Grider v. Driver

46 Ark. 50

Opinion

Battle, J.

This action was brought by appellants, Sue-M. Grider and W. H. Grider, her husband’, in the Mississippi circuit court, to restrain John L. Driver, as trustee,, from foreclosing six several deeds of trust given by appellants on a large body of land in Miississippi county, to-secure certain debts mentioned In the deeds.

1. Not usury. On the 1st day of May, 1879,. James D. Driver was the owner of five notes executed by Sue M. Grider, then Sue-M. McGavock, to different parties and for different amounts. All of these notes were bearing interest, except one for the sum of $3,133.35, which was due on the 1st day of October,. 1879, and bore 10 per cent, interest from, maturity until paid. He loaned her $233. According to an agreement. made with.her, he calculated the interest on all these notes then bearing interest down to the 1st day of May, 1879, and then added all the principals of the notes then bearing interest, and the interest so calculated thereon and the $233 cash loaned, and on the sum total, thereof calculated interest at- 10 per cent, from the 1st day of May, 1879, to the 1st day of May, 1881, and calculated the interest on tbe note for $2,133.35 from the 1st day of October, 1879, the day when it commenced bearing interest, down to the 1st day of May, 1881, and added this interest, and the $2,133.35, said sum total and interest calculated thereon, making the sum of $5,514.57; and Miss McGavock executed her note to Driver for this amount, due the 1st day of May, 1881, and bearing 10 per centum per annum interest from maturity until paid, and executed the first of the six deeds of trust to secure the payment thereof. This deed in trust and the note secured thereby were delivered to, and received and accepted by Driver in payment and satisfaction of the notes held by him, which were surrendered to Miss McGavock.

Not usury.. On the 17th day of February, 1880, James D. Driver held and was the owner of a note executed by Miss Mc-Gavock, now Mrs. Grider, to Stowell & Heintz for $224.40, bearing 10 per cent, interest from the 1st day of June, 1879, until paid. Miss McGavock was also indebted to Driver for cash loaned on the 19th day of September, 1879, in the sum of $225. He loaned her the further sum of $1,000, and paid for her $6 for conveyances made by her. He then calculated the interest on the Stowell & Heintz note, and the sums of cash loaned and paid, at the rate of 10 per cent., in the same manner he did in taking the first deed in trust, making the amount due thereon, on the 17th day of February, 1881, $1,628.59; and Miss McGavock executed her note for this amount, bearing date the 17th day of February, 1880, due on the 17th day of February, 1881, ■and bearing 10 per cent, interest from maturity until paid, and executed the second of the six deeds in trust to secure the payment thereof. This deed in trust and the note secured thereby were delivered to Driver, and all the evidences of the indebtedness incorporated in the new note were by him delivered to Miss McG-avock.

Not usury. On the 20th day of March, 1880, appellants borrowed of James D. Driver the sum of $2,500 for one year; agreed to pay him for the use thereof interest at the rate of 10 per cent, per annum, and executed to him their note for the sum of $2,750, the amount of the sum loaned and one year’s interest thereon, due on the 20th day of March, 1881, and bearing 10 per cent, interest from maturity until paid, and executed the third of the six deeds in trust to secure the payment thereof.

Not usury, On the 14th day of September, 1880, James D. Driver held and was the owner of four other notes of Miss Mc-Gavock and one of W. H. Grider. These notes were •executed to different parties and for different amounts. According to an agreement with appellants, he calculated the interest on these five notes in the same manner he did in taking the first deed of trust, making the amount due thereon, on the 1st day of January, 1882, $2,769.78; and appellants executed their note for this amount, bearing date the 14th day of September, 1880, due on the 1st day of January, 1882, and bearing 10 per cent, interest from maturity until paid, and executed the fourth of the six deeds in trust to secure the payment thereof, and delivered the same to Driver, which he accepted in satisfaction of the five notes then held by him, which he surrendered to appellants.

Appellants contend that the notes secured by the first four deeds in trust, in so far and to the extent appellants, or either of them, thereby undertake to pay interest on the interest to accrue after the respective dates thereof, are void. They insist that while it is not usurious, according to the more recent decisions, to compound interest, provided the rests are not so frequent as to indicate an intention of evading the usury laws, the compounding must be upon interest already accrued; that the parties cannot stipulate that interest subsequently to accrue shall be compounded; that such stipulation is in the nature of a penalty, and will be deemed void in equity, and that the damages allowed by law for a failure to pay money when due is the lawful interest, and any promise to pay more than that is regarded as an extortion on the part of the creditor, and should be held invalid.

