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KLEIN v. MATHEWSON (03/13/56)

March 13, 1956

KLEIN
v.
MATHEWSON, APPELLANT.



Appeals, Nos. 303 and 304, Jan. T., 1955, from orders of Court of Common Pleas of Luzerne County, Oct. T., 1951, No. 1855 and Oct. T., 1951, No. 1856, in case of Alfred M. Klein v. Ralph C. Mathewson. Orders affirmed.

COUNSEL

Joseph E. Gallagher, with him Paul R. Orrson, for appellant.

Fredric R. Gallagher, with him Fahey & Casper, for appellee.

Before Stern, C.j., Stearne, Jones, Bell, Chidsey, Musmanno and Arnold, JJ.

Author: Stern

[ 384 Pa. Page 299]

OPINION BY MR. CHIEF JUSTICE HORACE STERN

This is an appeal from the refusal of the court below to open judgments entered by confession on two certain notes, which, defendant claims, were rendered illegal because of usury.

Defendant, Ralph C. Mathewson, was in financial difficulties of various kinds, one of his troubles being a pending foreclosure of a $40,000 mortgage on certain of his properties and which he tried to avert by instituting proceedings in the federal court under a section of the Bankruptcy Act. In order to obtain a loan to liquidate this mortgage and other indebtedness, and his own efforts in that direction proving abortive, he sought one Julius D. Gilbert, a real estate broker, to whom he gave written authority to negotiate a $50,000 mortgage loan, and agreed that for his services in accomplishing this he would pay him a commission of $5,000. Gilbert tried, but, being unsuccessful, he consulted one Samuel Marx, an attorney, who referred him to the plaintiff, Alfred M. Klein. Gilbert and Marx discussed the matter with plaintiff and subsequently defendant himself visited him, and, according to plaintiff's testimony, told him that, just as he had agreed to pay Gilbert $5,000, he would pay him $5,000 if he obtained the loan. Plaintiff succeeded in securing $40,000 from the Girard Trust Company, $5,000 from his brother Philip Klein, and $5,000 from his brother-in-law Alan Goodman, and accordingly a bond and mortgage were prepared and executed by defendant

[ 384 Pa. Page 300]

    in the sum of $50,000 payable within one year from the date thereof, together with interest thereon at 6% per annum, the obligees named in the bond, and the mortgagees named in the indenture, being Goodman and the plaintiff. Because it appeared at the time of the settlement that the proceeds of the loan would not be sufficient to liquidate the old mortgage and also meet all the defendant's other obligations including the promised brokerage commission of $5,000, defendant executed and delivered to plaintiff two demand judgment notes, one for $2,000 and the other for $3,000, with the signatures of defendant's counsel subscribed as witness. These are the notes on which the judgments, now challenged by defendant, were entered.

The plaintiff and Goodman, having given their own note in the sum of $40,000 to the Girard Trust Company, assigned to it the bond and mortgage. When these were not liquidated by defendant during or at the end of a year, the Trust Company reassigned the bond and mortgage to Goodman and the plaintiff, and defendant entered into an agreement with them according to which he deeded the property to plaintiff and Donald O. Coughlin, defendant's attorney, as trustees to sell the properties covered by the mortgage and apply the proceeds in payment of various obligations including the amount due on plaintiff's notes. No payments on the notes, however, have since been realized.

In his petition to open the judgments defendant invokes the defense of usury, claiming that the notes were given as a bonus to plaintiff for the 6% loan. The determination of the issue thus raised obviously depends on one basic question, namely, whether plaintiff himself made the loan to defendant or whether it was obtained entirely ...


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