Opinion
14014
March 8, 1935.
Before GREENE, J., Anderson, July, 1934. Affirmed.
Action by Long Realty Company against Mamie M. Breedin. Judgment for plaintiff, and defendant appeals.
Master's report and Court order, directed to be reported, follow:
Pursuant to an order of reference dated July — , 1933, I held a reference in the above-entitled matter on July 28, 1933, took testimony which, together with exhibits introduced in evidence, are transmitted herewith. I beg leave to report my findings of fact, together with my conclusions of law, as follows, to wit:
The pleadings in this case raised three principal questions as follows:
(1) Is the plaintiff the owner and holder of the notes and mortgage being sued upon?
(2) Are the notes and mortgage tainted with usury?
These two questions will be taken up in the order named.
(1) I find from the testimony and exhibits in evidence that Long Realty Company is a separate and distinct corporation from that of Security Mortgage Company, however, each corporation has practically the same officers of the other. That the mortgage and notes it was given to secure, which are sued upon in this action, were duly transferred and assigned to plaintiff and that plaintiff is now and was at the time of the commencement of this action the owner and holder of same. The defendant contends that inasmuch as the assignment to plaintiff was not recorded prior to the date of the reference, the plaintiff was not the owner of the papers and could not maintain this action. There is no merit in this contention; assignments and transfers of notes and mortgages are valid whether recorded or not. Section 8881, Vol. 3, 1932 Code of Laws of South Carolina, provides for the recordation of mortgages and provides that such assignments shall, when recorded, be valid and binding for the protection of innocent subsequent purchasers, etc., as against unrecorded assignments. The question of subsequent purchasers, etc., does not enter at all into this case. I might add here that the assignment of the notes and mortgage by Security Mortgage Company to the Citizens' Southern National Bank, as trustee, dated August 31, 1927, was duly recorded in the office of the Clerk of this Court on September 12, 1927, in Sat. Book 4, at page 299. The assignment of said papers by the said bank as trustee to plaintiff, dated March 10, 1933 (prior to the commencement of this action), was duly recorded in said Clerk's office on July 28, 1933 (after the commencement of this action), in Sat. Book 4, at page 671. The defendant contends that inasmuch as the assignments are not probated that the same could not be recorded. Although as to the issues in this case it is immaterial whether the assignments were recorded or not, I will pass on this contention of the defendant. The section of the Code above referred to clearly states that such assignments must be in writing, witnessed as required of mortgages of real estate (two witnesses) and not probated where the same is on the original mortgage itself, in order to be recorded. The assignments in this case are in writing and witnessed as required of real estate mortgages and are not probated. The assignment to the bank as trustee is on a sheet of paper which is glued to the original mortgage; and the other, the one to plaintiff, is on a sheet of paper pinned and clamped with pins similar to that used in clamping and pinning legal papers, to the back of said mortgage. I hold that this is a compliance with the provision of said Section of the 1932 Code of Laws of South Carolina, providing to the effect that assignments need not be probated "where the same is upon the original mortgage itself." Therefore, my conclusion is that although as far as it concerns this case it is not necessary that the assignments be recorded, said assignments are properly and duly recorded in the office of the Clerk of this Court.
(2) Now, as to the question of usury: The defendant bases her contention along this line upon two sets of circumstances, to wit:
(a) Defendant claims that the receipt by the original mortgagee of part of the brokerage fee or commission, paid by her to the loan broker, constituted usury.
(b) She also claims that it appears upon the face of the notes and mortgage, by virtue of language of same, that the transaction was usurious.
