*1 1911. 0.] Riley Sears. CO., Inc.,
CHARLES A. RILEY COMPANY W. T. SEARS et al.
(Filed April, 1911.)
1. Usury Pleadings—Answer—Parties—Legal Representatives. — knowingly taken, It is when unlawful interest has been reserved, stipulated money, directly aon loan of or indi- rectly ; knowingly acting and one in violation of our law by taking, receiving, reserving, charging greater rate of per per annum, interest than G cent either before or after the may accrue, interest, interest “shall forfeit the entire and when greater paid, may rate has been double the amount be recov- party paying same, legal representatives,” ered or his by way up and such be recovered of counterclaim set Revisal, the answer. sec. 1951. Usury Contracts—Notes—Illegal 2. Consideration. — paid When a debtor has his creditor amount a loan lawfully chargeable against him, and in addition thereto has
given obligation arising his notes for the balance of his from an interest, agreed upon making loan, usurious amount of brought creditor cannot recover on the notes in a suit for their collection. 3. Same. appears by itWhen a written contract entered into between money that the debtor had borrowed an amount of obligated repay per which he had himself at a certain rate purchased thousand feet of lumber to be cut from timber to be money loaned, not to be less than a certain monthly money, plan payment sum of included anof money additional amount of to that borrowed and the lawful rate thereon; appears of interest and it further that the debtor re- had actually borrowed, the amount with more than the lawful given Held, and had his notes for the balance: being given
5. Same. obligation repay money The a loan of borrowed to undertake enterprise dependent an wbicb is not made the risks on to be upon enterprise incurred or fails, whether the venture or succeeds or stipulation repayment with a in the contract for its exceeding by law, at event a rate of interest that allowed is usurious, partnership and not a contract. Substitution—Accounting. 6. Same — partnership, Co., having A T. & borrowed to be invested standing timber, repaid to be at a certain rate thousand therefrom, agreement feet of lumber cut under an held to be usurious, by T., S., company dissolved retirement oí firm, partnership person formed a with a third under incorporated. name of S. & which soon thereafter became ninety days provided beginning Some before the time for the payments upon agreed upon the various the loan under the con- corporation, consent, T. & tract of with the creditor’s cut debt, except lumber and off the that created the usurious creditor, corporation the contract. The agreement, accounting together written entered an into and de- upon termined the amount due the latter under the contract: Held, by parties corporation the consent of all the was sub- original parties usury stituted ing successor to the and the affect- original removed; (2) transaction was not effaced or accounting which the under was had was with acknowledgment reference and in contract. Usury 7. Intent —Proof. —Contracts—Fraudulent money intentionally charges the lender When the borrower greater allows, purpose rate of interest than the law and his clearly instrument, corrupt the face of the stands revealed on intent to violate the law on the of the lender is shown. Usury 8. —Contracts—Estates—Loss—Parties—Privies—Receivers. plea open privies, is to the and their made when the transaction the debtor’s estate ordinarily by wrongfully depleted, having legal right one case, protect estate, as, in this a receiver of an insolvent against sought which a usurious contract is to be Revisal, enforced. sec. 1222. Usury Contracts—Forfeiture—Penalty—Pleadings—Amend- 9. — ments. brought alleged In an action to recover to be due on a plea wherein contract entered into between usury recovery sought up in the answer and under is set our 0.]
Riley v. Sears. paid, recovery statute double tlie amount of the interest o.f sought penalty; inis the nature of a and when the facts are readily requires known or obtainable law definite state- pleading amount, allega- ment in the the time before sufficient, tions in action are held to be and such statement having made, case, been on the facts no amendment pleadings should be allowed. Appeal Whedbee, I., at of New Term, 1910, October HaNOVEB.
