Camilla Cotton Oil Co. v. Spencer Kellogg and Sons

• Citation: 257 F.2d 162
• Decision Date: 30 June 1958
• Docket Number: No. 17024.,17024.
• Parties: CAMILLA COTTON OIL COMPANY and George M. Perry, Sr., Appellants, v. SPENCER KELLOGG AND SONS, Inc., Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

257 F.2d 162 (1958)

CAMILLA COTTON OIL COMPANY and George M. Perry, Sr., Appellants, v. SPENCER KELLOGG AND SONS, Inc., Appellee.

No. 17024.

United States Court of Appeals Fifth Circuit.

June 30, 1958.

R. Lamar Moore, Waldo DeLoache, Moore, Gibson, DeLoache & Gardner, Moultrie, Ga., for Camilla Cotton Oil Co. and George M. Perry, Sr., appellants.

Hoyt H. Whelchel, Jr., Hoyt H. Whelchel, Whelchel & Whelchel, Moultrie, Ga., for Spencer Kellogg and Sons, Inc., appellee.

Before HUTCHESON, Chief Judge, and TUTTLE and BROWN, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

This appeal began as a suit on a promissory note executed by Camilla Cotton Oil Company and endorsed personally by its president, George M. Perry, payable to Spencer Kellogg covering a portion¹ of the purchase price of two used cotton seed oil expellers bought by Camilla from Spencer Kellogg under a conditional sale contract. In its original complaint, Spencer Kellogg sought interest, late charges and attorneys' fees as provided in the note.² In answer to the complaint, Camilla interposed defenses of breach of contract and usury and counterclaimed for the expenses ($2,917.49) for parts and labor incurred in putting the allegedly defective machines into proper operating condition and for the increased cost of the actual production in terms of fuel, labor, and electrical power, because of defects in the machines during the rehabilitation period. This latter was the so-called Sixth Defense and in final form comprised the items specified in note 5, infra.

On January 17, 1957, Spencer Kellogg moved that Camilla be required to file a more definite statement as to its Sixth Defense counterclaim for damages arising out of the retarded operation of the expellers because there were no particulars alleged as to which of the machines the alleged expenditures or losses were attributable, and Camilla had alleged that one machine was wholly worthless while the other was only defective. This motion was finally granted in the Court's order of September 23, 1957, requiring that a more definite statement be filed within five days. In the interim, on September 3, 1957, Camilla attempted to amend its counterclaim to include a Seventh Defense alleging damages suffered through loss of profits because of the alleged breach of contract by Spencer Kellogg.³ This amendment was vigorously opposed by Spencer Kellogg on the ground that depositions had been taken and other trial preparations made on the basis of the prior pleadings, and that there was no opportunity to prepare for trial which was then imminent at the forthcoming October trial term. In its order of September 23, the Court struck this Seventh Defensive claim as coming too late since it would require further continuance of a cause already two years old⁴ and also because the damages claimed were too remote and speculative to be recoverable.

At this point, on September 23, 1957, Spencer Kellogg served notice that it intended to take the deposition of Mr. Perry, Camilla's president, setting the date as September 27. On September 24, Mr. Perry moved that he be excused from oral examination because of his health. This motion was supported by a certificate from a physician attesting to Mr. Perry's cardiac condition and stating that he was in no condition to undergo the emotional stress of a court appearance or similar situation. After a consideration of this certificate and one from another doctor given for the purpose of obtaining a continuance of the case the preceding February, both of which discussed the fact of Mr. Perry's acknowledged severe cardiac attack, the Court denied Mr. Perry's motion but ordered that his deposition be taken after that of T. B. Twitty, Jr., another officer of Camilla, and then only if necessary in preparation for trial. The Court also expressed confidence in counsel for both sides to proceed with due consideration of Mr. Perry's welfare, especially since one of plaintiff's counsel had recently undergone, and fully appreciated, a serious cardiac damage which, no doubt, Mr. Perry had suffered.

When the time set for taking these depositions arrived, Mr. Perry did not appear because of his and his counsel's concern over his health, and counsel for Spencer Kellogg refused to examine Mr. Twitty because he was no longer an officer of Camilla and counsel felt that to take his testimony, Mr. Twitty would have to be made a witness for Spencer Kellogg so that there could be no cross examination.

Meanwhile, on September 26, the Court, having previously on August 27 sustained Camilla's objection to the asserted claim for attorney's fees on the ground that the highly technical requirement of the statutory notice, Georgia Code Ann. § 20-506, had not been fulfilled, allowed a supplemental complaint setting out that proper notice under the Georgia Statute had been given by letter to Camilla on September 9. This was based upon Fed.Rules Civ.Proc. rule 15 (b), 28 U.S.C.A., as an allegation of an event which occurred subsequent to the filing of the pleading to be supplemented.

