Whaley v. American Freehold Land-Mortgage Co. of London

• Decision Date: 05 May 1896
• Docket Number: 152.
• Citation: 74 F. 73
• Parties: WHALEY et al. v. AMERICAN FREEHOLD LAND-MORTG. CO. OF LONDON, Limited, et al.
• Court: U.S. Court of Appeals — Fourth Circuit

74 F. 73

WHALEY et al. v. AMERICAN FREEHOLD LAND-MORTG. CO. OF LONDON, Limited, et al.

No. 152.

United States Court of Appeals, Fourth Circuit.

May 5, 1896

On the 25th October, 1883, W. H. Duncan, residing in Barnwell county, S.C., put in his county newspaper an advertisement of 'money to lend in sums from $500 to $500,000, on five years' time. ' W. H. Duncan, now dead, who made this advertisement, was a man of small means. W. H. Duncan was a lawyer, but his son, W. J. Duncan, whom he associated in the business with him under this advertisement, was not. The business, as described by W. J. Duncan, the son, was that of negotiating loans for those who applied, and upon the securities they could give. The father attended to the law part of the business, and the son assisted him in negotiating the loans. They did a large business; negotiated loans to the amount of $250,000 or more in Barnwell county alone. All these loans were negotiated possibly with eight or ten companies, all having their places of business in New York City, but W. J. Duncan can remember only six. The business of the Duncans was conducted through the Corbin Banking Company of New York, according to a routine described as follows by W. J. Duncan, the Corbin Company furnishing the printed forms: 'The party made the application to us for the amount of money desired, giving a description of the property he proposed to mortgage, and also made a contract agreeing to pay us 20% commission; to pay for the abstract of title, and recording the mortgage, etc. We prepared the abstract of title, and with the application, contract, and inspector's report, and questions for applicant's agent to answer, we forwarded these to New York, to our correspondents, the Corbin Banking Company, who endeavored to negotiate with investors wherever they could find them. If they succeeded in negotiating the loan, the abstract, with the mortgage and notes, were returned to us for closing the loan, with a check from the Corbin Banking Company for the money. We did not know if we could get any money upon the application, nor did we know who the lender would be. We only knew who the lender was when the money was sent to us for closing the loan. ' While W. H. Duncan was conducting this business, in December, 1886, of January, 1887, the defendant below, J. J. Whaley and himself met at a public meeting in which money matters were discussed, when Duncan informed Whaley that he was the agent of the Corbin Banking Company. Whether the subject of the loan to Whaley was first broached by Duncan or by Whaley, it is agreed that Duncan would get for Whaley the money he wanted. They entered into a contract as follows, which does not violate the usury laws of South Carolina:

'Whereas I have this day employed W. H. Duncan to negotiate for me a loan of $5,000 for a term of five years, with interest at the rate of eight per cent. per annum, upon a note and mortgage securing the same, which shall be a first lien upon my farm in Barnwell county, S.C.: Now, then, if he shall succeed in negotiating said loan within thirty days, upon the usual conditions exacted by Eastern money lenders as to security, perfecting of title, insurance, &c., I agree to pay the said W. H. Duncan the sum of $1,000, which shall be in full of his commissions and the commissions of those whom he employs to assist him in making said negotiation. I also agree to furnish an abstract of title to the farm, and to pay the fee for recording my mortgage.

'J. J. Whaley.

'Dated January 12, 1887.'

In this certificate upon the application of Whaley, Duncan described the borrower as a man whose general reputation and standing in the community was 'No. 1,' who always paid his bills promptly for cash; never allowed himself to be sued; had a 'splendid' supply of farming implements and machinery; was 'strictly' temperate, industrious, economical, and honorable; who did not touch a drop of liquor; who only wanted the money to take up a prior mortgage and further improve his property proposed as security for the loan; who had other means of living,-- a handsome income from a mill; and, finally, that the land offered to secure a $5,000 loan was worth $15,000 in cash. Altogether, Duncan's certificate described a first-class risk, in commercial language. Some time after the public meeting, Duncan mentioned to Whaley that he could get the money, and, three or four weeks later, informed him that he had the 'papers fixed, all ready,' and came out to Whaley's residence, where the papers were all signed. Among the papers signed by Whaley was the following note and contract: '$5,000.

Blackville, S.C., February 19th, 1887.

'On the 19th day of February, 1892, I promise to pay the American Freehold Land-Mortgage Co. of London, Limited, or order, at the office of the Corbin Banking Company, New York City, five thousand dollars in the gold coin of the United States, of the present standard of weight and fineness, with interest from this date at the rate of eight per cent. per annum, payably annually, as per 5 interest notes hereto attached, value received. Should any of said interest not be paid when due, it shall bear interest at the rate of ten per cent. per annum from maturity, and, upon failure to pay any of said interest within thirty days after due, 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, agree to pay all costs of collection, including ten per cent. of the principal and interest as attorneys fees. It is expressly agreed and declared that this note is made and executed under, and in all respects to be construed by, the laws of the state of South Carolina, and is secured by mortgage of even date herewith, duly recorded.

J. J. Whaley.

'No. 42,538.'

Five coupon notes were attached, for the installments of interest which would accrue annually, all made payable at the Corbin Banking Company, in New York City. On the same day, Whaley executed the mortgage deed to secure the note, which was duly recorded on the 28th February, 1887, in the proper office of Barnwell county, S.C. In accordance with the premises the American Freehold Land-Mortgage Company of London placed in the hands of the Corbin Banking Company the sum of $5,000, and took the note of Whaley above mentioned. On the same day, the 19th February, 1887, the defendant gave a receipt to the latter company, as follows:

'19 Feb., 1887.

'Received from the Corbin Banking Co. five thousand dollars, proceeds of loan negotiated by them for me with the American Freehold Land-Mortgage Company of London, Limited, less commissions, as agreed.

'J. J. Whaley.'

The money received by the Corbin Banking Company from the Freehold Mortgage Company was not all paid over to Whaley the borrower. Fifteen per cent. of it was returned as its own commission for negotiating the loan. Nor was the remaining $4,250 paid directly to the defendant Whaley. It was paid to W. H. Duncan, who applied it first in payment of his own commission of $250, due under the contract of January 12, 1887; leaving $4,000, which amount was applied for the benefit of Whaley, chiefly in discharge of one or more mortgage debts previously secured on Whaley's land, and to other debts of Whaley. A very inconsiderable sum, left after these larger liquidations, was paid to Whaley. W. G. Wheeler, a partner in the Corbin Banking Company, and the person who, on its behalf, negotiated for Whaley, through...