The Security Mortgage Company, the original mortgagee, is a corporation in Atlanta, Ga., engaged in the business of loaning money. The defendant on August 5, 1927, in writing made application to said mortgage company for a five-year loan of $6,500.00, at the rate of 7 per cent. interest per annum, payable semi-annually, to be secured by a real estate mortgage, etc. In the application, which the defendant signed, she agreed to (quoting from the application) "give Geiger-Barton Company the exclusive right to secure the loan for ten days, and I also agree to pay my said agents, the regular 5 per cent. commission, and further agree to pay the above expenses in case, for any reason, I do not accept the loan, or in case the titles are not good or merchantable." Following this application said mortgage company on or about August 15, 1927, made the loan to the defendant paying her the sum of $6,500.00. I might add here that in making the application it was understood that the 5 per cent. brokerage commission was to pay Geiger-Barton Company (this was a company at Anderson, S.C.), their charges and all expenses of the loan, such as attorney's fees, recording the papers, and other expenses, etc. Upon the loan being made the defendant executed and delivered to said mortgage company her sealed promissory note in writing for the sum of $6,500.00 due five years after date with interest from maturity at the rate of 8 per cent. per annum. At the same time as evidence of interest on the said $6,500.00 from date of maturity, she executed and delivered to said mortgage company twenty interest notes, numbered 1 to 20, inclusive, and each marked interest note, each for the sum of $113.75 and each being for interest at the rate of 7 per cent. per annum on the said $6,500.00 for the three-month period immediately prior to its maturity. The said interest notes matured at intervals of three months; that is to say, note No. 1 matured three months after date of same, No. 2 matured six months after date of same, No. 3 nine months after date of same, and so on. Each of said interest notes were identically alike except as to maturity date. A copy of one of said interest notes is as follows:
"Interest Note No. 19 Anderson, S.C. "113.75 August 15th, 1927.
"Four years and nine months after date I promise to pay to the order of Security Mortgage Company One Hundred Thirteen and seventy-five one-hundredths dollars in gold coin of the United States or its equivalent, for value received.
"With interest after maturity until paid at eight per cent. per annum with all costs of collection, including ten per cent. attorney's fees, if collected by law or through an attorney at law. Each of us, whether principal, security, guarantor, endorser or other party hereto, hereby severally waives and renounces each for himself and family, any and all home-stead and exemption rights, either of us, or the family of either of us, may have under or by virtue of the Constitution or laws of Georgia, any other state, or the United States, as against this debt or any renewal thereof; and each further waives demand, protest and notice of demand, protest and nonpayment. It is also expressly agreed and understood, if this note, or any part thereof, is not paid when due that all other notes outstanding, bearing even date with these presents, and given for the same intent and purpose as this note, shall, at the option of the holder, become due and collectible — time being of the essence of this contract.
"Given under the hand and seal of each party.
"MAMIE M. BREEDIN (Seal)."
At the same time the defendant executed and delivered to said mortgage company as security for said notes the real estate mortgage that is being foreclosed in this action. Upon the execution of said papers said mortgage company duly paid the defendant the sum of $6,500.00. Thereupon the defendant paid Geiger-Barton Company brokerage commission of 5 per cent., amounting to $325.00.
Geiger-Barton Company out of the $325.00 paid certain expenses of the loan, such as attorney's fees for examining the title and drawing the papers, stamps on the notes, expense of recording the mortgage, appraiser's charges for appraising the property, cost of photographs of the property, etc. Geiger-Barton Company also forwarded $127.15 of this sum to said Security Mortgage Company, and this money was used by the mortgage company to pay $11.38 cost of title insurance, one-half of one per cent. of the loan annually to McCurbey Goodrich Company, for expense of selling bonds to get funds for Security Mortgage Company to loan; one-half of one per cent of the loan per year to United States Fidelity Guaranty Company, for guaranteeing the loan. In paying these expenses the mortgage company paid more than $127.15.
All of the interest notes except note No. 19 were paid on or about the maturity of same. Interest note No. 19 for $113.75 and the principal note of $6,500.00 have not been paid and are now past due, same having matured August 15, 1932. This action was commenced March .., 1933, upon the last two mentioned notes and to foreclose the mortgage given to secure same. Since making the loan the mortgagees have received the following amounts and no more: The $127.15 which was expended by the mortgage company as above set out and the face amount of interest notes numbers 1 to 19, inclusive.
It is upon these facts that the defendant pleads usury.
