Fleet Finance, Inc. of Georgia v. Jones

• Decision Date: 14 June 1993
• Docket Number: No. S93A0185,S93A0185
• Citation: 430 S.E.2d 352,263 Ga. 228
• Parties: FLEET FINANCE, INC., OF GEORGIA v. JONES, et al.
• Court: Georgia Supreme Court

Page 352

430 S.E.2d 352

263 Ga. 228

FLEET FINANCE, INC., OF GEORGIA v. JONES, et al.

No. S93A0185.

Supreme Court of Georgia.

June 14, 1993.

Reconsideration Denied June 25, 1993.

James Timothy White, Carolyn Thorn Thurston, Varner, Stephens, Wingfield & Humphries, Atlanta, William A. Trotter, III, Augusta, Frank C. Jones, William S. Duffey, Jr., King & Spalding, Atlanta, for Fleet Finance, Inc., of Georgia.

Harry P. Revell, Burnside, Wall, Daniel & Ellison, Stephen E. Shepard, Thomas R. Burnside, Jr., Burnside, Wall & Daniel, James M. Thompson, Larry I. Smith, Thompson & Smith, Augusta, for Elizabeth Jones.

Joseph Lefkoff, Lefkoff, Duncan, Grimes & Dermer, W. Stell Huie, Long, Aldridge & Norman, W. Rhett Tanner, Gregory R. Hanthorn, Jones, Day, Reavis & Pogue, Atlanta, Ted H. Clarkson, Knox & Zacks, Augusta, Richard R. Cheatham, Hilary P. Jordan, Kilpatrick & Cody, John C. Hollister, Trust Company Bank, Michael E. Ray, Wachovia Bank of Georgia, N.A., Atlanta, Marvin S. Arrington, Randy C. Gepp, Gary W. Diamond, Arrington & Hollowell, P.C., Atlanta, Carol V. Clark, McCalla, Raymer, Padrick, Cobb & Nichols, Hugh W. Gibert, Arnall, Golden & Gregory, Atlanta, for amicus appellant.

Beverly B. Martin, Sr. Asst. Atty. Gen., Lisa J. Krisher, Steven D. Caley, Atlanta, Paul E. Kauffmann, Columbus, William J. Brennan, Jr., Decatur, A. Rowland Dye, Thomas Tucker, John B. Long, Dye, Tucker, Everitt, Wheale & Long, David E. Hudson, Hull, Towill, Norman & Barrett, Augusta, Michael J. Bowers, Atty. Gen., Atlanta, Carolyn Richards, Macon, for amicus appellee.

Brendan J. McCarthy, Varner, Stephens, Wingfield & Humphries, Atlanta, for other appellant.

Douglas N. Campbell, Laura E. Stevenson, Booth, Wade & Campbell, Robin K. Warren, Atlanta, Attorney Register.

SEARS-COLLINS, Justice.

The appellant, Fleet Finance, Inc., of Georgia (hereinafter "Fleet") holds promissory notes and security deeds from the three appellees, who filed the present action against Fleet. The appellees contended that Fleet was charging usurious interest rates under OCGA § 7-4-18 and that therefore Fleet should be enjoined from proceeding with threatened foreclosures and should be required to forfeit all interests contracted for under the notes. The appellees also moved for a class certification, contending, among other things, that § 7-4-21, which prohibits class certification where a loan is secured by real property was unconstitutional. Fleet opposed the appellees' motion for class certification and filed a motion to dismiss the appellees' action, on the ground that the notes were not usurious. The trial court enjoined Fleet from proceeding with any foreclosures; granted the appellees' motion for class certification, ruling that § 7-4-21 was unconstitutional for numerous reasons; and denied Fleet's motion to dismiss. Although we do not condone Fleet's interest-charging practices, which are widely viewed as exorbitant, unethical, and perhaps even immoral, and suggest that further regulation of the lending industry is needed by our General Assembly to insure the economic survival of individuals like the appellees, we are constrained to hold that the loans in question are legal and not usurious. We thus must reverse the denial of Fleet Finance's motion to dismiss. For that reason, we need not address the issues regarding class certification.

1. Whether the appellees' loans are usurious centers around various issues regarding the discount points and loan origination fees that Fleet charged to the appellees at the closing of their loans. These front-end interest fees ranged from 22% to 27% of the principal amount of the appellees' loans. The appellees did not pay for these fees in cash at closing. Instead, the fees were deducted from the face amount of the loans in question, thus reducing the net amount of loan proceeds actually paid to the appellees, and the appellees agreed to pay for them in a small, fixed amount over the life of the loan. The fees, however, became nonrefundable and nonrebateable at closing. In addition to these fees, Fleet charged yearly interest rates ranging from 18.9% per annum to 19.9% per annum.

