Compton v. Collins , 190 Ala. 499 ( 1914 )

de GRAFFENRIED, J.

Mr. Charles W. Collins,, who is now over 80 years of age, was at one time owner of a plantation consisting of several thousand acres of land and which was situated in the lime lands of Hale county. These lands were fertile and productive of those crops which are accustomed to be grown in what is known as the “Canebrake Section” of Alabama. A good many years ago Mr. Collins found that his extensive farming operations, through the changes which new conditions had created, had heavily, involved him in debt, and since that time his history, and the history of his lands, as shown by this record, have been the history of a section which is turning from large ownerships to small ownerships in land; the history, in short, of a section in which the large landowner is being eliminated and the small landowner is tailing his place. In his efforts to extricate himself from his financial embarrassments, Mr. Collins began to make sales of parts of his lands, and this policy was pursued until there remains to him something over 1,000 acres. This is, of course, a large tract of land; but its size is modest when compared with his former holdings.

(1, 2) We gather from this record that during the period of his long embarrassment Mr. Collins was forced to become indebted to many people. Some of these creditors were mortgage companies to which he made mortgages on some of his lands; one, at least, of them was a lady who resided in New York, while some of them were his immediate neighbors and relatives. During this period, Mr. Collins began to do business with Mayer Bros., a large mercantile partnership which did business at Demopolis, Ala., and which, for the purposes of this opinion, was composed of two brothers, Morris Mayer and Ludwig Mayer, and one H. B. Pake. Morris Mayer and Ludwig Mayer are dead. H. B. Pake still lives, but he was not, when this bill was filed, a member of the firm, or in any way interested in it. We take it from this record that Morris Mayer and Ludwig Mayer were, when Mr. Collins opened up the account with the firm, men who, like Mr. Collins, were of advanced age, and we also take it that Mr. Collins and the members of the firm of Mayer Bros, had known each other for many years. While Mayer Bros, seem to have been possessed of large means, we- gather from the record that their business was, essentially, that of merchants, and not that of money lenders. The business of Mr. Collins was such that he required not only supplies from the store of Mayer Bros., but he also required some of their cash, and an arrangement was entered into, when Mr. Collins began to do business with them, whereby the account of Mr. Collins — and, when we say “account,” we mean “store account” — became tainted with usury. The- chancellor'so' found upon the evidence, and in .that funding we sustain him. We-do this with full recognition that “usury” is the result of a covinous contract entered into by. two or more parties, whereby one party -is to receive and the other party is to pay, for the use of money loaned, more than-the:-legal rate of interest. While we doubt whether Mayer Bros, were desirous of advancing cash to Mr. Collins at even the usurious rate which they charged him — and which he agreed to pay — nevertheless the contract was made, and we are of the opinion that the chancellor properly held that the account which Mr.. Collins had with Mayer Bros, from year to year should be restated, that no interest should be allowed on this account, and that the principal of the account should be credited with the payments which were made by Mr. Collins as they were made.

In this state the usurer is forbidden interest, and the payments made by the debtor are credited upon the principals, both in actions at law and suits in equity, and without regard to who is the actor in the proceedings. This penalty was imposed by the Legislature upon contracts tainted with usury,, and it is, of course, the plain duty of the courts to inflict the penalty.

(3) We are not disposed to think, however, that any of the items on the account of Mayer Bros, against Mr. Collins were falsely charged upon the account. On account of the financial embarrassment of Mr. Collins,' his account was probably not so attractive to Mayer Bros, as was the account of an unembarrassed customer with unimpaired credit, and, as the opportunity thus presented by Mr. Collins’ situation appealed to the cupidity of the members of the firm, an usurious arrangement was the result; but we are not of the opinion that the evidence sustains the argument that Mayer Bros., at any time, charged Mr. Collins on their store account with articles which he did not purchase from or through them. Through usurious contract, Mayer Bros, attempted to make an unlawful — and, under the law, an unconscionable — profit out of Mr. Collins, ’ on the cash advanced to him from their store; but, in our opinion, the articles charged upon the account were in fact obtained by Mr. Collins. This statement applies .to fbe item of seven mules which appears upon the account. We are satisfied that Mr. Collins obtained from Mayer Bros, the seven mules — not five — and those seven mules should be charged upon the restated account at what Mayer Bros, paid for them. There are items upon the account, to which we make specific reference below, which should not be upon the account; but these items are in the nature of charges for interest or attorneys’ fees, and are not charges for merchandise or property which Mr. Collins did not obtain from Mayer Bros. In so far as the store account is concerned, the items charged thereon as having been sold to Mr. Collins were, in all human probability, obtained by him. While there may never have been a technical statement of the account between Mayer Bros, and Mr. Collins, statements were from time to time rendered to him, and we are not inclined to think that items appeared upon those statements as representing things sold to Mr. Collins unless they were in fact sold to him. An error may have inadvertently crept into the statement, but we hardly think that an error so great as the value of two- mules could have crept into the account.

