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The opinion of the Court was delivered by
Mr. ChiEE Justice BeEasE.
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The very carefully prepared report of the special referee, Hon. E. H. Henderson, in this cause, sets forth clearly the facts and correctly disposes of the legal issues involved. The
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decree of the Circuit Judge approved the special referee’s report. Our examination of the record convinces us that the exceptions of the appellant should be overruled.
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The judgment of this Court is that the decree appealed from be, and the same is hereby, affirmed.
Messrs. Justices Stabler, Carter and Bonham concur.
Mr. Justice Cothran did not participate on account of illness.
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Case posture Posture Before RICE, J., Barnwell, November, 1929. Affirmed.Action by J. Cohen against H.A. Williams and another, in which named defendant filed a counterclaim. From a decree approving the special referee's report, first named defendant appeals.
Report of Special Referee E.H. Henderson, directed to be reported, follows:
This is an action brought by the plaintiff, J. Cohen, for the foreclosure of a mortgage of real estate dated November
15, 1919, executed to him by the defendant H.A. Williams in the original sum of $6,000.00, and recorded in Book 9-A, page 134, in the office of the Clerk of Court for Barnwell County.
In his answer the defendant H.A. Williams, as his chief defense, sets up the claim of usury. He contends that he had bid in at public sale, conducted by the master and the Probate Judge, certain real estate, for the sum of $5,700.00; that in order to complete the purchase of this land he had to borrow this sum of money; that he applied to the plaintiff for the loan; and that as a result the mortgage in question was agreed upon, whereby the sum of $300.00, in addition to interest at the rate of 8 per cent. per annum, was added to the amount, making the mortgage for $6,000.00, instead of $5,700.00. He alleges that he has paid, as interest, the aggregate sum of $3,536.68, and in his counterclaim he seeks a judgment against the plaintiff in the sum of $7,067.36.
In his reply, the plaintiff contends that at the sale held by the master he himself bought one tract for $4,600.00, and at the sale by the Probate Judge he himself bought the other tract for $1,100.00; that after the sale he transferred his bids, and sold to H.A. Williams the lands for $6,000.00, and directed the master and Probate Judge to make deeds to H.A. Williams; that he sold the lands to the defendant Williams on credit for $6,000.00, upon the terms set forth in the bond and mortgage in suit.
The other defendant, L. Cohen, in his answer sets up a mortgage given to him by H.A. Williams, dated May 25, 1921, in the original sum of $3,528.18, and recorded in Book 9-K, at page 200.
By order of the Circuit Court the cause was referred to me as special referee to take the testimony and to report the same to the Court, together with my findings of fact and conclusions of law. Accordingly I have held references, and have taken all of the testimony offered by the parties to the
action. I submit this testimony, with the exhibits, to the Court, along with this report.
There are no difficult legal issues for decision, since the case is governed by well-recognized principles of law.
Usury was not forbidden by the common law, and as a consequence the case must be determined by the statutory provisions which are found in Sections 3638-3642, inclusive, of the Code, Vol. 3.
In Section 3638, it is provided that no greater interest than seven (7) per cent. per annum shall be charged, taken, agreed upon or allowed upon any contract arising in this State for the hiring, lending or use of money or other commodity, either by way of straight interest, discount or otherwise, except upon written contracts wherein, by expressed agreement, a rate of interest not exceeding eight per cent. may be charged.
Section 3639 is as follows: Any person or corporation who shall receive, or contract to receive, as interest any greater amount than is provided for in the preceding section shall forfeit all interest, and the costs of the action and such portion of the original debt as shall be due shall be recovered without interest or costs, and where any amount so charged or contracted for has been actually received by such person or corporation, he or she, or they shall also forfeit double the total amount received in respect of interest, to be collected by a separate action or allowed as a counterclaim in any action brought to recover the principal sum.
In a case based on somewhat similar facts, the Circuit Judge stated in his decree: The statute against usury does not apply in this case. The transaction between plaintiff and Axana Marchbanks amounted simply to a contract for the sale and purchase of land, and the excess which Axana Marchbanks agreed to pay to the plaintiff above the amount for which the land was bid off at the master's sale, was profit on the sale of the land in consideration of indulgences granted to the purchaser, and was not in violation of the
statute against usury. Axana was unable to buy the land for $1,045.00 upon one-third cash and balance on a credit of one year, but felt able, and was willing, to buy for $1,345.00, upon one-third cash and the balance on a credit of six years. The plaintiff purchased the land and resold it to her upon her own terms, and this is really all that the contract amounts to. There is no usury in it. This decree was affirmed by the Supreme Court. Wheeler v. Marchbanks , 32 S.C. 594 , 10 S.E., 1011 .
Applicable principles of law are set forth in Cyc. It is manifest that any person owning property may sell it at such price and on such terms as to time and mode of payment as he may see fit, and such a sale, if bona fide , cannot be usurious, however unconscionable it may be. But the law will not permit a usurious loan to hide itself behind the form of a sale. Whether parties intended a sale or a loan is a question for the jury. 39 Cyc., 926.
Usury is an affirmative defense, and must be pleaded, thus placing the burden of proof on the defendant. New England Mortgage Security Co. v. Baxley , 44 S.C. at page 90, 21 S.E., 444, 885; Bank v. Miller , 39 S.C., at page 193, 17 S.E., 592.
Where usury is set up in counterclaim and denied in the reply, the burden, of course, is on the defendant to establish his contention.
With these legal principles as a background, we find that the present case resolves itself to one of fact, and may be narrowed to a single question, and that is, Was there a sale of the lands by the plaintiff, J. Cohen, to the defendant H.A. Williams, or not?
The defendant Williams testified that he was present at the sale with the plaintiff, and that the plaintiff bid in the land, acting for Williams, and with a view of lending him the money to comply with the bid; the $300.00 being added as a bonus or extra interest.