(a) Now as to usury regarding the $127.15 of the brokerage fee received by Security Mortgage Company:
Our Courts have consistently held that a lender may charge and receive the legal rate of interest permitted by statute plus reasonable expenses incident to the loan, such as expenses of attorney for examining the title, preparing the papers, etc., recording fees, brokerage commission, etc. Mayfield v. Mortgage Co., 104 S.C. 152, 88 S.E., 370, 371; Danielson v. Mixon, 109 S.C. 264, 95 S.E., 515, 517; Brown v. Brown, 38 S.C. 173, 17 S.E., 452; 19 L.R.A. (N.S.), 392. In the present case, the borrower pursuant to a signed written contract paid Geiger-Barton Company $325.00, same being 5 per cent. of the $6,500.00 loan. The testimony shows that this fund was used to pay expenses incident to the loan, attorney's fees, appraisers, brokerage commission, etc., and that $127.15 of said sum was forwarded to the mortgage company and used by it in paying $11.38 for title insurance and the balance in paying other expenses incident to the loan. There is no testimony showing that this sum of $325.00 paid by the borrower to the broker was unreasonable or unconscionable and without such being unreasonable and unconscionable there could be no usury. The burden of proof is upon the person claiming usury to show that there was usury. New England Mortgage Security Co. v. Boxley, 44 S.C. 81, 21 S.E., 444, 885. As a matter of fact, and I so find, that the testimony shows clearly that the charges were reasonable.
But suppose, as the defendant contends, that the commission charged was unreasonable, to the extent of the $127.15 received by the mortgage company; would that be usury? It is not denied that the borrower signed a written application for the loan agreeing to pay interest at the rate of seven per cent. per annum and to pay five per cent. of the amount borrowed as broker's commission to Geiger-Barton Company. The papers were executed and the rate of interest charged was seven per cent. per annum, so on the face of the papers the rate of interest charged is within the statute. Our Courts hold that they will go further than the mere wording of the contract to ascertain whether or not sums of money retained or charged for brokers' commissions, expenses, etc., is really expenses or interest. If such expenses, or alleged expenses, are unreasonable or unconscionable and were made for the purpose of evading the usury law, then such unreasonable portion is really interest, regardless by what name it is called. This is held to be the law in the cases above cited. In the Mayfield case, supra, the Court says:
"It was not denied that the borrower could be required to pay a reasonable fee without violation of the statutes against usury. Only the unreasonable portion, then, could be charged as usury. The borrower had agreed in writing to pay the fee. If the unreasonable portion carried the interest over eight per cent. it was usury. There was evidence that it was unreasonable, but to what extent it was unreasonable there is no evidence. * * *
"An unconscionable commission or fee being paid, there is no remedy at law or in equity. The courts have, however, the right to uncover the hidden unlawfulness of a contract and declare its true character. A sum of money retained or paid in an attempt to evade the law against usury may be declared to be in fact usurious interest; and, when it is adjudged to be usurious interest, then the law against usurious interest applies."
So, in the present case if the commissions charged were unreasonable to the extent of $127.15, then the $127.15 would be construed as interest. Upon that construction, then, the borrower's written contract application for the loan would be an agreement to pay interest at the rate of seven per cent. per annum for five years, brokerage or expenses of $197.35, and the further sum of $127.15 interest. Then the question arises: Does that constitute usury? Under our statute she had a right to agree to eight per cent. interest per annum for five years. Is seven per cent. per annum for five years on $6,500.00 and the sum of $127.15 more than eight per cent. per annum on $6,500.00 for five years? The question boils itself down to simple mathematics. A similar question was presented to the Court in the Mixon case, supra. In that case the loan amounted to $1,700.00, the brokerage charged and agreed upon in the application was $156.50, and interest at seven per cent. per annum for five years. In rendering the decision the Court says: "In this case the trial Judge allowed a fee of $85.00 and declared the excess of $51.00 to be usurious. The appellant agreed in writing to pay the fee and could have agreed to pay eight per cent. on the money. The note had five years to run before its maturity. Accepting his Honor's method as correct, we have (let the circuit decree be reported), taken off the $51.00 disallowed, and we have interest (the difference between seven and eight per cent.) on $1,649.00, is $16.49 per year. Now, multiply that by five, the number of years allowed for payment by the note, and we get $82.45, or a margin within the usury statute of $31.45. So, whether we consider the commission charged a scheme or not, there was no violation of the usury laws. The agreement was in writing. Therefore fore eight per cent. could be charged and taken, and the amount charged and taken did not exceed eight per cent."
