Flower v. Millaudon

Builard, J., delivered the opinion of the court. This case involves the examination of complicated transactions between the parties for a series of years, some of which relate to the late firm of W. & D. Flower, under a special contract with the defendant, and some to the plaintiff personally. The court is called on in the first place to give a construction to the contract under which the defendant made certain advances to the late firm. It is contended by the plaintiff’s counsel, first, that Millaudon made himself a partner of the house of W. & D. Flower, by stipulating for a portion of the profits of the concern, not only in relation to third persons dealing with the house on his credit, but also in relation to the plaintiff, who was in part but a nominal partner, and that consequently the defendant is liable to him for losses sustained by him as a partner in the old firm and a customer of the new, under the head of olcl books. But if the court should be of opinion that he did not make himself a partner by that contract to the extent contended for, then it is urged, secondly, that the contract was usurious, in as much as Millaudon stipulated for something more than ten per cent interest for advances made to the concern, and that he is bound to deduct from his account the profits he has received and the whole interest charged. I. As to the partnership: An agreement dated June 19th 1822, was entered into between W. & D. Flower on the one part, and Laurent Millaudon on the other, by which the latter engaged to furnish that house an advance of twenty thousand dollars^ either cash or endorsements in order to enable them to pay off their old engagements. This advance was to be continued for three years. They engaged on their part to pay an interest at ten per cent on the money-advance, and one third of the profits of a new concern under the same style which was to take place on the 1st of July following, and to continue for the space of three years. To secure the [706] reimbursement of this advance they engaged to give their _ ... Y Y obligation secured by H. Flower, James tlower, J* LiFinlay and J. C. Faulkner. Articles of partnership for the new concern alluded to in this contract were entered into on the same day between W. & D. Flower and David Griffith. This latter contract is not signed by Millaudon, and it is not necessary for our present purpose to recite its particular stipulations. One article is in the following words: “a copy of this agreement signed by the parties will be furnished to L. Millaudon, and they also agree to let him have the same freedom for the investigation of the books as one of the parties.” Where a third person stipulates with a commer dai fmn to advanee a certain sum in cash or Sid iraoauppon allowed6 ten °per ammift1 and one fits for a term of years, at the end of winch tins sum hedoonsiderednas Saving 6made “a loan to the firm. It appears to us the parties never contemplated that Millaudon wás to be viewed in the light of a partner of this house, to the extent contended for by the Plaintiff’s counsel. He was to receive a certain share of profits for the risk run by him in sustaining the credit of the house by his endorsements. This participation in profits might render him liable towards third persons dealing with the firm, but it would in our opinion, be wholly inconsistent with the general tenor of the agreement, to consider him liable towards the partners themselves for any losses which would diminish the capital advanced by him. The advance made by Millaudon under this agreement was in truth a loan, and the plaintiff bound himself for its ultimate reimbursement. It is true the plaintiff was no longer to . . . , - . " . come m for profits eo nomine. And although he was to x ° reside in the country when he engaged to advance the ^ c-> ° general interest of the house, the only benefit he calculated M derive from its operations was the recovery of capital due him by the former house of W. & D. Flower, with which an account was to be opened under the name of “old books.” The annual balance in favor of old books was to hear an interest of ten per cent, which interest was tobe P3M to W. Flower, on the 1st of July of each year, and Me capital to remain in the new concern. We are bound un(jer £his contract to regard the plaintiff as a partner in the new house and not a stranger, having a right to look to [707] Millaudon to make good to him any losses he may have sustained. II. As to usury: It has been settled by various decisions of this court that whensoever a higher rate of interest than ten per cent has been agreed upon, either directly or indirectly, under what" ever disguise or pretence it may be, no part of the stipulated interest can be recovered. 3 N. S. 191, 622. 4 N. S. 167, 201. 7 N. S. 408. 4 La. Rep. 542. 3 La. Rep. 387. In order to ascertain whether this contract be usurious or not it is necessary to analyse it somewhat minutely. Millaudon engages to furnish the house of W. & D. Flower an advance of twenty thousand dollars, to be made either in endorsements of their notes of accommodation in the banks of New-Orleans or in cash as they may require, to be continued for the space of three years from the 1st of July 1822. On the curtailment of the notes of accommodation he engages to extend his advances to such amount as he should be relieved from the endorsments; so that the money advanced and the endorsements should always remain at twenty thousand dollars. W. & D. Flower on their part bind themselves to pay him an interest at the rate of ten per cent per annum on any or all sums of money so received by them until refunded ; the interest to be settled up annually on the 1st of July. The last clause of the contract we give in the words used by the parties, to wit: “and in consideration of the sum so furnished, or to be furnished by the said L. Millaudon to the said W. & D. Flower, to wit, by the endorsements of their notes of accommodation as aforesaid, and by the advances of money as before mentioned, the whole amounting to twenty thousand dollars, the said W. & D. Flower will give to L. Millaudon their obligation secured by H. Flower, J. Flower, J. L. Finlay and J. C. Farnham, and also .one-tlfird part of the profits of the new establishment under the firm of W. & D. Flower which is to take place on the 1st day of July next, and to continue until the 1st day of July 1825.’’ According to the literal tenor of this last clause of the con [708] tract, one-third of the profits are to be given in consideration of the endorsements and the advance of money. It cannot be said therefore without disregarding the very words of this clause, and the only grammatical construction of which it is susceptible, that the profits were exclusively intended to cover the risk incurred by the endorsements, and that a previous part of the instrument provides for the payment of interest at ten per cent on the money part of the advances to be made. If the whole had been in money, the contract would have secured to the lender two thousand dollars as interest, and one-third of the profits besides. We cannot suppose that the loan and money would have been made for an interest of ten per cent, unless coupled with the further engagement to pay a part of the profits. The two are so blended together in this contract that we cannot separate them. But it is argued that it was optional with W. & D. Flower to take money or not; that they might have accepted of endorsements alone and then no interest would be due. This argument assumes as a principle, that if a party voluntarily engages to pay usurious interest, he is not entitled to relief. But the law annuls stipulations for the payment of usurious interest, not because they are not voluntary, but because the policy of the law prohibits them; and they are null because prohibited and not because there was any want of consent. But suppose the leaving of it to the option of the borrower amounts to nothing more than a proposition; as soon as that proposition is accepted by the borrower’s signifying his option, the contract is formed. Now in point of fact the first advance made was partly in money and partly in endorsments and both interest and profits were changed for the first year. We cannot yield our assent to the reasoning which would make the same contract at one time usurious and not so at another according to to the varying state of accounts between the parties. Whore it is sti pulatcd between plaintiff and defendant that the latter is to receive ton por cent, per annum interest on his advances to and one third profits in the morft"m«,_thó°coneiaroa usurious and no part of the ¡«tci-cst ¡mdproe‘e,:i- [708] We are of opinion that the stipulation for interest and profits in this contract was usurious, and that consequently so much of the amount claimed by defendant in reconvention as is made up of profits and interest on those advances ought [709] to be deducted. But we cannot without the hazard of great injustice to the parties in the present state of the accounts, proceed to establish a balance. We think the court below ought to have submitted the accounts to auditors to state an , account. III. Among the transactions between the plaintiff personally and the defendant, there is one of which the former ** complains. He alleges that he received from the defendant a note of Nott & Co. for ten thousand dollars, having about two years to run, and that the defendant exacted from him usuriously his note for eleven thousand dollars payable at the same time. And he claims credit for the eleven thousand dollars as well as accruing interest. We find this item of eleven thousand dollars charged in account A, and by adding interest upon interest at the rate of ten per cent, it amounted at the time of the trial to nineteen thousand nine hundred and thirty dollars and six cents. This compound interest is not justified by any evidence in the record. Whether the difference between the amount of Flower’s note and Nott’s ought also to be struck out together with all accruing interest depends on the question, whether the transaction was usurious. Two facts are clearly established, to wit, that there was an exchange of notes, and that there was a difference of a thousand dollars between them. But it is left doubtful whether both notes had the same time to run; if Flower’s note had a year longer to run than Nolte’s, then the difference is accounted for. The evidence shows that Millaudon had two notes of V. Nolte & Co. for ten thousand dollars each; his journal shows that on the 22d June 1822, he charged himself with one of these notes, “No. 66, given to W. & D. Flower.” On the same day the note of W. Flower was given for eleven thousand dollars payable about two years after. If we were bound to pronounce finally on this part of the case as it now appears in evidence, we should he inclined to think that the presumption is against the interest. But as the cause must-be remanded the parties will have an opportunity to give further evidence on this item. It is in the power of the defendant to explain it. [710] There is another transaction of which the plaintiff complains. He alleges that two notes passed to the defendant for two thousand and seven dollars and seventy-five cents eacil5 were credited only for the amount of two thousand five hundred and forty-nine dollars and fifty-four cents, the balance being retained as usurious interest. It does not appear in evidence what time those notes had to run. It appears from the record, there were several by the same drawers falling due at different periods, and that from two of them a large deduction was made for discount, but whether the plaintiff be entitled to a deduction for excessive discount we are unable to pronounce in the present state of the case. A bill of exceptions was taken to the refusal of the court to allow the commercial hooks of the firm of W. &. D. Flower to go to the jury, after having first exhibited the contracts Nos. 1 and 2 and introduced other evidence. At first we were inclined to the opinion, that the books ought to have gone to the jury under these circumstances in support of the allegation that the defendant was a partner. But subsequent reflection has satisfied us that our first impression was incorrect and we concur with the court below that the books were inadmissible. It has been urged that the question was left to the jury, whether there was a partnership or not, and that by withholding the books, the court took this issue from the jury. The books do not purport to be those of a commercial firm, of which Millaudon was a professed partner and to have admitted them would have assumed that Millaudon was a partner of the firm of W. & D. Flower as between the partners themselves. But the fact is, the books were not offered to prove the partnership, but to show the profits or losses of a firm of which it was contended Millaudon was virtually a partner. The articles of partnership were not signed by Millaudon, and we have already expressed our opinion that he was not a partner in relation to the plaintiff; and that such does not appear to have been the original intention of the parties. There seems never to have been a final settlement of accounts between the parties, and the defendant in his answer [711] avers that on such settlement the plaintiff will be largely his debtor, and he claims that balance in reconvention; the approval of accounts rendered does not in our opinion preclude the plaintiff from showing errors in the accounts. But we are unable as the case now appears before us to strike a final balance. Justice in our opinion requires that the case should be remanded for a new trial, according to the principles herein laid down. The approval of accounts rendered in the course of business, docs no! prevent the party from shewing- there arc errors in them on a final settlement. It is therefore ordered, adjudged and decreed, that the judgment of the District Court be reversed, and that the case be remanded for a new trial, and that the appellee pay the costs of this appeal.