Cuthbertson v. Peoples Bank, 170 N.C. 531 (1915)

Dec. 22, 1915 · Supreme Court of North Carolina

170 N.C. 531

T. M. CUTHBERTSON et al. v. THE PEOPLES BANK OF ELIZABETHTOWN, TENN.

(Filed 22 December, 1915.)

1. Usury — Bills and Sotes — Judgments—Credits—Principal and Surety.

Where a borrower of money from a bank has paid an usurious rate of interest, and has the bank to accept in settlement of the indebtedness then existing another note of his .with indorsers, against the latter of whom the bank obtained judgment, it is held that the maker is entitled, in an action against the bank, to recover twice the amount of the usurious interest paid (Revisal, sec. 1951), to be applied to the discharge, pro tanto, of the note, and the judgment against the indorser.

2. Usury — Equity—Forfeitures—Actions at Law.

The principle that a court of equity will eliminate an usurious rate of interest from the debt when the suit is brought by the debtor for the penalty, upon his paying the principal sum and the legal rate of interest, does not apply to an action at law involving no equitable principle.

3. Usury — Nonresident Creditor — Statute of limitations.

An action against a nonresident creditor for the statutory penalty for charging usury (Revisal, sec. 1951), who has no agent here upon whom process may be served, is not barred by the statute of limitations, nor does the fact in this case that one of the plaintiffs is a nonresident and the other has changed his residence affect the matter.

Appeal by defendant from Harding, J., at Spring Term, 1915, of Avery.

Civil action beard upon exceptions to referee’s report. From tbe judgment rendered defendant appealed.

~W. G. Howland, 8. J. Ervin for plaintiff.

J. D. Love for defendant.

BrowN, J.

It appears from tbe clear and intelligent report of tbe referee that Asbley & Lusk were borrowers of money from defendant and paid it mucb usurious interest. In 1909 defendant accepted in settlement of indebtedness then existing three notes of Asbley & Lusk of $1,000 eacb, witb tbe other plaintiffs herein as indorsers. Tbe defendant obtained judgments against tbe three indorsers on tbe notes, which are unpaid. In tbe present action tbe three plaintiff indorsers ask that tbe judgments be set aside for fraud.

Tbe referee ruled against them and sustained motion to nonsuit. As they have not appealed, that feature of tbe case is eliminated. Plaintiffs Asbley & Lusk seek to recover tbe penalty for usurious interest paid defendant by them, and ask that it be applied ih satisfaction of tbe judgments against their indorsers, and that tbe debt as to them be discharged pro tanto, also, as it is tbe same indebtedness upon which tbe said judgments were recovered.

Tbe defendant in its answer admits receipt of as much as 10 per cent interest in advance on its loans to Asbley & Lusk, and avers tbat tbe three $1,000 notes, on which judgments were obtained against the in-dorsers, represent only principal money. The statute of limitations is pleaded and judgment demanded against Ashley & Lusk, as well as the indorsers on the said notes.

The judge confirmed the report of the referee. The findings of fact are binding upon us, as it is not contended that there is no evidence to support them. The referee finds that defendant knowingly and intentionally exacted 10 and 12 per cent interest on the various loans to said plaintiffs and that the aggregate amount of interest received was $1,971.80, and that in June, 1909, the amount due by plaintiffs Ashley & Lusk to the defendant upon the several notes mentioned (not taking into consideration usurious interest charged), and allowing credit for the partial payments, was $3,034.

Our statute provides that where usury is exacted the person who has paid it may recover back twice the amount of interest paid, and further, “That in any action brought in any court of competent jurisdiction to recover upon any such note or other evidence of debt it shall be lawful for the party against whom the action is brought to plead as a counterclaim the benefit above provided for, to wit, twice the amount of interest paid as aforesaid, and also the forfeiture of the entire interest.” Re-visal, 1951. ■

There can be no question that upon these findings the defendant is liable for the penalty, and that it must be applied to the discharge pro tanto of the notes of Ashley & Lusk as well as to the judgments against the indorsers, as directed by the referee.

The defendant invokes the well established principle of equity that a debtor, seeking the aid of a court of equity, will have the usurious element eliminated from his debt only uiDon his paying the principal and legal rate of interest, the only forfeiture enforced against the creditor being the excess of the legal rate. Churchill v. Turnage, 122 N. C., 426; Owens v. Wright, 161 N. C., 127; Simonton v. Lanier, 71 N. C., 498.

There is nothing in this case upon which to apply that principle. In the eases cited it will be found that the plaintiffs were seeking aid of a court of equity to enjoin the foreclosure of a mortgage or to grant other equitable relief. These plaintiffs do not seek the interposition of equity in their behalf. They are suing at law “in an action in the nature of an action for defendant,” as provided in the statute for a statutory penalty.

The statute of limitations does not bar this action, as the defendant is a nonresident corporation with no agent in this State upon whom process could Lave been served. Williams v. B. and L. Assn., 131 N. C., 267.

The fact that the plaintiff Ashley is a nonresident of tbe State and tbat plaintiff Lusk bas been a nonresident for nearly two years since their cause of action accrued did not start the running of the statute in favor of a nonresident corporation which had not appointed an agent for service in the State of the forum. 25 Oyc., 1238-1240.

The judgment is

Affirmed.