Farmers Bank & Trust Co. v. Redwine

CoNNOR, J. At the trial of this action in the Superior Court, the plaintiff moved for judgment on the facts agreed that plaintiff recover of the defendants the sum of $487.58, with interest on said sum from 1 November, 1930, and the costs of the action. This motion was denied, and plaintiff duly excepted. The plaintiff further excepted to the judgment signed by the court. On its appeal to this Court, the plaintiff contends that there was error (1) in the denial of its motion for judgment on the facts agreed, for that the forfeiture of all interest on the debt of the defendants to the plaintiff, as evidenced by the note executed and endorsed by the defendants, and sued on in this action, is barred by C. S., 442, as amended by chapter 231, Public Laws of North Carolina, 1931, and (2) in the judgment signed by the court, for that the sum of $151.58 was paid voluntarily by the defendants as interest on their debt to the plaintiff, and for that reason is not applicable as a payment on the principal of said debt. The defendants did not except to the judgment of the Superior Court, and have not appealed therefrom to this Court. They concede that on the facts agreed, their counterclaim for twice the amount of usurious interest paid by them to the plaintiff, is barred by C. S., 442, subsection 2. The defendants’ cause of action on which they base their counterclaim for the penalty for usury paid accrued more than two years before the commencement of this action. The counterclaim was barred by the statute of limitations in force at the date the cause of action accrued. C. S., 442, subsection 2. The law applicable to the usurious transactions involved in this action, at the dates of such transactions, is found in section 2306, Consolidated Statutes of North Carolina, 1919. This statute has not been amended or altered by the General Assembly of this State, and reads as follows: “2306. Penalty for usury: Corporate bonds may be sold below par. The taking, receiving, reserving or charging a greater rate of interest than six per centum per annum, either before or after the interest may accrue, when knowingly done, shall be a forfeiture of the entire interest which the note or other evidence of debt carries with it, or which has been agreed to be paid thereon, and in case a greater rate of interest has been paid, the person or his legal representatives, or corporation *129 by whom it has been paid, may recover back twice the amount of interest paid, in an action in the nature of action for debt. In any action brought in any court of competent jurisdiction to recover upon any such note or other evidence of debt, it is lawful for the party against whom the action is brought to plead as a counterclaim the penalty above provided for, to wit: Twice the amount of interest ’paid as aforesaid, and also the forfeiture of the entire interest. Nothing contained in the foregoing section, however, shall be held or construed to prohibit private corporations from paying a commission on or for the sale of their coupon bonds, nor from selling such bonds for less than the par value thereof. This section shall 'not apply to contracts executed prior to February twenty-first, nineteen hundred and five.” The entire interest on the debt which is the consideration of the note sued on in this action was forfeited under the provisions of the statute, when the plaintiff first charged the defendants -interest on said debt at a greater rate than six per cent per annum. This forfeiture occurred prior to the date of the note, to wit: 1 November, 1929, and notwithstanding the agreement therein that the note was payable on 1 November, 1930, with interest from maturity at the rate of six per cent per annum, the debt was stripped of its interest-bearing quality. The agreement with respect to the payment of interest was void. No rights or liabilities, which are enforceable in this action, arose out of said agreement, unless as contended by the plaintiff. Chapter 231, Public Laws of North Carolina, 1931, is applicable to the forfeiture of interest on said debt under the provisions of C. S., 2306. Chapter 231, Public Laws of North Carolina, 1931, is as follows: "The General Assembly of North Carolina do enact: Section 1. -That section four hundred and forty-two of the Consolidated Statutes of North Carolina be amended by adding a new subsection number three, as follows: ‘3. The forfeiture of all interest for usury.’ That nothing herein shall apply to pending litigation. Section 2. That this act shall be in force and effect from and after its ratification.” The act was ratified on 1 April, 1931. C. S., 442, as amended by the addition of subsection 3, provides that there shall be no forfeiture of interest for usury after the expiration of two years from the date of a forfeiture under the provisions of O. S., 2306. This action was begun on 16 November, 1931. The forfeiture of all interest on the note sued on in the action occurred more than two years before the commencement of the action. If chapter 231, Public Laws of 1931, is applicable to the forfeiture of interest in the instant case, *130 tbe defendants would not be allowed a reasonable time within which to assert their rights under O. S., 2306, and upon well settled principles the statute would be void as to the defendants. Barnhardt v. Morrison, 178 N. C., 563, 101 S. E., 218. We do not think, however, that the language of the statute manifests a purpose on the part of the General Assembly that the statute shall operate retrospectively. The statute is prospective only, and is applicable only to a forfeiture under C. S., 2306, which has occurred, or shall occur, since its ratification on 1 April, 1931. There was no error in the judgment denying the plaintiff interest on the principal of the note sued on. Such interest was forfeited under the provisions of C. S., 2306, and such forfeiture is not affected by the provisions of C. S., 442, subsection 3. It was agreed by and between the parties to this action that the sum of $151.58 was paid by the defendants to the plaintiff as interest on the debt from 1 April, 1926, to 1 November, 1929, and that such interest was usurious. This sum was paid by the defendants voluntarily, and could not be recovered in an action instituted by the defendants against the plaintiff for that purpose. For this reason, it was error to allow said sum as a counterclaim in this action. The plaintiff is entitled to judgment for the principal of the note sued on, without interest. The judgment as modified in accordance with this opinion is affirmed. Modified and affirmed.