Small vs. Hicks et al.

Supreme Court of Georgia1889-01-23

81 Ga. 691

Summary · law.co

Holding. The judgment was affirmed. Where a mortgage containing a waiver of homestead and exemption is tainted by usury, the waiver becomes void as a conveyance tainted with usury, thereby discharging a surety whose risk and liability increased as a result of the creditor's usurious conduct.

Small brought suit against Hicks and Walker on a promissory note. Hicks asserted a usury defense, while Walker, who had agreed to serve as surety, argued that he had understood Hicks would secure the note by mortgaging certain property with a waiver of homestead and exemption rights. Walker claimed that Small's extraction of usurious interest rendered the mortgage security worthless and voided the homestead waiver, allowing Hicks to claim homestead protection in the property. This situation, Walker contended, discharged him from his surety obligations because his risk had increased through Small's unlawful conduct.

The jury found that usury in a small amount had occurred and rendered a verdict in Walker's favor. The trial court signed a judgment reflecting the jury's findings: it required payment of the note's principal and interest minus the usurious amount, and it discharged Walker from liability. Small objected and appealed.

The appellate court held that when a homestead and exemption waiver is included in a mortgage—an instrument functioning as a conveyance—and usury taints the transaction, the waiver becomes void. Because the usurious conduct destroyed the security Small had obtained, the surety Walker was properly discharged from his obligation. The court found the jury's verdict and the judgment entered upon it to be reasonable and proper.

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

Key issues

Whether usury in a mortgage transaction voids a homestead and exemption waiver
Whether a surety is discharged when a creditor's usurious conduct diminishes the agreed-upon security
The effect of usury on conveyances, including mortgage waivers

Procedural posture

Small appealed after the trial court entered judgment against Hicks for the principal and interest minus a small usurious amount, and discharged Walker from liability as surety.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

Blandford, Justice.

Small sued Hicks and Walker upon a promissory note. Hicks pleaded usury, and Walker pleaded that he was a mere security on the note, and that at the time he became security, it was understood and agreed between the parties that Hicks should give Small a mortgage, with waiver of homestead and exemption, upon certain mules and a wagon, to secure the payment of the note; that the mortgage was accordingly given, but that in taking the mortgage, Small took more than the lawful rate of interest from Hicks, and thereby rendered the security valueless and the homestead waiver of no effect, so that Hicks could take • a homestead in the property, which he did; in consequence of which Walker’s risk and liability, were increased; and that he was therefore discharged from his obligation as surety.

On tlie trial of the ease, the jury found a verdict as follows:

“We, the jury, find one and 62-100tks dollars usury, and also find for B. F. Walker.”

Thereupon the court directed the plaintiff to enter up judgment; but the plaintiff declined to enter any judgment on this verdict, and told the defendants to do so; and the defendants entered up judgment against Hicks for the amount of the principal and interest due on the note, save and except this small, amount of usury stated in the verdict, and also directed in the judgment that Walker be discharged, and the court-signed the judgment. Small excepted, and brought the ease to this court. No exception is taken to the finding of the jury as to the amount of usury, as being contrary to law and the evidence, and the presumption is that the finding is correct as to that.

It has been decided by this court, and we so hold in this ease, that where one makes a waiver of homestead and exemption in a mortgage, which is in the nature of a deed of conveyance, and usury enters into the transaction, the waiver thereby becomes void. The waiver is in the nature of a conveyance, and the statute declares that all conveyances tainted with usury are void. Hicks having taken a homestead and exemption in this property, as he had a right to do, by reason of the usurious transaction with Small, the security was thereby lessened, and Walker, the surety, was therefore discharged. The property upon which the mortgage was given, and as to which the waiver was made, was equal in value to the amount of the note, and but for the conduct of Small, the plaintiff, the mortgage would have been sufficient security for the payment of the note. In this conduct of Small, the defendant, Walker, did notin any way participate. He was a mere surety, with the understanding that a mortgage was to be taken from Hicks, with waiver of homestead and exemption.

Ye think the verdict was entitled to a reasonable intendment, and that a proper judgment was entered upon it. Hicks pleaded usury, and the jury found a certain amount of usury, thus sustaining the plea that it was a usurious transaction; and this was equivalent to finding the remainder of the debt in favor of the plaintiff, which amount could be made certain from the pleadings in the case.

Judgment affirmed.