Civil action, beard Tbe exceptions report referee. action was instituted plaintiff against corpora- defendant tion creditors, bebalf bimself and ground tbe debt insolvency, alleging $27,000 was about plaintiff’s a valid lien tbe assets of com- upon portion defendant *3 A receiver was pany. and tbe bulk of defend- duly appointed, a ant’s assets or of same have large amount been collected subject said receiver and are held tbe to orders tbe court made tbe cause. tbe John
Pending suit, A. Arringdale and, intervened a petition, alleged that was creditor defendant corpora- tion to $6,242.33, tbe amount with some a interest, being balance due and on a claim of owing defendant the origi- nal $7,442.33 amount of and on which some bad been made, and that claim, to tbe extent of $6,000, evidenced a notes, was lien valid of tbe portion assets, sufficient $242.33 tbe same, and was evidenced by open account and entitled to in tbe share rata tbe assets. pro distribution
This claim was resisted and on by plaintiff, Riley Company, tbe it for grounds (1) was usurious interest, void; that that in A. (2) claimant, fact and in truth tbe John Arringdale, was a partner of defendant liable corporation and, such, for the debts; (3) that, ¡in event, tbe lien favor alleged been of a petitioner bad reason subsequent displaced by and transaction agreement between tbe claimant and defendant for a substituted and lien. That company, providing later this last lien had registered, plaintiff’s bad been claim on thereby become tbe assets. prior Tbe receiver also tbe claim of tbe answered, resisting peti- COURT. IN THE SUPREME
IIiley Seaks. same was usurious (1) that tioner, Arringdale, grounds on the awas etc. not, partner, if the claimant that, and void; (2) after who, to E. S. Martin, Esq., The cause was referred re- made a counsel, hearing testimony arguments the claim held, things, among which was port, claim lien prior valid petitioner, Arringdale, n $6,000, wit, to the amount of of the assets portion was a debt account notes, open with and that the some creditors general rata with other unsecured to be pro the receiver filed various Plaintiff and corporation. certain additional and, hearing, on the exceptions report agreed upon by of facts been findings having judgment favor exceptions gave court overruled the the referee. according report the petitioner, receiver, plaintiff having duly excepted, appealed and the this Court. McClammy Riley.
Herbert for Bellamy. Davis Davis appellant & <& Iredell Meares and Rountree Oarr Arringdale. J., very after the case: It stating appears, Hoke, referee, February, that on report full careful John A. of the first claimant, Arringdale, party aCo., into an S. P. part, entered with Sears, firm of S. and W. T. Taylor, M. composed Tloyd, loaned the the second party part, *4 firm sum be used them the $12,000 purchase said the to toC., in the N. Columbus, certain timber lands county other timber wit, 4,000 known as the and acres, Flippo lands, be section, purchased and land the amount to timbered that to and 20,000,000 feet, not less than the said and and other prop- have lien the lands purchased timber to work, in the machinery, etc., engaged erty, mill, appliances, sums to $12,000 agreed the said other secure the parties under the contract the assumed obligations the pursuant the the second parties part, second That part. esti- lands, the soon after the agreement, bought Flippo to O.] Riley v. Seabs.
mated contain between 15,000,000 16,000,000 to feet tim- did ber, but not other said buy any standing neigh- timber borhood, it or its successors though have bought “may logs.”
In reference to loan, contract, repayment all clearly contemplating logs timber and described the contract shall be cut either as after shipped logs have been sawed they lumber, into contains the provision of the second shall parties part $12,000 “without repay interest,” and, in addition, shall first pay to party as much as 50 part cents thousand on all or lum- per logs feet ber an to less as shipped, 20,000,000 feet, amount not than to the time these when shall be makes payments made, stipula- tion as follows: Parties of second
“(4) covenant and after part agree of 90 expiration days the execution of this agreement to commence to- to the the first repay pay party of part of $12,000 the sum aforesaid, advanced to them as rate at the $2of all per thousand feet for the lumber cut and logs shipped, shall not amount to less than payments month, $500 per 10th payable of each month. same is to be The day credited of the by the first of the party part parties second each part month as paid. the second
“(5) further covenant and part that after agree repaid of the first they party part the sum of cash $12,000 aforesaid, advanced which $12,000 to bear are to first they party cents thousand all them from per logs shipped by mill, also 50 cents thousand feet on per thousand every feet lumber and all kinds cut at their mill. These payments are to be made on or lumber cut from the logs shipped of the execution of this are time but these agreement, payments not to to be made has begin $12,000 until after been original has aforesaid. And after that been repaid repaid par- are make these in the same ties second $12,000, wit, they manner as were to they repay $500 thousand and no less than month on j>er $2 to pay 154—33