By applying the same manner of calculation in the present case, assuming that the $127.15 was unreasonable part of the brokerage commissions, we have: Take $127.15 off the $6,500.00, and we have $6,372.85. The difference between seven per cent. and eight per cent. on this amount is $63.72. Now multiply this by five, the number of years, we have $318.60. Subtracting from this $318.60 the sum of $127.72. the amount over seven per cent. received, we have a margin within the usury statute of $191.45. Or we can make the calculation in another way which may be clearer, to wit:
Amount of loan ....................... $6,500.00 Less brokerage commission retained ... 127.15 _________ Net amount borrowed received ......... $6,372.85 Legal rate per year .................. .08 _________ Interest per year 8% ................. 509.82 Number of years for loan to run ...... 5 ________ Interest for 5 years legal rate ...... $2,549.14 The following calculations show what was actually charged, assuming the $127.15 was unreasonable and really interest: Amount of loan ....................... $6,500.00 Interest rate charged ................ .07 _________ Interest charged per year ............ $ 455.00 Number of years ...................... 5 _________ Interest charged for 5 years ......... $2,275.00 Amount retained ...................... 127.15 _________ Total interest received and charged .. $2,402.15In calculating in this manner, the amount actually charged and received would be considerably over a hundred dollars within the statute.
The fact that in this case the lender itself received the unreasonable portion would not alter my conclusions. In the Mayfield case, supra, the broker was the agent of the lender, and thus money paid to or retained by the agent is the same as if paid to or retained by the principal. In the Mixon case, supra, the Court says: "So, whether we consider the commission charged a scheme or not there was no violation of the usury laws."
So, it is in this case even assuming that the brokerage commissions charged were unreasonable to the extent of the $127.15 received by the lender, there was no violation of the usury law.
(b) The next question is: Does violation of the usury law appear on the face of the papers?
Our statute regarding usury, Section 6738, Vol. 3; Code of Laws of South Carolina, 1932, reads as follows: "No greater interest than seven (7) per cent. per annum shall be charged, taken, agreed upon or allowed upon any contract * * * for the hiring, lending or use of money * * * except upon written contract wherein * * * eight per cent. may be charged."
In this case one principal note was given for $6,500.00, due five years after date, with interest after maturity at eight per cent. per annum. The debtor was charged interest on the $6,500.00 from date to maturity at the rate of seven per cent. per annum and as evidence of such executed twenty interest notes each for $113.75, each maturing at intervals of three months and each representing interest on the $6,500.00 at the rate of seven per cent. per annum for the three months preceding its maturity. Each note contained the following language: "If this note or any part thereof, is not paid when due that all other notes outstanding, bearing even date with these presents, and given for the same intent and purpose as this note, shall at the option of the holder, become due and collectible — time being the essence of this contract."
The defendant contends that by virtue of this language there was a possibility that she would be called upon to pay the principal debt and all interest notes before maturity, and in such event she would be called upon to pay a sum, in addition to the principal, that exceeded the legal rate of interest (eight per cent. per annum), and that such sum would be interest. The testimony shows that the holders of the notes and mortgage never attempted to declare any of the notes that had not matured to be due and no attempt was ever made to collect any unearned interest. In fact, somewhat the reverse happened; upon default, the defendant was offered full settlement of the notes and mortgage at a discount of $1,200.00. The testimony shows that the lender never intended for the language of the papers to be construed as giving the holder of the papers the right in case of default to charge or claim as due and owing any unearned interest. That it was the lender's intention and customary practice, in cases of default, to declare as due and owing only the principal and unpaid earned interest up to the time of default. It was unfortunate for a clear understanding of the intention of the parties that printed blank notes usually used for the principal notes were also used for the interest notes. The defendant contends that the charging of usurious interest does not have to be willfully and knowingly done to constitute usury. This is correct where the mistake is a mistake of law. If I charge you 15 per cent. per annum interest on a debt, it would be no defense for me to say that I did not know such was against the law or that such constituted usury. Such mistake would be a mistake of law. All cases in this State to the effect that a mistake is no defense are cases where the mistake was a mistake of law. Where the mistake is a mistake of fact it is entirely different. If in drawing a paper the scribbler designated through mistake an interest rate greater than the parties intended, such would be a mistake of fact and the paper could not be usurious. Mistake in fact in calculating interest, resulting in a greater rate being collected than agreed upon, would not be usury. Rushton v. Woodham, 68 S.C. 110, 46 S.E., 943, 946; American Bank v. Sublett, 104 S.C. 366, 89 S.E., 319. Error in writing up the papers, where it appeared usurious, does not constitute usury. Westrope v. Abbott, 134 S.C. 502, 133 S.E., 465. In this case it was held that the Court by decree had a right to practically reform the contract. And evidence is admissible to show the true transaction. Rainwater v. Bonnette, 151 S.C. 474, 149 S.E., 254.
