First National Bank v. Waddell

• Decision Date: 18 February 1905
• Citation: 85 S.W. 417,74 Ark. 241
• Parties: FIRST NATIONAL BANK v. WADDELL
• Court: Arkansas Supreme Court

85 S.W. 417

74 Ark. 241

FIRST NATIONAL BANK v. WADDELL

Supreme Court of Arkansas

February 18, 1905

Appeal from Phillips Chancery Court, EDWARD D. ROBERTSON Chancellor.

Reversed.

STATEMENT BY THE COURT.

Appellee B. B. Waddell, on April 25, 1898, filed a complaint at law against appellants, the First National Bank of Helena, Ark Lycurgus Lucy and Jacob Trieber, to cancel his mortgage executed to Lucy on October 11, 1890, conveying the real estate in controversy situated in the city of Helena, and the foreclosure sale thereunder, and the deeds executed subsequently, through which appellant First National Bank claims title. On motion of defendants, the cause was transferred to equity. The conditions of the mortgage are as follows: "Whereas the said Lycurgus Lucy has agreed to become surety at our request for any and all indebtedness for which W. B. Lewis & Company, a firm composed of W. B. Lewis and Paul Waddell, may become indebted and liable for to the First National Bank of Helena, Ark., during the cotton season of 1890 and 1891, either by note, overdraft, or otherwise, to the extent of $ 3,000. Now, therefore, if said W. B. Lewis & Company, or either of them, or either of us, shall, on or before the 1st day of April, 1891, well and truly pay off all and every part of such indebtedness, whether evidenced by note or open account on the books of said bank, all their advances to bear interest at the rate of 10 per cent. per annum, then this deed to be void and of no effect; but if they shall fail to pay the same, or any part thereof, then this deed shall remain in full force, and the said Lycurgus is hereby authorized to sell said property," etc.

Paul Waddell, son of appellee, was a member of the firm of W. B Lewis & Company, and, being without means, the inducement to appellee to execute the mortgage was to assist his son in embarking in the cotton business (buying and selling cotton) during the season of 1890 and 1891.

Appellee alleges in his complaint, and it is shown by the proof, that on the date of the execution of the mortgage, W. B. Lewis & Company were indebted to appellant bank, of which Lucy was then cashier, in the sum of $ 3,700, and Lucy was surety to the bank for Lewis & Company to the extent of $ 3,000.

On April 1, 1891, Lewis & Company were indebted to the bank in the sum of $ 23,767.06, for which the bank held a large quantity of cotton pledged as security. This cotton was held by the bank until May, 1892, and then sold, and proceeds applied on the debt, reducing same to the sum of about $ 11,000. On January 31, 1893, the real estate was sold by Lucy under the mortgage for the price of $ 3,100 to Jacob Trieber, the vice president and one of the attorneys of the bank, who later conveyed to the bank. After crediting the price of the land on the account of Lewis & Company, the books of the bank showed a debit of $ 7,914 balance against them. The court below rendered a decree cancelling the mortgage and subsequent deeds thereunder, as prayed for, and the defendants appealed.

Cause reversed.

M. L. Stephenson, R. W. Nicholls and Morris M. Cohn, for appellants.

The contract was not usurious. 18 Ark. 9; 6 Ark. 463; 46 Ark. 50; Tyler, Usury, 241; 37 Ga. 384; 67 N.W. 456; 30 S.E. 713; 34 N.Y.S. 606; 32 S.E. 531; 20 So. 428; 68 Ark. 162; 19 Ark. 481; 23 Ark. 739; 34 Ark. 267; 36 Ark. 451; 37 N.E. 840; 32 Ark. 346; 60 Ark. 288. An agreement to pay interest on interest after it becomes due is enforceable. 54 Ala. 646; 114 Cal. 64; 105 Ill. 540; 91 Me. 340; 11 Mo.App. 55; 28 Ohio 265; 11 W.Va. 549; 38 Ark. 114; 37 Me. 308; 26 C. C. A. 70; 80 F. 655; 11 Conn. 487; 4 Ark. 216; 9 Ia. 317. Appellees are not entitled to plead usury. Sand. & H. Dig. §§ 5086-5087; 66 Ark. 121; 68 Ark. 162, 299; 67 Ark. 252; 56 Ark. 45; 64 Ark. 271; 18 Ark. 369; 55 Ark. 318; 67 N.Y. 162. The State law has no application to the transaction. 91 U.S. 29; 98 U.S. 555; 100 U.S. 239; 153 U.S. 318; 31 Ark. 346; 155 Mo. 58; 112 Ga. 232; 106 Ala. 364; 115 Mass. 539; 133 Mass. 248; 109 Ala. 157; 57 Barb. 429; 26 Oh. St. 75; 74 N.C. 514; 91 U.S. 35; 153 U.S. 318; 111 U.S. 197. Under Federal law usury cannot be set up here. 83 F. 269; 72 Hun. 373; 60 Cal. 387; 184 U.S. 151; 165 Pa.St. 199; 36 P. 905; 40 S.W. 413; 96 Pa.St. 340; 47 Ark. 64; 55 Ark. 319; 175 Pa.St. 494; 44 Ind. 290; 169 U.S. 416. A surety cannot set up usury under the act of Congress. 44 Ind. 298; 79 Pa.St. 453; 76 N.W. 800; 59 F. 917; Brandt, Spur & Guar. § 202; Ping. Sur. & Guar. § 185; 11 W.Va. 523; 35 N.J.L. 285. Appellee could not raise the question as to the right to take real estate as security. 98 U.S. 621; 103 U.S. 99; 112 U.S. 405, 439; 133 U.S. 318; 52 Ia. 541; 4 Ill.App. 305; 71 Mo. 221; 153 Mo. 7; 130 N.Y. 221; 158 Ill. 532; 33 Minn. 40; 29 F. 734; 20 Or. 421; 61 Neb. 575; 36 Ia. 443; 100 U.S. 239; 146 U.S. 240; 69 S.W. 702; 95 Tenn. 480. There was no extension of the debt, so as to release the appellee. 48 Ark. 261; 23 Ark. 163. A party is bound by the admissions in his own pleadings. 19 Ark. 319; 32 Ark. 470; 67 Ark. 278. The agreement entered into cannot be varied by any parol agreement. 30 Ark. 186; 38 Ark. 334; 51 Ark. 441; 65 Ark. 333; 26 P. 276.