514 IN THE SUPBEME COUNT.
Riley v. Sears. the first all until to the of logs party part cut, they all 50 feet logs sum cents thousand equal per shipped to all lumber cut from the beginning cents thousand per feet of the second part this after which time contract, parties first a sum equal are to of the pay party part monthly each thousand feet of lum- to 50 cents thousand feet upon per it is declared hereby ber cut month. And during the last for and the consideration be of the essence of this contract of the second are to $12,000, parties part pur- loan country chase section of the possible all the timber first part hereinbefore and to named, party all 50 cents feet on cents logs shipped thousand per Provided, on all sawed as aforesaid: thousand feet lumber not to for of the parties part pay anything that the second to be the lumber'cut and used them structures used by of the business herein referred to.” conduct And further: of the further
“(I) agree Parties second covenant part and with the of the first that if fail to make they party part as hereinbefore any payment, part payment, stipulated be or if fail of the other made, they agreements to perform herein made time and in the manner stipulated, at the then all of said shall become due immediately paya- at of the first part, including any ble option party and all which said suffer damages party part may first contract, reason of the breach of this any provision thereof; and the the first authorized party hereby to forthwith take possession property second a lien has been is in- upon given, tended this and to sell the same given, contract law, auction after due advertisement public according to said aforesaid.” purpose paying damages debts after the shortly contract, Tay- That execution this lor retired from firm of S. P. Co., receiving firm cost his assets of the were taken price T. over W. Sears and S. M. under the firm name of Lloyd, firm, W. T. Sears & soon thereafter with very associates, organized under corporation, defendant 0.] *6 Kilby Seaks. tbe Co., T. Sears & Incorporated,
tbe name and of W. style That firm all to tbe defendant corporation. assets passing in days all within tbe 90 provided these took changes place any of tbe and that payments, tbe contract for tbe beginning A. for or on account of all to John Arringdale and incor- him defendant company, tbe contract were made to porated. and em facts counsel agreed upon by
From tbe additional that under court, bodied in tbe of tbe judgment appeared to and including and contract and down by virtue tbe A. bad to John corporation paid tbe defendant July; 1906, in loan, $12,000, of tbe addition tbe amount Arringdale It was further made $2,627.20=$14,627.20. ap thereto A. claim 1907, Arringdale making that on 28 John pear, May, n ¡onder said contract, due tbe further amounts ;and an accounting together bad defendant signed due at $7,442.33, thereupon fixed tbe balance upon tbe following agreement: S. P. & Co. executed
“Whereas, 1904, Taylor on February, to tbe said second party a certain tbe agreement mortgage tbe said of tbe second party were to part, they whereby of lumber certain thousand feet part money per amounts a lien cer- at and secured Wananisb, C., upon to be cut W. and whereas T. agreement; tain described said property obliga- & succeeded to tbe Co., rights Sears partnership, Sears & and W. T. tions tbe said of said obligations tbe Inc., rights succeeded' all in- indebtedness, which have assumed this partnership as tbe full at $7,442.33 has been fixed by agreement debtedness (cid:127) tbe said agreement: amount at this time due under of tbe premises for and consideration “Now, therefore, tbe said $1 in band paid, and tbe further consideration of tbe to execute to tbe agrees party of tbe first part party herewith tbe certain notes of even date lieu part second that tbe said con- indebtedness, agreed it is further said date 4 to, February, above referred mortgage tract all tbe notes executed shall remain in full force and effect until same shall full, and that tbe agreement paid under IN THE SUPREME COURT. Riley v. Sears. secured tbe said as full and agreement mortgage manner as tbe debt was And it ample secured. further on failure first agreed tbat of tbe parties tbe or all of tbe notes executed pay any' under tbis agreement, then tbe of tbe second party part may proceed foreclose tbe lien contained of 4 tbe at February, 1904, time after default in tbe thereof. And it is payment agreed of tbe by the second tbat when all tbe party notes provided for under tbe terms of tbis contract are in full be will cancel said contract and release liens claimed thereunder.” *7 Same being signed “W. T. Sears & John A. duly by Inc., Co., Arringdale.”
