Fidelity Bank v. Wysong & Miles Co.

98 S.E. 769, 177 N.C. 284, 1919 N.C. LEXIS 117

• Court: Supreme Court of North Carolina
• Decided: April 2, 1919
• Status: Published

Opinion

Walker, J.,

after stating the case: The exceptions in this case, as will appear by reference to our statement of it, relate chiefly to the admission and exclusion of testimony. There is no exception to the charge, which is not set forth in the record, and we must, therefore, assume that it was correct in every respect and perfectly satisfactory to the appellant. Muse v. Motor Co., 175 N. C., 466. We make brief reference to this-fact because it makes it unnecessary for us to decide whether the transaction between tbe parties was usurious on its face or tainted per se with, usury, if it were such, as the defendant contends that it was, or if, in other words, the defendant has established his claim, that the 20 per cent of the discounted notes was left in the bank by it and held by the bank, without being subject to defendant’s check, under an express agreement of the parties to that effect. As the charge is presumed to have been correct, we must conclude that the judge instructed the jury as to all phases of the case, and that they-found under the evidence and charge either that there was no such agreement or, if there was such an agreement, the jury were instructed that it was not usurious on its face, and therefore they must find whether there was any actual intent to charge unlawful interest, and that, under the last instruction, they did find that there was no such intent. If they had found that there was an agreement, as claimed by the defendant, and the judge charged that it was usurious in law, they could not have answered the first issue “No” if they had followed the judge’s instructions, which we assume that they did. So that, upon a fair and proper construction of the verdict, which should be read in the light of the evidence and what presumably was the charge (Southerland v. Brown, 176 N. C., 187; Jones v. R. R., 176 N. C., 260), they either found that there was no such agreement or that there was no intent to violate the statute. We are of the opinion, though, that the jury found there was no agreement reserving unlawful interest, which of course would cut the defendant’s case up by the roots, as the existence of such an unlawful agreement is the basic fact of his whole contention. In any aspect of the case, therefore, the question as to whether there was a transaction infected with usury is not before us, and will not be hereafter, unless there was some substantial error in the rulings upon the evidence, which we now proceed to consider; but as preliminary to this discussion we may state tentatively, and without being committed to them, a few general principles of the law concerning the main question and as they are found in books. The test of usury in a contract is whether it would, if performed, result in securing a greater rate of profit on the loan than is allowed by law. To sustain the defense of usury there must be satisfactory proof of some unlawful gain or advantage secured by the creditor. The form of the agreement is immaterial, since any shift or device by which illegal interest is arranged to be received or paid is usurious. As above stated, it is not essential to usury that the contract to pay illegal interest should be absolute; the payment of the illegal interest may depend upon the happening of some contingent event, provided the principal is not put at hazard. Neither is it at all necessary that the parties shall have designated the usurious compensation as interest, eo nomine. If the money, property, or other thing of value agreed upon is intended as compénsa-' tion for the use of the principal sum. it is, as a matter of law, interest. Tbus it bas been held that an agreement for unlawful interest may, it seems, be inferred from an unexplained retention by the lender of a portion of the loan, the whole amount of which bears interest at the highest rate. Webb on Usury, sec. 28 and notes; 27 Am. and Eng. Enc. of Law, 925; citing Cummins v. Wire, 6 N. J. Eq., 73; Andrews v. Poe, 30 Md., 485; MacKenzie v. Garnett, 78 Ga., 251; Uhifelder v. Carter, 64 Ala., 527; Vilas v. McBride, 42 N. Y. St., 204; 17 N. Y. S. Rep., 171. And in another case it was said that where a person went to obtain discount at a bank voluntarily leaves a sum of money on deposit with the expectation that he will be thus enabled to obtain discount more readily, but without any understanding to not withdraw his money at any time, there is no usury. Appleton v. Fiske, 8 Allen (Mass.), 201. The following illustrations have been given: Where, in a State in which the legal rate of interest is 10 per cent, a municipal corporation attempts to satisfy a judgment against it by issuing warrants at the rate of one dollar in warrants for every seventy-five cents of the judgment, such warrants are void for usury. Clark v. Des Moines, 19 Iowa, 199. In determining whether usury exists in any particular case, the proper inquiry is not necessarily whether the borrower is to pay for the use or forbearance but what is the lender to receive for the loan or forbearance of his money. Where the entire gain of the lender is derived from the borrower, the profit to the former and the cost to the latter are commensurate; but where there are intervening sources of profit to the lender or expense to the borrower, the proposition stated in the last preceding sentence may have application. Webb on Usury, page 30 and notes. In Eringhaus v. Ford, 25 N. C., 522, where a bank of this State agreed to lend to an individual notes of a Virginia bank, which were at a depreciation in the market, below both specie and the notes of the bank of this State, and the borrower was to give his note at ninety days, to be discounted by the bank, and to be paid in specie or in the notes of the bank making the loan, it was held that the note given in pursuance of this agreement was void for usury, though the borrower stated at the time that he could make the Virginia notes answer his purpose in the payment of his debts to another. Usury consists in the unlawful gain, beyond the rate of 6 per cent, taken or reserved by the lender, and not in the actual or contingent loss sustained by the borrower. The proper subject of inquiry is, what is the lender to receive, and not always what the borrower is to pay, for the forbearance. It is generally true that to constitute usury there must be an between the lender and the borrower by which the latter pays lises to pay and the former knowingly receives or secures a ate of interest than is allowed by the statute. Webb on Usury, p. 30, sec. 30. As to tbe practice and procedure, it has been said that in all cases tbe purpose should be to ascertain tbe intention of tbe parties. Tbe intent may be construed by tbe law upon tbe face of the usurious contract, as we have clearly shown, or it may be proved as a fact. Since, therefore, tbe question of usury may depend sometimes upon tbe purpose and intent of tbe parties, it follows tbat usury may be a question of law or fact, or a mixed question of both law and fact. There cannot be usury without facts; and those facts, which may include tbe actual intent, when they are controverted, must be tried and ascertained by tbe jury. 'Whether upon those facts tbe transaction be usurious is a question of law which addresses itself alone to the court. But tbe question of unlawful interest is commonly one for tbe jury, where it does not follow as a clear deduction from undisputed facts, or is not imputed by tbe mere construction by tbe court of a written instrument, unaided by extrinsic evidence, when it becomes a question of law to be determined by tbe court. Tbe latter is tbe. case where tbe contract on its face and by its own terms per se imports usury. Webb on Usury, see. 434; Lynchburg v. Norvell, 20 Gratton, 601; Smith v. Hathorn, 88 N. Y., 211; Walker v. Bank of Washington, 44 U. S., 61; Levy v. Gadsby, 3 Cranch (U. S.), 80; Banning v. Hall, 72 N. W. Rep. (Minn.), 817; Woolsey v. Jones, 84 Ala., 88. But we need not decide these questions as they are not directly involved, and merely refer to them incidentally as they serve to. throw some light upon tbe other questions which are presented for decision. They will all be found fully treated in Webb on Usury, secs. 27 to 41, pp. 27 to 31, and secs. 454, 455, pp. 500 and 501, and cases in the notes. See, also, Grant v. Morris, 81 N. C., 150; Burwell v. Burgwyn, 100 N. C., 389; Bennett v. Best, 142 N. C., 168; Yarborough v. Hughes, 139 N. C., 199; Miller v. Ins. Co., 118 N. C., 612; Meroney v. B. and L. Asso., 116 N. C., 882; Arrington v. Goodrich, 95 N. C., 462. This brings us to tbe rulings on evidence.

