Layton v. Liberty Loans of Waycross

• Decision Date: 26 November 1979
• Docket Number: No. 58252,58252
• Parties: LAYTON et al. v. LIBERTY LOANS OF WAYCROSS.
• Court: Georgia Court of Appeals

Page 167

263 S.E.2d 167

152 Ga.App. 504

LAYTON et al. v. LIBERTY LOANS OF WAYCROSS.

No. 58252.

Court of Appeals of Georgia.

Submitted July 3, 1979.

Decided Sept. 24, 1979.

Rehearing Denied Nov. 26, 1979.

Rudolph J. Chambless, Waycross, for appellants.

Dennis J. Strickland, Sr., Waycross, for appellee.

Charles M. Baird, John C. Porter, Jr., amicus curiae.

CARLEY, Judge.

In August 1977 the appellee filed suit against appellants on a 36-month note governed by the Industrial Loan Act (ILA). Appellants failed to answer and, on October 31, 1977, a default judgment was entered against them. On March 16, 1979, appellants moved to set aside the default on the ground that interest had been included in the computational base used to calculate the loan fee, in violation of the ILA, and that the underlying loan contract was null and void. Consolidated Credit Corp. v. Peppers, 144 Ga.App. 401, 240 S.E.2d 922 (1977). The motion to set aside was heard by the court and denied. However, the judgment against appellants was amended so as to reduce the appellee's recovery by an amount equal to that improperly charged as a loan fee. Appellants appeal from the denial of their motion.

1. The appellee does not dispute that the loan fee charged appellants was in excess of that permitted by the ILA, as interpreted in Peppers, supra. It does note, however, that the loan contract and the notes were executed and the judgment itself was entered prior to our decision in Peppers. Since Peppers applies retroactively (to loan contracts entered into prior to that decision) and not merely prospectively (to loan contracts entered into after that decision), the fact that the events underlying the instant appeal preceded that decision, standing alone, affords the appellee no basis for arguing that the holding in Peppers is inapplicable here. Carter v. Swift Loan, etc., Inc., 148 Ga.App. 358, 251 S.E.2d 379 (1978) (decision in Peppers applied to loan made in 1976). However, subsequent to our decision in Peppers, the General Assembly enacted Ga.L.1978, pp. 1033, 1034, which amended the ILA by striking section 20 thereof in its entirety and substituting in lieu thereof a new section which provided, inter alia: "If a contract is made in good faith in conformity with an interpretation of this Act by the appellate courts of this State or in a rule or regulation officially promulgated by the (Georgia Industrial Loan) Commissioner after public hearings, no provision in this Section imposing any penalty shall apply, notwithstanding that after such contract is made, such rule or regulation is amended, rescinded, or determined by judicial or other authority to be invalid for any reason." Ga.Code Ann. § 25-9903(c). The appellee argues that this statute should be applied retroactively so as to give pre-Peppers lenders the benefit of the good faith defense.

"A statute is never to be given a retroactive operation unless such construction is absolutely demanded. (Cit.)" J. Scott Rentals, Inc. v. Bryant, 239 Ga. 585, 587, 238 S.E.2d 385, 386 (1977). It is clear that this rule of construction applies to statutes which amend the usury law of this state. See, e. g., Long v. Gresham, 148 Ga. 170, 96 S.E. 211 (1918); Lankford v. Holton, 187 Ga. 94, 200 S.E. 243 (1938). The 1978 Act of the legislature here in issue did not authorize the loan fee computation procedure condemned as violative of the ILA in Peppers. Indeed, the statute specifically retained the language of the former section to the effect that any loan contract made in violation of the ILA would be "null and void." " '(N)ull and void' . . . means that the contract is illegal and against the public policy of the state, and that any money loaned under such a contract cannot be recovered. (Cits.)" Hodges v. Community Loan & Invest. Corp., 234 Ga. 427, 430, 216 S.E.2d 274, 277 (1975). The part of the statute which is relevant to the issue here merely provides for a "good faith" defense to the claim that a loan contract is "null and void." The statute, in so doing, does not contain "imperative" language indicating that the "good faith" defense provision is to be applied retroactively. See, Moore v. Gill, 43 Ga. 388 (1871). Thus, the question is whether a loan contract which was "null and void" under the law existing at the time of the consummation of the transaction gains new life and enforceability because of the subsequent enactment of a statute which provides for a good faith defense against nonenforcement without specifically providing for retroactive applicability of such good faith defense.

Maynard v. Marshall, 91 Ga. 840, 18 S.E. 403 (1893) is controlling on this issue. In that case the statute in effect at the time the parties entered into the usurious transaction provided that the penalty was the forfeiture of all interest, the usurious and the non-usurious alike. Subsequently the statute was amended so as to repeal that portion providing for the forfeiture of the legal interest, so that thereafter only the usurious interest would be forfeited. Thus the amendment provided for a lesser penalty than that previously established and had the effect, by legitimatizing the collection of lawful interest, of allowing the enforcement of usurious contracts as if they had been entered into in conformity with the usury laws. When, in Maynard, suit was brought to foreclose the mortgage given to secure the note, the plea of usury was made. The jury found the transaction to be usurious and the court, applying the statute that was in effect at the time the transaction was entered into, denied the lender's right to recover any interest. The lender appealed, contending that he should be afforded the benefit of the subsequent amendment and thus recover the legal rate of interest. The Supreme Court, applying the law as it existed at the time of the transaction, held that lender was not entitled to the benefit of the subsequent amendment and affirmed the denial of any recovery of interest.

It is true that in Maynard the question was whether legal interest or no interest was recoverable, while in the instant appeal the question is whether the loan contract is, in its entirety, "null and void." However, the thrust of the arguments of the lenders in both cases is identical that an otherwise usurious contract gains greater enforceability than it had at the time the transaction was consummated by virtue of the enactment of a subsequent amendatory statute. We quote at length from the Maynard decision extrapolating, where pertinent, to the law and the facts applicable in the instant appeal. "The constitution of (1976) (Ga.Code Ann. § 2-107) expressly prohibits the passage of...