Stewart v. G.L. Miller & Co., Inc.

• Decision Date: 26 February 1926
• Docket Number: 4829,4830.
• Citation: 132 S.E. 535,161 Ga. 919
• Parties: STEWART et al. v. G. L. MILLER & CO., Inc. G. L. MILLER & CO., Inc., v. STEWART et al.
• Court: Georgia Supreme Court

132 S.E. 535

161 Ga. 919

STEWART et al. v. G. L. MILLER & CO., Inc.

G. L. MILLER & CO., Inc., v. STEWART et al.

Nos. 4829, 4830.

Supreme Court of Georgia

February 26, 1926

Rehearing Denied Feb. 27, 1926.

Syllabus by the Court.

Under the Civil Code of 1910, § 3436, no greater rate of interest than 8 per centum per annum shall be reserved, charged, or taken for any loan or advance of money, either directly or indirectly, by way of commission for advances, discount exchange, or by any contract of contrivance or device whatever.

Under the act of 1916 (Acts 1916, p. 48), where a transaction is usurious all interest is forfeited, but no other forfeit shall be occasioned.

An "underwriting contract" is one to insure the sale of bonds or stock subscribed; and in case they are not sold before the installments fall due, then to purchase and pay for them at par. It is an "underwriting," and not an agreement to loan money.

Under the facts of this case it cannot be said as matter of law that the underwriting contract was usurious.

In the circumstances of the case the court did not err in appointing a receiver.

Russell C.J., and Hines, J., dissenting.

Suit by G. L. Miller & Co., Inc., against J. A. Stewart and others. Judgment for plaintiff, and defendants bring error, and plaintiff assigns cross-error. Affirmed on main bill of exceptions. Cross-bill dismissed.

G. L Miller & Co., Inc., as trustee, brought an equitable petition against James S. Stewart and Fred P. Jeter, having for its purpose the foreclosure of a trust deed or mortgage on certain described real estate situate on Fourteenth street in the city of Atlanta, the land having upon it an apartment house, which was built from the proceeds of certain bonds which were secured by the trust deed or mortgage. The petition alleged certain defaults on the part of the defendants: (1) In nonpayment of interest from March 1, 1924, to the date of the suit, and nonpayment of the principal from July 23, 1924, the trust deed providing that the payments on the principal and interest due should be paid monthly; (2) the failure of the defendants to keep the premises insured, which the trustee under the deed of trust had done for the benefit of the bondholders at a cost of $1,568.64; (3) the failure on the part of the defendants to deposit with the trustee an amount representing 4 per cent. of the interest paid, being the amount of income tax chargeable against the holders of the bonds upon the interest; (4) the failure on the part of the defendants to pay the city, state, and county taxes for the preceding year. There was a prayer for a receiver to take charge of the property pending the foreclosure of the mortgage, basing the right to receivership partly upon the contract right to have a receiver appointed, as set out in the trust deed, and partly upon the provision of the trust deed that in case of the appointment of a receiver the rents and profits should become security for the outstanding bonds, and upon the allegation in the petition that the rents, etc., from the property were being used by the defendants for purposes other than those set out above, and that none of them was being applied to the payment of the sums due under the trust deed.

The defendants filed an answer to the petition, admitting some of the allegations, denying the alleged default, and averring that the indebtedness was a loan made by Miller & Co., Inc., to James A. Stewart, and that the same was usurious. The record discloses that on July 23, 1923, James A. Stewart, then the owner of the mortgaged property, entered into a written agreement with G. L. Miller & Co., Inc., the material portions of which are hereinafter set out.