The statutes of this state expressly say: “ The parties to . any contract, whether the same be under seal .or not, may agree in writing for the payment of interest not exceeding 10 per centum per annum on money due or to become due.” Mansfield’s Digest, sec. Jfl38.

In Wallis & Bro. v. Lehman, Abraham & Co., 36 Ark., 569, it was held by this court that a promissory note given for the aggregate amount of an account for advances and 10 per cent, interest thereon to date of the note, and bearing 10 per cent, interest from its date, is not usurious.

In Turner v. Miller, 6 Ark., 463, the plaintiff holding several small notes against the defendant, by agreement with him, calculated the interest due on each note, and adding it to the principal, took a new note for the whole sum, bearing 10 per cent, interest, and this court held that the new note was not a usurious contract.

In Vaughan v. Kennan, 38 Ark., 114, appellants executed their promissory note for $875, dated the 5th day of February, 1873, payable on the 1st day of September, 1874, and bearing 10 per cent, per annum interest from date, and stipulated therein that if the interest was not paid annually, it should become principal and bear the same rate of interest; and this court held “ that the note itself continued to bear interest at the rate of 10 per cent, after maturity as before, and that the unpaid interest due at maturity became interest-bearing at the same rate, together with the successive annual installments of interest as the failure to pay them occurred on each anniversary of the maturity of the note; not, however, so as to compound the interest on the amounts in default, which should each bear simple interest alone at the contracted rate.”

In Portis v. Merrill, 33 Ark, 416, Portis was sued on a note executed by him to Merrill for $475.79, dated the 28th day of June, 1874, due on or before the 28th day of November, 1874, and bearing 5 per cent, interest per month from due until paid, and he endeavored to avoid the payment of the 5 per cent, per month interest by a plea in equity that it was an agreed penalty intended to stimulate him to pay the note promptly at its maturity; and this court held that this interest could not be avoided by any such plea. Chief Justice English, in delivering the opinion of this court, said: “It was a hard bargain, and the creditor may have been over-exacting, but appellant must abide by the face of his written contract, as we held in Miller v. Kempner, 32 Ark, 573. We cannot make new contracts for parties, or alter their plain meaning by construction. * * * * A sane man has no claim upon a court of law or equity to relieve him from a hard bargain, when it is voluntarily entered into, and no fraud is practiced upon him.”

It is not proven that there was any fraud practiced upon appellants, or either of them, in the execution of the first four deeds of trust, and the notes respectively secured thereby. In the giving and taking the notes mentioned interest was not compounded so often as to indicate an intention to evade the usury laws. The maker thereof had a right, under the laws óf this state, to contract to pay any rate of interest not exceeding 10 per centum per annum on moneys due or to become due. The interest to accrue on these notes was as much money to become due as the principals. The note sued on in Vaughan et al. v. Kennan, supra, and the notes secured by the first four deeds in trust in this- ease, stand upon tbe same principle. The only difference is in the form of the contract. In one case it is stipulated that the interest when due shall become principal and bear 10 per cent, interest; and in the other case the interest down to the maturity of the notes is made parts of the principals and together with the principals bear 10 per cent, interest from the maturity of the notes. The effect in both, cases is the same; and the notes in botb «ases are valid in law and equity.

2. Usury. Selling p r o p e rty on credit. When usurious. On the 19th day of April, 1881, appellants executed to James D. Driver their note for the sum of $1,524, for an indebtedness then contracted by them with him and for corn before that time sold to them, dated the day of its execution, due on the 1st of January, 1882, and bearing 10 per eentum per annum interest from date until paid; and Driver agreed to advance to them moneys, goods, wares and merchandise to the amount of seventeen hundred and sixty dollars during the year 1881. To secure this note and advances to be made they executed the fifth of the six deeds of trust.

