R. E. Peebles was charged in the City Court of Savannah with the offense of usury on two accusations. The two cases were tried together and divulged similar facts, but only that one relating to the prosecuting witness Moses Green is before this court. It appears from the record that the defendant was a partner in a small loan business, the State Finance Company; that this company made a loan of $20 to Green, charging a combined interest rate and insurance premium thereon of $3 for a period of one week, on June 25, 1952, and each week for seven weeks thereafter repeated the transaction, the witness signing a note for $20, and paying $3 for insurance and interest. On each occasion Green also signed an authorization to the defendant to take out insurance protection, same to be held by the creditor as collateral for the indebtedness. This provision is in bold-face type immediately preceding the debtor's signature, and states that the creditor has not made compulsory any purchase of insurance by them. Another provision of the authorization reads as follows: "Such insurance policy is to be furnished and delivered at the time of closing my loan transaction, in a company acceptable to the Creditor. Should I fail or elect not to furnish such insurance policy at that time, the creditor is hereby authorized to furnish, in my behalf and at my expense, such protection by securing from an insurance company duly authorized to do business in this State, a term life insurance policy in the amount of $25.00 and $43.83 per month accident and health insurance (eliminating the first three days of illness), for a period equivalent to the terms of my note . . . at a cost of $2.67. The beneficiary under said policy shall be the creditor to the extent of any indebtedness I may owe at the time of a claim due me under the policy, with the balance, if any, payable to the beneficiary . . . or . . . to my estate; and with the balance, if any, as respects any disability benefits, payable to me." The effective date of the loan was stated on the insurance authorization as June 25, 1952, and the following certificate signed by the defendant appeared thereunder: "I hereby certify that the above named debtor is insured in the amount and in the manner specified in the above authorization from this date until 7-2-52 (Expiration date) under the terms and provisions of Master Group Policy No. GI 1129 issued by Piedmont Life Insurance Company to State Finance Co. This 25 day of June, 1952."
Policy No. GI 1129, introduced in evidence, insures the lives of debtors of State Finance Company in accordance wish a schedule to be furnished by State Finance Company of new loans made during that month, showing new insurance upon the lives of all persons becoming debtors during such month and making State Finance Company the irrevocable creditor beneficiary thereunder. The cost of such insurance is stated in the policy as 16 2/3 cents per $100 original amount of each level amount loan multiplied by the number of months in the duration of the loan, with a minimum premium charge of 25 cents, a fraction of a month to be counted as a whole month.
The group policy also contains a health and accident provision at a stated premium of 60 cents per $10 of monthly benefit, the indemnities thereunder to be payable to the debtor, subject to any assignments, which provision, as to accident and health indemnity, states that, if the debtor as a result of bodily injuries through accidental means or sickness, as therein defined, contracted on or after the 15th day from the loan date, shall be wholly and continuously disabled "so as to prevent him from performing any and every duty pertaining to his occupation, the Company will pay for the number of days of said disability at the rate of the monthly benefit, commencing on the fourth day thereof but ending not later than the original due date of such loan." As to hospital indemnity, the following is applicable: "If a debtor shall become confined as a resident patient in a lawfully operated hospital under the care of a legally qualified physician or surgeon, as a result of such bodily injuries or sickness, the company will pay to the debtor the sum of $5.00 for every day the debtor is so confined, but ending not later than the original due date of such loan, provided, however, that the aggregate amount of indemnity payable hereunder to such debtor shall not exceed the monthly benefit."
The defendant introduced in evidence an insurance chart which he stated was furnished him by the company for his use in computing charges to be made on loans, and that, in accordance with such chart, he had charged the witness Green, for each weekly $20 loan the sum of 4 cents for a $25 life insurance policy; $2.63 for health and accident insurance in the amount of $43.83; 25 cents as a policy writing fee, and 8 cents as weekly interest on the loan, at the rate of 1 1/2% per month, making a total of $3 per week as combined interest and insurance. He further stated that all sums in excess of the 8 cents interest and 25 cents policy writing fee allowed him by the company were forwarded to the insurer, Piedmont Life Insurance Company of Atlanta.
The court, trying the case without the intervention of a jury, found the defendant guilty. He thereafter filed a motion for a new trial on the general grounds only, and the overruling of this motion is assigned as error.
Code 57-117 provides in part as follows: "No person, company or corporation shall reserve, charge or take for any loan or advance of money, or forbearance to enforce the collection of any sum of money, any rate of interest greater than five per centum per month, either directly or indirectly, by way of commission for advances, discount, exchange, the purchase of salary or wages, by notarial or other fees, by any contract, contrivance, or device whatever." The State here contends that that part of the $3 per week above 5% per month reserved by the defendant on the $20 weekly loan constituted usury within the meaning of this Code section. The defendant contends that all of the $3 except 1 1/2% per month, or 32 cents, constitutes legitimate cost of insuring the borrower so as to protect the lender from loss. That a lender may by contract with a borrower obtain insurance to protect the former from loss to the extent of the loan, and charge the cost of procuring such insurance to the borrower, and that such cost cannot be counted as a charge for the money loaned, is well settled in this State. See Sledd v. Pilot Life Ins. Co., 52 Ga. App. 326 (183 S. E. 199). However, where the evidence authorizes the finding that the purported insurance policy fails to constitute a contract of insurance, or where the charges for procuring it are not actually such in good faith, but on the other hand such charges, or a substantial part thereof, are actually reserved as interest for the use of the money loaned, and the purported contract of insurance or a part thereof constitutes only a contrivance or device for the reservation of interest for the use of the money loaned, then such insurance policy, on the part thereof found to be such a contrivance or device, will be held and construed to be interest reserved for the use of the money loaned.
