Mills v. Johnston

• Decision Date: 01 January 1859
• Citation: 23 Tex. 308
• Parties: ROBERT MILLS v. ALEXANDER S. JOHNSTON AND ANOTHER.
• Court: Texas Supreme Court

23 Tex. 308

ROBERT MILLS

v.ALEXANDER S. JOHNSTON AND ANOTHER.

Supreme Court of Texas.

1859.

A commission merchant, after having charged a commission for accepting a draft, may claim a further commission, for advancing money to pay the same, together with legal interest on the amount advanced.

He may also charge legal interest and a commission, on the amount advanced by him to pay a draft, not previously accepted.

Advances, made by a commission merchant, are not properly to be regarded as mere loans for the sake of interest, but as incident to the general business which he has undertaken to do, and for which he is entitled to charge a reasonable compensation.

To entitle a commission merchant to recover the commission charged, it must be a bona fide charge for services rendered in the course of legitimate business; and not a cloak for the taking a higher rate of interest than the law permits. In the absence of express contract, it must be a reasonable compensation for the service performed. And these are questions of fact for a jury.

The custom of merchants in a particular place, may be given in evidence, to show that the charges are reasonable; but this is received as any other evidence; and the jury must be satisfied with the reasonableness of the charge.

When an account has been settled by note, the burden of proof is on the party who seeks to open the settlement.

Where one person, by request, pays the debt of another, which arose upon an illegal contract, the party paying it, although cognizant of the fact, is entitled to recover the amount paid, from the person at whose request the payment was made.

That one member of the firm, by whom the debt was paid, is also a partner of the firm to whom it was paid, does not affect the question.

So, where the debt has been voluntarily paid, a subsequent promise by the debtor, by the execution of his notes, is a ratification of what has been done, and equivalent to a previous request.

The law will not look to the mere form in which accounts are kept, to ascertain whether there is usury in a subsequent settlement.

Nor will it impute usury to a settlement, because the parties have agreed to compound interest; this, if not intended as a cover for usury, is not unlawful.

But it will look at the whole amount of interest reserved, and any illegal charges for commissions, and if these together, independent of legal commissions, do not exceed the highest interest allowed by law, for the whole period of forbearance, it cannot be held to be usurious.

A commission merchant cannot charge a commission on a “dry balance,” i. e., the balance due upon the old, and passed to new account, as a new advance.

APPEAL from Galveston. Tried below before the Hon. Peter W. Gray.

In this case, two suits (which were subsequently consolidated) were commenced by the appellant, against the appellees, Johnston & Dewbury, one on a note of the appellees, due March 1, 1854, for $11,721.69, upon which were sundry credits; the other, on a note of the appellees, due March 1, 1855, for $8,800, without credits; both of these notes were payable to the appellant.

The appellees pleaded (among other matters, not necessary to be noticed) that the notes sued on, and another note for $12,000, due March 1, 1853, and which had, since that time, been paid, were given in settlement of certain accounts, with the firms of Mills, McDowell & Co., in New York; McDowell, Mills & Co., in New Orleans, and R. & D. G. Mills, in Galveston, of all of which firms, the appellant was a partner. The appellees alleged, in their answer, that there was usury in the transaction, by said Mills, McDowell & Co., with them, by charging and receiving not only seven per cent. interest per annum, the full legal rate of interest allowed by the law of New York, but also the further sum of two and a half per cent. for accepting, and two and a half per cent. for advancing, on the loans and advances made by the said house to the appellees; setting out and pleading the law of New York. Also, alleging that there was usury in the transactions of the firm of McDowell, Mills & Co., of New Orleans, with them, by charging on advances, interest at the rate of ten per cent. per annum, besides a commission of two and a half per cent. for accepting, and two and a half per cent. for advancing and paying drafts drawn by them; also setting out in their answer, the law of Louisiana, by which eight per cent. per annum, is the maximum of interest, for which the law permits parties to contract. And also alleging, that there was usury in the transactions between the house of R. & D. G. Mills and themselves, by charging and receiving on the settlement, when the notes sued on were given, ten per cent. interest per annum, and two and a half per cent. for accepting, and two and a half per cent. for advancing and paying the drafts drawn by the appellees on said house, and by further charging two and a half per cent. on balances, as upon and for a new advance.

