I.General Consideration

History. —

For history of this section, see Commercial Credit Corp. v. Robeson Motors, Inc., 243 N.C. 326 , 90 S.E.2d 886, 1956 N.C. LEXIS 364 (1956).

Allowing Interest Is Matter of Legislative Discretion. —

At common law the taking of any interest was an indictable offense; hence, interest is now purely statutory, being chargeable in such cases and to such extent only as is expressly allowed by statute. The entire subject of the rate of interest and penalties for usury rests in legislative discretion, and the courts have no power other than to interpret and execute the legislative will. Smith v. Old Dominion Bldg. & Loan Ass'n, 119 N.C. 249 , 26 S.E. 41, 1896 N.C. LEXIS 267 (1896).

Provisions Forbidding Usury and Declaring Forfeiture Are Clear. —

The provisions of the law forbidding usury are very clear and explicit. No one can possibly misunderstand them. If, moved by avarice, a party deliberately violates this law, he has no ground to complain that his punishment has been in the very respect which caused him to sin, and that in grasping after illegitimate interest he has lost also the legitimate interest which the law would have given a law-abiding citizen. Moore v. Beaman, 111 N.C. 328 , 16 S.E. 177, 1892 N.C. LEXIS 179 (1892).

They will be strictly construed. Dixon v. Smith, 204 N.C. 480 , 168 S.E. 683, 1933 N.C. LEXIS 171 (1933); Argo Air, Inc. v. Scott, 18 N.C. App. 506, 197 S.E.2d 256, 1973 N.C. App. LEXIS 1924 (1973).

This section was copied from the National Bank Act, and has gone into the laws of many states in exactly the same form. Pinnix v. Maryland Cas. Co., 214 N.C. 760 , 200 S.E. 874, 1939 N.C. LEXIS 427 (1939).

The North Carolina penalties for usury were identical with those prescribed in the National Bank Act. Smith v. Old Dominion Bldg. & Loan Ass'n, 119 N.C. 249 , 26 S.E. 41, 1896 N.C. LEXIS 267 (1896).

Purpose of Statute. —

Both the former and the present statutes were enacted in restraint of excessive interest for the same general policy, and especially on the idea of protecting the borrower against the oppression of the lender, the chief difference being that a violation under the old statute invalidated the contract, working a forfeiture of the sum lent as well as of the interest, whereas the present law leaves the contract valid for the principal, but makes the interest forfeitable. Moore v. Woodward, 83 N.C. 531 , 1880 N.C. LEXIS 111 (1880).

Statutes prohibiting charging usury or an illegal rate of interest are enacted for the benefit of the borrower. Ector v. Osborne, 179 N.C. 667 , 103 S.E. 388, 1920 N.C. LEXIS 313 (1920).

The statute against usury is striking at, and forbidding, the extraction or reception of more than a specified legal rate for the hire of money, and not for anything else. Michigan Nat'l Bank v. Hanner, 268 N.C. 668 , 151 S.E.2d 579, 1966 N.C. LEXIS 1281 (1966); State Whsle. Supply, Inc. v. Allen, 30 N.C. App. 272, 227 S.E.2d 120, 1976 N.C. App. LEXIS 2239 (1976).

Duty of Courts to Carry Out Legislative Intent. —

The forfeiture of the entire unpaid interest and recovery back of twice the interest paid is in the nature of a penalty intended to induce an observance of the statute, and it is the duty of the courts so to expound and apply the law as to carry out the legislative intent. Moore v. Woodward, 83 N.C. 531 , 1880 N.C. LEXIS 111 (1880).

Enforceability of Unlawful Interest in Absence of Penalty. —

Even in the absence of a penalty on charging usurious interest, such as contained in this section, a rate of interest above the one prescribed by law would not be enforceable. Hughes v. Boone, 102 N.C. 137 , 9 S.E. 286, 1889 N.C. LEXIS 25 (1889).

Effect of Usury Formerly and Now. —

By the former law, the taint of usury made the contract void both as to principal and interest into whose hands it might come, and so likewise any appearance, shift or device whereupon or whereby an illegal rate of interest was received or taken was declared to be void. By G.S. 24-1 six percent (now eight percent) is fixed as the legal rate of interest, and in case more than the rate allowed is taken, received, reserved, or charged, the contract is not invalidated as to the principal, but the entire interest carried by the note or other evidence of debt, or otherwise agreed to be paid thereon, is, under this section, forfeited; and in case such greater rate has been paid, a remedy is given to the party paying the same to recover by action of debt twice the amount of the interest paid. Moore v. Woodward, 83 N.C. 531 , 1880 N.C. LEXIS 111 (1880).

The forfeiture provided by this section will be enforced against the usurer, when he seeks to recover upon the usurious contract or transaction. His debt will be stripped of all its interest-bearing quality, and he will be permitted to recover only the principal sum loaned. If a sum in excess of interest at the legal rate has not only been charged by the lender, but has also been paid by the borrower for the use of money, then the person, or his legal representative, or the corporation by whom the same has been paid, may recover twice the amount paid in an action in the nature of action for debt. Waters v. Garris, 188 N.C. 305 , 124 S.E. 334, 1924 N.C. LEXIS 58 (1924); Sloan v. Piedmont Fire Ins. Co., 189 N.C. 690 , 128 S.E. 2, 1925 N.C. LEXIS 381 (1925); Ripple v. Mortgage & Acceptance Corp., 193 N.C. 422 , 137 S.E. 156, 1927 N.C. LEXIS 363 (1927).

Under this section, usury does not invalidate a contract. It simply works a forfeiture of the entire interest, and subjects the lender to liability to the borrower for twice the amount of interest paid. Wilkins v. Commercial Fin. Co., 237 N.C. 396 , 75 S.E.2d 118, 1953 N.C. LEXIS 532 (1953).

A note otherwise valid is not rendered void either as to principal or interest by the taint of usury, but is subject only to the penalties and forfeitures of this section, one of which is the forfeiture of all interest when usury is properly pleaded and proven. Pinnix v. Maryland Cas. Co., 214 N.C. 760 , 200 S.E. 874 (1939), overruling in this respect, Ward v. Sugg, 113 N.C. 489 , 18 S.E. 695, 24 L.R.A. 280 (1893); Ripple v. Mortgage & Acceptance Corp., 193 N.C. 422 , 137 S.E. 156, 1927 N.C. LEXIS 363 (1927).

A note executed and delivered as evidence of the promise of the maker to pay to the payee or his order a sum of money which has been loaned by the payee to the maker is not void, although the payee has knowingly taken, received, reserved, or charged interest on the note at a greater rate than six percent (now eight percent) per annum, which is the legal rate in this State; only the promise to pay interest is void in such case. Federal Reserve Bank v. Jones, 205 N.C. 648 , 172 S.E. 185, 1934 N.C. LEXIS 37 (1934).

The charging of usurious interest strips the debt of all interest, and it simply becomes a loan which in law bears no interest. Hansen v. Jonas W. Kessing Co., 15 N.C. App. 554, 190 S.E.2d 407, 1972 N.C. App. LEXIS 1966 , cert. denied, 282 N.C. 151 , 191 S.E.2d 601, 1972 N.C. LEXIS 900 (1972).

Effect of Repeal of Old Law. —

A contract absolutely void under the old law for being usurious is not validated by the repeal of that law and the enactment of this section, which does not invalidate the principal of a usurious contract. Pond v. Horne, 65 N.C. 84 , 1871 N.C. LEXIS 26 (1871).

Four Requisites of Usurious Transaction. —

In order to constitute a usurious transaction, four requisites must appear: (1) There must be a loan, express or implied; (2) There must be an understanding between the parties that the money lent shall be returned; (3) For such loan a greater rate of interest than is allowed by law shall be paid or agreed to be paid, as the case may be; and (4) There must exist a corrupt intent to take more than the legal rate for the use of the money loaned. A profit greater than the lawful rate of interest, intentionally exacted as a bonus for the loan of money, imposed upon the necessities of the borrower in a transaction where the treaty is for a loan and the money is to be returned at all events is a violation of the usury laws, it matters not what form or disguise it may assume. Doster v. English, 152 N.C. 339 , 67 S.E. 754, 1910 N.C. LEXIS 270 (1910); Swamp Loan & Trust Co. v. Yokley, 174 N.C. 573 , 94 S.E. 102, 1917 N.C. LEXIS 147 (1917); Ector v. Osborne, 179 N.C. 667 , 103 S.E. 388, 1920 N.C. LEXIS 313 (1920); Preyer v. Parker, 257 N.C. 440 , 125 S.E.2d 916, 1962 N.C. LEXIS 355 (1962); Associated Stores, Inc. v. Industrial Loan & Inv. Co., 202 F. Supp. 251, 1962 U.S. Dist. LEXIS 3905 (E.D.N.C. 1962), aff'd, 326 F.2d 756, 1964 U.S. App. LEXIS 6612 (4th Cir. 1964).

To maintain an action for the usury penalty the claimant must show: (1) That there was a loan, express or implied, or a forbearance of money; (2) That there was an understanding between the parties that the money lent would be returned; (3) That for such loan or forbearance a greater rate of interest than is allowed by law was paid; and (4) That there was a corrupt intent to take more than the legal rate for the use of the money. Carolina Indus. Bank v. Merrimon, 260 N.C. 335 , 132 S.E.2d 692 (1963); Michigan Nat’l Bank v. Hanner, 268 N.C. 668 , 151 S.E.2d 579 (1966). In accord with second paragraph in the main volume. See Bagri v. Desai, 83 N.C. App. 150, 349 S.E.2d 309, 1986 N.C. App. LEXIS 2671 (1986).

The elements of usury are these: (1) a loan or forbearance of money; (2) an understanding that the money loaned shall be returned; (3) payment or an agreement to pay a greater rate of interest than that allowed by law; and (4) a corrupt intent to take more than the legal rate for the use of the money loaned. Henderson v. Security Mtg. & Fin. Co., 273 N.C. 253 , 160 S.E.2d 39, 1968 N.C. LEXIS 585 (1968); Hodge v. First Atl. Corp., 10 N.C. App. 632, 179 S.E.2d 855, 1971 N.C. App. LEXIS 1686 , cert. denied, 278 N.C. 701 , 181 S.E.2d 602, 1971 N.C. LEXIS 1029 (1971); Western Auto Supply Co. v. Vick, 47 N.C. App. 701, 268 S.E.2d 842, 1980 N.C. App. LEXIS 3182 (1980), aff'd, 303 N.C. 30 , 277 S.E.2d 360, 1981 N.C. LEXIS 1083 (1981); Swindell v. Overton, 80 N.C. App. 504, 342 S.E.2d 391, 1986 N.C. App. LEXIS 2207 (1986).

Forbearance of Debt or Loan of Money Is Essential. —

It is universally held that in order that a transaction shall fall within the prohibition of the statutes against usury it is essential that there should be a contract for the forbearance of an existing indebtedness or a loan of money. There is no exception to this universal rule, that there must be an extension of credit and an illegal compensation for it, knowingly taken, in order to constitute usury. This is recognized in the earliest cases on the subject up to the present time. Smithwick v. Whitley, 152 N.C. 366 , 67 S.E. 914, 1910 N.C. LEXIS 279 (1910); Western Auto Supply Co. v. Vick, 303 N.C. 30 , 277 S.E.2d 360, 1981 N.C. LEXIS 1083 (1981).

Usury can only attach to a loan of money or to forbearance of a debt. Carolina Indus. Bank v. Merrimon, 260 N.C. 335 , 132 S.E.2d 692, 1963 N.C. LEXIS 704 (1963).

Forbearance Defined. —

For the purpose of applying the law of usury to a given transaction in order to determine its applicability, the term “forbearance” means the contractual obligation of a lender or creditor to refrain for a given period of time from requiring the borrower or debtor to repay the loan or debt which is then due and payable. Western Auto Supply Co. v. Vick, 303 N.C. 30 , 277 S.E.2d 360, 1981 N.C. LEXIS 1083 (1981).

Corrupt Intent Is Also Essential. —

To constitute a usurious transaction, corrupt intent to take more than the legal rate of interest is an essential element. Bailey v. Inman, 224 N.C. 571 , 31 S.E.2d 769, 1944 N.C. LEXIS 436 (1944).

The statutory penalty for charging usurious interest is imposed only when a corrupt intent exists to take more than the legal rate. Perry v. Doub, 249 N.C. 322 , 106 S.E.2d 582, 1959 N.C. LEXIS 363 (1959).

That Is, Intentional Charging of More Than Lawful Rate. —

The “corrupt intent” required to constitute usury is simply the intentional charging of more for money lent than the law allows. Associated Stores, Inc. v. Industrial Loan & Inv. Co., 202 F. Supp. 251 (E.D.N.C. 1962), appeal dismissed, 313 F.2d 134 (4th Cir. 1963), cert. denied, 379 U.S. 830, 85 S. Ct. 60, 13 L. Ed. 2d 39 (1964), aff’d, 326 F.2d 756 (4th Cir. 1964); Western Auto Supply Co. v. Vick, 47 N.C. App. 701, 268 S.E.2d 842, aff’d, 303 N.C. 30 , 277 S.E.2d 360, aff’d on rehearing, 304 N.C. 191 , 283 S.E.2d 101 (1981). In accord with first paragraph in the main volume. See Bagri v. Desai, 83 N.C. App. 150, 349 S.E.2d 309, 1986 N.C. App. LEXIS 2671 (1986).

The statutory penalty for charging usury is the forfeiture of all interest on the loan. The charging of usurious interest as provided for by a partnership agreement is sufficient to cause a forfeiture of all the interest charged. The charging of such usurious interest strips the debt of all interest. It becomes simply a loan which in law bears no interest. Any payments of interest which have been made at a legal rate are by law applied to the only legal indebtedness — the principal sum. Kessing v. National Mtg. Corp., 278 N.C. 523 , 180 S.E.2d 823, 1971 N.C. LEXIS 1010 (1971); Argo Air, Inc. v. Scott, 18 N.C. App. 506, 197 S.E.2d 256, 1973 N.C. App. LEXIS 1924 (1973).

Should the court determine that the transaction was usurious, the court will (1) eliminate the indebtedness of all interest charged, (2) determine the amount of interest paid, and (3) give plaintiff credit on the indebtedness for twice the amount of interest paid. Argo Air, Inc. v. Scott, 18 N.C. App. 506, 197 S.E.2d 256, 1973 N.C. App. LEXIS 1924 (1973).

The corrupt intent required to constitute usury is simply the intentional charging of more for money lent than the law allows. Where the lender intentionally charges the borrower a greater rate of interest than the law allows and his purpose is clearly revealed on the face of the instrument, a corrupt intent to violate the usury law on the part of the lender is shown. And where there is no dispute as to the facts, the court may declare a transaction usurious as a matter of law. Swindell v. Overton, 80 N.C. App. 504, 342 S.E.2d 391, 1986 N.C. App. LEXIS 2207 (1986).

The corrupt intention which is required is not that the offender intended to violate the usury laws. The intent which is required is merely the intention to take the interest which is called for in the loan or forbearance agreement. In the event that the interest agreed upon exceeds that allowed by law under the particular circumstances of the case, the requisite usurious intention exists. Swindell v. Overton, 80 N.C. App. 504, 342 S.E.2d 391, 1986 N.C. App. LEXIS 2207 (1986).

Applicability To Check Cashing Business That Charged Usurious Interest Rates. —

Where evidence against a check cashing business established that it executed contracts for usurious loans, it used its alternative business purpose of providing Internet access to consumers as a guise to cover this illegal activity, and no evidentiary basis existed upon which a reasonable fact-finder could reach a contrary conclusion, the State’s claims of usury and violations of the Consumer Finance Act were established as a matter of law; moreover, the contracts which customers had with the business were cancelled pursuant to G.S. 75-15.1 , requiring all funds collected by the business pursuant to such contracts to be refunded to the customers. State ex rel. Cooper v. NCCS Loans, Inc., 174 N.C. App. 630, 624 S.E.2d 371, 2005 N.C. App. LEXIS 2588 (2005).

Evidence of a lender’s good intentions is not relevant to the issue of “corrupt intent.” Rather, corrupt intent is present where the interest agreed upon exceeds that allowed by law. Swindell v. Overton, 80 N.C. App. 504, 342 S.E.2d 391, 1986 N.C. App. LEXIS 2207 (1986).

Which in Itself Shows Corrupt Intent. —

Where the lender of money intentionally charges the borrower a greater rate of interest than the law allows, and his purpose stands clearly revealed on the face of the instrument, a corrupt intent to violate the usury law on the part of the lender is shown. Riley v. Sears, 154 N.C. 509 , 70 S.E. 997, 1911 N.C. LEXIS 303 (1911).

But Contract Must Have Been Executed in Bad Faith. —

To constitute an intent to circumvent the usury laws, the contract must have been executed in bad faith, such “bad faith” meaning that the transaction involved was dishonestly conceived and consummated with knowledge of a fraudulent design or deception. Clarkson v. Finance Co. of Am., 328 F.2d 404, 1964 U.S. App. LEXIS 6276 (4th Cir. 1964).

