Bang v. Phelps & Bigelow Windmill Co.

• Decision Date: 13 March 1896
• Citation: 34 S.W. 516,96 Tenn. 361
• Parties: BANG v. PHELPS & BIGELOW WINDMILL CO. et al.
• Court: Tennessee Supreme Court

34 S.W. 516

96 Tenn. 361

BANG v. PHELPS & BIGELOW WINDMILL CO. et al.

Supreme Court of Tennessee.

March 13, 1896

Appeal from chancery court, Davidson county; Thomas H. Malone Chancellor.

Action by W. F. Bang against the Phelps & Bigelow Windmill Company the Kalamazoo National Bank, and the City Savings Bank of Nashville. Decree for defendants, which was reversed by the court of chancery appeals, and a decree entered for plaintiff, from which defendant bank appeals. Modified.

A. G Goodlett, for appellants.

N. D Malone, for appellee.

WILKES J.

This bill was filed to enjoin the collection of a note or paper writing which is in the following words and figures: "$331.00. Nashville, Tenn., March 17, 1893. On or before Nov. 1st, 1893, after date, I promise to pay to L. F. Butler & Co., or order, at First National Bank, Nashville, Tenn., three hundred and thirty-one dollars, for value received, with interest at the rate of six per cent. per annum from the date hereof, and ten per cent. after due until paid, together with ten per cent. attorney's fees if sued upon, or placed in the hands of an attorney for collection. Failure to pay interest annually, or to comply with any condition named, renders this, and all other notes growing out of same claim, due and payable, at option of payee. This note is given for certain labor and goods and materials furnished in the erection of an improvement upon my real property, in the nature of a windmill and attachments, by the payee, pursuant to previous written order in that behalf, and the execution, delivery, and acceptance of this note shall not in any way or manner be deemed a waiver of any lien the payee may have therefor upon said real property in said written order described. W. F. Bang." The bill filed was against the Phelps & Bigelow Windmill Company, the Kalamazoo National Bank, and the City Savings Bank of Nashville. Its allegations were that the mill was not as represented, and was worthless, and that complainant had given notice of this fact; that Butler & Co. were but agents of the windmill company, and the Kalamazoo Bank was virtually the same as the company, and not an innocent holder of the note; that the Nashville Bank simply held it for collection; that the windmill company was a foreign corporation, and had not complied with the law as to registration of its charter. The City Savings Bank answered simply that it held the note for collection, and knew nothing of the other matters alleged. The Kalamazoo Bank answered, claiming to have received the note in due course of trade, and that it was an innocent holder. It filed its answer as a cross bill, set out the note, and prayed for judgment for the full amount of debt, interest as provided, and attorneys' fees. This was answered by complainant. The chancellor gave judgment for the amount of the note, etc., in favor of the Kalamazoo Bank, and the defendants appealed and assigned errors. The cause was tried by the court of chancery appeals, and the decree of the chancellor was reversed, and decree ordered declaring the note void, and remanding the cause for the cancellation and delivery of the same, with costs against the defendants in the original bill. The cause is now before us on appeal by the defendant bank.

Two points were raised in the court of chancery appeals that appear not to have been made previously: One, that the note is nonnegotiable; and the other, that it is usurious on its face, and therefore illegal and void. The court of chancery appeals did not decide whether the note was negotiable or not, nor whether it was without consideration, but was of opinion that it was, upon its face, illegal, usurious, and void, and we think that in this the court was clearly correct. This is not a case similar to that of Garritty v. Cripp, 4 Baxt. 86; Brown v. Gardner, 4 Lea, 157; Bank v. Mann, 94 Tenn. 17, 22, 27 S.W. 1015. The substance of these cases is that a purchaser may agree to give a larger amount upon a credit basis than for cash, and it will not be usurious, even though the instrument show that the increase in price is based upon the delay, and is expressed as a per cent., instead of a round sum; the distinguishing feature being that in those cases there was no "forbearance of a debt" or loan of money, but simply an increase in the amount to be paid or agreed on as a part of the original consideration. In the case at bar the instrument provides for a credit till November 1, 1893. At that date, by the terms of the instrument, the amount of the original debt and 6 per cent. interest became due. Any indulgence after that date is the "forbearance of the debt," and, inasmuch as it is provided that for this forbearance 10 per cent. must be paid, it is clearly usurious, under our statute. See, also, Graeme v. Adams, 14 Am. Rep. 130; Reger v. O'Neal (W. Va.) 10 S.E. 375. There is a class of cases holding that a stipulation for interest in excess of...