Opinion
12716
August 13, 1929.
Before FEATHERSTONE, J., Florence. Affirmed.
Action by J.H. Rainwater, trading as the Carolina Discount Company, against J.M. Bonnette and the Atlantic Coast Line Railroad Company, in which defendant first named filed a counterclaim. From judgment for first named defendant on the counterclaim, plaintiff appeals.
After citing the pleadings and facts, the decree provides as follows:
"From the testimony which was taken in open Court, I find that plaintiff was really engaged in the business of lending money. This was shown by the fact that loans were offered through printed cards which were circulated among the employees of the Atlantic Coast Line Railroad Company; no records of the transactions were kept; no receipts given; the borrowers were expected to pay every two weeks, and this was understood and acted on; when the amount borrowed was paid, 10 per cent. thereof was taken and kept for the use of the money, no other service having been rendered by plaintiff.
"The essential elements of usury are: (1) A loan or forbearance either express or implied; (2) a loan or forbearance of money or something circulating as such; (3) an understanding between the parties that the principal shall be payable absolutely; (4) the exaction of a greater profit than is allowed by law; (5) an intent to evade the law.
"The assignment of a specified amount of an undivided interest in the wages of the borrower was manifestly not a bona fide sale of a chose in action, and was never resorted to by either party so long as the real promise to pay the loan was kept. This is disclosed in the conduct of the defendant Bonnette and of a number of other employees, in like situation, who testified for defendants, and whose testimony remains undisputed.
"It being true that resort to the use of written applications to sell wages and written assignments of an undivided interest in wages, used by the parties to these transactions, was a mere device to evade the usury laws, the Court will look beyond the form of the transactions to their substance, and it is an inflexible rule that the mere form in such cases is immaterial, but that it is the substance which must be considered. If, from the transaction as disclosed by the evidence, it is in substance a receiving or contracting for the receiving of usurious interest for a loan or forbearance of money the parties are subject to the statutory consequences, no matter what device they may have employed to conceal the true character of their dealings. Mayfield v. Mortgage Co., 104 S.C. 152, 88 S.E., 370; Citizens' Bank v. Heyward, 135 S.C. 190, 133 S.E., 709.
"As a general proposition, where the inquiry is whether a contract is usurious, it is open to evidence beyond the written agreement to show that, though legal on its face, it was in fact an illegal agreement. Otherwise the very purpose of the law in forbidding the taking of usury under any cover or pretext would be defeated.
"In view of this situation and of the rulings of numerous Courts in similar cases, I am unable to take the view advanced by the plaintiff's counsel to the effect that the relation of debtor and creditor did not exist between plaintiff and the defendant Bonnette, and that on the contrary plaintiff loaned defendant Bonnette $50, at a usurious rate of interest.
"The case came on for trial upon the pleadings and the testimony introduced; no objection having been interposed by either party to the from of the pleading of the other. Plaintiff was in the position of asking for an accounting and judgment against the Atlantic Coast Line Railroad Company and for an adjudication of any rights which defendant Bonnette might have. The defendant Bonnette asserted a counterclaim for double the amount of the usurious interest actually paid by him. The defendant Atlantic Coast Line Railroad Company asserted that plaintiff was engaged in lending money at usurious and exorbitant rates of interest; that, so far from plaintiff being entitled to a judgment against the railroad company by reason of Bonnette's assignment to plaintiff, Bonnette was entitled to a much larger judgment against the plaintiff and to the right to have any amount which he had borrowed offset against such judgments, and to require the railroad company not to recognize the so-called assignment of an interest in wages.
"Plaintiff seems to have elected to come into a Court of Equity to have the rights of all parties adjudicated and the fund in question distributed among them according to their respective rights: `When a litigant goes into a Court of Equity, the Court may refuse its aid to enforce an unconscionable demand. "He who seeks equity must do equity."' This quotation is from the case of Mayfield v. Mortgage Co., 104 S.C. 152, 88 S.E., 370, 372, and the right to collect usurious interest was under consideration in that case.
