Larson v. State ex rel. Patterson

• Decision Date: 26 July 1957
• Docket Number: 3 Div. 749
• Citation: 266 Ala. 589,97 So.2d 776
• Parties: C. J. LARSON et al., d/b/a Tide Finance Company, v. STATE of Alabama ex rel. John PATTERSON, Attorney General.
• Court: Alabama Supreme Court

Page 776

97 So.2d 776

266 Ala. 589

C. J. LARSON et al., d/b/a Tide Finance Company, v. STATE of Alabama ex rel. John PATTERSON, Attorney General.

3 Div. 749.

Supreme Court of Alabama.

July 26, 1957.

Rehearing Denied Nov. 14, 1957.

Wallace L. Johnson, Mobile, Winton G. Wilson and S. Palmer Keith, Jr., Birmingham, D. Eugene Loe, Hill, Robison & Belser and Hill, Hill, Whiting & Harris, Montgomery, for appellants.

John Patterson, Atty. Gen., J. Noel Baker and Robt. Bradley, Asst.Attys. Gen., for appellee.

White, Bradley, Arant, All & Rose, Birmingham, amici curiae, in support of appellee.

GOODWYN, Justice.

This is a suit brought in the circuit court of Montgomery County, in equity, by the State of Alabama, on the relation of the Attorney General of the State, against C. J. Larson and Virgil C. Moore, a partnership, doing business as Tide Finance Company, and C. J. Larson, Virgil C. Moore and M. R. Rice, individually. The bill seeks a temporary injunction enjoining and restraining respondents, 'their servants, agents and employees, while acting within the line and scope of their employment, from making or entering into any contract or agreement whereby the rate of interest upon the loan or forbearance of money, goods, or things in action, exceeds the rate of $6.00 upon $100.00 for one year, or whereby the rate of interest by written contract exceeds the sum of $8.00 upon $100.00 for one year, or exceeds that rate for a greater or lesser sum or for a longer or shorter time, and on loan contracts and agreements presently in existence on which interest has been charged in excess of the lawful rate, to enjoin and restrain each of the respondents from filing suit thereon for more than the principal amount of the obligation with proper credit for all prior interest payments.'

There is also a prayer that upon a final hearing the court 'will issue a permanent injunction in accordance with the foregoing prayer for a temporary injunction, and in addition will declare that the acts of the respondents constitute a public nuisance against the citizens of the State of Alabama; that in consequence thereof the contracts taken and held by the respondents in violation of Title 9, Section 60, 1940 Code of Alabama, be declared null and void, and that each of said respondents, and their servants, agents and employees, be forever enjoined and restrained from carrying on and prosecuting their said business in violation of Title 9, Section 60, 1940 Code of Alabama, and from committing the acts as aforesaid which constitute a public nuisance', and will 'appoint a receiver who shall be directed by this Honorable Court to examine, investigate and scrutinize each and every loan of record of each and every borrower whose name or names appear in the records kept by the said respondents; that the receiver determine if usurious interest has been charged upon said loan contracts, and determine the amount of usurious interest collected by the respondents upon each and every loan contract; that receiver be directed to deduct from the principal the usurious interest collected on each and every loan contract; further, that the receiver be directed to examine each and every contract made after the entry of the permanent injunction against the respondents to determine whether or not the respondents are charging a rate of interest in excess of that prescribed by law.'

Tne bill also contains a prayer for general relief.

The material averments of the bill, as amended, are as follows:

That John Patterson is the duly qualified Attorney General of the State and as such brings the action in the name of and for the State; that respondents Larson and Moore are partners in the business known as Tide Finance Company, which maintains an office in the City of Montgomery; that respondent Rice is a resident of Montgomery and is manager of said business; that respondents 'are engaged in the business of lending money for themselves and others in Montgomery County, Alabama, and have been so engaged for a period of 12 months next before the filing of this bill of complaint'; that respondents 'have in the conduct of their business in said county during the 12 months preceding the filing of the bill of complaint, and are now, deliberately, persistently, continuously and intentionally violating the laws of the State of Alabama and in particular Title 9, Section 60, 1940 Code of Alabama, which reads as follows:

