Polikoff v. Finance Service Co.

OlakksoN, J. The only exception and assignment of error that we think necessary to consider as determinative of this controversy is as follows: “That the Forsyth County Court erred in overruling the defendant’s motion that the action be dismissed, for that the evidence introduced by the plaintiff does not make out a cause of action, and to the entry of the judgment appearing in record.” We see no error in the ruling of the Forsyth County Court, which was affirmed on appeal to the Superior Court. The Forsyth County Court in its judgment found: “And being of the further opinion that the fourth assignment of error of the plaintiff should be and the same is hereby sustained, and the court being of the further opinion, and so finds, that the contracts are governed by the laws of the State of North Carolina, and that the plaintiff is entitled to recover and that the laws of Maryland do not control for the reason that the stipulation that the laws of Maryland should apply was made for the purpose and with the intent of evading the usury laws of the State of North Carolina. The fourth assignment of error of plaintiff, sustained by the Forsyth County Court, and affirmed on appeal to the Superior Court, is as-follows: “Fourth exception — That the referee found as a conclusion of law that the contracts are governed by the laws of the State of Maryland and, therefore, that the plaintiff is not entitled to recover as set out in the referee’s conclusion of law No. 2: Whereas, he should have found that the contracts are governed by the laws of the State of North Carolina, and that the plaintiff is entitled to recover and that the laws of Maryland do not apply for the reason that the contract stipulation that the law of Maryland should apply is in had faith and for the purpose and intent of evading the usury laws of the Stale of North Carolina.'” (Italics ours.) In Bundy v. Credit Co., 200 N. C., 511 (515), this Court, quoting from Zimmerman v. Brown, 166 Pac., 924, says: “By the great weight of authority it is held that, in a case like the present one, every presumption is against an intention to violate the law, so that where notes are *634 executed in one State and payable in another, the parties will be presumed to have contracted with reference to the law of the place where the transaction would be valid rather than in view of the law by which it would be illegal, provided, however, that there is no evidence of bad faith or of an intention to evade the usury law of the latter State. Therefore, when a contract is usurious by the law of the State wherein it was made, but not according to that of the State wherein it is to be performed, the parties will be presumed to have contracted with reference to the law of the latter State, and the contract will be upheld, subject to the conditions of good faith just set forth.” In Bundy v. Credit Co., 202 N. C., 604 (607), we find: “Bad faith cannot be defined with mathematical precision. The ultimate definition of the term would depend upon the facts'and circumstances of a given controversy. Certainly, it implies a false motive or a false purpose, and hence it is a species of fraudulent conduct. Technically, there is, of course, a legal distinction between bad faith and fraud, but for all practical purposes bad faith usually hunts in the fraud pack.” We think that, taking the fourth assignment of error of plaintiff, which was sustained, and the further finding of fact by the judge of the Forsyth County Court, affirmed by the court below, it is sufficient to support the judgment. In Abbitt v. Gregory, 201 N. C., 577 (596), we find: “In Trust Co. v. Lentz, 196 N. C., 398 (at page 406), 145 S. E., 776, it is said: Tn view of the position taken by some of the parties that the judge was without authority to change the report of the referee — the reference being by consent — it is sufficient to say that, in a consent reference, as well as in a compulsory one, upon exceptions' duly filed, the judge of the Superior Court, in the exercise of his supervisory power and under the •statute, may affirm, modify, set aside, make additional findings, and confirm, in whole or in part, or disaffirm the report of a referee. Contracting Co. v. Power Co., 195 N. C., 649, 143 S. E., 241; Mills v. Realty Co., 196 N. C., 223, 145 S. E., 26.’ ” Moore v. Brinkley, 200 N. C., 457; Wallace v. Benner, 200 N. C., 124; Thigpen v. Trust Co., 203 N. C., 291 (295). We think there was sufficient evidence for the court below to find the facts as above, set forth. The general principle is thus stated in 53 A. L. R., at p. 746: “The later cases substantiate those cited in the earlier annotation to the effect that a court, in deciding whether or not a transaction is usurious, will disregard its form and look to the substance, and will condemn it if all the requisites of usury are found to be present, despite any disguise it may wear, and that the question of good faith in exacting or receiving a charge which is ostensibly for *635 an expense of the loan is often a decisive factor in determining whether or not the transaction is usurious,” citing Ripple v. Mortgage Corp., 193 N. C., 422. In Bank v. Wysong, 177 N. C., 380 (388) : “This kind of usurious agreement has been cast in various forms, but the courts have invariably stripped it of its flimsy disguise, and decided according to its substance and its necessary tendency and effect, when the purpose and intent of the lender are unmistakable. And this is the correct rule.” In Bundy v. Credit Co., supra, at p. 516, it is stated: “The general 2Drinciple recognized in all jurisdictions is that ordinarily the execution, interpretation and validity of a contract is to be determined by the law of the State or county in which it is made.” In Ripple v. Mortgage Corp., supra, at p. 428, the following able instruction by Oglesby, J., to the jury was approved: “Now, gentlemen of the jury, if the place of payment was specified as in the State of Maryland, for the purpose of avoiding the usury laws of North Carolina, and if it were a scheme or method to avoid the usury laws of North Carolina, and that was the reason for the place of payment being provided in Maryland, then your answer to the second issue would he No’; that they were not to be performed in Maryland, because if providing the place of payment as Maryland was a scheme to evade and whip around the usury laws of North Carolina, and was not done in good faith, then the place of payment, so far as the law is concerned, would not be in Maryland.” In Clark v. Bank, 200 N. C., 635, “The statutory penalty for charging usury is the forfeiture of all interest on the loan; it is only when the borrower had paid usury to the lender of money, that he can recover in a civil action as the statutory penalty for taking and receiving usury, twice the amount paid,” citing C. S., 2306, and many authorities. C. S., 2305, is as follows: “The legal rate of interest shall be six per cent per annum for such time as interest may accrue, and no more.” In Pugh v. Scarboro, 200 N. C., 59 (64), we find: “The humanities of all civilized nations has condemned usury, a species of ingenious oppression, especially in this day. It may be well for us to hark back to the Mosaic law, where we find: ‘If thy brother be waxen poor, and fallen in decay with thee, then thou shalt relieve him; yea, though he be a stranger, or a sojourner, that he may live with thee. Take thou no usury of him, or increase, but fear thy God, that thy brother may live with thee. Thou shalt not give him thy money upon usury, nor lend him thy vituals for increase.’ Lev. xxv, 35-37.” In the present case it was in evidence that the interest charged on different loans, the percentage rate was: 16.58, 16.76, 17.52, 17.62, 17.68, *636 1Y.86, 18.00, 18.05, 18.29, 18.35, 19.06, and 20.29. It is a matter of common knowledge that suck - exorbitant usury would naturally cause tbe company to fail and go into tbe bands of a receiver, as in tbe present case. Tbis enormous percentage rate no doubt caused tbe deatli of tbis industrial corporation. Tbe judgment of tbe court below is Affirmed.