Penalties for Charging and Collecting Usurious Rate of Interest. —

Where a usurious rate of interest on money has been paid by the borrower of money, the statutory penalty is double the amount of the usury, but where it is only charged, and not collected, the statute eliminates the usury and forfeits the interest on the amount of the loan. Ragan v. Stephens, 178 N.C. 101 , 100 S.E. 196, 1919 N.C. LEXIS 399 (1919).

Amount of Recovery. —

Under the clear terms of this section the plaintiff is entitled to recover back double the entire interest paid, not merely double the usurious excess. Tayloe v. Parker, 137 N.C. 418 , 49 S.E. 921, 1905 N.C. LEXIS 187 (1905).

Even Where Plaintiff Is in Pari Delicto. —

A borrower who has paid usurious interest may under this section recover of the lender twice the amount of usurious interest so paid, notwithstanding that he is in pari delicto in the transaction. Hollowell v. Southern Bldg. & Loan Ass'n, 120 N.C. 286 , 26 S.E. 781, 1897 N.C. LEXIS 54 (1897).

But Payment Is Necessary for Recovery. —

Before the plaintiff can maintain the action he must pay the usury in money or money’s worth. It is well settled that the penalty is not incurred by the charging of usurious interest; it is by taking the usury that the party incurs the penalty, and no action lies therefor until it is paid. Stedman v. Bland, 26 N.C. 296 , 1844 N.C. LEXIS 175 (1844); Godfrey v. Leigh, 28 N.C. 390 , 1846 N.C. LEXIS 70 (1846); Rushing v. Bivens, 132 N.C. 273 , 43 S.E. 798, 1903 N.C. LEXIS 275 (1903).

Usurious interest must first be paid before any recovery may be had by the borrower. Steed v. First Union Nat'l Bank, 58 N.C. App. 189, 293 S.E.2d 217, 1982 N.C. App. LEXIS 2742 (1982).

To be entitled to recover this penalty for usury, plaintiff must have been charged usurious interest and must have actually paid the usurious interest. Adams v. Beard Dev. Corp., 116 N.C. App. 105, 446 S.E.2d 862, 1994 N.C. App. LEXIS 862 (1994).

Renewal of the note does not constitute such payment of the original debt. Ragan v. Stephens, 178 N.C. 101 , 100 S.E. 196, 1919 N.C. LEXIS 399 (1919).

Double Damages Proper. —

Plaintiff was properly awarded $1,700 in damages for usury, and was entitled to have the damages doubled pursuant to this section. Britt v. Jones, 123 N.C. App. 108, 472 S.E.2d 199, 1996 N.C. App. LEXIS 572 (1996).

Double Recovery Not Allowed If Actual Interest Paid Was Not Usurious. —

Where a greater rate of interest than allowed by law was charged by means of a partnership agreement required, but no profit inured to the defendant under this agreement, and the only interest actually paid by plaintiff company was the 8% provided for in the note, this in itself was a legal rate so no usurious interest had been paid, and plaintiff company was not entitled to recover double the amount of the interest. Kessing v. National Mtg. Corp., 278 N.C. 523 , 180 S.E.2d 823, 1971 N.C. LEXIS 1010 (1971).

Only where a usurious rate of interest has been paid by the borrower, rather than merely charged by the lender, may the borrower recover double the interest. If a usurious interest rate has been charged but not actually paid, the penalty is forfeiture of the entire interest paid; the borrower is not allowed to recover double the interest. Swindell v. Overton, 80 N.C. App. 504, 342 S.E.2d 391, 1986 N.C. App. LEXIS 2207 (1986).

Recovery Cannot Be Had on Allegation of Overpayment by Mistake. —

In an action to recover for overpayment of interest, made by mistake, recovery cannot be had for the forfeiture of double the interest as a penalty for usury, since, upon the allegation of such overpayment by mistake, no legal implications arise that the plaintiff is suing for the forfeiture. Gillam v. Life Ins. Co., 121 N.C. 369 , 28 S.E. 470, 1897 N.C. LEXIS 243 (1897).

Intentional Charging Forfeits Entire Interest. —

This section makes the “taking, receiving, reserving or charging usury,” when knowingly done, i.e., intentionally done, and not by a mere error of calculation, a forfeiture (not merely forfeitable) of the entire interest which the note carries with it, or which has been agreed to be paid thereon. Ward v. Sugg, 113 N.C. 489 , 18 S.E. 717, 1893 N.C. LEXIS 112 (1893).

All interest is forfeited when usury is knowingly exacted. Guaranty Bond & Mtg. Co. v. Fair Promise A.M.E. Zion Church, 219 N.C. 395 , 14 S.E.2d 37, 1941 N.C. LEXIS 334 (1941); Haanebrink v. Meyer, 47 N.C. App. 646, 267 S.E.2d 598, 1980 N.C. App. LEXIS 3180 (1980).

But Mere Entry Does Not Constitute Charging. —

The mere entry on account and subsequent presentation of a usurious claim is not a “charging” within the meaning of this section. Grant v. Morris & Sons, 81 N.C. 150 , 1879 N.C. LEXIS 156 (1879).

The charging which constitutes a forfeiture is the contract, promise or agreement to a usurious rate of interest as opposed to the actual payment of that interest. Haanebrink v. Meyer, 47 N.C. App. 646, 267 S.E.2d 598, 1980 N.C. App. LEXIS 3180 (1980); Northwestern Bank v. Barber, 79 N.C. App. 425, 339 S.E.2d 452, 1986 N.C. App. LEXIS 2059 (1986); Adams v. Beard Dev. Corp., 116 N.C. App. 105, 446 S.E.2d 862, 1994 N.C. App. LEXIS 862 (1994).

Junior Lienor Has Same Rights as Mortgagor as to Senior Debt. —

A junior mortgagee enjoining the sale under a senior lien is entitled to have the senior debt stripped of usury and the amount of the debt ascertained at the amount advanced plus interest thereon at the legal rate of six percent (now eight percent), this being the relief to which the mortgagor would be entitled, and equity requiring that the same rule should be applicable to the junior lienor. Pinnix v. Maryland Cas. Co., 214 N.C. 760 , 200 S.E. 874, 1939 N.C. LEXIS 427 (1939).

Creditor May Not Evade Statute by Assigning His Debt. —

Where defendants had a right to plead usurious payments as a setoff or defense to any action brought by the original creditor, the creditor could not evade the express language of this section by assigning his debt to a third person. Overton v. Tarkington, 249 N.C. 340 , 106 S.E.2d 717, 1959 N.C. LEXIS 372 (1959).

Insurance Companies Are Subject to Penalties. —

An insurance company which charges, retains, or receives interest on a loan made by it in this State, to a policyholder or other person, at a rate in excess of six per centum (now eight percent) per annum is subject to the penalties prescribed by this section notwithstanding the provisions of G.S. 58-32 as to the premiums paid on policies. Cowan v. Security Life & Trust Co., 211 N.C. 18 , 188 S.E. 812, 1936 N.C. LEXIS 391 (1936).

Two remedies are provided for the enforcement of the penalties authorized by this section: First. Where a greater rate of interest than six per centum (now eight percent) per annum has been paid, the person or his legal representatives or the corporation by whom it has been paid, may recover back twice the amount of interest paid, in an action at law in the nature of an action for debt. Second. In any action brought by the creditor to recover upon any usurious note or other evidence of debt affected with usury, it is lawful for the party against whom the action is brought to plead as a counterclaim or setoff, the penalties provided by the statute, to-wit, twice the amount of interest paid, and also the forfeiture of the entire interest charged. Waters v. Garris, 188 N.C. 305 , 124 S.E. 334, 1924 N.C. LEXIS 58 (1924); Overton v. Tarkington, 249 N.C. 340 , 106 S.E.2d 717, 1959 N.C. LEXIS 372 (1959).

The borrower may waive his rights under this section. Ector v. Osborne, 179 N.C. 667 , 103 S.E. 388, 1920 N.C. LEXIS 313 (1920).

By consent judgment entered in an action upon a note, wherein usury is set up by the defendant, and the parties have agreed upon a compromise in a certain sum, signed and entered by the court, the defendant waives his right under the usury law, and may not thereafter maintain the defense that a note he had given the plaintiff, in the amount of the judgment, was tainted with the usury of the first transaction. Ector v. Osborne, 179 N.C. 667 , 103 S.E. 388, 1920 N.C. LEXIS 313 (1920).

Recoupment and Revival of Claims. —

With respect to interest paid on the note to date, debtors asked the court to extend additional, affirmative relief in the form of a recovery of “twice the amount of interest paid,” G.S. 24-2 . Because such demand was affirmative in character, recoupment did not revive monetary damages on claims of interest paid beyond the two year statute of limitations period. however, any interest payments made on the usurious loan on or after November 29, 2008, were within the limitations period and did not require recoupment to revive such claims for relief. McClendon v. Walter Home Mortg., 488 B.R. 876, 2013 Bankr. LEXIS 793 (Bankr. E.D.N.C. 2013).

New Note Must Be in the Nature of a Compromise in Order to Constitute a Waiver of Right to Plead Usury. —

A usurious contract is not purged of the usury by the execution of renewals or by a change in the form of the contract, or by the giving of a separate note for the usurious charge, and in order for an agreement as to the total debt and the execution of a new note therefor to constitute a waiver of the right to plead usury, the new amount arrived at must be agreed to by the debtor as just and due the creditor, taking into consideration his claim of usury, and be in the nature of a compromise and settlement and be a novation rather than a renewal. Hill v. Lindsay, 210 N.C. 694 , 188 S.E. 406, 1936 N.C. LEXIS 203 (1936).

Thus, where it was found that the parties agreed upon the total amount of the debt after an accounting involving the credit of sums obtained from the sale of collateral given for the debt, but not involving the question of usury, and that the debtor executed a new note for the balance thus arrived at, it was held insufficient to support the court’s conclusion of law that the debtor waived the right to claim usury, the transaction being a renewal rather than a novation. Hill v. Lindsay, 210 N.C. 694 , 188 S.E. 406, 1936 N.C. LEXIS 203 (1936).

A renewal of the original obligations does not constitute a settlement of the plaintiff’s right to invoke the statutory remedy for usury so as to purge the renewal contract of the taint. Henderson v. Security Mtg. & Fin. Co., 273 N.C. 253 , 160 S.E.2d 39, 1968 N.C. LEXIS 585 (1968).

Usurious Interest on Other Bonds Is Defense to Suit on Chattel Mortgage Securing Such Interest. —

In an action of claim and delivery for certain property conveyed by a chattel mortgage, the defendant can set up the defense of usury upon the allegation that the sole consideration of the bond secured by the mortgage was usurious interest, which had accrued upon certain other bonds executed by the defendant to the plaintiff. Moore v. Woodward, 83 N.C. 531 , 1880 N.C. LEXIS 111 (1880).

Brokerage Commission for Usurious Loan Not Prohibited. —

The conduct condemned by the usury statutes is the extraction or reception of more than a specified legal rate for the hire of money, and not for anything else and brokerage commissions may be recovered for negotiating a usurious loan. Hansen v. Jonas W. Kessing Co., 15 N.C. App. 554, 190 S.E.2d 407, 1972 N.C. App. LEXIS 1966 , cert. denied, 282 N.C. 151 , 191 S.E.2d 601, 1972 N.C. LEXIS 900 (1972).

Defendant cannot avoid payment for brokerage services simply because the defendant and the lender chose to enter into an agreement which was in violation of the North Carolina usury statutes. There is nothing in this record to show that the plaintiff did more than bring the borrower and the lender together. He did not make the loan or negotiate its terms. Hansen v. Jonas W. Kessing Co., 15 N.C. App. 554, 190 S.E.2d 407, 1972 N.C. App. LEXIS 1966 , cert. denied, 282 N.C. 151 , 191 S.E.2d 601, 1972 N.C. LEXIS 900 (1972).

Time Limitation on Forfeiture of Interest for Usury. —

There shall be no forfeiture of interest for usury after the expiration of two years from the date of forfeiture under the provisions of this section. Haanebrink v. Meyer, 47 N.C. App. 646, 267 S.E.2d 598, 1980 N.C. App. LEXIS 3180 (1980).

Late Payment Fees Are “Interest”. —

The General Assembly, which specified a maximum legal rate for late payment fees in G.S. 24-10.1 , considered such fees “interest” and intended to induce observance of that law through the penalty provisions of this section. Swindell v. Federal Nat'l Mtg. Assoc., 330 N.C. 153 , 409 S.E.2d 892, 1991 N.C. LEXIS 739 (1991).

Penalty fees for late payments are “interest” and are compensation for the detention of money owed another, and all such compensation must be forfeited when its rate is usurious, as defined by the laws of this State. Swindell v. Federal Nat'l Mtg. Assoc., 330 N.C. 153 , 409 S.E.2d 892, 1991 N.C. LEXIS 739 (1991).

This Section Applicable to Enforce Violations of G.S. 24-10.1 . —

The statutory penalty for usury requires a defendant which has charged late payments in excess of the legal maximum rate permitted by former G.S. 24-10(e) (see now G.S. 24-10.1 ) to forfeit all late payment charges to which it might otherwise have been entitled under the terms of the loan, but defendant is not required to forfeit the interest due on the loan itself. Swindell v. Federal Nat'l Mtg. Assoc., 330 N.C. 153 , 409 S.E.2d 892, 1991 N.C. LEXIS 739 (1991).

Applicable Remedy Was Appropriate. —

Debtors’ Note was indeed usurious in its contracted rate of interest and was, therefore, an illegal contract as written. The applicable remedy as outlined in statute and case law was appropriate with respect to a forfeiture of the entire interest which the Note carried with it, G.S. 24-2 ; because debtors’ posture with respect to the contract as written was defensive in nature, recoupment permitted such remedy despite a tolling of the statute of limitations. McClendon v. Walter Home Mortg., 488 B.R. 876, 2013 Bankr. LEXIS 793 (Bankr. E.D.N.C. 2013).

II.Substance Controls Nature of Transaction

A.General Doctrine

Form of Transaction Cannot Conceal Its Usurious Nature. —

An express or implied loan, upon the understanding that the money shall be returned at a greater interest rate than the statute allows, whatever the form of the transaction, and with corrupt intent on the part of the lender, is usury under this section, the corrupt intent consisting in “taking, receiving, reserving, or charging” a greater rate than that allowed by law. Swamp Loan & Trust Co. v. Yokley, 174 N.C. 573 , 94 S.E. 102, 1917 N.C. LEXIS 147 (1917).

Where a transaction is in reality a loan of money, whatever may be its form, and the lender charges for the use of his money a sum in excess of interest at the legal rate, by whatever name the charge may be called, the transaction will be held to be usurious. The law considers the substance and not the mere form or outward appearance of the transaction in order to determine what it in reality is. If this were not so, the usury laws of the State would easily be evaded by lenders of money who would exact from borrowers with impunity compensation for money loaned in excess of interest at the legal rate. Ripple v. Mortgage & Acceptance Corp., 193 N.C. 422 , 137 S.E. 156, 1927 N.C. LEXIS 363 (1927).

Where there is negotiation for a loan of money, and the borrower agrees to return the amount advanced at all events, it is a contract of lending; and however the transaction may be shaped or disguised, if a profit or return beyond the legal rate of interest is intended to be made out of the necessities or improvidence of the borrower, or otherwise, the contract is usurious. MacRackan v. Bank of Columbus, 164 N.C. 24 , 80 S.E. 184, 1913 N.C. LEXIS 6 (1913); Swamp Loan & Trust Co. v. Yokley, 174 N.C. 573 , 94 S.E. 102, 1917 N.C. LEXIS 147 (1917).

The nature and terms of the contract determine its character and purpose, and if usurious in itself it must be so understood to have been intended by the parties, and they cannot be heard to the contrary. So the parties to a contract usurious upon its face, understandingly entered into, must be deemed to have intended to provide for the payment of a rate of interest in excess of that allowed by law, and that is itself a usurious contract. Burwell v. Burgwyn, 100 N.C. 389 , 6 S.E. 409, 1888 N.C. LEXIS 197 (1888).

The courts do not hesitate to look beneath the forms of transactions alleged to be usurious in order to determine whether or not such transactions are in truth and in realty usurious. Ripple v. Mortgage & Acceptance Corp., 193 N.C. 422 , 137 S.E. 156, 1927 N.C. LEXIS 363 (1927); Western Auto Supply Co. v. Vick, 47 N.C. App. 701, 268 S.E.2d 842, 1980 N.C. App. LEXIS 3182 (1980), aff'd, 303 N.C. 30 , 277 S.E.2d 360, 1981 N.C. LEXIS 1083 (1981).

The vitality of the usury statutes would not be maintained by allowing creditors to charge unlawful interest rates merely by disguising the form of their transactions; the court must be concerned with substance and not form. Western Auto Supply Co. v. Vick, 47 N.C. App. 701, 268 S.E.2d 842, 1980 N.C. App. LEXIS 3182 (1980), aff'd, 303 N.C. 30 , 277 S.E.2d 360, 1981 N.C. LEXIS 1083 (1981).

In construing a transaction with regard to the usury statutes the court will look to its substance and not to its form. Pratt v. American Bond & Mtg. Co., 196 N.C. 294 , 145 S.E. 396, 1928 N.C. LEXIS 352 (1928).