Tbat of tbis $1,200 amount was money May, 1907; $243 was in tbe of an form open account and tbe remain- der of the claim
two years the time the repayment was received begin, back his $12,000 and in addition $2,627.20; so if this that, a as the loan, termed it, he had already received for when these notes now money sued on were given the princi pal sum and twice the amount of nearly interest allowed by law. notes, therefore, These for being given an additional amount claimed, are based on a entirely usurious consideration, and no thereon can be had. recovery Faison v. Grandy, C.,N. Ward 827; Sugg, v. 113 N. C., It is in earnestly sisted for the petitioner this is a charge not for lent money in the ordinary acceptation things, but a only profit-shar ing agreement, and as such within the purview not to 1 statute, we cited Paige Contracts, 755; Ovis v. Curtis, Barrow, 157 N. 657; v. Y., 187; N. Y., Crift v. Scupps Crawford, 123 in Mich., 173, other cases sup- SUPREME COURT. IN THE V. SEARS.
RlLET in in and as instanced As stated Paige of the port position. in to the effect that are decisions cited, cases there some that one an agreement a general partnership contract from the shall receive money capital who advances partners legal in excess of the an annual return the business proceeds of held, It has been is usurious. necessarily rate interest not ja for with enterprise some business too, that loan money in for interest and as a substitute for sharing profits provision cases so. But while these rate not be may excess' the lawful condi under proper as sound recognized applied transaction, for an usurious when not cloak tions and contract within in not, bring present facts do our opinion, into where the lender entered This is no case the principle. taking for its debts and incurring responsibility partnership is of money venture. Nor it a loan full of the risks on such risks. for use is made dependent its charge or enter whether the venture agreement, But under for repay is failed, stipulation or there succeeded prise lent and full amount of the money of the ment event not less than of 50 cents thousand on use charge its from Paige In the citation feet of timber. 20,000,000 the amount of “If, however, probable says: author further is the lender the share is estimated profits expressed receive expressed on the of such earning profits, contingent nor made profits case of Weaver And the transaction is usurious.” Deemer, Burrett, Judge, delivering opinion, quotes supra, in 2 p. Paige, Walworth with from Ghancellor approval a pre “Whenever, by as follows: or for a loan of interest rate legal beyond mium profit secured indirectly, is, directly either advance of money loan or statute, unless the violation it is a lender, circumstances some contingent with is attended advance A contingency hazard. evident is put which the principal hazard principal little or with no nominal, merely effect legal alter the advanced, cannot loaned the money a negotiation . . . Where there the transaction. *9 return agrees to and the borrower money, or of loan advance TERM, 1911. N. O.] Riley v. Seaks. advanced, lending: a contract of events, at all it is
the amount . . . or the transaction disguise and whatever shape rate of interest is intended if a the assume, beyond legal profit of bor- of the be made out the necessities or improvidence rower, is usurious.” otherwise, the contract availa- is not It is further contended that the of plea the notes, ble because under the contract between against these same May, 1901, claimant and the date 28 corporation were as of the given part property purchase price W. T. Sears & Co. successors to S. P. Co. if
It is a sound that one undoubtedly buys prop proposition and note affected with erty agrees take up maintain the he cannot defense purchase price, reason usury against note, and sufficient very him that as is not for loan of obligation money.
