Court Decision Issued in 1894 Sheds Light on Finances Behind the Development of Chester Park in the Early 1890s

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Chester Park is a lovely neighborhood centered around a public green located at the northern tip of the Town of Pelham. A local landowner named William T. Standen developed the area in the early 1890s. I have published a few items regarding the history of Chester Park. See, e.g.:

Thursday, June 1, 2006: Early Photographs of Chester Park Among Materials Donated to The Office of The Historian of The Town of Pelham

Friday, June 2, 2006: Several of the Early Photographs of Chester Park Recently Donated to The Office of The Historian of The Town of Pelham

Monday, June 5, 2006: More Early Photographs of Chester Park Recently Donated to The Office of The Historian of The Town of Pelham

Tuesday, June 6, 2006: More Early Photographs of Chester Park Recently Donated to The Office of The Historian of The Town of Pelham

Bell, Blake A., History of Chester Park in the Village of Pelham, The Pelham Weekly, Vol. XIII, No. 46, Nov. 19, 2004, p. 10, col. 1.

A judicial decision issued on December 14, 1894 sheds some light on the finances behind the development of Chester Park in the early 1890s. The decision was by an appellate court following an earlier decision. The underlying dispute was an interesting one. It involved three transactions.

According to the Court's opinion, as of July 28, 1892, developer William T. Standen was the owner of fifteen "Bonds and Mortgages" totaling $10,216.67 that appear to have been issued in his favor by individuals who purchased lots in the new Chester Park development. On that date, Standen assigned the fifteen Bonds and Mortgages to Col. William L. Brown as "collateral security" in exchange for a payment from Brown of $9,800. Standen further agreed to repay Col. Brown a total of $10,000 one year later "with interest at 6 per cent., payable semiannually".

The opinion also describes a second transaction. As of September 8, 1892, Standen owned an additional nine "Bonds and Mortgages" totaling $3,376.67 that also appear to have been issued in his favor by individuals who purchased lots in the new Chester Park development. On that date, Standen assigned the nine Bonds and Mortgages to Col. William Brown as "collaterial security" in exchange for a payment from Brown of $3,300. Standen further agreed to repay Col. Brown a total of $3,376.67 one year later "with interest at 6 per cent., payable semiannually".

The opinion further describes a third transaction on October 18, 1892. On that date, according to the opinion, Standen owned three shares (with an arbitrary par value of $600 per share) in the Pelhamville Land & Homestead Association. This was the land development Association used to develop Chester Park. On that date, Standen assigned to Col. Brown the three shares of stock as "collateral security" in exchange for a payment from Brown of $1,590. Standen further agreed to repay Col. Brown a total of $1,623.33 one year later "with interest at 6 per cent., payable semiannually".

The relationship between Standen and Brown apparently unraveled. Slightly more than a year later, on November 8, 1893, Standen commenced a lawsuit to have the three transactions "canceled as usurious and void". Standen argued, in effect, that the transactions were loans that required interest payments that were "usurious" because they exceed the rate of interest that the law allowed to be charged.

Col. Brown responded that the transactions were not loans at all and, thus, limits on the rate of interest that could be charged did not even apply. According to Col. Brown, the transactions involved sales of the Bonds and Mortgages with delivery of the assignments serving as "guaranty" of payment of the bonds and mortgages sold to Col. Brown.

The lower Court ruled that the transactions were not loans and, thus, could not be canceled as usurious. The Appellate Court analyzed the transactions carefully indicating that it agreed, but seemed to decide the matter in favor of Col. Brown based on a letter that William T. Standen wrote to Col. Brown's lawyers in which he admitted that "When these transactions were made, it was certainly understood that this was only an indirect way to the purchase by Col. Brown of the numerous little mortgages which I held, and it was done in this way in order that the colonel might not be bothered with the collection of small amounts of interest, but might look to me for such payments in one sum." This admission, according to the Appellate Court, gutted Standen's case. Accordingly, the Court affirmed.

The text of the entire decision and a source citation appear immediately below:

"Appeal from special term, New York county.

Action by William T. Standen against William L. Brown for the cancellation of three bonds of plaintiff, executed and delivered by him to defendant, and for the return of certain collateral securities. The complaint was dismissed, and plaintiff appeals. Affirmed.

