"The
case made by the bill is that Harmon Bros. borrowed money
from Lehman, Durr & Co., to be used in the purchase of
cotton, and gave their father, John F. Harmon, as security
who signed the note, and executed a mortgage upon certain
lands belonging to him, which are described in the bill, with
the understanding that the money was to be used in the
purchase of cotton, which, when sold, was to be applied to
the payment of the mortgage debt. The bill further alleges
that the loan was usurious. The bill alleges the purchase of
cotton with the money, and asserts that, if the proceeds had
been applied according to the agreement, the mortgage debt
would be paid; and it concludes with an offer to pay any
balance that might remain unpaid. Respondents admit that
Harmon Bros. desired to borrow money, and their refusal to
loan without security; also the execution of the note and
mortgage, and the loan of $5,000; but they deny that the loan
was to Harmon Bros., and deny that it was a part of their
original agreement that the money was to be used in the
purchase of cotton alone, or that the proceeds of the cotton
purchased with the money was to be applied to the payment of
the debt secured by the mortgage. They also deny any usurious
intention in connection with the loan, and ask a foreclosure
of the mortgage. This short statement presents the main
points for consideration.
"Taking
detached portions of the complainant's testimony, it may
be that his proof sustains the case made by the bill; but
considering his evidence as a whole, it is far from
satisfying the court that he is entitled to all the relief
asked for in the bill. In complainant's deposition T. B
Harmon uses the following language: 'We stated to him
[meaning John F. Harmon, their father] that we wanted to make
arrangements for him to borrow some money, and for him to be
responsible, or bind his lands for that amount, and let us
have some money to buy some cotton; and that when we sold the
cotton we would take up the mortgage. Our father said, that
was all right.' Is there any reason why other portions of
complainant's testimony should have more weight than this
simple statement, which is so consistent with the entire
transaction and proceedings from that time on, and with John
F. Harmon's own conduct? He evidently understood that the
money was borrowed in his name, or else why give the check to
Harmon Brothers? If he understood that he was simply a
surety, and Harmon Brothers the principals, by what process
of reasoning could he come to the conclusion that the money
was placed to his credit-a mere surety-by Lehman, Durr & Co.
instead of to the credit of the principals? It may be said
that equity looks at the real transaction of the parties as
it was, and not as it appears to be. That may be true; but
equity cannot prescribe the terms and securities upon which a
man may lend his money, provided those terms do not
contravene some statute or public policy; nor will a court of
equity change those terms. As between John F. Harmon and his
sons, he doubtless borrowed the money for them. He was
willing to trust them. But as between the complainant, Harmon
Brothers, and Lehman, Durr & Co., the latter evidently has
the right to prescribe the terms of the loan. The note and
mortgage bear date January 26, 1886. T. B. Harmon testifies
that it was not signed until several days after this date,
but was signed before the money was drawn by them. Why do we
find them on the 3d February using this money for other
purposes than to buy cotton, if it was to be used only in the
purchase of cotton? Considering the whole evidence of the
complainant together, it fails to impress the court
favorably. It must not be understood that the conversations
between John F. Harmon and Harmon Brothers, in the absence of
Lehman, Durr & Co., or some member or agent of the firm, are
considered by the court as legal evidence, or as binding upon
them, unless communicated, and so as to have entered into the
making the contract for the loan. Without pressing upon the
question whether Harmon Brothers were the agents of Lehman,
Durr & Co. in making the trade with the complainant, as
insisted by him, we simply state that one who deals with an
agent does so at his peril; and the proof does not sustain
the claim that Harmon Brothers were authorized by respondents
to make said contract. When the complainant's evidence is
considered in connection with respondents' testimony, we
cannot perceive any reason why complainant should have the
proceeds of the cotton bought and paid for with the borrowed
money, applied to the mortgage debt. The statement by Harmon
Brothers that the respondents were directed to sell the 77
bales of cotton, and so apply the proceeds, is not sustained
by the evidence; and the application made by them, as shown
by the stated account rendered, to which there was no
dissent, must be conclusive against Harmon Brothers. We think
the complainant utterly fails to sustain this branch of his
case. If there was any money in the hands of respondents,
belonging to Harmon Brothers; or if the evidence established
the fact that Lehman, Durr & Co. were properly chargeable
with cotton, or the proceeds of cotton, for which they have
not accounted, after the payment of any balance that might be
due them from Harmon Brothers, such money should be credited
on the debt secured by the mortgage, of January 26, 1886.
"Let
us now consider the question of usury. If, upon consideration
of all the circumstances, it should appear that the language
used or the stipulations made 'were a mere devise to
evade the statute against usury, to conceal the real intent
the mere form will not relieve the contract from the
consequences of usury.' Swilley v.
Lyon, 18 Ala. 552, per DARGAN, C.J. 'The intent
is the test. Was it intended to compensate for risk, trouble,
or expense incurred at the request of the debtor? or was it
intended to give the creditor additional profit for the loan
of money?' Was it reasonably expected that the 500 bales
of cotton could be delivered by the Harmons? If not, Lehman,
Durr & Co. could as easily have contracted for the payment of
so much money as interest, as for the storage and
commissions. Uhlfelder v. Carter's
Adm'r, 64 Ala. 532. Did the respondents make the
heavy outlay of $25,000 or $30,000, annually, in running
their business as warehousemen, and in order to meet this
expense, and to promote their interest as commission
merchants, loan money and require a shipment of so much as
ten bales on the $100 loaned? The witness Roman states and
repeats that this expense is estimated and provided for after
the money is loaned. He says: 'We regulate the fall
business by the advances made in the spring. We engage such
force as we think necessary from the amount of money advanced
in the spring. The arrangements are made by May the 1st, for
we can tell by that time how much cotton we can handle.'
We do not think that a contract made in the spring, which is
at the time usurious, can be purged of the taint of usury,
because respondents incur large expense to enable them to
carry out their part of the usurious contract. They contract
to loan a man $100, for which he is to pay them eight per
cent. interest, and, in addition thereto, make him agree to
ship them bales of coton worth $400, or, in default thereof,
pay as liquidated damages an amount equal to fifty cents per
bale storage, and one and a half per cent. commissions;
amounting to eleven per cent. additional to the legal rate;
total interest, nineteen per cent. A shipment of three bales
would pay the interest on the $100, yet the borrower is
required to ship seven more bales; storage on the extra seven
bales, $3.50; commissions, $4.20; total extra payments,
$7.70,-or nearly double legal interest. This is usury, unless
it be held that the expense incurred to serve the business of
warehousemen and commissions merchants frees the contract
from usury. Can this be done, when the facts are as stated by
Mr. Roman? 'We regulate the expense after the money is
loaned.' But, under the facts of this case, could Lehman,
Durr & Co. have reasonably expected the shipment of 500 bales
of cotton from the Harmons, including the cotton to be made
by John F. Harmon? They did business with John F. Harmon &
Son in 1884, and with all of them in 1885. They had very
accurate information as to the means of these persons. In
January, 1886, Harmon Brothers were not able to meet their
past liabilities, and Lehman, Durr & Co. refused to lend them
money, or to do business longer without security. Respondents
were reasonably advised that from thirty to fifty bales was
the extent of John F. Harmon's ability to ship. From what
source was the 500 bales to come, which, at forty dollars per
bale, required an outlay of $20,000? Respondents say that
Harmon Brothers were to buy out some merchant or business at
Union Springs. But how were they to buy out this large
business? They were not then able to pay their indebtedness
to Lehman, Durr &...
