Lanier v. Union Mortgage, Banking & Trust Co.

• Decision Date: 24 April 1897
• Citation: 40 S.W. 466,64 Ark. 39
• Parties: LANIER v. UNION MORTGAGE, BANKING & TRUST COMPANY
• Court: Arkansas Supreme Court

40 S.W. 466

64 Ark. 39

LANIER v. UNION MORTGAGE, BANKING & TRUST COMPANY

Supreme Court of Arkansas

April 24, 1897

Appeal from Mississippi Circuit Court in Chancery, JAMES E. RIDDICK Judge.

Decree affirmed.

Johnson & Coleman, for appellant.

Ocobock was the agent of the Corbin Banking Company, and the bank was the agent of the mortgage company, and knowledge and participation in the illegal reservation of twenty per cent called commissions, was brought home to the bank and the company, and rendered the loan usurious. 54 Ark. 50; 51 id 545; 27 Am. & Eng. Enc. Law, 1007; 33 Conn. 86; 43 Minn. 310; 110 U.S. 14; 46 Minn. 360; 32 F. 113. The Corbin Banking Company loans were usurious because the notes bore interest at the highest legal rate of interest, whereas the money was not paid to the borrower until long afterwards. 63 N.W. 787; 20 A. 287; Perley on Interest, 223 (g). They were further usurious because the bank, instead of paying the borrower in money, furnished him supplies, upon which it secretly charged a large profit. 35 Ark. 217. These loans were New York contracts, and usurious under the laws of that state. 54 Ark 573; 3 Am. & Eng. Enc. Law, p. 550; note 3; 1 Neb. 108; 88 Pa.St. 118; 10 Wheat. (U. S.), 367; 4 Peters (U. S.), 211; 10 Wis. 333; 2 Ark. 382; 53 Barb. (N. Y.), 350. The loan by the Real Estate Mortgage Company was a mere consolidation and renewal of Lanier's former indebtedness to the Corbin Banking Company. This new company was created for the express purpose of cutting off any plea of usury, a mere sham and device of the Bank. 54 Ark. 155; 35 N.W. 265; 27 Wis. 177; 15 Mass. 95; 39 Iowa 549; 9 Cowen (N. Y.), 647; 71 Iowa 50; Cook on Stock and Stockholders, § 663a; ib. § 6; Spelling, Priv. Corp. §§ 829, 831; 31 Mich. 490; 85 Tenn. 572; 23 A. 806; 87 Ala. 211; 20 F. 700. They were void even in the hands of innocent holders. 41 Ark. 331. They were New York contracts. 60 Ark. 269.

Watson & Fitzhugh, for appellee.

The accounts cannot be opened up now except for fraud or mistake. 58 N.W. 830; 36 P. 382; 31 Ill. 487; 4 Dana, 109; 5 Jones, L. 284. Facts known to a party when he settled an account cannot serve him afterwards to impeach it. 66 Mo. 603; 53 Mo.App. 610; 53 Ark. 160; 41 id. 503; 93 Ga. 515. The allegations in the complaint that these were New York contracts and void under the laws of that state are not sufficient to call for a denial. 5 Iowa 357; 4 id. 464; 2 Mass. 34; 10 Wend. 75; 1 Mass. 103; 2 East. 260; 8 Mass. 99; Rorer on Int. Law, p. 163. The burden was on appellant to prove usury. 3 Green (N. J.), 481; 69 N.Y. 339; 57 Ill. 138; 36 Wis. 390; 22 N.J.Eq. 606; 25 id. 491; 34 N.Y. 444; 48 III. 353; 17 Vt. 231; 2 Green (N. J.), 460. The evidence fails to sustain the plea. 25 Ark. 195; 44 Barb. 521; 3 Day, 268; 2 Rice, Ev., p. 1304; 57 Ark. 353; 57 Ark. 255, 256. It was expressly agreed that these contracts should be governed by the laws of Arkansas. This was valid. 15 S.E. 812; 88 Ga. 756; 79 Tex. 247.

BATTLE J. RIDDICK, J., was disqualified. BOURLAND, Special Judge, dissenting. WOOD, J., concurs in the dissenting opinion.

OPINION

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 eight per cent. per annum, payable on the first 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 commissions and expense. The commission was $ 1,720, which was twenty 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 steamboat, 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 misfortune 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 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 Brothers 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. Kelley 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 Brothers' 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...