SUPREME COURT OF ARKANSAS. 941 *MAGRUDER ET AL. $6,259.50, due at twelve months, in reV. newal of certain promissory notes THE STATE BANK. previously made by him to the A note given to the Bank of the State of Arkan-bank. At the same time, Charles sas, for a debt past due, and payable at a future B. Magruder, in consideration of day, including the interest then due and interest such renewal, and for the pur-on the whole sum to the day of payment, is not *pose of securing the payment of r11 usurious (S. & G. Turner v. Miller, 6 Ark. R. 463). The Bank of the State of Arkansas permitted a said writing obligatory, executed to the debtor to renew his notes, then due, and gave him bank, a mortgage upon the north-west time upon his debt, in consideration that he would quarter of sec. 9, T. 13 north, range 6 secure it by mortgage upon property executed by a W., lying in Independence county, on third person: this was a valid legal consideration for the mortgage. Polk Bayou, and on which tract were Under the act of liquidation, the Bank of the situated the "Pelham mills," subject to State of Arkansas was authorized to take mort-the condition that, on the maturing of gages to secure its debts: and if its officers did not the writing obligatory, Pelham should strictly follow the directions of the law in taking such mortgages, they' are amenable for their owl-have the privilege of renewing it by duct; but this would not make the mortgage null paying ten per cent, upon the amount and void. due, with advance interest at seven per Appeal from Independence Circuit cent. per annum; and thus to renew Court in Chancery. from year to year, until the debt was IIHE HON. BEAUFORT H. extinguished; and if at the maturity of NEELY, Circuit Judge. the bond, or any subsequent renewal Byers, thereof, Pelham should fail to renew or for the appellant. pay the debt, the mortgage was to be-S. H Hempstead, for the appellee. come absolute, etc. That Pelham had 10*] • ENGLISH, C. J. This was a bill failed to make any renewal of payment. filed by the Bank of the State, in the That, subsequent to the mortgage, ludependence circuit court, against Magruder had made some conveyance Charles B. Magruder, Charles H. Pel-of the mortgaged premises to Pelham; ham and Miles Williams, to foreclose and that Williams occupied them as a mortgage. tenant, etc. Prayer for foreclosure and The case made by the bill is sub-sale, etc. stantially as follows: Williams made default: Pelham de-On the 2d of August, 1849, Charles murred to the bill, and Magruder an-H. Pelham executed to the bank his swered. Final decree in accordance with the prayer of the bill, and appeal writing obligatory, of that date, for by the defendants. (
MAGRUDER V. STATE BANK. VOL. 13
The points of defense made by the Curtail on this sum $ 750 00 demurrer of Pelham and the answer of Magruder will be considered together Balance due $5,850 00 1. It is insisted that the mortgage Advance interest on this sum debt WaS usurious. at 7 per cent 409 50 The facts in relation to the origin of this debt, seem to be as follows:—Prior Total $ 6,259 50 to the act of 31st January, 1843, placing the bank in liquidation, Pelham And according to the above agree-was indebted to the bank upon notes ment, Pelham gave the bond, and Ma-discounted for him, and renewed them gruder the mortgage in question to se-under the provisions of the act. In cure to the bank the amount due to such renewal, he gave his note, with her as by the above statement. W. L. McGuire, James E. Pelham and The counsel for the appellants has Thomas J. Carter, securities, for $4,000 not pointed out what particular feature dated 1st July, 1844, due at twelve of this contract makes it, in his judg-months. On the 1st October, 1844, he ment, usurious; nor have we been able gave the bank another note, with the to discover the usury. two persons last named as securities, The bank did not charge more back for $1,000.00, due at twelve months, in interest upon the two notes of Pelham, substitution of indebtedness of Joseph renewed by the mortgage bond, than H. Egner to the bank. That some she was legally entitled to. The law time after these notes were due, the allowed her interest at 8 per cent. up-bank brought suits upon them, against on notes payable at twelve months. the makers, aud while the suits were (Acts of 1838, p. 11.) And where she pending, the bank and Charles H. Pel-had to put the notes in suit, as it seems ham made an agreement that the two she did Pelham's notes, she was au-12*] notes should be consolidated,*that thorized to collect ten per cent. (Acts Pelham should pay four years back in-1837—called session, p. 136.) In the above terest at the rate of eight per cent. per statement, Pelham is charged with $1,- annum, and a curtail of $750, and seven 280 ou the 64,000 note, and $320 on the per cent. advance