Court Opinion

ID: 9846665
Source: CourtListenerOpinion
Date Created: 2023-09-24 03:45:10.367288+00
Date Added: 2024-06-11T09:19:42.604442
License: Public Domain

Justice TIMMONS-GOODSON
dissenting.
Plaintiffs have demonstrated, and the majority agrees, that the loan origination fee plaintiffs were charged is indeed usurious under North Carolina law. Plaintiffs’ loan was for $16,500, to be repaid over 180 months. Plaintiffs were charged a loan origination fee of $1485, which amounts to nine percent of the loan. This fee was financed as part of the mortgage loan. N.C.G.S. § 24-14(f) provides, in pertinent part:
[T]he lender may include in the principal balance fees or discounts not exceeding two percent (2%) of the principal amount of the loan less the amount of any existing loan by that lender to be refinanced, modified or extended.
N.C.G.S. § 24-14(f) (2005). This section applies to loans which meet the following criteria:
(1) Secured in whole or in part by a security instrument on real property, other than a first security instrument on real property; and
(2) The principal amount of the loan does not exceed twenty-five thousand dollars ($25,000); [and]
(3) The loan is repayable in no less than six nor more than 181 successive monthly payments, which payments shall be substantially equal in amount.
Id. § 12-12 (2005). Plaintiffs’ loan clearly meets these requirements. Therefore, the loan origination fee charged in conjunction with plaintiffs’ loan is usurious under N.C.G.S. § 24-14(f). Moreover, for loans of less than $300,000, including plaintiffs’ loan, any fee or interest imposed by a lender that is not affirmatively permitted by Chapter 24 or Chapter 53 of the General Statutes is prohibited by N.C.G.S. § 24-8(a).
The majority holds that the statute of limitations for claims of usury violations under the facts in the instant case accrued on the *143closing date of the loan. In reaching that conclusion, the majority adopts the reasoning in Faircloth v. National Home Loan Corp., 313 E Supp. 2d 544 (M.D.N.C. 2003), aff'd per curiam, 87 Fed. App’x 314 (4th Cir. 2004) (unpublished), a federal case in which the plaintiff argued the identical theory that plaintiffs present in the instant case. Federal decisions, with the exception of the United States Supreme Court, are not binding upon this Court. See State v. McDowell, 310 N.C. 61, 74, 310 S.E.2d 301, 310 (1984) (State courts should treat “decisions of the United States Supreme Court as binding and accord[] to decisions of lower federal courts such persuasiveness as these decisions might reasonably command.”). I disagree with the rationale in Faircloth, and therefore with the majority, for the reasons which follow.
“It is the paramount public policy of North Carolina to protect North Carolina resident borrowers through the application of North Carolina interest laws.” N.C.G.S. § 24-2.1 (2005). “Our courts do not hesitate to look beneath the forms of the transactions alleged to be usurious in order to determine whether or not such transactions are in truth and reality usurious.” Kessing v. Nat’l Mortgage Corp., 278 N.C. 523, 531, 180 S.E.2d 823, 828 (1971) (citations omitted). As this Court stated in Henderson v. Security Mortgage and Finance Co., “ ‘A profit,’ greater than the lawful rate of interest; intentionally exacted as a bonus for the loan of money, ... is a violation of the usury laws, it matters not what form or disguise it may assume.’ ” 273 N.C. 253, 263, 160 S.E.2d 39, 46 (1968) (quoting Doster v. English, 152 N.C. 325, 237, 152 N.C. 339, 341, 67 S.E. 754, 755 (1910)).
I would hold that plaintiffs’ usury claim is not time-barred. Because plaintiffs’ usurious loan origination fee was financed and added to their mortgage loan, plaintiffs have paid usurious interest with each monthly mortgage payment. This conclusion comports with our view in Henderson v. Security Mortgage & Finance Co., 273 N.C. 253, 160 S.E.2d 39 (1968), which holds that “[t]he right of action to recover the penalty for usury paid accrues upon each payment of usurious interest when that payment is made.” Id. at 264, 160 S.E.2d at 47. In the instant case, plaintiffs’ monthly payment is $219.63. This payment amount includes the usurious nine percent origination fee. If plaintiffs had been charged a non-usurious origination fee of two percent, their monthly payment would have been $203.86. Accordingly, plaintiffs are paying usurious interest every month. Therefore, following Henderson, plaintiffs’ claim is not barred.
*144Further support can be found for my position in the Internal Revenue Service’s treatment of financed fees. As a matter of economic reality, the Internal Revenue Service recognizes that fees that are financed are not paid at closing. Specifically, the United States Tax Court has determined that financed fees cannot be deducted as part of the interest on a home mortgage in the year the loan is made. See, e.g., Schubel v. Comm’r, 77 T.C. 701, 704-07 (1981). Instead, such fees must be deducted over the life of the loan. Id. This treatment reflects the reality of the present plaintiffs’ situation. Plaintiffs have made and continue to make payments that include interest for the alleged usurious loan origination fee.
For the foregoing reasons, I would hold that plaintiffs’ claim for twice the amount of interest paid within two years of the filing of the complaint is not barred by the statute of limitations. Accordingly, I respectfully dissent.
Justices MARTIN and EDMUNDS join in this dissenting opinion.