*1 1127 CIT Hudgens. Corp. Credit Universal 2d 658 5-2603 April rehearing 1962. Opinion delivered rehearing. J., This was George Rose Smith, originally replevin. appellant’s action in com- plaint alleged incep- the car be worth At $1,000. appellant possession tion of the case the obtained of by executing vehicle delivery bond. equity.
The ease was later transferred to
final
decree the chancellor canceled the contract for fraud and
gave
appellees
judgment
for $1,060,
representing
damages
value
the car for the
wrongful repossession.
We affirmed the decree
ground
question
reaching
without
alone,
usury.
being Walker, Johnson in status Kilgo Co., *2 Cas. v. Continental 196; merely the of one the is Hence if case 171. pur- wrongful, the repossession for car not of the was required recover it and could to surrender were chasers payment only of with interest. $245, their down set of sale is contract hand, the other when On keep purchaser the to is entitled for the aside Corp. Stanley, 225 property. I. T. Credit Universal C. usurious this contract was 2d 556. If 279 W. appellees a right awarding the was the chancellor judgment neces- becomes the car. It thus for the value of pass fix the sary the issue of for us to damages. measure by the the show that chancellor,
The as found facts, represented price The to be $1,095. seller car appellees sign salesman induced the contract price being fraudulently blank and filled in the as later charge an contract recites excessive The $1,395, $300. legal charge an interest which is within the per per really if limit of 10 cent annum the was charge $1,395. If, however, the excessive of $300 agreement plainly as usurious. treated interest the dispute It is shown without before the seller appel- agree telephoned would to the transaction he pur- investigation finance lant chasers’ contract to be certain conditional sales credit, appellees’ was could be credit transferred. good. day found to be sale dealer On the after the assigned appellant. the contract The recited unpaid principal finance $1,150, balance company paid issuing setting by. a check for $943 up paid a reserve which was dealer $207 monthly all when installments been met purchasers. (Whether practice setting up such might involve as the finance com- reserve between pany and the has dealer not before dealer us, complained. origi- only issue here is whether the buyers nal transaction between the seller and .usurious.) either to Did excessive amount in itself or to a resorted cloak scheme usury? sign the borrower to a note
Where
lender induces
in a
and later fills in the
sum
blank
(correctly,
actually
than the amount
lent it has been held
think)
support
we
these facts
Bennett,
Cortner v.
92 So.
Auto
559;
Miss.
App.,
Pritchett,
Fort Worth v.
credit
Tex. Civ.
Gilbert,
951;
S. W. 2d
Chambers
contra,
Minn.
Yet not or instance of fraud in con- *3 properly nection with a or loan credit sale can be classi- usury. knowingly give fied as If lender should money borrower counterfeit the transaction would be obviously fraudulent and but it criminal, would not be any purchase goods more than the usurious, of with coun- money usury. Again, terfeit constitutes if a thief should property sell stolen on credit the transaction would be subject usury. but not rescission, for To determine which of side the line this falls case ‘‘ usury. must we understand what is and what is not The legal excess over the rate to a borrower for the money” use is said be Bouvier’s Dic- Law (8th tionary Ed.). given An almost identical definition is Dictionary. in Webster’s Third International many The definitions in our own cases are substan tially “Usury corrupt agreement to the same effect. is a legal for more rate interest on a loan of money, or for the forbearance of debt.” Ford v. Han cock, “It 248. essential, order to establish plea usury, that there was a loan or forbearance money, for such forbearance there was an agreement intent or to take unlawful actually such unlawful interest was taken or reserved. wrongful imputed act of will never be parties, opposite and will not be inferred when the reasonably Briggs conclusion can fairly be reached.” v. agreement Steele, 91 Ark. 458, 121 S. 754. W. A mutual necessary constitute interest is
for unlawful
part of
an intention on the
have been
“there must
but
legal
more than the
take or receive
the lender to
It will be seen charge for an excessive exaction of money. bar if In the case loan forbearance or keep and had the contract himself had intended dealer amount as device an increased inserted compensation obtaining greater for his exten- as return might jus- well then sion of credit tified. quite Here however, actual different. case, amake could not have intended to seller unpaid simply purchase price,