In this case I find that the parties never intended for the notes and mortgage to be construed as to give the mortgagee the right under any circumstances to claim unearned interest, and that there was no violation of the usury statute.
For the sake of argument let us assume that the parties really intended that the mortgagee should have the right in case of default to claim as due and owing the interest notes which represent interest that had not been earned; would such constitute usury? There is no question but that under such circumstances had there been default say in interest note Nos. 2 or 3, and the holder declared the other notes due, the borrower would have been charged a sum of money which would have been more than eight per cent. per annum on the amount loaned from the date of the loan to date of default. Now, the question is: Would this additional amount charged be interest within the meaning of the usury statute? If so, the transaction would be usurious; if not, there would be no usury. Would this amount be a penalty for failure on the part of the borrower for not carrying out her contract? If such would be a penalty, there would be no usury.
"Interest," under our statute, is money charged or paid for the hiring, lending, or use of money. That is practically the common-law definition. Regarding the question of the distinction between "interest" as used in the usury statutes and "penalty," we find the following notes in 49 L.R.A., 550:
"The decisions bearing upon this question run back to a time before the taking of interest was permitted, when a provision might be inserted in the contract providing for the return of a large addition to a loan in case of failure to pay at maturity."
"In Shephead's Touchstone 62, it is said if I lend a man ten pounds for a year, and the obligation be that if the borrower pay not the ten pounds within the year, that then he shall pay twenty pounds for it, this is not usury. (This same principle is laid down in 26 Ed. III 17 cited in V, Abr. Usury; Garret v. Foot, Com., 133."
"It is generally held that the agreement will not be usurious if the debtor can relieve himself from paying the additional amount by prompt payment. Cutler v. How, 8 Mass. 257. But if this cannot be done the contract will be usurious. Cutler v. Johnson, 8 Mass. 266."
In support of this general rule will be found cases from Illinois, Iowa, Arkansas, North Carolina, and other states.
"Where a note was for the full amount of principal and interest for the time it was to run, and was made payable in installments with the provision that failure to pay any installments when it should become due would render the whole sum immediately payable, it was held that there was no usury because the increased amount was only a penalty to enforce prompt payment. Wells v. Girling, 4 J.B. Moore, 78 Gen., 21."
"Where the whole debt with interest to maturity is to become immediately due upon default in payment of an installment of interest the provision will be construed as a penalty against which equity will relieve. Moore v. Cameron, 93 N.C. 51."
This same principle is laid down in Weyrich v. Hobleman, 14 Neb. 432, 16 N.W., 436; Upton v. O'Donahue, 32 Neb. 565, 49 N.W., 267; Fisher v. Otis, 3 Pin. (Wis.), 78.
"It is usually held that if the understanding is that the loan shall continue after maturity the contract for the unlawful interest will be usurious." Supporting this principle are: Union Mortgage Co. v. Hagood (C.C.), 97 F., 360; Pike v. Crist, 62 Ill., 461, and other cases.
The only case in this State that touches upon this question is Carroll County Sav. Bank v. Strother, 28 S.C. 504, 6 S.E., 313, 320.
In the Strother case provision was in the note that after maturity it was to bear 10 per cent. (illegal), interest. Question before the Court was whether this was penalty or usurious interest. The Court held: "It seems to us that the language used in the contract shows it was not the intention of the parties that this stipulation should operate simply as a penalty to enforce prompt payment. The promise is to pay this rate of interest 'as agreed, for negotiating and carrying this loan, so long as it remains unpaid.' This plainly implies that the parties contemplated and expected that the money should not be paid promptly at maturity, but that the debt should be carried for a while, 'as agreed.'"
