Smith v. Lehman, Durr & Co.

STONE, C. J. Stephen L. Smith, husband of appellant, executed a mortgage to Lehman, Durr & Co., to secure the payment of money advanced to him, and also to deliver certain bales of cotton for storage and sale as warehousemen and commission-merchants. The mortgage conveyed, among other things, certain lands, to secure the payment of the money and the delivery of the cotton. Mrs. Smith, the ■ wife, united in the mortgage, by proper words and certificate to bar her dower, and to legalize the conveyance of the homestead. The mortgage contained ’a power of sale on default, and under it the lands were advertised for sale. Before the sale was made, Lehman, Durr & Co. learned that the title to the lands mortgaged was jointly and equally in the said Stephen L. Smith and his wife, Cordelia C. Smith. They thereupon sold the undivided half interest, and Lehman Brothers, two of the members of the firm of Lehman, Durr & Co., purchased the said half interest, and received a conveyance. The present bill was filed by the wife, Mrs. Cordelia C. Smith, and alleged that the lands, though conveyed to her husband and herself jointly, were purchased and paid for with her money — her statutory separate estate. She seeks to have a trust declared in her favor for the entire half interest so conveyed to her husband, or for such part as was purchased and paid for with her money. She also sets up usury in the mortgage made by herself and husband to Lehman, Durr & Co., and on that account charges that they are not bona fide purchasers, so as to cut off her equity, even though it was latent, and they had no notice of it. Under our rulings, if there be usury in the debt secured, that vitiates the defense of bona fide purchase, and permits an equity, even though latent, to prevail over a title thus tainted. — Cap. City Ins. Co. v. Quinn, 73 Ala. 558; Wailes v. Couch, 75 Ala. 134; McCall v. Rogers, 77 Ala. 349. In Harmon v. Lehman, Durr & Co., at the present term, we decided that, when a warehouseman or commission-merchant, in advancing money to a customer, takes a note for the repayment of the money -with interest, and an obligation to deliver for storage and sale certain bales of cotton, if there be a reasonable expectation, or just ground for belief, that such obligation to deliver cotton can be complied with, then it is a legitimate transaction, and is not usurious. On the other hand, if there be no reasonable expectation, or just ground for believing, that the stipulated quantity of [398] cotton can be delivered, an agreement to pay, as liquidated damages, a sum equal to the charges for storing and selling cotton of like quantity to that stipulated to be delivered, but not delivered, is usurious. In the present case, if the testimony of Smith and Beard be true, Beard, of Beard, Wright & Hamil, merchants, conducted the entire negotiations with Lehman, Durr & Co., which led them to malee the advance to Smith. The latter was never brought into communication with Lehman, Durr & Co., and hence made no representations as to his ability to deliver the cotton. If representations were, or were not made by Beard, Smith, according to their testimony, did not, and could not have personal knowledge of it. Three witnesses were examined who had the means of knowing what representations were made; Beard, on the part of Smith, and one member of the firm of Lehman, Durr & Co., together with their managing agent or clerk, in their behalf. It is not controverted, but is conceded, that Smith’s plantation and farming appliances were not sufficiently extensive to justify a reasonable expectation, or even a belief, that he could produce and deliver therefrom as much as one hundred and fifty bales of cotton, the quantity he bound himself to deliver. Beard was not examined as to what representations he made, or did not make, in reference to the delivery of the one hundred and fifty bales of cotton. The witnesses for appellees give testimony tending to show that Beard, Wright & Hamil were able to deliver, and agreed to deliver for storage and sale, cotton enough to make up the deficiency in Smith’s delivery; and that this representation- was made before Lehman, Durr & Co. agreed to advance the money; in fact, that it was one of the conditions on which they agreed to advance, and did advance the money. True, this testimony is not as direct and emphatic as it might be, and some portion of it wras illegal in form, if it had been objected to. No objections or exceptions are found in the record. The following question to Smith, and answer by him, tend to show there must have been some agreement, or representation, in regard to delivery of cotton by Beard, Wright & Hamil, under Smith’s contract: Q. “Did they [Beard, Wright & Hamil] not agree to aid and assist you in delivering the cotton stipulated in the mortgage to be delivered?” “Did