McCubbins v. Virginia Trust Co.
| Decision Date | 06 January 1936 |
| Docket Number | No. 3949.,3949. |
| Citation | 80 F.2d 984 |
| Parties | McCUBBINS et al. v. VIRGINIA TRUST CO. et al. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Clifford Frazier and R. M. Robinson, both of Greensboro, N. C. (Woodson & Woodson and Hudson & Hudson, all of Salisbury, N. C., on the brief), for appellants.
L. R. Varser, of Lumberton, N. C. (R. A. McIntyre and O. L. Henry, both of Lumberton, N. C., on the brief), for appellees.
Before PARKER and NORTHCOTT, Circuit Judges, and COLEMAN, District Judge.
This is a suit in equity instituted by the Virginia Trust Company and certain named individuals, trusts, and corporations, herein referred to as the plaintiffs, against the appellants, herein referred to as the defendants, to foreclose on certain property upon which a deed of trust had been given to secure bonds held by the plaintiffs. The defendants answered, setting up the plea of usury under the North Carolina statute (Consolidated Statutes, § 2306). The court below denied the defendants' plea of usury, from which action this appeal was brought.
On October 1, 1927, E. P. Wharton (testator of W. G. Wharton, executor), and the defendant F. N. McCubbins, executed and delivered to the Virginia Trust Company, ninety coupon bonds, each in the sum of $1,000, bearing interest at the rate of 6 per cent. per annum, payable semiannually. These bonds were payable to bearer and were secured by a deed of trust executed by Wharton and McCubbins, and others, conveying certain property located in the city of Salisbury, Rowan county, N. C., which deed of trust was recorded in the office of the register of deeds on October 4, 1927.
The Virginia Trust Company, after the bonds were delivered to them, sold and transferred them to the other plaintiffs herein. The said trust company holds some of the bonds as trustee for various trusts but owns no bonds in its own right.
Prior to and at the time of the execution and delivery of said bonds, it was agreed between E. P. Wharton and the Virginia Trust Company that the Virginia Trust Company should be paid out of the sale price of the bonds the total sum of $2,600, for its services in handling the bonds, selling the same to the investing public, collecting the semiannual interest, distributing the same to the bondholders, looking after the property with respect to taxes and insurance throughout the period of the life of the loan, to wit, ten years, and to pay for the inspection of the property and the expenses of its own legal department in attending to the details of the transaction.
After the issuance of the bonds and the execution of the deed of trust the owners of the property executed a deed conveying it to the Salisbury Investment Company, a corporation, which investment company assumed the payment of said bonds and paid in addition the sum of $110,000, cash to E. P. Wharton and F. N. McCubbins. Fifteen thousand dollars of the bonds were retired leaving a balance of $75,000. Default was made and this suit was brought to subject the property conveyed by the deed of trust to the payment of the residue of the bonds.
The North Carolina Statute respecting usury is section 2306 Consolidated Statutes, which provides in part as follows: "The taking, receiving, reserving or charging a greater rate of interest than six per centum per annum, either before or after the interest may accrue, when knowingly done, shall be a forfeiture of the entire interest which the note or other evidence of debt carries with it, or which has been agreed to be paid thereon."
The statute further provides in substance that, when "a greater rate of interest has been paid," that the persons who pay it may recover back twice the amount of the interest paid in an action in the nature of action for debt. It is further provided that when suit is instituted to recover upon evidence of debt, the party charged may plead the usury penalty as a counterclaim for twice the amount of interest...
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