1. After Mr. Collins had thus been dealing with Mayer Bros, for several years, his financial situation and pressure from creditors indicated to him the necessity of, so far as possible, consolidating his indebtedness and of arranging a long loan. To' this end he employed an attorney to negotiate for him a loan for a large amount for a period of five years, the loan to be secured by a mortgage on his Alabama lands. Efforts were made to secure this money from some corporation engaged in the business of lending money, but these efforts were unsuccessful. Finally, Mayer Bros, agreed to lend Mr. Collins $24,956.43 on five years’ time, with interest at the rate of 8 per cent, per annum. To this end a mortgage was executed and delivered by Mr. Collins and his wife to Mayer Bros. This mortgage covered all, or substantially all, of the real estate of Mr. Collins in Alabama, and secured the following notes, viz.: An interest note of $1,868.96, due December 1, 1904. Three interest notes of $1,966.51, due, respectively, on December 1, 1905, 1906, and 1907. And one note for $26,852.94, being for the principal, $24,-956.43, and $1,966.51 interest, due December 1, 1908. The papers all bear date December 28, 1903, and the interest represented by the. above notes on $24,956.43 is 8 per cent, per annum.

The principal of $24,956.43, of the above' indebtedness, represented the following items: $2,200 claimed to have been paid to Davies & Bro. $2,600 claimed to have been paid to one Gage. $902.47 claimed to have been paid to one Metzger. $2,332 claimed to have been paid to one Marx. $1,102.21 claimed to have been paid to Davies & Bro. $660 claimed to have been paid to one Gilder. $500 claimed to have been paid to one Gilder. $751.81 claimed to have been paid to one Nelson. $878 claimed to have been paid to one Ernst. $1,465.75 claimed to have been paid to R. H. & W. C. Agee. $344.31 claimed to have been paid on a judgment. The balance of the $24,956.43, viz., about $1,219.88, was represented by the balance claimed by Mayer Bros, to be due them by Mr.Collins on his account with them, including usurious interest which had been charged to him by them and possibly one or two items which are not above enumerated as having been paid out by Mayer Bros, when this mortgage was made.

(4) 2. The item of $2,200, to which we have above inferred, claimed to have been paid Davies & Bro., was not paid to them on the day the mortgage- was made. It was Mr. Collins’ understanding either .that it had been paid or that it would be paid in full. Some time later, however, Mayer Bros, paid to Davies & Bro. the sum of $2,250 in full of said debt. In our opinion Mr. Collins is chargeable with that $2,250 from the date of its payment and interest thereon at the rate of 8 per cent, per annum.

The members of the firm of Davies & Bro. were related to Mr. Collins, and if Mayer Bros, misled him as to the amount which they paid Davies & Bro. — or would in the future pay them — they are not in a position to take advantage of the rebate which they obtained from Davies & Bro.

(5) When Mr. Collins executed the notes and mortgage to which we have above referred, and delivered them to Mayer Bros., they became, in equity, his trustees of a fund which amounted to the difference between' the principal of $24,956.43, and the amount of their usurious account, and if, in paying any of the debts above referred to — they represent the debts which Mayer Bros, claim to have canceled with said sum — Mayer Bros, made any profit, then, ex aequo et bono, Mr. Collins, the cestui que trust of the fund, is entitled to the rebate. After the execution and delivery of the notes and mortgage, the sum left in Mayer Bros.’ hands, over and above their account, was a sum in their hands which belonged to Mr. Collins and not to Mayer Bros. In paying off the above scheduled debts, Mayer Bros, were representing, not themselves, but Mr. Collins.

