Opinion
37496.
DECIDED FEBRUARY 5, 1959. REHEARING DENIED MARCH 24, 1959.
Action to recover usury paid. Fulton Civil Court. Before Judge Henson. October 30, 1958.
Johnson, Hatcher Meyerson, Henry M. Hatcher, Jr., for plaintiff in error.
Fraser Schell, Young H. Fraser, contra.
Since the petition and exhibits thereto did not show or allege that the plaintiff was entitled to recover usurious payments made within one year prior to the filing of the action, the court erred in overruling the general demurrer and the special demurrers touching this question.
DECIDED FEBRUARY 5, 1959 — REHEARING DENIED MARCH 24, 1959.
Lee Lindsey sued the First Federal Savings Loan Association of Atlanta to recover usurious interests paid within one year prior to the filing of the action. The petition alleged substantially as follows: that on or about March 16, 1954, the plaintiff executed a note to the defendant in the sum of $859,600, a copy of the note attached showing the principal due six months from date and interest due thereon payable monthly "at the rate of five percent per annum on the average balance of advances." A disbursement sheet given at the execution of the note shows a service charge of $21,490 (2 1/2 percent of the principal) and shows that $798,859.50 was held for construction and inspection. Both the note and disbursement sheet show that the note was given for improvements on Burgess Hills Subdivision; that subsequently on August 5, 1954, the plaintiff executed an additional note to the defendant in the amount of $30,000 due September 16, 1954, the same maturity date as the note of March 16, 1954, interest likewise at "five percent per annum on the average balance of advances." A disbursement sheet given at the execution of the note shows a service charge of $750 (2 1/2 percent of the principal) and shows that $29,100 was held for construction and inspections. Both the note and disbursement sheet show that this note likewise was given for improvements on Burgess Hills Subdivision; that to the petition is attached a schedule of all advances made to the plaintiff and all repayments made by him with the balances owed at given dates. From this schedule it appears that on June 13, 1955, there was a balance due on the foregoing notes of $63,900. By June 28, 1955, additional amounts of $68,969.40 had been repaid, or $5,069.40 more than the balance then due on the notes of March 16, 1954, and August 5, 1954; that on June 13, 1955, the plaintiff executed another note to the defendant in the amount of $100,000, payable in twenty-four equal monthly installments beginning twelve months from date, bearing interest at "8 percent per annum on the average balance of advances", interest payable monthly. The accompanying disbursement sheet shows a service charge of $523.75, a disbursement of $33,900 "for selling price and quit-claiming property," and $65,002 held for construction. This note and disbursement sheet show the proceeds were to be used in Longdale Park Subdivision; that on August 12, 1955, the plaintiff executed another note to the defendant in the amount of $100,000 payable in twenty-four equal monthly installments beginning twelve months from June 13, 1955, bearing interest at "8 percent per annum on the average balance of advances", interest payable monthly. The accompanying disbursement sheet shows a service charge of $500 and $99,000 held for construction. This note and disbursement sheet show the proceeds were to be used in Longdale Park Subdivision; that on October 6, 1955, the plaintiff executed a further note to the defendant in the amount of $49,000 payable in twenty-four equal monthly installments beginning twelve months from June 13, 1955, bearing interest at "8 percent per annum on the average balance of advances", interest payable monthly. The accompanying disbursement sheet shows a service charge of $245 and $48,510 held for construction. This note and disbursement sheet show the proceeds were to be used for improvements in Longdale Park Subdivision; that on December 22, 1955, the plaintiff executed a further note to the defendant in the amount of $15,000 payable in twenty-four equal monthly installments beginning twelve months from June 13, 1955, bearing interest at "8 percent per annum on the average balance of advances", interest payable monthly. The accompanying disbursement sheet shows a service charge of $75 and $14,850 held for construction. This note and disbursement sheet likewise show the proceeds were to be used for improvements in Longdale Park Subdivision; that the schedule of advances and repayments attached to the petition is a consolidated schedule of all advances to and all repayments by the plaintiff without regard to the notes under which the advances were made and by the terms of which payments became due and interest was charged. Attached also is a consolidated schedule of all interest paid without regard to the notes under the terms of which the interest became due; that the consolidated interest is alleged to total $39,158.16, which when added to the service charges totaling $24,158.75 "for which (it is alleged) no service was rendered" "equals a total interest payment of the amount herein sued for, to wit $63,316.91"; that on the basis of these consolidated schedules and the allegation that no service was rendered for the service charges, it is alleged that "the actual interest rate charged by the defendant was 9.19 percent, said rate being usurious and above the maximum rate permitted under the laws of the State of Georgia." By amendment to the petition it was alleged "that the rate of usurious interest set out in said petition was determined by computing the rate of interest charged, including both interest as such and service charge, on the outstanding daily balances owed by the plaintiff to the defendant." It was further alleged that "Even had the daily balances not been reduced on account of payments made prior to the maturity date of the note, and even though the defendant had been permitted to charge interest at the contract rate from the date of said payments to the date of the maturity of the note, said additional interest permitted to be charged, if under the law the same is permitted, would not have reduced the interest actually charged to the legal contract rate of eight percent (8%), and permitting the defendant to take credit for such amount upon its interest account between the defendant and the plaintiff, the transaction would still be tainted with usury." By amendment the plaintiff alleged further "That to secure said notes petitioner was required by defendant to execute a security deed to the defendant conveying title to the entire tract of land known as Longdale Park Subdivision, and that whenever a house was completed in said subdivision the defendant executed its quit-claim deed to the lot upon which the house had been constructed and required the plaintiff to pay the major portion of the sale price received upon the principal of said notes." By final amendment it was alleged "That all of the notes referred to in paragraphs 3 and 5 of said original petition, together with all of the disbursement sheets referred to in paragraph 6 of said original petition, constituted one transaction, said transaction being a construction loan for the building of houses in two (2) subdivisions in DeKalb County, Georgia, one being known as Burgess Hills and the other being known as Longdale Park Subdivision; said houses having been constructed on the two subdivisions simultaneously and under the same construction loan agreement with the defendant."
