Hodges v. Community Loan & Inv. Corp. of North Georgia, 49527

• Decision Date: 23 October 1974
• Docket Number: No. 49527,No. 1,49527,1
• Citation: 133 Ga.App. 336,210 S.E.2d 826
• Parties: Reuben B. HODGES et al. v. COMMUNITY LOAN & INVESTMENT CORPORATION OF NORTH GEORGIA
• Court: Georgia Court of Appeals

Page 826

210 S.E.2d 826

133 Ga.App. 336

Reuben B. HODGES et al. v. COMMUNITY LOAN & INVESTMENT CORPORATION OF NORTH GEORGIA.

No. 49527.

Court of Appeals of Georgia, Division No. 1.

Oct. 23, 1974.

Rehearing Denied Nov. 18, 1974.

Antonio L. Thomas, Thulani Gcabashe, Atlanta, for appellants.

Schwall & Heuett, Lee S. Alexander, Atlanta, for appellee.

Syllabus Opinion by the Court

CLARK, Judge.

Of the issues raised by this appeal, two are of first impression in this state. One involves the Georgia Industrial Loan Act of 1955 codified in the Annotated Code as Chapter 25-3. The other deals with the Federal Truth-In-Lending Act, 15 U.S.C.A. § 1601 et seq. and the regulation adopted pursuant thereto published at 12 CFR 226, commonly known as Regulation Z.

The first problem has most recently been explored by Justice Conley Ingram via his concurring opinion in Ga. Invest. Co. v. Norman, 231 Ga. 821, 204 S.E.2d 740. We pose this question thusly: Can an Industrial Loan Act lender recover from a borrower balance of principal owing from a loan pursuant to a theory of assumpsit, or money had and received, when the loan contract between the lender and borrower is null and void because its terms violate the provisions of the Industrial Loan Act?

The second question concerns the one year statute of limitations embodied in the Federal Truth-In-Lending Act. As to this In the complaint for money had and received filed September 20, 1973, the pleader recites: 'On June 15, 1972, plaintiff loaned to defendants the sum of $1,164.41 cash and thereafter defendants paid to plaintiff a total of $480.67 leaving a principal balance due of $883.74 on which interest has accrued in the sum of $54.01 at the rate of 7% per annum.' The answer filed by the borrowers-defendants denied liability on the ground that the action was predicated upon a contract which was null and void because its provisions violated the Industrial Loan Act. Borrowers also pleaded a counterclaim which alleged that lender failed to meet the requirements imposed by the Federal Truth-In-Lending Act, 15 U.S.C.A. § 1601 et seq., and its implementing regulation, 12 CFR 226 et seq., known as 'Regulation Z.'

issue we inquire: Can a borrower maintain a counterclaim against a lender for violations of the Truth-In-Lending Act when the counterclaim is initiated more than one year from the date of the violation of the act?

After discovery, both parties moved for summary judgment which motions were resolved in favor of the plaintiff-lender from which rulings borrowers being this appeal.

1. 'An action for money had and received is founded upon the equitable principle that no one ought unjustly to enrich himself at the expense of another, and is maintainable in all cases where one has received money under such circumstances that in equity and good conscience he ought not to retain it, and ex sequo et bono it belongs to another. Merchants Bank of Macon v. Rawls, 7 Ga. 191, 50 Am.D. 394; Alexander v. Coyne, 143 Ga. 696, 85 S.E. 831, L.R.A.1916D, 1039. Thus an action for money had and received is a substitute for a suit in equity (Culbreath v. Culbreath, 7 Ga. 64, 50 Am.D. 375), and, while founded on causes of action arising out of application of equitable principles, is an action at law by reason of its origin as a mode of action in the common-law courts. Culbreath v. Culbreath, supra.' Jasper School District v. Gormley, 184 Ga. 756, 758, 193 S.E. 248, 250. Can such an action be maintained in the case at bar?

In Abrams v. Commercial Credit Plan, 128 Ga.App. 520, 197 S.E.2d 384, this court ruled that a licensed lender could not recover upon a loan contract which was made for a period in excess of twenty-four months and was, therefore, null and void under the provisions of the Industrial Loan Act. But in so ruling, this court added: 'What we hold here is that the contract is void under the language of the statute, to wit, Code Ann. § 25-9903. As to whether the indebtedness is extinguished is another matter, and we do not reach that question, as the above statute simply provides that the 'loan contract' is null and void. However, there is law to the effect that an action in assumpsit, or as is commonly termed, 'an action for money had and received' may be available to recover money to which one party is entitled, and which the opposing party, in equity and good conscience, is not entitled to retain.' Id. 128 Ga.App. at 522, 197 S.E.2d at 385. Thus, in ruling upon the issue presented in the Abrams case, we theorized that an Industrial Loan Act lender may recover from the borrower for money had and received regardless of the loan contract being a nullity.