(6) 3. Under the evidence in this case, we think that the'chancellor Correctly form'dTthat' Mr. Collins is not chargeable Avith the item of $660 paid to Mr. E. J. Gilder. Mr. Collins perfected a sale of certain lands in the state of Virginia. Upon these lands Mr. Collins had made a mortgage to Mrs. Rachel Mayer, of New York, ■which had been assigned to Mayer Bros.. After this sale of the Virginia lands had been arranged by Mr. Collins, Mayer Bros, saw proper to send Judge Gilder, who was then a practicing attorney, to Virginia, to collect the money due on the Rachel Mayer mortgage and to release the lands from the mortgage. The note which was secured by the Rachel Mayer mortgage provides for the payment of an attorney’s fee if it becomes necessary to employ an attorney to collect the amount due on it, and the mortgage provides for the payment of an attorney’s fee in the event of a sale of the lands described in the mortgage, under the power of sale contained in the mortgage. There was no sale of the lands under the power contained in the mortgage, and Mayer Bros, were under no necessity to send an attorney to Virginia to collect their money out of the proceeds of the sale of the Virginia lands. It is evident that, as Mr. Collins himself arranged a sale of the Virginia lands, this collection could have been made through the medium of a bank in Virginia, and that Mr. Cob lins should not be required to pay the fee of an attorney employed by Mayer Bros., under the circumstances named. At the time of the employment of this attorney, Mr. Collins, with all of his property wrapped up in mortgages and covered by liens, was struggling to meet the just demands of his creditors, and while Mayer Bros, had the right, if they saw proper, under the circumstances named, to. indulge in the luxury of sending an' attorney’ to' Virginia — and we do not question the fact that he earned his fee — they had no right, even under the letter of their bond, to employ one to go to Virginia at the expense of Mr. Collins. While we do-not believe that this employment of an attorney grew out of any desire ’on the part of- Mayer Bros, to inflict useless punishment upon Mr. Collins, it did grow out of a not well-grounded fear that something might happen to the proceeds of the sale of the Virginia lands if Mayer Bros, were not there on the spot when the sale was . consummated. In other words, the employment of an attorney grew out of a lack of proper business trust on the part of Mayer Bros., and for the result of this not well-founded business timidity Mr. Collins should not be required to pay.

4. There appears on the account of Mayer Bros, with Mr. Collins credited, as of November 8, 1901, a mortgage for $2,000, and on December 4, 1901, he is charged with, “To cash from bills receivable,” $2,000. We are satisfied from the evidence that the truth of this matter is that these two items refer to the same thing, and that they offset each other. We are not of the opinion that Mayer Bros, intended to be dishonest with Mr. Collins, and we think that the testimony of Mr. Bley furnishes a reasonable and truthful explanation of this debt and credit. Mr. Bley testified, in substance, that Mr. Collins made this mortgage for the purpose of raising a sum of money to pay certain pressing debts. These debts amounted, it was thought, to $2,000; but in reality they were, after the papers were executed and delivered, ascertained to be only $1,750. Mayer Bros, paid these debts, and- they appear as items on the account. The account had been credited with the mortgage for $2,000, and, to make the books speak the exact truth, the mortgage was charged back on the account, thus leaving the debt of Mr. Collins at what it really was, viz., $1,750.

5. Mayer Bros., we think, with the approval of Mr. .Collins, and at his request, paid to the attorneys of Metzger the sum of $902.47, which we have listed above. This sum includes an attorney’s fee and a large advertising bill; but Mayer Bros, had no interest in this matter, and we are satisfied that they not only paid that money, but that there was no usury in that transaction. The evidence also- satisfied us that the sums which we have above set out as having been paid to Gage, Marx, Nelson, Ernst, R. H. & W. 0. Agee, $1,102.21 judgment to Davies & Bro., and the $344.31 noted as having been paid on a judgment, were in fact paid, and that there is no usury in any of those transactions. There is no dispute between the parties as to the correctness of the item of $500 paid to Judge E. J. Gilder as a fee for preparing the papers evidencing the loan of $24,956.43.

6. We agree with the chancellor, in his finding that Mr. Compton, who bought the mortgage for $24,956.43 from Mayer Bros., is not in a position to claim that Mr. Collins is estopped from setting up usury in his transactions with Mayer Bros. We make this announcement without going into the reasons for this conclusion after a careful examination of all the evidence in the case, and a discussion of the subject would simply involve a discussion of the evidence. The parties to the cause are familiar with the evidence, and a mere discussion of it at our hands would serve no useful purpose.

