Case Name: FAISON v. GRANDY
Court: Supreme Court of North Carolina
Jurisdiction: North Carolina
Decision Date: 1901-06-01
Citations: 128 N.C. 438
Docket Number: 
Parties: FAISON v. GRANDY.
Judges: 
Reporter: North Carolina Reports
Volume: 128
Pages: 438–446

Head Matter:
FAISON v. GRANDY.
(Filed June 1, 1901.)
1. INTEREST — Lex Loei Contractus — Lex Loci Solutionis — Conflict of Laws.
Money loaned in Virginia on real estate in North. Carolina is governed by the rate of interest in North Carolina.
2. USURY — Interest—Negotiable Instruments — Purchaser Without Notice.
A note embracing usurious interest is void in the hands of a purchaser before maturity and without notice.
3. APPEAL — Review-—Assignment of Error — Rehearing—Exceptions and Objections.
Where no exception is taken in trial court to a' ruling, and no error is assigned upon rehearing, the Supreme Court will not review the ruling.
4. USURY — Negotiable Instruments — Personal Defense.
The plea of usury being a personal plea, can be taken advantage of only by the borrower or debtor or other person directly connected with the transaction, upon whom the burden of the usury falls.
5. ESTOPPEL — Judgment.
A judgment which provides that issues relating to usury are reserved by consent to be passed on by referee does not estop the raising of the question of usury before a referee.
6. ESTOPPEL — Judgments—Representations—Statements.
Representations and statements not relied or acted on by the party to whom made do not work an estoppel.
ON BEinsARiNG this case was modified and remanded. Eor former opinion, see 126 N. C., 827.
Day & Bell, II. B. Peebles, and D. L. Russell, for tbe plaintiff.
T. N. Ilill, Pruden & Pruden, Shepherd & Shepherd, for tbe defendants.

Opinion:
Cook. J.
Tbis action is now reheard npon the petitions of both plaintiff and defendants. It was beard at February Term, 1900 (126 N. C., 821), upon appeal by plaintiff from tbe judgment rendered by bis Honor, Judge Brown, upon exceptions thereto taken.
The plaintiff now assigns as grounds for rehearing:
1. For that the Court overlooked tbe fact that the record showed that items of usurious interest other than the $638.93 mentioned in 'the opinion of the Court, entered into the consideration of the $10,000.00 bond, and two drafts aggregating, $4,400, to-wit: On page 173 of printed record, $119.71; on page 174, $132.81, $933.38, $575; on page 175, $120.63, $62.12, $711.07, $97.34 — all of these sums were interest at the rate of 9 per cent per annum charged in the account on page 175, which amounted to $14,421.74 up to January 1, 1876, and which was settled by the $10,000.00 bond and two drafts. All of said sums were charged against plaintiff by the referee and Court below, upon the ground that the plea of usury was not open to plaintiff. The refere© found as a fact that Hiere was in said account $638.93 charged against Faison as a bonus, and for Which Faison received nothing. This sum was separate and apart from the interest charged in said account at 9 per cent. In said account, The Farmers and Merchants Loan and Trust Company credited Faison with certain items of interest at 9 per cent, to-wit: On page 174, $138.99, $54.82, $190.43, $178.32. These items of course should be deducted from the items above mentioned as having been charged against siaid Faison.
2. For that the Court overlooked a clerical error of $208.71 made by the referee. This error occurred in this wlay, to-wit: In the account, amounting to $14,421.71, interest was calculated up to January 1, 1876, and when the bond and drafts were given to close it, they drew interest from that date. In making out the account mentioned in finding 14, page 79, the referee overlooked tha/5 fact, and brought his -account down to March 2, 1876, >and included interest up- to' that time, and still bis account -fell short of the account closed by bond and drafts $638.93. If hie -had stopped ait January 1, 1S76, his account would hlave been two months interest smaller, to-wit: $208.71, 'and hence the difference would have been $845.67 instead of $638.93.
3. Tbat the Court oiveadooked the fact that the "improper charges" did noi consist of interest in excess of legal rates. Said sum was made up as follows: Out of the $9,500 note due June 2, 1873, came $495.20. This note was charged to Faison at $9,500, page 174. The referee charged it at $9,004.80, making a difference of $495.20 of principal, not interest, because 'the referee found that Faison g'ot for said note only $9,004.80. Referee disallowed item of $78.75, page 175, October 14, 1875, was not allowed against Faison. Item of $48.25 (charged twice) was allowed once only. Item of $82.71, page 172, was allowed at $80.00, making $495.20, $78.75, $48.25, $625.91. The balance of $16.73 must have arisen from error in calculation. Excepting the above items, the record will show that the referee allowed against Faison every item contained in accounts on pages 170 to 176. with interest at nine per cent per annum (see pages 89 to 93), except the following, which ajipeared both on the debit and credit sides of tlie account, to-wit: $2,373.00 and $1,267.55 charged on page 173, and credited on page 174 and page 176, and item $3,390, charged on page 175, credited on page 376, and $2,935.45 charged on page 174, and credited on page 173.