his forbearance he meant to we said is, never forbear —that This dealer would the Sloan to wait his case, until he had first made sure not even enter into the sale immediately transfer the contract to the he could *4 company. to That the conduct amounted finance seller’s lacking have there essen- doubt, fraud we no but the that is the of tial characteristic earmark company the for- It the finance that exercised doing it an for but did receive extra bearance, paid it in so. the dealer full for the recited Instead, principal debt and was to receive no more than legal upon respect interest its investment. In this the distinguished to from Hare v. General Contract case is Purchase Corp., 220Ark. other contracts sale to recent cases in which we have found of appel- be usurious. Here there is no indication that the charge or lant was aware of the dealer’s excessive acted collusively plain enough in the And it transaction. operation, that this method unlike various dealer’s of the repeatedly for could not be used as means cloaks public. this trans- victimizing The salient factor attempt dishonesty than his rather was the seller’s action buyers’ advantage No for credit. need take to habitually long he remain in business if could dealer subjected finance com- his customers defrauded pany many like one. this suits making took chancellor charge position that the recited interest upon amounting legal
although to less it would $1,150, was usurious because recited balance of illegal charge upon $850, which been balance have an parties. orally agreed upon-by This the sum position nor the finance is not sound. Neither the dealer charging any ever had intention purchasers nor $850, balance of did making payment. any intention of such a ever have entirety. must or fall in its fraudulent contract stand parties by agreement giv- a new "Wecannot make figure, ing recited which is effect to the interest favor- appellees’ and at same contention, able rejecting time principal figure, is unfavor- the recited which able them. really a
What we have here routine case of fraud, principles provide equity adequate imposes remedy. 19, § Our Art. severe constitution, penalty usury; liberty but not at we are amend by extending language constitution, its effect, reach a not fall transaction does within the or letter spirit any definition of that we have been any any authority jurisdiction. able to find in Had appellant beginning this contract been usurious in the subject infirmity. have would taken Clem v. Nelson, W. 2d 448. But the while was never fraudulent, usurious, because no exces- sive was made for the loan or forbearance *5 petition rehearing granted. The decree is entry reversed and the cause remanded for of a decree rescinding contract for fraud. J.,
Ward, concurs. McFaddin, Johnson, and Robinson, JJ., dissent. dissenting. Justice, F. Associate Ed. McFaddin, Chancery Court that held the contract was tainted opinion usury. February with both fraud and In the Majority 1962, the rested its affirmance on sole 19, opinion ground My that of fraud. concurrence to stated: “My study that of this case convinced me the trans- clearly my action I usurious, and rest affirmance on ground. express that opinion. I As to the fraud no matter, ’’ rehearing, I. that On Universal C. T. insisted since ground set on the contract was aside the sole fraud, then this Court should eliminate the strict rules that govern opinion rehearing and cases; agrees petition rehearing. Major- with the Thus, ity definitely holding nowis that the transaction was not usury; holding against usury with tainted and such from vigorously opinion I because I am still dissent that the Chancellor1 was correct in his was established. surrounding original
I
submit
the facts
May
transaction
1959,
established
Mr.
On
Hudgens
daughter
Dodge
his
their
drove
car
to the “West
Auto Sales” and
it for a
traded
priced
Hudgens
Ford,
at $1,095.00. The
Dodge, leaving
were allowed
their
a balance
opinion,
usury:
concerning
In his
the Chancellor said
though
“The Chancellor finds that
there is a conflict in the testi-
mony
preponderance
of the evidence is to the effect that the execu-
by
tion of the
obtained
Sales Contract
.Conditional
in blank
the defendants was
representation by
agents
employees
false
of West
agreed purchase price
Auto Sales and that
of the auto-
$1,095.00
$1,395.00
mobile was
rather
than the sum of
as reflected
by
Therefore,
the sales contract.
the finance
shown
the contract
of
shown
exceeded
interest on the amount which
should have been
10%
the sales
and was therefore usurious.
In the recent
Corporation,
of Foster
case
330 S.W. 2d
v. Universal C.I.T. Credit
231 288, opinion
Supreme
delivered Nov.
wherein the
though
found
Court
contract was
usurious
on its face the
seeds
sown' in the
contract
became usurious
been
contingency
the occurrence of a
which made the sales contract
greater
usurious. In this instance the inclusion of an amount
purchase price agreed upon resulting
in a
rate of Interest
than
contingency
due
the balance
would have been such a
as would
10%
make
transaction usurious and therefore void.”
*6
to be
was
balance there
To this
them of $850.00.
due
charges; and
interest
and the
insurance
the cost of
added
per month.”
payments
“about
$50.00
were to
thoroughly
original
transaction
above was
That the
Majority,
be-
conceded
must be
and
established
original
there
transaction
not been
if this had
cause
usury.
Harris,
nor
Mr.
been neither
could have
represented
Auto
told
Sales,
the West
who
place
Hudgens
business
at the
was no one
that ther
up
(May 21st)
type
contract;
that afternoon
leaving
Hudgens signed
it to
in blank,
the contract
so the
contract. The
to fill
Auto Sales
West
Dodge
away
Hudgens
in the Ford.
car and went
left their
Hudgens
contract had
that the blank
learned
Later,
May
follows:
filled in as
dated
been
$1,395.00
Price of the Ford Car
Dodge
245.00
Car
Less Value of
Unpaid
Price
1,150.00
Balance
Cash
142.90
Insurance
Cost of
Charge
133.42
Interest
$1,426.32
Due
Total
twenty-four
payable in
amount was
The last mentioned
monthly
installments
each.