Accordingly, a study of the insurance policy, the application, and the authorization must be made in order to determine whether the trial court was authorized to find as a matter of fact that the cost of procuring the insurance here was not in good faith to insure the lender from loss, or was in whole or in part a contrivance or device for the purpose of reserving interest for the use of money loaned.
The defendant made application to Piedmont Life Insurance Company for a policy of group indebtedness insurance to insure debtors "under loans . . . which may be of level amount repayable in a lump sum within six months or of reducing amount payable in equal monthly installments for not to exceed six consecutive months from the date of the loan." The premiums on the policy so issued were, as to each debtor, as follows: for life insurance, "$.16 2/3 per $100.00 original amount of each level amount loan multiplied by the number of months in the duration of the loan," and, for the health and accident insurance, "$.60 per $10 of monthly benefit." It is accordingly obvious that both the application and policy contemplated monthly insurance to cover monthly loans, or loans of not more than six months. As to life insurance, the debtor paid four cents weekly, which was one fourth of his monthly premium, and gave him a full month's coverage, paid in weekly instalments.
As to the sickness and accident insurance, however, the debtor paid each week $2.63, which was the premium for a full month's coverage. There was thus collected on this type of insurance a sum which was four times as great as the premium specified in the policy on the coverage of $43.83 specified in the debtors insurance authorization, and which the defendant certified that he was obtaining for this debtor. Further, even this sum did not give the coverage certified by the defendant. As to sickness insurance, there was no coverage whatever, because under the policy sickness benefits could not commence until 15 days after each note was made, and they terminated at the end of the original loan date, which was 7 days after the note was made. As to accident coverage, the first three days of each policy certificate were excluded, which left four days of coverage under each monthly premium (collected weekly) at a rate of $1.46 per day, or a maximum benefit of $5.84. There is in addition a hospital benefit of $5 for each day of hospitalization. It would therefore be impossible, under the use to which the defendant put the policy by applying it to weekly notes, for a debtor to recover any amount whatever for illness, but it would be theoretically possible for him to recover $35 for hospital benefits and $5.84 for accident disability, or a total of $40.83, if he were disabled by accident on the day the loan was made, and remained hospitalized the entire week. He could not under any circumstances collect more than this amount, and accordingly could never receive in benefits the sum of $43.83 for which he applied and on which each of his premiums was figured, and which the defendant certified that he would be eligible to receive.
In addition, the defendant each week charged a policy writing fee of 25 cents for the coverage afforded by the monthly premium, and each week collected a full monthly premium. Whether or not the defendant remitted these premiums to the insurance company, and whether or not he received any part of such premium money back as commissions, is not shown by the evidence, and of course the burden would have been upon the State to produce this testimony, and not on the defendant to prove the nature of his agency relation, if any, to the insurance company. However, he admitted receiving and retaining a 25-cent fee weekly for making out insurance certificates based on a monthly premium and perfectly adequate to afford monthly coverage provided they had been applied to monthly loans as contemplated by the defendant's application for insurance and the policy issued to him thereunder. The application of such policy to weekly loans by the defendant materially reduced the coverage of the debtor, materially increased his expenses, and in addition benefited the defendant to the extent of 75 cents per month over and above the fee of 25 cents to which he was legitimately entitled for writing the one-month certificate of insurance and collecting the one-month premium.
App] JANUARY TERM, 1953. 655
The court was therefore authorized to find that the use to which the contract of insurance was put constituted a contrivance or device by which the defendant obtained 75 cents in policy-writing fees to which he was not legitimately entitled, and was thus authorized to construe the insurance premiums collected, to the extent of 75 cents per month, as interest reserved for the use of the money loaned. This 75 cents, added to the 32 cents admittedly collected by the defendant as interest on the $20 indebtedness per month, amounts to $1.07, or more than 5% per month reserved by the defendant for the use of the money loaned, and accordingly is sufficient to sustain the conviction of usury. Under the facts of this case, the policy of insurance was not a straightforward transaction, as in the Sledd case, supra, but was a contrivance to obtain and reserve additional sums for the use of the money equally as obnoxious as the salary-buying transactions condemned in Jackson v. Bloodworth, 41 Ga. App. 216 (152 S. E. 289), and Hinton v. Mack Purchasing Co., 41 Ga. App. 823 (155 S. E. 78).
The trial court did not err in overruling the motion for a new trial.
Judgment affirmed. Gardner, P. J., and Carlisle, J., concur.