FrauRnthar, J.
This was a suit brought by the plaintiff, T. W. Steele, against the defendant, A B. Briggs, for the foreclosure of a real estate mortgage. The complaint alleged that on January 2, 1905, the defendant executed to plaintiff three notes, aggregating $500, for merchandise and moneys which were thereafter to be furnished; that plaintiff made such advances to the amount of said notes and also additional advances, upon which was a balance due of $901.16; that on the day of the execution of the notes defendant and his wife duly executed to plaintiff a mortgage upon certain land to secure the above indebtedness. He sought a recovery for the above alleged balance and a foreclosure of the mortgage. The defendant filed an answer, in which he admitted the execution of the notes and mortgage, but in general terms denied that he was indebted to plaintiff and pleaded payment. Subsequently, by way of amendment to his answer, he interposed a plea of usury.
The clause in the mortgage which described the indebtedness which it secured is as follows:
“The foregoing conveyance is on condition that whereas the said A. B. Briggs is justly indebted to the said T. W. Steele in the sum of five hundred dollars for money loaned the said Briggs, as evidenced by three certain promisory notes of date of January 2, 1905, as follows towit: One note for two hundred dollars due and payable January 1, 1906; one note for two hundred dollars due and payable on or before -January 1, 1907; and one note for one hundred dollars, due and payable on or before January 1, 1908, each note bearing interest at the rate of ten per cent, per annum from date until paid.
“Now if the said A. B. Briggs shall pay or cause the said notes to be paid with interest, according to the tenor and effect thereof, then this instrument shall be null and void.”
The only evidence adduced in the trial of the case was the testimony of the plaintiff and his book-keeper. They testified to the correctness of the indebtedness claimed by plaintiff, and that sometime before the institution of the suit the defendant examined with them each item of- the indebtedness and admitted and agreed to its correctness; and that defendant promised to arrange the matter by executing to plaintiff a deed to the land and receiving from the plaintiff a bond for title therefor, which in effect would have given defendant time in which to make redemption from such conveyance; and they testified that instruments of writing were drafted in accordance with that promise, but that afterwards defendant failed and refused to comply with that promise.
It would appear from the testimony that at the time of the execution of said notes and mortgage the defendant was only indebted to the plaintiff in the sum of $30.69, and that the notes and mortgage were given to cover merchandise and moneys which plaintiff would thereafter advance. The three notes were executed respectively for $200, $200 'and $100, and matured respectively on January 1, 1906, 1907 and 1908, and each of the notes bore ten per cent, interest from date. The plaintiff furnished to - defendant from time to time during the above years merchandise and moneys upon the consideration of said notes, and also furnished merchandise and moneys in addition thereto, and this additional indebtedness, together with the advancements made on the notes, amounted to the aggregate sum of $1,192.65. In addition to the claims for indebtedness for the said merchandise and moneys, the plaintiff testified that defendant owed for two notes which had been executed by defendant to the father of plaintiff on January x, 1900, and which notes were then the property of plaintiff. These last two notes with interest amounted at the time of the trial to $322., Plaintiff also testified that defendant owed him.$5 for drafting the written documents in 1908.
It appears from the testimony that the plaintiff was to charge interest on -all moneys advanced at the rate of ten per cent, per annum, and that upon all merchandise furnished he should charge in the way of profit a commission upon the price paid by him to jobbers and wholesale dealers, the commission to be ten per cent, for the first year and twenty per cent, for the second year. The defendant made several payments from time to time, which aggregated $634.12.
The chancellor rendered a judgment in favor of the plaintiff for the total sum of $901.16, in which were included all of said notes, and decreed the same a lien upon the land by virtue of said mortgage and a foreclosure thereof.
It is urged by the defendant that, 'by virtue of the above agreement providing for a charge for interest and commissions, the indebtedness, and mortgage were tainted with usury, and are therefore void.
To constitute usury, there, must either be an agreement between the parties by which the borrower promises to pay, and the lender knowingly receives, a higher rate of interest than the statute allows for the loan or forbearance of money; or such greater rate of interest must be knowingly and intentionally “reserved, taken or secured” for such loan or forbearance. It is essential, in order to establish the plea of usury, that there was a loan or forbearance of money, and that for such forbearance there was an intent or agreement to take unlawful interest, and that such unlawful interest was actually taken or reserved.
The wrongful act of usury will never be imputed to the parties, and it will not be inferred when the opposite conclusion can be reasonably and fairly reached. Scruggs v. Scottish Mortgage Co., 54 Ark. 566; Garvin v. Linton, 62 Ark. 370; Leonhard v. Flood, 68 Ark. 162; First National Bank v. Waddell, 74 Ark. 241; Citizens’ Bank v. Murphy, 83 Ark. 31; Eldred v. Hart, 87 Ark. 534.
