Opinion
33088.
DECIDED NOVEMBER 22, 1950. REHEARING DENIED DECEMBER 15, 1950.
Complaint; from Fulton Civil Court — Judge Parker. March 15, 1950.
H. C. Holbrook, for plaintiffs in error.
Israel Katz, Samuel L. Eplan, contra.
1. The Code, § 57-116, as amended by the act of 1937 (Ga. L. 1937, p. 463), authorizing interest to be computed in a manner which exceeds 8 percent, figuring the rate of interest for the entire period in which payments are to be made, aggregating the principal and interest and dividing the same into monthly, quarterly or yearly installments, applies only to lending money, and where in a sale of realty for an agreed price, to be paid in installments with interest, the interest is computed in accordance with such Code section as amended so as to amount to more than 8 percent interest per annum, such exaction is usurious and all interest is forfeited.
2. The allegations showing that the written contract, executed in the exercise of an option granted to the petitioners, was usurious, the petition as amended set forth a cause of action against the defendants jointly for recovery, to the extent sought, of payments in excess of the purchase-price of the realty.
3. The court did not err in overruling the general and special grounds of demurrer to the petition as amended.
DECIDED NOVEMBER 22, 1950. REHEARING DENIED DECEMBER 15, 1950.
Lewis Jones and Sallie Jones filed in the Civil Court of Fulton County, Georgia, an action against Pickens Investment Company, a corporation, and W. H. Crosby, trading as Pickens Investment Company, the petition as amended alleging the following: The defendants are each indebted to the petitioners in the sum of $1430. On or about October 25, 1940, the petitioners entered into an agreement with the defendant, Pickens Investment Company, a corporation, copy of which was attached to the petition as Exhibit "A" and made a part thereof. This exhibit shows a contract entered into between Pickens Investment Company and the petitioners whereby the corporation leased to them a dwelling house known as No. 5 on lot No. 48 of the Oak Grove Subdivision located in land lots 275 and 276 of the 18th district of DeKalb County, Georgia, for a term of 52 weeks, commencing on October 19, 1940, and ending on October 18, 1941, for a rental, to be paid on the first day of each rental period, of $7.50 for each two weeks in advance. It was provided in the lease agreement that: "Lessor gives lessees option to purchase above described property for the total sum of $1500 at 6 percent interest payable at the rate of $15 per month in advance, plus taxes and insurance. Said option to expire October 18, 1941. Lessee to notify lessor in writing if lessee exercises option, and in the event option is exercised credit will be given for rental paid, less deductions for insurance, upkeep, taxes and interest." On or about November 2, 1940, the petitioners decided to exercise the said option and executed an agreement, a copy of which was attached to the petition as Exhibit "B" and made a part thereof, signed on behalf of Pickens Investment Company, without disclosing as to which defendant he was acting for, by one R. L. Stephens, as shown in the said exhibit. This exhibit showed an agreement recited to be between W. H. Crosby, trading as Pickens Investment Company and the petitioners, dated November 2, 1940, providing for the sale of the said lot No. 48 located in lots 275 and 276 in the 18th district of DeKalb County, Georgia, for the sum of $15 cash and 360 payments of $7.50 each, payable as follows: "(a) Fifteen ($15) dollars cash having been paid on or before the ensealing and delivery of these presents, and (b) then the remaining balance in equal payments of seven and 50/100 (7.50) dollars each to be made at the office of the seller, commencing on November 16, 1940, and continuing every two weeks thereafter until the said purchase-price shall have been fully paid, together with interest at the rate of six (6 percent) percent per annum, upon the whole sum remaining from time to time unpaid. . . That upon the said purchase-price being fully paid, according to the conditions, provisions and terms of this agreement, the seller shall convey, by warranty deed, to the purchaser, the said piece or parcel of land in fee simple, free from any and all encumbrances that are not herein assumed by the purchaser." This instrument purports to have been signed by Pickens Investment Company, by R. L. Stephens, and the petitioners. "5 (a) That on June 17, 1940, title to the property described in Exhibits `A' and `B' hereof was taken in the name of Pickens Investment Company, a corporation, although Pickens Investment Company was not legally granted a charter as a corporation until August 21, 1940. That on August 30, 1941, said corporation deeded said property to W. H. Crosby, the other defendant herein, and said Crosby deeded same back to defendant corporation on August 10, 1946, on which date said corporation was granted a new charter, although it had never legally surrendered the former charter under which it actively operated during 1940 and 1941. 