In the present case the facts are different from those in the Strother case. In the present case I find that it was the intention of the parties that the notes be paid promptly when due. Testimony shows that the mortgage company sold bonds against this mortgage and had a guaranty company to guarantee the payment of the bonds. The mortgage company's business was lending money in this manner. In view of this it is clear that it is highly important that loans be paid promptly when due. In the Strother case it is clear that the 10 per cent. was for the use of the money. In our case it cannot be said that if default had occurred and the mortgagee insisted on unearned interest notes being paid, such would not be for the use of money, but would be a penalty for failure to pay. The question of whether equity would relieve the defendant of this penalty does not enter into this case, as the mortgagee has never claimed or attempted to claim this penalty.
In further discussing this point attention is called to McCrary v. Woodard, 122 Ga. 793, 50 S.E., 941. In this case: "It was held that there was no usury where, before the maturity of some of several notes which were payable at different times, and each of which included interest to its maturity, an action was brought on all of them, under a stipulation that if any of them should not be paid at maturity, all should become due, but the judgment was not rendered until after maturity of the last note. The Court said however that if the judgment had been rendered before the maturity of one or more of the notes, the debtor would have been entitled to a reduction in an amount representing the interest unearned at the time of the rendition of the judgment."
In answering the objection that such an agreement as here presented constituted usury, because the whole sum, with interest, might have been due upon default in payment of any note, the Court in Goodale v. Wallace, 19 S.D., 405, 103 N.W., 651, 117 Am. St. Rep., 962, 9 Ann. Cas., 545, said that such stipulation imposed a penalty which the mortgagor could avoid by prompt payment of the notes when due.
In Moore v. Cameron, 93 N.C. 51, cited in 28 L.R.A. (N.S.), 114, note, the Court held that such acceleration upon default of paying any installment did not constitute usury.
This question is fully treated in 84 A.L.R., 1283. Quoting from the annotations: "By the greater weight of authority it is held that the inclusion, in a contract to repay money, of a provision that, on default in the payment of interest, or any installment of the principal, the entire indebtedness including interest for the whole term or interest to date of default, shall become due, does not constitute usury though the amount of such interest will exceed the legal rate. The excess interest is penal and can be neither collected nor retained." American Clearing Co. v. Walkill Stock Farms Co. (1923, D.C.), 293 F., 58. Also in support of the above principle there is cited a number of cases from Arkansas, Georgia, Idaho, North Carolina, Oklahoma, South Dakota, Washington, and others.
I cannot find any case anywhere that lays down a principle materially different from the cases above referred to. At first blush it would seem that the Court in Shropshire v. Commerce Credit Co., 120 Tex., 400, 30 S.W.2d 282, 39 S.W.2d 11, 84 A.L.R., 1269, recognized a different principle. This Court recognized the general principle that such acceleration did not usually constitute usury but held held that inasmuch as the Texas statute (Rev. St., 1925, Art. 5069), defined interest as the "use or forbearance or detention of money," such acceleration constituted usury under the Texas statute. In Florida, the case of Maxwell v. Jacksonville Loan Imp. Co., 45 Fla., 468, 34 So., 255, held such acceleration constituted usury under the Florida statute inasmuch as the Florida statute in defining "interest" uses the word "forbearance."
Our statute does not use either of these words "detention" or "forbearance" in defining interest, therefore the principles laid down in Texas and Florida would not be applicable here.
In view of the great weight of authority, I have come to the conclusion that in this case, even if the parties had intended to claim unearned interest in event of default in the payment of any interest note, such would not be in violation of our usury statute. That such excess claim would be in the nature of a penalty against which equity would give the borrower relief.
In defending the claim of usury plaintiff takes another position. It claims that even taking the exact literal wording of the notes which reads, "That all other notes outstanding, bearing even date with these presents and given for the same intent and purpose as this note, shall, at the option of the holder become due * * *," other interest notes that had not matured could not have been declared due. It contends that there were no two notes given for the same intent and purpose; that interest note No. 1 was given for interest on $6,500.00 for the first three months of the loan, interest note No. 2 was given for interest on the $6,500.00 for the fourth, fifth, and sixth month of the loan, and so on. That a clause of this nature would be proper in notes given for various installments of the principal, but when unfortunately the printed blanks for principal notes were used for interest notes, such clause became meaningless. I find, that these facts stated by plaintiff relating to this contention are correct, yet I think it best and more equitable as a rule to decide such matters on the real and true intention of the parties rather than on a strictly literal construction of the papers.
