Brenner v. Plitt

Bailey, J., delivered the opinion of the Court. This is an appeal by Hannah Brenner and Fannie M. Pehr from a decree of the Circuit Court of Baltimore City, passed on January 18, 1943. By said decree the clerk of said court was directed to make the following distribution of the fund deposited with him under a decree of interpleader, passed on October 4, 1941, upon a bill of complaint of Home Life Insurance Company against Clarence M. Plitt and others, including the appellants: First. To pay the courts costs.

Second. To pay to Clarence M. Plitt the sum of $5,-210.65, in full and final payment of the unpaid balance of a mortgage and note of May 19, 1939. Third. To pay to William L. Rawls and Louis M. Silberstein, counsel for Plitt, the sum of $521.06 as counsel fee, under the provision of the note of May 19, 1939.

Fourth. To pay the balance, in equal shares, to Hannah Brenner and to Fannie M. Pehr. The money paid into court under the decree of inter-pleader represented the proceeds of two life insurance policies issued by Home Life Insurance Company on the life of Joseph Brenner, in which policies Hannah Brenner was named as beneficiary. The policies had been assigned to Plitt as collateral security for the note of May 19, 1939, under circumstances hereinafter more fully explained.

The Brenner family consisted of the following: Joseph Brenner, Hannah Brenner, his wife, and Ethel Brenner, ³⁵¹ Henry Brenner and Nathan Brenner, their children. On December 23, 1937, the Brenners executed a mortgage for §2,500 upon their home at 2302 Tioga Parkway, in Baltimore City. The mortgage was taken in the name of Edward Azrael, but it is admitted that the money was advanced by Plitt. The sum actually advanced to the Brenners was §1,920.

The difference of §580, after the payment of the recording expenses, was divided between Azrael and Plitt, the evidence being vague as to the amounts received by each. The mortgage note provided for payments in installments on the principal, and interest at the rate of 6 per centum. In determining the total amount due from the Brenners to Plitt on May 19, 1939, the amount due on the mortgage was fixed at §235.25, but in arriving at this figure interest at the rate of 6 per centum was calculated upon the face amount of the note and mortgage, §2,500, rather than upon the sum of §1,920 actually received by the Brenners. Joseph Brenner and his son, Nathan Brenner, were co-partners, trading as Joseph Brenner & Son, in the scrap iron and junk business.

Commencing on April 30, 1938, with a loan from Plitt in the amount of §500, there were many transactions between Plitt and this firm, involving almost daily loans from Plitt in various amounts, until May 17, 1939. In the course of their business, the firm had opportunities to buy certain scrap and junk for cash, but, not having the necessary funds available, the money was borrowed from Plitt, with the understanding that when the merchandise was sold, the money advanced by Plitt was to be repaid to him, together with an additional amount for the use of the money. Plitt contends that these various deals constituted joint ventures, and that he was to receive a certain percentage of the profits for the use of the money advanced by him. But he testifies that Brenner, meaning the father, personally guaranteed the repayment of the loans and that he, Plitt, was to be repaid in full, even if the particular transaction resulted in a loss rather than a profit.

The evidence offered by the appellants shov/s that what Plitt ³⁵² received for the use of his money was an arbitrary amount, designated by Plitt, upon the receipt of the proceeds of the various sales, without regard to the profit that may have been made on the particular transaction. The bookkeeper for the Brenners testifies that she made all entries on the books in accordance with instructions given her by Plitt and that the money repaid to him, in excess of the money loaned or advanced by him, was entered on the books in a column headed “Commission.” There were other personal loans to Joseph Brenner for personal and household expenses, and upon their repayment Plitt was likewise paid a commission in excess of the legal rate of 6 per centum. On May 19, 1939, the amount due to Plitt on the loans to Joseph Brenner & Son and on the personal loans to Joseph Brenner was the sum of $9,729.35, but in making this calculation no credit was given to the Brenners for the amount of “commissions” paid, in excess of interest at the legal rate. Joseph Brenner had five policies of insurance on his life, in the total face amount of $21,000, in four of which policies his wife, Hannah Brenner, was designated the beneficiary and in the fifth, the beneficiaries were his wife and three children.

