Harmon v. Lehman, Durr & Co.

SOMEBVILLE, J. We have studied the record and the able opinion of the chancellor in this case with great care and interest, and the result is that we approve and adopt the chancellor’s views in every respect save those hereafter noticed. We direct that his opinion in extenso be published in the report of our decision. Both the testimony and the arguments of counsel tend to show that the inquiry, whether John F. Harmon, or Harmon Bros, were principals in the debt to Lehman, Durr & Co., was deemed important in the preparation of this cause. We confess we are not able to perceive its importance. But, if we concede its materiality, we are not able to discover its bearing on the case before us. It is manifest that the money raised was intended for, and used by Harmon Brothers, sons of John F. Harmon. It is equally manifest that Lehman, Durr & Co. refused to advance to Harmon Brothers, on terms less binding than those demanded and acceded to. The terms were, that John F. Harmon should give his note conjointly with Harmon Brothers, they signing as a firm and as individuals, and that the former, J. F. Harmon, should execute the mortgage to secure a compliance with the terms of the note. The terms were acceded to, and the money obtained in the name of John F. Harmon, and immediately checked out by him in favor of Harmon Brothers. The plain import of all this is, that, the requirements of Lehman, Durr & Co. being acceded to, the money was advanced to John F. Harmon as principal debtor, on the condition, and only on the condition, that all the other sureties and securities should be bound for its repayment. Lending one’s name by acceptance or other ? wise, with a consequent pledge o£ primary liability, without consideration or inducement other than a spirit of accommodation, is not infrequent in commercial transactions. In this case, all the parties were bound as principals for the payment of the money to Lehman, Durr & Co. As between themselves, Harmon Brothers may have been bound to indemnify John E. Harmon for any loss he suffered. And while as a crop lien, under the statute once of force, it is possible the facts we have been considering might exert some influence (on this question we intimate no opinion), considered as a mortgage, no question can arise growing out of the relations the parties sustain to each other, under the facts disclosed in this record. Lehman, Durr & Co. were warehousemen and commission-merchants, for the storage and sale of cotton on commission. As such, they controlled a considerable amount of money, which it was their custom to advance to merchants and planters, as a means of increasing their business. Such, it was shown, was the general habit and custom of warehousemen and commission-merchants throughout the country. Their plan was as follows: At the opening of the agricultural season, they advanced to their customers a given sum of money, taking their notes for repayment, with interest from date, the payment to be made on some specified day during the next coming cotton season. The contracts contained the following additional stipulations: That for every ten dollars so advanced, the merchant or planter, as the case might be, bound himself to deliver to them, for storage and sale on commission, one bale of cotton; and to the extent he might fail to deliver the number of bales stipulated, he bound himself to pay to them, as liquidated damages, storage for one month, and commissions for selling, the same as if the cotton had been received, stored one month, and sold by them. These additional stipulations, it is contended, are in their nature usurious; and it is further specially contended that it was and is usurious under the facts of this case. The chancellor disallowed these charges, holding that they were usurious. In this State, following the rulings of other courts, we have held that such contracts are not necessarily and per se usurious. If the person by whom the money is advanced is not engaged in the warehouse or commission business, and thus has no occupation which can be promoted by a compliance with its terms, such stipulation is but a cover for [391] unlawful interest. — Uhlfelder v. Carter, 64 Ala. 527. So, if tlie advance be made by a warehouseman or commission-merchant, and there is no reasonable expectation, or ground for believing, that the customer can perform the stipulation, this furnishes the requisite evidence that compliance was not expected, and renders the contract usurious. On the other hand, if on entering into, or obtaining such promise, there is a reasonable expectation, or ground for believing, that such contract can be complied with, this relieves it of all stain and imputation of usury; and the stipulation, if made to a warehouseman or commission-merchant, is binding. — Dozier v. Mitchell, 65 Ala. 511; Woolsey v. Jones, 84 Ala. 88; Pollard v. Baylor, 6 Munf. 433; Cockle v. Flack, 93 U. S. 344; Matthews v. Coe, 70 N. Y. 239. The testimony in this case is very clear, that there was no ground for believing that John F. Harmon, the mortgagor, would be able to deliver the five hundred bales of cotton the contract bound him to deliver. He could have had no reasonable expectation of being able to deliver more than one tenth of that quantity. But Harmon Brothers, his sons, and for whose accommodation and use the money was obtained, were shown to be merchants engaged in business; and the testimony shows that they, in negotiating the advance, represented that they, in their business, would handle eight hundred bales of cotton, and whatever quantity their father failed to deliver, they would deliver, so as to complete the five