I find that all allegations of the complaint are correct, except there has not been sufficient proof that the mortgagee advanced or paid $70.02 insurance premiums as alleged in the complaint. I find that the defendant is not entitled to any part of the offsets and counterclaims asked for in her answer.
I find that there is now due and owing to plaintiff by the defendant the sum of $7,571.94 together with reasonable attorney's fee for plaintiff's attorney in this action. That as security for this debt plaintiff holds a mortgage over the premises described in the complaint, and plaintiff is entitled to have said mortgage foreclosed and the proceeds of sale thereof applied to said debt.
Wherefore it is recommended that plaintiff have judgment against the defendant for the sum of $7,571.94 plus reasonable attorney's fees for its attorney in this action; that the mortgaged premises be sold as is customary in such matters; and that the proceeds be applied towards the payment of said indebtedness to plaintiff, after the payment of taxes, costs, etc.
DECREE OF JUDGE GREENEThis is an action commenced on the 20th day of March, 1933, for the foreclosure of a real estate mortgage executed by the defendant to Security Mortgage Company, a corporation, as security to an indebtedness evidenced by two written promissory notes, one for $113.75 and interest, and the other of $6,500.00 and interest. The defendant answered, setting up several defenses and counterclaim, as follows:
1. A general denial.
2. That plaintiff was not the owner and holder of the mortgage and notes sued upon.
3. That the notes and mortgage were tainted with usury, in that the lender received of the brokerage fee $127.15, in addition to the interest of seven per cent. of the amount of the loan as provided by the notes; and in that, at the time of the making of the loan, the lender caused the defendant to execute in addition to a note for $6,500.00, the principal amount of the loan, quarterly interest notes, representing at the rate of seven per cent. per annum interest on the principal amount of the loan from the date of the loan to the maturity of the principal amount. And said notes contain provisions to the effect that if any note was not paid when due all notes should become immediately due at the option of the holder of same. The position of the defendant is that such provisions would in the event of default give the holder the right to demand unearned interest.
The defendant asked for judgment against plaintiff in the sum of $4,576.80, claiming that she was entitled to such as double the interest, under her usury claim.
The plaintiff's reply was a general denial.
The matter was referred to the Probate Judge of Anderson County as special referee to take testimony and report his findings of fact and conclusions of law. This has been done. The referee found that there was no usury and that defendant was not damaged by any unlawful acts of Security Mortgage Company.
The referee found that plaintiff was the legal owner of the notes and mortgage, was entitled to have the mortgage foreclosed, and that the defendant was due and owing the plaintiff the sum of $7,571.94 on said indebtedness, together with reasonable attorney's fees. The amount of reasonable attorney's fee has not been ascertained. Plaintiff's attorney states that inasmuch as the property is not worth the principal and interest on the debt, plaintiff will not ask for attorney's fees.
The defendant excepted to said report regarding the findings that there was no usury and in the referee's failure to find that plaintiff was owing the defendant $4,971.50 under the usury claims, and in the finding that defendant was due and owing plaintiff the sum of $7,571.94. No exception was made as to other matters set out in the report. And therefore the only question before me is whether or not the transaction was usurious.
Upon reading the pleadings, testimony and exhibits, and the referee's report, and after hearing argument of counsels:
It is ordered, adjudged, and decreed that for the reasons set forth in said report of the special referee, which report is hereby made a part of this decree, the notes and mortgage sued upon, and the dealings between plaintiff and/or the original mortgagee and the defendant, were not and are not usurious. That there is now due and owing to plaintiff by the defendant upon said notes and mortgage $7,571.94, and that plaintiff is entitled to have the mortgaged premises sold and the proceeds thereof, after the payment of taxes and costs, applied towards the payment of said indebtedness. That the report of H.E. Bailey, Probate Judge as special referee, bearing date June 8, 1934, be and the same is hereby approved and affirmed in every respect.