(7) 7. On March 4, 1908, a ¡sale of what is known as the Manning Place was arranged by joint agreement of Mayer Bros, and Mr. Collins, to James F. Compton. The Manning Place was supposed to contain 2,200 acres of land. It originally belonged to a tract of about 4,000 acres, which was bisected by Big Prairie creek. The lands lying north of this creek, several yeaps before this time, had been sold to .Ivey F. Lewis, and some part of the land had been sold to B. M. Allen.- The land conveyed to Compton comprised the lands situated in certain sections bounded on the north by Big Prairie creek and on the south by the Prairieville and Laneville Road. The evidence all show,s that the Manning Place was a well-known and reasonably well-defined plantation, and we think that the evidence shows beyond controversy that at the time of this conveyance to Compton the lands were worth at a minimum not less than $20 per acre. In discussing this matter, we shall treat this purchase of the Manning Place as if it had been made by Mayer Bros, direct. Compton was a clerk in the employ of Mayer Bros., and he not only knew all about this matter, but he also knew all about the state of the account of Mayer Bros, with Mr. Collins; and we are also quite satisfied that he must have known all about the financial situation of Mr. Collins. Indeed, through his deals with Mayer Bros, and Mr. Collins, he finally became possesser of Mayer Bros.’ indebtedness against Mr. Collins, and also of the Manning Place, representing, in all, an investment by Compton of something like $50,000. If the purchase of the indebtedness of Mayer Bros, against Mr. Collins and the Manning Place by Mr. Compton, were made by him for his sole benefit — if, in such purchase, he was not, in fact, Mayer Bros. — then Mr. Compton made this purchase of the indebtedness of Mayer Bros, and the Manning Place because he saw an inviting field in which to engage his attention and from which, as a business man, he could safely look for large returns. Undoubtedly, when this sale of the Manning Place was arranged, Mayer Bros, had been led, by their dealings from year to year with Mr. Collins, into arrangements which had locked up a large part of their capital in securities which were probably giving them grave concern, and which, from the standpoint of merchants who need quick assets, were not desirable; and we think that the record shows that, when the Manning Place was sold, Mayer Bros, had become timid of their dealings with Mr. Collins and. were anxious to change at least the form of a large part of his indebtedness. If Mr. Compton made the purchase to which we have above referred —and we raise no point on that matter, and accept the statement that he did make the purchase for his own personal benefit as the truth — he bought the Manning Place under such circumstances as placed him in Mayer Bros.’ shoes, and that purchase must carry with it the same burdens as if Mr. Collins had conveyed his equity of redemption in the Manning Place direct to Mayer Bros. While Mr. Compton was not a member of the firm of Mayer Bros., he was in their active employ, and in this matter he became the beneficiary of the sale of a valuable plantation which was brought about by pressure from the firm of which he was an employee. The business precautions and fears of Mayer Bros., and not a wanton desire or intent to oppress, may have produced the pressure, but the pressure was there, and it is the business of courts of equity, when oppression, no matter from what cause it may arise, is |Shown, to see to it that no undue advantage is derived thereby. Courts of equity are watchful of releases by mortgagors to mortgagees, of their equities of redemption in lands, and, when there is a sale at a consideration which would be deemed unreasonable if the transaction were between other parties dealing with similar property in the vicinity, such' a sale will not be upheld. In this case there was “power, on one side and weakness on the other,” and in our opinion the chancellor properly held that the account of Mayer Bros, should remain credited with the $35,000, the amount with which it was originally credited, as the price of the Manning Place. — Goree v. Clements, 94 Ala. 337, 10 South. 906; Stoutz v. Rouse, 84 Ala. 309, 4 South. 170. When, through Mayer Bros., the sale of the Manning Place was effected, the place was supposed to contain 2,200 acres. 'Mr. Collins wanted $35,000 for his Manning Place, and $35,000 divided’ by 2,200 (acrps) gives $15.91 per acre. When the price was agreed up, it was in writing, signed by Mayer Bros., Mr. Compton, and Mr. Collins agreed that the purchase price was $15.91 per acre, and the writing continues as follows: “In consideration of the purchase of what is known as the Manning Place in Hale county, Alabama, supposed to contain twenty-two hundred (2,200) acres, by Jas. P. Compton, from C. W. Collins at and for the price of $15.91 per acre, as .soon as a survey of said plantation is had and the number of acres ascertained, Mayer Bros, agrees to release and discharge from their mortgage executed to them by C. W. Collins, said real estate upon a settlement to be then had with said Compton and to credit the indebtedness and mortgage of said C. W. Collins with the purchase price of said real estate when the acreage is ascertained, at $15.91 per acre. The said C. W. Collins agrees and covenants to sell and does hereby sell said Manning plantation supposed to contain twenty-two hundred (2,200) acres to said Compton at the purchase price of $15.91 per acre, and said J. F. Compton agrees and covenants to settle and pay for said land at and for said sum of $15.91 per acre.”