Brenner had borrowed on said policies and was paying interest on the loan at the rate of 6 per centum. This insurance loan was refinanced for Brenner by Plitt, and the five policies were assigned by Brenner to Plitt as security for the loan, with interest at 3 per centum. This transaction was carried on the Brenner books as a separate item, and the balance due thereon on May 19, 1939, was $10,378.92. Another transaction between the parties involved the purchase of certain assets of Geiser Manufacturing Company, of Waynesboro, Pennsylvania.

The sum of $3,100 advanced by Plitt in this matter was carried on the Brenner books as a separate item, upon which no interest was paid, and was taken into consideration in figuring the total amount of the indebtedness on May 19, 1939. While a considerable part of the record is ³⁵³ concerned with this item, the facts in connection therewith are not material to the decision of the issues involved in the instant case. Many of the facts are detailed in the opinion of this court in the case of Berg v. Plitt, 178 Md. 155 , 12 A. 2d 609 , 13 A. 2d 364 . The other principal item taken into consideration in arriving at the amount of the note and mortgage of May 19, 1939, was the sum of §1,125, owed by Joseph Brenner & Son to Plitt and secured by a chattel mortgage on a motor-driven shear.

There is no dispute about this item. Some time in May, 1939, Plitt decided to discontinue loaning or advancing money to Joseph Brenner & Son and to Joseph Brenner, individually, and at his suggestion and request, all the Brenners, on May 19, 1939, executed to Plitt a mortgage and collateral note, payable thirty days after date, in the amount of §24,-459.93. This amount represented the total indebtedness from the Brenners to Plitt as of that date, and included the balance due on the Azrael mortgage, the running account of the loans to Joseph Brenner & Son and to Joseph Brenner, individually, the insurance loan, the money involved in the Geiser Manufacturing Company transaction, and the chattel mortgage on the shear, with a slight adjustment of interest. The mortgage was a lien on the Brenner home at 3202 Tioga Parkway, all the household furniture therein, a 1935 White automobile truck and the motor-driven shear.

The five life insurance policies, in the face amount of §21,000, were assigned to Plitt as collateral security for the note, which bore interest at the rate of 6 per centum. Thereafter no further advances were made by Plitt, except certain fees in connection with the Geiser Manufacturing Company transaction, about which there is no dispute, but the indebtedness was credited by him with payments received from time to time from the sales of merchandise by the Brenners and with disability payments made under certain of the insurance policies. Joseph Brenner died on January 17, 1940. A dispute then arose between the surviving Brenners and Plitt as ³⁵⁴ to the correct amount due him on the indebtedness of May 19, 1939, and there was an agreement between the parties that Plitt should proceed with the collection of three of the. life insurance policies and apply the proceeds thereof as a credit on the indebtedness, but that the amount due on the two policies of Home Life Insurance Company was not to be collected by him until final agreement among them as to the correct amount due to Plitt, and that, upon their failure to reach such an agreement, the proceeds of the two policies, in the approximate amount of $7,000, were to be paid into court, under bill of interpleader, and distributed in accordance with the decree of the court.

The only items disputed by the Brenners were the balance on the Azrael mortgage of $235.25 and the running account of $9,729.35. In the meantime, in settlement of a suit which had been instituted in the Superior Court of Baltimore City by Fannie M. Pehr against the Brenners, the Brenners assigned to her an undivided one-half interest in and to the claim or claims of every kind, character and description which they had against Plitt or Home Life Insurance Company. When the Brenners and Plitt failed to agree upon the correct amount of the indebtedness, Home Life Insurance Company filed its bill of complaint asking that the parties interplead. The decree of intérpleader was passed on October 4, 1941, directing Home Life Insurance Company to pay into court the sum of $7,115.36, representing the proceeds of the two life insurance policies, after the deduction of court costs to date and a counsel fee of $350 to its solicitors.

