Fidelity Bank v. Wysong & Miles Co., Inc.

• Citation: 98 S.E. 769,177 N.C. 284
• Decision Date: 02 April 1919
• Docket Number: 325.
• Parties: FIDELITY BANK v. WYSONG & MILES CO., INC.
• Court: United States State Supreme Court of North Carolina

98 S.E. 769

177 N.C. 284

FIDELITY BANK v. WYSONG & MILES CO., INC.

No. 325.

Supreme Court of North Carolina

April 2, 1919

Appeal from Superior Court, Durham County; Devin, Judge.

Action by the Fidelity Bank against the Wysong & Miles Company Incorporated. Judgment for plaintiff, and defendant appeals. No error.

In action involving issue of whether there was a usurious agreement between plaintiff bank and defendant maker of notes, requiring defendant to maintain 20 per cent. of indebtedness on deposit, question: "Did * * * instruct you to maintain a balance of 20 per cent. of the indebtedness of (defendant) with (plaintiff) bank," held leading.

The plaintiff alleged that the defendant corporation is indebted to it in the sum of $13,320, with interest as stated, being the balance due on the three notes, one of $1,000, another of $8,000, and the remaining one of $4,500, due 90 days after their respective dates, and given by defendant to it, for money loaned, in the months of March and April. 1918.

The defendant denied that any money had been loaned, but admitted the execution of the three notes, and alleged, as a counterclaim, that they had an agreement, under which it was to borrow of the plaintiff a large sum of money from time to time, but upon the condition, and as a part of the consideration for the loans, that the defendant should keep on deposit with the plaintiff bank a sum of money equal to 20 per cent. of the total amount of the loan as made to it which should not be subject to check; or, in other words, the defendant borrowed the money and gave its three notes for the full amount of the loan, but received twenty per cent. less than the amount of it or the same per cent. less than the face value of the notes.

Defendant further alleged that it borrowed other money from the plaintiff bank, under a similar agreement as to the keeping of the 20 per cent. of each loan on deposit with the bank, so that, in all, the defendant had borrowed, and executed its notes for, $45,000, and had received only $36,000 thereon when the plaintiff applied the 20 per cent. kept on deposit under the agreement, and amounting then to $3,700, to the indebtedness of the defendant; that during the entire course of these transactions, it further alleges, the interest on the respective loans, or the notes given therefor, was regularly paid by defendant at the rate of 6 per cent., and that "the requirement on the part of the plaintiff that the defendant should keep on deposit with the plaintiff 20 per cent. of the amounts represented by the said notes was simply a scheme by which the plaintiff charged, reserved, and collected a greater rate of interest than that allowed by law;" that under this scheme, which was devised for the purpose of exacting and receiving excessive and unlawful interest, under the guise of a fair and valid transaction the defendant had paid to the plaintiff, and the later has received, as usury, the sum of $5,232.50, and for this amount it demands judgment.

The plaintiff answered to the counterclaim and denied that it had received any excessive or unlawful interest from the defendant, or that it had agreed to do so, or to enter into any scheme or device for the purpose of reserving usurious interest in any form or manner, and specially that it required a deposit to be kept by defendant in its bank of 20 per cent. of the loans, or that it charged, reserved, or received interest, either directly or indirectly, on any amount which was really larger than that which was actually loaned. The defendant circumstantially denied all of the averments of the counterclaim as to the alleged usury.

There was evidence that when 20 per cent. of a discounted loan is kept on deposit, it amounts to 7 1/2 per cent. on the original indebtedness.

O. C. Wysong was former president of the defendant company. He is now dead.

Defendant asked Guy Branson, its own witness, this question:

"Did Mr. Wysong, president of this company, while you were there, ever instruct you to maintain a balance of 20 per cent. of the indebtedness of the Wysong & Miles Company with the Fidelity Bank? (Objection by plaintiff. Objection sustained, and defendant excepted.)

By the Court: Any declaration by the deceased president is incompetent and hearsay."