ease of Construction Stuckey Va., v. W. p. cited, other cases are authorities for this apt position; Doster v. English, C., 339, our own Court Yarboro C., 204, 139 N. of the Hughes, recognition principle. no such here. As conclu Rut in our case opinion presented sion is not a correct of the contract law, interpretation were a 1907, that the notes given purchase price nor of the is there corporation, the assets partnership record that would justify uphold evidence any of fact. before after the Long this, is, shortly finding were made on the and before any payments loan show retired same, Taylor, having the facts of his firm, receiving price partner cost Sears & of two of the original W. T. ship composed firm, assets, formed and the taken over having was with over others, soon and took incorporated was thereafter firm all of its obligations. of the last and assumed assets So far as the contract this loan was concerning con an which the cerned, arrangement by it was and this was substituted as successor former parties, knowledge recognition claimant, done with the and full all under the con Arringdale, any made corporation, tract have been *10 THE IN SUPREME COURT. Riley v. Sears. Arring- it been between the said concerning transactions in to this, the reference the company. Accordingly, dale and finds, things: referee among properly “4. after the execution of said date agreement, That the firm of between John A. February, 1904, Arringdale the S. P. the said in of said firm, agree- & consequence or erected mill at and soon after ment, Wananish, purchased firm of the or erection of said the W. T. Sears purchase mill, Sears, & M. and W. of the said S. T. composed Lloyd soon the bought Taylor, the interest of thereafter M. the Sears, organized said S. W. T. and others cor- Lloyd, W. T. Sears & and all fur- poration Co., Incorporated, called ther under said were had between said transactions firm of W. cor- and said T. Sears Co. and said poration.”
The re embody contract 1907 was the subsequent only sults of an between the which the accounting parties by amount due under and virtue of the contract was ascer original tained, its Both obligations its liens recognized, preserved. the recitals and show this its the contract to be body in and that the purpose accounting only recognition A position assumed the 1904 and acted on since. of all case, then, which, is with the consent the presented was substituted as successor to the and, evidence, the facts affect original parties, usury ing is not effaced removed. In 29 original obligation Am. Eng. Ene., is fol p. position recognized as lows : “In whether a ascertaining new is novation obligation so through change relieve of the taint obligors original indebtedness, inherent the fact on the new obligors obligation and those on the old one are not same is not conclusive; there though change, the new still obligation may renewal of or a sub merely stitute for usurious indebtedness and so tainted with the original usury.” And the case of Holland v. Cham bers, 22 cited in Ga., 193, is not support un principle, like the one here. presented made that claims in this case is plea good
N. 0.]
Riley Seaks.
lack of a
intent
is without force. The corrupt
intent
corrupt
is the
the decisions
intentional
more for
spoken
charging
law
allows, and, according
lent than the
construc
our
tion,
stands
revealed
purpose
clearly
face
instrument. Nor can
be maintained
position
plea
cannot be made
the receiver
because the same
*11
The
personal
to
debtor.
is
to
plea
open
Webb on
417.
their
The
is that
privies.
Usury, p.
theory
is a
a
transaction
debtor’s estate is wrongfully
depleted, and
one
ordinarily
to
having
legal right
protect
the estate can avail himself of the
In 7 Wait’s Actions
plea.
Defenses,
it is said:
p.
right
“The
to recover back
a
in
paid
loan,
for
excess of legal interest, where that
is
right
allowed, is not limited to the borrower. The injury
done
is to the
usurer
estate
borrower, and
to
right
receive back the amount of
in
interest
excess of the legal
passes
rate
to
assignee
v.
bankruptcy,” citing Wheelock
Lee, 64
a
Y.,N.
and to
receiver
242;
appointed in proceedings
to
Palen v.
46
supplementary
execution,
Bard.,
citing
Johnston,
Wareham,
21;
Bank v.
and see
Y., 635;
49 N.
Co. v.
Trust
Bank,
Stern,
In
143;
re
Fed.,
Fed.,
956;
v.
