Dudley v. Colonial Lumber Co.

• Decision Date: 05 November 1931
• Docket Number: 5 Div. 81.
• Citation: 137 So. 429,223 Ala. 533
• Parties: DUDLEY ET AL. v. COLONIAL LUMBER CO.
• Court: Alabama Supreme Court

137 So. 429

223 Ala. 533

DUDLEY ET AL. v. COLONIAL LUMBER CO.

5 Div. 81.

Supreme Court of Alabama

November 5, 1931

Appeal from Circuit Court, Lee County; S. L. Brewer, Judge.

Bill for accounting, etc., by Donna E. Dudley and Lula O. Dudley doing business as Dudley Lumber Company, against the Colonial Lumber Company. From a decree for respondent, complainants appeal.

Reversed rendered, and remanded.

Wm Russell and C. A. deBardeleben, both of Tuskegee, for appellants.

Powell & Powell, of Tuskegee, for appellee.

BROWN J.

It is well settled that a mortgagor in possession, before foreclosure under the power may without tender, upon offer in his bill to do equity, maintain a bill to protect and enforce his equity of redemption, and a foreclosure pendente lite does not affect his right to relief, and in a proper case may have an accounting. The allegations of the bill were sufficient to bring the case within these principles. Williams v. Noland, 205 Ala. 63, 87 So. 818; Ezzell v. First National Bank of Russellville, 218 Ala. 462, 119 So. 2; Boyd et al. v. Dent, 216 Ala. 171, 113 So. 11, 15; Blue v. First National Bank of Elba, 200 Ala. 129, 75 So. 577; Sewell v. Nolen Bank et al., 204 Ala. 93, 85 So. 375.

The controversies, the basis of this litigation, arise out of the relation of principal and agent, involving numerous and sundry transactions extending over a period of two or more years, about which much testimony was given, resulting in a voluminous record which has been painstakingly examined, and we are content to state the principles of law applicable and our conclusion on the facts.

The complainants, at the time the relation between the parties began and throughout its existence, were engaged in the business of operating a sawmill, equipped for manufacturing, drying, and finishing lumber, at Tuskegee, Ala., and the defendant was engaged in the wholesale lumber business, buying from different and sundry mills in the Southern territory and selling at wholesale.

On May 5, 1928, to state its general effect, the parties entered into a contract, covering the period from said date to May 1, 1929, in which the complainants conferred upon the defendant, as their agent, the right to sell all lumber "controlled and owned," the output of complainants' mill; and the defendant engaged to sell at the reasonable market price, to make report of such sales, and pay or credit to complainants' account, the amounts received less commissions paid salesmen, freight to destination, the usual trade discount of 2 per cent. from the amount after deducting freight and "$1.50 per thousand feet for orders specifying a grade of #2 common or lower grades, and $3.00 per thousand on orders specifying a higher grade than #2 common," the specified commissions to be received by the defendant "as compensation for the sale of said lumber and for accommodation in the form of credit extended to" complainants. The complainants guaranteed "grade, count and workmanship." (Italics supplied.)

In connection with this contract, the defendant advanced to complainants $2,500, secured by note and mortgage and drawing 8 per cent. interest, payable six months from date, and defendant agreed to advance the additional sum of $1,500 to be secured by second mortgage.

The business of manufacturing, selling, and shipping lumber proceeded under this contract until December 5, 1929, when there was a casting up of accounts between the parties, resulting in a balance of $24,000, due the defendant, for which the complainants executed their notes as follows: Two notes dated October 25, 1929, one for $2,000 and the other for $3,000, falling due January 25, 1930; and four notes dated December 5, 1929, one for $5,000, due three months after date, one for $5,000 due six months after date, one for $5,000 due nine months after date, and one for $4,000 due twelve months after date, all drawing interest from maturity; interest on account, constituting the indebtedness represented by said notes, being included in the face of the notes to date of their execution.

The mortgage recites, inter alia: "The parties hereto on May 5th, 1928, executed a contract whereby certain monies were advanced and certain arrangements entered into between them. Operating under said contract and expending and enlarging the limits of credit specified therein and the volume of business contemplated therein the account between the parties has reached the proportions set forth above. The said contract still continued in force between said parties and shall continue until all indebtedness as herein specified and secured has been fully paid. Upon the payment in full of all outstanding indebtedness by the mortgagors, then the contract between the parties hereto may be terminated at the option of either."

The parties operating under said contract, the complainants manufactured during the period of operation something over 10,000,000 feet of lumber, on which commissions were allowed, the major part of which, consisting of 325 cars, was handled by the defendant.

The appellants' first contention is that the contract is rendered usurious by the provision that the commissions received by defendant were received "for the sale of said lumber and for said accommodations in the form of credit extended"-money advanced on which interest was charged at the rate of 8 per cent. In support of this contention, proof was offered showing that the usual and customary commission charged by wholesalers was 5 per cent. of the price received.

"The law seems to be well settled that where a contract for a loan provides for the rendition of services by the lender to the borrower, a fair charge for the services, in addition to the legal rate of interest on the money loaned does not render the contract usurious" (27 R. C. L. 231, § 32), if there is reasonable expectation that the services provided for can and will be performed. Harmon v. Lehman, Durr & Co., 85 Ala. 379, 5 So. 197, 2 L. R. A. 589; Smith v. Lehman, Durr & Co., 85 Ala. 394, 5 So. 204; Houghton v. Burden, 228 U.S. 161, 33 S.Ct. 491, 57 L.Ed. 780.

While the commissions provided for in the contract and deducted from the proceeds of the lumber sold were greatly in excess of the usual and customary charge made by wholesalers, where there is no obligation on the part of the wholesaler to advance money to the millowner, we are not of opinion that it has been shown that the commissions provided for were for the use of the money advanced and intended as an evasion of the statute against usury, but were provided and taken for services rendered in selling, and for the obligation of the defendant to hold itself ready and able to advance complainants money when needed. Brown v. Harrison & Robinson, 17 Ala. 774; Swilley & Riley v. Lyon & Baker, 18 Ala. 552; Woolsey & Sons v. Jones & Bro., 84 Ala. 88, 4 So. 190.

The appellants' next contention is that the defendant, without complainants' consent, violated the contract creating the agency, and was guilty of bad faith and gross disloyalty in using the agency for its own gain without regard to the interest of complainants.

It is unquestionably the law that it is the duty of an agent to act in matters touching the agency, with due regard to the interest of the principal. In accepting the agency he impliedly undertakes to give his principal his best care and judgment, and to use the powers conferred upon him for the sole benefit of his principal consistent with the purposes of the agency. Seeberg v. Norville et al., 204 Ala. 20, 85 So. 505; Bowdon Lime Works et al. v. Moss, 14 Ala. App. 433, 70 So. 292.

And "an agent who, for a reward, is employed in the transaction of business, will justly forfeit all right to compensation, if he is guilty of bad faith to the principal." McGar v. Adams, 65 Ala. 106; Clay v. Cummins, 201 Ala. 34, 77 So. 328.

The evidence relevant to this question shows that all the lumber handled by defendant was shipped on its orders, specifying No. 2 common pine boards, No. 2 common and better, and better grades; that it was billed to defendant in accordance with said orders, and without complainants' knowledge the lumber was reinvoiced to the customer, the footage increased and all of the orders for No. 2 common and No. 2 common and better sold as roofers or "Georgia roofers"; that defendant accounted to complainants on the basis of the original order, after deducting freight, the 2 per cent. discount and the commissions, the defendant retaining not only the specified commissions, but the "overage." A like course was pursued as to deduction and "overage" in respect to the other...