In -this case there is no evidence that there was any agreement to charge for the loan of the money a greater rate of interest than ten per cent, per annum; and the commission that was charged on the goods was for the purpose of securing a profit on the goods, and not an usurious rate of interest on money loaned. The plaintiff purchased the goods from jobbers and wholesale dealers, and he sold them to the defendant at a profit of from ten to- twenty per cent, on the cost price to him. Such a transaction, if made in good faith for the purpose of securing a profit on the goods sold, and not for the purpose of evading the usury law, is not itself usurious and invalid. Brakefield v. Halpern, 55 Ark. 265.
In addition to this, the charges do not exceed the rate of ten per cent, per annum when the interest is calculated upon the moneys for the actual time that had run. The .chancellor made a finding that the transaction w.as not usurious, and we are of opinion that his finding is well sustained by the evidence.
But -the mortgage in this case was executed to secure the ■payment of $500, evidenced by three notes, which are described therein, and the mortgage does not provide for the security of any other indebtedness. A mortgage which expressly states that it was given as security for an indebtedness which is specifically named in amount and kind cannot be made to cover other obligations and liabilities. It cannot be made to cover other debts or a larger amount of indebtedness than that which is expressly stated therein.
Free access — add to your briefcase to read the full text and ask questions with AI
FrauRnthar, J.
This was a suit brought by the plaintiff, T. W. Steele, against the defendant, A B. Briggs, for the foreclosure of a real estate mortgage. The complaint alleged that on January 2, 1905, the defendant executed to plaintiff three notes, aggregating $500, for merchandise and moneys which were thereafter to be furnished; that plaintiff made such advances to the amount of said notes and also additional advances, upon which was a balance due of $901.16; that on the day of the execution of the notes defendant and his wife duly executed to plaintiff a mortgage upon certain land to secure the above indebtedness. He sought a recovery for the above alleged balance and a foreclosure of the mortgage. The defendant filed an answer, in which he admitted the execution of the notes and mortgage, but in general terms denied that he was indebted to plaintiff and pleaded payment. Subsequently, by way of amendment to his answer, he interposed a plea of usury.
The clause in the mortgage which described the indebtedness which it secured is as follows:
“The foregoing conveyance is on condition that whereas the said A. B. Briggs is justly indebted to the said T. W. Steele in the sum of five hundred dollars for money loaned the said Briggs, as evidenced by three certain promisory notes of date of January 2, 1905, as follows towit: One note for two hundred dollars due and payable January 1, 1906; one note for two hundred dollars due and payable on or before -January 1, 1907; and one note for one hundred dollars, due and payable on or before January 1, 1908, each note bearing interest at the rate of ten per cent, per annum from date until paid.
“Now if the said A. B. Briggs shall pay or cause the said notes to be paid with interest, according to the tenor and effect thereof, then this instrument shall be null and void.”
The only evidence adduced in the trial of the case was the testimony of the plaintiff and his book-keeper. They testified to the correctness of the indebtedness claimed by plaintiff, and that sometime before the institution of the suit the defendant examined with them each item of- the indebtedness and admitted and agreed to its correctness; and that defendant promised to arrange the matter by executing to plaintiff a deed to the land and receiving from the plaintiff a bond for title therefor, which in effect would have given defendant time in which to make redemption from such conveyance; and they testified that instruments of writing were drafted in accordance with that promise, but that afterwards defendant failed and refused to comply with that promise.
It would appear from the testimony that at the time of the execution of said notes and mortgage the defendant was only indebted to the plaintiff in the sum of $30.69, and that the notes and mortgage were given to cover merchandise and moneys which plaintiff would thereafter advance. The three notes were executed respectively for $200, $200 'and $100, and matured respectively on January 1, 1906, 1907 and 1908, and each of the notes bore ten per cent, interest from date. The plaintiff furnished to - defendant from time to time during the above years merchandise and moneys upon the consideration of said notes, and also furnished merchandise and moneys in addition thereto, and this additional indebtedness, together with the advancements made on the notes, amounted to the aggregate sum of $1,192.65. In addition to the claims for indebtedness for the said merchandise and moneys, the plaintiff testified that defendant owed for two notes which had been executed by defendant to the father of plaintiff on January x, 1900, and which notes were then the property of plaintiff. These last two notes with interest amounted at the time of the trial to $322., Plaintiff also testified that defendant owed him.$5 for drafting the written documents in 1908.
