Opinion
21106.
ARGUED JANUARY 10, 1961.
DECIDED MARCH 9, 1961. REHEARING DENIED MARCH 22, 1961.
Equitable petition. Fulton Superior Court. Before Judge Shaw.
Troutman, Sams, Schroder Lockerman, T. M. Smith, Harold McKenzie, Jr., for plaintiff in error.
Arnold Harris, Nancy Pat Phillips, Robert B. Harris, contra.
1. A petition which alleges that a deed absolute in form and accompanied by possession of the property therein described was in fact made by the plaintiff and delivered to the defendant for the purpose of securing a usurious loan, and sets forth facts clearly showing the existence of the loan, that the rate of interest was actually above that allowed by law, the scheme or device under which the unlawful interest was exacted or charged, and either that the plaintiff has tendered to the defendant the amount actually due him together with the lawful interest, or that such tender if for some good legal or equitable reason excused, sets forth a cause to have the deed decreed security for such loan; and that, upon the plaintiff's paying the loan, the deed be canceled, and for such ancillary relief as appears from the averments of the petition to be necessary in order for equity to do complete justice between the parties. In this connection, it is held that, where information as to the amounts to be credited on the loan is not accessible to the plaintiff but is reflected by books, documents, and other data exclusively in possession of the defendant, the plaintiff is entitled to an accounting with the defendant in order that the amount of such credit will be discovered and adjudicated.
2. A matter not passed upon by the trial judge is not for review by this court. An assignment of error expressly abandoned in the brief of counsel will not be considered.
ARGUED JANUARY 10, 1961 — DECIDED MARCH 9, 1961 — REHEARING DENIED MARCH 22, 1961.
In his petition in equity, filed on March 17, 1960, against Louis Isaacson, Raymond R. House alleges substantially the following: House owned on January 23, 1959, certain described realty in the city of Atlanta valued at $119,600, on which there was outstanding a first mortgage held by Realty Operations, Inc., with a principal balance of $79,153.42, and payments of $1,340.50 in arrears. A portion of the property was leased for $7,440 per year, and the remainder was occupied by House. By the terms of a lease, dated January 5, 1959, between House and Southern Fur Service, Inc., of which Isaacson was president, House was bound to make certain improvements, which he had been unable to do because of financial difficulties. House's financial condition was well known to Isaacson because of House's failure to meet the obligations of their lease.
House sought and obtained a loan from Isaacson on the following terms: conveyance of title to the realty to Isaacson by warranty deed, grant of a nonassignable option to repurchase to House, delivery of possession of the property and assignment of all leases to Isaacson, payment to Isaacson of $400 per month rental by House for the use of a portion of the premises, and House to make up any deficit between income and charges against the property; and nullification of the option to repurchase upon any default in the performance of the lease. By the terms of said option to repurchase, the option price was set according to the following terms: the cash payment was to equal the difference between a fixed option price and the principal balance due on the first mortgage. For instance, the fixed option price from February 22, 1959, to August 22, 1959, was $92,360. The amount due on the first mortgage on February 22, 1959, was $78,325.82. Thus the total cash payment necessary to exercise the option on February 22, 1959, was $2,034.18 as interest on the $12,000 loan at the rate of 200 percent per annum. If the option had been exercised on the last date prior to expiration, the fixed option price was $93,620. The principal balance on the first mortgage was $70,610, making the amount payable in cash in order to exercise the option $23,010, which would have constituted a payment of $11,010 as interest at the rate of 40.5 percent per annum. The warranty deed, the option, and the lease were executed on January 23, 1959, House did not actually receive the $12,000 from Isaacson; but, as shown by the closing statement, received only $1,950.83. The remainder of the loan principal was paid by Isaacson in liquidation of items which were then owed by House on the real property (such as past-due first-mortgage payments in the amount of $1,340.52), or amounts held in escrow to be used for the improvement of the property (for example, one-half the cost of improving front of building $550, and internal improvements of $1,250), and $500 owed by House as broker's commission and other expenses.
House alleges that the writings entered into between the parties do not constitute an unconditional absolute sale of the property, but rather the truth of the transaction is that the writings secured the repayment of the usurious loan in consideration of the money actually received by House and that paid by Isaacson on behalf of House. The form of this transaction was demanded by Isaacson, who knew of House's distressing financial situation. Isaacson's demands were acceded to because of House's urgent necessity, amounting to duress and coercion. Isaacson demanded that the transaction take this legal form so that House would have difficulty proving its true nature.
