Strickland v. Bank of Cartersville

Lumpkin, J. (After stating the foregoing facts.) 1. There was no error in striking paragraphs 11 and 12 of the answer. They set np an agreement by the plaintiff with Brooke to extend the time of payment of the debts on which the latter was liable. But the contract showed on its face that the agreement to extend was based upon certain conditions, and the answer alleged the performance of only part -of the requirements, failing to allege a complete performance of the conditions necessary to the extension. The nature of the contract will he more fully considered below. 2. In the written contract between Brooke and the Bank of Cartersville, dated June 3, 1909, it was agreed that the bank would extend or renew the obligations on which Brooke was indorser, guarantor, or surety, either on notes, deeds, or mortgage, provided that Mulhern should pay each and every monthly note promptly as they matured, and that in the event they were not paid the Bank of Cartersville was not bound to sue on them or in any way obligated to extend the debt or obligation of Brooke as maker or indorser. It was also provided, that, in the event Brooke should fail to keep paid all of the taxes upon the property on which the bank extended credit, and to maintain the insurance thereon, or keep a watchman, the bank would not be bound or obligated to extend or renew any of Brooke’s obligations, but might proceed to enter suit and avail itself “of any agreements to proceed to collect all of said debt's.” The amendment which was stricken alleged, in substance, as follows: The defendants proceeded to perform the other terms of the contract beside the payment of $5,000 by a certain date, and did comply with such terms in a manner accepted by the plaintiff until the eighth day of June, 1911. While the taxes and insurance were not always paid as early as they became due, yet, prior to the giving by the plaintiff of any notice of its intention to proceed to collect the indebtedness, and prior to the filing of the suit, all insurance on the property formerly known as that of the Etowah Milling Company and all taxes had been paid fully, and nothing was due thereon. The Mulhern notes were given by the maker for rent of property which was later sublet, and the sublessee reg — 572 — ularly paid to the plaintiff-the first eleven of the Mulhern notes; and since then had paid rent to the receiver next mentioned. The property of the Choctaw Elevator Company, the original payee in such notes, was placed in the hands of a receiver by the chancery court of Tennessee on or about February 21, 1911, and on May 23 the Bank of Cartersville filed a petition in the chancery court, alleging that it was the owner of the notes and that the proceeds thereof belonged to it, and prayed that an order be entered so adjudicating, and directing the receiver to turn over to the bank all the proceeds collected by him. It was contended, that, in the course of the execution of the contract, the parties had departed from its terms, that they had paid and received money under such departure, and that, before either could recover for failure to pursue the letter of the agreement, reasonable notice must be given the other of the intention to rely on its exact terms. Civil Code (1910), § 4227. The contract contained two distinct provisions authorizing the bank to proceed. The first was that, if the Mulhern notes were not paid promptly as they matured, the bank was not bound to extend the time for payment of the debts described in the contract. The other related to the insurance, taxes, etc. The allegations were to the effect that the insurance and taxes had not been paid promptly, but they had been paid in full and in a manner accepted by the bank as a compliance with the contract in that regard up to the time when a notice of intention to proceed to collect was given. If there had been a departure from the exact terms of the contract on this subject, mutually accepted as amounting to a compliance, probably the bank would not have been authorized to declare the contract at an end, on that ground, without giving notice to Brooke that he must thereafter comply strictly with its terms. But as to the Mulhern notes, the allegations did not show any waiver of their prompt payment by accepting payments after the dates when they respectively matured, as being a compliance with the contract, or as creating a waiver by means of mutual departure from the strict terms of the contract. So that on that subject no notice of a requirement of strict compliance was necessary, but by the very terms of the contract the bank was not obligated to extend the debts of Brooke. True it was alleged that the notes were given by Mulhern for rent, and passed into the hands of Brooke and from him .to the — 573 — bank, and that the property of the original payee of the notes had been placed in the hands of a receiver, who had collected rent from a subtenant of the maker, 'and that the bank had filed a petition claiming to have the fund applied to the notes. It did not appear that it had received the fund or what had become of the petition. Its contract with Brooke was that the notes must be promptly paid, or it would not be bound to extend his debts. The bank was not placed in the position of having to lose its collateral altogether and make no effort to collect it, on pain of waiving this term in its contract; and the fact that it thus sought to collect the collaterals held by it did not, under the terms of the contract, operate as such waiver. There was no error in striking certain paragraphs of the amendment offered on this subject. 3. Under the ruling in Strickland v. Lowry National Bank of Atlanta, 140 Ga. 653 (79 S. E. 539), that bank, was a necessary party to a proceeding to enforce the security created by the deed made to the two banks. The fact that attached to the petition as an -exhibit was a transfer of the bond for title by the purchasers from the maker of the security deed to the two banks, which contained a recital that it was made “subject only to the claims of said bank [the present plaintiff] and the Lowry National Bank, .’ . 