His Honor, Judge Brown, beld that the referee Was in error in bis first conclusion' of law — "that the said Trust Company, notwithstanding ilts charter, is subject to the general interest and usury laws of Virginia, and consequently that the note for $9,500, dated March 1, 1873, bearing 9 per cent interest on its face is usurious.'" From this ruling defendants did not appeal, 'and plaintiff noit having assigned the same as error upon rehearing, it must to stand. While vie agree with his Honor in his eondusiom that the transaction • was usurious, we differ from him in the reasoning. The record shows 'that the money was loaned upon real estate security situate in this State, the security being the basis of the loan; the rate of interest is governed by the interest laws of this State', notwithstanding that the loan was made in the State of Virginia — the reasons for which fully appear in Meroney v. Loan Asso., 116 N. C., 882 (and in Jackson v. Am. Mortgage Co., a Georgia ease therein cited). Interest therefore should hlave been charged at the rate of 6 per cent— not nine.
It therefore follows that those items of interest which are charged at nine per cent are usurious, and the items of account to' which errors are assigned upon the rehearing must be restated with interest calculated ait six per cent, both upon the debit, and credit sides, and the errors pointed out in plaintiff's third assignment must be corrected — excepting, however, from the restatement of the account the interest on the $9,500 note, to which usury is not pleaded and to which no -exception is taken upon appeal. For in plaintiff's complaint, allegation 67, he says: "This does not.-apply to the $9,500 note of March 1, 1873, on which plaintiff admits nine per cent interest was properly charged;" and in exception 56 he says: "He should have held that said company had the right to charge nine .per cent on the $9,500 note." The second assignment of plaintiff is a patent error and must be cor- recited. The record shows that the referee added interest on the sum iolal from January 1, 1876, to March 2 (two months and two days — $208.71); and when the note and draft were executed in May, 1876, for that sum, 'they bear interest from January 1, 1876, thus charging interest tiwiee for two months and two days during the same time.
Defendants' petition for rehearing is based upon errors assigned :
1. That the note was assigned to Mrs. Grandy and Wm. Selden in 18S1, instead of February 2, 1878, as stated by the Court.
2. .That the item of $638.93 wias not usurious as held by the Court.
4. That, it was error in holding that the plaintiff was not precluded from setting up the plea of usury against the $10,000 note, and was not estopped from pleading usury.
5. That plaintiff was not entitled to a credit of the $638.93 item.
6. That- they should not have been taxed with the costs in this Court.
A careful review of the ruling of 'this Court upon the item of $638.93, pointed out in the second and fifth assignments by defendants fails to discover any error in ife former decision, and the siame is reaffirmed.
In considering the defendants' other assignments upon petition to rehear, the record reveals the fadt that the transfer of notes by the Loan and Trust Company was, as claimed, made on February 2, 1878, instead of 1881, as reported by the referee (XXXIII), and adopted by this Court (at February Term, 1900), as correct; but this does not alter the status of the parties, except in so far is it shows, 'that tire note was transferred te William Selden and Mrs. Grandy before maturity, which is not material, since it is the well-settled law of this State that a note embracing usurious interest is void in tbe bands of a purchaser before maturity and witbont notice. Ward v. Sugg, 113 N. C., 489, and cases there cited, wherein Coor v. Spicer, 65 N. C., 401 is disapproved.
Tbis brings ns to the consideration- of the •assignon'eart taken to the ruling of tbis Co-urt in bolding that Ms Honor, Judge Brown, was in error in adjudging that the plaintiff was precluded from setting up the plea of usury -against the bond, it being the third finding in his judgment.