And if transaction is a subterfuge it will be treated accordingly. —

If in fact the transaction is a bona fide sale and not a loan of money, it is not usurious. But if the form of the transaction is a subterfuge to conceal an exaction of more than the legal rate of interest on what is in fact a loan and not a sale, the transaction will be regarded according to its true character and will be held usurious. Michigan Nat'l Bank v. Hanner, 268 N.C. 668 , 151 S.E.2d 579, 1966 N.C. LEXIS 1281 (1966).

B.Specific Instances

Where a bank followed an arrangement made by its depositor that the latter keep a certain percent of the money borrowed upon his own paper and paper of its customers upon which he remained responsible, and which was good and collectible by the bank without trouble to it, and thus collected on the series of transactions a rate of interest in excess of the legal rate, the interest thus received was usurious and comes within the intent and meaning of the statute forbidding it. English Lumber Co. v. Wachovia Bank & Trust Co., 179 N.C. 211 , 102 S.E. 205, 1920 N.C. LEXIS 210 (1920).

Where a building and loan association charged a stockholder certain fines under former G.S. 54-15, such fines could not be alleged as interest paid on the loan from the corporation. Moore v. Mutual Bldg. & Loan Ass'n, 203 N.C. 592 , 166 S.E. 597, 1932 N.C. LEXIS 47 (1932).

Where a borrower executed notes for the principal sum borrowed and notes for the interest on the principal notes from the time of their execution until their respective maturities, and the lender paid the borrower the principal sum borrowed less an amount deducted and retained by the lender, in the absence of an agreed fact or a finding by the court that the sum deducted was reserved by the lender as interest, the transaction did not constitute usury, and therefore the notes were not tainted with usury in the hands of a purchaser. Ray v. Atlantic Life Ins. Co., 207 N.C. 654 , 178 S.E. 89, 1935 N.C. LEXIS 237 (1935).

Any charges made by a building and loan association against a borrowing member, in excess of the legal rate of interest, whether such charges are called “fines,” “dues” or “interest,” are usurious. Hollowell v. Southern Bldg. & Loan Ass'n, 120 N.C. 286 , 26 S.E. 781, 1897 N.C. LEXIS 54 (1897).

Stipulation That Laws of Another State Should Apply. —

Where the court finds that the stipulation in a contract that the laws of another state should apply was made in bad faith for the purpose of evading the usury laws of this State, and that defendant charged and received payment of usurious interest, the findings are sufficient to support a judgment in plaintiff’s favor that he recover of defendant twice the amount of usurious interest paid as determined by this section. Polikoff v. Finance Serv. Co., 205 N.C. 631 , 172 S.E. 356, 1934 N.C. LEXIS 33 (1934).

The Maryland usury statute was controlling in determining whether a loan agreement between a North Carolina corporation and a Maryland finance corporation was usurious where the agreement was first executed in this State and then mailed to the Maryland office of the finance corporation for signing and where the agreement’s direction that the entire transaction be measured upon the laws of Maryland was in no degree illegal, opposed to public policy, or offensive to the good morals of either state. Clarkson v. Finance Co. of Am., 328 F.2d 404, 1964 U.S. App. LEXIS 6276 (4th Cir. 1964).

Usury in Fact Made Payable in This State. —

Where in fact a contract for the payment of usurious interest, in violation of G.S. 24-1 et seq., was made payable in this State, the fact that it appeared from the face of the contract that it was payable in another state did not relieve it of its usurious charge of interest contrary to the statute of this State. Ripple v. Mortgage & Acceptance Corp., 193 N.C. 422 , 137 S.E. 156, 1927 N.C. LEXIS 363 (1927).

Sum Paid to Trust Company Held to Be a Reasonable Brokerage Fee. —

Two thousand six hundred dollars paid to a trust company for its services in handling ninety $1,000 bonds bearing interest at the legal rate was held not to constitute usury, but a reasonable brokerage fee. McCubbins v. Virginia Trust Co., 80 F.2d 984, 1936 U.S. App. LEXIS 3310 (4th Cir. 1936).

Bonus. —

A profit, greater than the lawful rate of interest, intentionally exacted as a bonus for the loan of money, is a violation of the usury laws; it matters not what form or disguise it may assume. Henderson v. Security Mtg. & Fin. Co., 273 N.C. 253 , 160 S.E.2d 39, 1968 N.C. LEXIS 585 (1968).

A profit, greater than the lawful rate of interest, intentionally exacted as a bonus for the loan of money, imposed upon the necessities of the borrower in a transaction where the treaty is for a loan and the money is to be returned at all events, is a violation of the usury laws; it matters not what form or disguise it may assume. Western Auto Supply Co. v. Vick, 47 N.C. App. 701, 268 S.E.2d 842, 1980 N.C. App. LEXIS 3182 (1980), aff'd, 303 N.C. 30 , 277 S.E.2d 360, 1981 N.C. LEXIS 1083 (1981).

Commission. —

If the lender charges a commission in addition to the maximum rate of interest permitted by the statute, such charge is usury. Henderson v. Security Mtg. & Fin. Co., 273 N.C. 253 , 160 S.E.2d 39, 1968 N.C. LEXIS 585 (1968).

Fee for Finding Lender. —

One who makes no loan but, as broker or agent of the borrower, finds a lender and procures the making of a loan by him, has not received usury when he collects a fee for his services. Henderson v. Security Mtg. & Fin. Co., 273 N.C. 253 , 160 S.E.2d 39, 1968 N.C. LEXIS 585 (1968).

A bona fide credit sale upon an installment payment basis does not involve a loan of money or a forbearance of a debt within the meaning and application of the usury laws. Carolina Indus. Bank v. Merrimon, 260 N.C. 335 , 132 S.E.2d 692, 1963 N.C. LEXIS 704 (1963); Michigan Nat'l Bank v. Hanner, 268 N.C. 668 , 151 S.E.2d 579, 1966 N.C. LEXIS 1281 (1966).

If there is a real and bona fide purchase, not made as the occasion or pretext for a loan, the transaction will not be usurious even though the sale be for an exorbitant price, and a note is taken, at legal rates, for the unpaid purchase money. Carolina Indus. Bank v. Merrimon, 260 N.C. 335 , 132 S.E.2d 692, 1963 N.C. LEXIS 704 (1963); Michigan Nat'l Bank v. Hanner, 268 N.C. 668 , 151 S.E.2d 579, 1966 N.C. LEXIS 1281 (1966); State Whsle. Supply, Inc. v. Allen, 30 N.C. App. 272, 227 S.E.2d 120, 1976 N.C. App. LEXIS 2239 (1976); Western Auto Supply Co. v. Vick, 47 N.C. App. 701, 268 S.E.2d 842, 1980 N.C. App. LEXIS 3182 (1980), aff'd, 303 N.C. 30 , 277 S.E.2d 360, 1981 N.C. LEXIS 1083 (1981).

There is no statute regulating time prices in general retail credit sales payable in installments. Michigan Nat'l Bank v. Hanner, 268 N.C. 668 , 151 S.E.2d 579, 1966 N.C. LEXIS 1281 (1966).

A purchaser is not, like the needy borrower, a victim of a rapacious lender, since he can refrain from the purchase if he does not choose to pay the price asked by the seller. Michigan Nat'l Bank v. Hanner, 268 N.C. 668 , 151 S.E.2d 579, 1966 N.C. LEXIS 1281 (1966); State Whsle. Supply, Inc. v. Allen, 30 N.C. App. 272, 227 S.E.2d 120, 1976 N.C. App. LEXIS 2239 (1976).

Usury cannot be predicated upon the fact that property is sold on credit at an advance over what would be charged in case of a cash sale so long as it appears that the price charged is in fact fixed for the purchase of goods on credit with no intention or purpose of defeating the usury laws, even though the difference between the cash price and the credit price, if considered as interest, amounts to more than the legal rate. Michigan Nat'l Bank v. Hanner, 268 N.C. 668 , 151 S.E.2d 579, 1966 N.C. LEXIS 1281 (1966).

A vendor may fix on his property one price for cash and another for credit, and the mere fact that the credit price exceeds the cash price by a greater percentage than is permitted by the usury laws is a matter of concern to the parties and not to the courts, barring evidence of bad faith. Michigan Nat'l Bank v. Hanner, 268 N.C. 668 , 151 S.E.2d 579, 1966 N.C. LEXIS 1281 (1966); State Whsle. Supply, Inc. v. Allen, 30 N.C. App. 272, 227 S.E.2d 120, 1976 N.C. App. LEXIS 2239 (1976).

The sale of merchandise is not usurious when the sale is made for one price if cash is paid and for a higher price if payment is deferred or made in future installments, so long as the transaction is not a subterfuge to conceal a usurious loan. State Whsle. Supply, Inc. v. Allen, 30 N.C. App. 272, 227 S.E.2d 120, 1976 N.C. App. LEXIS 2239 (1976).

If there is a bona fide purchase of property as opposed to a subterfuge to conceal a loan at a usurious rate, then the usury laws have no application whatsoever, even though the sale is made at an exorbitant price. The reason for the recognition of the time-price doctrine is manifest: The usury laws are directed at the extraction of more than the legal rate of interest for the use of money, and a purchaser can refrain from paying the price asked by the seller if he so chooses. Western Auto Supply Co. v. Vick, 303 N.C. 30 , 277 S.E.2d 360, 1981 N.C. LEXIS 1083 (1981).

Conditional Sale. —

An action to recover alleged usurious interest paid cannot be maintained upon evidence disclosing that the transaction alleged was not a loan but was a sale with deferred payment secured by conditional sale contract. Hendrix v. Harry's Cadillac Co., 220 N.C. 84 , 16 S.E.2d 456, 1941 N.C. LEXIS 481 (1941).

Loan by Finance Corporation for Purchase of Automobiles. —

Where a finance corporation loaned money for the purchase of automobiles sold in this State to be paid for at a greater rate of interest than six percent (now eight percent) the transaction was a usurious one coming within the inhibition of the usury statute and the penalty it imposed, though the contract was couched in the language of bargain and sale in order to evade the usury law. Ripple v. Mortgage & Acceptance Corp., 193 N.C. 422 , 137 S.E. 156, 1927 N.C. LEXIS 363 (1927).

Charge for Forbearance in Collection of Debt at End of Payment Period. —

The two percent per month service charge sought to be imposed by plaintiff did not constitute a “time price” but was a charge for plaintiff’s forbearance in the collection of the debt at the end of the payment period; as such, the two percent per month service charge was interest and usurious. State Whsle. Supply, Inc. v. Allen, 30 N.C. App. 272, 227 S.E.2d 120, 1976 N.C. App. LEXIS 2239 (1976).

Requiring Endorsement of Seller as Guaranty of Payment. —

It has been repeatedly held in this State that while one may buy a note from another, at any price that may be agreed upon, the bargain being free from fraud or unlawful imposition, if the purchaser requires the endorsement of the seller as a guaranty of payment, the transaction, as between the immediate parties thereto, is in effect a loan, and will be so considered, within the meaning and purport of the laws against usury. Western Auto Supply Co. v. Vick, 47 N.C. App. 701, 268 S.E.2d 842, 1980 N.C. App. LEXIS 3182 (1980), aff'd, 303 N.C. 30 , 277 S.E.2d 360, 1981 N.C. LEXIS 1083 (1981).

Where a usurious note called for level monthly payments and the note provided that each payment was to be applied to principal and interest, defendant was entitled to recover twice the amount of interest paid. Equilease Corp. v. Belk Hotel Corp., 42 N.C. App. 436, 256 S.E.2d 836, 1979 N.C. App. LEXIS 2773 , cert. denied, 298 N.C. 568 , 261 S.E.2d 121, 1979 N.C. LEXIS 1632 (1979).

Documents Not Stating Interest Rate. —

Promissory note, deed of trust and sales contract showing a face amount of $9,645.12, payable in 144 equal monthly installments, but not stating the specific interest rate charged, which interest was added to the amount of the note in advance, did not entitle defendants, who allegedly loaned plaintiffs only $5,600.00 and charged an illegal 10% thereon, to a directed verdict or judgment n.o.v. DeHart v. R/S Fin. Corp., 78 N.C. App. 93, 337 S.E.2d 94, 1985 N.C. App. LEXIS 4264 (1985).

III.Equitable Doctrines as Affecting Rights of Parties

History. —

Prior to the 1959 amendment to this section, it was held that in equity, while a usurious lender could have no relief whatever, neither could a borrower have relief against such a lender, such as enjoining the enforcement of a mortgage, without repaying the principal plus lawful interest. The basis of this principle was the equitable maxim, “He who seeks equity must do equity.” See McBrayer v. Roberts, 17 N.C. 75 (1831); Cook v. Patterson, 103 N.C. 127 , 9 S.E. 402 (1889); Waters v. Garris, 188 N.C. 305 , 124 S.E. 334 (1924); Miller v. Dunn, 188 N.C. 397 , 124 S.E. 746 (1924); Jonas v. Home Mtg. Co., 205 N.C. 89 , 170 S.E. 127 (1933); North Carolina Mtg. Corp. v. Wilson, 205 N.C. 493 , 171 S.E. 783 (1933); Pinnix v. Maryland Cas. Co., 214 N.C. 760 , 200 S.E. 874 (1939). However, it was held that such principle did not apply to a proceeding by a debtor at law for the statutory penalty. See Cheek v. Iron Belt Bldg. & Loan Ass’n, 127 N.C. 121 , 37 S.E. 150 (1900); Currituck Grain, Inc. v. Powell, 28 N.C. App. 563, 222 S.E.2d 1 (1976). And there had been some criticism of cases applying the doctrine. See Currituck Grain, Inc. v. Powell, 28 N.C. App. 563, 222 S.E.2d 1, 1976 N.C. App. LEXIS 2756 (1976).

Where the payee withholds from the borrower a part of the face amount of the note, the same being a device to evade the usury laws, the borrower is entitled in equity to have the note credited with the amount so withheld upon the maturity of the note as against the payee under this section. Federal Reserve Bank v. Jones, 205 N.C. 648 , 172 S.E. 185, 1934 N.C. LEXIS 37 (1934).

IV.Rights of Subsequent Purchasers

Holder in Due Course Occupies No Better Position than Lender. —

As to usurious contracts, the law regards the maker, not as in pari delicto, but as acting “in chains,” and to permit his contract, which is deemed exacted under duress, to come under the general rule in favor of innocent holders for value of commercial paper, would be to nullify the protecting statute. The recourse of the holder is against the payee and indorser, who is more likely by far to be able to respond than the maker. Ward v. Sugg, 113 N.C. 489 , 18 S.E. 717, 1893 N.C. LEXIS 112 (1893).

Prior to this section, a usurious contract worked a forfeiture of both the interest and the debt, and it was stated in Coor v. Spicer, 65 N.C. 401 (1871), that under the operation of such a statute, innocent and meritorious holders were obliged to suffer. Faison v. Grandy & Sons, 126 N.C. 827 , 36 S.E. 276, 1900 N.C. LEXIS 328 (1900).

A note tainted with usury retains the taint in the hands of a subsequent holder. The forfeiture of interest is the decree of the law. Faison v. Grandy & Sons, 126 N.C. 827 , 36 S.E. 276, 1900 N.C. LEXIS 328 (1900).

Notes vitiated by an usurious or gaming consideration cannot be enforced in the most innocent hands, but are always and under all circumstances void. Glenn v. Farmer's Bank, 70 N.C. 191 , 1874 N.C. LEXIS 195 (1874); Ward v. Sugg, 113 N.C. 489 , 18 S.E. 717, 1893 N.C. LEXIS 112 (1893).

Contrary Rule Would Render Usury Statute Nugatory. —

If, by passing the note off before maturity and for value, the indorsee may recover on it, the statute is useless, as the protection intended and the penalty and prohibition are alike rendered nugatory. The victim would have no recourse but to suffer in silence. The usury would be collected in spite of the law which had declared the “entire interest forfeited” ab initio, by the fact of “charging or reserving” it. On the other hand, the innocent indorsee has his recourse against the payee who has indorsed the note to him, a recourse which would more surely protect him, being against the party who has money to loan, not to borrow. Ward v. Sugg, 113 N.C. 489 , 18 S.E. 717, 1893 N.C. LEXIS 112 (1893).

Rule Applies to Obligations Secured by Mortgages. —

The only case that seems to mitigate against the otherwise uniform tenor of the decisions on this subject is Coor v. Spicer, 65 N.C. 401 (1871), which holds that a mortgage given to secure a usurious bond might be enforced in the hands of an innocent purchaser for value. The case recognizes the general rule, but takes mortgages out of it upon the supposed wording of former G.S. 39-20. Aside from the fact that this is held expressly otherwise in the later case of Moore v. Woodward, 83 N.C. 531 (1880), an examination of former G.S. 39-20 will show that Coor v. Spicer was a palpable inadvertence. That statute in fact does not purport to protect the innocent holder of a mortgage note which is tainted with usury but the “purchaser of the estate or property” at sale under the mortgage, who buys without notice of the usurious taint in the debt secured. It would be a fraud for the mortgagor to stand by and let him purchase without giving him notice, but the make can give no notice usually to the assignee of the note. Ward v. Sugg, 113 N.C. 489 , 18 S.E. 717, 1893 N.C. LEXIS 112 (1893).