hundred bales. This was sufficient ground for the reasonable expectation that the cotton would be delivered, and relieves the transaction of all imputation of usury on this account. The stipulation in the mortgage to provide suitable storage &c. is not an independent consideration, to uphold a promise otherwise illegal, or without consideration. Such service is incident to all lines of business or employment, and on its face indicates nothing which the relation itself does not impose as a duty. — Pheiffer v. Adler, 37 N. Y. 164; 1 Wait’s Act. & Def. 95. There is one phase of this contract, however, which, in our judgment, stamps the transaction as usurious. The evidence shows that the usual charge, in the city of Montgomery, for selling consigned cotton was fifty cents per bale, tuhere no money was advanced by the consignee. The price stipulated for in the present contract is a commission of one and a half per cent, on the proceeds of sale, which will ag [392] gregate from 67 to 75 cents per bale — or from 17 to 25 cents more than this usual charge, estimating the price of cotton at from nine to ten cents per pound, as it was shown to be by the testimony. It is sought to legalize this charge, which is from thirty-four to fifty per cent, more than the price of fifty cents, by showing that it was the customary price charged by commission-merchants for selling cotton where they advanced money. The service to be performed in each contingency is precisely the same — the sale of the cotton. It is no more trouble to sell when money has been loaned, than when no money has been loaned. The thing to be charged for is the service rendered in making sale of the article consigned. The additional charge, therefore, from thirty-odd to fifty per cent, for the service rendered, can not rest on the consideration of the service. There is nothing to support it but the loan of the money, for which lawful interest is also charged. Usury is the “taking more for the use of money than the law allows.” — Woolsey v. Jones, 84 Ala. 88, 91. If the contract is usurious, no custom can legalize it, because no custom is good which is contrary to law. The lender, as we have often held, is not prohibited from charging an extra and reasonable amount for some incidental service, expense or risk, additional to the lawful interest, other than for the loan of money. He may charge the usual storage, and reasonable commission for selling consigned goods. — Dozier v. Mitchell, 65 Ala. 511; Cockle v. Flack, 93 U. S. 344. He may charge reasonable commission, if engaged in the business of a commission-merchant, for accepting bills of a customer, and providing funds for meeting such bills. This is a compensation for the service rendered in lending his credit, and raising money to meet the debt of another, as in Brown v. Harrison, 17 Ala. 774, and cases of that class; Trotter v. Curtis, 19 John. 160; s. c., 10 Amer.211. It is not the case of charging an additional bonus, over and above lawful interest, for the mere use of the money. We conceive the law to be, that where the borrower of money agrees absolutely to pay commission for advancing money on goods consigned, in addition to lawful interest for the money, and based on no incidental service to be rendered by the consignee, the so-called commission is none the less for the use of the money because called by another name than interest. To be sustained as lawful, and rescue the contract from the taint of usury, we repeat, this additional [393] charge must he shown to be based on some service rendered, some trouble encountered, or inconvenience sustained, or. risk assumed by the lender, other than the advance o£ money. Stark v. Perry, (6 Lea, 411); s. c., 40 Amer. Rep. 47; Davis v. Garr, 55 Amer. Dec. 395, Note, and cases cited; Fanning v. Dunham, (5 John. Ch. 122); s. c., 9 Amer. Dec. 283. The charge, moreover, must be fair and reasonable; and the courts will scrutinize it with care, if not suspicion, with the view of probing its true character. If it purports to be a charge for some incidental service, to be rendered by the lender to the borrower, it must be a reasonable charge adequate to the service, not extravagant or excessive, at the risk of being pronounced a mere cover for usury. The appellees, Lehman, Durr & Co., were entitled to charge lawful interest for their money loaned. They could stipulate for the bona fide consignment of cotton by the borrower, and he could lawfully agree to pay reasonable storage on such cotton, in view of the fact that the consignees were warehousemen engaged in the cotton business. They could also charge the usual and reasonable price for selling cotton, such as was customary among commission-merchants in Montgomery. But they could not charge one price for this service where no money was loaned, and a larger price for the same service where money was loaned. The necessary inference is, that the excess of charge was not for the service, but as a bonus for the use of the money, additional to lawful interest. From the principles declared above, it necessarily follows that the Harmons, or J. F. Harmon, can take nothing by their assignments of error, and the same are disallowed. In the case of Lehman, Durr & Co. v. Harmon, the chancellor erred in disallowing storage and customary commissions of fifty cents per bale, for the cotton promised to be delivered under the contract. To this extent, the decree of reference is altered and amended, and the register will take and state an account between the parties, and report the same to the chancellor with all convenient speed. All other questions are reserved for decision by the chancellor. Reversed and rendered.