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WALTON v. JOHNSON

Supreme Court of Georgia1957-02-12No. 19558
213 Ga. 108

Summary

Holding. The judgment awarding principal and interest was affirmed as to those amounts, as Johnson presented no evidence supporting his defenses and the usury claim lacked merit; however, the award of attorney's fees was reversed because Walton failed to allege and prove the statutory notice requirement, and the judgment is affirmed on the condition that Walton write off the attorney's fees within ten days, or else a new trial is ordered.

Walton sued Johnson to collect on a promissory note for principal and past-due interest. Johnson raised several defenses in his pleadings but presented no evidence to support them. The trial court directed a verdict for Walton on the principal and interest owed. Johnson argued the transaction involved usury because past-due interest was included in the note, but state law permits interest to accrue on liquidated demands, including past-due interest notes, so this argument lacked merit.

The court affirmed the directed verdict on principal and interest but found a critical defect in Walton's claim for attorney's fees. Although the note provided for such fees, state law required that after the note matured, the creditor must notify the debtor that he had ten days from receiving notice to pay the principal and interest without incurring attorney's fees. Walton's pleading alleged only a general demand letter but did not demonstrate compliance with this statutory notice requirement. The court gave Walton the opportunity to waive the attorney's fees within ten days, conditioned on which the judgment would stand; otherwise, a new trial would be ordered.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether a directed verdict was proper when defendant presented no evidence supporting his affirmative defenses
  • Whether inclusion of past-due interest in a promissory note constitutes usury
  • Whether attorney's fees may be recovered absent statutory notice to the debtor

Procedural posture

The trial court directed a verdict for the plaintiff on the principal and interest, and the defendant appealed on multiple grounds.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

Head, Justice.

“Where there is no conflict in the evidence, and that introduced, with all reasonable deductions or inferences therefrom, shall demand a particular verdict, the court may direct the jury to find for the party entitled thereto.” Code § 110-104.

The assignments of error in the bill of exceptions Nos. 1, 3, 4, 5, and 6 were based on the contentions of the defendant in his pleadings, which contentions were wholly unsupported by any testimony for the defendant. The court did not err in directing a verdict for the principal and interest due the plaintiff. See Blackburn v. Woodward, 128 Ga. 226 (57 S. E. 318); Mayor &c. of Madison v. Spears, 159 Ga. 241 (125 S. E. 380); Bowles v. White, 206 Ga. 343 (57 S. E. 2d 187).

Ground 2 of the assignments of error in the bill of exceptions is based on the defendant’s contention that the principal note of $16,702 may have a charge of interest amounting to usury therein, because $350.07 of past-due interest was a part of the consideration for the note. The note signed by the defendant to the plaintiff was to bear interest at 6 percent per annum. Usury is the taking of, or contracting to take, a greater rate of interest than 8 percent per annum. There is no contention in the assignment of error that the plaintiff collected a greater rate of interest than 8 percent per annum on his debt. The defendant’s contention seems to be that, because the sum of $350.07, past-due interest, was included in the note, the transaction was thereby tainted with usury, on his theory that interest can not be collected on interest.

“The charging of interest on these interest notes when they were past due is said to constitute usury, because interest can not be legally exacted on interest. There is no merit in this contention. Liquidated demands bear interest. Code § 57-110. When an obligation to pay interest is put in the form of an interest note, that note becomes a liquidated demand; and when it is not paid at maturity it bears interest as such, certainly if the parties have contracted that it should.” Byrd v. Equitable Life Assurance Society, 185 Ga. 628, 640 (196 S. E. 63). The contention that there was some issue pertaining to usury for consideration by the jury is wholly without merit.

The burden was on the plaintiff to show a valid notice to the defendant that attorney’s fees as provided by the note would be claimed, pursuant to the provisions of Code § 20-506, as amended by Ga. L. 1946, pp. 761, 766, and Ga. L. 1953, Jan.-Feb. Sess., pp. 545, 546 (Code, Ann. Supp., § 20-506).

It is alleged in paragraph 5 of the petition: “The note of the defendant dated February 3, 1949, being in default, the plaintiff, on the 3rd day of November, 1953, by letter demanded payment and notified the defendant of his intention to file suit for collection of said note including 10% attorneys fees provided therein.”

The allegations of the petition are insufficient to meet the requirements of Code § 20-506, as amended. This deficiency in the petition is not met by paragraph 1 of the defendant’s answer, admitting the allegations of paragraph 5 of the petition, for the reason that paragraph 5 does not allege a compliance with the •statute, either before or after amendment. This court has many times stated the requirements of the statute (§ 20-506) prior to amendment. See Holcomb v. Cable Co., 119 Ga. 466, 467 (6) (46 S. E. 671); Pritchard v. McCrary, 122 Ga. 606 (50 S. E. 366); Stocking v. Moury, 128 Ga. 414 (57 S. E. 704); Byrd v. Equitable Life Assurance Society, 185 Ga. 628 (5), supra.

“By the terms of Code (Ann. Supp.) § 20-506, attorneys fees, for which provision is made in a promissory note, are not collectible unless it be alleged and proved that after maturity the holder of the note notified the person sought to be bound thereon that he had ten days from the receipt of such notice to pay the principal and interest without attorneys fees; . . .” Stone v. Colonial Credit Co., 93 Ga. App. 348, 349 (3) (91 S. E. 2d 835).

Because of the failure of the plaintiff to give a proper notice, the recovery of attorney’s fees was unauthorized. Leave is given the plaintiff to write off the attorney’s fees within ten days after the filing of the remittitur in the court below, and upon his doing .so, the judgment will be affirmed; otherwise a new trial is ordered. See Pritchard v. McCrary, supra.

The defendant having procured a substantial revision of the judgment against him (or a reversal of the judgment, if the direc tion given is not complied with), it is directed that the costs of the appeal be paid by the plaintiff.

Judgment affirmed, on condition.

All the Justices concur.