58 Wis. 56 | Wis. | 1883
In the examination of these appeals it is essential, at the outset, to ascertain, if possible, the real relation which the parties held to each other during the period, •covering the transactions to be considered. The defense of usury must turn principally upon the view w'hich is taken
FTo one understands better than the very able and intelligent counsel for the defendants that such a mortgage would not be valid, nor create any lien, legal or equitable, in this state. For the rule established by this court in many well-considered cases is “that a chattel mortgage of after-acquired goods does not create a lien, legal or equitable, by force of •the mortgage, upon after-acquired goods.” Ryan, C. J., Hunter v. Bosworth, 43 Wis., 583-591. So it would follow
There does not seem to have been any change in the legal Telation of the parties after the failure of Eish Brothers, and while- the compromise agreement was being consummated. The Eish Brothers expected some satisfactory arrangement would be made with their creditors, and, by such aid as the plaintiff had offered to render them, they would be enabled to resume business and carry it on as before until their stock was worked up and debts paid. But in that expectation they were disappointed, in consequence of the action of some of their creditors, who refused to come into the ■compromise. But the stock and material on hand when the chattel mortgage was given remained in their possession; some new material was purchased by the plaintiff for them, ■so that they could finish some wagons; and doubtless some material was worked up, but how much does not appear. The plaintiff advanced them some money on the real estate mortgage to pay workmen, and these accounts were assigned
At about this time the plaintiff claims he went into the actual possession of the property purchased at the sales, became the absolute owner thereof according to the terms and conditions of the agreement he had made with Fish Brothers, which has been already mentioned. Indisputably, from that time all purchases of material were made upon the individual credit of the plaintiff, who held himself out to the world as principal, and responsible for all the debts and liabilities of the concern. Also it is admitted that the financial business was removed to the plaintiff’s private office, quite a distance from the office of the concern, and was there attended to by the plaintiff or by his private clerk. All collections, all payments, the handling of the money of the concern, were attended to by the plaintiff or by his clerk. The plaintiff assumed the right to advise and control as to the way the business should generally be conducted; he assumed the right to fix the amount of salary which each of the Fish Brothers should have or withdraw from the business for their expenses; he assumed the right to fix the salary of the book-keeper and to discharge employees. His right or authority to do these things, to control the business as he did, was not challenged in any way by the Fish Brothers, or either of them. On the contrary, they held themselves out to the world as acting as his agents in the
It will be borne in mind that this was the way in which a large business was conducted for years — a business which involved the plaintiff in personal liabilities to the amount of several hundred thousand dollars annually some years. How idle, then, to say, in view of these indisputable facts and of others which might be alluded to, having the same bearing, that the relation between the plaintiff and Fish Brothers, and Fish Bros. & Co., was simply that of mortgagor and mortgagee, or that of debtor and creditor. It is true, while neither of the Fish Brothers deny the fact that the business was conducted in the manner above stated for years, they do pretend the “ agency arrangement,” as they call it, was merely a cover, so that the plaintiff should be secure as to outside parties while they went on and worked up the stock as before, and should pay the plaintiff his claims and advances, with interest. But the accuracy of that statement is most conclusively disproved, as well by their own conduct as by all the facts and probabilities of the case. That they were to own the business when they had satisfied all the claims of the plaintiff according to the agreement, and had relieved him from the liabilities which he had incurred in its management, is precisely what the plaintiff claims. But how the “ agency arrangement,” if not real, but a sham, would inure to his advantage or security, when he was personally responsible for every dollar of indebtedness contracted in carrying on the business, is a matter not explained and is difficult of explanation. But, as already intimated, the statement of the defendants in that regard cannot be accepted as correct.
The plaintiff did not agree to continue the business for any length of time; but he did agree to furnish whatever money should be necessary to carry it on, no amount being specified. The expectation seems to have been that by good management the business would pay the plaintiff’s claims within two or three years, when the Fish Brothers would be entitled to have and own it, with whatever had been saved or made out of it. But that expectation, it seems, was not realized. The business was conducted in the manner as indicated, the plaintiff furnishing all necessary means for the purpose, orlising his credit at the banks to procure discounts as needed. The volume of business was largely increased. In January, 1869, the plaintiff claimed and charged in account, as compensation for his personal services and clerk hire for 1868, $2,000; for 1869, $1,500-; for 1870, $1,250; and for 1871, $1,250. These charges were over and above ten per cent, interest on all advances which he had made to the business, on all moneys which he had paid to buy up the debts of Fish Brothers,, and on their notes which he held. That rate of interest he exacted, and it was allowed him on these several amounts. The- plaintiff says that all these charges for compensation for personal services and clerk hire were made by arrangements at different times with Fish Brothers, or one of them, who consented and agreed to them.
