Utley v. Cavender

The opinion of the court was delivered by Mr. Chiee Justice Simpson. This was an action to fore — 286 — close a mortgage given by the defendant, Cavender, to one David Utley, under whom the plaintiff claims. The other defendants were lien creditors. The decree of his honor', Judge Fraser, hereto appended, sufficiently states the facts. It appears that the mortgage was given to secure the payment of a bond dated May 6, 1881, for a large amount, borrowed money, payable five years after date, with interest at seven per cent, payable semi-annually. Various payments were made on this note up to November 10, 1885, and on November 15, 1886, some six months after the note fell due, the defendant, Cavender, made a payment of $134.95, which was interest at 10 per cent, up to November 6, 1886. on the deferred payments of the semiannual interest, -which had not been paid promptly as per note. And on January, 1887, Cavender made a written agreement with David Utley, in which he stipulated that in consideration of ex-' tension of time on the bond and mortgage, he would pay a sum equal to ten per cent, per annum on said bond from the 10th of May previous, to wit, from the 10th of May, 1886. One defence set up was that both of these transactions were' usurious, and that plaintiff could, therefore, recover only the principal, forfeiting all interest and costs, and that the defendant' was entitled to double the amount of $134.95, the alleged usurious interest paid, which he claimed by way of counter-claim. His honor sustained this last- defence, and allowed the counter-claim, to wit, $269.90, but overruled the other, holding that the written agreement above was not usurious, and he decreed that the plaintiff' be allowed his debt, after deducting the amount paid and the counter-claim. Both parties have appealed--the plaintiff on the ground that the payment of the $134.95 was held to have been usurious, and on the allowance of double that sum to the defendant as a counter-claim because of the usury ; and the defendant on the ground that the written agreement made in January, 1887, to pay 10 per cent, interest from May 10, 1886, a past date, was not held usurious. Usury consists in receiving more than the legal rate of interest for the use of money, and it has been held that even any advantage, certain or uncertain, contingent or otherwise, to the creditor, over and above the legal rate of interest, amounts to — 287 — usury. In our State, 7 per cent, is the legal rate in the absence of any written agreement for a higher sum, but the parties may stipulate in writing for any sum above 7 per cent, to 10 per cent. The penalty for lending or advancing money or other commodity at a greater rate is a forfeiture of all interest, and a limitation to the recovery of the principal sum without costs. Act of 1882, 18 Stat., 35. And where the illegal interest has been actually received, a forfeiture also of double the amount so received, to be recovered by the debtor in a separate action, or by counterclaim to any action brought by the creditor to recover the principal sum. Act of 1882, supra. Now, the questions before us may be resolved into questions of fact. First, has the plaintiff lent or advanced money to the defendant at a greater rate of interest than 7 per cent., in the absence of written agreement to pay more, or has he charged a greater sum ? Second, has he received a greater rate than 7 per cent, on any money lent or advanced, without a written agreement to pay the same ? If either of thtse questions must, upon the testimony, be answered in the affirmative, then usury is present in the matter thus affirmed. As to the first. It is conceded that the money sued for was originally lent for a period of five years from the 6th of May, 1881, at 7 per cent., to be paid semi-annually : there was certainly no usury in this. The bond fell due on the 6th of May, 1886, when, according to law, the bond would have still borne 7 per cent, until paid, with accumulated unpaid interest, if any, added and incorporated. The bond was not paid when it fell due, and in January thereafter, to wit, January, 1887, the defendant desiring further time, in consideration thereof, agreed in writing to pay ten per cent, upon the bond, the ten per cent, to commence on the 10th of May previous, about the time the bond had become due; and upon this written'agreement, the plaintiff now charges the 10 per cent, from said time. Now, can it be said upon-these facts, that the plaintiff has either lent or advanced money to defendant at a greater rate of interest than 7 per cent., in the absence of a written agreement to that effect, or that he has thus charged a greater rate? Certainly not. He lent the money originally at 7 per