Merck v. American Freehold Land Mortgage Co. of London, Ltd. , 79 Ga. 213 ( 1887 )

Bleckley, Chief Justice.

1. All the notes were contracts to be performed in the ■city of New York. There is no evidence in the record as to the law there obtaining touching interest and usury. What restriction on the rate of interest, if any, prevails there does not appeal-. The argument here proceeded on the theory upon which the case was tried in'the court below, namely, that the law of Georgia governs these contracts in all respects. In that view we acquiesced, without ruling for or against its correctness. Our law concerning interest and usury is found in the code from section 2050 to section 2057(g) inclusive. I copy therefrom all the provisions that we deem applicable to the caso : i;The legal rate of interest shall remain seven per cent, per annum, where the rate per cent, is not named in the contract, and any higher 'rate must be specified in writing, but in no event to exceed eight per cent, per annum. Usury is the reserving and taking, or contracting to reserve and take, either directly or by indirection, a greater sum for the use of money than the lawful interest. It shall not be lawful for any person, company or corporation to reserve, charge or take for any loan or advance of money .... any rate of interest greater than eight per cent, per annum, either directly or indirectly, by way of ■commission for advances,discount, exchange or by any con(tract or contrivance or device whatever. Any person, com•pany or corporation violating the provisions of the foregoing section shall forfeit the excess of interest so charged er taken, or contracted to be reserved, charged or taken. All titles to property made as a part of an usurious contract or to evade the laws against usury are void.”

Tried by these provisions, does the fact that Merck promised and paid $80 to procure the loan, taint it with, usury ?

Nelson & Barker had a business establishment in Atlanta. Their business was to discover borrowers and lenders, procure for borrowers loans on landed security, verify the security, and serve as a channel of communication and transmission between tho contracting parties. They were middle-men stationed betwixt want and supply, and flanked on either side by other middle-men.. One of these was Lattner, of Gainesville, in Hall county, who fronted, as it were, on borrowers, and another was the Oorbin Banking-Company of New York city, who fronted on lenders. Such was the line of intermediaries concerned in the present case. Merck, a farmer of Hall county, signed an application, not addressed to any one, for a loan of $400, and in the instrument designated Lattner as his agent. At the same time he signed another instrument, addressed to Nelson & Barker, in which he constituted them his agents to negotiate for the loan, agreed to pay them for negotiating it a commission of $S0, and authorized them to retain the same out of the money in case of success. Both papers were sent to Nelson & Barker, and by them forwarded to the Corbin Banking Company. As the result of services rendered by the three intermediaries, who acted in concert on. tho basis of a business arrangement already existing, a lender was found, the loan was negotiated, the necessary papers were interchanged, and every dollar of the loan was paid to the Corbin Banking Oompan3r, and except the $80 retained as commissions, through it to Merck. His testimony raises in a dubious way some question as to a deficit of ten dollars, but there is little if any room to doubt that he received $320.00.

On the face of the papers, Sherwood was the lender; but from the testimony of Wheeler, a member of the Cor-bin Banking Company, it appears, that the defendant in error (a London corporation) was the actual lender, and that Sherwood was the agent of the corporation, and its only agent who took any part in the transaction. He was not connected with the Corbin Banking Company, Nelson & Barker or, so far as appears, with Lattner, nor was the corporation he represented; neither did lie or it receive or have any interest in any of the compensation retained by .the intermediaries, that being divided amongst themselves in the proportion of ten to the Corbin Banking Company, six to Nelson & Barker and four'to Lattner.

