Morgan v. Shepherd
| Decision Date | 16 June 1930 |
| Docket Number | 7506. |
| Parties | MORGAN v. SHEPHERD. |
| Court | Georgia Supreme Court |
Rehearing Denied Sept. 17, 1930.
Syllabus by the Court.
Person guaranteeing payment of money loaned cannot charge more than 8 per cent. of principal of loan (Acts 1920, p. 220, § 17).
Section 17 of the act of August 17, 1920 (Acts 1920, pp. 215, 220 221), applies to one who guarantees the payment of an obligation of another, given for money borrowed; and such guarantor is by said section prohibited from charging more than 8 per cent. of the principal of the loan for guaranteeing its payment.
Act regulating business of making small loans held not unconstitutional because title referred to more than one subject-matter or contains matter different from that expressed in title (Acts 1920, p. 220, § 17; Const. art. 3, § 7, par. 8).
Said section is not unconstitutional and void because the title of the act in which it is found refers to more than one subject-matter, or because it contains matter different from what is expressed in the title thereof, in violation of article 3, § 7, par. 8, of the Constitution of this state.
Borrower paying more than 8 per cent. for guaranty of payment of obligation can recover excess of charge from guarantor (Acts 1920, p. 220, § 17; Civ. Code 1910, § § 3437, 4317).
Where one guarantees the payment of an obligation given by a borrower to a lender for money borrowed, and charges the borrower more than 8 per cent. per annum for such guaranty and the borrower pays such charge, he can recover from the guarantor the excess of such charge over that permitted by section 17 of the act cited above. Such payment does not fall within the ordinary rule that one who voluntarilypays money upon an illegal demand cannot recover the same; but such payment will be regarded as obtained by taking advantage of the necessities of the borrower, and for this reason excepted from the general rule.
Error from Superior Court, Fulton County; John D. Humphries, Judge.
Suit by Claud Shepherd against J. L. Morgan. Judgment for plaintiff was affirmed by the appellate division of the municipal court, defendant's certiorari was overruled by the superior court, and defendant brings error.
Affirmed.
R. R Jackson, of Atlanta, for plaintiff in error.
Orin J Bundy and J. L. R. Boyd, both of Atlanta, for defendant in error.
Shepherd applied to Morgan to borrow from him the sum of $25, but Morgan refused to make said loan; but agreed to guarantee Shepherd's note for that amount, payable to the Southern Loan & Real Estate Corporation, if Shepherd would execute to him a bill of sale to his household goods to protect him against loss arising from reason of his guaranty of Shepherd's note, and if Shepherd would pay him for such guaranty the sum of $4.70 per month. Shepherd accepted this proposition, complied with its terms, and received the principal of said note. On the first of each month from September 1, 1927, to February 1, 1928, inclusive, Shepherd paid to Morgan 25 cents per month as interest on said note. Shepherd paid Morgan the sum of $4.70 per month for having guaranteed his note, making in all the sum of $28.20. Shepherd brought suit in the municipal court of Atlanta to recover from Morgan said sum, upon the ground that such charge for his guaranty was in violation of section 17 of the act of August 17, 1920 (Ga. Laws 1920, pp. 215, 220, 221). Morgan demurred to the petition of Shepherd, upon the grounds: (1) That no cause of action is set forth therein; (2) that it affirmatively appears from said petition that Shepherd is seeking to recover sums of money paid to Morgan as a charge for guaranteeing his note, which he discounted with others, and said charges for said guarantee were not illegal and cannot be recovered; (3) that the act of August 17, 1920, regulating the lending of money, on which said suit is predicated, does not prohibit or regulate charges for guaranty by those who are not lenders of money, and that the language in the seventeenth section of said act, with respect to the "loan, use or sale of credit," should not be construed to mean that said act prohibits or regulates the charge for guaranty of the payment of an obligation by one who is not himself a lender; and (4) that if a contrary construction of said act were adopted, and if it were held that this portion of the seventeenth section of said act prohibited or regulated a charge for guaranty, the said portion of said section would be unconstitutional and void as violative of article 3, § 7, par. 8, of the Constitution of this state, wherein it is provided that no law or ordinance shall pass which refers to more than one subject-matter, or contains matter different from that expressed in the title thereof, said act containing more than one such matter, and said portion of said act contains matter not expressed in the title thereof, which limits the scope of the act to matters connected with the charges for the lending of money and the regulation thereof, and said portion of said section purports to contain a provision in regard to charges for guaranty by those who were not themselves lenders, which said matter is not contained in the title of the act and is not germane thereto.
The defendant by amendment added nineteen additional grounds of demurrer, to which we need not refer for the reasons that counsel for the defendant in his brief specially insists only upon the first, second, third, and fourth grounds of the original demurrer, and that these added grounds are lacking in merit.
The trial judge in the municipal court overruled the demurrer. The defendant appealed to the appellate division of that court, which sustained the judgment of the trial judge. The defendant sued out a certiorari, in which he sought to have the superior court review and reverse the judgment of the appellate division of the municipal court. The judge of the superior court overruled the certiorari, and the present writ of error was sued out to review that judgment.
1. It is insisted that the act of 1920 does not prohibit a guarantor from charging one for whose benefit he enters into a contract of guaranty, and that this act does not limit the charge for such service. Section 17 of this act provides that: Acts 1920, pp. 215, 220, 221. This act prohibits any one from directly or indirectly charging for or receiving any interest or consideration greater than 8 per cent. per annum for the loan or use of money, goods, or other things, or upon the loan, use, or sale of credit. The language, "the loan, use or sale of credit," embraces any contract by which one guarantees the payment of the note of another. Whenever one person guarantees the payment of the obligation of a borrower for money borrowed, such guarantor uses his credit in order to induce the lender to make the loan to the borrower; and such guarantor falls within the meaning and intent of this provision in this section of this act. This being so, the transaction with which we are dealing falls within the seventeenth section of the act of 1920; and when the guarantor charged more than 8 per cent. per annum for guaranteeing the contract of the borrower, he violated the provisions of this section.
2. But it is insisted that if we give this construction to section 17 of this act, it violates article 3, § 7, par. 8, of the Constitution of this state, which declares that "no law or ordinance shall pass which...
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