'as described in a certain security deed from Etowah Milling Company to said banks, dated February 10, 1906,' . . and without prejudice to the protection and security provided for in said deed,” did not estop the defendants from setting up that whatever rights the two banks had under that deed could not be enforced by each in a separate suit seeking to condemn and have' sold undivided fractional interests in proportion to the amounts of the purchase-money notes held by them respectively. While it may be, as a general'rule, that objection for nonjoinder of a necessary party appearing on the face of the petition should be raised by demurrer, yet where the sworn answer duly filed, which set up such defense, was demurred to on the ground that it presented no good and sufficient defense to the petition, and this demurrer was sustained, if in law the defense of nonjoinder was good, the erroneous ruling will not be affirmed by this court on the ground that the point should have been presented by demurrer or plea instead of being included in the answer. While it appears from the recitals in the exceptions pendente lite that, in addition — 574 — to the written demurrer to this paragraph of the answer, counsel for the plaintiff made certain oral objections to the answer (which was itself not the proper form of procedure), the ruling made by the court sustained the written demurrer and decided against the defense on its merits, and not merely because of the manner in which it was raised; and this court will deal with the ruling of the trial court as it was made. ■ Contentions were made, in the reply brief of counsel for the defendant in error, that the defense of nonjoinder was included in the answer, that it did not conclude with a prayer for an abatement of the action, and that it did not show that the Lowry National Bank of Atlanta was within the jurisdiction of the court. The primary difficulty about these contentions is that they do not appear to have been properly raised in the court below. As we have stated, the ruling invoked by the demurrer and made by the court was in substance that the Lowry National Bank was not a necessary party. Whether the pleading or part of the pleading setting up that particular defense had a proper caption or ended with a proper prayer was not the point ruled by the court below. Moreover, the plaintiff’s own petition refers to the Lowry National Bank of Atlanta as being of Fulton county, Georgia. Furthermore, this defense does not go to an abatement of the entire action, but t'o that part of it which involves the title, and not the part which is based solely upon a suit on the note. It is especially true in the present case that the judgment can not be affirmed, as the answer alleged that the security deed was made to the two banks jointly, and that the bank which was not a party to the case still held one of the purchase-money notes, on which there" was a balance of several thousand dollars due, and that such bank was a necessary party to any suit seeking to establish or declare a lien on the land for the purchase-money. This allegation went beyond what appears on the face of the plaintiff’s petition, and alleged the affirmative fact that the other bank still held an unpaid note. Counsel for defendant in error urged that the evidence showed that the plaintiffs in error were estopped, by facts appearing in evidence, from setting up the defense above indicated. The court did not rule on the effect of the evidence, but, on demurrer, struck the defense set up by the answer on this subject. The defendants in the court below were thus cut off from trying the issue as a qopstion of fact. — 575 — 4. It was also pleaded that the attorney who represented the bank, and who was one of the directors, interfered with or obstructed certain efforts to obtain money, made by Strickland and Brooke, to pay the indebtedness of the Riverside Milling and Power Company. There was nothing in these allegations which set up any legitimate defense. It was accordingly not error to strike the allegations in the answer and the proposed amendment on that subject. Taking the allegations most strongly against the pleader, they failed to show that the acts of the attorney were within the scope of his employment; and it also appeared to be an effort to set off a tort against a suit on a contract. The allegation that the attorney was a director in the bank did not of itself make the bank liable for his conduct, if it was wrongful. 5. Where a different rate is not expressed in the contract, the legal rate of interest in this State is seven per cent. Any higher rate, to be collectible, must'-be specified in writing, and in no event can it exceed eight per cent. Civil Code (1910), § 3426. To reserve, charge, or take more than eight per cent, for any loan or advance of money, or forbearance to enforce the collection of money, is unlawful. § 3436. By section 3438 it is declared: ■ "Any person, company, or corporation violating the provisions of section 3436 shall forfeit the excess of interest so charged or taken, or contracted to be reserved, charged, or taken.” The amount so forfeited may be pleaded as a set-off in an action to recover the principal. § 3439. A suit to recover the forfeiture is barred after one year. § 3441. It will be seen that our statute makes a difference between interest up to eight per cent, and that in excess of it. This is recognized in Atlanta Savings Bank v. Spencer, 107 Ga. 629 (33 S. E. 878). To charge or take above eight per cent, is unlawful. It is not unlawful to charge as much as eight per cent.; but in order for an executory contract: to pay more than seven per cent, to be enforceable, it must be in writing. Where a past-due note bore six per cent, interest, if it was agreed in parol by -the makers to pay an additional two per cent, from that time, in consideration of delay in the enforcement of the debt, such a parol executory agreement could not he enforced. But if the ,debt was due, and the creditor announced its intention to proceed to collect it, and, in consideration of delay in so doing, the makers orally agreed to pay eight per cent., instead of six per cent, as specified — 576 — in the note, and delay for'some'two years was thus obtained prior to the making of the Written contract for further time, mentioned later, 'and during that time the increased interest was actually paid, such payment was valid, and the increased interest paid could neither be recovered by the makers nor thereafter applied as a credit on the principal of the note, at their option. The inability to enforce an agreement to pay eight per cent., instead of six, because it was not in writing does not render the agreed payments, made after so obtaining the indulgence, unlawful, so as to authorize them to be recovered or reapplied by the debtors. 