The option to repurchase was conditioned upon full and complete performance by House of his obligations under the lease agreement. The nonassignable option is exclusively in House, his heirs, executors, and administrators. For three months House fully performed his obligation under the lease at a cost to him of at least $12,000 but after that time his rent fell into arrears. Sub-lease or assignment of his lease was prevented by Isaacson's uncooperativeness. House thereafter offered to liquidate his indebtedness to Isaacson. But, maintaining the nullity of the option to purchase and his absolute ownership of the property, Isaacson refused House's offer, thereby preventing tender of the amount of indebtedness and obviating Georgia foreclosure law.
House has repeatedly demanded an accounting of the property's rental income, disbursements, improvements, remodeling, maintenance, and repairs; disbursements from the rent paid by House; credits and balance due on the $12,000 loan principal. The last such demand was contained in a letter addressed and delivered to Isaacson on February 23, 1960. These demands were refused, preventing tender of the amount due on said loan plus costs of improvements not paid from rental income. House alleges readiness and willingness to tender whatever sum is ascertained by an accounting to be owing. Isaacson has been in possession of the realty since January, 1959, so that he might properly apply rental income to first-mortgage payments and maintenance and operating costs. During his possession, Isaacson has received a large sum of money, the exact amount of which is unknown to House, but well known to Isaacson, who is chargeable with having disbursed this sum in the manner described above. The fund remaining after such disbursements belongs to House, and should be applied to reduce House's debt to Isaacson. The balance of the debt Isaacson has not accounted for or demanded, but House offers and will offer to pay this debt when its amount is ascertained. House prays that the accounting be conducted by a court-appointed auditor.
In December, 1959, Fulton County sought to condemn a portion of the premises in question. On March 7, 1960, a special master recommended an award of $39,000 to the condemnees. House claims ownership of this fund when it is paid into court subject to the liens of the first and second mortgage loans. House prays for the appointment of a receiver to administer this fund and to collect the income from the subject property to insure the proper application of these funds. Administration of the income of the property by Issacson endangers House's interest, in that the outstanding first mortgage could be foreclosed if Isaacson fails to keep that account current. House further prays that Isaacson be enjoined from taking any action with respect to the subject property which will jeopardize House's property rights. House prays further that the court decree his right to tender and repay the net amount due Isaacson; that the loan contract is usurious, relieving House of charges for the use of the principal, that, upon payment of the debt to Isaacson, the deed held by Isaacson be canceled; and that title to the realty be vested in House.
1. The petition in the instant case is patterned after that of Manget Realty Co. v. Carolina Realty Co., 169 Ga. 495 ( 150 S.E. 828), held by this court to sufficiently set forth a cause of action. The cases differ in no material particular. The cause is founded on the same principles pronounced in other cases. Parsons v. Fox, 179 Ga. 605 ( 176 S.E. 642); Rogers v. Blouenstein, 124 Ga. 501 ( 52 S.E. 617, 3 L.R.A. (NS) 213); Pope v. Marshall, 78 Ga. 635 ( 4 S.E. 116); Simpson v. Charters, 185 Ga. 592 ( 196 S.E. 31).
In order to avoid a deed absolute on its face by showing it to be a mere defeasible conveyance made for the purpose of securing a usurious loan, the petition must set forth the following elements: (1) that the deed was actually made to secure a loan; (2) that the loan was made upon condition that the plaintiff agree to pay an unlawful rate of interest on the money borrowed; (3) that the plaintiff has offered to do justice by tendering such amounts as he admits to be due on the loan, or that such tender is for some valid reason excused; (4) the facts concerning each element of the cause must be pleaded with such particularity as is necessary to a clear understanding of the case.
Here the petition with all necessary particularity alleged that the deed secured a loan, and showed the transaction to be a loan as defined by this court. "A loan may be defined as the delivery by one party to, and the receipt by another party of, a sum of money upon an agreement, express or implied, to repay the sum with or without interest." Parsons v. Fox, 179 Ga. 605, 607, supra. The Court of Appeals adhered to this rule of law in McLendon v. Johnson, 71 Ga. App. 424 ( 31 S.E.2d 89).
The petition described explicitly, definitely, and in minute detail, the scheme under which usury was exacted on the loan secured by the deed; so that, according to First Federal Savings c. Assn. v. Norwood Realty Co., 212 Ga. 524 (3) ( 93 S.E.2d 763), the usury was not only shown to have been charged, but the facts were set out regarding the matter with the precision required in a plea of usury, because they furnish data by which the amount of unlawful interest charged can be readily calculated and ascertained.
