Opinion
43707.
ARGUED JUNE 3, 1968.
DECIDED NOVEMBER 8, 1968. REHEARING DENIED NOVEMBER 25, 1968.
Action on note. Fulton Civil Court. Before Judge Wright.
Marvin O'Neal, Jr., Robert Paul Leiter, for appellants.
Lipshutz, Macey, Zusmann Sikes, John M. Sikes, Jr., for appellee.
1. A notice to the obligors in an instalment note, reciting that because of their failure to pay the instalments when due the maturity of the unpaid balance has been accelerated and declared to be due forthwith, and then informing them that unless payment of the balance in full is made before the expiration of ten days from receipt of the notice the obligation in the note to pay attorney's fees will be enforced, complies with the requirements of Code Ann. § 20-506 and with the provisions of the note, authorizing the adding of attorney's fees as a part of the debt when payment was not made within the ten days.
2. Inclusion in a note of an amount to cover premiums for credit life insurance on the obligors does not render the transaction usurious.
3. Where the payee in a note obtained credit life insurance on the life of the obligor, adding in the cost of the premium as a part of the obligation, but failed to inform the obligor that the insurance was required, was being obtained or that the cost of the premium was being added in as a part of the obligation, and the obligor testified that he had no knowledge of the matter and would not have consented if he had known of it, there was a failure of consideration as to the amount of the insurance premium, and the payee is not authorized to recover therefor in a suit on the note. The result is not changed by testimony that requirement of the credit life insurance in connection with instalment loans was a custom of the trade, unless it further appears that the obligor had knowledge of this custom or had reason to know thereof.
4. Notations added in the margin of a note concerning the amount included for credit life insurance premiums and how much was included for interest to maturity, though made after the note was signed and without the knowledge or consent of the obligors, do not alter or change the obligation of the contract and are not material alterations.
5. Records which are made in the regular course of a business and which constitute a memorandum or record of any part of a transaction in issue are admissible. Code Ann. § 38-711.
ARGUED JUNE 3, 1968 — DECIDED NOVEMBER 8, 1968 — REHEARING DENIED NOVEMBER 25, 1968 — CERT. APPLIED FOR.
The Bank of Forest Park brought suit against Jack D. Franco, as maker, and Bradley T. Porter, as endorser, on a promissory note originally given October 2, 1964, for the sum of $11,160, with interest thereon from maturity at eight percent per annum, and which was repayable in 36 equal monthly instalments of $310, beginning November 8, 1964, with an acceleration clause in the event of default in the payment of any instalment for as long as ten or more days. Plaintiff alleged that the unpaid balance of the note was $6,200 and sought judgment for that amount, besides interest at 8 percent from July 7, 1966 (when maturity of the unpaid balance had been accelerated because of more than ten days default in payment of the instalments), and 15 percent of the principal and interest as attorney's fees.
Attached as an exhibit to the petition was a copy of the note which showed notations in the margin, "$9,000 advanced. Cr. Life, Cherokee $300, Vulcan, $69.60, Peninsular, $300. Interest $1,490.40," and "Interest $1,490.40, Ins. $669.60," which defendants contend to have been material alterations, made without their knowledge or consent after the note was signed.
Defendants filed their plea and answer asserting that they had been charged a usurious interest of $2,160 for the loan of $9,000, and in their answers assert that they had no knowledge of the credit life insurance or of any charge to be made therefor, that they did not want or need the insurance, and would not have consented thereto if they had known of it.
On trial of the case officials of the bank testified that there was no charge made for interest on the loan beyond the $1,490.40, and that the remainder of the charge or $669.60 was for credit life insurance premiums which they paid on behalf of Franco and Porter. The policies were produced in court under notice from the defendants, as well as the bank records showing payment of the premiums by the bank by deposits to the accounts of the insurance companies, this having been done shortly after closing of the transaction.
The bank officials admit that there was no discussion with Franco and Porter relative to the insurance at the time of closing the loan, but asserted that it was the custom of all banks in the area to require the obtaining of the insurance in connection with an instalment loan.
Defendants urge that they were in fact charged interest on the whole amount of the loan at the rate of 8 percent per annum for the whole 36-month period, and that the charges for insurance were but subterfuges to cover up the usury.
The trial court directed a verdict for the plaintiff for the full amount sued for, pointing out that there was no denial of the balance due under the note; that the charge of 8 percent was applied, by terms of the note, only after maturity; that the uncontradicted evidence demanded a finding that the interest in fact charged for the loan was not usurious; and that defendants had failed in carrying their burden of showing the existence of usury. As to the charge for credit life insurance premiums, the trial judge pointed out that the testimony of the bank officials that it was a custom of the trade in banking to require the insurance in connection with instalment loans was uncontradicted. It was stipulated and admitted that the notice to bind the defendants for the payment of attorney's fees was given more than ten days before suit was instituted, in which the maturity of the unpaid balance was accelerated. Thus, as he saw it, there was no question for submission to the jury, and the verdict was directed.
Defendants appeal from the judgment entered on the directed verdict, urging error in the direction of the verdict, in admitting in evidence the letter containing the notice to bind the defendants for attorney's fees, and in admitting the insurance policies and records concerning payment of the premiums thereon.
