Martin v. Adams

• Decision Date: 03 December 1898
• Citation: 48 S.W. 494,66 Ark. 10
• Parties: MARTIN v. ADAMS
• Court: Arkansas Supreme Court

48 S.W. 494

66 Ark. 10

MARTIN v. ADAMS

Supreme Court of Arkansas

December 3, 1898

Appeal from Chicot Chancery Court JAMES F. ROBINSON, Chancellor.

Decree reversed and cause remanded.

Rose & Coleman, for appellants.

To charge a lender with usury on account of the act of his agent in demanding a compensation from the borrower, which, added to the interest paid the lender, made an amount in excess of the legal interest, the lender must have had knowledge of the transaction, or the circumstance must be such as to charge him therewith. 51 Ark. 545. The agency of the Corbin Banking Company could not be proved by the declarations of its officers. 33 Ark. 251; 37 Ark. 17; 46 Ark. 222. Its acts did not really bind the lender at all, because nothing shows the character of the services they were to render. 82 Ga. 299. Ratification must be made with full knowledge of all essential facts. Whart., Ag. §§ 65, 614. The fact that the banking company advanced the money on the approval of the loan did not constitute it the lender. 82 Ga. 299; 96 Ga. 227.

Robt. E. Craig and Baldy Vinson, for appellee.

If the Corbin Banking Company was the agent of the mortgage company its exaction of usury binds the latter. 51 Ark. 544; 54 Ark 50. Ratifying this act and accepting benefit of same would render it chargeable. Or if the banking company made the loan on its own responsibility, it was usurious, and the taint follows it into the hands of all transferees. 41 Ark. 331; 54 Ark. 572. The agreement for the interest and that for the bonus formed one entire contract. 13 S.W. 843. But the banking company was the real lender, in the first place. 11 S.W. 881.

BATTLE J. HUGHES and WOOD, JJ., dissent.

OPINION

BATTLE, J.

In 1883, the Corbin Banking Company did a general banking business, and acted as loan brokers in the negotiation of loans. At the same time the American Mortgage Company was a corporation organized in Scotland to lend money on mortgages on farms in the United States, Canada, and other countries having its principal office in Edinburgh, Scotland, and an agent (J. K. O. Sherwood) in New York City, whose duty it was to examine the titles to the farms offered as security, and accept applications for loans, subject to the approval or rejection of his principal. As early as 1877 the banking company commenced to negotiate with the mortgage company for loans, and in the course of many years succeeded in securing a considerable number. They were secured in this manner: Applications for the loans, accompanied by statements showing an abstract of the applicant's title to the land which he offered to secure the loan and the value of the same, were first presented to the agent in New York City for acceptance or rejection. If he accepted, the applicant executed his notes for the amount desired to the mortgage company, and a mortgage to secure the same, and caused the mortgage to be recorded; and then the banking company sent the application and accompanying statements, and the notes and mortgage to the mortgage company in Edinburgh; and, if it approved the application, notes and mortgage, it paid the full amount of the notes to the banking company for the applicant.

In June, 1883, Mrs. Kate H. Adams applied to John C. Calhoun for a loan of $ 4,500 at 8 per cent. per annum interest, to be secured by a mortgage upon her lands. At the same time she entered into a written contract, by which she agreed to pay him $ 900 in the event he succeeded in securing the loan. Calhoun forwarded the application, and a statement showing an abstract of her title to the lands and their fertility and value to the banking company, which presented them to Sherwood, as agent, and he approved making the loan. The banking company thereupon prepared a note for $ 4,500, with five coupons for 8 per cent. interest attached, payable to the mortgage company, and a deed of trust in favor of Sherwood, as trustee, to secure the payment of the same. They also prepared five other notes aggregating $ 900, payable to Calhoun, and a deed of trust in favor of F. W. Dunton cashier of the banking company, to secure them. The deeds of trust and the notes and coupons secured by them were then forwarded to Mrs. Adams, and she executed all of them. The deed in favor of Sherwood was filed for record on the 4th of July, 1883, and the other on the 26th of the same month. The former was recorded on the twentieth, the sixteenth day after it was filed. After this Calhoun returned the deeds, notes and coupons to the banking company, with information that he had drawn five drafts on them, aggregating $ 4,500, the amount of the loan, which drafts were duly paid by the drawees. The banking company then forwarded the note for $ 4,500 and the coupons for interest thereon, which were payable at their office in the city of New York, and the deed of trust executed to secure them, which contained a stipulation that it and the note secured thereby, except as therein otherwise provided, "should be construed according to the laws of Arkansas, where the same was made," and the application for the loan and the accompanying statements, to the mortgage company in Edinburgh, Scotland, which approved the loan and delivered to the banking company the $ 4,500. Calhoun transferred the other five notes and mortgage to the banking company in full payment for their services, having first received from them $ 90 for his interest therein. The mortgage company had no interest in them (the five notes) nor...