J. F. Wiley, witness of plaintiff, testified that he was a stockholder and an active officer, as cashier, of the plaintiff bank at Durham, N. C.; that he had a conversation with Mr. Wysong, and agreed to refer the defendant's application for a loan to the directors of the plaintiff bank, if defendant would send a statement of its financial condition, and would give a satisfactory reference, and that after that the loan was made. The witness then testified that the balance of defendant's account with the bank varied, sometimes considerably below the 20 per cent. level, and at other times above it; in July it dropped to $899, and at other times it was as low as $1,000, $1,200, $1,400, and $1,600, the defendant having the right to check on the deposit at will. This witness stated that the $3,700 was credited on defendant's note under its instructions, given by Mr. Wysong, who was its president. The latter evidence was objected to by defendant, and the objection was overruled. Defendant excepted. He then further testified that he had never heard of any usury agreement until this suit was brought, and that defendant ratified what was done by the plaintiff as to the $3,700 by giving the note for $1,300, which was the balance. The witness further testified as follows:

"The account varied every day because they checked on us. There was nothing unusual about the account. The account has been practically dead since the time of the application of the $3,700, May 6, 1914. The final statement shows a balance of $33.02. I have never objected to their drawing that out, and did not know it was in the bank until we worked up this statement. * * * I have made demand for payment of the notes now due for $4,500, $1,000, and $7,820, total $13,320. Mr. Wysong did not sign these notes, and I am asserting no claim against his estate. I am simply pressing these notes. They never made any suggestion of usury. We were requested to renew these notes, but refused. (Plaintiff here offers three notes in evidence as follows: April 6, 1918, $4,450; March 6, 1918, $1,000; March 29, 1918, $7,820."

Cross-examined, he said:

"Mr. Wysong was indorser on the first notes, and I think on all the notes given up to the time of his death. I think he died last January. Up until the time Mr. Wysong died he was indorser on these notes."

He did not indorse those now sued on.

Several letters of a correspondence between the parties were introduced by the defendant, the first letter, dated January 10, 1912, asking for "a line of credit," and proposing to keep a 20 per cent. balance of all discounted papers in the bank. This could not be answered, as Mr. Wiley, cashier of plaintiff bank, was about to leave Durham for a business trip, and he so wrote to defendant in a letter dated January 10, 1912. In the third letter, dated May 12, 1912, the defendant refers to it having kept such a balance in another Durham bank, where it had an account, and stated that it was favorable to that bank, as it averaged between 7 1/4 and 7 1/2 per cent. interest on the loans. This letter was answered by the plaintiff on January 24, 1912, in which it said:

"We beg to say that the matter mentioned in your letter has been considered, and it looks like we can accommodate you. If convenient, come down some day and talk it over, and in that way we can understand each other much better than by attempting to do so by correspondence."

The other letters written in 1912 refer merely to a loan of $5,000. A letter of May 6, 1914, refers to the application of the $3,700 to the note in the bank, which would leave a balance of $33.02. The letter of May 6, 1914, also stated that Mr. Vaughn, who represented the defendant and was then in Durham, had assented to the suggested application of the $3,700, or rather had said it was the proper thing to do. The remaining letter, dated May 23, 1917, asked for a detailed statement of defendant's account with the plaintiff, so that it will show the balance on deposit subject to check; a list of defendant's notes discounted by the plaintiff, with face value dates, and maturity of the same, giving as a reason for making the request that defendant had just employed a new auditor, who would post and balance its books for the closing fiscal year.

The jury under the evidence (and the charge of the court, which is not in the record), rendered the following verdict:

"(1) Did the plaintiff knowingly take, receive, reserve, or charge a greater rate of interest than 6 per cent. per annum on the notes set up in the complaint, or any notes of which the said notes set up in the complaint are renewals, as alleged in the answer? Answer: No.

(2) What amount, if any, is the defendant entitled to recover of the plaintiff on the counterclaim set up in the answer? No answer.

(3) What amount, if any, is the plaintiff entitled to recover of the defendant? No answer."

Judgment was entered upon the verdict for the plaintiff, and an appeal taken by the defendant.

Jerome & Scales, of Greensboro, for appellant.

Bryant & Brogden and Fuller, Reade & Fuller, all of Durham, for appellee.

WALKER, J. (after stating the facts as above).

The exceptions in this case, as will appear by reference to our statement of it, relate chiefly to the admission and exclusion of testimony. There is no exception to the charge which is not set forth in the record, and we must therefore assume that it was correct in every respect, and perfectly satisfactory to the...