"In view of the character of the transaction between plaintiff and the defendant Bonnette, I hold that plaintiff is entitled in this equity suit to no relief against either of the defendants.
"Since, however, in order to redress his grievance against plaintiff, the defendant Bonnette should likewise be required to do equity, any amount which he is entitled to recover in this suit should be reduced by the principal amount actually received by him from plaintiff.
"The proof discloses that plaintiff has received, and that the defendant Bonnette has actually paid, $71 on account of usurious interest charges, and that all of the payments aggregating this amount were made within a period of approximately ten months, and before notice of an assignment was given by plaintiff to the defendant Atlantic Coast Line Railroad Company. The defendant Bonnette is therefore entitled to judgment against plaintiff in the sum of $142 but, inasmuch as plaintiff is entitled to recover the sum of $50 actually loaned by him either from Bonnette or from the railroad company, and of the further fact that the Atlantic Coast Line Railroad Company, if called upon to pay this amount to plaintiff, will be entitled to recover it back from Bonnette, Bonnette is in equity entitled to judgment against plaintiff in the sum of only $92.
"It is contended by plaintiff that the defendant Bonnette is not entitled to judgment on his counterclaim because of the fact that plaintiff is making no demand for judgment against Bonnette.
"Under Section 597, Code Civ. Proc. 1922, it seems to me that judgment may be given for or against plaintiff in this case or either of the defendants. This is specifically held in the case of Plyer v. Parker, 10 S.C. 464. In any case in which the plaintiff against whom a claim is set up is entitled to seek a several judgment against the defendant setting up the claim and in which the defendant would be entitled to a several judgment against plaintiff, judgment may be rendered on a counterclaim made by said defendant.
"This Court has jurisdiction in all civil cases with power to render judgment which is defined to be `the final determination of the rights of the parties in the action.' Bush v. Aldrich, 110 S.C. 491, 96 S.E., 922, 923.
"`The relief granted to the plaintiff, if there be no answer, cannot exceed that which he may have demanded in his complaint; but in any other case the Court may grant him any relief consistent with the case made by the complaint and embraced within the issue.
"`Section 296 authorizes a determination of the ultimate rights of the parties on each side as between themselves, and the granting to defendant of any affirmative relief to which he may be entitled.' Beall Co. v. Weston, 83 S.C. 491, 65 S.E., 823, 824.
"Plaintiff should not be permitted by so shaping an action brought in this Court as to make it appear to be a suit at law against the drawee of a draft, when as a matter of fact its purpose is to recover a loan tainted with usury, to evade the penalties imposed for making and collecting usurious charges. The action should be treated as what it really is rather than as what it appears on its face to be. If by changing the form of an action brought to enforce an usurious contract a party making usurious charges can escape these penalties, the provisions of law designed to prevent usurious exactions would soon be nullified.
"It is therefore ordered that the defendant J.M. Bonnette have judgment against the substituted plaintiff, J.H. Rainwater, trading under the business style of Carolina Discount Company, in the sum of $92, with the costs of this action.
"It is further ordered that as to the defendant Atlantic Coast Line Railroad Company the plaintiff recover nothing.
"Upon the call of the case, J.H. Rainwater moved to be substituted as plaintiff in the place of J.H. Howington, and this motion was made in open Court, and, no objection having been interposed, the case proceeded to trial on behalf of J.H. Rainwater, trading under the business style of Carolina Discount Company, against the defendants above named.
"It is therefore ordered that the further proceedings in this case be conducted in the name of J.H. Rainwater, trading as Carolina Discount Company, as plaintiff, against the defendants herein named."
The alleged contract referred to in the opinion here follows:
"State of South Carolina — County of Florence"To Atlantic Coast Line Railroad Company, $55.00. For value received, I have bargained, sold and assigned to Carolina Discount Company, doing business in the City of Florence, S.C. all my right and interest in and to the sum of $55.00, of an undivided interest in my account for salary or wages earned or to be earned by me for services by me while in the employ of the Atlantic Coast Line Railroad Company, employer, during the period from the 1st day of November, 1926, to the 15th day of December, 1926.
