#### J. CLYDE RAY v. ATLANTIC LIFE INSURANCE COMPANY.

(Filed 28 January, 1935.)

Usury A a — Sum deducted by lender in excess of legal interest must be reserved by him as interest in order to constitute usury.

In tbis action against tbe purchaser of notes to recover tbe amount of interest paid thereon on tbe ground that tbe notes were tainted with usury, C. S., 2306, it appeared from tbe facts agreed' that tbe borrower executed notes for tbe principal sum borrowed and notes for tbe interest on tbe principal notes from tbe time’of their execution until their respective maturities, and that tbe lender paid tbe borrower tbe principal sum borrowed less an amount deducted and retained by tbe lender: *Held,,*in tbe absence of an agreed fact or a finding by the court that the sum deducted was reserved by tbe lender as interest, tbe transaction did not constitute usury, and therefore the notes were not tainted with usury in the bands of tbe purchaser.

Appeal by plaintiff from *Sinclair, J.,*at May Term, 1934, of OkaNGE.

Affirmed.

Tbis is an action to recover a sum of money paid by tbe plaintiff to tbe defendant as interest on certain notes wbicb were executed by tbe plaintiff and bis wife and are now beld by tbe defendant as a purchaser for value and in due course from tbe payee.

It is alleged in tbe complaint that tbe payee of said notes at tbe date of tbeir delivery knowingly charged and received from tbe plaintiff interest on said notes at a rate in excess of six per cent per annum, and that for that reason all interest on said notes was forfeited as provided by statute. C. S., 2306.

Tbis allegation is denied in tbe answer filed by tbe defendant.

At tbe trial of tbe action tbe parties waived trial by jury, and agreed that tbe court might render judgment on a statement of facts agreed submitted by them.

From judgment on tbe facts agreed that jilaintiff recover nothing of tbe defendant, tbe plaintiff appealed to tbe Supreme Court.

*S. M. Gattis, Jr., for plaintiff.*

*Giles & Giles for defendant.*

Connor, J.

On or about 15 August, 1925, tbe plaintiff and bis wife executed and delivered to tbe Federal Trust Company of Richmond, Va., at Hillsboro, N. C., ten notes aggregating tbe sum of $3,000, and twenty notes aggregating tbe sum of $990. Tbe consideration for tbe ten notes was the agreement of tbe Federal Trust Company to lend to tbe plaintiff tbe sum of $3,000. Tbe consideration of tbe twenty notes was *655the interest which would accrue on the ten notes from their date to their respective maturities. Upon the delivery of said notes to it, the Federal Trust Company delivered to the plaintiff the sum of $2,797, “which sum represented all the proceeds of the loan received by the plaintiff.” It was agreed by the parties that the sum of $203 was “knowingly retained by the lender — the Federal Trust Company.” It does not appear from the statement of facts agreed that the sum of $203 was retained by the Federal Trust Company as interest. It does not appear for what purpose the said sum was retained. In the absence of an agreement by the parties or a finding of fact by the court that said sum was reserved by the lender as interest, its retention did not constitute usury. *Bank v. Jones,*205 N. C., 648, 172 S. E., 185. In the cited case it was admitted at the trial that the payee of the note sued on had charged, reserved, and received usury on the note prior to its purchase by the plaintiff. For' this reason it was held in that case that all interest on the note had been forfeited, even in the hands of an innocent purchaser for value. In the instant case it is denied in the answer that the payee, had charged, reserved, or received usury on the note prior to its purchase by the defendant.

On or about 19 August, 1925, the defendant Atlantic Life Insurance Company of Richmond, Va., purchased from the Federal Trust Company all the notes which were executed by the plaintiff, and became the holder for value in due course of all said notes. All of said notes— both those for .principal and those for interest — have been paid by the plaintiff, some voluntarily, and others by foreclosure of the deed of trust by which said notes were secured.

On the facts agreed at the trial of this action, none of the notes which plaintiff executed, and which were subsequently paid, were tainted with usury. There is no error in the -judgment.

Affirmed.