"The rate of interest upon the loan or forbearance of money, goods or things in action, except by written contract, is six dollars upon one hundred dollars for one year, and the rate of interest by written contract is not to exceed eight dollars upon one hundred dollars for one year; and at that rate for a greater or less sum, or for a longer or shorter time'; that constantly and continuously, knowingly and deliberately, the respondents have loaned money to individuals in Montgomery County and exacted from them a rate of interest by written contract in excess of $8 upon $100 for one year; that in making loans in said county during the period of one year next preceding the filing of this bill of complaint the said respondents have charged or received and are now continuously and knowingly charging or receiving high and usurious rates of interest, which said rate of interest so charged or received is greatly in excess of the amount authorized by law to be charged, exacted or received for making such loans; that respondents 'in carrying on and engaging in their business as above set forth have used the courts of this State in enforcing and collecting usurious interest in violation of the provisions of Title 9, Sec. 65, 1940 Code of Alabama, which provides as follows:

" § 65. Interest on usurious contracts; recovery back of usury.--All contracts for the payment of interest upon the loan or forbearance of goods, money, things in action, or upon any contract whatever, at a higher rate than is prescribed in this chapter, are usurious, and cannot be enforced either at law or in equity, except as to the principal. Nor shall the borrower of money at a usurious rate of interest ever in any case in law or equity be required to pay more than the principal sum borrowed, and if any interest has been paid the same must be deducted from the principal and judgment rendered for the balance only. Provided, however, that the defense of usury may not be pleaded against a holder of any negotiable instrument, in due course."; that 'the parties contracted with and sued by the respondents are largely ignorant and not advised of their legal rights and are not able to employ counsel to represent them; that the contracts of loan are prepared by the respondents and innocently or ignorantly executed by the borrowers and do not show on their face the usurious interest which is being charged; that because of the inability of the borrowers to retain legal counsel and by reason of their ignorance of the law and their legal rights, the borrowers allow judgments by default to be rendered against them in said actions; that in and by such judgments, in addition to obtaining a judgment for money to which they have no legal right in that proper credit for interest is not given and in and by such suits, the respondents obtain judgments for attorneys' fees greatly in excess of what would be a reasonable fee had the judgment been rendered for the principal amount of the indebtedness less the amount of interest paid thereon'; that 'the State of Alabama in its sovereign capacity is interested in the protection of its citizens, particularly small wage earners, from invasions of their legal rights and from the illegal exaction or extortion of monies which such citizens are not legally required to pay' and 'is also interested in preserving the courts of Montgomery County from an abuse of their processes on the part of said respondents in their attempt to use the courts of the County in the manner aforesaid for the purpose of collecting money under the aforedescribed contracts, which is not legally collectible; and the State is also interested that the courts of Montgomery County be so conducted that the trial disposition of legal and meritorious matters coming before said courts be not impeded or hampered, and that the practices of the respondents as described above be effectually restrained'; that respondents 'will continue to violate the provisions of the statutes of Alabama set forth above and will continue to exact large sums of money as usurious interest, and will continue to institute * * * vexatious actions in the courts of Montgomery County for the purpose of attempting to enforce, and collect, usurious sums of money and interest, and that the processes of the courts of Montgomery County will continue to be abused by such actions unless restrained therefrom by order, judgment or decree of this Court'; that 'it is the established public policy of the State of Alabama to protect the interest and welfare of its indigent and helpless citizens against the ravages of the respondents, and to protect the economic prosperity of its industrial areas, and to further the public faith in the integrity and impartiality of its courts of law; that the acts of the respondents as above described constitute a public nuisance to the citizens of the State of Alabama and will continue to be a public nuisance unless the practices of the respondents be effectually restrained.'

The bill is sworn to by John Patterson, the Attorney General.

Upon filing the bill the cause was set down for hearing on the question of granting a temporary restraining order as prayed for. Code 1940, Tit. 7, §§ 1054-1055.

Prior to the hearing, Larson and Moore successively demurred to the bill, moved to strike from the bill certain 'prolix and irrelevant allegations', moved to dismiss the bill, filed an amended demurrer to the bill as last amended, and answered the bill.

After the hearing the court rendered decrees denying the ...