It appears from the testimony that the plaintiff was to charge interest on -all moneys advanced at the rate of ten per cent, per annum, and that upon all merchandise furnished he should charge in the way of profit a commission upon the price paid by him to jobbers and wholesale dealers, the commission to be ten per cent, for the first year and twenty per cent, for the second year. The defendant made several payments from time to time, which aggregated $634.12.
The chancellor rendered a judgment in favor of the plaintiff for the total sum of $901.16, in which were included all of said notes, and decreed the same a lien upon the land by virtue of said mortgage and a foreclosure thereof.
It is urged by the defendant that, 'by virtue of the above agreement providing for a charge for interest and commissions, the indebtedness, and mortgage were tainted with usury, and are therefore void.
To constitute usury, there, must either be an agreement between the parties by which the borrower promises to pay, and the lender knowingly receives, a higher rate of interest than the statute allows for the loan or forbearance of money; or such greater rate of interest must be knowingly and intentionally “reserved, taken or secured” for such loan or forbearance. It is essential, in order to establish the plea of usury, that there was a loan or forbearance of money, and that for such forbearance there was an intent or agreement to take unlawful interest, and that such unlawful interest was actually taken or reserved.
The wrongful act of usury will never be imputed to the parties, and it will not be inferred when the opposite conclusion can be reasonably and fairly reached. Scruggs v. Scottish Mortgage Co., 54 Ark. 566; Garvin v. Linton, 62 Ark. 370; Leonhard v. Flood, 68 Ark. 162; First National Bank v. Waddell, 74 Ark. 241; Citizens’ Bank v. Murphy, 83 Ark. 31; Eldred v. Hart, 87 Ark. 534.
In -this case there is no evidence that there was any agreement to charge for the loan of the money a greater rate of interest than ten per cent, per annum; and the commission that was charged on the goods was for the purpose of securing a profit on the goods, and not an usurious rate of interest on money loaned. The plaintiff purchased the goods from jobbers and wholesale dealers, and he sold them to the defendant at a profit of from ten to- twenty per cent, on the cost price to him. Such a transaction, if made in good faith for the purpose of securing a profit on the goods sold, and not for the purpose of evading the usury law, is not itself usurious and invalid. Brakefield v. Halpern, 55 Ark. 265.
In addition to this, the charges do not exceed the rate of ten per cent, per annum when the interest is calculated upon the moneys for the actual time that had run. The .chancellor made a finding that the transaction w.as not usurious, and we are of opinion that his finding is well sustained by the evidence.
But -the mortgage in this case was executed to secure the ■payment of $500, evidenced by three notes, which are described therein, and the mortgage does not provide for the security of any other indebtedness. A mortgage which expressly states that it was given as security for an indebtedness which is specifically named in amount and kind cannot be made to cover other obligations and liabilities. It cannot be made to cover other debts or a larger amount of indebtedness than that which is expressly stated therein. It cannot be enlarged by parol agreement made at the time of its execution, and a parol agreement made subsequently to enlarge the indebtedness which it is to secure will be inoperative. Whiting v. Beebe, 12 Ark. 482; Johnson v. Anderson, 30 Ark. 745; Martin v. Halbrooks, 55 Ark. 569; Moore v. Terry, 66 Ark. 393; Hughes v. Johnson, 38 Ark. 285.
When a mortgage is executed for the express purpose of securing a particular indebtedness therein named, the holder of the mortgage cannot “tack” to that indebtedness any other debt or demand he has against the mortgagor, so as to stretch the security of the mortgage to cover that also. It therefore follows that the mortgage herein did not cover the two notes executed by the defendant to T. W. Steele on January 1, 1900, nor the charge of $5 for the drafting of the deed and instruments in 1908.
The defendant in his answer also pleaded payment, but generally, and without stating in what -manner payments were made or the amounts thereof. He introduced no testimony whatever. In their reply brief, counsel for appellant for the first time refer to this issue, and attempt to sustain it upon the testimony of the plaintiff. But in his testimony the plaintiff denied that the indebtedness was paid. The burden of proof to show and establish payment was on the defendant. This has not been done.
The total amount of all the debt, including interest, as represented by all the notes and account to the date of the decree below, was $1,519.65. The payments of $634.12, applied to the debts not represented by notes, reduce that total to $885.53. In this balance are included the two notes executed in 1900 and the charge of $5 for the drafting of papers in 1908, and these with the interest calculated thereon amounted to $327; and this, being deducted from the last above sum, leaves $558.53, which is the amount due upon the notes described in and covered by the mortgage, with interest to the date of the decree. To that extent only should a lien be declared upon the land by virtue of the mortgage. For the said sum of $327 the plaintiff should have a personal judgment only against the defendant.
The decree is reversed, and the cause is remanded with instructions to enter a decree in accordance with this opinion.
Opinion delivered October 11, 1909.