The decree further provided that the defendants interplead and that Hannah Brenner, Nathan Brenner, Ethel Brenner, Henry Brenner and Fannie M. Pehr be designated the plaintiffs and Clarence M. Plitt and Union Trust Company of Maryland, 'the defendants. The designated plaintiffs filed their bill of complaint, which was fully answered by Plitt. Union Trust Company of Maryland filed an answer in which it disclaimed any interest in ³⁵⁵ the policies or the proceeds therefrom. Testimony was taken in open court before the chancellor and it is from his decree that this appeal is taken.

In addition to the preliminary question as to whether any of the transactions between Plitt and Joseph Brenner & Son were joint ventures, the appeal presents for our determination three questions, namely: First: Are the Brenners barred from showing the usurious character of any of the transactions, by reason of the provisions of Section 6 of Article 49 of the Code, 1939? Second: Are they estopped to question the amount of the indebtedness as of May 19, 1939, because of the execution of the note and mortgage as of that date? Third: Are the solicitors for Plitt entitled to counsel fee out of the fund, under the provisions of the note of May 19, 1939? To constitute a “joint venture” or “joint adventure,” as it is sometimes called, it is not sufficient that parties share in profits and losses, but they must intend to be associated as partners, either as general partners, or merely for the duration of the joint adventure.

Hutchinson v. Birdsong, 207 N. Y. S. 273, 275. Mere agreement to share in profits, of itself, constitutes neither a partnership nor a joint adventure. Palmer v. Maney, 45 Idaho 731 , 266 P. 424, 428 . It has been held that a “joint adventure” exists when two or more persons combine in joint business enterprise for their mutual benefit with the understanding that they are to share in profits or losses and that each is to have voice in its management.

Chisholm v. Gilmer, 81 F. 2d 120, 124 . The relationship between Joseph Brenner & Son and Plitt lacks all of the necessary elements to constitute any of the transactions between them joint ventures. Plitt admits in his testimony that under no circumstances was he to suffer any loss, and his testimony fails to disclose any voice that he had in the management of the affairs of Joseph Brenner & Son or any part that he took in the business or the sale of the merchandise. ³⁵⁶ In its most favorable light, his testimony is to the effect that he participated in the profits, in some manner determined by him alone. This is insufficient to constitute such transactions joint ventures, and we must conclude, as did the chancellor, that these transactions were definitely loans of money, and that interest was charged thereon at more than 6 per centum per annum.

The fact that the payments to Plitt were designated upon the firm’s books as “commissions” does not change their usurious character. It is likewise, our conclusion that the Azrael mortgage is tainted with usury. The deduction of the §580 and the return of an undetermined portion of it to Plitt by Azreal creates a situation closely analogous to the one presented to this court in the case of Glass v. Building & Loan Association, 156 Md. 26 , 143 A. 587 . In that case it was held that where the owner of property, in order to make a sale to one without means, procured from a building association a mortgage loan to the purchaser of §3,400, which was §675 in excess of the cash price of the property, and this excess was immediately returned to the building association as a bonus for making the loan, but thereafter the association. collected in the regular way from the purchaser on the basis of a loan of §3,400, the bonus was paid by the purchaser and not by the seller and that consequently the usury therein could be asserted by the purchaser against the building association.