not said Beard, Wright & Hamil again agree to assist you in delivering the number of bales of cotton required to be delivered by the mortgage?” Am. “I [399] do not think they did agree distinctly. They said that, if they had more than was necessary for their own use, they would let me have the advantage of the shipment of it. . Beard, Wright & Hamil did not make such agreement, only as above stated.” As we have said above, the testimony of the witnesses for appellees tends to show that Beard, Wright & Hamil, as a condition on which the money was obtained, agreed to deliver for Smith whatever number of bales of cotton might be necessary to comply fully with his contract; and their testimony stands practically uncontroverted. Smith’s contract, the execution of which is not denied, bound him to deliver the agreed number of bales of cotton. We have shown that a warehouseman or commission-merchant, in making advances to a customer, may, in addition to the payment of lawful interest, exact from him an obligation to deliver cotton for storage and sale; and, in certain conditions, such obligation to deliver is neither usurious, nor otherwise illegal. From these premises, the legal conclusion is irresistible, that the burden was and is on Mrs. Smith to show that, in making this contract, there was no reasonable expectation, or just ground for belief, that Smith could comply with this term of his contract. In other words, when parties enter into a contract which, on its face, contains no stipulation which is, per sc, or prima facie illegal, and only becomes so by the existence of certain extrinsic facts, the court must, in the absence of extrinsic proof, pronounce the contract legal, ut res may is raleat, quam pereat. The burden of making the extrinsic proof must rest on him who assails the validity of such contract. Usury is a defense, and must be satisfactorily proved, when set up. — 2 Brick. Dig. 128, § 122; Munter v. Linn, 61 Ala. 492; Thomas v. Murray, 32 N. Y. 605; L. I. Bank v. Boynton, 105 N. Y. 656; Popleton v. Nelson, 12 Or. 349; Rowland v. Rowland, 40 N. J. Eq. 281. The question of reasonable ground for believing whether the cotton could be delivered, was and is important in this case, only as it sheds light on the inquiry of usury in the transaction. The proof in support of this feature of the case is insufficient. By the terms of the contract which Stephen L. Smith made with Lehman, Durr & Go., he was to pay them interest on the money received, was also to deliver them, for storage and sale, one hundred and fifty bales of cotton, and [400] was to pay customary charges o£ fifty cents per bale for storage for one month, whether the cotton was delivered or not. This, as was shown in Harmon v. Lehman, Durr & Co., was permissible, when there was a reasonable expectation that the cotton could be delivered. But the contract contained a further stipulation, that upon all the one hundred and fifty bales of cotton, whether delivered or not, Lehman, Durr & Co. were to be paid commissions of two and a half per cent. At the average price at which cotton was then selling, this would amount to $1 12-100 to $1 25-100 per bale, while the price for selling, when no money had been advanced, was universally fifty cents per bale. This was shown by all the testimony-, without conflict. To the extent the commissions for selling were increased in consequence of the money advanced, the contract was usurious, under the decision in Harmon v. Lehman, Durr & Co. This, under the authorities cited above, takes away from Lehman, Durr & Co. the vantage-ground, or defense of bona fide purchase, and opens the transaction to the assertion of Mrs. Smith’s equity, if sufficiently proved. The question then arises, has Mrs. Smith shown an equity as against her husband’s half of the land? We feel bound to answer that she has, but not to the full extent of the purchase price. Six hundred and fifty dollars of the deferred installment of the purchase-money was paid from the proceeds of crops, and she can assert no lien on this account. The remaining three hundred and fifty dollars was obtained from a sale of a part of the land, in which he had title and claim to one half. He is indebted to her on account of the land purchase seven hundred*and thirteen 51-100 dollars, for which sum, without interest, she is entitled to a paramount lien on her husband’s half of the land. The decree of the chancellor is reversed, and it is ordered that the husband’s half of the land be resold, and out of the proceeds the complainant be paid, first, seven hundred and thirteen 51-100 dollars; and the balance will be paid to Lehman, Durr & Co., until they are paid any balance due from Stephen L. Smith to them under the mortgage. The sale to Lehman Brothers is set aside and vacated. All other necessary orders will be made by the chancellor. Reversed and rendered.