“Shall Be a Forfeiture” Construed. —

The Supreme Court has expressly held that the words “shall be a forfeiture” in this section makes void the agreement as to interest. Ward v. Sugg, 113 N.C. 489 , 18 S.E. 717, 1893 N.C. LEXIS 112 (1893).

V.Usury Laws as Affecting Corporations

Corporations Are Embraced Within Usury Laws. —

In the absence of special legislation, corporations are embraced in the usury laws just as natural persons are. Commissioners of Craven v. Atlantic & N.C.R.R., 77 N.C. 289 , 1877 N.C. LEXIS 81 (1877).

Conflict of Laws. —

A statute of another state forbidding corporations to plead usury as a defense cannot govern a corporation of this State sued in this State, although the bonds in question were delivered in the other state and made payable there. Commissioners of Craven v. Atlantic & N.C.R.R., 77 N.C. 289 , 1877 N.C. LEXIS 81 (1877).

Where such bonds express a rate of interest illegal in this State, and also in the other state, and were issued in payment of a precedent debt and secured by a mortgage on the corporation’s property, they could legally bear no greater rate of interest than that allowed in this State. Commissioners of Craven v. Atlantic & N.C.R.R., 77 N.C. 289 , 1877 N.C. LEXIS 81 (1877).

Sale of Bonds at Discount. —

Under this section as it then read, a corporation could not legally sell its bonds, bearing the highest legal rate of interest, at a discount for the purpose of borrowing money. Such a sale was in effect a loan, and was usurious. Commissioners of Craven v. Atlantic & N.C.R.R., 77 N.C. 289 , 1877 N.C. LEXIS 81 (1877).

Provisions of Corporate Charter Construed. —

The language in alleged act of incorporation, “May discount notes and other evidences of debt, and lend money upon such terms and rates of interest as may be agreed upon,” did not confer the right to exact a rate of interest greater than the legal rate. The statute nowhere confers an express power to exceed the legal rate of interest and the operative words, “any rate of interest that may be agreed on,” meant any rate of interest not greater than the legal rate. Simonton v. Lanier, 71 N.C. 498 , 1874 N.C. LEXIS 137 (1874).

VI.Pleading and Practice

Usury must be pleaded. Dixon v. Smith, 204 N.C. 480 , 168 S.E. 683, 1933 N.C. LEXIS 171 (1933).

And Proved. —

Where there is no evidence that any holder of the note executed by plaintiffs has charged or received interest thereon in excess of six percent (now eight percent), in an action on the note plaintiffs may not invoke the forfeiture of interest for usury. Smith v. Bryant, 209 N.C. 213 , 183 S.E. 276, 1936 N.C. LEXIS 427 (1936).

By Whom Pleaded. —

The plea of usury is open to the parties and their privies, and may be made when, by the transaction, the debtor’s estate is wrongfully depleted, and ordinarily by one having the legal right to protect the estate, as a receiver of an insolvent corporation against which a usurious contract is sought to be enforced. Riley v. Sears, 154 N.C. 509 , 70 S.E. 997, 1911 N.C. LEXIS 303 (1911).

Class Actions Allowed. —

When the General Assembly has wished to prevent class actions to enforce statutory claims for relief, where the relief sought was personal and penal in nature, it has said so expressly and unequivocally. The failure of the General Assembly to expressly prohibit class actions to enforce this statute convinces the Supreme Court that it intended to allow them for such purposes. Crow v. Citicorp Acceptance Co., 319 N.C. 274 , 354 S.E.2d 459, 1987 N.C. LEXIS 1933 (1987).

Rights of Trustee in Bankruptcy. —

A right of action to recover the penalty for a usury charge is in the nature of an action for debt, and is a wrongful detention of, or injury to, the estate of the bankrupt which passes to his trustee in bankruptcy. Ripple v. Mortgage & Acceptance Corp., 193 N.C. 422 , 137 S.E. 156, 1927 N.C. LEXIS 363 (1927).

When Tender Is Required. —

A claim of forfeiture of all interest for usury may be properly set up as a defense in the creditor’s action on the debt without a tender of the debt with legal interest. Tender is required only when the debtor seeks affirmative equitable relief such as enjoining the collection of the debt or the foreclosure of the security therefor. Virginia Trust Co. v. Lambeth Realty Corp., 215 N.C. 526 , 2 S.E.2d 544, 1939 N.C. LEXIS 302 (1939).

When Counterclaim Is Available. —

While a counterclaim for usury may be set up in an action on a note under this section, such counterclaim may not be set up in an action in ejectment based on title to the property under foreclosure of the deed of trust securing the note. North Carolina Mtg. Corp. v. Wilson, 205 N.C. 493 , 171 S.E. 783, 1933 N.C. LEXIS 600 (1933).

The purpose and intent of the counterclaim provision was not to restrict the right of recovery by way of counterclaim, but rather to make it clear that the right granted by the statute to recover the penalty for usurious interest paid “in the action in the nature of action for debt,” could be pleaded as a counterclaim in an action between the parties. Commercial Credit Corp. v. Robeson Motors, Inc., 243 N.C. 326 , 90 S.E.2d 886, 1956 N.C. LEXIS 364 (1956).

While this section provides that a counterclaim for usury may be set up in an action to recover upon the note or other evidence of debt, on which the alleged usurious interest has been charged, such a counterclaim may not be pleaded in an action based on other cause of action. Commercial Fin. Co. v. Holder, 235 N.C. 96 , 68 S.E.2d 794, 1952 N.C. LEXIS 327 (1952).

There was no conflict between this section and subsection (2) of former G.S. 1-137 in reference to pleading of counterclaim for usury. Commercial Credit Corp. v. Robeson Motors, Inc., 243 N.C. 326 , 90 S.E.2d 886, 1956 N.C. LEXIS 364 (1956).

Construing this section and former G.S. 1-137 (2) in pari materia, where a lender brings an action to recover on a note or other evidence of debt, the borrower, by counterclaim in such action, can recover the penalty for usurious interest paid by the borrower to the lender in connection with separate and independent transactions between them. Commercial Credit Corp. v. Robeson Motors, Inc., 243 N.C. 326 , 90 S.E.2d 886, 1956 N.C. LEXIS 364 (1956).

Definiteness of Allegations. —

In an action brought to recover money alleged to be due on a contract entered into between the parties, wherein the plea of usury is set up in the answer and a recovery is sought under this section for double the amount of the interest paid, the recovery sought is in the nature of a penalty; when the facts are known or readily obtainable the law requires a definite statement in the pleading as to the time and amount, before allegations in such action are held to be sufficient, and when such statement is not made no amendment to the pleadings should be allowed. Riley v. Sears, 154 N.C. 509 , 70 S.E. 997, 1911 N.C. LEXIS 303 (1911).

Burden of Proof on Plaintiff. —

Upon the trial of an action to recover for usury, the burden of proof is on the plaintiff throughout the trial to establish his cause of action. Hodge v. First Atl. Corp., 10 N.C. App. 632, 179 S.E.2d 855, 1971 N.C. App. LEXIS 1686 , cert. denied, 278 N.C. 701 , 181 S.E.2d 602, 1971 N.C. LEXIS 1029 (1971).

Where plaintiff failed to show that defendant did not in fact render services for the one percent “service charge” or “construction loan fee,” defendant was entitled to directed verdict that such “charge” or “fee” was not a part of the interest charged on the loan. Hodge v. First Atl. Corp., 10 N.C. App. 632, 179 S.E.2d 855, 1971 N.C. App. LEXIS 1686 , cert. denied, 278 N.C. 701 , 181 S.E.2d 602, 1971 N.C. LEXIS 1029 (1971).

Amendment of Complaint. —

Where plaintiff in its complaint sought interest in excess of the 12% allowed under G.S. 24-1.1 , but presented evidence as to the amount of interest when calculated at 12%, the trial court did not abuse its discretion in granting an amendment to the pleadings so as to reduce the interest sought to that calculated at 12% per annum. Northwestern Bank v. Barber, 79 N.C. App. 425, 339 S.E.2d 452, 1986 N.C. App. LEXIS 2059 (1986).

Statute of Limitations. —

An action to recover the penalty for usury, under this section, is barred after the lapse of two years from the accrual of the cause of action in the absence of disability or nonresidence affecting the running of the statute. Smith v. Finance Co. of Am., 207 N.C. 367 , 177 S.E. 183, 1934 N.C. LEXIS 471 (1934).

Where plaintiff filed his complaint seeking forfeiture of all interest more than two years after the execution of promissory note, the two-year statute of limitations barred plaintiff’s claim for forfeiture of interest pursuant to this section. Adams v. Beard Dev. Corp., 116 N.C. App. 105, 446 S.E.2d 862, 1994 N.C. App. LEXIS 862 (1994).

Same — Nonresident Creditor. —

An action for the statutory penalty for charging usury, brought against a nonresident creditor who has no agent here upon whom process may be served, is not barred by the statute of limitations, nor does the fact in such case that one of the plaintiffs is a nonresident and the other has changed his residence affect the matter. Cuthberton v. Peoples Bank, 170 N.C. 531 , 87 S.E. 333, 1915 N.C. LEXIS 446 (1915).

Setting Aside Fraudulent Conveyance. —

In a creditor’s action to establish its debt and to have a subsequent conveyance by the debtor set aside as fraudulent as to creditors, the fact that plaintiff’s debt is tainted with usury entitles defendant debtor to invoke the forfeiture of interest, but does not defeat plaintiff’s action, or estop plaintiff from asserting the equitable remedy of setting aside the fraudulent conveyance under the doctrine that he who seeks equity must come into court with clean hands. Virginia Trust Co. v. Lambeth Realty Corp., 215 N.C. 526 , 2 S.E.2d 544, 1939 N.C. LEXIS 302 (1939).

Restraining Foreclosure. —

The holder of a second mortgage, able and willing to pay the amount of the debt secured by the first mortgage, but alleging usury under this section, is entitled to have a restraining order against foreclosure continued until determination of the issue of usury. Wilson v. Union Trust Co., 200 N.C. 788 , 158 S.E. 479, 1931 N.C. LEXIS 444 (1931).

Borrower May Use Lender as Witness. —

To the end that the defense may be ample and complete, if the borrower in his discretion should resort to his remedy under this section he is authorized to examine the lender as a witness. Merchants Bank v. Lutterloh, 81 N.C. 142 , 1879 N.C. LEXIS 155 (1879).

Usury as Question of Law When Facts Not in Dispute. —

What constitutes usury is a question of law to be determined by the court when the facts are not in dispute. Grant v. Morris & Sons, 81 N.C. 150 , 1879 N.C. LEXIS 156 (1879).

When Usury Is Question for Jury. —

Where, in an action upon a note, the defendant pleads the usury statute, and the evidence is sufficient to sustain a verdict that the excess of interest was a proper charge made for negotiating the loan, the question should be submitted to the jury. Swamp Loan & Trust Co. v. Yokley, 174 N.C. 573 , 94 S.E. 102, 1917 N.C. LEXIS 147 (1917).

If a transaction is of doubtful character it should be submitted to the jury for determination. Carolina Indus. Bank v. Merrimon, 260 N.C. 335 , 132 S.E.2d 692, 1963 N.C. LEXIS 704 (1963).

Where the plea of the usury under this section is made by the plaintiff in the action to enjoin the defendant from the sale of land securing a mortgage note, and there is a dispute as to whether the charge made was usurious, and as to the amount due under the mortgage, it is reversible error for the trial judge to assume the correctness of the plaintiff’s contentions as a fact, and take the case from the jury accordingly. Miller v. Dunn, 188 N.C. 379 , 124 S.E. 746 (1924).

The fact that a sum borrowed was made payable to the borrowers and an attorney with allegations and evidence that the attorney under instructions from the lender deducted a certain sum therefrom before the borrowers could obtain the money, together with the “item of expense” set out in the deed of trust securing the loan, is held sufficient to have been submitted to the jury on the question of usury. Jonas v. Home Mtg. Co., 205 N.C. 89 , 170 S.E. 127, 1933 N.C. LEXIS 465 (1933).

Where the plaintiff alleged usury and the defendant contended that the transaction was within the “commission for the sale of bonds” exception to the usury law, it was held that as the evidence was conflicting it was properly submitted to the jury, and was sufficient to support its verdict in plaintiff’s favor. Sherrill v. Hood, 208 N.C. 472 , 181 S.E. 330, 1935 N.C. LEXIS 55 (1935).

Effect of Consent Judgment. —

Where a controversy between the parties as to the amount of the debt has been settled by a consent judgment such judgment is conclusive and final as to any matter determined and cannot be impeached collaterally in another proceeding under this section. Rector v. Suncrest Lumber Co., 52 F.2d 946, 1931 U.S. App. LEXIS 3801 (4th Cir. 1931).

Failure to Instruct as to Double Recovery Is Prejudicial. —

The plaintiff in his action to recover for usurious rate of interest paid and received by the lender is entitled under this section to recover double the amount of the interest so paid and received, and an instruction to the jury that fails to give him this right is prejudicial to him and is reversible error. Bundy v. Commercial Credit Co., 200 N.C. 511 , 157 S.E. 860, 1931 N.C. LEXIS 374 (1931).

I.In General

Editor’s Note. —

Many of the cases cited below were decided prior to the 1981, 1985, and 1987 amendments to this section.

Constitutionality. —

This section does not violate the equal protection clause of the U.S. Const., Amend. XIV or N.C. Const., Art. I, § 19. Powe v. Odell, 312 N.C. 410 , 322 S.E.2d 762, 1984 N.C. LEXIS 1808 (1984); Lowe v. Tarble, 313 N.C. 460 , 329 S.E.2d 648, 1985 N.C. LEXIS 1552 (1985).

This section does not violate N.C. Const., Art. I, § 19, the equal protection and due process clauses of U.S. Const., Amend. XIV, or the exclusive emoluments clause contained in N.C. Const., Art. I, § 32. Lowe v. Tarble, 312 N.C. 467 , 323 S.E.2d 19, 1984 N.C. LEXIS 1815 (1984); Harris v. Scotland Neck Rescue Squad, Inc., 75 N.C. App. 444, 331 S.E.2d 695, 1985 N.C. App. LEXIS 3711 , writ denied, 314 N.C. 329 , 333 S.E.2d 487, 1985 N.C. LEXIS 2256 (1985).

The legislature could reasonably have concluded that the classification scheme established by this section would best serve to further important and legitimate public purposes, including compensation of a plaintiff for the loss-of-use value of a damage award, the prevention of unjust enrichment to liability insurers who are required by law to maintain claim reserves on which interest is earned, and the promotion of settlement by these insurers, who, unlike self-insurers, have as their primary business the insuring, investigation, defense and settlement of claims. The Legislature could have reasonably concluded that the distinction between defendants with liability insurance and those without was a valid one, and that the public welfare would be best served by such a classification. Therefore, this section does not create a special emolument or privilege within the meaning of N.C. Const., Art. I, § 32. Lowe v. Tarble, 312 N.C. 467 , 323 S.E.2d 19, 1984 N.C. LEXIS 1815 (1984).

Legislative Intent. —

The probable intent of this section is threefold: (1) to compensate plaintiffs for loss of the use of their money; (2) to prevent unjust enrichment of the defendant by having money he should not have; and (3) to promote settlement. Brown v. Flowe, 349 N.C. 520 , 507 S.E.2d 894, 1998 N.C. LEXIS 845 (1998).

Section Changes Common Law. —

At common law a judgment did not carry interest when an execution of sci. fa. was issued upon it. In an action upon the judgment the plaintiff could recover interest by way of damages for the detention of the money. The statute was passed for the purpose of amending the law in this respect. Collais v. McLeod, 30 N.C. 221 (1848). The intent was that the principal should bear interest because it was just and right that it should, and that the technical rule of the common law should no longer stand in the way. McNeill v. Durham & C.R.R., 138 N.C. 1 , 50 S.E. 458, 1905 N.C. LEXIS 218 (1905).

This section is not exclusive in prescribing instances in which interest is recoverable, and in proper instances interest may be recovered upon transactions not coming within the statute. Anderson Cotton Mills v. Royal Mfg. Co., 221 N.C. 500 , 20 S.E.2d 818, 1942 N.C. LEXIS 496 (1942).

Application of Section. —

This section is obviously referring to claims which are defended by the liability insurer, because there is no logical reason to distinguish between claims against an uninsured defendant and an insured defendant defending a claim which falls short of the deductible amount of the insurance policy. R-Anell Homes, Inc. v. Alexander & Alexander, Inc., 62 N.C. App. 653, 303 S.E.2d 573, 1983 N.C. App. LEXIS 2975 (1983), limited, Carter v. West Am. Ins. Co., 190 N.C. App. 532, 661 S.E.2d 264, 2008 N.C. App. LEXIS 1021 (2008).

Superior court erred by ordering a city to pay postjudgment interest under G.S. 24-5(b) because the statute was not applicable as the functions in which the city engaged, the enforcement of state and municipal traffic laws and the management of the proceeds collected for violations of the laws, were governmental functions. Shavitz v. City of High Point, 177 N.C. App. 465, 630 S.E.2d 4, 2006 N.C. App. LEXIS 1080 (2006).

