Opinion ID: 2269257
Heading Depth: 1
Heading Rank: 7

Heading: the individual status.

Text: There is included in these proceedings a law action between the defendant Camden Trust Company in its individual corporate capacity and Ditmars, Jr. Camden Trust Company sought to recover judgment for the amount due it on three promissory notes of Ditmars, Jr. These notes (two executed in September 1933 and the third in September 1935) were drawn in the total principal amount of $37,326.53. On April 23, 1941, when Camden Trust Company instituted suit, Ditmars, Jr. owed thereon $26,232.68. Ditmars, Jr. claimed that by virtue of alleged usury all interest on these indebtednesses was forfeited, and that the amounts of interest paid should be credited on account of principal. The total amount of interest charted during the years in question was $21,330.31. There were four bases for claims of usury asserted by Ditmars, Jr. One was asserted discrepancy of principal of $250. This claim was withdrawn by counsel at the trial. The second was an alleged duplicate charge of $105 against interest in the trustee's book accounts for the month of April, 1936, and the third was an alleged overcharge of interest, covering a period of several years, in the total amount of $296.39. The fourth claim was asserted by Ditmars, Jr. on motion for relief from judgment, filed February 1, 1952, based on allegedly newly discovered evidence of a discrepancy in an income reserve account consisting of income accumulated to July 1, 1941. This motion was denied by the trial court on February 15, 1952, and it appears properly so. The record shows that Ditmars, Jr. received periodic statements showing this reserve but never questioned it until June 28, 1951, and took no action to preserve his alleged rights until November 17, 1951, which was after the entry of final judgment on September 20, 1951 and after he had filed (November 2, 1951) his notice of appeal from said final judgment. Rule 3:60-2 permits relief from judgment on newly discovered evidence only where made within a reasonable time and where such evidence would probably alter the judgment and by due diligence could not have been discovered in time to move for a new trial.    It is obvious that Ditmars, Jr., by due diligence during these long drawn-out proceedings, could have discovered the asserted new evidence at any time prior to the time the trial court's conclusions were made known, and further, that he did not move within a reasonable time. Ditmars, Jr. contended that there was a deduction from the income of the trust in April 1936, of an item of $105 for payment of interest on a mortgage at two different times. There was evidence that this was an error and was promptly corrected. Although plaintiff attacked the credibility of this evidence, he introduced no contradictory evidence. He claims that this error was not corrected and that it resulted in usury because $105 should have been credited to the principal of his indebtedness. We are of the opinion that the weight of the evidence does not support his claim. The principal ground upon which Ditmars, Jr. asserts his claim of usury is that the defendant customarily computed interest by using tables based upon a 360-day year instead of a 365-day year during the period from the time these indebtednesses were incurred by him to April 1, 1941, and no credit was allowed him when the defendant changed its banking practices in this respect until October 14, 1941. The admitted amount of the overcharge was $296.39. Ditmars, Jr. contends in his briefs that we should modify the judgment of the court below to allow him repayment of alleged illegal interest now asserted to have been received by defendant between March 31, 1940 and April 1, 1941. Ditmars, Jr. asserted in his complaint that the total overcharge to March 31, 1941 was $296.39. The record does not show that he asserted otherwise at the trial. No recovery may be had on this item. One of the pertinent statutes is R.S. 31:1-1, which reads as follows: Except as otherwise provided by law, no person shall, upon contract, take, directly or indirectly, for loan of any money, wares, merchandise, goods and chattels, above the value of six dollars for the forbearance of one hundred dollars for a year, and after that rate for a greater or less sum or for longer or shorter time. The other pertinent statutes are R.S. 31:1-3 (providing for forfeiture of interest in lender's action, and deduction of illegal interest actually paid from the amount due), and R.S. 31:1-4 (borrower's action to require lender to accept principal without interest). The latter two statutes are asserted by Ditmars, Jr. to require a forfeiture of all interest where usury exists. We find it unnecessary to determine this question of construction, and rest our decision upon other principles hereinafter expressed. There is authority elsewhere that a bargain is not usurious because of the payment or promise of payment of interest calculated at the highest permissible rate on the assumption that there are only 360 days in the year. Restatement of the Law, Contracts (1932), sec. 534 ( c ), p. 1036. This is generally accepted rule based upon custom and convenience, although there are some decisions to the contrary. 6 Williston on Contracts ( rev. ed. 1938), sec. 1695, p. 4799; 55 Am. Jur., Usury, sec. 40, p. 353; 66 C.J., Usury, sec. 146, p. 219. In Patton v. LaFayette Bank, 124 Ga. 965, 53 S.E. 664, 5 L.R.A. ( N.S. ) 592, 595 ( Sup. Ct. 1906), the subject is discussed at length, with a comparison of the opposing views. The Georgia Supreme Court determined that the majority of decisions of courts of last resort in other states held that computation of interest on the 360-day year basis is not usurious, provided this principle is resorted to in good faith as furnishing an easy and practicable mode of computation, and not as a cover for usury. Cf. Merchants', etc., Bank v. Sarratt, 77 S.C. 141, 57 S.E. 621, 122 Am. St. Rep. 562, 564-566 ( Sup. Ct. 1907). In this State we have no dispositive decision. In Sussex Bank v. Baldwin and Shipman, 17 N.J.L. 487, 496 ( Sup. Ct. 1840), the majority of the former Supreme Court, although apparently critical of the practice, held that The mode of calculation adopted, might certainly have presented a serious question for the court   , but did not determine whether the 360-day year calculation was opposed to the usury and interest statutes, and rested its decision on the ground that if this were so, mistake was a valid defense. Thus the specific question appears to remain open here. We are of the opinion that the calculation of interest at the maximum statutory rate upon a 360-day year is illegal, and that excess interest received in that manner should be repaid. Whether the practice could attain the force of law by long usage is doubtful in the absence of some indication of legislative recognition such as existed in Columbia National Life Ins. Co. v. Withers, 121 N.J.L. 54, 56-57 ( E. & A. 1938), and we find no convincing evidence in the record of this case of such a long usage in general throughout this State, although there is evidence that it long existed as a practice of the defendant. However, the burden of proof of the corrupt bargain (beyond a reasonable doubt) is upon the one who asserts the claim of usury, Stein v. Wittmer, 117 N.J. Eq. 535, 540 ( E. & A. 1934). If neither party intend it, and act bona fide and innocently, the law will not infer a corrupt agreement. Durant v. Banta, 27 N.J.L. 624, 632-633 ( E. & A. 1858). Thus where, as in this case, the illegal interest is received by mistake or a miscalculation made in good faith, and not by intent to evade the usury laws, the transaction itself is not usurious and forfeiture of legal interest does not follow although the illegal interest received must be repaid. See 6 Williston on Contracts ( rev. ed. 1938), sec. 1698. This is even more evident in equity, for there relief will only be granted the borrower on condition that he do equity by repaying to his creditor what is justly and in good faith due, that is, the amount actually advanced, with lawful interest. 2 Pomeroy's Equity Jurisprudence (5 th ed. 1941), sec. 391, p. 68; 55 Am. Jur., Usury, sec. 108, pp. 399-400. The Statute of Limitation. We find no merit in the contention of the plaintiff Ditmars, Jr. that certain of the notes in question are barred by R.S. 2:24-1. The trial court correctly held that payments of income by the defendant trustee on Ditmars, Jr.'s account to itself in its individual corporate capacity by virtue of his express written authorizations are sufficient to arrest the running of the statute under the principles expressed in Ballantine & Sons v. Macken, 94 N.J.L. 502 ( E. & A. 1920).