2020 Georgia Code
Title 7 - Banking and Finance
Chapter 4 - Interest and Usury
Article 1 - In General
§ 7-4-13. Law of Place of Contract Governs Interest Unless Otherwise Provided
Every contract shall bear interest according to the law of the place of the contract at the time of the contract, unless upon its face it shall be apparent that the intention of the parties was to adopt the law of another forum; in this case the law of that forum shall govern.
(Orig. Code 1863, § 2026; Code 1868, § 2027; Code 1873, § 2053; Code 1882, § 2053; Civil Code 1895, § 2880; Civil Code 1910, § 3430; Code 1933, § 57-106.)
Law reviews.- For article on choice-of-law of contracts in Georgia, see 21 Mercer L. Rev. 389 (1970).
JUDICIAL DECISIONSANALYSIS
- General Consideration
- Intent of Parties
- Evidence
O.C.G.A. § 7-4-13 has been interpreted as a choice of law provision which determines which state's usury laws are controlling. FDIC v. Lattimore Land Corp., 656 F.2d 139 (5th Cir. 1981).
Determination of place of contract.
- See Folsom v. Continental Adjustment Corp., 48 Ga. App. 435, 172 S.E. 833 (1934).
Law of place of performance governs interest.
- On contracts made in one state to be performed in another, if the contracts bear interest, the law of the state where the contracts are to be performed governs the rate of interest to be paid. Vinson v. Platt & McKenzie, 21 Ga. 135 (1857).
General rule that interest which contract shall bear is to be governed by law of place where it is to be performed applies to contracts legal where made. Martin v. Johnson, 84 Ga. 481, 10 S.E. 1092, 8 L.R.A. 170 (1890).
Choice of law provisions cannot create exemption from state investigation.
- Parties to a private contract who admittedly made loans to Georgia residents could not, by virtue of a choice of law provision, exempt themselves from investigation for potential violations of Georgia's usury laws. BankWest, Inc. v. Oxendine, 266 Ga. App. 771, 598 S.E.2d 343 (2004).
Dealings with foreign corporation governed by laws of its domicile.
- Dealings in Indiana with corporation chartered by that state are governed by its laws, and when attacked here for usury, provisions of such laws applicable to the transaction must be made to appear. Flournoy & Epping v. First Nat'l Bank, 79 Ga. 810, 2 S.E. 547 (1887).
Place of preliminary negotiations does not determine place of contract.
- Since land was located in Georgia and all papers executed therein, mere fact that negotiations preliminary to execution of papers took place in Florida does not alter fact that this is a Georgia contract. First Nat'l Bank v. Rambo, 143 Ga. 665, 85 S.E. 840 (1915).
Federal law was intended to preempt conflicting state law in the area of due-on-sale home loan assumption practices of federal savings and loan associations, and federal law permits the escalation of interest rates upon the assumption of a residential purchase loan when there is an appropriate provision in the contract. Lindenberg v. First Fed. Sav. & Loan, 691 F.2d 974 (11th Cir. 1982).
Section applicable when note executed in another state.
- When note is executed and made payable in another state, even though secured by a deed to land in this state, the rate of interest on the note is governed by usury laws of the sister state. Jones v. Lawman, 56 Ga. App. 764, 194 S.E. 416 (1937); Clark v. Transouth Fin. Corp., 142 Ga. App. 389, 236 S.E.2d 135 (1977).
Georgia law applies when contract executed and payable in Georgia.- Choice of law rule holds that when: (1) land held by security deed is in Georgia; (2) contract was executed in Georgia; and (3) contract was made payable in Georgia, law of usury applies as Georgia is place of performance of contract. FDIC v. Lattimore Land Corp., 656 F.2d 139 (5th Cir. 1981).
Applicability of common law of Georgia.
- When a promissory note is both executed and to be performed in another state, in an attack by the maker upon a note for usury, in an action brought in this state against the maker by the holder, when laws of the foreign states regulating interest charges and usury do not appear, the common law will be presumed to be there in force, and the right to collect interest in such suit, unless contrary to public policy or specific statutes of this state, will be governed by common law as it has been construed and applied in this state. Folsom v. Continental Adjustment Corp., 48 Ga. App. 435, 172 S.E. 833 (1934).
When evidence is silent as to legal interest in another state, common law is presumed to govern, and a contract for reasonable interest is allowed. Thomas v. Clarkson, 125 Ga. 72, 54 S.E. 77, 6 L.R.A. (n.s.) 658 (1906); Ellington v. Harris, 127 Ga. 85, 56 S.E. 134, 119 Ann. Cas. 320 (1906).
Subsequent agreements governed by laws as of date made.- Parties are free to bargain away their rights, and once the borrower is released from liability, whether by novation, a loan modification, or any other means, subsequent agreements for repayments of the debt are governed by the laws as of the date they are made, and not the date of the creation of the debt. Lindenberg v. First Fed. Sav. & Loan Ass'n, 528 F. Supp. 440 (N.D. Ga. 1981), aff'd, 691 F.2d 974 (11th Cir. 1982).