The plaintiff, on the other hand, contends that he was acting for himself when he bought in the land at the two
public sales, and that he resold the tracts to Williams by assigning his bids, making a profit of $300.00 on the sale.
It will be seen, therefore, that the case turns upon the question of whether Mr. Cohen was acting for himself or for Williams at the sale. If he was acting for Williams, then there could have been no sale by Cohen to Williams, and consequently the mortgage would be affected with usury. If plaintiff was acting for himself, then a sale of his land to Williams, at a profit, would not be usury.
On this, the crucial and decisive point in the case, I find from the evidence, as a matter of fact, that the plaintiff, J. Cohen, was bidding for himself at the sales, and not acting as the agent of Williams.
It appears that for many years L. Cohen, who is the son of the plaintiff, had attended to a great part of his father's business matters. Prior to the time of the two public sales, L. Cohen had had occasion to learn the value of these tracts, and had been informed that they were then worth as much as $10,000.00. Before the sales in question were held, the defendant Williams stated to L. Cohen that he would like very much to own the lands, which were advertised for sale, and expressed a willingness to pay $8,000.00 for them. L. Cohen told Williams that he himself might buy the lands for speculation, and sell them to Williams, additional security to be put up for credit terms. L. Cohen testified positively that Williams had never asked him to bid at the sale as Williams' agent, and that there had been no agreement to lend him any money.
It appears that both of the Cohens, as well as Williams, attended the two sales, and that J. Cohen did the bidding. The lands were knocked down to J. Cohen by the officers. The sales were conducted on November 3, 1919, and thereafter negotiations took place between the plaintiff and Williams as to a purchase of the property by Williams. When they had come to terms, the plaintiff's son paid in the amounts due on the bids, and asked the master and the Probate Judge to make the deeds to H.A. Williams, L.
Cohen took the two deeds with him, and, when the defendant Williams had executed the bond and mortgage in question, Mr. Cohen delivered the conveyance to him.
Mr. H.L. O'Bannon, an honored member of the bar, testified that at the time he was the master for Barnwell County, and conducted the sale referred to, that L. Cohen came to his office and paid him the purchase price for the lands bid in by his father, and that L. Cohen asked him to make the deed to Williams, stating that he had concluded a sale of the land to Williams, to give him the deed, and he would deliver it to Williams when the sale was completed, and, if it was not completed, he would bring the deed back and deliver it to the master, and ask him to make the conveyance to J. Cohen.
J. Cohen, the plaintiff, who is now quite old, testified that he never talked with H.A. Williams about the matter in the absence of his son, L. Cohen.
John K. Snelling, the Probate Judge for Barnwell County, testified that he sold the $1,100.00 tract to J. Cohen at the public sale; and that after the sale, and before the bid had been complied with, upon his requesting L. Cohen to attend to the matter, the latter stated that he was consummating a trade for the land, and as soon as the trade was completed he would come to the Probate Judge's office and comply with the bid.
In view of all of the testimony in the case, I find as matter of fact that the plaintiff bid in the lands for himself, for speculative purposes, and thereafter sold the tracts to Williams at a profit of $300.00. Williams, not being able to pay the $6,000.00 in cash, the present mortgage was given, covering the two tracts as well as other security. I find that the entire transaction was bona fide , that there was no intention of using this procedure as a cloak for the charge of usury, and that the mortgage is in no way tainted with usury.
I find that there is due on the mortgage given by the defendant Williams to the plaintiff, including principal and interest
up to December 1, 1930, the sum of $8,127.72, with the sum of $812.77 as an attorney fee, making a total as of December 1, 1930, of $8,940.49. To this sum should be added the interest from December 1, 1930, to the date of the decree.
There is no contest as to the mortgage held by the defendant L. Cohen. I find that there is due on that mortgage, by the defendant H.A. Williams to L. Cohen, including principal and interest up to January 30, 1930, the sum of $5,055.52, with the sum of $505.55 as an attorney fee, making a total, as of January 30, 1930, of $5,561.07.
On this mortgage due to L. Cohen, in the event the decree is not signed prior to January 30, 1931, I have also calculated the amount due up to that date. I find that there is due on this mortgage, including principal and interest up to January 30, 1931, the sum of $5,459.96, with the sum of $545.99 as an attorney fee, making a total, as of January 30, 1931, of $6,005.95.
The mortgage held by the plaintiff covers three tracts of land — a tract of 125 acres, one of 22 acres, and a tract of 132 acres.
The mortgage held by the defendant L. Cohen is a second lien on these three tracts, and in addition it covers a tract of 178 acres which is not included in the plaintiff's mortgage.
I find as a matter of law, that the defendant H.A. Williams is not entitled to a judgment on his counterclaim; that the plaintiff is entitled to a judgment against the defendant H.A. Williams in the sum found to be due on his bond; that the defendant L. Cohen is entitled to a judgment against his codefendant, H.A. Williams, in the sum found to be due on his bond; and that the plaintiff and the defendant L. Cohen are entitled to judgment in foreclosure as to the lands covered by their respective mortgages.
I find as a matter of law that, after the payment of the costs and disbursements of the action, and any taxes due and outstanding, the proceeds arising from the sale of the 125-acre
tract, the 22-acre tract, and the 132-acre tract, should be applied first to the mortgage debt of the plaintiff, next, to the mortgage debt of the defendant L. Cohen, and that any balance should be paid over to the defendant H.A. Williams. However, if the mortgage held by L. Cohen is not paid in full from the proceeds of the three tracts mentioned above, then L. Cohen is entitled to have the 178-acre tract sold, and the proceeds applied to his mortgage debt, with any surplus to be paid over to H.A. Williams. Source: CourtListener
