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Lawskills.com Georgia Caselaw
CLARK et al. v. ASSOCIATES DISCOUNT CORP.
35712.
Action on note. Before Judge Arnold. Fulton Civil Court. March 22, 1955.
QUILLIAN, J.
1. That a note is taken on a form furnished by an indorsee and made payable at its offices, does not without more show notice to the indorsee of any infirmity of the instrument or defect in the title thereto, so as to affect the indorsee's status as a holder in due course of the instrument.
2. A plea of usury is sufficient as against a general demurrer if it meets the requirements of Code 57-103.
3. Usury is a species of fraud, and its taint is not eradicated by negotiation of an instrument infected by it to a holder in due course.
Associates Discount Corporation brought suit against Vernon
B. Clark and Lillian Clark on a promissory note, originally payable to Martin Burks Motor Company and transferred by indorsement to the plaintiff before maturity.
The defendants undertook to plead breach of warranty, rescission, and usury. The plea of usury, contained in an amendment to the answer, reads: "Defendants amend their answer as originally filed by striking paragraph 5 and substituting in lieu thereof a new paragraph 5 as follows: Defendants further say that the note sued on is usurious In that it provides for interest greatly in excess of the maximum lawful rate of 8% as is hereinafter shown.
Defendants say that the amount upon which interest was paid or was to be paid, was $707.60, by virtue of a contract dated July 25, 1953, payable in 18 monthly installments of $38.35 each, beginning on August 25, 1953. The amount of usury agreed upon or contracted to be paid, and included in the note sued on is $120.57."
The plea of rescission was stricken by amendment.
It is conceded by counsel for the defendants that since the plaintiff was apparently the holder in due course of the note, the defendants could not defend the action on the ground that the consideration for which the note was given failed, unless their pleadings further disclosed facts showing that the plaintiff was not in fact the holder in due course. The pleadings show simply that the note was on a form furnished by the plaintiff, and was made payable to its offices or place of business. That a note is taken on a form furnished by an indorsee, and made payable at its offices, does not without more show notice to the indorsee of any infirmity in the instrument or defect in the title thereto, so as to affect the indorsee's status as a holder in due course of the instrument.
The plea of usury in this case is subject to the criticism that it alleges that the amount upon which usury was to be charged was $707.60, and also avers that this amount was to be paid in 18 monthly payments of $38.35, which, of course, aggregates $690.30. However, the plea further alleged: "The amount of usury agreed upon to be paid and included in the note sued on is $120.57." A plea of usury is not subject to general demurrer if it furnishes a factual basis upon which the court and jury may by calculation determine whether the amount reserved or charged as interest is greater than is lawful. If it does this, it meets the requirements of Code 57-103 which prescribes the essential allegations of a plea of usury. Pickens Investment Co. v. Jones, 82 Ga. App. 850 (62 S. E. 2d 753). What is held here is in harmony with the holding in Burnett v. Davis & Co., 124 Ga. 541, 543 (52 S. E. 927). Obviously the amount of $120.57 would be a usurious charge of interest for the loan of $707.60 or that of $690.30 over a period of 18 months. So, while the plea was subject to a special demurrer, it was sufficient to meet the requirement of Code 57-103 and should not have been stricken on general demurrer.
Usury is a species of fraud. It infects a negotiable instrument with a taint that is not eradicated by negotiation to a holder in due course.
Judgment reversed. Felton, C. J., and Nichols, J., concur.
Levy, Buffington & Levy, contra.
William B. Jones, for plaintiffs in error.
DECIDED SEPTEMBER 9, 1955.
Saturday May 23 02:51 EDT


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