Under his contract with appellants for advances, Driver furnished them with Mississippi county warrants to the amount of $377.31, worth at the time eighty cents on the dollar, and with supplies amounting in the aggregate, including 20 per cent, added to the cost thereof, to the sum of $1,352.27. Driver testified that it was agreed and understood that he should be paid dollar for dollar in currency for the county warrants in consideration of his agreeing to wait until the end of the year for his pay; that he sold the county warrants to appellants at their face value on a credit; and that it was agreed he should be paid the costs and 20 per cent, thereon for the supplies; and that the 20 per cent, was added to pay him for his risk and trouble had and incurred in furnishing them. W. H. Grider testified that the difference between the value of the county warrants and the amount for which the same was issued was allowed as interest.

Appellants insist that the contracts under which these county warrants and supplies were furnished is usurious and void. Are they correct ?

In Ford v. Hancock, 36 Ark., 248 this court said :

“ It is not usury for one who sells a piece of property on credit to contract for a higher price than he would have sold it at for cash. If the intention be, in fact, to sell on credit, he has a right to fix a price greater than the cash price, with legal interest added; but if the sale be really made on a cash estimate, and time be given to pay the same, and an amount is assumed to be paid greater than the cash price, with legal interest, would amount to, this is an agreement for forbearance that is usurious.”

Mr. Tyler says:

“ The rule is, therefore, well established by the ancient authorities, and the same is recognized at the present day, that where usury is disguised under a sale of merchandise, the property in the goods passes to the vendee, but the excess of price over the just value is considered as a premium for the forbearance of the debt, founded on a presumed loan of so much of the purchase money as is equivalent to the cash value of the commodity sold. It will be observed, however, that the object with which the person taking the goods entered into the transaction was the immediate means of supplying his wants, and that the sale-adopted was only colorable, and not in the common course-of trade.

“The same rule applies to a sale or exchange of diosesin action, or credit, or where a part only of the consideration is a transfer of chattels, when the real object is a loan of money, although, in fact, no money is received by the-borrower. The law, looking at the substance of the transaction, converts the substitute agreed upon by the parties-into money according to its cash value. So that, in every instance where the object of the parties is a loan of money,, and something else, under the form of an exchange or sale, is substituted for it, the principal of the loan, and consequently of the debt contracted by the nominal vendee, will' be the value in money of the substitute received by him ;. and any consideration paid or reserved to the vendor beyond that will, in general, be considered as interest for its forbearance ; and, if exceeding the legal rate, will be regarded as excessive and usurious.” Tyler on Usury, 300.

Driver was a planter. lie kept plantation supplies in his dwelling and smoke-house to sell to his employes. He did not keep them to furnish planters. He, however, sometimes sold to persqns other than his employes, but this was not his business. He was not a merchant and did not hold himself out to the world as such. He was a man of considerable property; had money to invest in good notes, and sometimes loaned it. He had loaned appellants various and large sums of money on several occasions. He was to purchase the goods furnished appellants as they needed them. It was not expected that, in furnishing them, he would do more than order and pay for them. He ordered them from parties in Memphis and St. Louis, and they were shipped directly to appellants. The bills- were sent to Driver. The real effect of this transaction was, that appellants borrowed the amount paid fob the supplies and agreed to pay him 20 per cent, for the use thereof for a period of time less than one year. The manifest intention of the parties to this merchandise transaction, as shown by the whole evidence and the dealings of Driver and appellants, was to borrow and loan money, under the disguise of a pretended sale of merchandise, at a greater rate of interest than 10 per cent, per annum. The same is true of the county warrant transaction. The preponderance of evidence sustains Grider’s statement and understanding as to that.

3. Same: Relief i: «equity. But “he who seeks equity must do equity.” Upon this principle it is well settled that one who goes into a court of equity for relief against a usurious contract can obtain none, except on the condition he pays the principal and legal interest. Pickett v. Merchants National Bank of Memphis, 32 Ark., 346; Anthony v. Lawson, 34 Ark., 628. Appellants in this case will, therefore, be required to pay eighty cents on the dollar for the county warrants and 6 per cent, interest on the value thereof at eighty cents on the dollar from the time the same were furnished, and the amount paid for the goods and 6 per cent, interest from the time when Driver paid for them.