5 (b) That on or about November 2, 1940, when said Exhibit `B' was executed as shown herein plaintiffs appeared at defendants' place of business and were informed by defendants' agent, R. L. Stephens, that said Exhibit `B' was drawn to carry out the option agreement, Exhibit `A', and that said payments listed in paragraph Two thereof represented the $1500 principal as provided for in the option, plus six (6 percent) percent added-in interest for the period of fifteen years or ninety (90 percent) percent interest on the principal, amounting to $1200, making the total purchase cost to plaintiffs over fifteen years of $2700, and that said Stephens represented that the said payments therein to be made of $7.50 every two weeks were the same as $15 per month, and that seller was denominated as therein stated in order to conform the same to the true source of title, whereupon plaintiffs, being ignorant of interest calculations, and Stephens asserting same to be proper and legal, executed said agreement as shown herein, relying upon said representations. 5 (c). That said Exhibit `B' was purposely drawn by defendants' agent Stephens so as to omit the principal and interest calculations from the face thereof and to show only the number and amount of payments, and was in the nature of a scheme and device to obscure its violation of the laws of this State against usury and to make it appear that said instrument was a novation of the original option agreement, although in truth said Exhibit `B' contained added-in interest at six percent for the unpaid balance of the principal purchase-price of said lot No. 48 and further violated the laws of this State against usury as set out in paragraph 7 of this petition. 5 (d). That commencing November 2, 1940, and continuing throughout the period of the transaction herein described the individual defendant assumed, ratified, and accepted the benefit and liabilities of corporate defendant's agreement and dealings with plaintiffs, and corporate defendant likewise assumed, ratified, and accepted the benefits of individual defendant's agreement and dealings with plaintiffs, each defendant assuming to act for the other interchangeably with respect to this transaction with plaintiffs, and defendants accepted the monies from time to time tendered by plaintiffs in discharge of the purchase-price of said lot No. 48."
It was further alleged: The said agreement "B" purports to be the agreement both of the individual defendant and the corporate agreement, but the same was in the exercise of the option agreement, Exhibit "A," in any case, and imposed usurious terms upon the petitioners for the payment of the agreed purchase-price of $1500. The said usurious terms are contained in provision 2 and subparagraphs of said Exhibit "B," which provisions required the petitioners to pay $15 down and make 360 payments of $7.50 each at two-weeks intervals, the said terms being then and there usurious under the laws of Georgia, Code, § 57-101 et seq., and particularly in violation of the Code, § 57-116, dealing with repayment of principal and interest through periodic payments. The petitioners commenced making biweekly payments under the usurious provisions of the contract, Exhibit "B," on November 2, 1940, at the place of the corporate defendant and the other defendant, and received receipts in the name of Pickens Investment Company by W. H. Crosby or oftentimes by R. L. Stephens. The petitioners' periodic payments in furtherance of the said agreement were made without knowledge by the petitioners that the terms imposed upon them were usurious, and were made as set out in Exhibit "C" hereof and made a part of the petition. (This exhibit purports to show itemized payments, beginning on October 19, 1940, and ending on October 1, 1948, totaling $1865, and the further payments of $15 on November 1, 1948, $15 on December 1, 1948, and $15 on January 1, 1949, a total of $45, making a grand total of $1910. The court sustained ground of demurrer that payments prior to October 6, 1948, were barred by the statute of limitations, thus leaving only $45.) In addition to such periodic payments the petitioners paid under the usurious agreement the original $15 payment in October, 1940, and made a final payment of $1020 on or about January 15, 1949, which sums aggregate $2030 [$2930] paid to discharge the original $1500 principal (or $1065 after the court eliminated $1865), whereupon the individual and corporate defendants jointly executed to the petitioners a warranty deed to the said real estate.
The prayers were: (a) For process: (b) for recovery of $1065 with interest at 7 percent from January 1, 1949, from the defendants and each of them; (c) for general relief. (The original petition sought to recover $1430, but the court, on demurrer, struck all claim for usurious payments made prior to October 6, 1948, and, accordingly, the prayer was amended to recover only $1065.)
