Opinion
(Decided 11 May, 1898.)
Action for Accounting and Injunction — Mortgagor and Mortgagee — Usury — Forfeiture of Interest — Time Prices for Goods — Debtor Seeking Equitable Relief — Pending — Evidence.
1. Where a complaint in an action to enjoin the sale of land under mortgage and for accounting, alleged (substantially) that a note and mortgage had no other consideration than the balance due on a prior debt and mortgage of which it was a renewal, and that the difference between the two was usury charged by the mortgagee for indulgence: Held, that under The Code the allegations set out with sufficient distinctness the facts which constitute the alleged usury.
2. Where, in an action to enjoin a sale of land under mortgage, the complaint alleged usury in the debt, and the answer admitted that the note and mortgage were in consideration of the balance due on a prior mortgage, but in another paragraph alleged a further consideration of several hundred dollars, the exact amount of which the defendant could not remember, and on the trial it appeared that the new mortgage debt exceeded the old one and accrued interest by several hundred dollars for which no consideration was proved: Held, that the difference between the true amount of the old debt and the amount named in the new mortgage was usurious.
3. A "time" price charge of 10 per cent on the cash price for supplies furnished under an agricultural lien being the usual rate of advance, is not usurious.
4. A debtor, seeking the aid of a court of equity, will have the usurious element eliminated from his debt only upon his paying the principal and legal rate of interest, the only forfeiture enforced against the creditor being the excess of the legal rate.
ACTION to enjoin a sale under mortgage and for an accounting, (427) usury being alleged, heard before Allen, J., at August Term, 1897, of GREENE, on exceptions to the report of a referee to whom the case had been referred under The Code. The facts sufficiently appear in the opinion. From a judgment overruling the plaintiff's exceptions, the plaintiff appealed.
George M. Lindsay and Shepherd Busbee for plaintiff.
Swift Galloway, Y. T. Ormond, and J. B. Batchelor for defendants.
CLARK, J., dissents arguendo.
The plaintiffs executed to the defendants a mortgage upon real estate, on 27 December, 1889, for the amount of $3,671.36, evidenced by three bonds of equal amount, payable on 1 January, 1891, 1892, and 1893, respectively, with interest at the rate of 8 per cent per annum. On 1 January, 1894, the plaintiffs executed another mortgage to the defendant Turnage upon the same land to secure the amount of $3,743.89 evidenced by three bonds of equal amount, payable 1 January, 1895, 1 January, 1896, and 1 January, 1897, with interest at 8 per cent. This action was commenced by the plaintiffs for an accounting, and for an injunction to prevent a sale of the land until the account should be stated between the parties. The complaint is inartistically drawn, and the allegations as to usury against the defendants are not clear what the best practice would suggest; but we think that under The Code they set out with sufficient distinctness the facts which constitute the alleged usury. It is substantially alleged in the complaint that the debt and mortgage of 1 January, 1894, had no other consideration than the debt secured in the mortgage of 1889, less the payments made (428) upon the last-named mortgage; that the mortgage of 1894 was simply a renewal of the mortgage of 1889, and that the difference between the debts mentioned in the two mortgages was usury charged by the defendant Turnage for indulgence. We think that, substantially, the requirements of the law as laid down in Rountree v. Brinson, 98 N.C. 107, cited by the counsel for the defendants in their argument here, have been complied with in the complaint as to the manner of statement of facts going to show the alleged usury. The defendants in one section of their answer admitted, out and out, the truth of the plaintiff's allegations that the only consideration of the mortgage of 1894 was the balance due on the mortgage of 1889; but in another section of the answer it was averred that there was a further consideration in the mortgage of 1894 of between $350 and $400, but, in the language of the defendants, "the exact amount the said defendant cannot now remember," which Turnage had advanced and loaned to the plaintiff, and that the same was added to the principal and interest due up to that time on the notes secured by the mortgage of 1889. The referee found as a fact that a part of the consideration of the debt under the mortgage of 1894 was the balance of the mortgage of 1889, but no where does the referee find what the other part of the consideration of the mortgage of 1894 was; indeed, he could not have found any other consideration from the evidence before us. The plaintiff excepted to that finding of the referee and insisted that there was no evidence before the referee upon which he could or ought to have made that finding, and