Stone v. Georgia Loan & Trust Co.

• Decision Date: 20 July 1899
• Citation: 33 S.E. 861,107 Ga. 524
• Parties: STONE v. GEORGIA LOAN & TRUST CO.
• Court: Georgia Supreme Court

33 S.E. 861

107 Ga. 524

STONE v. GEORGIA LOAN & TRUST CO.

Supreme Court of Georgia

July 20, 1899

Syllabus by the Court.

1. Under the decision of this court in Harrold v Morgan, 66 Ga. 398, which, upon a review thereof, is affirmed, a security deed infected with usury does not relatively to a judgment creditor of the grantor, pass title out of the latter; and this is so even though the judgment against him was not rendered until after the execution and delivery of such deed.

2. One who accepts from another a conveyance of land, with notice of the fact that a third person has an equitable interest therein, takes subject thereto.

3. The plaintiff in error is entitled to a new trial.

Error from superior court, Taliaferro county; S. Reese, Judge.

Action by Mary E. Stone against one Stone, her husband. Judgment for plaintiff. On levy of execution, the Georgia Loan & Trust Company filed a claim. Judgment for claimant, and Mrs. Stone brings error. Reversed.

Saml. H. Sibley, for plaintiff in error.

S. H. Hardeman and Horace M. Holden, for defendant in error.

LUMPKIN P.J.

In 1885 one Bacon bargained a tract of land in Taliaferro county to Stone for $3,000; the latter paying $1,500 in cash, and taking a bond from Bacon conditioned to make title upon payment of the balance of the purchase money. In 1889, with money borrowed from the Georgia Loan & Trust Company, for the use of which Stone contracted to pay interest amounting to more than 8 per cent. per annum, he discharged his debt to Bacon, took title to himself, and then conveyed the land to the loan company as security for his debt to it. The company took this conveyance without notice or knowledge that Mrs. Stone claimed any interest, legal or equitable, in the land. Afterwards, in 1895, Stone conveyed the land absolutely to the company, whose bond for title he had previously held, in full settlement of its claim against him. On the 6th day of October, 1897, an execution in favor of Mrs. Stone against Stone was levied upon the premises. This execution was issued upon a judgment rendered on August 24th of that year, which purported to be, not only a general judgment against Stone, but also one creating a special lien on the land in question. The company filed a claim, and upon the issue thus made a trial was had, resulting in a verdict for the claimant. Mrs. Stone, by her bill of exceptions, complains of the overruling of a motion for a new trial filed by her. She offered at the trial to prove that the $1,500 originally paid by Stone to Bacon as a part of the purchase money of the land in dispute was her money, which she had requested her husband to invest in land for the benefit of herself and her children, and, further, that before the execution and delivery of Stone's second deed to the company she had given notice to its agent of her equity in the land, and of the facts upon which it was founded. She also, in this connection, tendered in evidence the record of the suit resulting in the judgment upon which her execution was based, from which it would have appeared that in her action against Stone she set up her equity in the property, and obtained a judgment of the nature already described. The court rejected all of this evidence, holding that the same was irrelevant to the issue involved in the claim case. The judge evidently was of the opinion that Mrs. Stone was absolutely concluded by the conveyance from Stone to the company, and had no right to set up the contention that his first deed to it was void because infected with usury, or that his second deed to the company was void as to her because taken by it with notice of her equity.

Following the decision announced in Harrold v. Morgan, 66 Ga 398, we must hold that the court committed error. It was in that case distinctly ruled that the holder of a security deed infected with usury could not base thereon a claim which would prevail over the lien of a judgment creditor, although his judgment was obtained long after the execution and delivery of the security deed. The effect of that holding was to decide that such a security deed was absolutely void, as against a judgment creditor, and passed no title, legal or equitable. It necessarily follows from the doctrine there laid down that the first deed from Stone to the company presented no obstacle to the enforcement of Mrs. Stone's judgment lien upon the land. The decision in 66 Ga. was predicated upon the idea that a judgment creditor of one who had made to another creditor a conveyance infected with usury was not such a stranger to the transaction as to be precluded from raising the question of usury. We granted leave to review that decision, but after gravely considering the question whether, upon principle, it should be affirmed or overruled, we have concluded that we ought to allow it to stand. To do otherwise would necessitate the repudiation of a doctrine which this court laid down in cases of much older date, and has in more recent cases recognized as correct. In Pope v. Solomons, 36 Ga. 541, it was, in substance, held that as Pope, whose debtor, Williams, had paid to William Solomon, another creditor, certain sums of usury, was, under the facts appearing, entitled to payment of his demands out of the proceeds of Williams' property after the satisfaction of his indebtedness to Solomon, Pope had an equitable right to have Solomon's claim credited with the sums he had received as usury, and by thus reducing its amount deprive this claim, save only as to principal and lawful interest, of any priority over that of Pope. It will thus be seen that this case went a considerable length in allowing a creditor to attack as usurious his debtor's transaction with another,--much further, we may safely say, than it is necessary for us to go in upholding the decision in 66 Ga. But, be this as it may, the ruling in Pope's Case was necessarily based upon the idea that the creditor was not to be regarded as a mere stranger. It is inconsistent with any other view. And that this was the view entertained by the court is evidenced by the following, which we quote from the opinion of Chief Justice Warner, on page 545: "But it is said no one but the party who pays the usury can take advantage of it,--that it is a personal privilege not extended to strangers. As a general, abstract proposition, it is true that a contract for usury cannot be avoided by a mere stranger to the transaction. But here the complainant is not a mere stranger having no interest in the result of this usurious transaction between Solomon and Williams. He is a creditor of Williams,--claims under and through the latter to the extent of his debt. His interest is affected by the usurious contract, and to the extent of that interest he is entitled to be heard in relation to it. There is a legal privity between the complainant and his insolvent debtor. He is interested in his insolvent debtor's estate, so far as the payment of his debt is concerned, and is not, therefore, an officious interloper. Dix v. Van Wyck, 2 Hill, 522; Post v. Dart, 8 Paige, 639." The Pope Case has been several times cited by this court, and, though it has in two instances declined to give its full sanction to the application which the court therein made of the rule as to privity between creditor and debtor, it has never, so far as we have been able to ascertain, distinctly said that the doctrine embraced in the words above quoted was unsound. On the contrary, this court has many times treated it as correct. Thus, in Phillips v. Walker, 48 Ga. 55, it was held that a creditor could not attack as usurious a common-law judgment in favor of another creditor against their common debtor; and Judge Trippe, after remarking that the court was not disposed to carry the doctrine of the Pope Case to the extent asked for in the case then under consideration, said, "We by no means impeach that decision." Page 58. The decision in Gatewood v. Bank, 49 Ga. 45, is to the same effect. In that case Judge McCay said (page 48): "In Pickett v. Pickett, 2 Hill, Eq. 474, the chancellor says that a case is not to be found in the books of an interference by chancery with a judgment at law, obtained in the usual mode, under pleadings and notice, on the ground of usury in the original contract. That contract has been merged into the judgment, which imports absolute verity; and it is conclusively presumed that the parties made all the defenses allowed by law, and that the judgment is the conclusion of law on the true facts of the transaction." But, in speaking of the relation of the complainant to his debtor, who was the defendant in the judgment which the former sought to attack for usury, the eminent judge also said (page 49): "He is clearly a privy of the defendant. His only interest in the matter is that the defendant is his debtor. He comes into the controversy through the defendant, and it would entirely upset the whole doctrine of the conclusiveness of judgments, if they were liable to be attacked on their merits...