Intеrest is the compensation allowed by law, or fixed by the parties for the use, or forbearance, or detention of money. Black’s Law Dictionary.
The legal rate of interest in North Carolina is six per cent per annum for such time as, interest may accruе, and no more. C. S., 2305. An agreement by the parties for the payment of interest in excess of the legal rate, made in this State and to be performed therein, is unlawful; such an. agreement is in violation of the statute and is contrary to the public policy of this State, as declared by its General Assembly. No cause of action founded upon such an agreement can be maintained in the courts of this State. The agreement is void; there can be no recovery in any court in North Carolina upon a promise or agreement by a borrower to pay as compensation for the use of money a sum in excess of interest at the legal rate, where such agreement is made within this State, and both parties contemplate that it shall be performed therein. The law in this respeсt is well settled, and generally understood by all persons, firms, or corporations doing business in North Carolina. From time to time, however, our courts are called upon to determine whether or not the law has been successfully evaded by those who are not cоntent to lend money in North Carolina at the legal rate of interest. Attempts to evade the law have not been generally successful. Our courts do not hesitate to look beneath the forms of transactions alleged to be usurious in order to determine whethеr or not such transactions are in truth and in reality usurious. In
Bank v. Wysong,
In North Carolina the penalty, as prescribed by statute, for taking, rеceiving, reserving, or charging for the use of money a sum in excess of interest at the legal rate is forfeiture of the entire interest which the
*425
note or other evidence of debt carries with it, or which has been agreed to be paid. The forfeiture will be enforced against the usurer-, when he seeks to recover upon the usurious contract or transaction. His debt will be stripped of all its interest-bearing quality, and he will be permitted to recover only the principal sum loaned. If a sum in excess of interest at the legal rаte has not only been charged by the lender, but has also heen paid by the borrower for the use of money, then the person, or his legal representative, or the corporation by whom the same has been paid, may recover twice the amount рaid in an action in the nature of action for debt. C. S., 2306.
Sloan v. Ins. Co.,
This action is for the recovery of twice the amount paid by the George H. Willard Motor Company, a corporation organized under the laws of the State of North Carolina, with its principal placе of business at Winston-Salem, N. 0., to defendant, a corporation organized under the laws of the State of Delaware, with its principal place of business in the city of Baltimore, in the State of Maryland, as compensation for the use of money, the amount so paid being in excess of interest at the legal rate npon the amounts loaned. The transactions upon which the several amounts were paid extended from 23 June, 1924, to 23 January, 1925. The aggregate of the amounts so paid between said dates is $1,145.40. The Georgе H. Willard Motor Company was adjudged a bankrupt on 6 March, 1925, and plaintiff, a resident of Forsyth County, has been duly appointed a trustee in bankruptcy for, said company. This action was begun on 22 April, 1925.
Defendant’s first assignment of error, upon its appeal to the Superiоr Court, was based upon its exception to the refusal of the county court to sustain its motion made in said court, before the jury was empaneled, that the action be dismissed on the ground that plaintiff, trustee in bankruptcy, cannot maintain the action, it being for the recovery of a penalty prescribed by statute. Defendant contends that this penalty can be recovered only by the person or corporation by whom usury has been paid, and that the right to recover same does not pass to or vest in the trustee in bankruptcy of such person or corporation. Hpon its appeal to this Court, defendant assigns as error the refusal of the judge presiding in the Superior Court to sustain this assignment of error.
Hpon the facts alleged in the complaint, the George H. Willard Motоr Company, by the express provisions of the statute — C. S., 2306 — at the date of its adjudication as a bankrupt, had a right of action, in the nature of an action for debt, against the defendant for the recovery of the amount demanded in the complaint. This right of - action, together with all other rights of action arising upon contract, or from the unlaw *426 ful taking or detention of, or injury to the property of the bankrupt, passed to and vested in the trustee in bankruptcy, upon his appointment and qualification as such trustee. National Bаnkruptcy Act, sec. 70. The cause of action alleged in the complaint is founded upon a statute; the statute, however, defines the action as one in the nature of an action for debt. It is for the recovery of twice the amount unlawfully taken by defendant from the bankrupt. The amount so taken is wrongfully detained by defendant, to the injury of the estate of the bankrupt. The right to recover twice this amount, by operation of law, has vested in the plaintiff, who as trustee in bankruptcy may maintain the action.
