Union Sav. Bank & Trust Co. v. Dottenheim

• Decision Date: 19 July 1899
• Citation: 34 S.E. 217,107 Ga. 606
• Parties: UNION SAVINGS BANK & TRUST CO. v. DOTTENHEIM.
• Court: Georgia Supreme Court

34 S.E. 217

107 Ga. 606

UNION SAVINGS BANK & TRUST CO. v. DOTTENHEIM.

Supreme Court of Georgia

July 19, 1899

Syllabus by the Court.

1. Where money is loaned, and interest is calculated at the highest lawful rate for the full period of the loan, and the aggregate of the principal and interest, thus calculated, is divided into as many notes as the period embraces months, one of such notes maturing each month, the transaction is, under Civ. Code, §§ 2877, 2886, infected with usury.

2. The act of 1889 (Civ. Code, § 2391) making the provisions of the act of 1888 (Civ. Code, § 2388 et seq.), which authorized building and loan associations to make contracts of the character above referred to, "apply to all savings institutions which pay interest to depositors, and whose deposits are not subject to check," is a general law operative throughout the state upon all persons coming within the terms of the act, and is, therefore, not repugnant to that clause of the constitution which declares that "laws of a general nature shall have uniform operation throughout the state, and no special law shall be enacted in any case for which provision has been made by an existing general law."

3. Whether the act referred to is applicable to a bank which is both a savings institution and a bank doing a general banking business is a question not raised by the present record.

4. Even if a provision in a special bank charter authorizing it to make contracts of the character of that involved in the present case is inoperative because repugnant to the clause of the constitution above quoted, it is not necessary to so decide in the present case.

Simmons C.J., dissenting.

Error from superior court, Bibb county; W. Dessau, Judge pro hac.

Action by Celia Dottenheim against W. H. Ashworth and the Union Savings Bank & Trust Company. Judgment for plaintiff, and the defendant trust company brings error. Reversed.

Steed & Wimberly, Bacon, Miller & Brunson, and John I. Hall, for plaintiff in error.

Preston & Ayer and Hardeman, Davis & Turner, for defendant in error.

COBB J.

Celia Dottenheim brought an action of ejectment in the fictitious form against W. H. Ashworth as tenant in possession, and the Union Savings Bank & Trust Company, having been served as the true claimant in the case, came in and defended. The charge of the court was, in effect, a direction to the jury to return a verdict in favor of the plaintiff, which was done. To this ruling the defendant excepted.

