American Insurers Life Ins. Co. v. Regenold

• Court: Arkansas Supreme Court
• Writing for the Court: GEORGE ROSE SMITH; FOGLEMAN
• Citation: American Insurers Life Ins. Co. v. Regenold, 423 S.W.2d 551, 243 Ark. 906 (Ark. 1968)
• Decision Date: 22 January 1968
• Docket Number: No. 5--4297,5--4297
• Parties: AMERICAN INSURERS LIFE INSURANCE COMPANY et al., Appellants, v. J. E. REGENOLD, Appellee.

Page 551

423 S.W.2d 551

243 Ark. 906

AMERICAN INSURERS LIFE INSURANCE COMPANY et al., Appellants, v. J. E. REGENOLD, Appellee.

No. 5--4297.

Supreme Court of Arkansas.

Jan. 22, 1968.

Rehearing Denied Feb. 26, 1968.

Patten & Brown, by Chas. Brown, Little Rock, and E. J. Butler, Forrest City, for appellants.

E. J. Ball, Fayetteville, and Oscar Bendler, Blytheville, for appellee.

GEORGE ROSE SMITH, Justice.

In 1960 the appellee's father, E. M. Regenold, lent $17,892.23 to the principal appellant, American Insurers Life Insurance Company, to enable that company to avert the foreclosure of a mortgage upon 4,495 acres of farm land owned by American Insurers in Mississippi. The elder Regenold gratuitously assigned the contract to his son, who brought this suit to enforce a provision in the contract by which the lender was to receive, in addition to interest at the rate of 6% per annum, one half of the net proceeds accruing from the ultimate sale of the Mississippi lands. The defendants, American Insurers, and several of its officers, attacked the validity of the provision in question on the ground that it made the loan agreement usurious. The chancellor rejected that defense and awarded the plaintiff a judgment for $110,538.96, with interest bringing the total to $127,702.47. The pivotal issue here is that of usury.

Except for a dispute about the value of the Mississippi lands when the contract was made, there is hardly and real conflict in the testimony. From a record of almost 2,000 pages we winnow the pertinent facts.

Noble Gill organized American Insurers Life Insurance Company in 1958 and was originally the sole contributor of its capital assets. At Gill's death in 1960 the company was insolvent, at least in the sense of being unable to meet its current obligations. A foreclosure proceeding was pending against the Mississippi land--the corporation's principal asset. The comparatively small sum of $17,892.23 was needed to pay delinquent items then due upon mortgage indebtednesses totaling $262,519.89.

It is fairly inferable that Gill, as president of the company, had not kept his fellow officers and directors fully informed about the Mississippi foreclosure suit. We may suppose that Gill had some plan for averting the foreclosure, but his death leaves that matter in a state of uncertainty.

Gill died on June 12, 1960. One of the appellants, Walter H. Patton, was elected to succeed him as president of the company. A few days later Patton and another director, J. E. Stevenson, Jr., were both in Mississippi. Stevenson, Gill's brother-in-law, was an Arkansas real estate dealer with whom the lands had been listed for sale at an asking price of $350,000. He testified that it was not until June 23 that he learned that a public foreclosure sale was scheduled to take place on June 25. He and Patton began desperate efforts to find some last-minute means of averting the sale.

The two men telephoned E. M. Regenold, a close friend who was president of a bank in Blytheville, Arkansas. After mcuh discussion Regenold agreed to lend American Insurers the needed $17,892.23, with the debt to be evidenced by a promissory note bearing interest at 6% per annum. As security for the note American Insurers agreed (a) to assign to Regenold the net proceeds of an insurance policy on Gill's life, (b) to assign to Regenold the rents from part of the Mississippi lands, (c) to give Regenold a note for $10,000, to be executed by Stevenson, and (d) to give Regenold a 'commission' of hald the net proceeds of the sale of the Mississippi land, after the payment of the mortgage indebtedness and expenses of sale. On the basis of the telephone conversations Regenold sent a cashier's check to Patton and Stevenson, which reached them only minutes before the foreclosure sale would have been held. Regenold's attorney promptly drafted a resolution embodying the terms of the loan contract, which the directors of American Insurers adopted on June 30. The corporation also executed its note for $17,892.23, which was actually paid within a few months from the Mississippi rents. In 1963 American Insurers, which was then in liquidation, sold the Mississippi lands for $567,131.25. After the payment of the debts against the land and of the sum of $133,804.38 as a compromise settlement with tenants who had an option to purchase the land themselves, there remained the net proceeds of sale upon which the chancellor based his decree in favor of the appellee.

At the outset we disallow the appellee's contention that the transaction was a 'joint venture' rather than a simple loan of money. We find no resemblance between the contract, as described by Regenold's own attorney, and a joint venture or partnership agreement. Regenold took no risk in the sense of advancing money that might be lost if the...