Merck v. The Am. Freehold Land Mortgage Co.

• Decision Date: 31 October 1887
• Citation: 79 Ga. 213
• Parties: Merck. vs. The American Freehold Land Mortgage Company, of London, Limited.
• Court: Georgia Supreme Court

79 Ga. 213

Merck. vs. The American Freehold Land Mortgage Company, of London, Limited.

Supreme Court of the State of Georgia

OCTOBER TERM, 1887.

Interest and Usury. Contracts. Principal and Agent. New Trial. Practice in Supreme Court. Before Judge Wellborn. Hall Superior Court. August Term, 1887.

On January 20, 1886, the American Freehold Land Mortgage Company, of London, Limited, alleging itself to be a corporation under the laws of Great Britian, brought suit in the superior court of Hall county against George B. Merck on a promissory note. This note was dated November 16, 1883, was made by the defendant to J. K. O. Sherwood or order, payable at the office of the Corbin Banking Company, New York city, for $400, with interest from date at eight percent, payable annually, for which five interest notes were stated to be attached to the main note. The consideration stated was value received; homestead was waived; and the note concluded as follows:

"Should any of said interest not be paid when due, it shall bear interest at the rate of 8 per cent, per annum from maturity, as stipulated in said interest notes; and upon failure to pay any of said interest within thirty days after due, said principal sum may, at the option of the holder of this note, be declared due without notice and may thereupon be collected at once, time being of the essence of this contract; and in case this note is collected by suit, I agree to pay all cost of collection, including ten per cent. of the principal and interest as attorneys' fees."

This was endorsed by Sherwood "without recourse."

Attached to the main note when made were five notes of like form, all dated November 16, 1883, and due on December l, 1884, 1885, 1886, 1887andl888, respectively. Each of them stated that, for value received, the maker promised to pay to Sherwood or order the amount stated, at the office of the Corbin Banking Company, New York city, "being interest to that date" (the date of maturity) "on my note given to said payee." Each of them, except the first, added, "with interest from maturity at eight percent.per annum." In the note due December 1, 1884, this clause (according to copy annexed to the declaration) reads, "with interest from date at the rate of 8 per cent. per annum." The amount of this note is $33.24, that of the others being for $32 each; all except the last named were endorsed by Sherwood "without recourse." In copy no indorsement of the last appears.

The declaration alleged that, at the time when Merck executed and delivered the note to Sherwood, he also executed and delivered to him a deed to certain described land to secure a loan of $400, evidenced by the said note, and a bond to reconvey was given in conformity to sections 1969 and 1970 of the code; that on the same day, the note was transferred to the plaintiff and a deed made to it by Sherwood, and plaintiff is now the bona fide holder for value of the note and deed; that the interest note due December 1, 1884, was paid, cancelled and delivered to Merck, but the one due December 1, 1885, was not paid, and has remained due for more than thirty days; that Merck has failed and refused to pay it, and has thus violated his contract and failed to act in good faith, whereby the principal sum has become due; and plaintiff sues for the principal, with the interest due and to become due thereon, and also for the amount of the interest notes with interest thereon, and ten per cent. of such principal and interest as attorneys' fees. A general judgment on the notes and a special judgment against the land were prayed for. Service was acknowledged on July 20, 1886.

On February 23, 1887, the defendant filed the following pleas: The general issue; nul tiel corporation; that plaintiff was not the bona fide holder of the note and deed; usury, in that the main note with the interest notes attached (one of which latter notes bore interest from its date) were given to Sherwood for $400, and that sometime thereafter, the defendant received $310, the balance being reserved by Sherwood and his agents for interest, commissions, etc.; that the $90 so reserved and the ten per cent.attorneys\' fees and the interest from date of the first interest note, were illegal, being charged in excess of the lawful rate of interest and to evade the usury laws; that the title conveyed was void because tainted with usury; and that there was a failure of consideration as to the $90 with accumulated interest thereon, and the ten per cent. attorneys\' fees, they being without consideration and added in the notes to evade the laws against usury.

On motion, the plea of nul tiel corporation was stricken.