that he ought to have found that there was no other consideration for the debt secured in the mortgage of 1 January, 1894, except the balance due on the mortgage of (429) 1889; and upon examination of the evidence we are of that opinion. Turnage himself testified that the plaintiff paid him (he averring that he was then the sole owner of the mortgage of 1889), in November or December, 1890, $1,000 on the mortgage of 1889, and $300 on the same in 1891 (in his own words), "might have been a little more or a little less." He seldom seemed to be accurate as to his business transactions with the plaintiff, except, possibly, in those in which it was to his interest to be definite. He testified further that when he took the mortgage of January, 1894, he computed the amount due on the three notes secured in the mortgage of 1889, and took the three notes secured in the mortgage of 1 January, 1894. He testified to nothing about the $350 or the $400 which he averred in his answer that he had advanced to the plaintiff and added in the mortgage of 1894. There was no testimony going to show any other consideration for the debt secured in the mortgage of 1894, except the amount due under the mortgage of 1889. The transaction was, even by the evidence of Turnage himself, a simple renewal of the debt secured in the mortgage of 1889, and, by a simple mathematical calculation, the debt secured in the mortgage of 1894 exceeded the debt due under the mortgage of 1889 between four and five hundred dollars. That calculation is based upon the payment of $300 (admitted to have been paid by the plaintiffs in 1891) as having been made on 1 January, 1891 — most strongly against the interest of the creditor. Upon this evidence the referee ought to have found that the difference between the true amount of the debt due under the 1889 mortgage and the amount named and secured in the mortgage of 1894 was usurious, and should not have been allowed by the referee. This (430) difference was carried forward as is admitted by all the parties, and is embraced in the mortgage of 9 November, 1894, and ought to have been eliminated in the finding of the referee, with the interest on it from 1 January, 1894.
The plaintiff's second exception cannot be sustained. The defendants charged the usual time prices for goods and supplies furnished the plaintiffs, an average of about 10 per cent more than for cash, without interest, and we do not think that was unlawful. No interest was charged on the advancements. The other exceptions of the plaintiff to the rulings of his Honor on the referee's report affect the defendant's right to recover any interest whatever after the discovery of usurious interest in the transactions between the parties. In Moore v. Beaman, 112 N.C. 558, the Justice who delivered the opinion of the Court expressed the view, which he said was his individual opinion and not necessary to the decision of that case, that where usury was received no interest ought to be allowed, and the Justice who writes this opinion might be disposed to coincide with that view, but the decisions of this Court are too numerous and too strong the other way to be overruled. These decisions are numerous and uniform and to the effect that a debtor seeking the aid of a court will have a usurious element eliminated from his debt only upon his paying the principal and legal interest. Ballinger v. Edwards, 39 N.C. 449; Purnell v. Vaughan, 82 N.C. 134; Burwell v. Burgwyn, 100 N.C. 389. The defendants Turnage and Ormond ought not to have been allowed by the referee interest at the greater rate than 6 per cent on the amounts brought over from one year to the other in the crop liens executed by the plaintiffs to the defendants from the years 1891 and 1895, inclusive of both, because of usury charged and secured in (431) each of the crop liens upon the cash advanced in the account of 1891. In Grant v. Morris, 81 N.C. 160, it was held that the mere entry of a usurious claim upon an account which was neither recognized nor paid by the debtor was not "a charging" within the meaning of the act of 1876, 1877. There the Court said that the words, "a taking, reserving or charging," imply something more to be done to the loss or detriment of the debtor than the mere presentation of an illegal claim, which is neither recognized nor paid. In the case before us, the usurious interest on the cash advanced in 1891, under the crop lien of that year, was not only charged but it was carried forward in the crop liens of each succeeding year to 1895, inclusive, and was recognized by the plaintiffs as a debt against them, and was secured by a lien. The sum of $46.60 usury collected by Turnage (admitted by him), with interest from 9 January, 1893, must be deducted from the amount of the mortgage of 9 November, 1894. The judgment below may be modified in accordance with this opinion with the consent of the parties, and if that is not done the report will be recommitted to the referee that he may make another report in conformity with this opinion.
Modified and affirmed.