1. The objection, based upon tbe exclusion of tbe question addressed to tbe witness Guy Branson, as to instructions from Mr. Wysong, cannot be sustained for several reasons, one of which is that it’ does not appear what answer be would have given. Jenkins v. Long, 170 N. C., 269; Rawls v. R. R., 172 N. C., 211; Smith v. Comrs., 176 N. C., 466. He might have answered “No,” in which case the defendant would have proved nothing. If we should bold this ruling to be error, and reverse, when tbe witness is called at tbe next trial be may answer “No,” and we will have been at great pains to decide a matter utterly immaterial. Tbe question also was leading, and it was discretionary with tbe court whether it should be excluded. S. v. Price, 158 N. C., 641; McKeel v. Holleman, 163 N. C., 132; S. v. Williams, 168 N. C., 191. Tbe defendant’s witness, J. R. Brown, testified four times, and without objection, that a 20 per cent deposit was required at all times, tliougb we do not place our decision on this ground. It merely goes to show that defendant was not materially harmed, even if the ruling was technically erroneous. The witness, J. R. Brown, testified at least three times, under cross-examination, to the instructions from "Wysong as to the 20 per cent deposit without any protest from the plaintiff. It would seem, therefore, that the fact was not seriously contested, and if so, no real harm was done by the judge’s ruling, Weathersbee v. Goodwin, 175 N. C., 234; and we would be slow to reverse unless it was reasonably clear that the ruling was prejudicial. Weathersbee case, supra; S. v. Davis, 175 N. C., 723, 729; Goins v. Indian Tr. School, 169 N. C., 737; Elliott v. Smith, 173 N. C., 265; Mitchell v. Bottling Co., 174 N. C., 771.