With the case in this posture and after Camilla filed its more definite statement on September 30, Spencer Kellogg on October 9 moved to strike Camilla's Sixth Defense under F.R.C.P. 37(d) for the wilful failure of Mr. Perry to appear for the taking of his deposition. Camilla countered with an affidavit from Mr. Perry's physician reiterating that the emotional stress of a court appearance or similar situation would be dangerous to Mr. Perry and possibly imperil his life. There was no medical evidence, report, certificate or information which either denied or challanged this detailed certificate. The Court seemed to attach predominant significance to the fact that Mr. Perry had been summoned as a petit juror for that term and, the Court thought, had actually served during the week, although it seems quite clear that the Clerk or Marshal had excused him from further service.

A hearing was held on this final motion and on October 11, the Court ordered that three specific items⁵ of Camilla's Sixth Defense pertaining to increased operational costs alleged to arise from faulty operation of the expellers be stricken on the dual express ground that no basis for relief was stated and for Mr. Perry's failure to appear for deposition.

On October 17, the District Court entered summary judgment and judgment on the pleadings for Spencer Kellogg in the following amount:

                  (a) Principal                 $11,057.51
                  (b) Interest @ 8% subsequent
                      to maturity                 1,784.73
                  (c) Late charges 5%               552.87
                  (d) Attorney's fees             1,926.33
                                                __________
                                                $15,311.44
                

To obtain this Spencer Kellogg formally conceded for the purpose of the motion for summary judgment that Camilla was entitled to a full credit for the $2,917.49 which it alleged was the cost of parts and labor of actual repairs to the faulty machinery.

Camilla's contentions on this appeal may be grouped into four primary areas: (1) that a charge of 5% for late payment in conjunction with 8% interest after maturity is usury; (2) that (a) increased operational costs and (b) lost profits are proper items of recovery; (3) that attorney's fees cannot be allowed on a supplemental complaint showing notice given long after suit is brought; and (4) that the Court erred in striking Camilla's Sixth Defense for failure of Mr. Perry to appear for oral examination on deposition, and therefore judgment should have been entered for Camilla or a trial ordered because of the existence of factual controversies.

The legal maximum interest rate in Georgia is 8%. Georgia Code Ann. § 57-101. Camilla concedes that the inclusion of interest in the face amount of the note and a consequent charge of interest on interest after maturity is not contrary to law but insists that the addition of the 5% late charge taints the entire transaction with usury. We do not agree. It is clear that under the law of Georgia for usury to exist there must be an intent to circumvent the usury laws. Bailey v. Newberry, 52 Ga.App. 693, 184 S.E. 357; Bellerby v. Goodwyn, 112 Ga. 306, 37 S.E. 376. Here the obvious intent and the one the law must credit, there being no contrary showing, was that the note would be paid when due. Had this been done, as it was entirely within the power of Camilla to do, and as its contract bound it to do, the highest interest charged would have been but 5%, less than the legal maximum.

That an amount greater than one computed on the legal rate is collectible in Georgia upon default is seen in Alexander v. Troutman, 1 Ga. 469. Camilla strongly urges upon us Clark v. Kay, 26 Ga. 403, an opinion never cited by the Georgia Courts, in which in sweeping language it is said that any stipulation of damages for the nonpayment of money which exceeds the legal interest rate is usurious. In that case, however, the suit was upon a bond given to secure several notes. The stipulated recovery on the bond would have equaled the payment due on the note and was thus greatly excessive. Citing Swift v. Crow, 17 Ga. 609, which carefully distinguished between liquidated damages and a penalty, the Court in Clark struck down the bond. In this state of the Georgia law, the general authorities cited by the Court below are convincing that there is no usury here. 82 A.L.R. 1213; 30 Am. Jur. Usury § 45, p. 356.

We are also certain that there was no error in the dismissal of Camilla's Seventh Defense for lost profits.⁶ This action was proper regardless of whether or not it was timely asserted because, as stated by the Court below, the damages alleged were so speculative and remote that no recoverable claim was stated. The Georgia Courts are in accord that this is so. Firestone Tire & Rubber Co. v. Shore, 31 Ga.App. 644, 121 S.E. 709; Thornton & Warren v. Cordell, 8 Ga.App. 588, 70 S.E. 17; Georgia Grain Growers Ass'n v. Craven, ...