The charging of such a commission by the lender has been branded as usurious by this court in the cases of Real Estate Trustee v. Lentz, 153 Md. 624 , 139 A. 351 ; Carozza v. Federal Finance Company, 149 Md. 223 , 131 A. 332 , 43 A. L. R. 1, and Brown v. Real Estate Investment Co., 134 Md. 493 , 107 A. 196 . Usury is a moral taint wherever it exists .and no subterfuge shall be permitted to conceal it from the eye of the law. In Andrews v. Poe, 30 Md. 485 , it is said that “it matters not in what part of the transaction it may lurk, or what form it may take — whether it reads ³⁵⁷ 6 per cent, upon its face, with an understanding to pay-an extra 4 per cent., or whether it be a pretended sale and lease, or under whatever guise the lender — always fruitful in expedients — may attempts to evade the law, Courts of justice, disregarding the shadow and looking to the substance, will ascertain what in truth was the contract between the parties.” This case was decided in 1869, prior to the passage of Chapter 358 of the Acts of 1876, now codified as Section 6 of Article 49 of the Code of 1939, but the court in the case of Woods v. Matchett, 47 Md. 390 , decided in 1877, says: “It is well settled in this State that a Court of equity will grant relief against the payment of usurious interest, even after judgment, and further than this, that an action at law would lie prior to the Act of 1876, to recover excessive interest actually paid. Hitch v. Fenby, 6 Md. 218 ; West v. Beanes, 3 Har. & J. 568 ; Goldsmith’s Adm’r v. Tilly, 1 Har. & J. 361 ; Scott v. Leary, 34 Md. 389 ; Bandel v. Isaac, 13 Md. 202 .” Sections 1 to 5, inclusive of Article 49, of the Code of 1939, appeared in the Code of Public General Laws, 1860, as Article 95, Sections 1 to 5, inclusive, and Chapter 359, of the Acts of 1876, amended said Article 95, by adding an additional section thereto, numbered 6, and reading as follows: “6.

Provided, however, that nothing in the preceding sections of this article shall be so construed as to make usury a cause of action in any case where the bond, bill obligatory, promissory note, bill of exchange, or other evidence of indebtedness, has been redeemed or settled for by the obligor or obligors, in money or other valuable consideration, except that of a renewal in whole or in part of the original indebtedness, but this section shall not apply in any cases of claims or suits now instituted by assignees in bankruptcy.” In the Code of Public General Laws of Maryland, 1888, Article 95 appears as Article 49, and Section 6 reads therein as above, with the following changes: the words “Provided, however, that,” at the beginning of the sec ³⁵⁸ tion, and the clause “but this section shall not apply to any cases of claims or suits now instituted by assignees in bankruptcy,” are omitted. By Chapter 74, Acts of 1888, it is provided that the Code of Public General Laws of this State, as prepared by John Prentiss Poe, and the Code of Public Local Laws, prepared by him, “be and the same are hereby respectively approved, adopted and declared to be the Code of Public General Laws and Code of Public Local Laws of this State, respectively, in lieu of and as a substitute for all Public General Laws and Public Local Laws of this State in force on the first Wednesday of January, in the year eighteen hundred and eighty-eight.” !The next change in the wording of Section 6, of Article 49, was effected by the enactment of Chapter 835 of the Acts of 1912, which repealed Sections 6 and 7 of Article 49 and re-enacted the same with amendments. This Act struck out the words “except that of a renewal in whole or in part of the original indebtedness,” and inserted in lieu thereof the following: “except that usury shall be a cause of action in all cases where the redemption or settlement above mentioned is secured by or connected with a renewal in whole or in part of the original indebtedness, provided that such original indebtedness shall not have exceeded the sum of $500.” Certain changes were made in Section 7, with which we are not concerned. At the same time, the Legislature passed Chapter 836 of the Acts of 1912, adding three new sections to Article 56, title “Licenses,” sub-title “Brokers,” to be known as Sections 21A, 21B and 21C, defining and regulating the business of petty loan brokers.

The amendments to Sections 6 and 7 of Article 49 were made to bring those sections in line with its scheme for the control of the matter of petty loans, which by Chapter 836 were defined as loans of $500 or less, secured by chattel mortgage or bill of sale. By Chapter 88 of the Acts of 1918, the Legislature adopted the Uniform Small Loan Law. The title of this Act is as follows: “An Act to license and regulate the ³⁵⁹ business of