Purpose of 1981 Amendment. —

The legislature’s purpose in amending this section in 1981 to provide for prejudgment interest in tort actions when the claim is covered by liability insurance was to provide an incentive to insurance companies to expeditiously litigate actions they are involved in. Harwood v. Harrelson Ford, Inc., 78 N.C. App. 445, 337 S.E.2d 158, 1985 N.C. App. LEXIS 4291 (1985).

Applicability of 1981 Amendment. —

The Legislature’s intent was to make Session Laws 1981, c. 327, G.S. 1, which amended this section, inapplicable to pending litigation. Harwood v. Harrelson Ford, Inc., 78 N.C. App. 445, 337 S.E.2d 158, 1985 N.C. App. LEXIS 4291 (1985).

Plaintiffs who, on April 29, 1982, voluntarily dismissed actions filed on August 13, 1980, pursuant to G.S. 1A-1 , Rule 41(a), and subsequently commenced new actions on August 26, 1982, following the effective date of the amendment to this section by Session Laws 1981, c. 327, were entitled, upon the return of verdicts in their favor, to prejudgment interest from August 26, 1982. State v. Knox, 78 N.C. App. 493, 337 S.E.2d 154, 1985 N.C. App. LEXIS 4293 (1985).

Plaintiff whose action was instituted almost a year prior to the 1981 amendment to this section and was pending upon its ratification should not have been granted prejudgment interest. Harwood v. Harrelson Ford, Inc., 78 N.C. App. 445, 337 S.E.2d 158, 1985 N.C. App. LEXIS 4291 (1985).

Purpose of 1985 Amendment. —

When the legislature amended subsection (a) in 1985 to provide that the amount awarded on contract bears interest from date of breach it obviated the need for the rule that when the amount of damages in a breach of contract action is ascertained from contract itself, relevant evidence, or both, interest should be allowed from the date of breach. Metromont Materials Corp. v. R.B.R. & S.T., 120 N.C. App. 616, 463 S.E.2d 305, 1995 N.C. App. LEXIS 894 (1995).

Applicability of 1985 Amendment. —

The important date for determining whether the 1985 amendment to this section applies to any action is the date the action is commenced and not the date the contract was entered; therefore, the amendment, effective Oct. 1, 1985, and applicable to all claims except claims pending on that date, clearly applied to action for breach of contract instituted Aug. 21, 1986. Pickard Roofing Co. v. Barbour, 94 N.C. App. 688, 381 S.E.2d 341, 1989 N.C. App. LEXIS 632 (1989).

This section is not a part of the Financial Responsibility Act; therefore, its provisions need not be written into every automobile liability insurance policy. Sproles v. Greene, 329 N.C. 603 , 407 S.E.2d 497, 1991 N.C. LEXIS 524 (1991).

This section has no application to a judgment against the State Highway Commission. Yancey v. North Carolina State Hwy. & Pub. Works Comm'n, 222 N.C. 106 , 22 S.E.2d 256, 1942 N.C. LEXIS 40 (1942); North Carolina State Hwy. & Pub. Works Comm'n v. Privett, 246 N.C. 501 , 99 S.E.2d 61, 1957 N.C. LEXIS 481 (1957).

Interest on Costs. —

In this State, interest on costs is expressly disallowed by statute. City of Charlotte v. McNeely, 281 N.C. 684 , 190 S.E.2d 179, 1972 N.C. LEXIS 1161 (1972), limited, Town of Chapel Hill v. Fox, 120 N.C. App. 630, 463 S.E.2d 421, 1995 N.C. App. LEXIS 917 (1995).

Judgment Bears Interest Though Nothing Is Said. —

By virtue of this section a judgment bears interest from the time of its rendition until paid, though nothing is said therein about interest. McNeill v. Durham & C.R.R., 138 N.C. 1 , 50 S.E. 458, 1905 N.C. LEXIS 218 (1905).

This section was held directory so far as it provided that the judgment must itself state that it shall bear interest from the date of rendition until it is paid. It is perfectly clear that such a statement in the judgment is not essential to effectuate the intent of the Legislature, which is to allow interest on judgments. McNeill v. Durham & C.R.R., 138 N.C. 1 , 50 S.E. 458, 1905 N.C. LEXIS 218 (1905).

If Judgment Enables Officer to Compute Interest. —

It is best always that the court in its judgment should state fully the amount to be raised by the execution, both principal and interest; but the plaintiff will not forfeit his right to interest by the failure to do this, when enough appears on the face of the judgment to enable the officer to compute the amount justly due. All he is required to know is the amount of the principal, and then the statute makes that amount bear interest to the time of payment. McNeill v. Durham & C.R.R., 138 N.C. 1 , 50 S.E. 458, 1905 N.C. LEXIS 218 (1905).

No discretion is vested in the court to determine what shall be the rate of interest in a given case. Hardy-Latham v. Wellons, 415 F.2d 674, 1968 U.S. App. LEXIS 6672 (4th Cir. 1968).

Interest on Contracts and Torts Distinguished. —

Where a verdict is given in an action on contract in plaintiff’s favor for moneys due by the defendant to plaintiff’s intestate, interest is also given plaintiff on the amount of the recovery as a matter of law, when not incorporated in the verdict. When in tort the matter of interest is awarded or not according as the jury may find. Thomas v. Watkins, 193 N.C. 630 , 137 S.E. 818, 1927 N.C. LEXIS 420 (1927).

Tender of Payment. —

To constitute a valid tender of payment in North Carolina and thus stop the running of interest, the offer must include the full amount the creditor is entitled to receive plus all interest to the date of tender. Hardy-Latham v. Wellons, 415 F.2d 674, 1968 U.S. App. LEXIS 6672 (4th Cir. 1968).

Where case was erroneously nonsuited and the nonsuit was reversed on appeal, plaintiffs were entitled to interest from the first day of the term at which the nonsuit was erroneously entered. Jackson v. Gastonia, 247 N.C. 88 , 100 S.E.2d 241, 1957 N.C. LEXIS 543 (1957).

Plaintiffs held entitled to interest on entire amount of judgment. —

Where defendants tendered $20,000 to plaintiff pursuant to settlement agreement and plaintiff was entitled to rescind that agreement, trial court erred in awarding interest only on $31,749.97 of the $51,749.97 judgment; in refusing the check for $20,000 tendered by defendants, plaintiff was deprived of the $20,000 and was entitled to recover interest on that amount. Thompson-Arthur Paving Co. v. Lincoln Battleground Assocs., 95 N.C. App. 270, 382 S.E.2d 817, 1989 N.C. App. LEXIS 771 (1989).

Superior Court judge had no authority to entertain or allow motions for the payment of prejudgment interest or postjudgment interest on a judgment entered more than four years before the motion in the cause was made; said motions should have been dismissed. Roach v. Smith, 102 N.C. App. 482, 402 S.E.2d 173, 1991 N.C. App. LEXIS 443 (1991).

Prejudgment Interest in an Action for Breach of an Implied Warranty of Habitability. —

Because an implied warranty of habitability is a quasi-contract, the awarding of interest relative to such an action is governed by subsection (b) of this section, not subsection (a); thus, the trial court correctly awarded plaintiff homeowners prejudgment interest from the date the action was instituted, rather than from the date of breach. Medlin v. Fyco, Inc., 139 N.C. App. 534, 534 S.E.2d 622, 2000 N.C. App. LEXIS 995 (2000).

Postjudgment Interest on Treble Damages. —

This section provides for postjudgment interest on judgments for money damages generally, including a judgment for treble damages, until the judgment is paid. Custom Molders, Inc. v. American Yard Prods., Inc., 342 N.C. 133 , 463 S.E.2d 199, 1995 N.C. LEXIS 541 (1995).

Unconditional Payment Offers. —

An aggrieved party may, without prejudice to its right to recover prejudgment interest, decline unconditional payment offers. Members Interior Constr., Inc. v. Leader Constr. Co., 124 N.C. App. 121, 476 S.E.2d 399, 1996 N.C. App. LEXIS 1003 (1996).

Nothing in this section precludes the award of interest damages when those damages are recoverable under ordinary damage principles as a natural and foreseeable consequence of wrongdoing or damages within the contemplation of the parties as a probable result of their wrongdoing. Broussad v. Meineke Disct. Muffler Shops, Inc., 958 F. Supp. 1087, 1997 U.S. Dist. LEXIS 2759 (W.D.N.C. 1997), rev'd, 155 F.3d 331, 1998 U.S. App. LEXIS 20248 (4th Cir. 1998).

There is no indication that this section is designed to cap or otherwise diminish damages based on lost interest where those damages are recoverable under ordinary damage principles. Broussad v. Meineke Disct. Muffler Shops, Inc., 958 F. Supp. 1087, 1997 U.S. Dist. LEXIS 2759 (W.D.N.C. 1997), rev'd, 155 F.3d 331, 1998 U.S. App. LEXIS 20248 (4th Cir. 1998).

Interest Could Not be Awarded in Action Against County. —

When a county was required to refund “school impact fees” improperly imposed upon new residential construction, it was improper to require it to pay interest on the fees. Postjudgment interest could not be awarded against the State or its subdivisions unless authorized by statute or contract. Durham Land Owners Ass'n v. County of Durham, 177 N.C. App. 629, 630 S.E.2d 200, 2006 N.C. App. LEXIS 1187 (2006).

II.Contracts

Absent an agreement between parties, the legal rate under 24-1 is on money owed under a contract. Hardy-Latham v. Wellons, 415 F.2d 674, 1968 U.S. App. LEXIS 6672 (4th Cir. 1968).

Trend Is Toward Allowance of Interest. —

There has been a definite trend in North Carolina toward allowance of interest in almost all types of cases involving breach of contract. Harris & Harris Constr. Co. v. Crain & Denbo, Inc., 256 N.C. 110 , 123 S.E.2d 590, 1962 N.C. LEXIS 430 (1962); T.C. Allen Constr. Co. v. Stratford Corp., 384 F.2d 653, 1967 U.S. App. LEXIS 4878 (4th Cir. 1967); Rose v. Vulcan Materials Co., 282 N.C. 643 , 194 S.E.2d 521, 1973 N.C. LEXIS 1136 (1973).

Application Is to Liquidated Demands Only. —

The rule that all moneys due by contract, except those due on penal bonds, shall bear interest applies whenever a recovery is had for the breach of a contract and the amount is ascertained from the terms of the contract itself or from evidence relative to the inquiry and is due by one party to the contract to another; and it does not obtain as a matter of law where the interest sought does not come within the provisions of the statute and is by way of unliquidated damages, and there has been no adequate default on the part of the debtor in reference to withholding the principal sum or a part of it. Bond v. Pickett Cotton Mills, 166 N.C. 20 , 81 S.E. 936, 1914 N.C. LEXIS 341 (1914).

Application to Secured Creditors. —

Provisions of G.S. 24-5 did not directly apply to secured creditor’s action against creditors who auctioned off the debtors’ collateral because the statute was limited to actions for breach of contract. However, the secured creditor’s action was one for the tort of conversion, and the secured creditor had no action against the creditors for breach of the security agreement between the debtors and the secured creditor as the creditors were not parties to the agreement. Bartlett Milling Co., L.P. v. Walnut Grove Auction & Realty Co., 192 N.C. App. 74, 665 S.E.2d 478, 2008 N.C. App. LEXIS 1546 (2008).

Interest Is Imposed by Law in Nature of Damages. —

A debt draws interest from the date it becomes due, and when interest is not made payable on the face of the instrument, payment of interest will be imposed by law in the nature of damages for the retention of the principal of the debt. Security Nat'l Bank v. Travelers' Ins. Co., 209 N.C. 17 , 182 S.E. 702, 1935 N.C. LEXIS 6 (1935).

Under this section money due by contract, except money due on penal bonds, bears interest as a matter of law. Anderson Cotton Mills v. Royal Mfg. Co., 221 N.C. 500 , 20 S.E.2d 818, 1942 N.C. LEXIS 496 (1942).

When interest is not made payable on the face of the instrument, payment of interest will be imposed by law in the nature of damages for the retention of the principal of the debt. Craftique, Inc. v. Stevens & Co., 321 N.C. 564 , 364 S.E.2d 129, 1988 N.C. LEXIS 13 (1988).

Rate of Interest Controlled By Contract. —

Where contracts provided for a specific interest rate on past due accounts, that rate applied prejudgment and, because there was no agreement that such rate would apply postjudgment, the legal rate established by G.S. 24-1 applied. Barrett Kays & Assocs. v. Colonial Bldg. Co., 129 N.C. App. 525, 500 S.E.2d 108, 1998 N.C. App. LEXIS 650 (1998).

When Interest Is Added to Damages for Breach of Contract. —

Whenever a recovery is had for breach of contract and the amount of damages is ascertained from the terms of the contract itself or from evidence relevant to the inquiry, interest should be added. Harris & Harris Constr. Co. v. Crain & Denbo, Inc., 256 N.C. 110 , 123 S.E.2d 590, 1962 N.C. LEXIS 430 (1962); T.C. Allen Constr. Co. v. Stratford Corp., 384 F.2d 653, 1967 U.S. App. LEXIS 4878 (4th Cir. 1967); Rose v. Vulcan Materials Co., 282 N.C. 643 , 194 S.E.2d 521, 1973 N.C. LEXIS 1136 (1973).

From What Date Interest Allowed. —

Where a controversy was made to depend upon whether a written agreement of a certain date to subscribe to plaintiff’s enterprise in a sum certain was binding upon the defendant corporation, the affirmative answer of the jury to the issue carried with it interest on the subscription from the date it was due, as a matter of law. Chatham v. Mecklenburg Realty Co., 174 N.C. 671 , 94 S.E. 447, 1917 N.C. LEXIS 170 (1917).

Prejudgment Interest from Breach of Contract. —

In breach of contract actions, this section authorizes the award of prejudgment interest on damages from the date of the breach at the contract rate, or the legal rate if the parties have not agreed on an interest rate. Furr v. Fonville Morisey Realty, Inc., 130 N.C. App. 541, 503 S.E.2d 401, 1998 N.C. App. LEXIS 1003 (1998).

Trial court incorrectly ordered an employer to pay interest on an award to an employee only from the date of the judgment rather than the date of the breach of employment contract because there was no good faith exception to awarding interest from the date of the breach. Salvaggio v. New Breed Transfer Corp., 150 N.C. App. 688, 564 S.E.2d 641, 2002 N.C. App. LEXIS 645 (2002).

After a railroad breached a contract to relocate, at its own expense, a certain rail line to a phosphate plant, pursuant to G.S. 24-5(a) , the plant was entitled to prejudgment interest on the plant’s damages award accruing from the date of the contract breach. PCS Phosphate Co. v. Norfolk S. Corp., 2008 U.S. Dist. LEXIS 54199 (E.D.N.C. Jan. 28, 2008), aff'd, 559 F.3d 212, 2009 U.S. App. LEXIS 5024 (4th Cir. 2009).

Interest Allowed from Date of Breach. —

When the amount of damages in a breach of contract action is ascertained from the contract itself, or from relevant evidence, or from both, interest should be allowed from the date of the breach. General Metals, Inc. v. Truitt Mfg. Co., 259 N.C. 709 , 131 S.E.2d 360, 1963 N.C. LEXIS 611 (1963); T.C. Allen Constr. Co. v. Stratford Corp., 384 F.2d 653, 1967 U.S. App. LEXIS 4878 (4th Cir. 1967); Investment Properties of Asheville, Inc. v. Allen, 281 N.C. 174 , 188 S.E.2d 441, 1972 N.C. LEXIS 1101 (1972); Rose v. Vulcan Materials Co., 282 N.C. 643 , 194 S.E.2d 521, 1973 N.C. LEXIS 1136 (1973); Wilkes Computer Servs., Inc. v. Aetna Cas. & Sur. Co., 59 N.C. App. 26, 295 S.E.2d 776, 1982 N.C. App. LEXIS 2863 (1982).

Where the amount of damages can be ascertained from the contract, interest is allowed from the date of the breach. Interstate Equip. Co. v. Smith, 292 N.C. 592 , 234 S.E.2d 599 (1977); Noland Co. v. Poovey, 58 N.C. App. 800, 295 S.E.2d 238 (1982). In accord with second paragraph in the main volume. See Thomas M. McInnis & Assocs. v. Hall, 318 N.C. 421 , 349 S.E.2d 552, 1986 N.C. LEXIS 2676 (1986).

This section authorizes awards of interest on damages resulting from breach of contract from the date of the breach at the rate of interest provided in the contract, or at the legal rate if the parties have not agreed on their own rate. Craftique, Inc. v. Stevens & Co., 321 N.C. 564 , 364 S.E.2d 129, 1988 N.C. LEXIS 13 (1988).

This section authorizes interest on damages resulting from breach of contract from the date of the breach at the rate of interest provided in the contract or at the legal rate if no other rate is provided; the legal rate of interest on judgments in North Carolina is eight percent (8%) per year. Jacobs v. Central Transp., Inc., 891 F. Supp. 1120, 1995 U.S. Dist. LEXIS 14836 (E.D.N.C. 1995).