$59.43
price
on the con
car was increased
Ford
agreed
$1,395.00;
so
$1,095.00
tract from the
Hudgens
owing as the
instead of
balance of
they
showed
owed
balance of
testified,
the contract
they
that
amount of interest
were
$1,150.00;
speaks
pay
figure
volumes.!
was
That interest
$133.42.
Memp
unquestionably
that
The evidence thus
shows West
Hudgens
pay
were to
Auto Sales intended
his
sum
and this is con
the definite
$133.42
Opinion
by Majority
ceded
to be
on
obligation.
The intention
collect
definite sum of
money,
10°/o,
which is
excess of
Commercial
2d 1009.
Chandler,
Credit Plan v.
power my
I submit with all the
command
So
original
was
shown that
balance due
when it was
amount
collected
interest
he
and the
clearly
established
then
was $133.42,
charge.
there
Lower
found
Court
interest
that issue.
not be reversed
and should
*7
rehearing
Opinion
this
Majority
contains
The
law:
of the
paragraph,
a
statement
is
correct
which
sign a note
borrower to
a
induces the
lender
“Where
principal in a
sum
fills
in blank and later
(correctly,
actually
been held
lent it has
amount
than the
finding
support
think)
facts
that these
we
Auto
559;
Bennett,
369,
So. 2d
v.
230 Miss.
Cortner
App., 223
Pritchett,
Tex. Civ.
Fort Worth
credit of
Gilbert,
Minn.
Chambers v.
951; contra,
W. 2d
N.
After
above
Opinion
Majority
seeks
differentiate
of
present
law,
quoted
theory
on the
that the
case from the
rule
Memphis
Auto
transferred this contract
Sales
West
I.
and that
it was
the Universal C. T.
the Universal
I. T. that exercised the “forbearance”
and did
C.
doing
the extra
so. The transaction
receive
$300.00
amount of interest
to be
and the determination
but is to
transfer,
not to be determined after
Memphis
Auto
bé tested what West
Sales intended
Corp. Duke,
the time. General Contract
223 Ark.
Memphis
areWe holdings by letting by be a defense the seller wrong letting against usury. a defense one be That is present wrong. against hold- another The effect trusting buyer persuade ing may will be that seller may sign price thereafter raise the blank and company and contract to a finance and transfer the thereby will seller and the finance both the penalties usury. As I see it, avoid the extreme recognize— holding Majority is the failure vice in the present as did the Chancellor—that original transaction. dissenting. Ar- Justice, Associate Robinson, Sam pro- of the Constitution of Arkansas 13
ticle Sec. interest than for a rate of “All contracts vides: per per void, annum be ten cent shall prohibit Assembly shall and the General agreed by of interest but when no rate law; same per per upon, annum.” be six centum shall Notwithstanding and the statutes Constitution prac- period many years implementing over it, grown charging a usurious rate of interest tice of many instances interest was that in extent per per In Hare v. than annum. at a rate of more cent Corp., Purchase General Contract gave that a caveat to the effect subse- this Court quent constitu- effective date of decision the provision prohibiting usury would be enforced. tional this made it clear Later, in several cases Court Co., Roebuck would not tolerated. v. Sears Sloan therein. and cases cited at bar the effect of those decisions is the case opinion, practice swept away. my Henceforth, charging a more usurious rate of interest will occur fre- pen- quently than it did the Hare case. Now the before alty charging usury by merely can be avoided charging agreed price basing the more than the charge. gets interest on the fraudulent if the seller Then, caught making charge, the usurious he will not have to provides penalty suffer the law Here it was found trial Court this purchaser bought Court automobile for the *9 agreed paid at that he $1,095.00; purchase, leaving pay- time of the balance of $850.00, equal monthly able in 24 installments. Interest per per approxi- ten cent annum would amount to mately but as shown on the face of the purchaser charged approxi- was as per per mately majority cent But annum. effect holds that no usurious rate of interest was be- charging cause addition to unlawful rate of inter- attempt purchaser est, an was to defraud the made of an $300.00. additional respectfully
I dissent. concurring. I am Justice, Associate Ward, Paul opinion concurring merely majority I think necessary go than it order to went further consequently no show there was opinion open possibly present may the door add to I state confusion refer to the sen- relative tence “It which reads: was the finance exercised the but it did not forbearance, receive extra doing so”. $300 opinions thing
Our former have made at one least clear about conception is, if note is usurious in its —that purged usury by it cannot transfer to purchaser. opin- an innocent So, occurs me that the enough by citing ion went far the Ford v. Hancock case pointing and then out that the addition of merely a fraud and had none of the indicia aof for the forbearance of the use