Opinion
16881, 16882.
JANUARY 9, 1950.
Declaratory judgment. Before Judge David S. Atkinson. Chatham Superior Court. January 17, 1949.
Aaron Kravitch and Casper Wiseman, for plaintiff in error.
John M. Brennan, contra.
1. Code, Ann. Supp., § 57-116, authorizing interest to be computed in a manner that would exceed eight percent applies only to "lending money"; and where, in a sale of realty for a cash price, the interest is computed in accordance with the above Code section so as to amount to more than eight percent, it is usurious and all interest is forfeited.
2. It was not error for the trial judge to refuse to allow attorney's fees.
Nos. 16881, 16882. JANUARY 9, 1950.
This case was originally filed in this court, but transferred to the Court of appeals by reason of an agreement in the lower court between the parties, which agreement eliminated all issues that would authorize this court to take jurisdiction. See Graham v. Lynch, 205 Ga. 230 ( 52 S.E.2d 850). The case was transferred back to this court by reason of an equal division of the Judges of the Court of Appeals, Sutton, C. J., MacIntyre, P. J., and Worrill, J., being for affirmance, and Felton, Gardner, and Townsend, JJ., being for reversal.
T. J. Lynch filed a petition against L. V. Graham for a declaratory judgment and other relief, alleging in part: That Lynch purchased certain described realty from Graham for $4750, paying $950 cash, leaving a balance of $3800. Graham gave Lynch a warranty deed, and simultaneously Lynch reconveyed the property to Graham by security deed to secure the unpaid balance of $3800. In payment of the $3800, interest at 5 percent was computed for a period of ten years, making interest $1900, which, when added to the principal of $3800, made a total of $5700, and this amount was then divided into 120 monthly payment notes of $47.50 each. This computation of interest, it was alleged, was illegal and usurious, and therefore all interest was forfeited. At the time of filing the petition, Lynch had paid 33 of the notes, aggregating $1567.50; and he asserted that this amount should be applied to the payment of the principal of $3800, and leave a balance of $2232.50, which amount Lynch tendered to Graham and continues to tender him; that he had further offered to Graham the principal amount of $2232.50 plus interest thereon at 7 percent per annum, but that Graham had declined to accept either tender; and that Graham had acted in bad faith and had been stubbornly litigious. The prayers were for a declaratory judgment declaring all interest forfeited and a judgment for attorney's fees.
In his answer Graham asked the court to construe Code § 57-116, so as to apply the same to the transaction here involved, or in the event it should not be applicable, to hold that he is entitled to interest on the principal at the rate of 7 percent per annum.
On a hearing before the judge without a jury, it was agreed that the only issue involved, with the exception of attorney's fees, was: (a) "Whether or not Graham, as seller of the real estate involved, had the legal right to contract with Lynch, the purchaser thereof, for a deed to secure debt whereby said property was reconveyed as security for purchase-money notes representing the balance of the purchase-price to be paid on the monthly-payments plan at five (5%) percent interest per year on full amount of loan, which interest exceeds the maximum of eight (8%) percent simple interest allowed by law, said debt deed purchase-money notes having been executed pursuant to section 57-116 of the Code of Georgia, which permits charging of interest of six (6%) percent or less on monthly payment plan; and (b) if Graham had no such right, is he entitled to seven (7%) percent simple interest on said indebtedness, or is the entire interest forfeited pursuant to section 57-112 of the Code of Georgia?" There was evidence to show that the terms of the contract were in accordance with the stipulation, and also evidence as to what were reasonable attorney's fees for efforts made to avoid litigation.
The trial judge held that the interest charges under the contract were illegal and should be forfeited, that the amount already paid should be applied to the principal, and that the plaintiff was only obligated to the defendant for the unpaid balance of the principal; and the judge denied the plaintiff's prayer for attorney's fees. Both parties excepted. Graham assigned error on the ruling that he was only entitled to the unpaid balance of the principal debt, and Lynch, by cross-bill, assigned error on the denial of attorney's fees.
1. The Code section here in question, as amended by Ga. L. 1937, p. 463 (Code, Ann. Supp., § 57-116), is as follows: "Any person, natural or artificial, in this State, lending money to be paid back in monthly, quarterly, or yearly installments, may charge interest thereon at six percent per annum or less for the entire period of the loan, aggregating the principal and interest for the entire period of the loan, and dividing the same into monthly, quarterly or yearly installments, and may take security therefor by mortgage with waiver of exemption or title or both, upon and to real estate or personal property or both, and the same shall be valid for the amount of the principal and interest charged; and such contract shall not be held usurious."
Under Code § 57-101, it is provided: "The legal rate of interest shall be seven per centum per annum, where the rate per centum is not named in the contract, and any higher rate must be specified in writing, but in no event shall any person, company, or corporation 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."
The provisions of Code § 57-116, being in derogation of § 57-101, should be strictly construed. It applies only to "lending money," and the provisions for the computation of interest are not applicable where realty is purchased, the purchaser is given a warranty deed and simultaneously executes notes and a security deed to the seller. National Bondholders Corp. v. Kelly, 185 Ga. 788 ( 196 S.E. 411); Garner v. Sisson Properties, 198 Ga. 203 ( 31 S.E.2d 400).
Code § 57-102 provides: "Usury is the reserving and taking, or contracting to reserve and take, either directly or by indirection, a greater sum for the use of money than the lawful interest." Under § 57-112, any person violating the provisions of § 57-101, by charging more than the maximum rate of interest, forfeits the entire interest. Where land is sold at a cash price, but on deferred payments with a greater rate of interest than allowed by law, the contract is usurious. Irvin v. Mathews, 75 Ga. 739 (2); Bird v. Benton Brother, 127 Ga. 371, 373 (4) ( 56 S.E. 450); E. Tris Napier Co. v. Trawick, 164 Ga. 781 ( 139 S.E. 552).
Accordingly, it was not error for the trial judge to hold that all interest charged was forfeited, that the payments made should be credited on the principal, and that Lynch was only obligated to Graham for the unpaid balance of the principal.
2. Whether, under Code § 20-1404, making provision for the expense of litigation, attorney's fees could be properly awarded in the instant case (see Traders Insurance Co. v. Mann, 118 Ga. 381, 45 S.E. 426), need not be determined. Assuming that attorney's fees were allowable, the court found: "The court does not think the case has been made on the facts showing the defendant was stubbornly litigious."
Judgment affirmed on both the main bill and cross-bill of exceptions. All the Justices concur.