July 28, 1892, the plaintiff was the owner of the following bonds and mortgages:

B.&M. of Philip Godfrey, dated June 15, 1892 to sec. $700 & Int.

B.&M. of Wm. H. & M.E. Stead, dated June 15, 1892, to sec. 320 & Int.

B.&M. of Mary E. Taylor, dated June 15, 1892, to sec. 290 & Int.

B.&M. of Burnett T. Kirby, dated June 15, 1892, to sec. 280 & Int.

B.&M. of Joseph H. Bross, dated June 15, 1892, to sec. 320 & Int.

B.&M. of Maurice Hebert, dated June 15, 1892, to sec. 400 & Int.

B.&M. of Edward A. Collins, dated June 15, 1892, to sec. 200 & Int.

B.&M. of Fred H. Rindge, dated June 15, 1892, to sec. 200 & Int.

B.&M. of Geo. Hunt, dated June 15, 1892, to sec. 250 & Int.

B.&M. of Geo. P. Langdon, dated June 15, 1892, to sec. 4,606.67 & Int.

B.&M. of Asa S. Ashley, dated June 20, 1892, to sec. 500 & Int.

B.&M. of Grace I. Warner, dated June 20, 1892, to sec. 375 & Int.

B.&M. of Asa S. Ashley, dated June 20, 1892, to sec. 600 & Int.

B.&M. of Fred Nichels, dated July 14, 1892, to sec. 200 & Int.

B.&M. of A.J. McCarten, dated July 14, 1892, to sec. 975 & Int.

[Total] $10,216.67

July 28, 1892, the plaintiff assigned to the defendant the aforesaid fifteen bonds and mortgages, by a written instrument, 'as collateral security' for the payment of the plaintiff's bond, executed on that date, by which he undertook to pay to the defendant $10,000 one year from date, with interest at 6 per cent., payable semiannually. On the same date the defendant, in consideration of said bond, assignment, and of the delivery of said bonds and mortgages to him, gave to the plaintiff his check for $9,800, which was paid. On the 8th of September, 1892, the plaintiff was the owner of the following bonds and mortgages:

B.&M. of Annie Patterson, dated June 23, 1892, to sec. $116.67 & Int.

B.&M. of Jno. S. Crawford, dated July 12, 1892, to sec. 500 & Int.

B.&M. of Philip Godfrey, dated July 14, 1892, to sec. 260 & Int.

B.&M. of Margaret Reed, dated Aug. 9, 1892, to sec. 320 & Int.

B.&M. of Gilbert J. Angevine, dated Aug. 9, 1892, to sec. 460 & Int.

B.&M. of Jacob Freund, dated Sept. 1, 1892, to sec. 400 & Int.

B.&M. of Jacob Freund, dated Sept. 1, 1892, to sec. 360 & Int.

B.&M. of George Hunt, dated Sept. 2, 1892, to sec. 810 & Int.

B.&M. of Nathan P. Tyler, dated Sept. 2, 1892, to sec. 150 & Int.

[Total] $3,376.67

September 8, 1892, the plaintiff assigned to the defendant said nine bonds and mortgages, by a written instrument, 'as collateral security' for the payment of the plaintiff's bond, executed on that date, by which he undertook to pay to the defendant $3,376.67 one year from date, with interest at 6 per cent., payable semiannually. On the same date the defendant, in consideration of said bond, assignment, and the delivery of the bonds and mortgages to him, gave to the plaintiff his check for $3,300, which was paid. On the 18th of October, 1892, the plaintiff was the owner of three shares of the stock of the Pelhamville Land & Homestead Association, of the par value of $600 each. October 18, 1892, the plaintiff assigned to the defendant said three shares of stock, by a written instrument 'as collateral security' for the payment of the plaintiff's bond, executed on that date, by which he undertook to pay to the defendant $1,623.33 one year from date, with interest at 6 per cent., payable semiannually. On the same date the defendant, in consideration of said bond, assignment, and the delivery of said shares, gave his check to the plaintiff for $1,590, which was paid. On November 8, 1893, this action was begun to have the three bonds and the three assignments, executed by the plaintiff to the defendant, canceled as usurious and void. The plaintiff alleges in his complaint that the difference ($200) between the plaintiff's bond and defendant's check of July, 28, 1892, the difference ($76.67) between the plaintiff's bonds and defendant's check of September 8, 1892, and the difference ($33.33) between the plaintiff's bond and the defendant's check of October 18, 1892, were retained by the defendant, pursuant to a usurious agreement between the litigants that the plaintiff should pay, and defendant receive, these sums in excess of the legal rate of interest on the sums which the plaintiff obligated himself to pay by those bonds. The defendant, in his answer, denies that any usurious agreement was made between the parties.