It is further ordered, adjudged, and decreed that the plaintiff have judgment against the defendant for the sum of $7,571.94. That the real estate hereinafter described, same being the mortgaged premises described in the complaint, be sold at public sale by the Probate Judge of Anderson County, S.C. as special referee, in front of the courthouse door at Anderson, S.C. during the usual hours of sale on sales day in September, 1934, or some convenient sales day thereafter, to the highest bidder for cash in the manner provided by law; the purchaser to pay extra for papers and stamps. That in the event the purchaser fails to comply with his bid within a reasonable time, said premises to be readvertised and resold on some succeeding sales day upon the same terms and conditions as provided herein for the original sale, at the risk of the former purchaser. That the legal notice of said sale or sales be given by advertisement thereof in The Record, a newspaper issued at Anderson, S.C. for the time required by law. That the said referee upon compliance with the terms of the sale execute deed to said premises to the purchaser thereof and that such purchaser be let into possession of same upon producing said deed.
It is further ordered that the proceeds from the sale be applied, first, towards the payment of the costs of this action and all taxes and other legal assessments that may be owing on said premises, and the balance towards the payment of the said debt of $7,571.94 owing to plaintiff by the defendant, and the balance, if any, be paid to the defendant.
It is further ordered, adjudged, and decreed that the defendant and all persons claiming under her subsequent to the filing of the lis pendens herein be and they are hereby forever barred and foreclosed of all equity of redemption and/or other interests in or liens upon said premises hereinbelow described.
The real estate to be sold is described as follows: All that certain parcel or lot of land, with storerooms thereon, situate, lying, and being in the City and County of Anderson, State of South Carolina, fronting south on the north side of Kelly Street sixty-nine and one-half feet, and having the following courses and distances, to wit: Beginning at a point on Kelly Street at the southwest corner of the lot now or formerly owned by Sterling Lodge of Odd Fellows, and running thence "N 7 10 W 79.2 feet" to corner, thence "S 88 30 W 66.5 feet" to corner, thence "S. 7 20 E. 80 feet" to corner on Kelly Street, thence along Kelly Street "N. 88 10 E. 69.5 feet" to the beginning corner. Said real estate is bound on the north by other property, now or formerly of Mamie M. Breedin, on the east by property now or formerly of Sterling Lodge of Odd Fellows, on the south by Kelly Street, and on the west by property, now or formerly of J.W. Heaton, and is part of the real estate conveyed to Mamie M. Breedin by H.H. Daniel by deed dated July 16, 1926, of record in the R.M.C. Office for Anderson County, S.C. in Deed Book 5, § U, at page 434.
Mr. A.H. Dagnall, for appellant, cites: Usury: 38 S.C. 173; 49 S.C. 345; 83 S.C. 521; 109 S.C. 264; 150 S.C. 311; 114 S.C. 362; 135 S.C. 190; 27 R.C.L., 237; 45 Fla., 425; 34 So., 255; 120 Tex., 400; 84 A.L.R., 1269.
Mr. Rufus Fant, for respondent, cites: As to usury: 104 S.C. 152; 88 S.E., 370; 109 S.C. 264; 95 S.E., 515; 38 S.C. 173; 17 S.E., 452; 19 L.R.A. (N. S), 392; 68 S.C. 110; 46 S.E., 946; 104 S.C. 366; 89 S.E., 319; 151 S.C. 454; 149 S.E., 254; 28 S.C. 504; 6 S.E., 313; 49 L.R.A., 550; 293 F., 58; 171 S.C. 445; 172 S.E., 417.
March 8, 1935.
The opinion of the Court was delivered by
Under the admitted facts of this case, we think that Judge Greene correctly disposed of the appellant's contentions, and we approve the result of his decree.
Counsel for the defendant asks that the Court overrule the decision in Danielson v. Mixon, 109 S.C. 264, 95 S.E., 515, upon which the respondent relies in part to show that the transaction in the case at bar was not usurious. A study of that decision, however, does not disclose any good reason, even if it should be conceded that the holdings of the Court are not stated as clearly as they might be, to grant the request made.
The judgment of the Circuit Court is affirmed.
Let the master's report and the Court's order be incorporated in the report of the case.
MESSRS. JUSTICES CARTER and BONHAM and MESSRS. Circuit Judges E.C. DENNIS and C.J. RAMAGE, ACTING ASSOCIATE JUSTICES, concur.