Transactions involving the assumption of home loan obligations, the release of borrowers, and the substitution of new parties at escalated interest rates resulted in new contracts, notwithstanding that the loan modification agreements were not intended to be novations; so the date of the loan assumptions, rather than the original date of the notes, controlled the applicable usury rates. Lindenberg v. First Fed. Sav. & Loan, 691 F.2d 974 (11th Cir. 1982).
Facts resulting in finding of Georgia contract.
- See Taylor v. American Freehold Land-Mortgage Co., 106 Ga. 238, 32 S.E. 153 (1898).
Facts resulting in finding of out-of-state contract.
- See Goodrich v. Williams, 50 Ga. 425 (1873).
Party must plead and prove interest or usury laws of other state.
- When another state's law applies, provision of law applicable must be made to appear. Since courts of this state will not take cognizance of interest or usury laws of another state it is essential that the defendant, if the defendant wishes to avail oneself of defense of usury, plead and prove laws of other state in this respect, and that such laws were in force at time of execution of note. Jones v. Lawman, 56 Ga. App. 764, 194 S.E. 416 (1937).
Cited in Byrd v. Equitable Life Assurance Soc'y, 185 Ga. 628, 196 S.E. 63 (1938); In re Georgia, Fla. & Ala. R.R, 88 F. Supp. 796 (M.D. Ga. 1950); Liberty Loan Corp. v. Crowder, 116 Ga. App. 280, 157 S.E.2d 52 (1967); Midland Guardian Co. v. Varnadore, 148 Ga. App. 742, 252 S.E.2d 685 (1979); Christiansen v. Beneficial Nat'l Bank, 972 F. Supp. 681 (S.D. Ga. 1997).
Intent of Parties
Georgia law governs when contract so stipulates.
- When note, executed in this state, is made payable in the State of New York, and is secured by a mortgage which stipulates contract and note shall in all respects be construed according to the laws of Georgia, and the note on the note's face bears interest at the rate of 8 percent per annum, which is legal in Georgia, the entire amount of such interest is collectible in this state, notwithstanding that the maximum legal rate of interest in the State of New York may be less than 8 percent. New England Mtg. Sec. Co. v. McLaughlin, 87 Ga. 1, 13 S.E. 81 (1891).
Security deeds are relevant in indicating situs contemplated in fixing rate of interest on note. Clark v. Transouth Fin. Corp., 142 Ga. App. 389, 236 S.E.2d 135 (1977).
Facts evidencing intent of parties that Georgia law apply.
- See Underwood v. American Mtg. Co., 97 Ga. 238, 24 S.E. 847 (1895).
Evidence
No presumption of usury absent proof of other state's usury law.
- When there is no proof as to statute of usury of another state, there will be no presumption that the contract is usurious. Rooney v. Southern Bldg. & Loan Ass'n, 119 Ga. 941, 47 S.E. 345 (1904).
In ascertaining another state's usury laws, courts are confined to evidence introduced.
- It is not permissible for courts of this state to avail themselves of any means of ascertaining what are laws of another state on subject of usury, other than by evidence introduced. Champion v. Wilson & Co., 64 Ga. 184 (1879); Craven v. Bates, Kingsbery & Co., 96 Ga. 78, 23 S.E. 202 (1895).
One pleading another state's statute must show that the statute was in force at the contract's execution. Thomas v. Clarkson, 125 Ga. 72, 54 S.E. 77, 6 L.R.A. (n.s.) 658 (1906).
Evidence necessary for finding that foreign contract is usurious.
- For jury to find that the contract made and to be performed in another state was void for usury, evidence must show that the rate of interest agreed to be taken was in excess of the rate allowed by the law of such state. Mayor of Griffin v. Inman, Swann & Co., 57 Ga. 370 (1876).
Insufficient showing as to other state's usury laws.
- See Craven v. Bates, Kingsbery & Co., 96 Ga. 78, 23 S.E. 202 (1895).
RESEARCH REFERENCES
Am. Jur. 2d.
- 44B Am. Jur. 2d, Interest and Usury, §§ 11, 14, 15.
C.J.S.- 47 C.J.S., Interest and Usury; Consumer Credit, § 79 et seq.
ALR.
- Time at which interest is payable under will or contract providing for payment of interest, 10 A.L.R. 997.
Validity of agreement to pay interest on interest, 37 A.L.R. 325; 76 A.L.R. 1484.
Right of holder of preferred claim to interest after appointment of receiver or declared bankruptcy or insolvency, where assets are insufficient to pay principal of all claims, 69 A.L.R. 1210.
Law of the forum as governing the right to and rate of interest as damages for delay in payment of money or discharge of other obligations, 78 A.L.R. 1047.
Who other than borrower may avail himself to latter's right to recover back usurious payments or penalties therefor, 82 A.L.R. 1008; 134 A.L.R. 1335.