interest for one year, $1,000 note, making an aggregate back and that he should give a new note interest of $1,600. The bond and mort-payable at twelve months, with the gage bear date 2d August, 1849. The privilege of renewing at the end of note for $4000 was due the 1st of each year, by paying ten per cent. cur-July, 1845, and the interest upon tail on the amount of the debt, aud ad-it from that time to the date of vance interest on the residue at seven the mortgage, at eight per cent., per cent. per annum; to secure the pay-*was $1,307.52. The note for $1,000 [*13 ment of which note, Magruder should was due 1st October, 1845, and the in-execute the mortgage, etc.: Thus— terest upoa it, at the same rate, to the The one note for $4,000 00 date of the mortgage, was $307.32, making an aggregate of back interest, Interest thereon for 4 years at actually due upon the two notes, at 8 per cent 1,280 00 the date of the mortgage, of $1,614.84, The other note for 1,000 00 being an excess of $15.84 above the Interest added for 4 years at 8 amount of back interest with which per cent 320 00 Pelham was charged by the agreement between him and the bank. Making $ 6,60000 The curtail of $750 paid by Pelham
JULY TERM, 1856. MAGRUDER V. STATE BANK. did not extinguish the back interest by and close up its business, were contin-6850, and this balance of interest was ued ; (sec. 28. Underhill v. State Bank included in the bond, and thus he was 6 Ark. 135.) subjected to compound interest; but By the 10th section of the act, debt-this was not usurious, as decided by this ors, who might come forward within court, in S. & G. Turner v. Miller, 6 ninety days after their debts were due Ark. I?. 463.1 (sec. 9) and pay all arrearages of in-Pelham, instead of paying the ad-terest and calls, were allowed to renew vance interest of seven per cent., at their notes for one year, by giving sat-the time of executing the bond, ac-isfactory security, and paying interest cording to banking usage, retained it in advance at seven per cent., and the in his own hands, and inserted the receivers were required so to regulate amount of it ($409.50) as part of the the calls on the notes, when they be-principal in the bond, which was made came due, that the debts would be paid payable at twelve months without in-off within ten years, by regular annual terest until after due. There was surely calls. no usury in this. It was to his advan-By the 12th section, the receivers tage. 2. were required to keep a vigilant eye It is also insisted for Magruder upon the debtors, and were made liable that the mortgage was without consideration and void. upon their official bonds, if debts were No consideration moving from the lost by neglect or carelessness on their bank to him was necessary to make part. And it was made their duty, "in the mortgage valid. He had the right all cases where the security was doubt-to bind himself in writing for the pay-ful, to obtain, if possible, additional se-ment of Pelham's debt. The bank per-curity : and to this end, they might, mitted Pelham to renew Lis notes, and if necessary, extend the time of pay-gave him time upon the debt, in con-ment, and take mortgages and deeds sideration that he would secure it by of trust, in the name of the bank, upon Magruder's mortgage. This was a valid, any property, either real or personal," legal consideration for the mortgage. etc. And generally, "in all cases of 2 Yent's Corn. 465. doubtful or insolvent debts," the receiv-3. It is insisted, moreover, that the ers were authorized "to pursue such a mortgage is void, for want of power course, and make such arrangements in the bank to take it. in regard to them, as their judgment The bank was authorized by its char-might dictate to be most advantageous ter, to take mortgages as collateral se-to the bank or the State." curity, sec. 6; and to loan money on By act of January 4th, 1845 (Acts mortgages upon real property. Sec. 20 1844, p. 47), the office of executive re-21, 23, 24, Acts 1836, p. 17. ceiver, created by the liquidation act By the act of 31st January, 1843 of 1843, was abolished, and the com-(Acts 1842, p. 77), placing the bank in pletion of the process of liquidation liquidation, its corporate existence was was entrusted to a financial receiver, not destroyed, but its powers were and an attorney for the principal bank, abridged. Its privilege to discount and each of the branches. By the 3d notes, etc., or to loan money in any 141 section of this act, it was made the manner (sec. 1) wasre5 pealed; but duty of the attorneys to prepare all its corporate powers to collect in, and deeds, mortgages and other instruments pay off its debts, and to li quidate and of writing, which they or the receivers, 1. On usury see Grider V. Driver, 46 . 59 and might deem necessary to promote the cases cited. interest of the bank, etc.