It is contended by defendants that the plea of usury is personal and can be interposed only by the maker of the note; tba-t the note was executed by John Eaison, not Frank, who has interposed it in this action. "It is <a well-established rule that the defence of usury is personal to- the debtor o-r borrower and his privies by law or contract." Webb on Usury, sec. 365; Davis v. Garr, 6 N. Y., 124; 55 Am. Dec., 398. And it is true that it is a personal defence^ and the right of affirmative relief is likewise personal; but it is personal in the sense that it is- to- the exclusion of strangers, or parties disconnected with the immediate transaction. It is limited to-the borrower or debtor upon whom the burden falls whether he be tbe maker of 'the mote (the evidence of the debt) or no-t, or otherwise has an interest in the transaction which can be injuriously affected by the usury. In this case the plaintiff was the orignal debtor; the debt was secured by his "Urquhart" -and "Round Pond" tracts- of land, the legal tiltle to which was shifted to, John, accompanied with his (plaintiff's) deb-t. But plaintiff did not cease to be a debtor; he continued in possession, and occupied, managed and controlled on his own account bo-th of said tract's, and made payments upon said debts. It was not upon the credit of John W. Eaison, who is alleged in defendant's answer to have been insolvent (paragraph 35), that tire money was advanced in taking up the note, but upon the value of the land which had by common consent been taken out of the name of plaintiff and put into that of John. The bidding in of a $22,000 tract of land encumbered wiitih only $4,680.81 of purchase-money for $1,000, and the Eound Pond tract for $2,500 by tibe Lolan and Trust Company, for Which, they took deed, and then conveying same land toi plaintiff's brother, John, and taking a security upon said land for the $10,000 note, and upon a tract of John's land to secure the two- drafts which covered the indebtedness due by plaintiff in which the usury wias embraced, was well known to the parties to the transaction, coupled with the further agreement that plaintiff should pay off that indebtedness and John would reconvey the land to him, was all on paper, leaving the actual relations of the parties unchanged so far as otherwise could appear. John exercised no control over the land or the use or profits of it. Should the TJrqu-bart and Pound Pond tracts have been sold under the trust, it would have been no loss to John, but to plaintiff whom John wias helping. Therefore it Avas t'o plainliffs interest that the debt should be paid, to the end -that the title be reeonveyed to him, in the payment of Avhich, or any part thereof, the plaintiff AA'as directly interested, just as much as if the papers had been signed by bimiself instead of John. He being the substantial debtor had a right to set up' a personial plea in his behalf to protect his interest involved in tíre transactions AA'ith the other parties, out of Avlireh this litigaltiom has grown.
Th'e defendants further insist that the plaintiff is ©stopped hy the judgment rendered by Judge Boykin froto claiming that the sum owing by him was less than $14,000 and interest. But in what way we are not able to see. The judgment expressly provides that "all the issues relating to' the Questions of usury have been reserved, by consent, to be hereafter passed on by any referee Who may be appointed to' state an 'account in this action," and W. E. Allen AA»as appointed referee and ordered "to pass upon the issues raised by the plea of usury and report his findings and rulings," etc., which he has done, and his report -is here on appeal by plaintiff from the judgment rendered thereon by Judge Biroiwn confirming the samie.
Nor are we able to see the force of defendíanos contention of an estoppel in pais precluding plaintiff from pleading the statute of usury. Defendants' cite the testimony of plaintiff, wherein he says that, halving failed to' get the aetOunit settled by arbitration with the Loan and Trust Company, and failing to get it correctly adjusted, he accepted the statement of the Trust Company because hie cou'ld not raise the money to' take up the liens, and got Grandy & Sons to give the drafts and take up the note. But defendants, Grandy & Sons, not only do- not set np such defence, but aver in their answer that they took up the debts "in order to befriend John W. Eaisom and prevent a sale of said property and a probable sacrifice thereof," which was threatened by the administrator (paragraph 27 of answer) ; also- in paragraph 7 of their answer, they aver that "sometime after the execution of siai'd note for $10,000 and deed of -trust, the said John W. Faison apprehending applied to defendants, C. W. Grandy & Sons, to assist him. The said C. W. Grandy & Sons, believing said note to> be well secured and good, interested themselves in the matter and induced Dr. William Seiden land Mrs. Ann D. Grandy, executrix of -O. W. Grandy, Sr., to purchase, and this was done. The defendants, C. W. Grandy & Sons, were actuated in making the arrangements- solely by motives of friendship for him." From plaintiff's testimony it seems that he thought defendants were favoring him, while they deny the same- by saying that they were actuated solely by motives of befriending John ~W. Faison. Surely defendants can not he prejudiced by representations or statements, which they did not act or rely upon; nor can they now claim that- they were misled, in contradiction, of their oWtn positive, averment. Had they been misled by tbe representations and statements of plaintiff, and in consequence of such had acted to their injury, them lie would have been estopped; otherwise not. As the case is retained for further directions in the Count below, no judgment will be entered in this Court, and proceedings will there be had in accordance with this opinion.
Error, and petition allowed.