Nelson & Barker, .with whom the contract for compensation was made, were neither borrowers nor lenders; they were seekers after both, and had business relations with men, such as Lattner, to aid them in finding borrowers, apd with other men or corporations, such as the' Corbin Banking Company, to aid them in finding lenders. .This Avas an independent business, established and carried on by Nelson & Barker, not in the interest of borrowers or lenders, but in their own interest. It was a lawful business, and they had as much right to pursue it for profit as a merchant or farmer or lawyer has to attend to his own lawful affairs for legitimate gain. It might be well to make it unlawful, but that is a question for the legislature. Neither the wide extent of it nor the amount of income derived from it would render it any the less a legal avocation. They could make what terms they pleased and burden whom they pleased with compliance. They could put the whole burden of their compensation on the borrower, the whole on the lender, or divide it between them, provided they did so by contract fairly made and faithfully observed. .Moieover they could share their compensation with their business allies, those aiding them in rendering service, whether acting between themselves and borrowers, or between themselves and lenders, in any proportion mutually satisfactory. Were they to charge the lender twenty per cent, for finding a borrower, taking security and transacting the business, it would not reduce the loan. Nor would their charging the borrower that percentage for finding a lender, offering security and transacting the business, reduce it. The lender parts with as much of his money when the borrower pays some third person a commission on it, though it be paid out of the money derived from the loan, as when the borrower pays no commission. Doubtless, middlemen have a good business reason for charging borrowers, rather than lenders, that reason being that borrowers will assent to their terms and comply with them, and lenders will do neither. But it is not the fault of lenders that borrowers will accept terms which they themselves would reject. Are lenders to blame that Nelson & Barker exact compensation from borrowers for their services, and that borrowers consent to pay and do pay what they exact ? In this case, is the loan from the London corporation, through Sherwood to Merck, any the less untainted and incorrupt because Merck stipulated to pay and did pay Nelson & Barker for obtaining it? Neither Sherwood nor his principal was a party to that stipulation or had any interest in or concerning it. Then why should either of them suffer on account of it ? It was a perfectly legal stipulation, and, for ought we can see, as pure on the part of Nelson & Barker as it was on the part of Merck. And if of doubtful purity on the part of either, or both, it was certainly spotless on the part of Sherwood and the corporation he represented. They did not advise, prompt or instigate it, and so far as appears, had not the slightest knowledge or intimation of its existence. But if they did know of it, how could that affect their rights ? If it was a lawful stipulation as between the parties to it, how could it be unlawful as against those who were not parties ? How could a loan procured as the result of lawful service, rendered under a lawful contract, become unlawful because of the lender’s knowledge of such contract and service?

The only reply needed to the argument that the exorbitancy of the compensation is evidence that it was a device or contrivance for covering up usury, is, that the argument has no application to the facts ; for it is not the lender or any one in privity with him who lias received the compensation or shared in it. If the lender or his privies, under the name of commissions, wages for service or any other name, had received or retained anything, the argument would be in point. I will add, that though apparently very exorbitant, the compensation charged by Nelson & Barker may not be excessive for the peculiar kind of business which they transact and procure to be transacted. The record does not throw much light on the question, as there was no evidence as to the actual value of the services rendered. But if Merck went in person for a loan of $400 either to London or New York, the chances are that he would not get it, and if he did the expense might not be less than $80. If he sought to obtain a loan by correspondence, his expenses would be lighl, and the loan too, in all human probability. The truth is, that a person, by enlisting others in his service, especially if they have superior knowledge, skill, standing, experience and influence, can often accomplish through them what no exertions of his own would ever achieve. From the unspeakable good down to the supposed good of procuring the temporary use of a little money, mediation is a means, not seldom the only means, of attainment. It was really for their experience and skill in finding money to loan on such security as he had, and for their business, influence and efficiency in obtaining, through their correspondents or allies, loans on that kind of security, that Merck employed them. Call their vocation what you will, say that it was lobbying the money market, still it was their regular business, and he desired and obtained their services in that business, agreed to their price and paid it. Whether it was extravagant and oppressive we know not, but the oppression, if any, was theirs, not that of Sherwood or the corporation which he represented. Where the lender of money neither takes nor contracts to take anything beyond lawful interest, the loan is not rendered usurious by what the borrower does in procuring the loan and using its proceeds. Thus, that the borrower contracts with one engaged in the intermediary business of procuring loans, to pay him out of the loan for his services, and does so pay him, will not infect the loan, the lender having no interest in such intermediary business or its proceeds.

