Smith v. Old Dominion Building & Loan Ass'n ( 1896 )

[DEFENDANT'S APPEAL.] The Code, sec. 3836, provides: "The taking, receiving, reserving or charging a greater rate of interest than is allowed by the preceding section (3835) when knowingly done shall be deemed a forfeiture of the entire interest which the note or other evidence of debt carries with it, or which has been agreed to be paid thereon; and in case a greater interest has been paid, the person by whom it has been paid, or his legal representative, may recover back, in an action of debt, twice the amount of interest paid: Provided such action shall be commenced within two years from the time the usurious transaction occurred."

The second paragraph of the complaint charges that the defendant Association, in the inception of the contract, received, reserved and charged the plaintiff three hundred dollars as usury, and the third paragraph alleges "that in addition to said charges of usury defendant Association likewise charged, reserved and received other usurious amounts over and above the legal rate of interest, to wit: (specifying the amounts, dates, etc.). The defendant's contention that this is not a sufficient allegation of the payment of any sum to the defendant by the plaintiffs is a refinement which certainly receives no countenance from the present system of pleading. The Code, sec. 260. Besides, par. 4 of the complaint expressly alleges that said sums were charged against plaintiff, and knowingly taken, received and collected by defendant in violation of The Code, section 3836. The defendant well understood and intelligently contested the issues really presented by the pleadings. The court correctly held that the plaintiff could recover back double the amount of the interest which the proof showed had (255) been paid within two years prior to the beginning of the action.

The second exception is also without merit. The court properly held, in the very words of the statute, that the defendant had forfeited all interest upon the debt. In legal effect "the contract is simply a loan of money bearing no interest," and all payments are to be credited on the principal (Moore v. Beaman, 112 N.C. 558; Ward v. Sugg,113 N.C. 489; Fowler v. Trust Co., 141 U.S. 384, 406), and in addition if the lender accepted such payments of usurious interest the borrower is given a right of action to recover back double the amounts thus extorted within the two years before action brought. Roberts v. InsuranceCo., 118 N.C. 429. The statute makes the charging or contracting for usury a forfeiture of all interest, and in addition its actual acceptance is visited with the penalty of recovering back twice the amount paid. The words of The Code, section 3836, are recited and thus construed in the Usury Act of 1895, ch. 69. If the penalties thus inflicted seem severe it is because the law-making power deemed it necessary to repress the devices of the avaricious by making it altogether unprofitable to evade the law fixing limitations for the usurance of money.Meroney v. B. and L. Asso., 116 N.C. 882, 922. Our penalties for usury are identical with those prescribed in the National Bank Act, U.S. Rev. St., sec. 5198. It may well be doubted if anything less severe would be effective. At common law the taking of any interest was an indictable offense (11 A. E. Enc., 379); hence, interest is now purely statutory, being chargeable in such cases and to such extent only as is expressly allowed by statute. The penalties for usury were formerly much severer in this State, and are still so in some other jurisdictions, notably in New York, where in certain cases the charging (256) of interest above six per cent has been recently made indictable. The entire subject of the rate of interest and penalties for usury rests in legislative discretion, and the courts have no power other than to interpret and execute the legislative will. The 3d and 4th exceptions do not show error as against the defendant, and the same exceptions being made by the plaintiffs are treated in their appeal.

The 5th exception is well taken. The defendant's counterclaim, being in excess of plaintiff's claim, the former recovered judgment, and this carries the costs. Garrett v. Love, 89 N.C. 205; Hurst v. Everett,91 N.C. 399. If the plaintiff had wished to avoid liability for costs he should have tendered the amount legally due the defendant. The Code, 573; Pollock v. Warwick, 104 N.C. 638; Murray v. Windley,29 N.C. 201. Under the present Usury Act (1895) the usurious lender, whether plaintiff or defendant, recovers no costs; but in its terms that act does not apply to loans made prior to its passage. The 6th exception was abandoned.

The costs of this court on the defendant's appeal will be divided, each party paying his own costs. The Code, 527 (2).

JUDGMENT MODIFIED. Cited: Churchhill v. Turnage, 122 N.C. 433; Faison v. Grandy,126 N.C. 830; Cheek v. B. and L. Asso., ib., 245; S. c., 127 N.C. 123;Blalock v. Clark, 137 N.C. 144; Coward v. Comrs., ib., 301; Taylor v.Parker, ib., 419; Ervin v. Bank, 161 N.C. 49; Owens v. Wright, ib., 133, 142; Corey v. Hooker, 171 N.C. 233.

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