The answer further alleged, that the said notes were alone founded upon said usurious contracts, agreements, loans, etc., and claimed the enforcement of the penalties provided by the statutes referred to; set up payments that had been made, and claimed that they should be applied to the legal and valid portions of the debt, and asked, by plea in reconvention, for judgment, for such sums as they might have overpaid the amount justly due.

Without setting out the accounts between the appellees and the said firms, referred to in their answer, and which were presented in evidence upon the trial, it will suffice to observe that they exhibit the usual business transactions between merchants in the interior (as the appellees were shown by the testimony to be), and commission houses at the various sea-ports, and commercial marts mentioned; such as receiving and making sales of produce on and for a commission, and making advances and loans of money, sometimes upon sight drafts, but oftener upon acceptances of the drafts of the appellees, payable at a future day.

It also appeared from the said accounts, that on the 20th of March, 1852, the balance claimed to be due from the appellees, by the house of Mills, McDowell & Co., was settled by R. & D. G. Mills; who also, on June 8, 1852, settled the balance claimed against them by the house of McDowell, Mills & Co.; and these amounts were subsequently charged by the said house of R. & D. G. Mills in their accounts rendered against the appellees; and that the amount claimed by the last named firm was settled, on June 9, 1852, by the appellees executing to the appellant the two notes sued on, and the note for $12,000, as alleged in the answer; and the account was then charged in the books of said R. & D. G. Mills, to the appellant, and the notes given, entered to his individual account.

Upon the trial, a jury was waived, and the case submitted to the judge, by whom it was held, that there was no usury in the account of Mills, McDowell & Co., before the same was entered on the account of R. & D. G. Mills, and that the amount of the said account, was a valid item of principal, on which no interest should be allowed, after its entry on the account of R. & D. G. Mills. That there were usurious charges, under the laws of Louisiana, in the account of McDowell, Mills & Co., viz.: ten per cent. interest, and two and a half per cent. commission for advancing; and that the interest and commission should be deducted, and also the payments, and that the residue was a valid item of principal, upon which no interest should be allowed. That the charge of two and a half per cent. for accepting, and two and a half per cent. for advancing, in the account of R. & D. G. Mills, were valid charges, but that the charge of two and a half per cent. on the “dry balance,” in their account of December 31, 1851, was usurious, and should be deducted, together with all interest on their account subsequent to that time; and the court, after passing upon some other questions, as to payments and credits, which it is unnecessary to particularize, re-stated the account between the parties, and found a balance of $489.96, in favor of the appellees, for which judgment was rendered in their favor.

From this judgment, both parties gave notice of appeal, but the appellant alone perfected his appeal, by giving bond and assigning errors.O. C. & R. K. Hartley, for the appellant.

1. The most important inquiry is, whether the judgment of the court below is correct, in imputing usury to the notes, on account of the item of commissions, charged in the account of R. & D. G. Mills, on the 31st December, 1851.

The theory of the decision is, that if any one item of the account was for the forbearance of money, the notes were usurious, without respect to the rate of interest reserved by the account, as a whole, on the money advanced. We say such is the theory of the decision, because the principles which the court below formally determined, refer directly to the “dry balance item” as the offender; and because a simple calculation, so simple that it may be done by mental arithmetic, will show, that the account of R. & D. G. Mills, did not reserve twelve per cent. per annum, including all the commissions charged, lawful or unlawful.

The error of the court below, in this particular, is easily accounted for. Where there is no distinction between legal and conventional interest, and there is, therefore, a general charge of the highest rate allowed by law, it would follow, from a single item of charge of commissions, which was really for forbearance, that the account, and the notes taken on final settlement of it, would reserve more than lawful interest, unless the offending item were struck out; and, as the said “dry balance item,” retained its place in the account, if there had been a general charge of the highest rate of interest allowed by law, it would have followed, if the said special charge was substantially...