Regarding the question of whether the plaintiff has done equity by paying such amount to the defendant as was due on his loan, the exact factual situation pleaded here appears in Manget Realty Co. v. Carolina Realty Co., 169 Ga. 495, supra, only the parties and the amounts involved in each case being different. As in the Manget case, this petition alleges that the defendant was placed in possession of the property described in the deed with the responsibility of collecting the rents from the property and disbursing them to satisfy certain charges that would accrue against the property.
Similarly to that in the Manget case, this petition alleges that the plaintiff could not pay the amount due because he did not know and could not be expected to know that approximate amount due on the day he first offered to pay the loan in full. The defendant having kept the records, he knew what amount was due and whether it was more or less than the original amount of the loan ($12,000); but the defendant refused to divulge the information to the plaintiff and thus prevented a tender of the amount due. Secondly, the defendant absolutely refused to accept payment of the loan, but informed the plaintiff that he would not take the money to satisfy the loan. Consequently, the plaintiff contends that, under a familiar rule of law, he was excused from making the tender. The rule was clearly stated by this court in Fitzgerald v. Vaughn, 189 Ga. 707, 710 ( 7 S.E.2d 78): "It is of course a familiar rule that in those cases in which it is necessary to allege a tender as a prerequisite to the maintenance of a suit the tender will be excused where the other party has made declarations equivalent to a refusal to accept a tender if made, or has placed it beyond his power to comply with his part of the contract." Similar is the holding of Verner v. McLarty, 213 Ga. 472, 478 ( 99 S.E.2d 890): "Under the rule that equity will not require a useless formality, a tender is unnecessary when the person to whom the tender would be made states that it will be refused if made." This rule finds supporting authority in many opinions by this court.
The defendant stoutly contends that the transaction, even if it were a loan, was not usurious for the reason that the amount actually advanced to the plaintiff was not $12,000, but was $13,200, and that the allegations of the petition, when analyzed, show that the annual income from the property involved in the transaction, which was alleged to be in the defendant's possession, was less than the aggregate amounts necessary to preserve the property and pay the annual charges against it, including the first mortgage held by Realty Operations, Inc.
The defendant in his brief shows the calculation by which he arrived at this conclusion that the amount loaned was $13,200 instead of $12,000. The calculation includes as an amount furnished to the plaintiff by the defendant, in addition to the $12,000, an amount representing the monthly payments that the plaintiff owed on the first mortgage to Realty Operations, Inc., on January 23, 1959, the date on which the defendant made the loan to the plaintiff. This item was alleged to have been one of those paid by the defendant out of the $12,000 loaned to the plaintiff. The particular item did not, according to the petition, represent money that was actually advanced to the plaintiff in cash, but it was a part of the $12,000 that was to be paid by the defendant to Realty Operations, Inc., for the plaintiff's benefit. This fact clearly and distinctly appears from the petition, and it is obvious that the defendant's contention that the petition shows it to have been an amount furnished the plaintiff in addition to the $12,000 loan is erroneous. Thus the petition does not disclose that the defendant advanced or loaned the plaintiff more than the $12,000 as therein explicitly alleged.
It is suggested that the petition was not consistent, and was vague and contradictory. The case of Spence v. Erwin, 197 Ga. 635 ( 30 S.E.2d 50, 154 A.L.R. 1057), is cited as support for the position. There is a broad and marked difference in the two pleadings. The Erwin case alleged that the contract which purported to convey certain stock to the payee was in fact intended to secure a debt, but facts were set forth there from which it could be fairly inferred that the contract was intended as an absolute conveyance. The petition alleged that the loan referred to was usurious and also set out that the interest charged was only eight percent per annum. These contradictions resulted in the petition's failing to affirmatively show facts upon which the plaintiff could be granted the relief prayed.
In the instant case, every allegation is direct and clear, perfectly consistent with every other allegation. Indeed the petition in the instant case is structurally as near perfect as should be desired or required. Whatever may be the truth of the case, it was well plead.
2. In reference to the second ground of the general demurrer and the insistence that there was pending an action between the parties, in which all of the issues of this action could be determined, the defendant states in his brief: "The reference in the general demurrer to an in rem condemnation proceeding was not insisted upon before the trial court and is not now urged in this appeal." A matter upon which the trial court did not rule is not for review by this court ( Williams v. State, 206 Ga. 107, 55 S.E.2d 589); and a ground which is abandoned will not be considered. Moore v. Thornton, 180 Ga. 533 ( 179 S.E. 720).
Judgment affirmed. All the Justices concur.