To the petition as originally drawn the defendants demurred generally on the ground, among others, that no sufficient facts were alleged to constitute any cause of action against the defendants jointly. The court sustained this ground of demurrer with leave to amend. After the petition was amended by allegations which we have shown as 5 (a), 5 (b), 5 (c) and 5 (d) the defendants renewed this ground to the petition as amended and other grounds not passed upon by the court, and also demurred upon additional grounds, all of such grounds, in addition to the first mentioned, being as follows:
(a) Generally on the ground that the alleged facts set forth no cause of action against the defendants.
(b) Generally on the ground that no sufficient facts are alleged upon which to base the recovery of alleged usury paid.
(c) Generally on the ground that the petition fails to properly plead and allege usury, as required by law, in that it is not fully and distinctly alleged therein the specific amount or amounts of principal, the period the principal was to run, the rate of interest charged, contracted for or received on such amount or amounts of principal and for what period of time, and specifically what amount of the alleged payments made or received constituted principal and what part or amounts thereof constituted usury.
(d) specially to the allegation that the defendants and each of them are indebted to the petitioners in the sum of $1430 (later reduced to $1065 by amendment) as being a conclusion without supporting facts.
(e) Specially to the allegations as to entering into a contract as shown by Exhibit "A," on the ground that the allegations are irrelevant to the relief sought, namely, recovery of alleged usury based upon a contract dated November 2, 1940, and shown by Exhibit "B."
(f) Specially to the allegation that the usurious terms are contained in provision 2 and subparagraphs of the Exhibit "B," to wit, $15 down and 360 payments of $7.50 each at two-weeks intervals, on the ground that it is a mere conclusion of the pleader without supporting facts, and also seeks to add to and vary and contradict the terms of a valid written contract between the parties.
(g) Specially to the allegation that "Petitioners commenced making bi-weekly payments under the usurious provisions of the agreement, Exhibit "B," on the grounds that it seeks to add to, vary, and contradict the terms of a valid written contract between the parties, and also constitutes a mere conclusion of the pleader that the provisions of the contract were usurious.
(h) Specially to the allegations that petitioners' periodic payments in furtherance of agreement evidenced by Exhibit "B" were made without their knowledge that the terms imposed upon them were usurious, on the ground that the allegations are irrelevant to the relief sought and presumptive, in that no facts are alleged on which to base the conclusion that the "terms imposed" were usurious.
(i) Generally to the petition as amended on the grounds that it alleges facts and matters inconsistent with and contrary to the terms of the written contract evidenced by Exhibit "B."
(j) Generally on the ground that the allegations of the petition as amended seek to vary, add to, and to change the terms of the said written contract evidenced by Exhibit "B."
(k) Generally on the grounds that the petition as amended seeks to reform such written instrument, and the court has no jurisdiction to do so.
(l) Generally on the grounds that the petition as amended shows on its face that before the judgment prayed could be granted it would be necessary that the contract, Exhibit "B," be reformed, and as the court has no such jurisdiction the suit can not be maintained.
(m) Generally on the grounds that the amendment fails to meet the order of the court sustaining the ground of demurrer to the allegations that the agreement, Exhibit "B," imposed usurious terms upon the petitioners for the payment of the agreed price of $1500, the ground of demurrer being that the allegations sought to vary, add to, and contradict the terms of a valid written contract between the parties, and the amendment failing to set out sufficient facts to meet the objection.
(n) Generally to the petition as amended on the grounds that it fails to meet the order of the court sustaining the ground of demurrer that no sufficient facts are alleged to constitute any cause of action against the defendants jointly.
(o) (Abandoned; it being stated in brief of counsel that objection has been met.)
(p) Specially to portion 5 (a) of the petition added by amendment, on the grounds that the allegations are irrelevant and prejudicial to a fair trial of the case against the defendants.
(q) Specially to portion 5 (b) of the petition added by amendment, on the ground that the allegations seek to add to, vary, and to change by parol the terms of the valid written contract evidenced by Exhibit "B."
(r) Specially to the portion 5 (c) of the petition added by amendment, on the ground that the allegations are mere conclusions of the pleader without supporting facts.
(s) Specially to the portion 5 (d) of the petition added by amendment, except the words "and defendants accepted the monies from time to time tendered by plaintiffs in discharge of the purchase-price of said lot No. 48," on the ground that it is a mere conclusion of the pleader without supporting facts.
