Guaranty Bond & Mortgage Co. v. Fair Promise A. M. E. Zion Church

Stacy, C. J. The question for decision is whether the release of 13 December, 1928, estops the defendants from setting up usury in the original transaction. The answer is “No.” True, the decisions are to the effect that an abandonment of the usurious agreement and the execution of a new obligation for the amount of the original debt, eliminating the usury and providing for the payment thereafter of legal interest, purges the original usury, and renders the second obligation valid and enforceable. Hill v. Lindsay, 210 N. C., 694, 188 S. E., 406; Beck v. Bank, 161 N. C., 201, 76 S. E., 722; Ector v. Osborne, 179 N. C., 667, 103 S. E., 388, 13 A. L. R., 1207, and annotation. But this is not the ease sub judice. The refinancing of 13 December, 1928, was but a renewal of the original obligation, unpurged of usury, and new usury was added to the note here in suit. As exaction for the release, the defendants were required to promise to pay a part of the old as well as additional usury. This was a clear imposition upon the borrower. All interest is forfeited when usury is knowingly exacted. C. S., 2306. The items of $2,286.00 in the original note and $1,066.80 in the second lien renewal note obviously render both usurious. These amounts were knowingly charged in violation of the statute. At the time of the release no effort was made to rid the transaction of usury. Contrariwise, in addition to the original taint, more usury was exacted. This distinguishes the present case from Beck v. Bank, supra, where the compromise settlement was actually paid by the borrower, and the note stripped of usury. 66 C. J., 291. See MacRackan v. Bank, 164 N. C., 24, 80 S. E., 184, for valuable discussion of the whole subject. The following from Hill v. Lindsay, supra, would seem to be decisive of the question here presented: “Usury statutes are designed to protect the borrower whose necessity and importunity may place him at a disadvantage with respect to the exactions of the lender, and the borrower’s consent to the payment of usury, or even his subsequent approval of it, *398 will not debar him from subsequently asserting claim for the penalty prescribed by our broadly remedial statute. MacRackan v. Bank, 164 N. C., 24.” The cause will be remanded for judgment in accordance with what is here decided. Error and remanded.