Trial court properly determined, as a matter of law, that sellers breached the contract and that the buyer was entitled to recover its $100,000 deposit of the purchase price of a boat, and it properly ordered the sellers to refund the buyer’s $ 100,000 deposit with interest at a rate of eight percent the sellers breached the parties’ contract, and the buyer was entitled, under G.S. 25-2-711(1) , to recover the amount of the purchase price it had already paid, i.e., $100,000, with interest. D.G. II, LLC v. Nix, 211 N.C. App. 332, 712 S.E.2d 335, 2011 N.C. App. LEXIS 735 (2011).

Interest Allowed Where Rate on Note Usurious. —

Where interest rate on note was usurious and penalty of forfeiture was barred by the statute of limitation, interest allowed was not the maximum legal rate but the legal or judgment rate, and ran from the date of maturity onward. Merritt v. Knox, 94 N.C. App. 340, 380 S.E.2d 160, 1989 N.C. App. LEXIS 473 (1989).

Where guarantor had guaranteed interest as well as principal owed by debtor, interest was properly chargeable from the date of debtor’s breach, rather than from the date of demand and notice to guarantor. Craftique, Inc. v. Stevens & Co., 321 N.C. 564 , 364 S.E.2d 129, 1988 N.C. LEXIS 13 (1988).

When Action Is for Breach of Contract. —

Although in construing this provision the rule in North Carolina has been that interest should be allowed from the date of breach, this rule is applicable only when the action is one for breach of contract. State ex rel. Edmisten v. Zim Chem. Co., 45 N.C. App. 604, 263 S.E.2d 849, 1980 N.C. App. LEXIS 2707 (1980).

Defendants failed to show why the “finance fee” provision of the subcontract should not be enforced pursuant to G.S. 24-11 ; there was no argument against an award of post-judgment interest pursuant to G.S. 24-5(a) . United States ex rel. SCCB, Inc. v. P. Browne & Assoc., 751 F. Supp. 2d 813, 2010 U.S. Dist. LEXIS 119192 (M.D.N.C. 2010).

Interest Provided from Date of Substantial Performance. —

In an action on a construction contract, wherein the defendant counterclaimed for damages for plaintiff’s failure to complete the work in a good and workmanlike manner, the judgment entered by the court on the jury verdict should have provided for interest thereon from August 1, 1964 (the date upon which the jury concluded that plaintiff had substantially performed its contract), even though there was a bona fide dispute as to the correct balance due between plaintiff and defendant. T.C. Allen Constr. Co. v. Stratford Corp., 384 F.2d 653, 1967 U.S. App. LEXIS 4878 (4th Cir. 1967).

After demand by a depositor or creditor of a bank for the payment of the amount due and refusal of the bank to make payment, the bank is liable for the amount of the claim plus interest. Hackney v. Hood, 203 N.C. 486 , 166 S.E. 323, 1932 N.C. LEXIS 15 (1932).

Assessments Against Policyholder in Mutual Insurance Company. —

Under this section interest should be allowed on assessments against a policyholder in a mutual insurance company under the policies in suit from the dates of the respective demands by the receiver. Miller v. Barnwell Bros., 137 F.2d 257, 1943 U.S. App. LEXIS 2792 (4th Cir. 1943).

Breach of Insurance Contract. —

For purpose of computing interest, breach of insurance contract occurred when defendant denied plaintiffs’ demand for payment. Aills v. Nationwide Mut. Ins. Co., 88 N.C. App. 595, 363 S.E.2d 880, 1988 N.C. App. LEXIS 106 (1988).

Facts Not Excusing Payment of Interest by Insurance Company. —

Where, under the terms of a policy of insurance, payment is to be made to the beneficiaries immediately upon receipt of due proof of death of insured, the failure of the insurer to make payment until more than a year after receipt of such due proof entitles the beneficiaries to interest on the amount from the date of insurer’s receipt of due proof, and payment of interest will not be excused because payment by insurer was delayed by reason of the fact that the trust agreement under which the policy was assigned was changed without notice to insurer by adding an individual trustee and that the corporate trustee became insolvent before payment and a substituted trustee was appointed and insurer did not have notice of such substitution until a much later date, insurer having had the use of the money during the period of delay. Security Nat'l Bank v. Travelers' Ins. Co., 209 N.C. 17 , 182 S.E. 702, 1935 N.C. LEXIS 6 (1935).

Purpose of Requiring Jury to Distinguish Principal and Interest. —

The evident design of this section is to allow the plaintiff interest on the principal sum recovered in a judgment from the time of its rendition; and the direction to the jury to distinguish between the principal and interest was intended to provide for those cases in which the whole sum is assessed in damages, so as to enable the clerk or the sheriff to compute the interest on the principal sum. But where the principal and interest are discriminated on the record, or it can be collected from an inspection of it what the principal sum was, it is equally within the spirit of the act that interest should be calculated on that. Deloach v. Worke, 10 N.C. 36 , 1824 N.C. LEXIS 13 (1824).

This section does not require that the issue be submitted to the jury before interest can be allowed in contract cases. The requirement is merely that the jury “distinguish the principal from the sum allowed as interest,” which obviously pertains only to those rare situations where evidence as to both principal and interest is submitted to the jury for their consideration. Dailey v. Integon Gen. Ins. Corp., 75 N.C. App. 387, 331 S.E.2d 148, 1985 N.C. App. LEXIS 3699 (1985).

In a case involving the amount due under an insurance policy, computing the interest due was a mere clerical matter, and it would have been an absurd, pointless waste of time to ask the jury to “distinguish” between principal and interest. Dailey v. Integon Gen. Ins. Corp., 75 N.C. App. 387, 331 S.E.2d 148, 1985 N.C. App. LEXIS 3699 (1985).

III.Other Actions

In Tort Actions Judgment for Damages Bears Interest. —

Although the allowance of interest in an action for damages for conversion of property is discretionary with the jury, yet, after the verdict, the judgment for the damages assessed bears interest by virtue of this section, and this is so, even though the verdict is for a certain sum “without interest.” Stephens v. Koonce, 103 N.C. 266 , 9 S.E. 315, 1889 N.C. LEXIS 104 (1889).

But interest is not allowable as a matter of law in case of tort. Its allowance as damages rests in the discretion of the jury. Lincoln v. Claflin, 74 U.S. 132, 19 L. Ed. 106, 1868 U.S. LEXIS 985 (1869).

It Is Discretionary with Jury to Include Interest in Verdict. —

In an action for damages for conversion, the verdict being for the value of the property at the time of the conversion, interest can only begin from the time of the judgment. However, the jury may allow interest on the amount of the damages from time of the conversion. Lance v. Butler, 135 N.C. 419 , 47 S.E. 488, 1904 N.C. LEXIS 48 (1904).

The rule in this State is that interest, as interest, is allowed only when expressly given by statute, or by the express or implied agreement of the parties. Devereux v. Burgwin, 33 N.C. 490 (1850); Lewis v. Rountree, 79 N.C. 122 (1878). The only statute upon the subject is that contained in this section, which provides that all sums of money due by contract of any kind whatsoever, excepting such as may be due on penal bonds, shall bear interest, etc., but there is no provision made for actions of trover or trespass de bonis asportatis. In such cases, in order to compel the wrongdoer to make full compensation to the injured party, the jury may, in their discretion, and as damages, allow interest upon the value of the property from the time of its conversion or seizure, and it has been usual for them to do so. But there is no rule which gives it as a matter of law and right. Patapsco v. Magee, 86 N.C. 350 , 1882 N.C. LEXIS 204 (1882).

Under law the jury has discretion to award prejudgment interest in tort cases involving property losses. Leggett v. Rose, 776 F. Supp. 229, 1991 U.S. Dist. LEXIS 19544 (E.D.N.C. 1991).

No Interest on Awards Under State Tort Claims Act Absent Express Statutory Authority. —

Because the State Tort Claims Act (G.S. 143-291 et seq.) is in derogation of sovereign immunity, and should, therefore, be strictly construed as written, there must be a specific statutory provision authorizing the accrual of interest on damage awards under the act. And although this section and G.S. 24-7 refer to post-judgment interest, the General Assembly nevertheless recently enacted G.S. 97-86.2 allowing interest on workers’ compensation claims to be assessed on awards at the legal rate. Thus, the same type of statutory enactment would be necessary before any interest could accrue to a tort claims award. Myers v. Department of Crime Control & Pub. Safety, 67 N.C. App. 553, 313 S.E.2d 276, 1984 N.C. App. LEXIS 3072 (1984).

Plaintiff was not entitled to pre- or post-judgment interest under this section for his claim against the State under the Tort Claims Act. McGee v. North Carolina Dep't of Revenue, 135 N.C. App. 319, 520 S.E.2d 84, 1999 N.C. App. LEXIS 1044 (1999).

Interest on Surety Bond. —

Where the surety bond of a clerk of the superior court is fixed as to amount in the sum of $5,000.00, to that extent a surety is responsible for the defalcation of his principal, including interest from the time of notice given it, except from judgment thereon, when a different principal applies and the surety is liable for interest on the judgment until it is paid. State ex rel. Lee v. Martin, 188 N.C. 119 , 123 S.E. 631, 1924 N.C. LEXIS 18 (1924).

The measure of the surety’s liability is that of the principal, provided such liability does not exceed the penal sum of the bond, and where a bank gives a bond to an agency of the State to protect such agency’s deposit, upon the insolvency of the bank with assets insufficient to pay depositors in full, the State agency may not hold the surety liable for interest from the time action on the bond is instituted, since in such circumstances the bank is not liable for interest, but the surety is liable for interest only from the date of judgment against it on the bond on the amount for which the bank is liable to the State agency as of that date. State v. United States Guarantee Co., 207 N.C. 725 , 178 S.E. 550, 1935 N.C. LEXIS 251 (1935).

Dividend Declared by Receiver. —

Where a receiver declares a dividend which he wrongfully withholds, interest should run from the time the dividend is declared. Armstrong v. American Exch. Nat'l Bank, 133 U.S. 433, 10 S. Ct. 450, 33 L. Ed. 747, 1890 U.S. LEXIS 1923 (1890).

Interest on Damages in Condemnation Proceedings. —

Interest is not allowed on a judgment rendered in the superior court for damages awarded by the jury to the owner for taking his lands in condemnation; for while the jury may award interest in their verdict, the owner may not complain when such has not been done, in the absence of a special request for instructions with relation to it, and the absence of evidence tending to show he is entitled to it. Raleigh, C. & S.R.R. v. Mecklenburg Mfg. Co., 166 N.C. 168 , 82 S.E. 5, 1914 N.C. LEXIS 363 (1914). See also Yancey v. North Carolina State Hwy. & Pub. Works Comm'n, 221 N.C. 185 , 19 S.E.2d 489, 1942 N.C. LEXIS 426 (1942).

Prejudgment Interest on Compensatory Damages Denied. —

Although an underlying wrongful death judgment awarded compensatory damages, apportionment of that judgment did not; therefore, prejudgment interest under G.S. 24-5(b) was properly denied since the contribution action under the Uniform Contribution Among Tortfeasors Act, G.S. 1B-1 et seq., was derivative and based upon the codification of equitable principles. Medical Mut. Ins. Co. v. Mauldin, 157 N.C. App. 136, 577 S.E.2d 680, 2003 N.C. App. LEXIS 376 (2003).

Interest on Eminent Domain Actions. —

Trial court erred in awarding 14% interest from the time of entry of judgment until its satisfaction, even though subsection (b) of this section might be construed as allowing interest at the legal rate until judgment is satisfied, because G.S. 40A-53 specifically provides for interest in eminent domain actions during this period at the rate of 6% per annum. Concrete Mach. Co. v. City of Hickory, 134 N.C. App. 91, 517 S.E.2d 155, 1999 N.C. App. LEXIS 677 (1999).

Interest on Value of Permanent Improvements on Land. —

Where it has been ascertained by the verdict of the jury, upon a trial free from error, that the plaintiff is entitled to recover of the defendant the value of permanent improvements he has put upon the defendant’s land under a parol agreement that the latter would convey a part of the lands in consideration thereof, void under the statute of frauds, to the extent that the improvements have enhanced the value of the land, interest is properly allowed in the judgment from the time of the defendant’s breach, on the amount ascertained to be due at that time; and objection that the jury may have included the interest in their verdict is untenable when it appears that nothing was said by counsel or court in respect to it, the presumption being to the contrary. Perry v. Norton, 182 N.C. 585 , 109 S.E. 641, 1921 N.C. LEXIS 278 (1921).

Compromise Judgment in Will Contest. —

Where, in a will contest, a compromise judgment was entered whereby legatees named in the will were to receive certain amounts in settlement of their legacies which were ordered to be paid by the administrator cum testamento annexo thereafter to be appointed, the judgment was not such a judgment as, under this section would draw interest from its date. Moore v. Pullen, 116 N.C. 284 , 21 S.E. 195, 1895 N.C. LEXIS 208 (1895).

In an independent civil action upon a prior 1974 judgment on a promissory note, plaintiff was entitled to judgment for the principal amount of the 1974 judgment plus the accrued interest and court costs as of the date of the court’s order. However, the legal rate of interest could only be applied to the $100,000.00 principal amount due in the prior judgment. NCNB Nat'l Bank v. Robinson, 80 N.C. App. 154, 341 S.E.2d 364, 1986 N.C. App. LEXIS 2147 (1986).

Where a plaintiff brought an action to prevent the 10-year statute of limitations from barring his recovery on a prior judgment, the action was in the nature of an independent action on the judgment, the only procedure in this State by which a judgment can be renewed. As it was a separate and distinct action, the plaintiff could request, in his complaint, interest at the legal rate of eight percent, and the trial court could award interest at that rate from the date the present action was instituted until the judgment is satisfied. Speros Constr. Co. v. Musselwhite, 103 N.C. App. 510, 405 S.E.2d 785, 1991 N.C. App. LEXIS 811 (1991).

Money Wrongfully Received Draws Interest. —

Where the theory upon which the plaintiff recovers is that the defendant has received the money wrongfully and that the law implies a promise to repay it, there is no reason why the amount should not draw interest. Barlow v. Norfleet, 72 N.C. 535 , 1875 N.C. LEXIS 284 (1875); Farmer v. Willard, 75 N.C. 401 , 1876 N.C. LEXIS 305 (1876); Hilton Lumber Co. v. Atlantic C.L.R.R., 141 N.C. 171 , 53 S.E. 823, 1906 N.C. LEXIS 85 (1906).

Interest for That Which Would Have Accrued on Amount of Funds Wrongfully Disbursed from Accounts. —

In a judgment removing the father as custodian of all accounts created under the North Carolina Uniform Transfers to Minors Act, G.S. 33A-1 et seq., an award of interest was proper because he should have been liable for the interest that would have accrued on the amount of the funds wrongfully disbursed from the accounts. If he had not improperly expended and invested the funds, the minor would have had the benefit of those funds growing in the custodial account, G.S. 24-5(b) . Belk v. Belk, 221 N.C. App. 1, 728 S.E.2d 356, 2012 N.C. App. LEXIS 718 (2012).

Brokerage Commissions. —

Real estate brokerages were entitled to prejudgment interest at the legal rate, where they were denied the use of their commissions by the lessor from the time they were due. Furr v. Fonville Morisey Realty, Inc., 130 N.C. App. 541, 503 S.E.2d 401, 1998 N.C. App. LEXIS 1003 (1998).

Real Estate Commission. —

Where a real estate broker is entitled to recover a reasonable amount for his services rendered in securing a tenant for a building, the sum fixed by the verdict will, as a matter of law, draw interest from the time the same was due and payable. Thomas v. Piedmont Realty & Dev. Co., 195 N.C. 591 , 143 S.E. 144, 1928 N.C. LEXIS 147 (1928).

Interest on Recovery for Quantum Meruit. —

It was not improper for the jury to award interest on a recovery for quantum meruit, but since the jury had to determine the reasonable value of services, it was important for it to make the designation between principal and interest. Environmental Landscape Design Specialist v. Shields, 75 N.C. App. 304, 330 S.E.2d 627, 1985 N.C. App. LEXIS 3616 (1985).

In an action to enjoin deceptive acts and practices in the sale of antifreeze, interest on the court’s judgment ordering defendant to make restoration payments to 33 customers was governed by this section, and should have been awarded only from the time of entry of the judgment. State ex rel. Edmisten v. Zim Chem. Co., 45 N.C. App. 604, 263 S.E.2d 849, 1980 N.C. App. LEXIS 2707 (1980).

Interest on Reduced Award. —

Trial court did not err in limiting interest allowed plaintiff to the interest on the amount of the jury award as reduced pursuant to G.S. 97-10.2 . Absher v. Vannoy-Lankford Plumbing Co., 78 N.C. App. 620, 337 S.E.2d 877, 1985 N.C. App. LEXIS 4319 (1985).

Interest Improper on Punitive Double Damages. —

Trial court should not have awarded prejudgment interest and post-judgment interest on both the compensatory and the G.S. 84-13 punitive double damage award in the state bar’s action against the attorney for reimbursement of funds paid to the two clients after the attorney breached the attorney’s fiduciary duty to them and converted their funds. G.S. 24-5(b) only allowed interest to be awarded for compensatory damages. N.C. State Bar v. Gilbert, 189 N.C. App. 320, 663 S.E.2d 1, 2008 N.C. App. LEXIS 541 (2008).