When the above agreement was made, a conveyance from C. W. Collins and wife to James F. Compton, reciting a consideration of $35,000 for the Manning Place, was prepared, and was signed and delivered by Mr. Collins to Mr. Compton. Thereupon Compton was placed in possession of the Manning Place and became its owner. Without- making a -.survey as contemplated in the above agreement, Mr. Compton, according to the testimony, paid to Mayer Bros. $5,000-on the purchase of the Manning Place and executed to' them his notes secured by mortgage on the Manning Place for the balancé of the purchase money. Something like a year after the above transaction had thus been apparently closed, Mayer Bros, or Mr. Compton had the Manning Place surveyed, and ascertained that it contained, not 2,200 acres, but about 2,000 acres. There was therefore some disappointment as to the acreage. Thereupon, through pressure from Mayer Bros, who still held mortgages on substantially all of Mr. Collins’ property, and who, on that account, were the only people to Avhom Mr. Collins could look for financial assistance, Mr. Collins was induced to agree to an abatement of the purchase money of the Manning Place to the extent of $3,-336. Thereupon Mayer Bros, charged Mr. Collins with this $3,336, and credited the same amount upon the debt of Compton to them. When Mr. Compton, through the efforts of Mayer Bros, obtained the Manning Place at $35,000, he received a plantation which, upon a most conservative valuation, wa<s well worth every dollar that he agreed to pay for it, and, were this court to uphold this reduction, it would, under the great weight of the testimony as to the value of the Manning Place, overturn the doctrines which were announced by this court in Goree v. Clements, supra, and. Stoutz v. Rouse, supra. Mr. Collins was in no position to resist the demands of Mayer Bros, and while we do not believe that they, in their dealings with Mr. Collins, Avere actuated by dishonest motives, we do think that, under all of the testimony, they were not mindful, in making their trades with him, of the power which their position gave them over a man who Avas largely in their debt and who was faced with the constant necessity of providing methods of extending debts which he was unable to meet but which he was struggling to pay. • In other words, Mayer Bros, being merchants, were traders, and this was one trade which, on account of their commanding influence oyer Mr. Collins, they had not, in equity, the right to make. To uphold this reduction would result in up- • holding a bargain which, under all the evidence as we read it,' Mayer Bros, were in no position to exact.— Goree v. Clements, supra.

8. That the store 'account of Mayer' Bros, against Mr. CollinjS is tainted with usury is established by the case of Meyer Bros. v. Cook, 85 Ala. 417, 5 South. 147. In that case there was an agreement to pay more than the lawful- rate of interest, and we think the same character of agreement pervades the account of Mayer Bros, against Mr. Collins.

(8) 9. The fact that this usurious account was, when the mortgage for |24,956.43 as executed, brought into that mortgage and consolidated with debts not tainted with usury, does not render the debts not tainted with usury and which were brought into that mortgage usurious. — Smith v. Neely, 2 Ind. T. 651, 53 S. W. 451; Eslava v. Crampton, 61 Ala. 507; Nobles v. Moses, 74 Ala. 604.

10. The record in this case is extremely voluminous, and in this opinion we have, after a careful examination of the record, undertaken to- express our views as to each question which has been presented to us. We presume that the views above expressed will furnish the chancellor with a sufficient guide during the further progress of the cause.

Reversed and remanded.

Anderson, C. J., and McClellan and Mayfield, JJ,, concur.