Dorsey v. West

Decision Date02 July 1981
Docket NumberNo. 62088,62088
Citation283 S.E.2d 314,159 Ga.App. 274
PartiesDORSEY et al. v. WEST et al.
CourtGeorgia Court of Appeals

Michael C. Ford, Atlanta, for appellants.

Durwood T. Pye, Atlanta, for appellees.

BANKE, Judge.

The appellants sued to obtain relief from a note and secondary security deed executed to the appellees, contending that the loan was usurious under Code Ann. § 57-202 as it existed at the time the note was executed. They sought a declaration that the note and security deed were void as well as the return of all payments made. The appellees concede that the note is in technical violation of the applicable usury statutes but contend that they are at least entitled to return of the principal. They have counterclaimed accordingly.

The note was executed on April 18, 1973, and called for payment of interest at the rate of 9 percent per annum. Under Code Ann. § 57-202(d) as it existed in 1973, the maximum interest charge allowable on a note secured by a secondary security deed was either 6 percent per annum, if computed by the "add-on" method, or 8 percent per annum, if computed on the unpaid balance (i. e., as simple interest). Ga.L.1966, pp. 574, 576; 1967, pp. 637, 638. The statute has since been amended to delete the 8-percent simple interest limitation, and the current statute merely prohibits the charge of any effective interest rate greater than 6-percent "add-on." Ga.L.1979, p. 1281.

The appellees contend that they charged 9-percent simple interest rather than 8 percent because of a good-faith mistake as to the applicable law and that because of their good faith they have not forfeited their right to recover the unpaid principal. As it existed in 1973, Code Ann. § 57-203(a) provided as follows: "If any loan secured by a secondary security deed on real estate is made in violation of the provisions of this Chapter, except as a result of a bona fide error, the lender shall forfeit the entire principal amount of the loan plus interest and other charges. In addition thereto, the lender shall also refund any payments on the loan which have been made by the borrower." Ga.L.1966, pp. 574, 577. Under the section as it exists now, the only penalty for an excessive interest charge is forfeiture of interest, although forfeiture of principal may still result where the lender imposes an excessive charge of any other type. See Ga.L.1976, pp. 726, 727.

Following a non-jury trial, the court awarded the appellees judgment for the principal amount of the indebtedness, less all payments previously made by the appellants. In a previous appearance of this appeal, we remanded the case for entry of findings of fact and conclusions of law. Dorsey v. West, 156 Ga.App. 142, 273 S.E.2d 922 (1980). The case is now before us upon compliance with that order. Held :

1. In Maynard v. Marshall, 91 Ga. 840(2), 18 S.E. 403 (1893), the Supreme Court held that where a statutory forfeiture provision is in effect at the time a usurious loan transaction takes place, the statute continues to apply to the borrower's benefit even though it is subsequently amended to ameliorate the penalty. Accord Crane v. Goodwin, 77 Ga. 362(2) (1886). This holding was reaffirmed in the recent case of Southern Discount Co. v. Ector, 246 Ga. 30, 268 S.E.2d 62 (1980), wherein the Supreme Court held that a pre-1978 loan made pursuant to the Industrial Loan Act was subject to a 1978 statutory amendment providing the lender with a good-faith defense to the penalties which would otherwise have applied for violation of the Act. This holding was based on the general rule that statutes relieving against penalties and forfeitures should be liberally construed so as to afford maximum relief. Although the same principle would otherwise appear to be applicable to the case before us now, the court specifically distinguished Maynard v. Marshall, supra, based on the fact that the penalty at issue there "merely was ameliorated rather than lifted by the subsequent legislation." Southern Discount, supra, at 31, 268 S.E.2d 621. The statutory amendment to Code Ann. § 57-203(a) with which we are concerned in this case was also ameliorative in its effect--although it eliminated the provision for forfeiture of principal upon an overcharge of interest, it left intact the provision for forfeiture of interest. We are thus constrained to hold that the forfeiture provisions of the 1966 statute continue to apply to this loan.

The cases cited by the appellees in support of the general rule that statutory penalties may be abolished retroactively are not apposite, as the penalties in those cases did not arise out of contractual relationships but arose purely from operation of law. Thus, they did not give rise to vested rights. See Kelly v. Hall, 191 Ga. 470(2), 12 S.E.2d...

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7 cases
  • Holmes v. Worthey
    • United States
    • United States Court of Appeals (Georgia)
    • July 13, 1981
  • West v. Dorsey
    • United States
    • United States Court of Appeals (Georgia)
    • June 16, 1983
    ...the case are set forth in West v. Dorsey, 248 Ga. 790, 285 S.E.2d 703; Dorsey v. West, 161 Ga.App. 253, 289 S.E.2d 827; Dorsey v. West, 159 Ga.App. 274, 283 S.E.2d 314. The gist of those proceedings is that because the Wests had charged 9% interest at a time when maximum allowable simple in......
  • Henson v. Columbus Bank & Trust Co.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • September 17, 1985
    ...by the district court, is irrelevant and previously had been rejected by the Georgia courts in similar cases. See Dorsey v. West, 159 Ga.App. 274, 283 S.E.2d 314, 316 (1981), aff'd in part and rev'd in part on other grounds, 248 Ga. 790, 285 S.E.2d 703 (1982). The narrow question is whether......
  • Dorsey v. West
    • United States
    • Supreme Court of Georgia
    • January 31, 1984
    ...entered in favor of the [Dorseys] for the amount which they have paid to the [Wests] on this indebtedness." Dorsey et al. v. West et al., 159 Ga.App. 274, 276 283 S.E.2d 314 (1981). This court granted certiorari, and "affirm[ed] the holding of the Court of Appeals that the 9 per cent intere......
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