Interest on Judgment Proceeds Applied to Workers’ Compensation Lien. —

Workers’ compensation lien on judgment proceeds under the specific facts of case were neither derived from an action in contract nor from an amount “designated by the fact-finder as compensatory damages,” and the trial court’s award of interest would therefore be vacated. Hieb v. Lowery, 134 N.C. App. 1, 516 S.E.2d 621, 1999 N.C. App. LEXIS 659 , modified, 134 N.C. App. 21, 1999 N.C. App. LEXIS 907 (1999).

Under North Carolina law, interest runs from the date of the defendant’s breach, not the date of the plaintiff’s demand for a refund. Canady v. Crestar Mtg. Corp., 109 F.3d 969, 1997 U.S. App. LEXIS 6072 (4th Cir. 1997).

District court erred in holding that interest would not run until date that plaintiff’s demanded refund. Canady v. Crestar Mtg. Corp., 109 F.3d 969, 1997 U.S. App. LEXIS 6072 (4th Cir. 1997).

Interest awarded in recovery of legal fees. —

In a law firm’s suit to recover legal fees due from a decedent’s estate, the trial court properly categorized the fees as costs, which were specifically excepted from the interest provisions of G.S. 24-5(b) . Moreover, taken together, G.S. 7A-307(c)(2) and G.S. 28A-23-4 clearly supported the concept underpinning the trial court’s ruling, which was that the superior court can tax as costs attorney fees incurred when the attorney is the representative of the estate administering its distribution. Nexsen Pruet, PLLC v. Martin, 212 N.C. App. 680, 713 S.E.2d 130, 2011 N.C. App. LEXIS 1169 (2011).

IV.Prejudgment Interest

Editor’s Note. —

Some of the cases under this analysis line below were decided under this section as amended by Session Laws 1981, c. 327, s. 1, which provided for the accrual of interest on money judgments for compensatory damages in actions other than contract from the filing of the claim for claims covered by liability insurance, and from the time of the verdict for claims not so covered. Subsequently, the amendment by Session Laws 1985, c. 214, s. 1 rewrote this section, deleting any reference to liability insurance.

As a general rule, North Carolina courts do not recognize the granting of prejudgment interest on unliquidated damages. Lazenby v. Godwin, 60 N.C. App. 504, 299 S.E.2d 288, 1983 N.C. App. LEXIS 2493 (1983).

Legislative Intent. —

Probable intent of the prejudgment interest statute, G.S. 24-5(b) , is threefold: (1) to compensate plaintiffs for loss of the use of their money, (2) to prevent unjust enrichment of the defendant by having money he should not have, and (3) to promote settlement. Phillips v. Warren, 152 N.C. App. 619, 568 S.E.2d 230, 2002 N.C. App. LEXIS 959 (2002).

Section Is Designed to Provide Incentive to Resolve Claims Quickly. —

This section, under which the prejudgment interest was awarded, was designed to provide an incentive for an insurance carrier to resolve claims quickly rather than delay resolution in order to maximize return of investment on lost reserves. Hartford Accident & Indem. Co. v. United States Fire Ins. Co., 710 F. Supp. 164, 1989 U.S. Dist. LEXIS 3897 (E.D.N.C. 1989), aff'd, 918 F.2d 955, 1990 U.S. App. LEXIS 25793 (4th Cir. 1990).

Applicability of Subsection (b). —

In determining the question of prejudgment interest, where there is no question of liability and no judgment entered as to this issue, subsection (b) of this section does not apply. Barnes v. Hardy, 98 N.C. App. 381, 390 S.E.2d 758, 1990 N.C. App. LEXIS 412 (1990), aff'd, 329 N.C. 690 , 407 S.E.2d 504, 1991 N.C. LEXIS 516 (1991).

No award of prejudgment interest, because subsection (b) is inapplicable, since a final judgment, including a judgment as to liability, had not been entered. Collins v. Beck, 116 N.C. App. 128, 446 S.E.2d 610, 1994 N.C. App. LEXIS 863 (1994), aff'd, 340 N.C. 255 , 456 S.E.2d 307, 1995 N.C. LEXIS 245 (1995).

In a data company’s action against a competitor that hired its former employee, prejudgment interest was warranted because the federal court was required to apply the law of the forum, which mandated prejudgment interest. Legacy Data Access, LLC v. Mediquant, Inc., 2017 U.S. Dist. LEXIS 198817 (W.D.N.C. Dec. 4, 2017).

Recovery of Interest Under Subsection (b). —

Subsection (b) of this section provides for the recovery of interest in instances where there has been both a judgment as to liability and a determination of appropriate compensatory damages. Barnes v. Hardy, 98 N.C. App. 381, 390 S.E.2d 758, 1990 N.C. App. LEXIS 412 (1990), aff'd, 329 N.C. 690 , 407 S.E.2d 504, 1991 N.C. LEXIS 516 (1991).

The Supreme Court of North Carolina has held that prejudgment interest up to the amount of a carrier’s liability limit is part of compensatory damages for which an underinsured motorist carrier is liable. Austin v. Midgett, 159 N.C. App. 416, 583 S.E.2d 405, 2003 N.C. App. LEXIS 1537 (2003).

Plain language of G.S. 24-5(b) provides that prejudgment interest continues to accrue until the judgment is satisfied. Whiteside Estates, Inc. v. Highlands Cove, L.L.C., 169 N.C. App. 209, 609 S.E.2d 804, 2005 N.C. App. LEXIS 542 (2005).

Court properly awarded a landowner prejudgment interest pursuant to G.S. 24-5 for the period between the entry of the first judgment in its favor, which determined that it was entitled to damages for the land disturbing activities caused by the developer, and the second judgment, which determined the amount of damages. Whiteside Estates, Inc. v. Highlands Cove, L.L.C., 169 N.C. App. 209, 609 S.E.2d 804, 2005 N.C. App. LEXIS 542 (2005).

In a wrongful death action based on the medical specialist’s malpractice, the trial court did not err in requiring the specialist to pay all pre-judgment interest and costs; even if the claim of error had been preserved for appeal, there was no error because the trial court properly determined costs and interest before entitling the specialist to set-off for the settlement amount involving the other treating doctor, as G.S. 24-5(b) required that the pre-judgment interest be awarded before the set-off was given for the settlement amount. Boykin v. Kim, 174 N.C. App. 278, 620 S.E.2d 707, 2005 N.C. App. LEXIS 2396 (2005).

Failure to include interest mandated by the statute constitutes a clerical mistake; the trial court was correct to look to the statute when deciding the attorney’s motion for interest, and the fact that the attorney mistakenly requested relief pursuant to another subsection of the statute was not determinative, as the trial court had the authority to correct its oversight regardless of the arguments the attorney made. Robertson v. Steris Corp., 237 N.C. App. 263, 765 S.E.2d 825, 2014 N.C. App. LEXIS 1179 (2014).

Trial court properly ruled that interest on the attorney’s quasi-contract claim for quantum meruit was controlled by the second subsection of the statute, and although the trial court did not expressly designate the award in quantum meruit as compensatory damages, that designation was clearly inferred in the order, and the interest awarded was affirmed. Robertson v. Steris Corp., 237 N.C. App. 263, 765 S.E.2d 825, 2014 N.C. App. LEXIS 1179 (2014).

In breach of contract actions, prejudgment interest may be granted. Lazenby v. Godwin, 60 N.C. App. 504, 299 S.E.2d 288, 1983 N.C. App. LEXIS 2493 (1983).

And prejudgment interest has also been granted under certain limited circumstances where the amount of a claim is obvious or easily ascertainable from the contract or insurance policy. Lazenby v. Godwin, 60 N.C. App. 504, 299 S.E.2d 288, 1983 N.C. App. LEXIS 2493 (1983).

Treble Damages. —

It is appropriate under G.S. 75-16 to treble only the verdict awarded by the jury and not prejudgment interest assessable pursuant to this section. Market Am., Inc. v. Rossi, 104 F. Supp. 2d 606, 2000 U.S. Dist. LEXIS 14903 (M.D.N.C. 2000).

Pursuant to this section, the court should calculate prejudgment interest on the jury’s verdict only, and not on the trebled damages awarded by the court. Market Am., Inc. v. Rossi, 104 F. Supp. 2d 606, 2000 U.S. Dist. LEXIS 14903 (M.D.N.C. 2000).

Plaintiff whose damages were trebled pursuant to G.S. 75-16 of the North Carolina Unfair and Deceptive Trade Practices Act was awarded prejudgment interest on the amount of compensatory damages, $106.25 million, and postjudgment interest on the trebled amount, $318.75 million. Volumetrics Med. Imaging, Inc. v. ATL Ultrasound, Inc., 2003 U.S. Dist. LEXIS 11831 (M.D.N.C. July 10, 2003).

In a case arising from the termination of an employee, pre-judgment interest should not have been awarded based on treble damages arising from a violation of G.S. 75-1.1 due to a breach of contract; rather, the pre-judgment interest should have been awarded on the actual damages for breach of contract. Johnson v. Colonial Life & Accident Ins. Co., 173 N.C. App. 365, 618 S.E.2d 867, 2005 N.C. App. LEXIS 2015 (2005).

Prejudgment interest, provided for by this section held a “cost” within meaning of insurance contract. United States Fire Ins. Co. v. Nationwide Mut. Ins. Co., 735 F. Supp. 1320, 1990 U.S. Dist. LEXIS 3976 (E.D.N.C. 1990) (decided prior to 1985 amendment) .

Prejudgment Interest Held Not a Cost Within Meaning of Policy. —

Where insurance policy provided that, in addition to the policy limits, insurance company would pay all defense costs they incurred, prejudgment interest was not a defense cost within the meaning of the policy. Sproles v. Greene, 329 N.C. 603 , 407 S.E.2d 497, 1991 N.C. LEXIS 524 (1991).

Liability of Insurer for Prejudgment Interest. —

Since insurer’s insurance contract with the insured provided it would pay “all costs taxed to the insured in a suit we defend” it was liable for prejudgment interest under its contract of insurance. However, prejudgment interest could not be awarded on the amount of the judgment in excess of the insurer’s liability limits; thus, insured’s liability was limited to interest on the amount of the judgment which represented its insurance coverage. United States Fire Ins. Co. v. Nationwide Mut. Ins. Co., 735 F. Supp. 1320, 1990 U.S. Dist. LEXIS 3976 (E.D.N.C. 1990) (decision prior to 1985 amendment) .

A liability carrier’s obligation to pay prejudgment interest in addition to its stated limits is governed solely by the language of the policy. Nationwide Mut. Ins. Co. v. Mabe, 115 N.C. App. 193, 444 S.E.2d 664, 1994 N.C. App. LEXIS 602 (1994), cert. dismissed, 339 N.C. 614 , 454 S.E.2d 255, 1995 N.C. LEXIS 65 (1995), aff'd, 342 N.C. 482 , 467 S.E.2d 34, 1996 N.C. LEXIS 21 (1996).

Insurance company was obligated to pay prejudgment interest as part of the total of any damages up to its liability limit; therefore, where the total judgments exceeded the policy’s limit of liability, the individual claimants were not entitled to any prejudgment interest. Nationwide Mut. Ins. Co. v. Mabe, 115 N.C. App. 193, 444 S.E.2d 664, 1994 N.C. App. LEXIS 602 (1994), cert. dismissed, 339 N.C. 614 , 454 S.E.2d 255, 1995 N.C. LEXIS 65 (1995), aff'd, 342 N.C. 482 , 467 S.E.2d 34, 1996 N.C. LEXIS 21 (1996).

There is no statutory provision mandating that insurance carriers pay prejudgment interest that exceeds the stated limit of liability under the terms of the insurance contract, and since this section is not part of the Financial Responsibility Act, it is not written into every insurance policy. Watlington v. North Carolina Farm Bureau Mut. Ins. Co., 116 N.C. App. 110, 446 S.E.2d 614, 1994 N.C. App. LEXIS 866 (1994).

Whether the insurance policy expressly provided that prejudgment interest was calculable as a part of damages and was therefore included under the liability limits of the policy, defendant insurance company was not obligated to pay prejudgment interest above the policy limit of liability. Watlington v. North Carolina Farm Bureau Mut. Ins. Co., 116 N.C. App. 110, 446 S.E.2d 614, 1994 N.C. App. LEXIS 866 (1994).

The language of a liability carrier’s policy controls the liability carrier’s obligation to pay prejudgment interest in addition to its stated limits. Nationwide Mut. Ins. Co. v. Mabe, 342 N.C. 482 , 467 S.E.2d 34, 1996 N.C. LEXIS 21 (1996).

Nothing prevents a liability insurer from defining “damages” to include prejudgment interest and then capping the amount of damages that can be paid. Nationwide Mut. Ins. Co. v. Mabe, 342 N.C. 482 , 467 S.E.2d 34, 1996 N.C. LEXIS 21 (1996).

Prejudgment Interest from Date of Filing Complaint. —

This section allows prejudgment interest to accrue from the time the action is instituted. As G.S. 1A-1 , Rule 3 provides that a civil action is commenced by filing a complaint with the court, prejudgment interest is allowed to accrue from the date of filing with the court; thus, the court did not err in allowing prejudgment interest for the period prior to the time defendants were served with a valid complaint. Harris v. Scotland Neck Rescue Squad, Inc., 75 N.C. App. 444, 331 S.E.2d 695, 1985 N.C. App. LEXIS 3711 , writ denied, 314 N.C. 329 , 333 S.E.2d 487, 1985 N.C. LEXIS 2256 (1985).

In a damage action arising out of an automobile collision, the defendants’ admission in their answer of the existence of liability insurance was binding upon the parties and the trial judge. Therefore, the court’s assessment of interest from the date the complaint was filed was not error. Dunn v. Herring, 75 N.C. App. 308, 330 S.E.2d 834, 1985 N.C. App. LEXIS 3615 , cert. denied, 314 N.C. 539 , 335 S.E.2d 16, 1985 N.C. LEXIS 2032 (1985).

Where insurance company orally offered to pay its policy limit, prejudgment interest, and the costs to plaintiffs, but it did not pay those sums into court until 13 days later, since this section specifically provides that a noncontractual judgment bears interest from the date the action is instituted until the judgment is satisfied, it is the date its policy limits were paid into court which controls with regard to the payment of post-judgment interest. Sproles v. Greene, 329 N.C. 603 , 407 S.E.2d 497, 1991 N.C. LEXIS 524 (1991).

The Court of Appeals has interpreted the plain language of this section to allow prejudgment interest to accrue from the time the action is instituted. Roberts v. Young, 120 N.C. App. 720, 464 S.E.2d 78, 1995 N.C. App. LEXIS 938 (1995).

Superior court’s prejudgment interest award was erroneous and violated G.S. 24-5(b) because the court awarded interest beginning with the date that the suit was originally filed: (1) under G.S. 24-5(b) , plaintiff was entitled to prejudgment interest only for the period of time that his suit was pending prior to a judgment being entered in his favor; (2) plaintiff had voluntarily dismissed his original complaint a year after he filed it, and he had not refiled his suit until a year after that; and (3) the case was not pending, for purposes of awarding prejudgment interest under G.S. 24-5(b) before plaintiff refiled it as permitted by N.C. R. Civ. P. 41. Brookshire v. N.C. DOT, DMV, 180 N.C. App. 670, 637 S.E.2d 902, 2006 N.C. App. LEXIS 2513 (2006).

Arbitration Proceedings. —

An award of prejudgment interest was not precluded merely because the parties agreed to liability prior to entry into arbitration, but left open the issue of the amount of liability. Palmer v. Duke Power Co., 129 N.C. App. 488, 499 S.E.2d 801, 1998 N.C. App. LEXIS 653 (1998).

Where neither the arbitration agreement nor the arbitration award provided for prejudgment interest, the trial court was obligated to confirm the award as written and, accordingly, even if the arbitrator’s failure to include prejudgment interest was a mistake of law or fact, such mistake could not be corrected by the trial court on a motion for modification or correction. Palmer v. Duke Power Co., 129 N.C. App. 488, 499 S.E.2d 801, 1998 N.C. App. LEXIS 653 (1998).

Trial court did not impermissibly modify arbitration award under G.S. 1-569.24 when it calculated prejudgment interest under G.S. 24-5(b) but merely enforced the award as written, since both the arbitration agreement as understood between the parties and the arbitration award as drafted by the arbitrator contemplated an award of prejudgment interest. Lovin v. Byrd, 178 N.C. App. 381, 631 S.E.2d 58, 2006 N.C. App. LEXIS 1395 (2006).

Trial court did not err in denying a passenger’s request for prejudgment interest on his underinsured motorist arbitration award because, inter alia, implicit in the passenger’s request for prejudgment interest existed a request to modify the arbitration award, and the circumstances of G.S. 1-569.24 were the only circumstances in which a trial court was permitted to modify an arbitration award; G.S. 1-569.25 and G.S. 24-5(b) did not expand the limited circumstances in which a trial court was required to modify an arbitration award. Blanton v. Isenhower, 196 N.C. App. 166, 674 S.E.2d 694, 2009 N.C. App. LEXIS 360 (2009).