In their complaint the appellees based their contention that the loans were usurious on OCGA § 7-4-18, which provides that "[a]ny person, company, or corporation ... who shall reserve, charge, or take for any loan or advance of money ... any rate of interest greater than 5 percent per month ... shall be guilty of a misdemeanor." ¹

Before the trial court, the appellees contended that the use of the phrase "per month" in § 7-4-18 means that interest must be calculated for each individual month of the loan, and that, if the interest received in any one month exceeds 5 percent, the loan violates the statute. The appellees also contended that interest payments must be attributed to the month in which they are received and that nonrefundable discount points and origination fees must be deemed received in the first month of a loan. Calculating the interest under the appellee's method, the interest for the first month of the appellees' loans greatly exceed 5 percent. For instance, the interest rate for the first month of the loan of appellee Elizabeth Jones would be 23 per cent.

Fleet responded that under § 7-4-18 the "rate of interest ... per month," § 7-4-18, must be calculated based upon the ratio of total interest paid to the total number of months in the loan. Fleet Finance further contended that we adopted this method of calculating interest in Norris, supra, 260 Ga. at 271, 273(3), 392 S.E.2d 242, and that Norris was controlling in this case. Moreover, Fleet responded that, even if § 7-4-18 were interpreted to prohibit interest greater than 5% in any one month of the loan, it should not be construed so as to attribute nonrefundable discount points and origination fees to the first month because they are amortized and paid over the life of the loan. Calculating the interest under Fleet's method, the monthly interest rates for the appellees' loans are 1.57%, 1.67%, and 1.60%, ² well below 5 percent per month permitted by § 7-4-18.

With respect to Fleet's argument regarding Norris, the appellees conceded that in Norris we adopted the method of calculating interest urged by Fleet, but they contended that Norris was not controlling because the appropriate method of treating discount points and origination fees was not at issue in Norris and because Sigler Daisy Corp. would have lost the appeal even applying the interest calculation method most favorable to it.

The trial court ruled that under § 7-4-18 interest had to be calculated for each individual month of the loan; that if the interest in any one month exceeded 5 percent, the entire loan was usurious; that the discount points and origination fees had to be attributed to the first month of the appellees' loans; and that doing so caused the first month's interest for the loans to exceed 5 percent.

2. For numerous reasons, Fleet contends the trial court's ruling was in error. We first address Fleet's contention that the method of calculation used in Norris is binding in this case. We disagree with Fleet's assertion, because the competing interpretations of § 7-4-18 advanced in this case were not advanced in Norris and because the method we adopted was most favorable to Sigler Daisy Corp. and still resulted in the company losing the appeal. Moreover, although earlier decisions of this court have calculated the rate of interest "per annum" by totalling the cost of credit over the life of the loan in determining if a loan that included up-front interest charges exceeded the specified rate "per annum," those decisions also did not address the competing interpretations of the usury statute urged in this case. Green v. Equitable Mortgage Co., 107 Ga. 536, 539-540, 33 S.E. 869 (1899); Clarke v. Havard, 111 Ga. 242, 249, 36 S.E. 837 (1900); Harvard v. Davis, 145 Ga. 580, 586(4), 89 S.E. 740 (1916).

3. We thus turn to Fleet's contention that § 7-4-18 must be interpreted generally to require the consideration of the total interest paid over the entire period of a loan in determining if a loan is usurious. As previously noted, the appellees contend that the statute should be interpreted to mean that a person who charges more than 5% in any given month of a loan is guilty of a misdemeanor.

With respect to this issue, we first note that § 7-4-18 is a criminal statute. It thus must be construed strictly against criminal liability and, if it is susceptible to more than one reasonable interpretation, the interpretation most favorable to the party facing criminal liability must be adopted. Carsello v. State, 220 Ga. 90, 94, 137 S.E.2d 305 (1964); Bankston v. State, 258 Ga. 188, 190, 367 S.E.2d 36 (1988). This rule applies even though a criminal statute is being construed in a civil context. F.C.C. v. American Broadcasting Co., 347 U.S. 284, 296, 74 S.Ct. 593, 600, 98 L.Ed. 699 (1954); Bingham, Ltd. v. United States, 724 F.2d 921, 925 (11th Cir.1984).

We conclude that the statute is subject to multiple interpretations and that strictly construing it, we must adopt the one most favorable to Fleet. Relying on Hartsfield Co. v. Fulwiler, 59 Ga.App. 194 200 S.E. 309 (1938), ³ the appellees contend that the phrase "rate of interest ... per month" requires an interest calculation for each individual month of the loan and that if the interest actually paid in any given month exceeds 5%, the entire loan is usurious. The appellees would thus interpret § 7-4-18 to read "rate of interest greater than 5 percent in any one month." However, "per month" is defined as "by the month," see Black's Law Dictionary, p. 1022 (5th Ed.1979), and thus does not necessarily mean "in any one month." Indeed, the method urged by Fleet, see footnote 2, supra, itself gives a rate of interest "by the month." Moreover, the phrase "per month" might merely be an integral part of the rate of interest by specifying...