Opinion ID: 1794502
Heading Depth: 1
Heading Rank: 1

Heading: Pleadings and Trial Proceedings

Text: Cumberland Capital Corporation, a Tennessee corporation, organized and existing under the Industrial Loan and Thrift Companies Act, filed its complaint against Hubert D. Patty in the Circuit Court at Maryville, seeking to recover on two promissory notes having an aggregate balance of $61,887.58, together with attorneys fees thereon. It is alleged in the complaint that, simultaneously with the execution of each note, Patty also executed and delivered an appropriate Installment Savings Certificate. Patty's answer and counterclaim raises a defense of usury. The counterclaim seeks to have the Court decree credit against plaintiff's claims, and a judgment for the usury allegedly paid on other obligations. By amendment to his answer, Patty asserts that his contract with Cumberland is illegal on its face because of violation of Article 11, Section 7 of the Constitution of the State of Tennessee. Additional allegations of usury are set forth, and the Industrial Loan and Thrift Act is assailed as being in violation of Article 11, Section 7 of the State Constitution. It is further alleged that excessive service charges were made by Cumberland. After hearing testimony, the trial judge, in a memorandum opinion, held that the loans were usurious under Article 11, Sec. 7 of the Constitution of Tennessee and that Section 45-2007 was unconstitutional. He further held that [i]f the lender charges a fee for services that are not rendered or expenses that are not incurred, or if the amount charged exceeds that expended, the excess is interest... . Additionally, he held that Cumberland was entitled to compute interest at the rate of 10%, after giving proper credit for loans paid in advance either by money, refinancing, or foreclosure. A formal order was entered, granting an interlocutory appeal to each party and certifying two controlling questions of law: 1. Are the terms of Tennessee Code Annotated, Section 45-2007, violative of Article 11, Sec. 7 of the Constitution of the State of Tennessee? 2. If the terms of Tennessee Code Annotated, Section 45-2007 are violative of Article 11, Section 7 of the Constitution of the State of Tennessee, is the original complainant entitled to a computation of interest at the rate prescribed by Article 11, Section 7 of the Constitution of the State of Tennessee? Cumberland appealed from the holding that Sec. 45-2007, T.C.A. is unconstitutional. Patty appealed from the holding that interest should be computed at 10%. We are called upon to settle a constitutional issue of first impression and substantial significance. The solution lies in an analysis of Article 11, Sec. 7 of the Constitution of 1870 in the light of earlier constitutional provisions, a succession of statutes, the prior decisions of this Court and pertinent public records.