Trial court erred under G.S. 24-5(b) in refusing to award to an accident victim prejudgment interest on the amount of an arbitration award because the underinsured motorists provision of the automobile insurance policy provided for payment of compensatory damages and the arbitration award deferred the issue of prejudgment interest to the trial court. Hamby v. Williams, 196 N.C. App. 733, 676 S.E.2d 478, 2009 N.C. App. LEXIS 519 (2009).

No Prejudgment Interest on Equitable Distribution. —

No provision in the Equitable Distribution Act or any other statute authorizes the payment of prejudgment interest on an equitable distribution; this section, which authorizes prejudgment interest in certain instances, is limited to sums due by contract and to sums designated by the jury or other fact finder as compensatory damages in certain non-contract cases. Appelbe v. Appelbe, 76 N.C. App. 391, 333 S.E.2d 312, 1985 N.C. App. LEXIS 3882 (1985).

Prejudgment Interest for Tort Involving Property Loss. —

It is true that this section provides for the award of interest in certain situations. It does not, however, even peripherally address the jury’s discretion under the common law to award prejudgment interest in a tort involving loss of property. Accordingly, it cannot be construed to displace the existing common law, when such abrogation has not been provided for in whole or in part. City Nat'l Bank v. American Commonwealth Fin. Corp., 608 F. Supp. 941, 1985 U.S. Dist. LEXIS 20847 (W.D.N.C. 1985), aff'd, City Nat'l Bank v. American Commonwealth Financial Corp., 801 F.2d 714, 1986 U.S. App. LEXIS 31225 (4th Cir. 1986).

The release of claims is not equivalent to the entry of a judgment as to liability for purposes of subsection (b) of this section. Barnes v. Hardy, 98 N.C. App. 381, 390 S.E.2d 758, 1990 N.C. App. LEXIS 412 (1990), aff'd, 329 N.C. 690 , 407 S.E.2d 504, 1991 N.C. LEXIS 516 (1991).

Although case was not governed by the 1985 amendment providing for interest, plaintiff was entitled to prejudgment interest calculated from the date of breach since the amount of the damages to which the plaintiff was entitled could be determined by examining evidence relevant to the contract. Steelcase, Inc. v. Lilly Co., 93 N.C. App. 697, 379 S.E.2d 40, 1989 N.C. App. LEXIS 374 (1989).

Prejudgment Interest on Limits of Policy and Excess. —

Where trial court granted prejudgment interest on only $5,000 that remained due on $30,000 judgment after subtracting $25,000 policy limits paid by the liability carrier after the filing date of the complaint but before the judgment, the trial court erred in failing to award prejudgment interest on the $25,000 paid by the liability carrier from the filing date until it was paid by the liability carrier. Regarding the remaining $5,000, prejudgment interest should have been taxed from the date of filing to the time of judgment as a cost, less any interest already paid. Beaver v. Hampton, 106 N.C. App. 172, 416 S.E.2d 8, 1992 N.C. App. LEXIS 444 (1992), aff'd in part, vacated in part, 333 N.C. 455 , 427 S.E.2d 317, 1993 N.C. LEXIS 95 (1993).

Failure to Return Overpayment as Breach of Implied Contract. —

A breach of implied contract occurred each time during 1981 and 1982 that defendants overpaid plaintiff for oil and the latter failed to immediately return the overpayment, and the amount of the overpayments having been ascertained from the evidence, interest thereon immediately attached. But it attached only to the overcharges, the only money of defendants that plaintiff had the use of; it did not attach to the statutory penalty that was added to the overcharges pursuant to Chapter 75. Sampson-Bladen Oil Co. v. Walters, 86 N.C. App. 173, 356 S.E.2d 805, 1987 N.C. App. LEXIS 2681 (1987).

Prejudgment Interest on Bid Deposit “Detained” Pending Litigation. —

The executor was entitled under this section to prejudgment interest on, among other things, defendant’s bid deposit as compensation for the court’s “detention” of the deposit pending further litigation and resales arising from defendant’s default. Parker v. Lippard, 87 N.C. App. 43, 359 S.E.2d 492, 1987 N.C. App. LEXIS 2964 (1987).

Interest on Purchase Price. —

Although the contract for purchase and sale of property did not provide for the payment of any interest by defendant, because the parties contemplated defendant’s performance and not defendant’s breach of the contract, upon breach thereof the trial court properly ordered defendant to pay plaintiffs interest on the purchase price at the judgment rate to the date of closing. Deans v. Layton, 89 N.C. App. 358, 366 S.E.2d 560, 1988 N.C. App. LEXIS 189 (1988).

Default on Bid at Judicial Sale. —

Clerk’s order confirming the judicial sale constituted a legally binding acceptance of defendant’s bid and therefore created a specific contract of purchase. The executor tendered deed to the auctioned property and demanded payment. Defendant’s refusal to comply with that demand constituted a breach of defendant’s contract to purchase the estate property. Since the executor’s damages on that date were ascertainable based on defendant’s confirmed bid, defendant could have tendered the correct amount and stopped both the running of interest and the executor’s resale expenditures. Thus, as the executor’s claim was ascertainable on that date, the accrual of interest on that claim commenced on that date. Parker v. Lippard, 87 N.C. App. 43, 359 S.E.2d 492, 1987 N.C. App. LEXIS 2964 (1987).

Executor Entitled to Prejudgment Interest on Judicial Sale. —

An executor, after a series of resales arising from defendant’s failure to comply with his bid at a judicial sale under G.S. 1-339.30 , was entitled to prejudgment interest on defendant’s full $125,000.00 bid. Parker v. Lippard, 87 N.C. App. 487, 361 S.E.2d 395, 1987 N.C. App. LEXIS 3214 (1987).

Housing Authority Not Liable for Prejudgment Interest on Entire Verdict. —

The court held that there was no reason to subject defendant to liability for prejudgment interest on the entire amount of the verdict, when defendant, the housing authority, was only insured for less than half that amount. To do so would run counter to the policy reasons surrounding the enactment of subsection (b). Petty v. Housing Auth., 90 N.C. App. 559, 369 S.E.2d 612, 1988 N.C. App. LEXIS 618 (1988).

Interest Held to Begin When Defendant Refused to Pay Final Bill. —

In action by subcontractor to recover payment for work performed on a construction project, the award of interest from the date defendant refused to pay the final bill was properly granted. Moore v. Bobby Dixon Assocs., 91 N.C. App. 64, 370 S.E.2d 445, 1988 N.C. App. LEXIS 715 , cert. denied, 323 N.C. 476 , 373 S.E.2d 864, 1988 N.C. LEXIS 650 (1988).

In personal injury case, the trial court erred in awarding prejudgment interest to that portion of the award which was not covered by defendant’s liability insurance. Wagner v. Barbee, 82 N.C. App. 640, 347 S.E.2d 844, 1986 N.C. App. LEXIS 2602 (1986).

It is within the province of the trial court to set the date of breach for purposes of imposing prejudgment interest. Sockwell & Assocs. v. Sykes Enters., Inc., 127 N.C. App. 139, 487 S.E.2d 795, 1997 N.C. App. LEXIS 779 (1997).

Interest may be awarded on child support accruing on the date the complaint is filed. Taylor v. Taylor, 128 N.C. App. 180, 493 S.E.2d 819, 1997 N.C. App. LEXIS 1284 (1997).

The trial court properly ordered that prejudgment interest attach to the amount recovered under an insurance policy, even though the damages were unliquidated and undetermined until the verdict was rendered. Nothing in this section supports the proposition that a party obligated by contract to pay money to another can use the other party’s money at no cost merely because the exact amount due has not already been established. Dailey v. Integon Gen. Ins. Corp., 75 N.C. App. 387, 331 S.E.2d 148, 1985 N.C. App. LEXIS 3699 (1985).

Prejudgment Interest on Net Amount of Offset Award. —

In an arbitrated dispute between insurers where each party was awarded in its claim against the other, the district court did not err in offsetting the awards and in awarding prejudgment interest on only the net amount of the award, despite the claims by the insurer receiving the interest award that such an award of interest was a de facto award to which the other insurer was not entitled due to its dilatoriness in seeking to have the arbitration award confirmed and in opposing the confirmation; the de facto award merely placed the parties in the same position they would have occupied had they both immediately complied with the arbitration award. National Risk Underwriters, Inc. v. Occidental Fire & Cas. Co., 931 F.2d 1015, 1991 U.S. App. LEXIS 7582 (4th Cir. 1991).

Action on Uninsured Motorist Coverage. —

Although plaintiff’s uninsured motorist coverage was provided by insurance contract, the right to recover thereon was grounded in tort. Therefore, plaintiff insured’s action to recover under the policy met the first requirement for an award of prejudgment interest under this section, i.e., it was an action “other than contract.” Further, the uninsured motorist coverage under which the insured sought damages was liability insurance. Thus, by the uninsured motorist coverage contained in the motor vehicle liability insurance policy, the insurer assumed, up to its policy limits, the liability of the uninsured motorist for damages which the insured was legally entitled to recover from the uninsured motorist. Therefore, the insured was entitled to an award of interest from the date the action was instituted. Ensley v. Nationwide Mut. Ins. Co., 80 N.C. App. 512, 342 S.E.2d 567, 1986 N.C. App. LEXIS 2192 , cert. denied, 318 N.C. 414 , 349 S.E.2d 594, 1986 N.C. LEXIS 2597 (1986).

Action Against Underinsured Motorist Carrier. —

Underinsured motorist carrier was obligated to pay prejudgment interest, up to its policy limits, on the compensatory damages award of the jury in the underlying tort action by its insured against the tort-feasor. Baxley v. Nationwide Mut. Ins. Co., 334 N.C. 1 , 430 S.E.2d 895, 1993 N.C. LEXIS 283 (1993).

It was not error for superior court to allow prejudgment interest against subcontractor and the surety on the subcontractor’s bond in an action to recover by the contractor for work it was required to do after the subcontractor defaulted. Noland Co. v. Poovey, 58 N.C. App. 800, 295 S.E.2d 238, 1982 N.C. App. LEXIS 2836 (1982).

Award of Interest Held Inappropriate Where Specific Performance Ordered. —

Trial court erred in its order to award plaintiff ’s interest at the legal rate, on the earnest money deposit, from November 1, 1986 until delivery of a good and sufficient deed; an award of interest is inappropriate where the court has ordered specific performance and not monetary relief. Gordon v. Howard, 94 N.C. App. 149, 379 S.E.2d 674, 1989 N.C. App. LEXIS 438 (1989).

Shared Liability for Prejudgment Interest. —

Primary carrier and umbrella carrier were both liable for the payment of the awarded prejudgment interest on a pro rata basis based on their respective shares of the settlement amount since primary carrier could have limited its liability for prejudgment interest by tendering the amount of its policy prior to trial and umbrella carrier should have taken an active role in defending the underlying action in light of plaintiff ’s request for damages in excess of the limits under primary carrier’s liability policy. Hartford Accident & Indem. Co. v. United States Fire Ins. Co., 710 F. Supp. 164, 1989 U.S. Dist. LEXIS 3897 (E.D.N.C. 1989), aff'd, 918 F.2d 955, 1990 U.S. App. LEXIS 25793 (4th Cir. 1990).

Prejudgment interest is not authorized when only enforcing a statutory lien, absent a contract between the parties. W.H. Dail Plumbing, Inc. v. Roger Baker & Assocs., 78 N.C. App. 664, 338 S.E.2d 135, 1986 N.C. App. LEXIS 1965 (1986).

Proof of Insurance Coverage. —

The court did not err by allowing prejudgment interest where plaintiff presented no evidence that defendant carried liability insurance covering claim, since this section does not require plaintiff to present such evidence. Indeed, the law prohibits plaintiff from introducing such evidence at trial. In light of the statutory requirement of financial responsibility, G.S. 20-309 et seq., which is generally met through liability insurance, defendant has the burden of showing the absence of such insurance. Harris v. Scotland Neck Rescue Squad, Inc., 75 N.C. App. 444, 331 S.E.2d 695, 1985 N.C. App. LEXIS 3711 , writ denied, 314 N.C. 329 , 333 S.E.2d 487, 1985 N.C. LEXIS 2256 (1985).

Prejudgment Interest Not a Cost. —

Unless a policy of insurance provides to the contrary, prejudgment interest constitutes a portion of a plaintiff’s damage award and not a cost. Ledford v. Nationwide Mut. Ins. Co., 118 N.C. App. 44, 453 S.E.2d 866, 1995 N.C. App. LEXIS 81 (1995).

Calculation of Prejudgment Interest. —

The correct method of reducing a claim against a non-settling tortfeasor when prejudgment interest applies is to convert the settlement amount to judgment-time dollars, using the same legal rate of interest that is used in calculating prejudgment interest on the compensatory damages verdict, then subtracting the adjusted settlement figure from the adjusted compensatory damages figure. Brown v. Flowe, 349 N.C. 520 , 507 S.E.2d 894, 1998 N.C. LEXIS 845 (1998).

Prejudgment interest was properly calculated in a wrongful death case because interest was applied to the entire compensatory damages award and any credits to which a contractor might have been entitled were then deducted. Estate of Coppick v. Hobbs Marina Props., LLC, 240 N.C. App. 324, 772 S.E.2d 1, 2015 N.C. App. LEXIS 278 (2015).

Prejudgment interest provided for by this section held a “cost” within meaning of insurance contract, which insurer was obligated to pay. Lowe v. Tarble, 313 N.C. 460 , 329 S.E.2d 648, 1985 N.C. LEXIS 1552 (1985).

Where primary carrier filed a request for declaratory judgment to determine the party’s rights and obligations to pay $620,689.66 in prejudgment interest awarded in a State court action involving an insured of the primary carrier and umbrella carrier, the award of prejudgment interest in this case was an element of damages and not a cost; the purpose of the award of prejudgment interest is to compensate a worthy plaintiff for the loss of the use of money that he or she has incurred due to the wrongful acts of another party. Hartford Accident & Indem. Co. v. United States Fire Ins. Co., 710 F. Supp. 164, 1989 U.S. Dist. LEXIS 3897 (E.D.N.C. 1989), aff'd, 918 F.2d 955, 1990 U.S. App. LEXIS 25793 (4th Cir. 1990).

Prejudgment Interest on Payments Withheld by Clerk of Court. —

In a suit for the breach of a lease, the lessor was entitled under G.S. 24-5 to prejudgment interest on payments withheld by the clerk of court under G.S. 42-34 ; the payments did not include interest and were not a final settlement, and the lessor was deprived of the use of its money while it was retained by the clerk. N.C. Indus. Capital, LLC v. Clayton, 185 N.C. App. 356, 649 S.E.2d 14, 2007 N.C. App. LEXIS 1825 (2007).

Prejudgment Interest Properly Calculated After Discontinuance. —

Prejudgment interest was properly calculated under G.S. 24-5 on an operator’s judgment for damages arising out of a motor vehicle accident as: (1) due to a lapse in the alias or pluries summons, the operator’s action was discontinued under G.S. 1A-1 , N.C. R. Civ. P. 4; (2) the trial court lacked discretion in determining the commencement date of the action; (3) the action commenced on 9 June 2006, when the summons was reissued; and (4) the prejudgment interest was based on the period from 9 June 2006 to the date the judgment was entered. Bryson v. Cort, 193 N.C. App. 532, 668 S.E.2d 84, 2008 N.C. App. LEXIS 1981 (2008).

Principal and Interest Not Distinguished. —

The trial court did not err in awarding prejudgment interest when the jury did not distinguish between principal and interest, as the requirement that the jury distinguish between principal and interest pertains only to those rare situations where evidence as to both principal and interest is submitted to the jury for their consideration. Taha v. Thompson, 120 N.C. App. 697, 463 S.E.2d 553, 1995 N.C. App. LEXIS 920 (1995).

V.Decisions Under Prior Law

Decisions Under Prior Law. —

The legislature intended the words “from the time of the verdict” to mean the verdict upon which judgment in favor of plaintiff was rendered. Phelps v. Duke Power Co., 324 N.C. 72 , 376 S.E.2d 238, 1989 N.C. LEXIS 19 (1989) (decided under prior law) .

Former G.S. 24-5 was obviously meant to change the common law rule so that tort damages reduced to judgment would bear interest from the time the action was commenced provided the damages ordered to be paid were covered by liability insurance, and the legislature did not intend to change the rule regarding the accrual of interest on tort claims not covered by liability insurance. Phelps v. Duke Power Co., 324 N.C. 72 , 376 S.E.2d 238, 1989 N.C. LEXIS 19 (1989).

When plaintiff recovers judgment, it is the trial court’s duty, on its own motion, to inquire of the defendant regarding the existence of any liability insurance which could cover the damages awarded, and it is the defendant’s duty to respond fully and accurately to the trial court’s inquiry. Phelps v. Duke Power Co., 324 N.C. 72 , 376 S.E.2d 238, 1989 N.C. LEXIS 19 (1989) (decided under prior law) .

OPINIONS OF ATTORNEY GENERAL

Not Applicable When Appearance Bond Forfeited. — See opinion of Attorney General to Mr. Roy R. Holdford, Jr., 41 N.C. Op. Att'y Gen. 809 (1972).

Interest May Not Be Assessed on Costs. — See opinion of Attorney General to Honorable Charles M. Johnson, Clerk of Superior Court Montgomery County, 51 N.C. Op. Att'y Gen. 82 (1982).