The defendants allege in their answer, and offered proof
It seems to us the usury laws have really no application to the transactions under review. The plaintiff made advances under the agreement to carry on the business, and became liable for every debt that was contracted. This is
The referee and circuit court, while holding that the only Interest which the plaintiff had in the personal property and business was as security for the indebtedness due, yet were of the opinion that the charges for personal services, etc., above alluded to, were legal, and were not a cover for usury exacted on loans. In that view we fully concur. Rut in respect to another claim of the plaintiff the defense of usury was sustained. Owing to changes in the manner of conducting the business, the concern became embarrassed, and in 1873 the plaintiff was. applied to for additional advances to carry it on. The evidence shows that with great reluctance, after having taken an inventory of the assets, and having investigated the condition of the concern, he did advance $75,000, or thereabouts, to carry it on. It is alleged on the part of the defendants, and proof was given tending to support the allegation, that the plaintiff, taking advan
The plaintiff says that in no event was he to receive more than ten per cent, interest on his money, and that the excess, was charged as compensation for personal and clerk’s services, and the use of his credit. Such charges were made in account for the years 1813, 1874, and 1875. The plaintiff says that the charges as to each year were pursuant to an arrangement made with one of the defendants. Much stress was laid upon the fact that in the entry in the plaintiff’s books for 1873 the charge was for interest at twelve and one half per cent., thus, it is said, rebutting the inference that the parties understood the excess was for personal and clerk’s services. The plaintiff also stated that the use of money was worth more than ten per cent., and that more than that rate could be obtained for if in Chicago and Minnesota. But the entry and these statements are satisfactorily explained in the evidence. They would be entitled to much weight as tending to prove usury, if the relation of the parties was that of borrower and lender. As it is they have little or- no significance. If. the business had resulted disastrously
It need not be remarked that to constitute usury within the prohibitions of the statute there must be an intention knowingly to contract for and take more for the mere use of money than the law allows. There necessarily enters into the transaction a loan, where the principal is to be repaid,, with illegal interest by way of compensation for the use of the principal. That cannot be said was the real transaction as to any advances agreed to be made in 1873. The plaintiff not only risked the advances, but he had incurred and continued to rest under vast liabilities for the concern besides.
In case of an actual partnership, where there is a risk that the principal contributed may be lost, an advantage to be taken out of the trade may be measured in any way agreed on without subjecting the • arrangement to the charge of usury, because the money is not lying at interest, but is employed in making profits, subject to losses. Tyler on Usury, 185; Fereday v. Hordern, 1 Jac. Ch., 144; Gilpen v. Enderbey, 5 Barn. & Aid., 951.
In Gilpen v. Enderbey, “ by deed A. and B. covenanted to become partners in the business of army clothiers for ten years, and that A. should advance £20,000 as part of the capital for carrying on the business, and that B. should find a like sum; that A., during the continuance of the partnership, should have out of the profits, if sufficient, and if not, out of the capital, £2,000 yearly for his share of the profits. B. then covenanted that, on the determination of the partnership by effluxion of time, the sum of £20,000 should be repaid to A.; that B. should guarantee all debts and pay all losses. In an action brought upon this deed to recover the £20,000 at the expiration of ten years, the defendant pleaded that the deed was executed, byway of shift, in pursuance of an usurious agreement. That plea, upon issue joined, was negatived by the verdict of the jury, and judgment was given by the court of O. B. for the plaintiff. Held, upon error in K. B., that after that finding the deed must be
Other authorities of a similar import might be referred to in this opinion, but will not be, as they will be found on the brief of plaintiff’s counsel. Of course, the principle of these authorities does not apply where the real nature of the contract is a loan, and not a partnership, as was held in Morse v. Wilson, 4 Term, 353; Cooper v. Tappan, 9 Wis., 362; and that class of cases.