22 Cyc. 1486 (7); New York Life Insurance and Trust Co. v. Manning, 3 Sandf. Ch. 58; Yancy v. Teter, 39 Ind. 305; Cornell v. Smith, 27 Minn. 132 (6 N. W. 460); Carson v. Cochran, 52 Minn. 67 (53 N. W. 1130); Mosher v. Chapin, 12 Wis. 453; Marvin v. Nandell, 125 Mass. 562; Marye v. Strouse, 5 Fed. 483; Van Vleet v. Sledge, 45 Fed. 743 (11). It appeared that, shortly after Strickland and Brooke gave the note in suit and others for the purchase of the mill property, the Biverside Milling and Power Company was organized, of which Brooke was the chairman of the board of directors, and the executive officer; and Brooke testified that, in its organization, the company assumed the payment of the note now sued on, and paid the interest which was paid upon it up to the time the agreement was made between Brooke and the plaintiff in 1909.' The principles above announced were hot changed, whether Brooke and Strickland individually paid the interest from their own funds, or whether a corporation was- organized, agreed to pay the note, and, under the agreement with Brooke and Strickland, did make the payments of interest which they had agreed to make. 6. A resolution, entered on the minutes of the bank, “That the cashier call real-estate loan of A. Strickland and George W. Brooke and Etowah Milling Company at once, or secure written agreement from makers and indorsers to pay eight per cent, on same from January 1, 1907,” was admitted in evidence over objection. The minutes showed that this resolution was adopted on June 11, 1907, and that Strickland was present as one of the directors. The objection made to the admission of this evidence was that it was a self-serving declaration and an act of the plaintiff, and could not bind the defendants. It did not appear that any written contract — 577 — for an increased rate of interest was made. This resolution alone was not sufficient to create a contract on one side to delay enforcement of the claim, and on the other to pay eight per cent, interest. But it was admissible to show that the bank was declaring its intention to proceed to collect the indebtedness, and directed its officer to require a written contract for the increased interest; and, when taken in connection with the further evidence in regard to the fact that Strickland was present as one of the directors, and that he and Brooke agreed in parol to pay eight per cent., which was done, the evidence tended to show that there was an agreement to pay the increased rate, and that delay was obtained and the increased interest was paid accordingly. The resolution was at least admissible as matter of inducement. ■ While the resolution above mentioned stated that the increased rate of interest should be calculated from January 1 preceding its passage, the evidence of the president and the vice-president of the bank showed that it was in fact calculated at six per cent, until June 30, 1907. So that, if it would have been usurious to require payment of an increased rate of interest for the period already elapsed, this became immaterial in the light of the evidence. There is no merit in the contention that the resolution did not apply to the transaction under consideration, but 'apparently referred to some different matter. 7. Under the written contract made by the bank with Brooke on June 3, 1909, as long as it was kept by Brooke, and the Mulhern notes were promptly paid, the bank was bound to delay collection. It could not lawfully proceed to enforce the indebtedness. It could not thereafter require the payment of additional interest beyond that specified in the note now in suit, as a condition or consideration for delay or forbearance. .No provision was made in the written contract for the payment of any increased rate of interest. Its terms could not be enlarged by antecedent parol agreements providing that interest at eight per cent, must be paid as a condition of forbearance. It superseded any such agreement so far as Brooke was concerned, and it is not contended that there was ahy separate agreement by Strickland! In fact the vice-president of the bank testified that the note now in suit was extended, or not enforced, Upon the consideration of that agreement. Accordingly, amounts received by the bank after that time in excess of the six — 578 — per cent, specified in tbe note should have been credited by the bank upon the principal. There appears to be no consideration and no valid contract for crediting such amounts as interest after that time. In some respects the charge of the court was not in accord with the rulings here made. 8. Under the pleadings and evidence, and in view of the statement of the presiding judge as to the manner in which the notices of intention to bring suit, as a basis for claiming attorney’s fees, were brought in under a notice to produce describing them as having been served at a certain time, and by a certain person, in the absence of any conflicting evidence on the subject, there was no error in charging that the plaintiff was entitled to recover ten per cent, attorney’s fees on any amount which should be found in its favor on the note. It was suggested in the brief of counsel for defendant in error, that, if this court should hold that the plaintiff was not entitled to have a lien established on the property, or an interest in it, because-the Lowry National Bank of Atlanta was not a party, the general judgment might be affirmed, with proper direction as to the matters indicated. But from what has been said above it will be seen that there were other errors; and we can not determine, from an inspection of the verdict and judgment, that they were harmless. Judgment reversed. All the Justices concur, except Athinson, J., absent.