Matthews v. Georgia State Savings Ass'n

HART, J., (after stating the fapts). We will first consider the cross-appeal. The chancellor found that A. L. Brown was the agent of the Georgia State Savings Association and was paid a commission of $35, but the chancellor did not find that such commission was paid with the lender’s knowledge express or implied. After giving Matthews credit for the full amount of the commission paid with interest, the court rendered a judgment in favor of the association for the balance due it and entered a decree foreclosing the deed of trust securing the loan. In the case of Vahlberg v. Keaton, 51 Ark. 534, the court said: “The lender may receive for the forbearance of money 10 per cent, per annum and no more. In excess of that his agent can receive no bonus from the borrower. If the agent do receive from the borrower a bonus in excess of the highest lawful interest, either with his knowledge, or under circumstances from which the law will presume he had knowledge, then the transaction is usurious; while, if the agent received the excessive bonus without his knowledge, and under circumstances from which his knowledge could not be reasonably presumed, the transaction would not be usurious.” (1-3) The bond provided that the loan in question should bear interest at the rate of 10 per cent, per annum, the highest legal rate in this State. There is nothing-in the record tending to show that the association knew that Brown was charging or receiving a commission in connection with the loan. Indeed, the evidence shows that no commission was paid to Brown. It is true that Matthews testified that he paid him a commission of $35.00 but he was mistaken in so designating the amount paid to Brown. The amount was paid to Brown as an attorney’s fee for an examination of the title to the property mortgaged. The association would not make loans unless an abstract of title was furnished prepared by a lawyer in whom they had confidence. Brown was such a lawyer and was designated by the association as one whose examination of titles would be accepted. It was shown that Brown did not have any authority to make a loan for the association and there is nothing in the record to show that the payment of the $35 was a device to evade our statute against usury. The lender may require the borrower to pay the cost of examining the title to land offered as security or of inspecting and reporting upon any property offered as security, or preparing papers and doing every formal act necessary to the security of a loan. 39 Cyc. 982; Webb on Usury, paragraphs 81, 318 and 324; Goodwin v. Bishop, 145 Ill. 421; Ammondson v. Ryan, 111 Ill. 506; Lishey v. Snyder (Supreme Court of Appeals of West Virginia), 49 S. E. 515; Mackey v. Winkler (Minn.), 29 N. W. 337; Daley v. Minnesota Loan & Investment Co. (Minn.), 45 N. W. 1100; American Mortgage Co. v. Woodward (S. C.), 65 S. E. 730; Harger v. McCullough, 2nd Denio (N. Y.) 119; Eaton v. Alger, 2nd Keyes (N. Y.) 41, and Cobe v. Guyer, 237 Ill. 516, 86 N. E. 1071. The theory on which the borrower is required to pay the cost of the examination of the title is not that, he employs the conveyancer but that the lender is entitled to charge the borrower for the expenses to which the lender may be put in making the loan. This principle applies only to expenditures made in good faith. It is evident from the record that the $35 charged Matthews by Brown here was for services in abstracting the title and there is nothing, in the record to show that it was a shift or device- to conceal usury. It may also be here stated that the traveling expenses of the inspector paid by Matthews were proper charges under the authorities just cited. See also Smith v. Wolf (Iowa), 8 N. W. 429, and Kent v. Phelps, 2nd Day (Conn.) 483. It is also deducible from the above authorities that an agreement by a borrower to take out insurance on the property does not constitute usury unless it is shown that the policy was taken out as a cloak or device to evade the statutes. The bond contained a stipulation that the non-payment of three installments of principal or interest after the same shall fall due shall authorize the association to proceed to enforce the payment of the loan together with the interest dne thereon. This provision has reference to the amount of the principal and the interest due thereon at the time the option is acted on, and does not refer to the interest that would accrue subsequent to such time if no action were taken on the option. Therefore the note is not in this respect usurious. Eldred v. Hart, 87 Ark. 534; Graham v. Fitts, 53 Fla. 1046, 13 A. & E. Ann. Cas. 149, and Goodale v. Wallace (S. D.), 9 A. & E. Ann Cas. 545. Section 5385 of Kirby’s Digest, provides the rule for computing interest where partial payments have been made. It is as follows: “In calculating interest, where partial payments may have been made, the interest shall be calculated to the time when the first payment shall have been made, and such payment shall be applied to the payment of such interest; and if such payment exceed the interest, the balance shall be applied to diminish the principal, and the same course shall be observed in all subsequent payments. ’ ’ (4-5) Counsel for appellees have prepared and filed with their brief an itemized statement showing the amount due by calculating the interest as provided by the statute. As stated above the bond was dated the 21st day of May, 1915, and the interest was to be payable from date. The transaction was not closed and the money forwarded to Matthews until the 9th day of June, 1915. Hence it is claimed that this constituted usury. The record does not show that this was done as a device for hiding a usurious contract. On the other hand the circumstances of the loan show good faith on the part of the association. It is evident that the delay was unavoidably incident to the completion of the transaction and that there was no intent on the part of the association to charge usurious rate of interest. This is shown by the circumstances attending the consummation of the loan. The bond provided that the $40.79 monthly installment of principal and interest should be paid on the last business day of each month. No attempt was made by the association to collect any interest for the month of May. On the contrary at the time the loan was closed up, and it wrote Matthews on the 8th day of June, 1915, that the money had been forwarded, it notified him that the first installment would be due on the last day of that month and for each succeeding ninety-six months thereafter. Under this construction which was placed by the parties at the time the transaction was closed up there were only nine days in the month of June for which interest was charged. Under the rule of partial payments as laid down by our statutes as shown by the illustrated statements filed with the briefs, these nine days could not in any event make the contract usurious. Moreover the circumstances of the loan show good faith on the part of the association and the delay was not unreasonable. 39 Cyc. 956. It follows that the chancellor was right in holding that the transaction did not constitute usury but that he erred in holding that Matthews was entitled to the $35 paid Brown. For his error the - decree will be reversed and the cause remanded with directions to enter a decree in accordance with this opinion and for further proceedings according to law.