1. The record reflects that at the taking of Mr. Porter's deposition for use in the trial Mr. Leiter, representing both defendants, asserted: "Yes, we stipulate that we got the notice to collect attorney's fees." Mr. Porter admitted it in his testimony and asserted that upon receiving the notice he called Mr. Franco and that Franco informed him that he had also received a similar letter.
There is no merit in the objection to the admission of the notice on the ground that it was not given after maturity of the obligation, as required under our ruling in Dailey v. First Nat. Bank of Atlanta, 114 Ga. App. 248 (3) ( 150 S.E.2d 847). In that case the court did not have before it a notice such as we have here; there was reliance solely upon the fact of institution of the suit as an acceleration of the instalment obligation, and it did not appear that notice was given after suit was instituted. See One In All Corp. v. Fulton Nat. Bank, 108 Ga. App. 142 (2) ( 132 S.E.2d 116).
The letter sent to these defendants carried the statement: "As you are aware, you are in default under the terms of this note, the monthly payments on said note not having been paid since March of 1966. Therefore, the Bank of Forest Park has declared the entire unpaid principal sum, with all accrued interest, due and payable forthwith. In accordance with Code § 20-506, as amended, you are hereby notified that the Bank of Forest Park will enforce the terms of your note providing for the payment of 15 percent of all sums due as attorney's fees. This loan can be paid in full at any time within ten days after receipt of this notice by the payment of principal and interest, and the attorney's fees will not be charged."
Thus, the defendants were notified, first that the unpaid balance of the note had been accelerated under its terms, and then informed that unless full payment was made within ten days the provision for attorney's fees would be enforced. This fully complies with Code Ann. § 20-506, the terms of the note, and all other requirements.
There was no error in admitting the letter.
2. Was the note usurious? We think not. When the obligor pleads usury he has the burden of showing "with certainty that the transaction was tainted with usury." Equitable Mortgage Co. v. Watson, 116 Ga. 679 (1) ( 43 S.E. 49). And see Wilkins, Neely Jones v. Gibson, 113 Ga. 31 (5) ( 38 S.E. 374, 84 ASR 204).
"[The] premium paid by a borrower of money for a policy of insurance on his life, issued by the insurance company which made the loan, and assigned to it by the insured borrower as collateral security, could not be counted as a charge for the money loaned, thereby rendering usurious the loan at six percent interest." Sledd v. Pilot Life Ins. Co., 52 Ga. App. 326 ( 183 S.E. 199). "[W]here an excess over the legal interest is paid, or contracted to be paid, for other goods and valuable considerations beyond the mere use of money, it is not usury. Atlanta Mining Rolling Mill Co. v. Gwyer, 48 Ga. 9; Sledd v. Pilot Life Ins. Co., 52 Ga. App. 326 [supra]." Simpson v. Charters, 188 Ga. 842, 849 ( 5 S.E.2d 27). (Emphasis supplied).
The evidence demands a finding that in the charge of $2,160 above the $9,000 principal included in the face of the note was $669.60 for credit life insurance premiums. The policies were issued, and the premiums were paid by the bank to the companies. Thus, the remaining charge of $1,490.40 for interest was well within the legal rate.
3. However, in their answer and in their testimony the defendants assert that they knew nothing of the requirement for credit life insurance when they signed the note, and they would not have consented thereto if it had been called to their attention. In their testimony the bank officials admit that there was no discussion of the matter with defendants at the time the transaction was closed, and they rely upon a custom of requiring it in connection with instalment loans.
The trouble with the reliance on custom is that knowledge of this custom was not shown to have been brought home to the defendants by way of former dealings, whether with this or with other banks, or by any other means, and in the absence of knowledge on their part of the existence of the custom it cannot be said that there was any meeting of the minds on this item. Code § 38-506; Potts v. Moultrie Banking Co., 22 Ga. App. 498 (2) ( 96 S.E. 502). Cf. Phelps v. Belle Isle, 29 Ga. App. 571 (2) ( 116 S.E. 217); Hamilton Co. v. Moore, 94 Ga. 707 ( 19 S.E. 993). There was, then, a failure of consideration as to this portion of the charge. It was unauthorized.
4. The contention of material alteration is without merit. The notations made in the margin of the note concerning the amounts of the credit life insurance premiums and the amount of interest charged in no way or manner altered or changed the obligation of the note itself, and absent that, the alteration does not operate to discharge the parties from their obligations. Code Ann. § 109A-3-407; Dale, Inc. v. Dawson County Bank, 112 Ga. App. 560 ( 145 S.E.2d 619). And see Overcash v. First Nat. Bank of Atlanta, 115 Ga. App. 499 ( 155 S.E.2d 32); Overcash v. First Nat. Bank of Atlanta, 117 Ga. App. 818 ( 162 S.E.2d 210).
5. There was no error in admitting the policies of insurance, and the records of the bank showing deposits of the premiums to the accounts of the companies issuing them, in explanation of the $669.60 charge, it having been testified by the bank officials that the policies were procured and the records made in the usual and ordinary course of the bank's business. These were admissible under Code Ann. § 38-711.
Judgment affirmed with direction that the court modify its judgment by deleting therefrom the sum of $669.60 principal and the interest and attorney's fees which are included on that amount; otherwise it is reversed. Felton, C. J., and Whitman, J., concur.