Liberty Loan Corp. of Shoals v. Childs

• Citation: 140 Ga.App. 473,231 S.E.2d 352
• Decision Date: 14 October 1976
• Docket Number: No. 2,No. 52300,52300,2
• Parties: LIBERTY LOAN CORPORATION OF SHOALS v. Jimmie CHILDS et al
• Court: United States Court of Appeals (Georgia)

Page 352

231 S.E.2d 352

140 Ga.App. 473

LIBERTY LOAN CORPORATION OF SHOALS v. Jimmie CHILDS et al.

No. 52300.

Court of Appeals of Georgia, Division No. 2.

Oct. 14, 1976.

Rehearing Denied Nov. 18, 1976.

John A. Clark, Atlanta, for appellant.

Joseph H. King, Jr., Atlanta, for appellees.

Charles M. Baird, Atlanta, amicus curiae.

MARSHALL, Judge.

This is an appeal from a directed verdict for Jimmie and Della Childs, defendants below. The case had its inception in a secured promissory note given in November, 1974, by the Childs to Liberty Loan Corporation of Shoals in consideration for a loan in the amount of $1,560, payable in 24 equal monthly installments. Liberty is licensed under the Georgia Industrial Loan Act, Ga.L.1955, pp. 431 et seq. (Code Ann. Chap. 25-3), and in accordance with pertinent provisions of the Act, included within the $1,560 the maximum but lawful interest charges allowed. The body of the note also provided that upon default the holder could declare an acceleration of the maturity of the note rendering the entire indebtedness immediately due and payable. However, the note further provided in one reference that in the event of acceleration of the due date 'Lender will rebate interest in proportion to the reduction in the loan term' and in a second reference that 'On acceleration by Lender, precomputed interest will be reduced in proportion to the reduction in the loan term.' The trial court found that the note itself did not contract for unearned, usurious interest.

The Childs made four payments and then defaulted. In October, 1975, Liberty exercised its right to accelerate and demanded payment of the entire unpaid balance, including the unearned interest, as well as 15% attorney fees. The demand, as evidenced by the notice of intention to seek attorney fees as well as the complaint filed in November, 1975, did not offer a rebate of unearned interest but demanded the entire unpaid balance. On December 2, 1975, Della Childs answered the complaint (Jimmie having abandoned his wife, Della, and absconded) denying the indebtedness and further alleging the contract violated the Industrial Loan Act in that unearned interest was involved. On January 12, 1976, Liberty attempted to amend its complaint reducing its demand to a sum that did not include unearned interest and reduced its demand for attorney fees to 15% of the reduced amount.

The case was stipulated as to facts and submitted to the trial court on briefs. Even though the trial court held that the contract itself did not violate the Industrial Loan Act, it determined the demand, which included unearned interest, constituted a 'charge' within the meaning of the Act. The trial court held that the excessive 'charge' rendered the loan void. Finally, the trial court refused to consider the attempted amendment apparently on the theory that to allow the belated amendment would dilute the penalty provisions of Code Ann. § 25-9903 (Ga.L.1955, pp. 431, 444) by allowing a violator to erase a discovery of its violation by a simple amendment to reduce the amount charged.

Liberty enumerates as error the refusal of the trial court to allow the amendment to relate back to the original pleadings and by holding that the basic loan contract was void under the penalty provisions of the Georgia Industrial Loan Act. Held:

1. We reverse. The common problem presented in usury cases dealing with violations of the Georgia Industrial Loan Act has been the authorization in the underlying contract itself to accelerate the payment of that part of the installments not yet due but upon which unearned interest either has already been collected or for which by acceleration interest will be collected though not earned. This gives a higher interest return on the use of the money than is authorized under the statute, and nullifies the entire transaction. See, e.g.: Lewis v. Termplan, Inc., Bolton, 124 Ga.App. 507, 184 S.E.2d 473; Roberts v. Allied Finance Co., 129 Ga.App. 10, 198 S.E.2d 416; Hardy v. GAC Finance Corp., 131 Ga.App. 282, 205 S.E.2d 526, affirmed, GAC Finance Corp. v. Hardy, 232 Ga. 632, 208 S.E.2d 453; Lawrimore v. Sun Finance Co. 131 Ga.App. 96, 205 S.E.2d 110; Frazier v. Courtesy Finance Co., 132 Ga.App. 365, 208 S.E.2d 175.

A related line of problems dealing with usurious interest is found in the cases dealing with accelerated payments under the Georgia Retail Installment and Home Solicitation Sales Act (Ga.L.1967, pp. 659 et seq. (Code Ann. Chap. 96-9 et seq.)). See e.g.: Reese v. Termplan, Inc., Bolton, 125 Ga.App. 473, 188 S.E.2d 177; Bell v. Loosier of Albany, Inc., 137 Ga.App. 50, 222 S.E.2d 839; Harrison v. Goodyear Service Stores, 137 Ga.App. 223, 223 S.E.2d 261. However, as pointed out by this court in Bell v. Loosier of Albany, Inc., 137 Ga. 50, supra, at page 52, 222 S.E.2d 839, at page 841: '. . . the Retail Installment and Home Solicitation Sales Act is a totally different breed of animal than the Georgia Industrial Loan Act . . .' As further observed in the Bell case, the differences in penalties are significant and substantial. Though both Acts proscribe the charging, collecting or receiving of what amounts to usurious interest, only the Industrial Loan Act exacts a penalty of voidance of the contract where there is a 'contracting' of usurious interest. Code Ann. § 25-9903. The penalty exacted under the Retail Installment and Home Solicitation Sales Act for charging or collecting usurious interest is forfeiture of any finance charges, delinquency or collection charges and if the violation is wilful then the debtor may recover from the creditor specified statutory penalties. Ga.L.1967, pp. 659, 672 (Code Ann. § 96-910(b) and (c)). The announced penalty for charging, collecting or receiving usurious interest under this...