Briggs v. Industrial Bank of Richmond

BeogdeN, J. If a note secured by a mortgage or deed of trust is tainted with usury, can the makers thereof have the usurious element adjudged a cloud upon the title and removed under the provisions of C. S., 1743 ? The remedy prescribed by law for usurious transactions is thus stated in Ripple v. Mortgage Corp., 193 N. C., 422, 137 S. E., 156. “In North Carolina the penalty, as prescribed by statute, for taking, receiving, reserving, or charging for the use of money a sum in excess of interest at the legal rate is forfeiture of the entire interest which the note or other evidence of debt carries with it, or which has been agreed to be paid. The forfeiture will be enforced against the usurer, when he seeks to recover upon the usurious contract or transaction. His debt will be stripped of all its interest-bearing quality, and he will be permitted to recover only the principal sum loaned. If a sum in excess of interest at the legal rate has not only been charged by the lender, but has also been paid by the borrower for the use of money, then the person, or his legal representative, or the corporation by whom the same has been paid, may recover twice the amount paid in an action in the nature of action for debt.” C. S., 2306. -It is manifest that the note is not a cloud upon title. The cloud, if any, is formed by the mortgage or deed of trust. It was formerly held in Glisson v. Newton, 2 N. C., 336, that a bond tainted with usury was *122 utterly void “as is also every security or assurance founded upon it.” But the statute in force in 1796 when the decision was rendered, contained express provision to that effect. Shober v. Hauser, 20 N. C., 222. In construing the present statute upon the subject of usury it has been held that the usury complained of did not affect or impair the obligation and validity of the mortgage or deed of trust securing the note. Thus, in Spivey v. Grant, 96 N. C., 214, 2 S. E., 45, the Court declared: “Nor can the change in the rate of interest, assented to by him, made in the deed, impair its force as to him. Had it remained, it would have only affected the obligation to the extent of the interest, not the conveyance as a valid act.” To the same effect is the utterance in Rogers v. Booker, 184 N. C., 183, 113 S. E., 671. “The usury did not impair the validity of the mortgage, and only forfeits the interest.” Plaintiffs do not contend that the deed of trust is entirely invalid, but that it is partially so. C. S., 1743, does not apply to such a fact situation. The statute was intended to remove clouds not merely to determine their size. Affirmed.