cent., and since it has become dub, the — 288 — defendant has ma.de a new contract, by which he was to pay 10 per cent, from the time of maturity. Whether this contract was founded upon a sufficient consideration, is not before us. The fact is, it was made, and it is in writing, and to that extent is in compliance with the act. Under these circumstances, it does not seem to us that the plaintiff can be said to have violated the usury law. He has neither lent nor advanced money at a greater rate of interest than 7 per cent, without a written agreement, nor has he charged a greater interest in the absence of such an agreement. There is nothing more in this transaction than that the defendant, while liable only for 7 per cent, for the money borrowed from May the 6th, 1886, to January, 1887, on the latter date, in consideration of further forbearance, agreed in writing to pay 10 per cent, during that time, and during the further extension. In other words, he agreed to increase the rate of interest to the limit allowed by the act, and, as required by the act, put it in writing. The plaintiff had the right to collect the bond when it fell due, to wit, May the 6th, 1886, and had the written agreement supra been made at that time in consideration of further extension, no one would have contended, we suppose, that this would have been an usurious transaction; because it would have amounted to a new loan upon a new contract, in writing, at a higher rate of interest, but within the limit of the act, and in accordance with its provisions. What is the difference, in view of the fact, that the agreement was made after the maturity of the bond, and not at that moment? There can be none as to the question of usury. True, the bond between May 6th, 1886, and January, 1887, was running under the original contract at 7 per cent., and the plaintiff, if he had attempted to charge more without a written agreement to that end, would have been guilty of usury, but no attempt of this kind was made. On the contrary, the defendant for his own advantage, and upon what seems to us now a sufficient consideration, changed the existing contract as to the rate of interest, and made it reach back to the said maturity of the bond; and it is upon this changed contract, which is in writing, that the plaintiff now demands 10 per cent, instead of 7. The plaintiff, then, is not — 289 — charging a higher rate of interest than 7 per cent, for money lent or advanced in the absence of a written agreement by his debtor to pay said higher rate. The other transaction stands upon a different ground, and, we think, with his honor below, was usurious. But we think his honor erred in the amount allowed upon the counter-claim of the defendant. In that transaction, the plaintiff patently received more than 7 per cent, interest on the deferred semi-annual unpaid interest on the bond, and' this, too, without any written agreement on the part of the defendant to pay the same. According to the terms of the bond, the defendant was required to pay the interest thereon semi-annually at 7 per cent., and by the failure to meet these semi-annual instalments when due, by law they bore interest at 7 per cent. It seems that some of these semi-annual instalments had not been paid when the bond fell due, and the defendant, instead of paying them with 7 per cent, interest, on the 15th of November, 1886, paid thereon 10 per cent, interest, amounting to $184.95, which the plaintiff actually received. Here, then, was a clear case of more than 7 per cent, received by a creditor, for the forbearance of money, without a written agreement to pay the same by the debtor, which was in violation of the act of 1882. That act imposes a forfeiture of double the amount of the illegal interest, as this court has held in Hardin v. Trimmier, 30 S. C., 391. See, also, Bank v. Parrott, Ibid., 61. Seven per cent, would have been, and was, the legal interest to which the plaintiff Avas entitled. All over that, to wit, the 3 per cent, excess, wras illegal, and double that excess should have been the amount alloAved to the defendant on his counter-claim — no more. As to the constitutionality of the 2nd section of the act of 1882, we concur with the Circuit Judge. This section Avas germane to the section 1288, General Statutes, regulating interest, and Avas sufficiently embraced in the title of the act of 1882, amending said section. It is the judgment of this court, that the judgment of the Cir-. cuit Court be modified, so as to allow, by way of counter-claim to the defendant, double the amount of 3 per pent., the excess over 7 per cent, embraced in the payment of $134.95, instead of double — 290 — the said sum of $134.95; and that, in all other respects, the said judgment be affirmed.