West v. Equitable Mortg. Co.

• Decision Date: 30 November 1900
• Citation: 37 S.E. 357,112 Ga. 377
• Parties: WEST v. EQUITABLE MORTG. CO.
• Court: Georgia Supreme Court

37 S.E. 357

112 Ga. 377

WEST v. EQUITABLE MORTG. CO.

Supreme Court of Georgia

November 30, 1900

Syllabus by the Court.

1. Where one constitutes another his agent to negotiate a loan agreeing to give him a certain commission for his services and the agent obtains the loan from a third person, and agrees with the lender to deposit with him, out of the commissions of the agent, a certain percentage of the amount loaned, as a guaranty of its payment, this does not constitute the intermediary the agent of the lender or make the loan usurious, although the latter charged and received the maximum legal rate of interest on the loan.

2. If the intermediary should be a corporation, allowed by its charter to negotiate loans, in which the lender owns stock the fact that the lender, in addition to receiving a lawful rate of interest for the use of the money loaned, also shares, as a stockholder, in the profits and commissions of the intermediary, does not make the loan usurious.

Error from superior court, Greene county; John C. Hart, Judge.

Action by the Equitable Mortgage Company against W. E. West. Judgment for plaintiff. Defendant brings error. Affirmed.

Jas. Davison, for plaintiff in error.

Payne & Tye and J. B. Park, Jr., for defendant in error.

SIMMONS C.J.

West, through his agent, Weaver, made application to the Atlanta Trust & Banking Company, hereinafter called the "Atlanta Company," a Georgia corporation, to negotiate for him a loan, which was to be secured by a deed to certain land. For this he agreed to pay the Atlanta Company a commission of $270. The Atlanta Company submitted the application to the Equitable Mortgage Company, a corporation of Missouri. The latter company accepted the security and made the loan, taking West's promissory notes for $1,612.50, maturing in five years, bearing interest at 6 per cent. per annum, and secured by deed to the land. West failed to pay these notes, and suit was brought thereon by the mortgage company. West defended by pleading usury. On the trial the judge directed a verdict in favor of the plaintiff, and the defendant made a motion for a new trial. This motion was overruled, and he excepted.

The evidence showed that Weaver, West's agent, had actually received but $1,342.50, and that West had received but about $1,320 of the money loaned; that the mortgage company, regarding the loan as of $1,500, added thereto $112.50, and took the five-year notes, bearing interest at 6 per cent. per annum; that it also retained 3 per cent. of the amount loaned, or $45, as part of a guaranty fund, belonging to the Atlanta Company, to secure in part the payment of the loan; that the mortgage company paid the Atlanta Company 5 per cent. per annum as interest on the money thus retained, and agreed to return it to the Atlanta Company in the event it was not required to make good losses on loans made by the mortgage company through the Atlanta Company; and that West had agreed to pay the Atlanta Company had been capitalized at $50,000, and allowed by its charter to negotiate loans; that subsequently the legislature had amended its charter by authorizing it to increase its capital stock to $100,000 and to do a general banking business; and that the mortgage company had bought up the additional $50,000 of stock, and thus became a large stockholder in the Atlanta Company. Loans of the character of the one here involved, made by this mortgage company, except in so far as concerns the 3 per cent. deposit and the ownership of stock in the Atlanta Company, have on previous occasions been before this court; and it has already been decided that such a loan is not usurious, unless, indeed, it is made so by the deposit of the guaranty fund, or by the ownership of stock by the lender in the Atlanta Company. See Green v. Mortgage Co., 107 Ga. 536, 33 S.E. 869. Thus the present case presents two questions, both new to this court, which are the only questions argued here:

1. Did the deposit of 3 per cent. of the loan with the mortgage company by the Atlanta Company, as a fund to guaranty the payment of the loan, make the Atlanta Company the agent of the mortgage company, so as to make the loan usurious? Did the making of such deposit show usury in any other way? We think...