Norwood & Co. v. Faulkner , 1885 S.C. LEXIS 31 ( 1885 )

The opinion of the court was delivered by

Mr. Justice MoIver.

The plaintiffs, who were factors and commission merchants, doing business in the city of Charleston, entered into an agreement with the defendant, doing business in Darlington County, whereby the plaintiffs were to make advances to defendant of money and supplies to an amount not exceeding $2,500, and the defendant agreed to repay the same with interest at the rate of ten per centum per annum; and also agreed to ship to the plaintiffs at least two hundred bales of cotton to be sold by them on the usual commissions, shown by the evidence to be $1.25 per bale, or in default thereof to pay the like commissions on such number of bales as he might fail to ship. To secure the performance of these stipulations the defendant executed his bond and mortgage to the plaintiffs, which constitute the cause of action in tliis case. It is conceded that the defendant has repaid all the advances with interest, but having shipped only fifty-one bales of cotton the action is brought to recover the amount of the stipulated commissions on the one hundred and forty-nine bales which the defendant failed to ship according to contract.

The defence is rested upon two grounds; first, that the contract, so far as the stipulation to pay commissions on the cotton not shipped is concerned, is usurious. Second, that such contract was without any consideration. The Circuit judge held otherwise and rendered judgment for the plaintiffs. From this judgment defendant appeals upon the same grounds.

First, was the contract usurious? The act of 1882 (18 Stat, 35,) forbids the taking of a greater rate of interest than seven per centum per annum “for the hiring, lending, or use of money or other commodity,” except upon contracts in writing where the parties may stipulate for a rate not exceeding ten per cent. It is incumbent, therefore, upon the defendant to show that the charge for commissions was for the hire, loan, or use of money or other commodity, and this we think he has not shown. If this were so, then the plaintiffs would be converted from factors and commission merchants into mere money lenders, and there is nothing in the evidence to warrant us in so doing. The object of the contract, so far as the plaintiffs were concerned, was not merely to secure a return of the money which they might advance, or the amounts which they might expend in the purchase of supplies shipped to the defendant, with interest on the same, but also to promote their business in w7hich their capital was invested and to which their personal services were devoted, besides the necessary outlays in the way of store rent, clerk hire, &c. Hence the contract obligated the defendant to do two things — to refund the advances made to him with interest, and to ship the stipulated amount of cotton to the plaintiffs which they had prepared themselves to take charge of and sell, and in so doing had incurred expense not only in loss of time but in money actually paid out. The plaintiffs having thus equipped themselves for business as factors and commission merchants would very naturally endeavor to take all lawful means of extending their business as such, and, therefore, they very naturally required that the defendant should not only secure them the repayment of any advances they might make, with the lawful interest thereon, but, in order to forward their primary object, required the defendant also to ship them cotton, the main staple of their business. These views are fully sustained by the cases of Matthews v. Coe, 70 N. Y., 239, (26 Am. Rep., 583,) and Cockle v. Flack, 93 U. S., 344, cited in the argument of the counsel for respondent. We are satisfied, therefore, that there was no error on the part of the Circuit judge in holding that there was no usury in the transaction.

The only remaining inquiry is whether there was any consideration for the contract. The obligation of the defendant being under seal necessarily imported a consideration, but waiving that we think that the Circuit judge was right in holding that “ there being mutual stipulations from which benefit was expected by each, the contract was certainly not without consideration.” The defendant desired the plaintiffs to sell his cotton for him in Charleston, and this they agreed to do upon certain terms. In order to perform their part of the contract it was necessary for the plaintiffs to prepare themselves and hold themselves in readiness to receive and sell defendant’s cotton as it was shipped to them, and necessarily involved, on their part, an expenditure of time and money. If the defendant incurred no liability by a failure to ship a part of the cotton which he agreed to ship to the plaintiffs, then he would incur no liability by a failure to ship any cotton at all; and if he could thus relieve himself from liability by a failure to perform his obligation, then all of the customers of the plaintiffs could do likewise, and this would certainly cause damage to the plaintiffs. It is clear, therefore, that the defendant would be liable to the plaintiffs for any damages which they might be able to show that they had sustained by reason of the failure of the defendant to ship them the stipulated number of bales of cotton, if there had been no special contract between the parties fixing the amount of such damages. But in this case such special contract was entered into, which, it is conceded, under the case of Williams v. Vance (9 S. C., 344), was an agreement for the payment of liquidated damages, and not a mere penalty to secure the performance of the contract on the part of defendant.

The judgment of this court is that the judgment of the Circuit Court be affirmed.