"Said undivided interest being the amount due and owing to me on the date that said employer is notified of this sale and assignment, and to become due me on all future dates thereafter during the above-mentioned period until the date upon which my earnings will equal the amount herein sold.
"In order to obtain the purchase price of said undivided interest in my salary account, and as an inducement for this sale and transfer, I state and warrant to be true that I have contracted with said employer to work in the capacity of Car Repairer, and under the present contract now in force between myself and the party to whom this order is directed, I am entitled to regular employment, and I have already entered into performance of my part of said contract of employment.
"I further state and warrant to be true that there are no offsets or counterclaims, attachments or encumbrances of any character whatsoever against the account herein referred to, and the same nor any part of it has been transferred, sold or assigned by me heretofore.
"It is understood and agreed, and it is the true intent and meaning of this instrument, that this is an absolute and unconditional sale and assignment of said undivided interest in said salary account, and is not a loan or advance of money, is not a discount, that I am not a debtor to the purchaser, that I am under no obligation to redeem this paper, that this is original sale and assignment which is given for the purpose of collecting from my employer what I have sold and transferred.
"The above-named employer is hereby authorized and requested to pay the above salary account to the said Carolina Discount Company upon the dates upon which same falls due for services rendered, by me, and accept this instrument as a voucher against me for the same and when same shall have been paid in accordance herewith this writing shall be a complete release to the said employer above named.
"I further represent that I have read the above instrument and know the contents thereof, and that the above bill of sale and assignment contains the whole transaction between myself and the said purchaser.
"It is understood by the undersigned that the said purchaser of said undivided interest in said salary account has the option of notifying the party, firm or corporation to whom this is directed of the fact this sale and assignment having been made to said purchaser at any time said purchaser may choose to do so.
"In witness whereof, I have hereunto set my hand and seal.
"This 23 day of November, 1926.
"A duplicate of this bill of sale is by me waived.
[Signed] J.M. Bonnette. [Seal.]
"Witness: J.E. Pilgrim."
Messrs. P.H. Arrowsmith, and P.H. McEachin, for appellant, cite: Assignment of wages legal: 5 C.J., 865, 869; Pom. Eq. Jur., 1286; 65 L.R.A., 602; 196 Mass. 528; 5 L.R.A. (N.S.), 564; 2 R.C.L., 603; 28 L.R.A. (N.S.), 1108; 85 Am. Dec., 220; 96 Am Dec., 491; 34 A.S. R., 242; 37 Am. Dec., 744; 39 Conn., 536; 76 Mo., 413; 39 Conn., 26; 12 Ky. L. Rep., 190; 46 N.H. 148; 44 Barb. (N.Y.), 409; 27 Ohio Cir. Ct., 321; 134 Ill. App. 574; 95 Minn., 385; 47 Minn., 247; 156 Mo., App. 411; 102 Pac., 956; 104 Ill. App. 623; 62 Mass. 168; 38 Mass. 307; 61 Mass. 277; 75 Mass. 150; 84 Mass. 407; Id., 541; Rice Eq., 60; 17 S.C. 585; 97 S.E., 78; 62 S.E., 726; 87 S.E., 754; 73 S.E., 632; 114 S.E., 908; 112 S.E., 896; 61 S.E., 144; 135 S.C. 335; 146 S.C. 520. Terms of written contract cannot be varied by parol: 124 S.E., 265; 46 S.C. 411; 121 S.E., 787. As to proof of usury: 209 Pac., 614; 24 A.L.R., 855. "Usury": 95 N.W., 496; 6 Ohio St., 527; 66 U.S. 115; 4 Ind., 283; 126 S.E., 487; 67 S.C. 568; 62 S.C. 174; Id., 178; 114 S.C. 364; 100 S.C. 86; 104 S.C. 368; 77 S.C. 147; 61 S.E., 144. Wages may be assigned: 146 S.C. 520.
Mr. F.L. Willcox, for respondents, cites: "Usury": 104 S.C. 152; 135 S.C. 190; 136 Atl., 711; 9 L.Ed., 178; 100 Pa. St., 551; 133 S.E., 60; 125 Ga. 833; 132 S.E., 221; 135 S.C. 190.