(t) Specially to the language just above quoted, on the ground that it is too vague and indefinite, in that it does not show what amounts were tendered to each of the defendants and the separate amounts paid to each of them.
The court overruled all of the above stated grounds of demurrer, and the exception here is to that judgment.
The petition as amended is one in which the petitioners seek to recover payments in excess of the $1500 purchase-price of the property here involved, less such payments made more than one year previous to October 6, 1940, which the court on demurrer held to be barred by the statute of limitations. The amended prayer was, accordingly, for $1065, and this amount is sought to be recovered on the theory that the contract, Exhibit "B," was a usurious one and all interest therein calculated and paid was forfeited.
The court, in passing upon the general ground of demurrer which it sustained, was evidently of the opinion that the contract just mentioned, without more, showed as a matter of law that it was not usurious, it appearing on its face to be an agreement separate and distinct from the initial contract evidenced by Exhibit "A." But after the petition was amended in the respects shown in portions 5 (a), 5 (b), 5 (c) and 5 (d) the court then overruled the grounds of general demurrer. The correctness of this action is here questioned, and the answer will also dispose of the grounds of demurrer designated hereinbefore as (a), (b), (c), (d), (f), (h), (i), (n) and (r).
"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." Code, § 57-102. See also Sledd v. Pilot Life Ins. Co., 52 Ga. App. 326 (1) ( 183 S.E. 199). "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." Code, § 57-101. See also Kent v. Hibernia Savings c. Assn., 190 Ga. 764, 765(2) ( 10 S.E.2d 759). Where usury is shown, the entire amount of interest is forfeited. Code, § 57-112; Stewart v. Miller, 161 Ga. 919 (2) ( 132 S.E. 535); Reconstruction Finance Corp. v. Puckett, 181 Ga. 288 ( 181 S.E. 861); Padgett v. Jones, 34 Ga. App. 244 (1) ( 129 S.E. 109). If it is apparent on the face of the contract, the court may declare it to be usurious, but if doubtful the question must be resolved by the jury. Atlanta Savings Bank v. Spencer, 107 Ga. 629 (4) ( 33 S.E. 878); Virginia-Carolina Co. v. Provident Society, 126 Ga. 50 (6) ( 54 S.E. 929); Bank of Lumpkin v. Farmers State Bank, 161 Ga. 801 (2) ( 132 S.E. 221); Simpson v. Charters, 185 Ga. 592, 600 ( 196 S.E. 31). The petition as amended shows that, in pursuance of the option clause in the initial contract, Exhibit "A," whereby the lease property could be purchased for $1500 at 6 percent interest per annum, payable at the rate of $15 per month in advance, plus taxes and insurance, the petitioners elected to exercise this right. A contract, Exhibit "B," was then entered into, purporting to carry out such option. This contract, which is attacked as usurious, provided for the payment of $15 cash and 360 payments of $7.50 each, making a total sum of $2715. Manifestly this represents a usurious contract if, as the petitioners were informed, it was intended to provide for the payment of the purchase-price of $1500 with interest. While it is provided by the Code, § 57-116, as amended by the act of 1937 (Ga. L. 1937, p. 463), as shown in the supplement to the Annotated Code, that "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," it was held in Graham v. Lynch, 206 Ga. 301 ( 57 S.E.2d 86), that these provisions apply only to lending money and "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." In that case the plaintiff paid in cash $1950 on the purchase-price of $5750 for described realty, leaving a balance of $3800. The seller calculated interest at 5 percent for 10 years on $3800 and added this $1900 thereto, making a total of $5700, for which 120 notes at $47.50 each were executed. After paying 33 of these notes, totaling $1567.50, at the time of the filing of the suit, the purchaser contended that all of the interest was forfeited as usurious and that this amount should be applied against the balance of the purchase-price, namely, $3800, leaving $2232.50 which he had tendered to the seller with 7 percent interest and continued to tender. Judgment was sought declaring the interest forfeited and awarding attorney's fees. The court held: "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." In the present case the purchase-price, according to the contract, Exhibit "A," was $1500 with interest at 6 percent on deferred payments of $15 per month. The purchaser was also to pay taxes and insurance. The contract, Exhibit "B," which it is alleged the corporation's agent asserted was prepared to carry out the option agreement, required the plaintiffs to pay $15 cash and 360 payments of $7.50 each every two weeks, commencing November 16, 1940, a total of $2715, and it was stated that, after the specified cash payment of $15, it represented the $1500 purchase-price named in the contract evidenced by Exhibit "A," plus 6 percent added-in interest for a period of 15 years, or 90 percent interest, amounting to $1200, making a total of $2700.