2. It is insisted that these middle-men,’ all of them, should be treated as agents of' the lender. Implications of agency are easily over-strained, misapplied or otherwise abused. Here an express agency was created in behalf of the borrower, and the proof is plenary that the lender had no agent engaged in this transaction but Sherwood. It matters not how many agents appear on the scene if the lender has none or only one. If he holds control of his capital and decides for himself when he will part with it, and on what terms, and has no terms but lawful interest and good security, and satisfies himself that the security is good, he transacts his own business and is not to be judged by the law of agency. And if, doing none of these things in person, he commits them to a single agent, employed by him at his own expense, and this agent alone represents him, the principal and his agent are one, and the case is to be treated just as if the agent were the principal. Here, according to the evidence, and all the evidence, Sherwood was the agent and the sole agent of the lender. True, the notes and the deed were not delivered to him directly out of the hand of the borrower; true, he did not inspect the property or examine the title to see for himself whether the loan was secure; true, he did not deliver his bond to reconvey on payment of the debt, out of his own hand to the borrower in person, nor out of his own hand pay to him the money loaned; but deeds, bonds and promissory notes may be delivered to the absent and transmitted to any distance; money paid to any one accredited to receive it is well paid; and he who is satisfied with another’s inspection of property or examination of titles does not render that other his agent by forbearing to inspect or examine for himself. Nelson & Barker doubtless secure confidence in the inspections and examinations which they make, procure or adopt, by demonstrating that they are worthy of confidence. Sherwood does not the less judge of the security by basing his judgment on the representation or opinion of whomsoever commands his confidence. No doubt he would be willing to trust the borrower’s inspection and examination if they were trustworthy and he knew it or believed it. Inspections and examinations which come with the endorsement of Nelson & Barker, may in his opinion be more reliable than if they were made by himself. It is obvious that the success of such business as Nelson & Barker were engaged in, must be staked on accuracy and reliability. But grant that the middle-men were by legal implication agents of both parties, the lender as well as the borrower, for several purposes, such as receiving and delivering papers, inspecting the property, examining the title, etc., it is certain, according to the evidence in the record, that they were not agents express or implied for making the loan, fixing the terms of it or accepting the security. Nor did they in fact do these things, but they were done by Sherwood. Now, unless some one who represented the lender in making the contract took or contracted to take for himself or the lender or some other person, something from the borrower over and above a legal rate of interest, how could the contract, under our code, be usurious ? It seems to us legally impossible that it could be. By using intermediaries as channels of transmission for papers, relying upon their inspection of property and examination of titles, made at the borrower’s instance, and forwarding the money through them also at his instance, the lender does not constitute them his agents to make the loan, and is not chargeable with the consequences of dealings between them and the borrower, whether those dealings be public or private, known or unknown.

3. The question of interest on interest which the plea makes, that is, of interest on the first interest note from its date, was not decided or considered by this court. The declaration states that that note was paid, cancelled and surrendered to the maker. It is evident, therefore, the note was not before the pleader,yet what purports tobe a copy of it is annexed to the declaration, and that copy not only omits the indorsement made by Sherwood, the payee, but represents the note as bearing interest from date. The note given for the principal, on the contrary,- represents all the interest notes as bearing interest from maturity. Going by the latter, which is in the brief of evidence (the former not being in the brief, and thus escaping our notice), we regarded the plea as to that point not proved. Some time after the judgment was made up and delivered, the oversight became known to us, but there was no reconsideration of the matter. As there was no allusion in the brief of counsel for the plaintiff in error to the point that the first interest note bore interest from date, we were jiuthorized to conclude that he waived it, and that would justify us in not looking out of the brief of evidence for one of the facts tending to support the plea. The brief of counsel, as the rule of court requires, should always indicate the points relied upon.

That a stipulation for interest on interest overdue, or for reasonable counsel fees, is valid, has been so often ruled that we do not consider either of them an open question. It is lawful to contract for interest on interest overdue, and for payment by the debtor of reasonable attorneys’ fees on sums, both principal and interest, which have to be collected by suit. That the first interest note was slightly larger in amount than the others, is explainable by its covering more time, by some days, than they did.

4. Any evidence, whether admissible or not, which the court excluded, could not and would not have changed the result. Nor could any modification of the charge of the court, whether by leaving out or putting in, have so done. The facts constrained a verdict for the plaintiff below, the controlling facts being that the lender parted with every dollar of the loan on faith of the borrower’s contract expressed in the notes, and the security offered and given to secure performance, and was in no combination, league or confederacy wilh those who took the commissions, and they who took them did not represent the lender in loaning the money, fixing the terms of the loan or accepting the security. Had the verdict not been for the plaintiff, a new trial would have been due as matter, not of discretion, but of right. It follows that, in our opinion, the grounds of the present motion are each and all insufficient, and that a new trial was properly denied. If any error was committed in the progress of the trial, it was harmless, for the verdict was correct.

. Though we have not quoted authorities, we have examined them to our satisfaction, and on the state of facts before us, most of them, we think, tend to sustain us. But we are to bo understood as construing and applying the statutes of Georgia, and not as resting our decision upon what has been ruled touching the usury laws of other States. It is plain to every discriminating mind that any material difference either in the law or the facts will unfit one case for being an exact precedent for another.

The calamities which a people may bring upon themselves by borrowing money too lavishly we recognize and deplore, but this shall not prevent us as a court from protecting lenders who violate no law. Were it our province to give advice to farmers, we should counsel them not to borrow; and certainly not through agents or loan agencies; but if they do borrow, even in that way, to abide by their contracts and comply with them, unless the fault by which they suffer is that of lenders and not their own. Better advice we could not give.

Judgment affirmed.