August 13, 1929. The opinion of the Court was delivered by
This action concerns the law as to usury. The plaintiff claimed he bought from the defendant Bonnette certain wages to become due to him as an employee of his co-defendant, railroad company. He asked for an accounting on the part of the railroad company, and for judgment for the amount of his claim.
The defendants, in their respective answers, alleged that the transaction between the plaintiff and Bonnette was not a bona fide sale of Bonnette's wages to the plaintiff, but in reality the plaintiff had loaned $50 to Bonnette at a rate of interest of 240 per cent. per annum; and that Bonnette was entitled to judgment on a counterclaim he set up against the plaintiff for the sum of $164, on account of usurious interest accepted by the plaintiff and paid by Bonnette.
By consent of all the parties, his Honor, Circuit Judge Featherstone, heard the case without a jury. He rendered judgment in favor of the defendant Bonnette against the plaintiff for the sum of $92. His decree, as well as the alleged contract between the plaintiff and Bonnette, will be reported.
There are ten exceptions in the appeal. Without passing upon each of them separately, we will dispose of the questions they make.
Some of the exceptions complain of the admission of testimony from several witnesses as to the transactions which occurred between the plaintiff and Bonnette at or previous to the execution of the written instrument, on which the suit was based; the plaintiff contending that the testimony was irrelevant and improperly received, because it tended to vary and contradict the terms of the written contract. The evidence complained of was properly received.
"As a general proposition where the inquiry is whether a contract is usurious it is open to evidence dehors the written agreement to show that, though legal on its face, it was in fact an illegal agreement. Otherwise the very purpose of the law in forbidding the taking of usury under any cover or pretext would be defeated." 27 R.C.L., 212.
All the leading authorities, too numerous to mention, sustain this rule of evidence.
The appellant charges error on the part of the trial Judge in admitting testimony of several witnesses as to their transactions with the plaintiff, which were alleged to be similar to the transactions had by Bonnette with the plaintiff. It is not necessary to pass upon the question raised by these exceptions in properly determining the appeal. Even if there was error in this regard, which we do not at this time concede in view of the circumstances of the case, such error was not prejudicial to the appellant. There was plenty of competent testimony to sustain the findings of the Circuit Judge that the transaction was not a bona fide sale or assignment of wages on the part of Bonnette, but that the whole scheme was an attempt on the part of the plaintiff to evade the usury laws of this state.
What has already been said disposes of the appellant's contentions that there was no evidence to sustain the decree of Judge Featherstone that the transaction was usurious, and that he committed error in sustaining the counterclaim of the defendant Bonnette. The paper introduced in evidence, which Bonnette signed, is almost enough, without any testimony, to expose the plaintiff's scheme. It is another case where "The lady doth protest too much."
The appellant seems to rely strongly upon two of our cases recently decided, but we cannot see where they benefit him in any way. It is true, as pointed out by appellant, in Bryant v. Askin Marine Co., 146 S.C. 520, 144 S.E., 231, we held that wages to be earned in the future, under a present contract of employment, may be assigned. We did not hold, however, in that case that any contract purporting on its face to assign such wages could legally be used to cover up a scheme of usury.
The case of Hart v. Cook Brokerage Co., 135 S.C. 335, 133 S.E., 822, depended upon by the appellant, cannot avail his cause. The plaintiff there alleged that a paper executed to him by the defendant, showing on its face an assignment of wages, was simply a scheme to cover up an usurious loan transaction. The defendant denied that allegation. The case, one strictly at law, was tried in a Magistrate's Court, and the Magistrate found on the facts against the plaintiff's contention. That finding was affirmed by the Circuit Court on appeal. In this Court the only thing we determined was that the findings of fact by a Magistrate, concurred in by the Circuit Court on appeal, were not reviewable by this Court.
The judgment of the Court is that the judgment below be and the same is hereby affirmed.
MR. CHIEF JUSTICE WATTS and MESSRS. JUSTICES COTHRAN, STABLER and CARTER concur.