Brooks v. Burgess, 5-1328

• Decision Date: 28 October 1957
• Docket Number: No. 5-1328,5-1328
• Citation: 228 Ark. 150,306 S.W.2d 104
• Parties: Nancy BROOKS, Appellant, v. M. E. BURGESS, Executor, Appellee.
• Court: Arkansas Supreme Court

Page 104

306 S.W.2d 104

228 Ark. 150

Nancy BROOKS, Appellant, v. M. E. BURGESS, Executor, Appellee.

No. 5-1328.

Supreme Court of Arkansas.

Oct. 28, 1957.

Wiley A. Branton, Pine Bluff, for appellant.

Robert Meurer and Spitzberg, Bonner, Mitchell & Hays, Little Rock, for appellee.

GEORGE ROSE SMITH, Justice.

This is a suit brought by E. E. Burgess to foreclose two mortgages upon land owned by the appellant. The principal defense is a plea of usury. The chancellor rejected this plea, fixed the amount of the indebtedness at $13,050.30, and entered a decree of foreclosure. Burgess died during the pendency of the appeal, and the cause has been revived in the name of his executor.

The debt sued upon represents money and supplies advanced by Burgess over a period of years for the cultivation of land being farmed by the appellant and her husband. The account goes back to the fall of 1946 and was at first secured by the yearly execution of a chattel mortgage on the crop. In March of 1951 the debt exceeded the estimated value of the crop for that year, and the debtors executed the first of the two real estate mortgages in issue. It secures a note for $4,000, with interest at 10 per cent per annum. On January 1, 1953, the Brookses executed the other mortgage sued upon, to secure a note for $6,588.47. This note recites an interest rate of 10 per cent, though it is described in the mortgage as bearing only 8 per cent before maturity and 10 per cent thereafter. It does not appear that either note was meant to represent the exact amount then owed. The lender's son, Marvin Burgess, testified that the $4,000 mortgage was given 'to cover a part of what they owed at that time.' It is not clear whether the second mortgage was a renewal of the first, nor is it shown how the principal amount of $6,588.47 was determined.

Each note recites the maximum legal rate of interest and is not ostensibly usurious. Before the suit was filed, however, the appellant requested and was given a statement of the account. This statement covers the years 1946 through 1954, contains some 640 items of debit and credit, and must have been prepared from the lender's records. It discloses that the lender invariably calculated the interest on September 1 of each year and simply entered an interest charge amounting to 10 per cent of the sum then owed, regardless of when the advances had been made. In the first year, for example, a total of $3,389.99 was advanced from time to time between October 25, 1946, and September 1, 1947. On the latter date an interest charge of exactly 10 per cent, amounting to $338.99, was entered. Needless to say, this method of computing interest is usurious.

In view of the lender's itemized statement the appellant's attorney raised the question of usury before the suit was filed. Burgess then offered to delete the illegal charges and later brought suit for the amount of the principal only, though the complaint was subsequently amended to ask for interest in accordance with the terms of the mortgages. At the trial Marvin Burgess testified that he kept his father's books and followed 'a practice of ours for years' in making the 10 per cent interest charge every September. This is from his testimony:

'A. I charged interest the first of each September.

'Q. How much interest did you charge? A. Ten per cent.

'Q. Suppose a man obtained $100.00 on the first of August, how much interest would you charge on that item the first of September? A. Ten per cent.

'Q. Even though he had it only one month? A. That is right. I charged 10% on the dollar the first of September, regardless...