of a power of attorney authorizing service on any agent, officer or representative, and providing for service upon any person holding a power of attorney, or by publication, if no such person could be found, are valid and binding on such company.

2. INSURANCE 26-FOREIGN INSURANCE COMPANIES-SERVICE OF PROCESS.

Under Rev. St. Tex. 1895, art. 3064, requiring insurance companies desiring to do business in the state to file a power of attorney authorizing each agent to accept service of process, and consenting that such service shall be valid; article 3070, providing that process might be served upon any person in the state holding a power of attorney, and that if no such person could be found process might be served by publication; and Sayles' Ann. Civ. St. Supp. 1904, art. 3096ee, making the two articles mentioned conditions upon which foreign insurance companies were permitted to do business in the state, and providing that any such company engaged in issuing policies should be held to have assented thereto as a condition precedent to its right to engage in such business-the revocation by a foreign insurance company of a power of attorney to one of its agents, without the appointment at the same time of any successor, was illegal, and service on such agent was good, especially where the power of attorney was revoked after suit was filed, and seemingly for the express purpose of preventing service on him.

3. INSURANCE 16-FOREIGN INSURANCE COMPANIES-DOING BUSINESSWHAT CONSTITUTES.

Where, though a foreign insurance company attempted to formally withdraw from a state, it continued to collect premiums on outstanding policies numbering, in 1907, 1,143, and 682 in 1915, and representing insurance aggregating over $2,000,000 on the first date, and over $1,000,000 in 1915, their collection constituted the doing of business in the state. 4. INSURANCE 26-FOREIGN INSURANCE COMPANIES-SERVICE BY PUBLICA

TION.

Under Rev. St. Tex. 1895, art. 3070, and Sayles' Ann. Civ. St. Supp. 1904, art. 3096ee, if a foreign insurance company's revocation of powers of attorney to its agents defeated service of process on them, then as it had no agent in the state, service by publication was valid, as a stipulation to this effect in the policy would have been binding, and the existing statutes must be read into the policy.

5. STATUTES

2254-CONSTRUCTION-CONSTRUING STATUTES TOGETHER. Acts Tex. 31st Leg. c. 108, regulating domestic and foreign insurance companies, and expressly repealing prior statutes relating to service of process, must be construed with the act of 1909, requiring all foreign insurance companies to appoint the conmissioner of insurance as their agent for the service of legal process, where the two acts were pending at the same time, and the last-mentioned act, though approved a few days after the first one, went into inmediate effect more than two months before the first act was effective.

6. INSURANCE 26-FOREIGN INSURANCE COMPANIES-SERVICE OF PROCESS. In view of Acts 31st Leg. c. 108, requiring foreign insurance companies to appoint the commissioner of insurance as their agent for the For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes