Dodge v. Tulleys

• Decision Date: 11 April 1892
• Citation: 12 S.Ct. 728,36 L.Ed. 501,144 U.S. 451
• Parties: DODGE et al. v. TULLEYS et al
• Court: U.S. Supreme Court

144 U.S. 451

12 S.Ct. 728

36 L.Ed. 501

DODGE et al. v. TULLEYS et al.

April 11, 1892.

STATEMENT BY MR, JUSTICE BREWER.

On February 17, 1886, the appellants, residents of Hall county, Neb., executed and delivered two instruments, each dated February 1, 1886, and together given for a loan of $10,000. Both instruments conveyed the same lands. The first was in form a trust-deed executed to L. W. Tulleys, trustee, to secure payment of a bond of $10,000, given to Clarence K. Hesse, due in five years, with interest at 6 1/2 per cent., payable semi-annually. The second was in form a mortgage to Burnham, Tulleys & Co., to secure 10 notes of $112.50, due, respectively, at the times the semi-annual interest became due on the $10,000 bond. Burnham, Tulleys & Co. were loan brokers doing business at Council Bluffs, Iowa, and took these notes and this mortgage as payment of their commissions, the notes, with the interest named in the $10,000 bond, making the loan in fact, as was intended, at 8 3/4 per cent. Clarence K. Hesse, the obligee in the bond, was in the employ of Burnham, Tulleys & Co. as examiner of lands. He was not the lender of the money, and was named as obligee simply for convenience in transferring title. Default having been made in the payment of interest, a suit of foreclosure was commenced in the name of L. W. Tulleys, trustee, to which suit the present appellants were the sole defendants. The bill described complainant as 'trustee for Cornell University, and for Burnham, Tulleys & Company,' and set out two separate causes of action, the first on the trustdeed, and the second on the mortgage. In respect to the first, after alleging the execution of the bond and the trust-deed, it averred that Cornell University was the present holder of the bond. With reference to the second, the bill contained this allegation as to complainant's title: 'And your orator further shows the court that he is trustee for Burnham, Tulleys & Co., the owners of said promissory notes, and the mortgage deed securing the same, by virtue of the purchase of the same before maturity.' It is also alleged that Tulleys was a citizen of Iowa, and the defendants citizens of Nebraska. To this bill a demurrer was filed by defendants on the grounds— First Burnham, Tulleys & Co. were not made parties; and, third, that a cause of action in favor of Cornell University had been improperly joined with one in favor of Burnham, Tulleys & Co. This demurrer was overruled, and leave given to answer. Subsequently the court held that Cornell University ought to be made a party to the suit, and leave was given to amend the bill by making new parties plaintiff; and thereafter Cornell University and Burnham, Tulleys & Co. appeared and filed what was called an amendment to teh bill, but which simply reaffirmed in their behalf the allegations of the original bill. The answer, admitting the execution of the papers, alleged that Hesse, the obligee, was a mere nominal party, the real lender being Burnham, Tulleys & Co.; and that $534 of the $10,000 loaned had never been paid to the defendants; and also pleaded, generally, usury. Proofs were taken, and a decree entered in favor of the complainants for the full amount claimed, with a thousand dollars allowance for attorney's fees. The defendants appealed to this court.

C. S. Montgomery and Albert Swartzlander, for appellants.

Smith McPherson, for appellees.

Mr. Justice BREWER, after stating the facts in the foregoing language, delivered the opinion of the court.

Appellants allege several matters as grounds for reversal. They claim that the commission notes represent unlawful interest, or that, in any event, they should be credited with rebates. Adding the commission notes to the interest named in the bond aggregates only 8 3/4 per cent. on the money actually loaned, and 10 per cent. is allowable under the laws of Nebraska. Comp. St. Neb. p. 483, c. 44, § 1.

The claim of a credit for rebates springs from these facts: The title to the land at the time the loan was contracted for and the securities given was only partly in the defendants. One tract of it was school and another railroad land, in respect to which they had only a contract of purchase, and upon which balances were still due to the state and to the railroad company. These were paid by the lender out of the loan, and deeds perfecting title obtained. Then a portion of the loan was handed over to the defendants. Three thousand dollars were by agreement retained on account of a judgment against the defendant F. C. Dodge, which was a lien upon the land, but which had been appealed by him to the supreme court. After this judgment had been affirmed by that court, it was paid out of the moneys thus retained. Dates and amounts are as follows: The securities are dated February 1, 1886, and call for interest from that time. They were not in fact executed until February 17th. The amount due the state was $1,417.25, and was paid March 4th. That due the railroad company, $1,388, and paid March 11th. On June 8th, $4,194.75 was sent to defendants; and the judgment, $2,466, was paid October 8th. On the face of the papers, interest was due from February 1st. There was no agreement between the lenders and the borrowers with respect to a different date for its commencement. The borrower knew the condition of his title, and the fact of a judgment lien. The moneys due the state and the railroad company were paid within a reasonable time, and as soon as title could be obtained from the vendors. In the absence of an express agreement to the contrary, it must be assumed that the borrower, knowing that there would be some short delay in making payments and perfecting title, intended and agreed that such delay should work no change as to the time at which interest was to commence to run. The same is true of the $3,000 retained by express agreement for the judgment. It cannot be that the lenders were to hold that money without interest, waiting his pleasure in respect to the judgment. The delay was for his accommodation, and at his instance. But, with respect to the moneys given to him on June 8th, we think equity requires a rebate of interest on account of the long delay in the matter. When a loan is negotiated, the understanding is that the money is to be paid promptly after the execution of the papers. As the parties lived in different cities, of course a little time for transfer would be expected, and the perfecting of the title is implied; but there is no excuse for such a long delay as this. The judgment, which was a lien upon the property, justified the lenders in retaining enough money to satisfy it. It was only $2,000 in the first instance, and by agreement $3,000 was retained in order to cover interest and costs; but the balance of the loan should have been promptly forwarded to the borrower. Because it was not so forwarded, we think the...