We need not, therefore, consider whether the order given by Wysong to the witnesses, J. R. Brown and Guy Branson, and testified to by them, should be regarded as a self-serving declaration by Wysong, as contended by the plaintiff. They swore to the fact of retaining the 20 per cent, and it is claimed by defendant to be, therefore, competent for them to state that it was done under an order given at the same time, which was pars res gestee as qualifying or explaining their act. Jones on Ev., sec. 346. But however this may be, the result will be the same, in the view we take of the case.

2. As to the testimony of John E. Wiley, plaintiff’s cashier, relating to conversations with O. C. Wysong, defendant’s former president, who is dead. A corporation can act only through its agents, and it is competent to prove the agent’s declaration as against the principal, when it was made about matters within the scope of his authority and relates to the transaction in which he was then engaged on behalf of the principal. Gwaltney v. Assurance Society, 132 N. C., 925; Walker v. Cooper, 159 N. C., 536; Molyneux v. Huey, 81 N. C., 106; Roberts v. R. R., 109 N. C., 670; Sprague v. Bond, 113 N. C., 551 (557). Mr. Wysong was acting as defendant’s agent throughout the transaction, and was its leading officer. .The evidence, therefore, falls within the principle just stated. But the defendant’s objection is mainly founded upon another ground, that the conversations between the two officers, one of them Mr. Wysong, the defendant’s agent, being dead, is forbidden by Revisal of 1905, sec. 1631. We do not think so. A slight examination of the clear and excellent analysis of that section (Code of 1883, sec. 589), made by the present Chief Justice in Bunn v. Todd, 107 N. C., 266, will show that no such ease is presented as will exclude John F. Wiley as a witness or render his testimony incompetent. Mr. Wiley is. not a party to the action, nor did he claim through or under any one who is a party. He did not testify in behalf of himself or in behalf of any party succeeding to his title, for he had none, but solely as a witness for tbe plaintiff; nor did be testify against tbe representative of a deceased person, or against any person deriving bis interest through such person, nor as to any personal transaction or communication between tbe witness and tbe person since deceased, whose representative is a party to tbe action. Tbe exception to this rule of exclusion stated in Bunn v. Todd, supra, does not apply to tbe facts of this case. That tbe suit must be prosecuted against tbe representative of a deceased person, which is tbe capital requirement of tbe section, has no application here as this is not that kind of a suit, there being no representative of a deceased person as defendant, or even as plaintiff. There is nothing but tbe bare fact that Mr. Wiley had an interest, as stockholder in tbe plaintiff bank, and was one of its officers, and Mr. Wysong bad an interest'in tbe defendant corporation and was one of its officers. But this does not bring tbe testimony admitted by tbe court within tbe prohibition of section 1631. It may be that tbe section should be broadened so as to include such a case, but that must be done by legislation and not by our construction. If it would be wise and fair for this change to be made, tbe Legislature which declares tbe policy of tbe State must say so as it makes tbe law, and we merely declare what it is. This case is not within tbe spirit of tbe section, and certainly not within its letter. Bunn v. Todd, supra, has frequently been approved since it was decided, tbe two most recent cases which expressly endorse its statement of tbe rule and apply it being Brown v. Adams, 174 N. C., 490, and Pope v. Pope, 176 N. C., 283. Mr. Wysong was not a party to tbe last notes of tbe series of renewals, which are now sued on, nor is bis estate sought to be charged with any liability in this action through bis personal or legal representatives. As no claim was being or could be asserted in this action against tbe estate of Mr. Wysong or bis representatives, and as tbe defendant derived no title or interest through or under him, Mr. Wiley’s testimony did not relate to such a personal transaction or communication with a deceased person, as is forbidden by section 1631 of tbe Revisal. Roberts v. R. R., 109 N. C., 670; Sprague v. Bond, 113 N. C., 551 (557); Gwaltney v. Assur. Soc., 132 N. C., 925, supra. Wysong’s estate will not be affected in law by tbe event of this action, although be may have been an endorser on some of tbe renewals given prior to tbe notes in suit, and if be bad such a vague, indirect and eventual interest tbe suit is not against Mr. Wysong’s representatives, and tbe witness was not, therefore, testifying against tbe latter within tbe meaning of tbe statute, but only against tbe defendant, which is an incorporated company.

We do not see bow Mr. Wysong derived any interest in this suit under tbe defendant, as was argued, and if be bad any personal interest in tbe transaction it is not represented by bis administrator in this action.

There are other answers to the contention which need not be stated. It results that there is no error in the record, and it must be so certified.

No error.