On the trial, the plaintiff put in evidence the note sued on, with the last four interest notes attached, the deed from Merck to Sherwood, and that made by Sherwood to it on the same day, which stated that the conveyance was made subject to the bond for title of Merck, and closed.

The defendant testified, in brief, as follows: He understood that R. P. Lattner, of Gainesville, was negotiating loans on land in Hall county, and went to see him for the purpose of obtaining money. Lattner said he could get it for defendant if the latter would give a mortgage on his land. He required defendant to sign an application for it, which is set out hereafter, and which was read over to him. About a week or so later, Lattner gave him a check for $310 and took the note and deed involved in this suit. At the same time, the defendant signed a receipt to the Corbin Banking Company for $400, which also is copied below. Is not positive whether he received $310 or $320. Made no complaint to Lattner that he did not receive all the money he was to get under the agreement. Supposes Lattner carried out his contract to the letter. Never saw Sherwood. Gave the deed to Lattner.

It was admitted that the presumption was that the coupon note not attached to the main note had been paid.

C. L. Holleman testified, in brief, as follows: Is engaged in negotiating loans. Works under no one, but obtains loans from any one he can. He and his brother were in business together in Gainesville. He came in about two years after the loan involved in suit was made, and knewnothing concerning it when it was made. Directly after he began business in Gainesville, he and his brother were correspondents of Nelson & Barker, of Atlanta. The papers made out by them would be sent to Nelson & Barker and by them forwarded to some other place to get the money. Witness never was agent for the Corbin Banking Company for the purpose of loaning money or negotiating loans in this State. After the time of the loan to Merck, witness was a correspondent for that company. He asked to have business relations with them, so that they would recognize his applications. He would send applications for loans to them, and agreed to pay them ten per cent. for obtaining the loan, which was two-thirds of the charge made by him. He acted as the agent of the borrower and paid the company out of what the borrower paid him. He could not get money from local sources, and secured the assistance of the company for the purpose of calling the attention of lenders to these applications. An abstract of the title of the proposed borrower to the land offered as security had to be made out with applications for loans, the property had to be inspected, the records to be examined by witness, and missing links in the chain of title found; he paid his own expenses and charged the borrower for these services, and frequently they were worth more than the commissions. He was the head of his own business and charged what he pleased. The Corbin Banking Company furnished him with blank contracts, etc. to be signed. He did not negotiate loans according to their directions and instructions, but they would refuse applications not coming up to what they considered a proper standard, and witness knew what that standard was. Many of the applications forwarded failed to obtain the money. He paid the company for their services and received pay for his own. He was the principal in obtaining the money for the borrower. They could cease to do business with him, but could not discharge him; there was no contract between them, but a business arrangement to the effectthat, having confidence in him, they would attempt to negotiate loans upon such applications as he forwarded and such as they saw fit to negotiate. It was a business courtesy to recognize witness as to applications, but there was no agreement that they would recognize no one else; and if another should prove himself more worthy of confidence than witness, he could obtain money on an application. They do not appoint agents. Witness knows nothing of Sherwood and never acted as his agent directly or indirectly. Witness negotiated about fifty loans in Hall and neighboring counties through the Corbin Banking Company. Some of them were made by several different companies. Many private individuals at the north make such loans.

The plaintiff, in rebuttal, introduced L. B.Nelson, of Nelson & Barker, and W. G. Wheeler, of the Corbin Banking Company, who testified, in brief, as follows: Nelson & Barker were not agents for the Corbin Banking Company, or for Sherwood or the plaintiff, but acted for themselves and as agents of borrowers in securing loans. They had no connection with Sherwood or the plaintiff or other lenders, except to induce parties to make the loans. They made an arrangement with the Corbin Banking Company to negotiate such loans as they should forward applications for from Georgia, as the company " saw fit." Nelson & Barker bore their own risks and paid their own expenses. They had to do certain things, make certain examinations and furnish abstracts of title—requirements made by all loan brokers in Chicago, Boston and New York. That firm were not able to go directly to the men who had large amounts of capital to loan, being unknown to them, and therefore they paid the Corbin...