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October 19, 1959

T. G. STANLEY, doing business as Stanley's Drug Store, Defendant

The opinion of the court was delivered by: STEEL

Plaintiff has moved under Rule 50(b), 28 U.S.C.A., to set aside a verdict and judgment for defendant and for the entry of a judgment for plaintiff, or, alternatively, for a new trial.

Plaintiff sued to recover accelerated and unpaid 'rentals' of $ 17,810.53 claimed to be owing by defendant for drugstore equipment which plaintiff 'leased' to defendant, $ 6,000 of expenses incurred by plaintiff in enforcing its claim, and for the repossession of this equipment. All of these claims were based upon the terms of the 'lease'. The only defense of present concern is that of usury, it being defendant's theory that, although the transaction was in the form of a lease, the parties intended the transaction to be a loan. As part of the transaction plaintiff had 'purchased' the equipment from the defendant for $ 21,593.15, and then 'leased' it back to defendant under the agreement sued upon which required defendant to pay plaintiff $ 26,683.44 in installments over a five-year period. Defendant contended that the difference between the amount which plaintiff advanced to defendant as the 'purchase price' of the equipment and the amount which defendant was required to pay plaintiff as 'rentals' constituted interest which exceeded the legal rate in New York.

 The agreement by its terms is deemed to have been entered into in New York, and the rights and liabilities of the parties are determinable by New York law. The usury laws of New York are found in New York General Business Law, §§ 370-373. In substance they prohibit one from receiving more than 6% per annum for the loan of money and provide that any contract which reserves a greater sum shall be void and its prosecution enjoined.

 In a discussion in chambers prior to the close of plaintiff's case, plaintiff admitted that if the jury should determine that the transaction was a loan, then the agreement was illegal, usurious and unenforceable. This same concession was reiterated when the plaintiff successfully opposed the introduction of evidence by defendant to establish that the effective rate of return to plaintiff was in excess of 15%. The question for resolution was thus reduced to whether the transaction was a loan or a lease; and pursuant to F.R.Civ.P. 49(a), the jury was asked the following question:

 'Was the agreement between the parties in truth and in fact one for a loan of money or was it one for the leasing of equipment?'

 The jury was instructed that when usury is a defense a transaction must be judged by its real character and not by its form, *fn1" that the intention of the parties is of paramount importance in determining its nature, *fn2" and that if the jury concluded that both parties intended the transaction to be a loan of money but corruptly cast it in the form of a lease of equipment, then the usury defense would be established *fn3" and the question should be answered 'loan of money'. A converse instruction was also given. The jury answered the question 'loan of money'. Thereupon judgment for defendant was entered.

 The present motion was filed within ten days after the entry of the judgment, plaintiff having unsuccessfully moved for a directed verdict at the close of all the evidence.

 Motion for Judgment N.O.V.

 In determining a motion for judgment notwithstanding the verdict, the question is not whether the verdict is against the weight of the evidence. This is for the jury to decide. Only where there is no evidence of substance upon which reasonable men could reach the verdict is a trial judge empowered to set the verdict aside and enter a judgment for the adverse party. Binder v. Commercial Travelers, Mut. Acc. Ass'n, 2 Cir., 1947, 165 F.2d 896, 901.

 Here there was evidence which, if believed, would support the view that a loan was intended.

 The transaction was negotiated between defendant and Rosen, the president of plaintiff. *fn4" The defendant testified that he called Rosen on the telephone and told him that he desired to refinance some equipment and that he asked Rosen to lend him some money against it. According to defendant, Rosen said he would. Defendant testified that he asked Rosen what the rate of interest would be and Rosen said six percent. Defendant stated that he was quite sure that the word 'loan' had been used in the conversation, although Rosen had told him that the contract would be in the form of a lease so as to give the defendant certain income tax benefits.

 When plaintiff advanced the funds with which to 'purchase' the equipment, *fn5" it did so without having any one look at the equipment, without having an appraisal made of it, and without having a lien or mortgage check made to see whether it was encumbered. Rosen testified that he did not know the age or condition of the equipment, and that he had never asked defendant to show him what the defendant had paid for it. Defendant sent plaintiff a financial statement which showed a net worth in the neighborhood of $ 200,000. Rosen said that in entering into this type of transaction he relied upon the financial responsibility of the lessee, that basically the financial standing of the lessee is what counted, and that the quality, nature and kind of equipment were secondary considerations.

 This evidence, if believed, was sufficient to justify the jury in concluding that the parties intended the transaction to be a loan and not a lease.

 Plaintiff argues, however, that before usury can be established, both parties must have entered into the transaction with a 'corrupt' intention in the sense that each intended the transaction to be a cover for a usurious loan. Plaintiff asserts that this essential legal ingredient is absent, and that there was no evidence before the jury which either directly, or by inference, disclosed that the payment or reception of interest at a usurious rate was in the mind of either party. On the contrary, plaintiff argues, the undisputed evidence proved that the transaction was bona fide and that both parties ...

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