Shoemaker, Joplin & Co. were commission merchants, having an office and doing business in the city of Memphis, in the state of Tennessee. Miss McGavock was the owner of a large plantation and following the occupation of a planter in the county of Mississippi, in this state. During the year 1878 Shoemaker, Joplin & Co. furnished her with plantation supplies and advanced her moneys. She shipped to them a portion, if not all, of her cotton crop of that year. On the 19th day of April, 1879, in the city of Memphis, they had a settlement of accounts, and for the balance due Shoemaker, Joplin & Co. she then and there executed a note to them, giving the same for the sum of $2,375.89, due on the 1st day of January, 1880, and payable at Osceola, Arkansas, and Shoemaker, Joplin & Co. agreed to furnish and advance to her, during the year 1879, moneys and plantation supplies to any amount she might desire not exceeding one thousand dollars, and she agreed to ship to them her cotton crop of 1879 ; and to secure this note and future advances she executed the sixth deed in trust. They continued to advance moneys and supplies to her, during the year 1879, and she shipped to them a portion of her cotton crop of 1879. On the 11th day of September, 1880, they had a settlement, and it was ascertained that she was indebted to Shoemaker, Joplin & Co. on account, in addition to the note for $2,375.89, in’the sum of $110.54, for which appellant W. H. Grider executed his note, due the 15th day of December, 1880, and bearing 6 per cent, interest from date. James D. Driver purchased both the notes executed to Shoemaker, Joplin & Co. after the maturity of the larger and before the maturity of the smaller. The smaller note was incorporated in the note secured by the fourth deed in trust.

Appellants insist that the accounts of Shoemaker, Joplin & Co., settled by the notes executedto them, were usurious on account of illegal commissions and interest charged therein; that the proceeds of the sale of the cotton of 1879, shipped to Shoemaker, Joplin & Go., should have been appropriated to the payment of the note for $2,375.89 and the earliest items of the account of Miss McGavock with them, instead of appropriating them entirely to the payment of the account, so far as they would extend, as was done; and that the appropriation made, as it should have been, would have satisfied the sixth deed of trust, the proceeds being large enough to pay the indebtedness secured thereby.

4. Laws of other states. Presum p tion as to. The accounts of Miss McGavoek with Shoemaker, Joplin & Co. were made and contracted in Memphis, in the state of Tennessee, and their validity and the amounts due thereon depend upon and are determined by the laws of Tennessee. State v. Carl & Tobey, 43 Ark., 353; Parsons Oil Co. v. Boyett, 44 Ark., 230; and Jones v. McLean, 18 Ark., 456. There was no evidence introduced to prove what the laws of Tennessee are or were. In many cases it will be presumed that the laws of a foreign state, nothing being shown to the contrary, correspond with our own; but this presumption should not be indulged in when our laws impose a penalty or work a forfeiture, as in the case of usury. Our statute of usury is highly penal. It forfeits the entire debt, and did when these accounts were made. We are not, therefore, to assume that the laws of Tennessee correspond with our own, and visit the transaction with the same penal consequences. On the contrary, if the appellants intended to avail themselves of the benefit of the Tennessee statute of usury, they should have alleged in their complaint that the accounts were usurious by the laws of Tennessee, and should have sustained this averment by proof at the hearing. As the case now stands, we must assume that the accounts were not usurious. Hull v. Augustine, 23 Wis., 383; Cutler v. Wright, 22 N.Y., 472; Greenwade v. Greenwade, 3 Dana, 497; and Forsyth v. Baxter, 3 Ill., 9.

Appellants lost the right to have the proceeds of the sale of the cotton of 1879 appropriated in any particular manner, by the settlement made with Shoemaker, Joplin & Co., by the execution of the note for the balance of $110.51 found due on said settlement, and incorporating that note into another and securing the same by a deed in trust.

The decree of the court below is reversed, and this cause is remanded, with instructions to the Mississippi circuit court to enter a decree herein dissolving the-injunction granted in this suit, except in so far and to the extent it inhibits and restrains the sale of lands under the fifth deed of trust to pay any amount for county warrants and goods, wares and merchandise in excess of eighty cents on the dollar on amount of county warrants furnished appellants and 6 per cent, interest on the value thereof, estimating it at eighty cents on the dollar, from the time Driver furnished it to appellants, and in excess of the amount paid by Driver for the goods which he furnished to appellants and 6 per cent, interest thereon from the date of the payment thereof, and making the injunction perpetual as to such excess and forever restraining the collection thereof; and to render judgment against James D. Driver, one of the appellees herein, for one-sixth of the costs of the court below and against appellants for the remainder thereof. Judgment will be rendered here against James D. Driver for the costs of appeal.