Commercial Credit Plan, Inc. v. Parker, 58403

• Decision Date: 19 November 1979
• Docket Number: No. 58403,58403
• Citation: 263 S.E.2d 220,152 Ga.App. 409
• Parties: COMMERCIAL CREDIT PLAN, INC. v. PARKER et al.
• Court: Georgia Court of Appeals

Page 220

263 S.E.2d 220

152 Ga.App. 409

COMMERCIAL CREDIT PLAN, INC. v. PARKER et al.

No. 58403.

Court of Appeals of Georgia.

Argued Sept. 11, 1979.

Decided Nov. 19, 1979.

Joseph S. Skelton, Hartwell, Walter E. Leggett, Jr., Atlanta, for appellant.

Joanna B. Hannah, Hartwell, for appellees.

BIRDSONG, Judge.

We granted interlocutory appeal to the plaintiff below, Commercial Credit Plan, Inc. Under scrutiny here is the trial court's ruling that public policy considerations demand that Georgia law control the enforceability of a loan made in South Carolina to the appellees who are Georgia residents, and of the appellees' note for $2,886.48 which was executed and made payable in South Carolina. In October, 1974, the Parkers went to South Carolina originally to borrow $500 from Commercial Credit after having received advertisements, or "solicitations," which Commercial Credit sent the Parkers, apparently because they had previously been good customers of Commercial Credit through assignment to Commercial Credit of their automobile note by a Georgia automobile dealer. To obtain the $500, the Parkers were required to borrow $2,121.84 in order to pay off a prior note to a finance company in Georgia; $1,512 was disbursed to that Georgia finance company, and the Parkers received $609.84. The note executed by the Parkers in South Carolina extended payment to 36 months, and was secured by the Parker's household goods at their Georgia residence.

Appellant relies on the South Carolina Consumer Finance Law (S.C.Code § 8-797). For purposes of this appeal, it is conceded by argument that the loan contract and note are valid and enforceable under South Carolina law but would not be in Georgia, since in 1974 when the Parkers executed the note, under the Georgia Industrial Loan Act (Code Ann. Ch. 25-3) (hereinafter referred to as ILA), loan contracts extending in excess of 24 months were prohibited; and that consequently the loan was usurious in violation of ILA provisions. Implicit in the trial court's ruling is the conclusion that the note was made, executed and to be performed in South Carolina and that South Carolina is the lex loci contractus; we have no doubt that this is so (see especially Goodrich v. Williams, 50 Ga. 425(1), 434), nor is a contrary contention properly made by the Parkers on appeal.

The sole question before this court is whether, as the trial court ruled, "public policy considerations in this instance (as expressed by the ILA), outweigh comity considerations" and compel us to apply Georgia law, in accordance with Nasco v. Gimbert, 239 Ga. 675, 676, 238 S.E.2d 368. More precisely, the point arises by virtue of the holding in Hodges v. Community Loan etc., Corp., 234 Ga. 427, 430, 216 S.E.2d 274, 277 that "The declaration in the Industrial Loan Act (Code § 25-9903) that any loan contract made in violation of the Act is 'null and void' . . . means that the contract is illegal and against the public policy of the state, and that any money loaned under such a contract cannot be recovered. (Cit.) It is fruitless to debate whether a contract violating the (ILA) is as evil as some other contract to engage in an immoral or illegal act. The General Assembly has the right to declare what is void as against the public policy of the state." Held:

1. Acknowledging, as it has been held, that the provisions of the ILA constitute an expression of public policy in Georgia (Hodges, Id.) does it inexorably follow that loan contracts made in another state, which are valid and enforceable in that other state but under the Georgia ILA would not be if the loan were made in Georgia, will not be enforced according to the law of the state where the contract was made? We do not think such a result is justified.