In this agreement Stewart undertook to issue bonds aggregating the sum of $112,000, to be secured by a first mortgage or trust deed covering the property described in the agreement, maturing at different periods of time of about eight years, and bearing interest at 6 1/2 per cent. per annum, payable semiannually on the 23d day of January and July in each year; and the trust deed was to be in such form and to contain such provisions as might be approved by G. L. Miller & Co., Inc., and should convey the property under warranty to a trustee to be selected by "the underwriter." In order to insure the accumulation of a sufficient sum to retire the bonds maturing in any year, the owner was to pay the trustee named in the trust deed one-twelfth of the amount payable in each of the years, except the last year, on the 23d day in each month in that year, the first payment to be made on July 23, 1924. In order to create a fund sufficient to insure the prompt semiannual payments of interest as they respectively matured, the owner agreed to pay to the trustee one-twelfth of the amount of interest which would accrue in each year on the 23d day of each month in said year in advance; and it was provided that the sum so accumulated by the trustee for the purpose of paying the bonds maturing in any year, and paying the interest coupons maturing in each year, should be applied by the trustee to the retirement of the bonds and to the payment of interest. It was further provided in said underwriting agreement that the owner would sign the bonds and coupons and trust deed, deliver possession of the bonds and coupons to the underwriter, and the trust deed or mortgage to the trustee named therein, to be placed on record, "and all the bonds with coupons attached immediately to be delivered to the underwriter, who shall have the right, power, and authority to sell or otherwise dispose of the same, when and as the underwriter desires, and any purchaser or holder of said bonds receiving the same from the underwriter bona fide for value shall be fully protected against equities and claims of any character whatsoever." The underwriter underwrites the "entire issue of bonds at the sum of $98,000, which sum, and no more, such underwriter is bound to account for to the owner in a disbursement thereof in accordance with the terms and provisions of this agreement. *** The proceeds from said bonds, less any deduction that the underwriter may be entitled to deduct therefrom under any provision of this contract, shall be used in the construction of the building upon the lands hereinbefore described, which building is three stories and basement apartment structure, containing twenty apartments; also garage to accommodate nine motor cars, and is to be constructed in accordance with the building laws of the city of Atlanta, and in accordance with certain plans and specifications which have been agreed upon between the owner and the underwriter, and reference to which is here made. *** The name of said building shall be 'Somerset Apartments.' The underwriter shall deposit the proceeds of said bonds, as rapidly as needed, in some bank selected by it, and they shall be drawn and paid out as the building progresses, in such amounts and at such times and dates as the owner may agree upon, or, if they fail to agree, as the underwriter may determine as necessary and best. *** The underwriter may at all times hold sufficient of such funds on deposit in said bank or banks as he may select to entirely complete the building contemplated to be erected hereunder, free from any and all liens that are prior to said trust deed, and shall stop disbursements of said proceeds of said bonds at any time until such deficiency is made up by the owner. The owner will furnish to the underwriter waivers of liens and receipts for the payments of moneys for material and labor entering into the construction of said building, or satisfactory sworn statements showing such payments as will, under the law, relieve the property from liens in favor of materialmen, mechanics, and contractors, so as to always maintain said trust deed or mortgage as a first lien against said property, and under no circumstances shall the underwriter be held liable to the contractors," etc.

It is further provided in this agreement that, though the bonds shall bear interest only at 6 1/2 per cent., the underwriter may deduct the sum of $6,250 from the proceeds of the bond issue, in order to make them yield 7 1/2 per cent. "In consideration of the discount received on said bonds by the underwriter, the underwriter assumes full responsibility for the sale of said bonds and for the paying over and depositing, in the bank or banks selected, the $98,000 which the owner is to receive for said bonds, and agrees to supervise the progress of the construction of the building and make disbursements and payment of the proceeds of said bonds from time to time on vouchers for materialmen contractors, subcontractors, laborers, or others," etc. "The underwriter, its agents, officers, and attorneys shall incur no personal liability for what it or they may do or omit to do under the powers and duties contained in this agreement, except to faithfully account for the proceeds of said bonds as hereinbefore set out, and in case of its or their own gross negligence. The place of performance of this contract is hereby fixed at Atlanta, Georgia, and this contract is a Georgia contract and will be construed by the laws of the state of Georgia. The proceeds from said bonds, less any deductions which the underwriter may be entitled to deduct therefrom under any provisions of this contract, shall be disbursed in amounts as follows: 60 per cent., when title, satisfactory to underwriter's attorneys, is passed to said trustee by trust deed or mortgage, and complete abstract of title is furnished in accordance with paragraph 10. The remaining 40 per cent. shall be disbursed within thirty days after substantial completion of the entire work; it being expressly understood and agreed that no disbursements...