Camp Lumber Co. v. Citizens Bank , 142 Ga. 84 ( 1914 )

Hill, J.

(After stating the foregoing facts.) One of the grounds of demurrer alleges that the petition should be dismissed because of the plaintiffs’ failure to comply with the terms and conditions of a certain agreement, dated November 18, 1911. The material portions of this agreement were as follows: “Now, wherefore, it is agreed between the parties hereto that if said sale be consummated, all of said notes, except the first maturing note for two thousand dollars, shall be assigned by the R. J. & B. F. Camp Lumber Company to the said Citizens Bank of Valdosta, together with such security as may have been given for the payment of the same, and that a sufficient portion of the amount first accumulated by the payment of said notes, from month to month, to cover the amount of the principal and interest upon said five promissory notes shall be held by said bank .until the validity or legality' of said notes and of the said transaction on the ground of usury shall be adjusted and settled between the said Citizens Bank of Valdosta on the one part, and the said R. J. & B. F. Camp- Lumber Company and its Creditors’ Committee on the other part, or, if they shall be unable to come to an amicable agreement about the same, until the adjudication and determination thereof by the court, provided legal proceedings therefor shall be commenced within six months from the date hereof.” This agreement was executed between the plaintiffs in this case and the defendant bank with reference to certain notes alleged by the plaintiffs in their petition to have been given for the payment of usurious interest arising from another transaction. The plaintiffs desired to sell a portion of the property transferred to the defendant bank to secure the notes held by it against the plaintiff, and the defendant bank agreed that this be done, provided enough of the purchase-money notes were deposited as above set out. The case hinges upon the legality of this agreement. The contract bore date November 18, 1911, and the suit was not filed until the 27th day of August, 1912, more than six months from the date of the agreement. If the contract that suit must be commenced within six months is legal, then the plaintiffs are barred of recovery. But if the contract is illegal and void for any reason, then the plaintiffs have the statutory period of twelve months within which to bring their action. The Civil Code, § 3436, provides: “It shall not be lawful for any person, company, or corporation to reserve, charge, or take, for any loan or advance of money, or forbearance to enforce the collection of any sum of money, any rate of interest greater than eight per centum per annum, either directly or indirectly by way of commission for advances, discount, exchange, or by any contract or contrivance or device whatever.” And section 3441 declares: “Any plea or suit for the recovery of such forfeiture shall not be barred by lapse of time shorter than one year.” The action is in the nature of a suit for money had and received. At common law, and under the statutes of our State, the payment by a debtor of usury to a creditor gives a right of action in favor of the debtor for the amount of the usury so paid. As said by Nisbet, J., in the case of Whitehead v. Peck, 1 Ga. 140, 149: “In cases where the borrower pays the usurious interest himself, the statute against usury, and the fact of payment, create a contract. There is in the transaction a direct relation between the parties, viz., privity. The money is paid by the plaintiff and is received by the defendant for his use. It is the money of the plaintiff which he holds, and it being received, against the statute of usury, he can not retain it in conscience. Ex Eequo et bono, the plaintiff is entitled to it. In that case the borrower could certainly recover.” See also Parker v. Fulton Ass’n, 42 Ga. 451-454; Pope v. Marshall, 78 Ga. 635 (4 S. E. 116).

This case is here on exceptions to the judgment of the court below in sustaining the demurrer to the petition. The demurrer admits the well-pleaded allegations. The petition shows that the lumber company did not owe the bank anything on the principal sum, or any legal interest on the original debt. The principal and the legal rate of interest had been paid in full. There was nothing in the nature of a debt held by the bank against the lumber company, except the notes which represented the alleged usurious interest." This agreement was entered into between the bank and the lumber company, and by its terms the bank was to receive the proceeds of certain notes belonging to the lumber company and apply them to the settlement of the usury note, alleged to be only for the usurious interest. The contest over the usury is the basis of the contract. And the consideration of the agreement to sue within the six months is based upon the note containing the usury. This being the consideration, an agreement to sue for usury within a period less than that fixed by the statute is as illegal and void as the collection of the usury itself. As said by Judge Bleckley, in Tribble v. Anderson, 63 Ga. 56, “Usury stalks like a pestilence through every form of contract, and poisons all it touches.”

The lumber company -arranged to pay the usurious interest, it is true, by placing notes as collateral security with the bank, with authority to collect and appropriate the payment in case of non-agreement of the parties, or failure to sue within the time agreed upon. The surroundings of the case indicate that the agreement was secured through “a kind of moral duress, just as debtors are supposed to pay usury in ordinary cases.” Pope v. Marshall, supra. It was said in that case (78 Ga. 640), “No disguise of language can avail for covering up usury, or glossing over an usurious contract. The theory that a contract will be usurious or not according to the kind of paper bag it is put up in, or according to the more or less ingenious phrases made use of in negotiating it, is altogether erroneous. The law intends that a search for usury shall penetrate to the substance.” It is insisted that the real consideration for the agreement to sue within six months was the releasing of the property held by the bank as security for the note due by the lumber company. But back of it all the chief bone of contention was the ten thousand dollars usury claimed to be due by the lumber company to the bank. That was “the substance” that each party to the agreement was contending for. And this being true, the consideration of the agreement was void.

The defendant cites a number of decisions to the effect that the period fixed by statute within which suit may be brought can be lessened by agreement; but these cases all related to contracts— mostly insurance—where the subject-matter was lawful, and they were based upon a valid consideration. In the instant case the consideration was unlawful. The entire balance of the note due by the lumber company to the bank, if the allegations of the petition are true, represented usury, the collection of which is unlawful under our statute. Section 3440 of the Civil Code provides: “No contrivance or arrangement between the parties to any such unlawful transaction, or their privies, shall have the effect to discharge such forfeiture, except it be an actual and full payment of the amount so forfeited,” referring to the forfeiture of the excess beyond lawful interest. Assuming the allegations of the petition to be true, the note held by the bank against the lumber company contains only usury, and is therefore void; and no device or contrivance whatever by which the parties agreed to pay or secure the usurious note is valid and enforceable. Like the note itself, the effort to secure the note, and require the lumber company to bring suit within six months, is absolutely void. Nor could the lumber company waive its legal rights upon a consideration which was usurious and void. See Cleghorn v. Greeson, 77 Ga. 343; Lowry v. Parker, 83 Ga. 341 (9 S. E. 677); Tribble v. Anderson, 63 Ga. 55.

But it is argued that the bank had not applied the money collected from the Garbutt Lumber Company, and which belonged to the plaintiff, to the usurious note of the lumber company up to the. time of bringing the suit, but was merely threatening to apply it. There is no question raised in the record but that the sum claimed to be due to the bank is usurious. The bank has deeds to the plaintiffs’ land to secure that debt. All deeds tainted with usury are void. This is an equitable petition to cancel the deeds as being void because tainted with usury. A court of equity, having' jurisdiction of the case for the purpose of cancelling the deeds if found to be tainted with usury, would also require the money in the hands of the bank, which was collected from the Garbutt Lumber Company and which the bank had no right longer to hold, to be paid to the plaintiff and the usurious notes and conveyances canceled. We think that the petition set forth a cause of action, and that the court erred in sustaining the demurrer. See Page on Contracts, § 513. Judgment reversed.

All the Justices concur.