The Georgia legislature has already expressed, explicitly, the very ancient policy of Georgia with regard to the treatment of notes made in other states, bearing interest greater than that which is allowed in Georgia: "Every contract shall bear interest according to the law of the place of the contract . . . ." (Code Ann. § 57-106). What is usurious interest in a Georgia contract is plainly stated (Code § 57-101) and the penalty for exacting it (Code Ann. § 57-112) is grounded on an early appreciation of the practice as being "odious" and "greatly prejudicial to the welfare of the planters and others." Union Savings Bank etc., Co. v. Dottenheim, 107 Ga. 606, 610, 613-614, 34 S.E. 217. Under the common law, the exaction of usurious rates of interest was "a heinous offense," and, in Georgia, by legislation of the colony in 1759, the usurer not only had his contract utterly voided, but would forfeit and lose "the treble value of the moneys, wares and merchandises, and other things" which were the subject matter of the transaction. See Union Savings Bank, Id., p. 610, 34 S.E. 217. A stronger expression of public policy can hardly be imagined. Today, and since 1822 (Acts 1822, p. 139), the penalty for usury is less severe, but nevertheless reflects the attitude that the practice is one offensive to the public policy in Georgia and to the interests of Georgia citizens. The legislature has not, however, been constrained to extend this policy to the treatment of money contracts which are valid in the state where they are made and to be performed, but rather, as we have said, has expressly provided in accordance with the common law that the laws of that other state shall govern the obligation even though it is a usurious one under Georgia law (Code § 57-106; Mayor of Griffin v. Inman, Swann & Co., 57 Ga. 370, 371(8); Vinson v. Platt & McKenzie, 21 Ga. 135, 139). We conclude from the intrastate nature of the state's regard for money contracts and for the protection of Georgia debtors from unscrupulous exactions, that the public policy of the state is generally limited to enforcement of contracts to be performed in this state, and does not extend to the enforcement of valid contracts made in other states, for which the rules of comity will be observed (Code § 102-110).

The same principle has consistently been applied to the treatment of money contracts which would, if made in Georgia, fall under the provisions of the ILA. See Midland Guardian Co. v. Varnadore, 148 Ga.App. 742, 252 S.E.2d 685; Clark v. Transouth Financial Corp., 142 Ga.App. 389, 390 236 S.E.2d 135; Liberty Loan Corp. v. Crowder, 116 Ga.App. 280, 157 S.E.2d 52. Admittedly, the Act's severe penalty provisions constitute a strong expression of public policy in Georgia (Hodges, supra, 234 Ga. pp. 430-431, 216 S.E.2d 274), but the determinative issue here is, toward what end is that public policy directed? The trial court held that the policy involved in the ILA is "manifest to protect Georgia citizens against usury." However, the terms of the Act itself provide that its application is to "persons engaged in the business of making loans . . . in the State of Georgia," and "bona fide engaged in making loans . . . in the state of Georgia" (Code § 25-307). (Emphasis supplied.) As to the enforcement in Georgia of loan contracts made in another state, and valid under the laws of that state; and as to any rights of Georgia borrowers entering into such a valid contract in another state, the Act is utterly silent. Nevertheless, appellee urges us to interpret the Act as seeking quintessentially to protect the Georgia borrower from loans, wherever made, that would offend its terms. We do not agree with that proposition. The ILA unquestionably had its inception in the abuses perpetrated against the necessitous borrower by unscrupulous moneylenders; but to the end of protecting the necessitous borrower, "The purpose of the . . . Act . . . is to eliminate the abuses which grow from unregulated entities engaging in the small loan business." (Emphasis supplied.) Marshall v. Fulton Nat. Bank, 145 Ga.App. 190, 243 S.E.2d 266. The entire substance of the Act is directed toward the regulation of lenders within a certain class "engaged in the business of making loans . . . in the State of Georgia," and "bona fide engaged in making loans . . . in the state of Georgia" (Code § 25-307).

The former Small Loan Act contained a penalty provision seemingly, in part, consistent with the interpretation urged upon us by the appellee. Section 17 of that early act (Michie's Code, § 1770(73)),...