Grove M. Harwood, for plaintiff.
Eugene S. Ives, for respondent.

Argued before VAN BRUNT, P.J., and FOLLETT, and PARKER, JJ.


FOLLETT, J.
The special term found as a fact that the transactions were not loans by the defendant to the plaintiff, but were sales by the plaintiff to the defendant, and that the securities mentioned in the assignments and the three bonds given by plaintiff to defendant were for the purpose of guarantying the payment of the bonds and mortgages sold to defendant. The plaintiff filed exceptions to the facts found by the special term and to its conclusion of law. The only question involved on this appeal is whether the findings are contrary to the weight of evidence. The fact that it was recited in all of the assignments that the bonds and mortgages were assigned by the plaintiff to the defendant 'as collateral security' for the payment of the bond of even date is strong evidence that the three transactions were loans instead of purchases. Again, the fifteen bonds and mortgages assigned July 28, 1892, amount, without interest from their dates to July 28, 1892, to $10,216.67, while the bond given by plaintiff to defendant was for $10,000, and the check given by him to plaintiff was for $9,800, making a discount of $416.67, besides accrued interest on the securities. The nine bonds and mortgages assigned by the plaintiff to the defendant September 8, 1892, amount, without interest from their dates to September 8, 1892, to $3,376.67. The bond given by the plaintiff to the defendant on this transaction was for the same amount, and the plaintiff's check was for $3,300, making a discount of $76.67, aside from accrued interest on the securities. The par value of the three shares of stock assigned by the plaintiff to the defendant October 18, 1892, was $1,800. The plaintiff received from the defendant $1,590, and gave his bond for $1,623.33, making a discount of $33.33. It will be observed that the first bond is less, by $216.67 and the accrued interest, than the amount secured by the first fifteen bonds and mortgages. If the transaction were a sale and guaranty of payment of the securities sold, it is difficult to see why the purchaser did not execute a guaranty of the payment of the bonds and mortgages, principal and interest. The second transaction is not open to this criticism, though the bond taken is not equal to the principal and interest of the nine mortgages assigned. In respect to the third transaction, it does not appear that the value of the three shares of stock was agreed upon or even discussed between the parties, which is usual when a sale is made. The plaintiff swore positively that the three transactions were loans, and that the three assignments were, as recited in them, intended as collateral security for the payment of the sums loaned. In this he was corroborated by Charles M. Marvin, who was present at the first and second transactions. This witness testified that the agreement was that the plaintiff should pay the defendant a bonus of 2 per cent. in addition to the legal rate of interest, and that the two transactions were loans. In opposition to this, the defendant testified that the transactions were not loans, but were purchases of the securities assigned, and that the bonds were taken as guaranties of the payment of the securities assigned. Exactly how the payment of the three shares of stock was or could be guarantied is not explained. In a letter written by the plaintiff, September 12, 1893, to the defendant's attorneys, reference is made to a letter written by them to him September 11, 1893. Unfortunately, the letter of the 11th was not put in evidence. In the plaintiff's letter he says:

'When these transactions were made, it was certainly understood that this was only an indirect way to the purchase by Col. Brown of the numerous little mortgages which I held, and it was done in this way in order that the colonel might not be bothered with the collection of small amounts of interest, but might look to me for such payments in one sum.'

This statement is a strong corroboration of the testimony of the defendant, and we regard it as of sufficient probative force to sustain the finding of the learned trial judge, who had the witnesses before him, and had an opportunity to observe their manner. The judgment should be affirmed, with costs.

All concur."

Source: Standen v. Brown, 83 Hun 610, 64 N.Y. St. Rep. 170, 31 N.Y.S. 535 (App. Div. 1st Dep't 1894).

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