Lanier v. Union Mortgage, Banking & Trust Co.

• Decision Date: 24 April 1897
• Parties: LANIER v. UNION MORTGAGE, BANKING & TRUST CO.
• Court: Arkansas Supreme Court

40 S.W. 466

LANIER v. UNION MORTGAGE, BANKING & TRUST CO.

Supreme Court of Arkansas.

April 24, 1897.

Appeal from circuit court, Mississippi county; James E. Riddick, Judge.

Action by the executors of C. C. Graham, deceased, against Felix R. Lanier, the Union Mortgage, Banking & Trust Company, and others, to set aside trust deeds. Lanier filed a cross complaint in which all the other parties were made defendants. From a decree in favor of the mortgage company, Lanier appeals. Affirmed.

Johnson & Coleman, for appellant. Watson & Fitzhugh, for appellee.

BATTLE, J.

This action involves eight mortgages or deeds of trust, and the debts they were made to secure. They are attacked on the ground of usury. The following are substantially the facts of the case, as we find them:

First. Some time in 1883, Lanier saw an advertisement of A. W. Ocobock in a newspaper published at Memphis, Tenn., in which he claimed to represent capitalists who proposed to make loans on improved lands in Arkansas. Lanier called at his office in Memphis, and made arrangements to secure a loan through him. He executed a note for $8,600 to the American Freehold Land Mortgage Company, of London, the lender, dated February 10, 1883, and payable five years from date at the office of the Corbin Banking Company, in the city of New York. To this note five coupons were attached for interest on the same at 8 per cent. per annum, payable on the 1st of January, 1884, 1885, 1886, and 1887, and on the 15th of February, 1888, respectively, — the first, for $611; the second, third, and fourth, for $688 each; and the last, for $784.84. To secure the payment of the principal note and coupons, Lanier executed to J. K. O. Sherwood, as trustee, a deed of trust conveying lands in Mississippi county, in this state, and, after delivery of the papers to the lender, received from Ocobock a check on the Union & Planters' Bank of Memphis for $6,780. The difference between the amount received and the sum specified in the note, to wit, $1,820, was retained by Ocobock for commission and expense. The commission was $1,720, which was 20 per cent. on the face of the loan. The expense was $100, which was for looking at the land as he passed by it on a steam-boat, and for examining title. The deed of trust provides, "The contents embodied in this conveyance, and the notes secured hereby shall in all other respects be construed according to the laws of the state of Arkansas, where the same is made."

Lanier relies on various circumstances to show that the persons through whom he secured the loan were agents of the lender, and that it knew its agents collected usurious interest on the money loaned. But it is unnecessary to mention these circumstances, for reasons hereafter appearing.

Second. Owing to misfortunes in business, Lanier was unable to pay the interest on the $8,600 which was due and payable in 1884 and 1885. He was a planter, and needed money to enable him to cultivate his plantation. On account of his financial embarrassment he made contracts at various times with the Corbin Banking Company, a New York firm engaged in banking and brokerage, to advance to him money and supplies. An estimate of the amount needed by him in each year was made, and he executed a note for the same at 10 per cent. per annum interest thereon from date, payable to F. W. Dunton, a member of said company, at the office of the banking company, in the city of New York, and at the same time executed a deed of trust, in which W. G. Wheeler was trustee, to secure the payment of the note. In each deed of trust it was stipulated that it and the note secured thereby, except as therein otherwise provided, should "be construed according to the laws of the state of Arkansas, where the same is made." The money or supplies were advanced as Lanier requested, and were charged to him, together with 10 per cent. per annum interest thereon from the date of the same, on account. In their dealings after the execution of the deed of trust, it seems, no attention was paid to the notes, but the parties were governed by the account in ascertaining the amount of Lanier's indebtedness to the bank.

In the manner indicated, notes and deeds of trust were executed by Lanier as follows: On the 15th of April, 1885, a note for $1,500, with a coupon for $106.25 for interest attached; on the 5th of March, 1885, three notes for $2,400 each, payable on December 1, 1886, 1887, and 1888, respectively; on the 26th of May, 1887, a note for $2,500; on the 10th of April, 1888, a note for $3,000; and on the 3d of March, 1890, a note for $3,000; and on the day of the execution of each of these notes a deed of trust was executed by him to secure the payment of the note or notes made on that day.