Our theory was recently discussed by the Supreme Court in Ga. Invest. Co. v. Norman, 231 Ga. 821, 204 S.E.2d 740. There the court ruled that an unauthorized charge to the borrower of a notary public fee violated the Industrial Loan Act but en banc the court declined to pass upon our present problem because the question had not been posed in the trial court. In concurring as to the nullification of the loan contract Justice Ingram with Justice Gunter agreeing and Justice Jordan dissenting on this single point concluded '(T)he statute does not say the loan itself is void and that the borrower is therefore entitled to the windfall of retaining without repayment the actual As we deem the concurring opinion determinative of our question we quote it in extenso: '(T)he predecessor to our present Industrial Loan Act, provided that: 'If interest or charges in excess of those permitted by this Act shall be charged, contracted for or received, the contract of loan shall be null and void and the licensee shall have no right to collect or receive any principal, interest or charges whatsoever.' Ga.L.1920, pp. 215, 219. See also Ga.L.1935, pp. 394, 395, for an amendment containing the same language. Under the plain provisions of these laws, the right of the lender to recover the principal amount of the loan was expressly taken away, and the earlier appellate decisions applying the statute were correct.

amounts loaned to him.' (231 Ga. p. 827, 204 S.E.2d p. 744). In reaching the conclusion that the lender is entitled to recover in an appropriate assumpsit action the amount of cash actually advanced to borrower, the erudite justice reviewed the history of our small loan laws and applied legal principles of statutory interpretation.

'In 1955, the General Assembly adopted the Industrial Loan Act, as amended. See Ga.L.1955, pp. 431, 445. The penalties section of the Industrial Loan Act provides that, 'Any loan contract made in violation of this Act shall be null and void.' (Sec. 20). The language of the predecessor statute authorizing a forfeiture of the principal amount of the loan, if the loan were made in violation of the statute, was omitted from the new statute. As seen, the present statute provides only that the loan contract shall be null and void. It is the loan contract which creates the obligation on the borrower to pay interest and other charges. Thus, if the loan contract requires the borrower to pay interest or other charges which are illegal, the contract, by the terms of the statute is 'null and void.' Hence the lender in such circumstances forfeits all interest and charges created by the contract because, being null and void, it is unenforceable.

'This leaves an implied obligation on the borrower to repay the actual money loaned to him. If the General Assembly had intended to require a lender to forfeit the principal sum loaned, it would have included the language from the old Small Loan Act in the New Industrial Loan Act. Since the General Assembly intentionally omitted this language from the present Act, I fail to see how the courts can do other than apply the statute as written.' Id. 231 Ga. p. 827, 204 S.E.2d p. 745.

In summary we answer our first inquiry in the affirmative because the Legislature did not make the transaction illegal nor did it say 'the licensee shall have no right to collect or receive any principal, interest or charges whatsoever' but expressly limited its declaration of nullification to the 'loan contract.'

Moreover, we are constrained to recognize the principle that statutes are to be construed against forfeitures. This was well expressed by the courageous Justice Blandford ¹ in the historic case of Renfroe v. Colquitt, 74 Ga. 618. Following the acquittal of Renfroe in the impeachment proceedings ² brought against him for his conduct as State Treasurer (See Georgia State Jour. 1879 Adj. Sess., page 799 et seq.). Governor Colquitt sued him and his sureties upon his bond. In ruling for Renfroe, the Supreme Court, 74 Ga. at p. 624, said: 'Forfeitures are not favored in the law Cases wherein a plaintiff is not permitted to recover upon an implied promise due to the illegal nature of the express contracts are not apposite to the case at bar. The illegalities generally contemplated in such cases are those of a quasi-criminal nature or of the pari delicto type where both parties should suffer forfeitures because of the sinister connotations of such transactions. Such situation does not exist where the nature of the transaction was legal but the contract nullified by judicial interpretation of a statute. Courts should be slow to declare business dealings void against public policy. Mutual Life Ins. Co. v. Durden, 9 Ga.App. 797(3), 72 S.E. 295. 'The power of the courts to declare a contract void for being in contravention of a sound public policy is a very delicate and undefined power, and, like the power to declare a statute unconstitutional, should be exercised only in cases free from doubt.' Equitable Loan Co. v. Waring, 117 Ga. 599(1), 44 S.E. 320. Illustrative of cases in which public policy stricture has been invoked are Sapp v. Davids, 176 Ga. 265, 168 S.E. 62 (champerty) and Standard Club v. Saphire, 97 Ga.App. 135, 102 S.E.2d 72 (sale of Gambling devices). See also Code Ann. § 20-504. ...