Brown v. Central Arkansas Production Credit Ass'n

• Decision Date: 24 June 1974
• Docket Number: No. 74--54,74--54
• Citation: 510 S.W.2d 571,256 Ark. 804
• Parties: H. E. BROWN et ux., Appellants, v. CENTRAL ARKANSAS PRODUCTION CREDIT ASSOCIATION, Appellee.
• Court: Arkansas Supreme Court

Page 571

510 S.W.2d 571

256 Ark. 804

H. E. BROWN et ux., Appellants, v. CENTRAL ARKANSAS PRODUCTION CREDIT ASSOCIATION, Appellee.

No. 74--54.

Supreme Court of Arkansas.

June 24, 1974.

Herby Branscum, Jr., Perryville, for appellants.

Hartje & Hartje by George F. Hartje, Jr., Conway, for appellee.

FOGLEMAN, Justice.

This appeal was taken from a decree of the Chancery Court of Perry County in a foreclosure suit awarding appellee a judgment for $2,915.10, interest and an attorney's fee of $750.99. The suit was filed on March 1, 1972. The complaint alleged that an indebtedness then amounting to $15,081.97 remained due appellee on a note for $18,910.54 executed by appellants on December 17, 1969 and secured by a mortgage on certain real property and a security interest in certain farm equipment. After the suit was filed, appellants, with permission of appellees, sold the farm equipment and applied the proceeds to the debt. Thereafter, appellants filed a petition seeking a stay of the sale of the real estate, and later alleged that appellee had charged a usurious rate of interest, and that the attorney's fee of $750.00 allowed in the decree was unreasonable. After a hearing, the chancellor rejected appellants' contentions but reduced the judgment from $2,962.11 previously awarded. We affirm.

At the hearing, appellant Henry Brown testified that he borrowed the face amount of the note from Central Arkansas Production Credit Association on December 17, 1969 and that no payment was made until January 4, 1971 when $6,000 was paid by check. Brown said $2,019 of this was applied to interest and the remainder to principal. Brown said he first borrowed money from the Production Credit Association in 1952 or 1953. Appellants objected to cross-examination of Brown about his 1969 Central Arkansas Production Credit Association loan made in January, 1969, but when the objection was overruled, he answered that, while he did not think he owed appellee anything that was not incorporated into the face amount of the note sued on, it was possible that he did.

Estella Shaw, treasurer of the credit association, testified about the history of loans made to Brown on January 13 and December 17, 1969. She related that sometimes there is a time lag between a loan application and its approval by the association's loan committee. She said that the note sued on was prepared on December 17, 1969 and that an unpaid balance on the January loan amounting to $15,355.54 was 'renewed' as a part of the indebtedness evidenced by the new note. Under the lender's procedures, the application, note and mortgage are prepared the same day. If there is a time lapse between the application and disbursement upon approval of the loan, interest accrued in the interval on a preexisting indebtedness is not included in the new note. According to her calculations interest at 7% on Brown's debt remaining unpaid on the January loan amounted to $144.31, when the $6,000 payment was made. Mrs. Shaw applied the first $144.31 to the payment of this interest and the balance as a credit on the new note. She pointed out that no recovery of the $144.31 item was sought in the foreclosure complaint. On corss-examination, she admitted that the $2,019.00 credited to interest on both the old and new loans would exceed 10% per annum on the principal of the new loan. She also said that interest amounting to $1,874.69 was charged on the December loan at the time of this payment and that principal was credited with the remaining $3,981.00.

The chancellor held that the contract was not usurious, but said that some confusion about the $144.31 item was attributable to appellee's failure to furnish appellants with a breakdown showing the indebtedness existing at the time of the $6,000 payment and the application of that payment. Upon this basis, he ordered that the judgment be reduced by this amount and described his action as a gift to appellants by the court. Because of evidence showing that only $1,200 was disbursed to appellants at the time of the December loan, the chancellor did not accord full credibility to Henry Brown's testimony denying any indebtedness to appellee in December 1969 other than the face amount of the note.

Appellants first contend that the chancellor erred in admitting over their objection testimony relating to indebtedness existing prior to the note sued on, because no allegation in appellee's pleading indicated that a part of the payment made in January 1971 was or should have been applied to the preexiting indebtedness. Appellants argue that, because appellee's treasurer, by answering pretrial interrogatories (not abstracted) stated that the original amount of the...