In November, 1890, Alma C. Sherman held two notes for $1,660.49 each, and interest from date, which were executed by Lanier to her at Memphis, Tenn., on the 1st of September, 1882, and were secured by a deed of trust of same date. On the 8th of November, 1890, the Corbin Banking Company, at the request of Lanier, purchased the notes and deed for its own benefit. On the 19th of March, 1891, Lanier was also indebted to Hirsch Bros. in the sum of $10,898.62, and this, too, was secured by a deed of trust, and was purchased by the banking company, at the request of Lanier, for its own benefit. All these claims were transferred to William J. Kelly for the use and benefit of the banking company, although it was not so stated in the assignment.

On the 26th of March, 1891, Lanier was indebted to the Corbin Banking Company as follows:

                On account of the Sherman debt .. $ 5,000 00
                On account of the Hirsch Bros
                 claim ..........................  10,892 52
                On account of moneys and supplies
                 advanced .......................  14,995 38
                                                   _________
                  Making in the aggregate ....... $30,887 90
                

Third. In February or March, 1891, a statement of the account of Lanier with the Corbin Banking Company, together with the original vouchers for the moneys charged, were submitted to Lanier for the purpose of ascertaining and adjusting his indebtedness on that account. After examining them, he objected to the items of profits on the amounts paid for supplies purchased for him, and these items were eliminated from the account, which left him owing the $14,995.38. About this time, or soon after, the banking company, through its attorney, J. H. Watson, a lawyer of Memphis, proposed to him that it would negotiate a loan of a sum of money, on five years' time, sufficient to pay his indebtedness of $30,887.90 to it, and the amount he was owing to the American Freehold Land Mortgage Company, if he would secure the loan by a deed of trust upon his property. After considering the proposition for several weeks, he accepted it. Upon being informed of that fact, the banking company forwarded to its attorney at Memphis papers of the following description: Five blank notes, bearing date the 26th of March, 1891, for the aggregate sum of $41,792.84, and payable to the Real-Estate Mortgage Company, of the county of Cumberland, in the state of Maine; a blank deed of trust of the same date containing a statement that the contracts embodied therein and the notes secured thereby, except as therein otherwise provided, "shall be construed according to the laws of Arkansas, where the same is made," to secure the same; a statement showing the amount due it from Lanier on account of advances, with the profits on supplies and merchandise eliminated; and a statement showing the amount due the Freehold Company, including interest to the 26th of March, 1891, to be $10,904.94. After receiving these papers the attorney submitted to Lanier the statement showing the amount due on account of advances. After many weeks' deliberation, Lanier executed the notes and deed of trust in the form they were forwarded by the banking company to its attorney (the notes being for the sum total of the $30,887.90 due the banking company and the $10,904.94 due the Freehold Company), with the agreement and understanding by the parties that the securities which belonged to the banking company should be "kept alive," and should be held by the owner of the five notes for the purpose of protecting him against prior liens. James H. Watson, to whom these notes and the deed of trust were delivered, then gave Lanier a sight draft on the Real-Estate Mortgage Company for $41,792.84, and Lanier transferred it to the banking company, with instructions to collect it and apply the proceeds to the payment of the debts for the payment of which the new loan was to be made. Watson, who was also the attorney of the Freehold Company, and held Lanier's note to it for collection, thereupon accepted the settlement, and offered to surrender the note and the deed of trust which secured the same, together with a release to Lanier by the trustee therein, or hold the same for him. Whether the check was paid or not is not positively shown by any competent evidence. The five notes were, however, transferred to the Union Mortgage & Trust Company of London by the Real-Estate Mortgage Company, without recourse. Lanier states in his brief that George H. Bullock, the secretary of the Union Mortgage & Trust Company, a competent witness, testified that the last-mentioned company purchased these notes from the Corbin Banking Company on the 25th of June, 1891, and paid therefor $41,792.84, upon its (banking company's) written guaranty of the collection of the entire principal of the five notes, and at least 7 per cent. per annum interest thereon. (We rely upon the brief, because we are not referred to the pages of the very voluminous transcript in this case upon which this statement can be found, and because no one denies that the witness Bullock testified to that effect.) This testimony is not contradicted, and we take it to be true. No creditors of Lanier complain of Corbin failing to negotiate the loan and...