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Complaint. Richmond Superior Court. Before Judge Killebrew.
Since there was no evidence showing the debenture sued upon was infected with usury, the sole defense offered, the trial judge erred in denying the plaintiff's motion for summary judgment.
This is a suit by the holder of a corporate debenture brought after the maturity of the instrument to recover the principal, $21,500, plus interest from maturity at 8%, plus attorney's fees. The defendant corporation claims a reduction from the principal because it alleges the debenture was usurious. This particular suit is representative of approximately 30 similar suits by other debenture holders, which suits were consolidated for trial and appeal.
The five year eight percent unsecured debentures were obtained under an agreement entered into December 29, 1960, between Outdoor Development Company, Inc., and the stockholders of Nix and Company, Inc., whereby Outdoor agreed to purchase Nix stock in exchange for cash or the above-mentioned debentures.
The agreement provided that Outdoor would purchase all Nix's common stock for $3.00 per share in cash or $4.50 per share in five year 8% unsecured, subordinate debentures, at the option of the selling stockholders; provided that at least 50% of the stock and options were exchanged for debentures (which occurred). The debenture, bearing interest at 8% per annum beginning January 1, 1961, matured on January 1, 1966. Although the original Outdoor, a Georgia corporation, was dissolved, it was stipulated that the present Outdoor, a Delaware corporation, "is liable upon the debentures sued upon to the extent of legal liability of the obligor."
The defendant's answer set out that the principal amount of the debenture in the case sub judice represented 4,700 shares of stock, at $4.50 per share, sold to Outdoor by the plaintiff as a stockholder in Nix; that the stock had a value of $3.00 per share, or a total of $14,100, and the sum of $1.50 per share, or a total of $7,050, of the debenture's principal plus 8% interest per annum on the principal exceeds the maximum lawful rate; that the $1.50 per share in excess of the stock's cash value was added as "a scheme, device or subterfuge" to permit the plaintiff to charge interest at a usurious rate; that the difference between $14,100 and $21,150, the principal amount of the debenture, plus 8% on the principal is the amount of usury agreed upon; that $7,050 of the principal plus the sum of $8,460 paid as interest on the principal is usurious interest and the plaintiff's demand should be reduced by those sums.
The plaintiff moved for a summary judgment on the ground that since the only defense relied upon by the defendant is usury, and there is no issue as to usury, the plaintiff was entitled to a judgment for the full amount sued for. In support of his motion the plaintiff relied upon an affidavit and oral depositions by two witnesses.
The affidavit by Joseph R. Clisby, a representative of the Nix shareholders, recited: that Outdoor was desirous of obtaining all of Nix's stock but could not pay for the stock in cash so it would be willing to consider an exchange of stock for debentures; that after considerable negotiation a ratio of $4.50 in debentures for each share of Nix stock was deemed to be a fair exchange; that deponent felt some of the Nix stockholders would be unwilling to take an exchange for debentures and would prefer to accept a lesser amount in cash to cut their losses, take a tax deduction and take no chance on the ability of the company to make payment; that, after further negotiations, it was decided that Outdoor would make an offer of $3.00 per share in cash to those Nix shareholders who would not accept debentures, but at least half of the shareholders were required to accept the debentures in exchange for their stock; that between 50% and 75% of the stockholders accepted debentures, the remaining cash, and all the Nix stock was acquired by Outdoor; that for those shareholders accepting debentures the Nix stock was not sold for cash but on credit and at a time sale price, payment to be made within five years at the agreed time price and interest to be paid on the principal amount of debentures; that neither deponent nor, so far as "deponent avers and believes," any single individual in either negotiating group had any intention of violating the laws of usury in connection with the stock-debenture swap.
The depositions of two corporate officers of Outdoor revealed little as to the details or actual basis of the contract negotiations but both denied there was any intent to violate the usury laws.
In opposition to the motion for summary judgment, the defendant introduced the affidavit of the vice president of Outdoor during the period of the negotiations. The following pertinent evidence was adduced from his affidavit: that it was the opinion of Outdoor's representative that it would not be to their advantage to pay cash for all the stock; that, after considerable negotiations, it was agreed an additional sum would be added to the value of the stock of not less than $1.50 per share to entice the stockholders to finance the purchase price; that it was determined to issue debentures for the price of the stock to those stockholders not receiving cash; "that deponent considered the sum in excess of the value of stock as a bonus given to the shareholders, in addition to the legal rate, for the purpose of creating an incentive for the shareholders to invest in" Outdoor.