MAGRUDER V. STATE BANK. VoL. 18 The 6th section provides: "That it We are not sure that the depositions shall be the duty of said receiver and prove that the officers of the bank had attorneys to keep a vigilant eye upon no grounds to doubt the solvency of all persons indebted to said bank, and Pelham's securities at the time the if any debt be lost from the evident neg- mortgage was taken. W. L. McGuire lect and carelessness of said officers,they seems to have been regarded as the or each of them shall be held liable on most responsible one of the securities, their official bonds : and it shall be the and yet it appears that his indebted-151 *duty of said financial receivers 'Jess, at the time, as principal and se-and attorneys, in all cases where the curity, amounted to over $25,000, most secueity is doubtful, to obtain, if possi- of which was in suit; and the witnesses ble, additional security. To this end, do not value his property at so large a they may, if necessary, extend the time sum. But let all be conceded that is of payment not over two years, take claimed by the counsel for the appel-mortgages and deeds of trust in the lants, and the argument amounts to name of the bank, upon any property, this: the bank had safe and sufficient real or personal," etc., etc. * 4 * personal security for Pelham's debt, * * and, generally, in all cases of but her officers unwisely and by mis-doubtful or insolvent debtors, said offi- take, or in dieregard of the du- L*16 cers may pursue such a course, and ties imposed on them by law, surren-make such arrangements in regard to dered the personal security, and took them, as their judgment may dictate Pelham's individual bond for the debt, to be most advantageous to the bank,." with Magruder's mortgage upon prop-It is manifest from these enactments, erty not worth half the amount of the that the bank possessed express and debt, therefore the mortgage is null direct power to take mortgages for the aud void, and the bank must lose the purpose of securing debts due to her, only security which she now has—in even if this was not a power incident other words, that by an improvident to her general rights as a creditor to arrangement of her officers, she has seoure and collect her debts by the or- lost part of her debt, and therefore she dinary legal means allowed to creditors must lose it all ! This can neither be generally, good law, nor sound logic: the state-But the counsel for the appellant ment of the argument refutes it. takes two specific objections to the The second specific objectiou to the validity of the mort g age. The first is, validity of the mortgage, taken by the that the hank could only take a mort- counsel for the appellants, is that it gage where the security for the debt extends the time of payment for ten was doubtful; and it is averred in the years, when, by the 6th section of the answer of Magruder that the securities act-of January 4th, 1845, above copied, of Pelham upon the notes for which the officers of the bank were not au-the mortgage bond was substituted, thorized to extend the time of pay-were good and solvent, and amply re- ment, upon mortgage, more than two sponsible for the debts. His counsel years. also insist that the depositions read This provision of the statute must be upon the hearing prove this to be true; regarded as directory, and there is no and moreover, that the mortgaged good reason, founded iu public policy, property taken as a substitute for the yi ely co a n d t e ra p e anU lu re ll f a r roi m d N l o t sbo a u s ld in m ca ske s e personal security, which the bank had In o f contracts made in vio i l d a ' tion of the before, was not worth over $'2,000—not gaming or usury laws, or other laws near the value of the debt. affecting public morals.
JULY TERM, 1856. If the officers of the bank did not strictly follow the directions of the law in taking the mortgage, they are amenable to the appropriate authorities for their conduct, but there is no principle of law, applicable to such cases, that would warrant us in holding the mortgage to be null and void. The decree of the court below is affirmed: and the time fixed by the court for the sale of the mortgaged property having passed, the cause will be remanded, with instructions to the court to make the necessary orders to execute the decree.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.