The petition as amended sufficiently pleads usury: (1) The sum upon which paid ($1500); (2) the time when the contract was made; (3) when payable; and (4) the amount of usury agreed upon, $1200. Code, § 81-901; Lee v. King, 142 Ga. 609 (1) ( 83 S.E. 272); Dublin Veneer Co. v. Kendrick, 179 Ga. 237 (6) ( 175 S.E. 687); Hartsfield v. Willis, 192 Ga. 219 (1) ( 14 S.E.2d, 735); Chatham Finance Co. v. Eitel, 66 Ga. App. 643 (1) ( 19 S.E.2d 54). The petition showed that $1865 was paid on the original purchase-price of $1500 prior to October 6, 1948, representing a usurious over-payment of $365, but the court on demurrer struck as uncollectible all but $45, which, with payment of $1020 on or about January 15, 1949, made a total of $1065 sought to be recovered. A jury question was properly presented by the petition as amended, and the court did not err in overruling the grounds of demurrer above mentioned.
The ground designated as (e) hereinbefore, challenging the allegations as to entering into a contract evidenced by Exhibit "A," on the ground that they are irrelevant to the relief sought, is plainly without merit. These allegations were necessary in order to show the agreed purchase-price of $1500 and then demonstrate by other allegations and the Exhibit "B" that usurious terms were imposed upon the plaintiffs.
Grounds designated as (g), (j), (m) and (q) challenge certain allegations on the ground that they seek to add to, vary, and contradict the terms of a valid written contract between the parties. While it is well established that parol evidence can not be used to add to or change the terms of a valid written contract, the rule does not apply to a contract which is usurious and, therefore, invalid. Lytle v. Scottish American Co., 122 Ga. 458 (6) ( 50 S.E. 402); Manget Realty Co. v. Carolina Realty Co., 169 Ga. 495, 508 ( 150 S.E. 828); McDaniel v. Bank of Bethlehem, 22 Ga. App. 223, 233 ( 95 S.E. 724). The allegations here were pertinent to show that the contract, Exhibit "B," was tainted with usury. The law abhors such an exaction, and seeks to prevent it under any pretense or contrivance whatsoever. McGehee v. Petree, 165 Ga. 492 (1) ( 141 S.E. 206). "No scheme or device has yet been invented, the substantial effect of which is to violate the usury laws of this State, that the courts have not condemned as such." Gunnels v. Atlanta Bar Association, 191 Ga. 366, 381 ( 12 S.E.2d 602). As tersely stated by Bleckley, J., in Pope v. Marshall, 78 Ga. 635, 640: "No disguise of language can avail for covering up usury, or glossing over an usurious contract. The theory that a contract will be usurious or not according to the kind of paperbag it is put up in, or according to the more or less ingenious phrases made use of in negotiating it, is altogether erroneous. The law intends that a search for usury shall penetrate to the substance." It is upon this philosophy of the law that parol evidence may be admitted, under the allegations here made, to shatter the pretenses of the agreement evidenced by Exhibit "B."
The grounds designated as (k) and (l), contending that the court has no jurisdiction to reform the contract, and, therefore, no judgment could be rendered is without merit and based upon a misapprehension. No attempt is sought to reform the contract, Exhibit "B." It is set forth merely to show its terms and then by parol evidence to expose its usuriousness.
The ground designated as (p) is insufficient as the special demurrer fails to point out wherein the allegations are irrelevant and prejudicial, and it is apprehended that no valid reason could be assigned.
Ground (s) complaining that the allegations of the portion 5(d) of the petition as amended, except the language mentioned in this ground, are merely conclusions of the pleader is without merit.
Ground (t) complaining that the allegation, "and defendants accepted the monies from time to time tendered by plaintiffs in discharge of the purchase price of said lot No. 48," is too vague and indefinite, in that it does not show what amounts were tendered to each of the defendants and the separate amounts paid to each, is without merit. The petition shows that these defendants were acting in concert in receiving the usurious payments and were properly joined as defendants.
Judgment affirmed. Gardner and Townsend, JJ., concur.