The trial judge denied the plaintiff's motion for summary judgment and also overruled the plaintiff's general and special demurrers to the defendant's answer. The plaintiff appeals and enumerates as error these adverse judgments.
It is permissible to grant a motion for summary judgment only where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Malcom v. Malcolm, 112 Ga. App. 151, 154 (144 SE2d 188). Hence, the question we must determine in the case sub judice is whether any genuine issue as to usury was raised.
We recognize that: "A party may testify as to his intention. It is evidence to be considered, but the facts--all the facts--are to be considered, to arrive at the truth respecting his real motive." Hartford Fire Ins. Co. v. Lewis, 112 Ga. App. 1, 14 (143 SE2d 556); Royce & Co. v. Gazan, 76 Ga. 79 (5); Childers v. Ackerman Constr. Co., 211 Ga. 350, 354 (86 SE2d 227). Thus, while the plaintiff's evidence disclosed the parties did not intend to circumvent the law and charge usurious interest rates, our examination must include whether there was evidence that, despite these denials, this was in fact accomplished.
The defendant contends there is evidence of usury raised by the counter-affidavit which it filed. The affidavit recited that deponent considered the sum in excess of the value of the stock as a bonus given to the stockholders. As such it amounted to no more than a conclusion by the witness as to his interpretation of the contract. An affidavit in opposition to a motion for summary judgment must set forth facts which would be admissible in evidence on the trial. Mere conclusions, not being admissible, raise no issue of fact. Benefield v. Malone, 112 Ga. App. 408, 411 (145 SE2d 732).
"Usury is the reserving and taking, or contracting to reserve and take, either directly or by indirection, a greater sum for the use of money than the lawful interest." Code 57-102. The four tests of a usurious transaction are set out in Bank of Lumpkin v. Farmers State Bank, 161 Ga. 801 (132 SE 221). However, the prerequisite factor for our consideration is--was an illegal rate of interest charged?
825 (30 SE 541); E. Tris Napier Co. v. Trawick, 164 Ga. 781, 782 (139 SE 552).
The facts of this case present the converse of the normal time-price situation in that here the sellers rather than the buyer had the option of which course they would choose, that is, a cash price or a time price. We find no reason to differentiate between these categories. Regardless of the nomenclature used to describe the transaction it was in effect no more than a time-price sale of the Nix stock. There was no showing that it was a sham transaction or designed to cloak usury under the guise of bona fide sale. Here the stockholders could accept either a sum certain in cash or a greater expectation of gain coupled with the probability of loss. This is the essence of the time-price theory and juxtaposition of the cited cases with the instant one convinces us they are controlling here.
The parties, presumably dealing at arm's length, placed what they considered was a fair value for the Nix stock when exchanged for the debentures. The fact that should actual cash be chosen a lesser amount than the face value of the debentures was paid reflects the business practice of selling at a designated price for cash and a higher price on credit.
The defendant contends that its evidence, taken from the affidavit, that a sum was added to the actual cash value of the stock in order to constitute the amount of the debentures is a vital factor for consideration. However, it does not matter whether the parties originally fixed an amount as the cash price and added a sum to arrive at the time price or that a sum was deducted from the time price to compute the cash price. The methods are substantially equivalent, the end result the same.
The owner of a property has a perfect right to name the price at which he is willing to sell and to refuse to accede to any other. In Hogg v. Ruffner, 66 U. S. 115, 119 (17 LE 38), it is pointed out "A vendor may prefer $100 in hand to double the sum in expectancy, and a purchaser may prefer the greater price with the longer credit; and one who will not distinguish between things that differ, may say, with apparent truth, that B pays 100 per cent for forbearance, and may assert that such a contract is usurious; but whatever truth there may be in the premises, the conclusion is manifestly erroneous. Such a contract has none of the characteristics of usury; it is not for the loan of money, or forbearance of a debt." 55 AmJur 339, Usury, 21; Rushing v. Worsham & Co., 102 Ga. 825, 828, supra.
The debenture was not infected with usury and the trial judge erred in denying the motion for summary judgment.
In view of the ruling herein made it is not necessary to pass upon the demurrer rulings.
Judgment reversed. Jordan, P. J., and Deen, J., concur.
Cumming, Nixon, Eve, Waller & Capers, O. Palmour Hollis, for appellee.
Sanders, Hester & Holley, Thomas R. Burnside, Jr., Sell & Comer, John D. Comer, for appellants.
Friday May 22 19:08 EDT

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