Citizens' Bank v. Murphy

• Decision Date: 13 May 1907
• Citation: 102 S.W. 697,83 Ark. 31
• Parties: CITIZENS' BANK v. MURPHY
• Court: Arkansas Supreme Court

102 S.W. 697

83 Ark. 31

CITIZENS' BANK v. MURPHY

Supreme Court of Arkansas

May 13, 1907

Appeal from Union Chancery Court; Emon O. Mahoney, Chancellor reversed.

STATEMENT BY THE COURT.

On the 4th of June, 1904, Guy Murphy was appointed receiver of the El Dorado Lumber & Planing Mill Company, a corporation organized under the laws of Arkansas. The issue in this case arose out of a recommendation by the receiver in his report to the court that the claim of the Citizens' Bank appellant, which had been presented to him for allowance and payment, and which he had disallowed, be subjected to judicial examination, and that the bank be directed to appear on a certain day of the chancery court and present evidence to support its claim. The chancery court approved and adopted this part of the receiver's report, and ordered appellant to appear and show cause why the action of the receiver rejecting its claim on account of usury should not be approved. Accordingly the appellant bank responded, denying that the amount presented by it was tainted with usury and denying that any greater rate of interest was charged than ten per cent., and alleging that J. H. Walsh, the manager of the El Dorado Lumber & Planing Mill Company, agreed to allow one and one-half per cent. commissions on all invoices handled by the Citizens' Bank for said company. That this was a separate contract and for separate services. They allege that the claim was filed in proper time, and ask that the claim be allowed together with their cost.

The testimony was thus directed to the issue of usury, and it was substantially as follows: I. F. Price, who was cashier of the appellant bank at the time the transactions resulting in the account presented took place, testified:

"That the account which he exhibited is a statement of the indebtedness of the El Dorado Lumber & Planing Mill Company to the Citizens' Bank of Junction City. That it is based upon certain notes due the bank and certain overdrafts and the interest figured on both notes and overdrafts as listed to the date of the statement, September 30th, 1904. The first item is an overdraft, as shown by the books of the bank, the second item is the interest on the overdraft since April 12th, 1904. That the interest on the overdraft was figured at ten per cent. A charge ticket, amounting to $ 375.63, dated May 25, 1904, is introduced and read by the witness, the same being a charge of one and one-half per cent. on the notes and invoices. " And the witness continued: "Mr. Walsh was manager of the El Dorado Lumber & Planing Mill Company and he agreed that they would pay ten per cent. for the use of the money furnished the company by the bank, and, in addition to the regular rate of interest, he agreed to pay one and one-half per cent. commission for collecting the notes and invoices, and this was merely a charge for trouble. There was no other amount agreed upon except the ten per cent. interest when we made the deal with Mr. Walsh. Afterwards, when he found he had these invoices and other matters to collect, he, of his own accord, agreed to pay one and one-half per cent. for our time and trouble in collecting these invoices. This agreement was entirely separate and distinct from the contract under which we borrowed the money and they had no connection with each other at all. We never loaned them any money or agreed to loan them any money for any greater rate than ten per cent. interest. The consideration we were to give for this one and one-half per cent. was our trouble and expense in handling these invoices in the way we did. The overdraft did not enter into that arrangement in any way. Mr. Walsh stated to us that in the general way of handling his lumber business he would have to allow his customers a cash discount on all invoices of two per cent., and he stated that he could afford to allow us one and one-half per cent. for handling these invoices. He figured that it would cost him less to handle his lumber business in this way and pay his lumber bills than in the regular way, and allow two per cent. off. It took up a whole lot of the cashier's time in handling this business. Besides we had to pay postage on all invoices we forwarded for the mill. All the original invoices were delivered to us by Mr. Walsh and forwarded to us by his customers."

The witness described his method of keeping the books showing the transactions as follows: "When I received the invoice and note from the mill, I would credit the El Dorado Lumber & Planing Mill Company with the amount of the invoice, the amount of the note you might say, and at the same time it was his custom to send a check in the same envelope, payable to the Scotland Lumber Company, for the same amount. I would credit the Scotland Lumber Company with the check and charge the check to the El Dorado Lumber & Planing Mill Company. I would credit the El Dorado Lumber & Planing Mill Company with the amount of the...