The court overruled the general and special demurrers of the defendant in the trial court and it excepts.
This is an action to recover usury paid on an obligation within twelve months before the institution of the action. Code § 57-115. The basis and theory of the action is that, treating all of the dealings alleged between the parties as one transaction, the plaintiff paid the alleged amount of usury to the defendant within one year prior to the filing of the action. Assuming that the petition otherwise shows all the elements necessary to a cause of action of this kind, unless the petition, construed against the plaintiff on demurrer, shows that the amount sought to be recovered, or a part it, was paid as usury to the defendant, within one year prior to the filing of the action, no cause of action is set out. This is the only question necessary for decision in this case. The answer to the question depends on the proper construction of the petition as amended. The trial judge ruled that a cause of action was stated and based his conclusion on exhibits to the petition which showed that every note signed by the plaintiff was marked "Paid" on July 23, 1956. The suit was filed July 31, 1956. If the petition and exhibits showed no more than that the notes were paid on July 23, 1956, the trial court would have been prima facie correct in his ruling. However, another exhibit attached to and made a part of the petition showed that interest payments were made on the notes monthly from May 31, 1954, through May 23, 1956. On demurrer the fact of these monthly payments is treated as the truth and their payment is consistent with the fact that the entire notes were stamped paid at a later date. The exhibits show that the principal and interest on the notes of March 16, 1954, and August 5, 1954, had been paid for more than one year prior to the filing of the petition, as well as other interest on another obligation. As against the date an entire note is paid the allegation that interest payments on the note were made monthly must control in the construction of this petition. Since the petition does not allege that the payments made on the obligations treated as one transaction within one year prior to the filing of the suit were usurious, the petition fails to set forth a cause of action against the general demurrer, and the court erred in overruling the general demurrer. The various special demurrers attacking the various allegations of the petition which showed an effort to collect payments made more than one year prior to the filing of the suit were also improperly overruled. The other special demurrers were properly overruled.
Nothing herein ruled shall be construed to mean that the plaintiff in the trial court, defendant in error here, may not by amendment to the petition in this case show by appropriate allegations that he is entitled to recover some sum as usurious interest paid within one year prior to the filing of this action.
The court erred in overruling the defendant's general demurrer and the special demurrers specially ruled on. The court did not err in overruling the other special demurrers. Judgment affirmed in part and reversed in part. Nichols, J., concurs. Quillian, J., concurs specially.
I do not agree with all that is said in the majority opinion, though the result reached appears to be correct. I think the execution of the notes by the plaintiff to the defendant and the payments made upon them were dealings between the parties constituting one continuous transaction, as in First Federal Savings Loan Assn. v. Norwood Realty Co., 212 Ga. 524 ( 93 S.E.2d 763). In my opinion it is not material to the decision of the case to determine whether the payments made by the plaintiff were with or without directions as to their application. This is true because the direction of payment to usurious interest is as illegal as the original contract to pay usury. Reconstruction Finance Corp. v. Puckett, 181 Ga. 288, 294 ( 181 S.E. 861, 101 A.L.R. 735). Before the debt is fully satisfied, as in Reconstruction Finance Corp. v. Puckett, First Federal Savings Loan Assn. v. Norwood Realty Co., both supra, and Lilly v. DeLaPeriere, 76 Ga. 348, a plea of payment may set up payments of usurious interest made at any time, even more than one year before the plea is filed. But where the debt has been fully satisfied and more than a year's time has elapsed since the payment of the usurious interest the debtor cannot institute an independent action to recover such payments, nor can he set them off against a claim arising out of a transaction not connected with that in which the usurious interest is charged. Bailey v. Lumpkin, 1 Ga. 392; Gramling, Spalding Co. v. Pool, 111 Ga. 93 ( 36 S.E. 430).
The line of demarcation between the two lines of cases is narrow and technical.
However, if a plea in the nature of a plea of payment could not, at any time before the debt is satisfied, set up the payment of usurious interest and require the forfeiture of all interest that would otherwise be due upon the debt there would be no meaning to Code § 57-112 which reads: "Any person, company, or corporation violating the provisions of section 57-101, shall forfeit the entire interest so charged or taken, or contracted to be reserved, charged or taken. No further penalty or forfeiture shall be occasioned, suffered or allowed." If the payment of usurious interest could be pleaded after the debt is paid and after more time than a year has elapsed, Code § 57-115 would be meaningless. The latter Code section reads: "No plea or suit for the recovery of such forfeiture shall be barred by lapse of time shorter than one year."
In my opinion the petition sufficiently alleges the plaintiff's right to recover some amount, and for this reason is not subject to general demurrer. Hudson v. Hudson, 119 Ga. 637 (1) ( 46 S.E. 874). The petition is open to several grounds of special demurrer and for this reason a reversal of the trial court's judgment is necessary.