St. John Waddell, Quarles & Moore and Rose, Hemingway & Rose, for appellee.

No consideration passed for the mortgage. Brandt, Sur. & Guar. §§ 122, 156; 61 Ark. 420. The mortgage was fully paid. 15 Conn. 457; 45 Am. Dec. 484; 16 Barb. 82; 5 Phil. 70; 7 R. I. 576; 4 Ark. 76; 6 Ark. 142; Brandt, Sur. & Guar. §§ 440, 445; 34 Ark. 80; 37 Tenn. 79. The contract was usurious. 62 Ark. 370; 11 Am. & Eng. Enc. Law, 403, 408; 1 John Chy. 15; 51 Miss. 304; 62 Ark. 92; 53 Ark. 271; 56 Neb. 565; 32 Ark. 366; 47 Neb. 579; Sand. & H. Dig. § 5088. The mortgage sale was invalid. 11 Ark. 57; Jones, Mortg. § 826; 53 Ark. 185; 83 Am. Dec. 219; 1 Paige, 78; 51 Am. Dec. 95. The bank's purchase under the sale was void. 23 Ark. 622; 30 Ark. 44; 33 Ark. 587.

M. L. Stephenson, R. W. Nicholls and Morris M. Cohn, for appellants in reply.

The construction of the mortgage should be resolved against the guarantor. 1 How. 182; 2 How. 426; 53 Ark. 107; 3 Ark. 18; 15 Ark. 703; 27 Ark. 523. The guaranty was continuous. 7 Pet. 113; 61 Mich. 327; 142 N.Y. 207; 73 N.Y. 335; 18 N.Y. 502; 24 N.Y. 64; 12 Gray, 447; 139 Ind. 524; 46 Mich. 70; 145 Ill. 488; 67 Conn. 147; 57 Conn. 224; 44 How. Pr. 91; 14 Neb. 158; 79 Tex. 516; 86 Tex. 690; 62 Barb. 351; 2 Camp. 413, 436; 7 Pet. 113; 73 N.Y. 335; 18 N.Y. 502; 15 Ind.App. 382; 14 Neb. 158; 86 Tex. 690; 1 Jones, Mortg. § 379; 32 Ark. 598, 645; 45 Am. Dec. 484; 46 Ark. 131; 32 Ark. 645; 58 F. 437; 60 F. 151; 65 Ark. 333.

St. John Waddell, Quarles & Moore and Rose, Hemingway & Rose, for appellee in reply.

Payments made in the course of general dealings are to be applied to the extinguishment of the oldest indebtedness. 30 Ark. 75; 47 Ark. 111; 57 Ark. 595.

MCCULLOCH, J. WOOD, J., concurs in the judgment only. HILL, C. J., dissenting.

OPINION

MCCULLOCH, J., (after stating the facts.)

1. It is contended, on behalf of appellee, that the contract created only a limited guaranty for advances made by the bank to W. B. Lewis & Company to the extent of $ 3,000, and was exhausted by the first advancement of that sum and payment thereof; or, if it be held that it was a guaranty for the amount of balance due on April 1, 1891, to the extent of $ 3,000, a payment of that sum after April 1, 1901, discharged the guaranteed debt, even though a balance in excess of the $ 3,000 was left unpaid by the principal debtor. On the other hand, appellants contend that the contract constituted a continuing guaranty, and that appellee thereby became liable for $ 3,000 of any balance due the bank from Lewis & Company on April 1, 1891, and was not discharged by payments made by Lewis & Company, either before or after that date, so long as any balance remained unpaid. It is stated in 1 Brandt on Suretyship & Guaranty, § 156, that there is no general rule for determining whether a guaranty is a continuing one or not, and that the true rule for construing such contracts is "to give effect to the intention of the parties as expressed in the instrument, read in the light of the surrounding circumstances." That learned author quotes, as illustrative of the subject, the following remarks of Willes, J., in Heffield v. Meadows, L. R. 4. Com. Pleas, 595: "It is obvious that we cannot decide that question upon the mere construction of the document itself, without looking at the surrounding circumstances to see what was the subject-matter which the parties had in their contemplation when the guaranty was given. It is proper to ascertain that for the purpose of seeing what the parties were dealing about, not for the purpose of altering the terms of the guaranty by words of mouth passing at the time, but as part of the conduct of the parties, in order to determine what was the scope and object of the intended guaranty. Having done that, it will be proper to turn to the language of the guaranty to see if that language is capable of being construed so as to carry into effect that which appears to have been really the intention of both parties." To the same effect, see White's Bank v. Myles, 73 N.Y. 335.

We think that the law is correctly stated, so far as applicable to this case, in 14 Am. & Eng. Enc. Law, 1140, and numerous authorities in support are there cited as follows "Where the guaranty contains a limitation as to the amount for which the guarantor will be bound, but contains no limitation as to time, and there is nothing in the circumstances surrounding the execution of the contract to evince a contrary intention, it will, in general, be construed to be a continuing guaranty, and operative until revoked, and the guarantor will not be held...