The evidence established the following facts: Mrs. Dottenheim agreed to purchase the property now in controversy at the sum of $3,250. Having the sum of $550, she applied to and obtained from the defendant $2,700, the sum necessary to complete the contract of purchase. Having paid the purchase money, she received a warranty deed from her vendor, and went into possession. To secure the loan from the bank, she contemporaneously with the execution and delivery of the deed from her vendor to her, executed to the bank, in accordance with the provisions of section 1969 et seq. of the Code of 1882, a deed to the land which she had purchased. This deed was given to secure 60 promissory notes for the sum of $63 each, falling due monthly during a period of five years, making an aggregate amount of $3,780. This amount was made up of the principal of the debt ($2,700), and interest on the same at 8 per cent. per annum for five years; the two amounts being added together, and divided into 60 notes of $63 each. Contemporaneously with the execution of the deed and the delivery of the notes, an agreement was entered into, in which it was stipulated that, upon default in payment of any of the notes, the entire loan then unpaid should, at the option of the bank, become due and payable, and it should have the right to proceed to collect the debt, including the expenses and 10 per cent. attorney's fees, which were agreed to be paid. A number of the notes were paid promptly at maturity. Mrs. Dottenheim finding, however, that she could not pay all of them promptly, afterwards, without any change being made in the papers, made a parol agreement with the bank that a less amount might be paid each month, and credited on the debt. The amount to be paid each month was changed twice. Finally, she offered to turn the property over to the bank in settlement of the debt. This offer was declined, but, she having vacated the property, leaving the premises unoccupied, and the same being about to be sold for the payment of taxes due on it, the bank took possession, paid off the tax fi. fa., and rented the property. Ashworth, sued as tenant in possession, was in possession under the defendant. The amount collected by the plaintiff upon the debt, including what was collected as rent, was $1,288.65, leaving as a balance due $2,787.36, which is still unpaid. The bill of exceptions recites: "Defendant relied upon the provisions of its charter (found in Acts 1889, pp. 501-507), and upon the provisions of Act 1888 (Civ. Code, §§ 2388, 2389), and Act 1889 (Civ. Code, § 2391), as authorizing it to charge interest for the entire period of the loan." And, in addition to calling the attention of the court to its charter provision, put in evidence its pass book, by agreement, as showing its method of doing business, as follows: Interest at the rate of five per cent. per annum, semiannually compounded, was paid to its depositors; deposits drawing interest from the 1st day of the month after deposit is made. A depositor must always present his pass book when depositing or withdrawing moneys, in order to have the same entered on the book; the bank reserving the right to require 60 days' notice in writing of intention to withdraw deposit. Sums of twenty-five cents and upwards will be received on deposit. Married women and minors may make deposits in their own name, and withdraw the same upon their own receipts and upon the same conditions as other depositors. Any person may become a depositor upon agreeing to the conditions upon which deposits may be made and withdrawn. If a person desires to deposit more than $5,000, it shall be left with the bank to determine the terms. In case of the pass book being lost, immediate notice shall be given the bank, and the bank shall prescribe the conditions on which a new book shall be issued. These rules and regulations governing deposits are printed in the pass book, and at the top of each page of the pass book is the provision: "It is agreed that this contract is opened subject to the conditions as printed." The presiding judge held that the transaction between Mrs. Dottenheim and the bank was infected with usury, and, therefore, that her deed to the bank was void; the clause in the charter of the bank, as well as the sections of the Code above referred to, which conferred authority upon savings banks of a certain character to loan money in the manner followed in this case, each being, in his opinion, unconstitutional and void.

1. The question whether, at common law, "it was lawful in England to take any interest whatever, and, if so, how much for the use of money, is veiled in obscurity, and conflicting opinions have been given by writers in regard to it. It is certain, however, that the practice was severely condemned by the church, by whose laws the taking of interest was branded as a heinous offense, and punished accordingly; and it is also certain that the church was aided in its efforts by the temporal authorities, so that the usurer not only fell under the ban of the church's displeasure, but suffered the forfeiture of his property as well." 27 Am. & Eng. Enc. Law, p. 919; 2 Bl. Comm. marg. p. 454 et seq. The first English statute regulating the rate of interest was passed during the reign of Henry VIII., and the rate allowed was limited to 10 per cent. per annum; it being made a penal offense to charge more. This statute was repealed during the reign of Edward VI. by an act which absolutely prohibited the taking of any interest whatever, the penalty imposed by the act being a forfeiture of the entire debt. During the reign of Elizabeth the act just mentioned was repealed, and the rate of interest authorized by the statute passed during the reign of Henry VIII. was again made lawful. The rate was reduced to 8 per cent. during the reign of James I., and subsequently to 6 per cent. in the reign of Charles II., and finally to 5 per cent. during the reign of Queen Anne. Under the law last referred to the penalty for usury was a forfeiture of the entire debt. This statute remained of force until the present reign. In 1755 it was "enacted by the governor, council and assembly" of the province of Georgia that the lawful rate of interest in the provision should be 10 per cent., but the act provided no penalty for charging a higher rate. Colonial Acts Ga. 1755-74, p. 61. In 1759 the legislature of the province, in an act which, in its preamble, declared that "the high rate of interest" in the province of Georgia was greatly prejudicial to the welfare of the planters and others, provided that no greater rate of interest should be allowed than 8 per cent. per annum, and that all contracts in which a greater rate of interest was reserved or taken should be utterly void, and that any person attempting by any deceitful way or means to secure any greater rate of interest should forfeit and lose for every offense "the treble value of the moneys, wares and merchandises, and other things," which were the subject-matter of the transaction. Prince, Dig. Laws to 1820, p. 199; Watk. Dig. p. 58; Marb. & Cr. Dig. p. 270. The act of 1759 continued of force until 1822, when it was amended so as to provide that a contract attempting to collect more than 8 per cent. interest should not be entirely void, but the...