In Black on Bankruptcy, the author says: “A right of action under а state statute to recover back usurious interest paid (or double the amount of it, or a penalty for exacting it, as the case may be) will vest in the trustee in bankruptcy of the borrower, since the injury done by the usurer is an injury to the property or estate of thе borrower, and not a personal tort.” Sec. 344.
This statement of the law, taken from the text, is supported by authorities cited in the note. The identical question presented by defendant’s assignment of error was decided in
Reed v. American-German National Bank,
In
Cleland v. Anderson,
*427 In answer to the third and fourth issues, submitted at the trial in the county court, the jury has found that defendant did not own and sell the automobiles described in the conditional sales contracts offered in evidence; that the consideration for the notes executed by the said motor company, payable to (.he order of defendant, and thereafter paid by said company to defendant, was money loaned; and that defendant knowingly took, received, reserved, and charged said motor company, as compensation for money loaned, sums in excess of interest thereon at the legal rate.
We find no error in the refusal of the judge of the Superior Court to sustain defendant’s assignments of error with respect to these issues. All the evidence was to the effect thаt the George H. Willard Motor Company purchased the automobiles from the manufacturer, who shipped the same from the factory to the motor company, at Winston-Salem, N. C., upon bills of lading, with drafts attached for the purchase price of the said аutomobiles; that these drafts were paid by the motor company by checks drawn on its bank account, and that upon payment of said drafts, the said automobiles were delivered by the railroad company to the motor company. The title to said automobiles never passed to or vested in defendant, either actually or constructively. The conditional sales contracts, in which defendant is described as vendor and the motor company as purchaser of said automobiles, were manifestly used for the purpose of concealing the real nature of these transactions. These transactions involved loans of money by defendant to the motor company; they were not sales of automobiles by defendant tp the motor company.
Defendant admits that upon these various transactions, extending from 23 June, 1924, to 23 January, 1925, the motor company paid to it sums of money aggregating $1,145.40. These sums were called “finance charges”; they were in fact charges for the use of money, and exceeded interest аt the legal rate upon the amounts loaned. The transactions were clearly usurious; they were admittedly entered into in North Carolina, and not in the State of Maryland.
Defendant, at the trial in the county court, relied chiefly upon itp contention that the cоntracts upon which the motor company to it, as compensation for the use of money, sums in excess of interest at the legal rate, were to be performed in the State of Maryland, and not in the State of North Carolina, and that therefore there could be no recovery in this action.
Plaintiff contended that although the notes which were executed by the motor company were, upon their face, payable in the city of Baltimore, it was contemplated by both defendant and said company thаt they were to be paid in North Carolina.
*428 After stating the contentions of both, plaintiff and defendant, with respect to the second issue, the court instructed the jury as follows :
“Now, gentlemen of the jury, if the place of payment-was specified as in the State of Mаryland, for the purpose of avoiding the usury laws of North Carolina, and if it were a scheme or method to avoid the usury laws of North Carolina, and that was the reason for the place of payment being provided in Maryland, then your answer to the second issue wоuld be No’; that they were not to be performed in Maryland, because if providing the place of payment as Maryland was a scheme to evade and whip around the usury laws of North Carolina, and was not done in good faith, then the place of paymеnt, so far as the law is concerned, would not be in Maryland.”
In
Meroney v. Building and Loan Asso.,
We find no error in the trial of this action in the county сourt’. Upon the facts as- found by the jury, plaintiff is entitled to recover of defendant twice the amount paid by the George H. Willard Motor Company to the defendant for the use of money loaned, said amount being in excess of interest at the legal rate upon the amounts loaned. The judgment is
Affirmed.