Dunford
Bank,
Riley Seaes. ment and amount in sucb allegations time before action are lield be sufficient. 22 PI. and Pr., p. 502; Webb are Usury, While the facts set forth p. fully general the answer too report, allegations entirely constitute cause and the facts do not case action, present where an amendment should be now allowed furtherance of recovery. will error, report judgment There reformed accord with this decision.
Error.
APPEAL BY PLAINTIFF. J. held, The Court on the the re- having appeal Hoke, ceiver in this cause, claimant, transaction between the A. John and defendant Arringdale, simply 1hat of loan on usurious money, follows that on the appellant’s facts said position, Arringdale was partner, necessarily disallowed, and the claim of said peti- tioner, void in having been declared toto because based upon usurious consideration, raised as to question by appellant priority liens between the plaintiff said Arringdale *12 is no longer of moment. For it is reason, like not necessary to consider or pass upon plaintiff’s contract plea, be- tween the usurious. There is conflict in the decisions as to whether and under what circum- stances another creditor himself, may, plead usury protec- tion debtor’s qstate. weight would authority seem to be such a against entering under condi- plea, ordinary tions. sec. Paige Contracts, 503; Webb on Usury, p. Without deciding however, as is no in- question, longer volved, and under the made on the rulings receiver’s appeal, report judgment below, sustaining the claim of the will petitioner, Arringdale, formally reversed, and, our discretion, the costs of the will appeal be taxed against ap- pellant. Rayburn v. Casualty N. C., 376; Revisal, sec. 1279.
Modified. notes for an additional amount to that of the actually loaned, legal interest, entirely are based on an consideration, recovery usurious and no thereon can be had. Usury Contracts—Partnership—Test. — purchase standing When is loaned to timber and to be repaid at a certain rate feet thousand when the timber 'sawed, per month, partner- not less than a fixed sum there no ship arrangement lender, between the borrower so as to operation purview against take the matter from the of the law usury. THE IN SUPREME COURT. Riley v. Seaks.
Notes
was evidenced
number
notes
aggregat-
í
ing $6,000 and
tbe
being
notes referred to in tbe above agree-
ment and tbe same
on
sued
demanded in tbe
or
present petition.
these facts
Upon
we are of
findings,
tbat
tbe
opinion
contract between
these
which tbe
was
ob-
tained
usurious,
and tbat no further collection
be
may
had thereon.
In reference
tbe case presented,
be
usury may
said to exist where unlawful
interest has been knowingly
taken, reserved, or
stipulated
loan of
In its
money.
modern
and in more
acceptation
comprehensive terms, it has
been
well
in tbe
very
defined
Code as
Georgia
follows: “Usury
is tbe
or
reserving
taking or contracting
take,
to reserve and
either
or
directly
indirection,
sum for
greater
the- use of
than
tbe lawful interest.” And our
statute
tbe sub-
ject declares,
tbis
“Tbat
or
taking, receiving, reserving,
charg-
ing greater rate of interest than 6
cent
per
annum, either
per
before or after
interest
accrue,
tbe
when
may
done,
knowingly
shall
abe
forfeiture of tbe entire
.
.
.”
interest
and in
effect that where a greater
rate has been
double the
paid,
amount
be
tbe
may
recovered
tbe
party paying
same or his
legal
representative,
set
amount
be
up by way
etc.
counterclaim,
Revisal
sec. 1951. Tbe courts of tbis
country
been very generally insistent and alert in
en-
tbe
forcement
these regulations
concerning
our own
usury,
N.
1911.
term;
SPRING-
517
0.]
V. SEARS.
UlLEY
ill
Court,
well-considered
many
decisions construing our stat
ute, bas established the
principle
stated
the Code
expressly
“That
Georgia,
whenever,
‘directly
un
by indirection,’
lawful interest has been
knowingly taken
charged,
pro
visions of the
Parker,
statute
must
v.
applied.” Tayloe
N. C., 418; Carter v. Ins.