Lewis v. Dunlap

• Decision Date: 26 August 1919
• Docket Number: 10276.
• Citation: 100 S.E. 170,112 S.C. 544
• Parties: LEWIS ET AL. v. DUNLAP ET AL.
• Court: South Carolina Supreme Court

100 S.E. 170

112 S.C. 544

LEWIS ET AL. v. DUNLAP ET AL.

No. 10276.

Supreme Court of South Carolina

August 26, 1919

Appeal from Common Pleas Circuit Court of Abbeville County; S.W. G Shipp, Judge.

Action by Jessie J. Lewis, as executrix, and others against William C. Dunlap and others. From judgment rendered plaintiffs appeal. Modified.

Bonham Watkins & Allen, of Anderson, for appellants.

Wm. N Graydon, of Columbia, for respondents.

HYDRICK J.

This is an action against the administrators and heirs of W. A. Bigby to foreclose a mortgage given by him to R. A. Lewis. The defense is usury.

On November 22, 1886, Bigby gave Lewis and Morehead two notes, one for $2,871.50, due one day after date, with interest from date at 7 per cent. per annum, and the other for $600, due one day after date, with interest from date at 10 per cent. per annum. Both were lawful when given, and remained so until the subsequent transaction of 1907.

On January 11, 1907, the parties had a settlement, and Bigby gave Lewis a new note for $15,758.58, due one day after date, with interest from date at 8 per cent. per annum, payable annually, and, if not so paid, to become a part of the principal and bear interest at the same rate until paid. It also provided for the payment of attorney's fees for collection. This note was secured by the mortgage herein foreclosed.

The amount of this new note was made up of several items. One of the items has no special bearing on the issues to be decided, and the statement of the details concerning it is omitted, because it would only serve to confuse. The other items were a store account for $1,772.68, and old note for $500, and the two notes of 1886, on which interest was compounded at the respective rates therein mentioned.

The first question is whether compounding the interest on the $600 note and adding it to the new note tainted the latter with usury. Plaintiffs specially urge two reasons why it should not have that effect. First, because the act of 1882, which was of force when the note was given, permitted the taking of 10 per cent. upon written contracts therefor. The answer is that the new contract was made after the act of 1882 (18 St. at Large, p. 35) had been superseded by that of 1898 (vol. 1, Civ. Code 1912, § 2518), which provides that--

"No greater interest than seven (7) per cent. per annum shall be charged, taken, agreed upon or allowed upon any contract arising in this state for the hiring, lending or use of money, * * * except upon written contracts, wherein, by express agreement, a rate of interest not exceeding eight per cent. may be charged."

The act of 1898 (22 St. at Large, p. 749) is practically the same as that of 1882, so far as the rate allowed is concerned, except that the former allowed 10 per cent. and the latter only 8 per cent., when expressly agreed to in writing.

Every contract is made with reference to the law of force at its date. Here, then, we have the taking of interest on interest at 10 per cent. per annum without any written contract therefor, made during the time when such a contract could have been lawfully made. But it is agreed that the act of 1898 expressly provides that it shall not apply to contracts made prior to March 2, 1898. That provision was inserted out of abundance of caution to sanction the validity of contracts made under the previous law, which were lawful when made. Hence, under that provision, it would have been lawful for the parties to have calculated the interest on the note according to its terms, for it was a lawful contract when made. But the provision was not intended to sanction the making of a new contract, under the act of 1882, after it had been superseded by the act of 1898.

As the note did not provide for the payment of interest on interest at 10 per cent., and as there was no written agreement to that effect, while the act of 1882 was of force, the compounding of the interest at that rate in 1907 was a violation of the law in force at that time, and made the note taken therefore usurious.

The second ground upon which it is contended that compounding interest did not taint the transaction with usury is that it was unintentionally done. The testimony is that Lewis handed the two notes to Greer, the cashier of the Bank of Belton and asked him to calculate the interest on them, saying one of them bore 7 and the other 10 per cent., and that Greer, of his own motion, compounded the interest, because it was customary with him to do so. He says, however: "Mr. Lewis and Mr. Bigby accepted my calculations as correct." From this and the evidence that the calculations, which showed on their face that the interest had been compounded, were attached to the notes, the court did not err in finding that Lewis knew that the interest had been compounded. Greer was Lewis' agent, and his intention must be presumed to have been Lewis' intention,...