Mr. Collyer says: “ The better opinion, however, is that an agreement having the form of a partnership agreement, but in which profits beyond the legal rate of interest are reserved to one of the parties, is legal, unless it appears to have been executed by way of shift or contrivance to cover usury, because at all events the principal, for which such profits, and interests are taken, is hazarded to third persons.” Law of Partnership, (6th ed.), § 68. It is obvious that the principle of contingency or hazard applies with far greater force here than in a case of actual partnership. ' But it seems unnecessary to dwell longer upon the question of usury; for, under the arrangement for conducting the business as we have assumed it to be, the usury laws have no application to the case.
There is one piece of testimony which ought, perhaps, to be noticed, for it militates against the views we have expressed, and seems inconsistent with them. We refer to the notes which were given the plaintiff for advances February 1, 1876, and January 29, 1877. If he was the real owner of the business, it is certainly strange that his agents should give notes for advances to carry it on. The plaintiff gives an explanation of the object in taking these notes, but the reason assigned is not very satisfactory to my mind. But still no such weight or importance should be attached to these exceptional acts as to countervail or destroy the general tendency and effect of the evidence in the case, for the method
There is no sufficient reason shown for disturbing the settlements which were made from time to time by the parties. The accounts on both sides were more than once looked over, examined, and adjusted. The result of such settlements, or the balance found due, was entered on the books kept by the defendants. The proof is perfectly conclusive on this point. Now, what fact is shown to impeach the correctness of these settlements? What error, mistake, or fraud does it appear was committed in making them? The charges for personal and clerk’s services were agreed upon and allowed. We have-seen there was no legal objection to such charges, especially where the parties agreed as to the amount. It is true, compound interest entered into these settlements, but that affords no reason • — • as we shall presently see — for opening them. The principle or rule of law applicable to a stated account or settlement, applies with full force to these settlements which were made. That rule, as often stated by this court, is that a settlement once deliberately made is not to be opened except upon the clearest and most positive proof of fraud or mistake therein. Martin, v. Beckwith, 4 Wis., 219; Marsh v. Case, 30 Wis., 531; Kercheval v. Doty, 31 Wis., 476; Wilson v. Runkel, 38 Wis., 526; Hoyt v. McLaughlin, 52 Wis., 283; Klauber v. Wright, id., 303.
The first reason given for opening these settlements is that the defendants were completely in the plaintiff’s power, and 'were compelled to acquiesce in their correctness, otherwise the plaintiff would break up and destroy the business. We do not think this shows a good reason for setting the settlements aside. Suppose an actual partnership had existed which could be dissolved at the will of either partner, and
In the case before us there were a, great many items of indebtedness on both sides which were adjusted and the balance struck. The interest on the notes, on the “ forty per <cent.” account, and on the current account was computed, and also the interest upon the items upon the other side of the account. These settlements were voluntarily made; no •error or fraud is shown in respect to them; the defendants were under no such duress or coercion as should avoid them;
It follows from these views that the balance found due the plaintiff at the last settlement, January 1, 1876, must be deemed to be correct; and in stating the account this rule has been adopted in this court: “ When partial payments have been made, the payment is to apply in the first place to the discharge of the interest due. If the payment exceeds the interest, the surplus goes towards discharging the principal, and the subsequent interest is to be computed on the balance of principal remaining due. If the payment be less than the interest, the surplus of interest must not be taken to augment the principal, but interest continues on
We do not think the plaintiff should recover anything on his claim for personal and clerk’s services, or for the use of
The judgment on the plaintiff’s appeal is reversed, and the cause is remanded for a restatement of the account on the basis laid down in this opinion. That portion of the judgment appealed from by the defendants must necessarily be reversed, not because there is any error in it of which they can complain, but for the reason that the entire judgment is set aside on the other appeal. We do not feel called upon to consider at this time what relief the plaintiff will be entitled to in case the amount found due him on another accounting is not paid. The circuit court has ample power ¡to grant such further relief as may be necessary for the protection and security of his rights.
We cannot take leave of the case without expressing our great obligation to the counsel on both sides for the very lucid and masterly manner they discussed the questions of law and fact which we have had to consider. Their arguments were of essential aid in the examination of the case.
By the Court.— The judgment on both appeals will be entered in accordance with this opinion.