Dupree v. Virgil R. Coss Mortgage Company

• Decision Date: 03 November 1924
• Docket Number: 215
• Parties: DUPREE v. VIRGIL R. COSS MORTGAGE COMPANY
• Court: Arkansas Supreme Court

267 S.W. 586

167 Ark. 18

DUPREE v. VIRGIL R. COSS MORTGAGE COMPANY

No. 215

Supreme Court of Arkansas

November 3, 1924

Appeal from Chicot Chancery Court; E. G. Hammock, Chancellor affirmed.

Decree affirmed. Motion for rehearing denied.

John Baxter and R. W. Wilson, for appellant.

The contract is usurious and void for the reason that the American Farm Mortgage Company was the agent of the lender and the latter has attempted to exact interest and commission in excess of ten per cent. per annum. 27 R. C. L., 203-204; Crawford & Moses' Digest, § 7354; Id. § 7362; Id. §§ 7363, 7364, 7366. The calculation of interest on this loan by G. A. Franklin following the rule approved in the case of Green v Conservative Loan Life Insurance, 153 Ark. 219, shows it to be usurious, in that more than ten per cent. was charged. The commission collected here was not only known to, but equally shared in, by the lender with the agent. 51 Ark. 535; 54 Ark. 40 to 57 inclusive. See also 54 Ark. 573; 62 Ark. 375; 109 Ark. 69-77; 128 Ark. 74-75. The power of attorney naming the American Farm Mortgage Company as the agent of the borrower was a mere subterfuge, and will not be tolerated. 100 Ill. 611; 54 Ark. 40-57. A transaction is no less usurious because payment is made to the lender himself, or, as in this case, is equally shared by the lender with the agent. 132 Ark. 376, 377. It having been shown that more than ten per cent. per annum had been charged, it devolved upon the appellee to show that an honest mistake had been made, otherwise that clause in the mortgage disclaiming any intention to charge excessive interest was shown to have been a mere device or subterfuge to conceal the usury. 62 Ark. 380; 132 Ark. 377. A mutual agreement to give and receive unlawful interest is not necessary to constitute usury. If it be actually reserved, taken or secured, or agreed to be taken or reserved, the contract is usurious. 37 Minn. 441; 135 Ark. 578. Since a simple calculation of interest, as was done in this case, shows that more than ten per cent. was charged, the case depends upon the question of agency, and the facts in the case clearly disclosed the American Farm Loan Company's agency for the lender. 138 Ark. 262, 267; 150 Ark. 612; 2 Corpus Juris, 448, and note 78-B; 31 Cyc. 1661-1662. The facts establish the strongest form of agency, viz., a partnership, under all the tests of that relationship. 20 R. C. L. 27; Id. 823 (27) (28); Id. 825 (29); 63 Ark. 518-526; 87 Ark. 417; 44 Ark. 423; 63 Ark. 518; 74 Ark. 437; 80 Ark. 23; 87 Ark. 412-418; 143 U.S. 611; 91 Ark. 26-30; 95 Ark. 406-9; 144 Ark. 621-629.

W. D. Jones and James M. Golden, for appellees.

The burden is upon the party pleading usury to show that the transaction is usurious, by clear and cogent proof. 24 A. L. R., 856; 14 Ore. 47, 12 P. 89; 44 Ore. 530-533, 1 Ann. Cases, 418; 27 R. C. L. 268; 159 Ark. 141; 135 Ark. 578, and cases cited; 18 N.J.Eq. 481; 54 Ark. 566-569; 105 Ark. 661; 107 Ark. 21. To constitute usury there must be an agreement to pay for the use of money more than ten per cent. 54 Ark. 566-569. And the wrongful act of usury will never be imputed to the parties, and it will not be inferred where the opposite conclusion can be reasonably and fairly reached. 91 Ark. 462; 67 Ark. 370; 68 162; 74 Ark. 241; 83 Ark. 31; 87 Ark. 534. The intention of the parties is the principle that governs. 153 Ark. 219. Even if the American Farm Mortgage Company be held to be the agent of appellee in this transaction, still there can be no usury because of the provision in the mortgage to the effect that the interest should not, in any event, exceed the maximum legal rate permitted by the laws of Arkansas, and that any excess collected should be credited upon principle or interest remaining unpaid upon discovery of the erroneous overcharge. 56 Ark. 340; Id. 339; 129 Ark. 167; 167 S.W. 362. The statement of facts and the reasoning of the court in the case of Bolt v. Kirby, 57 Ark. 251, refute the contention of counsel for the borrowers here that the American Farm Mortgage Company was acting as the agent of appellee in making the loans. To sustain the plea of usury it must appear that excessive interest was paid to the lender or that a bonus or commission was paid to the agent of the lender, with his knowledge, or under circumstances from which his knowledge will be presumed, which, when added to the interest paid or to be paid, would exceed the lawful rate. A bonus or commission paid to the agent of the borrower will not make the transaction usurious. 54 Ark. 573; 51 Ark. 548. It is provided in the notes and mortgages that the same should be payable at the office of appellee in Muskogee, Oklahoma. The transaction is governed by the laws of that State. 25 Ark. 53. Oklahoma Statutes, § 5097; 59 Okla. 215; 39 Cyc. 899; 15 N.Y. 986; 39 Cyc. 1054-1055.

Williams & Williams, amici curiae.

HUMPHREYS, J. MCCULLOCH, C. J. Justice SMITH concurs.

OPINION

HUMPHREYS, J.

Appellant brought suit against appellees in the chancery court of Chicot County to cancel a note and mortgage he executed to Virgil R. Coss Mortgage Company on the 17th day of November, 1920, and by it assigned to the New Milford Security Company, upon the ground that the contract provided for a greater rate of interest than 10 per cent. per annum, which rendered it usurious and void under the laws of Arkansas, both as to principal and interest. It was alleged in the bill that appellant procured the loan from the Virgil R. Coss Mortgage Company, an Oklahoma corporation, residing at Muskogee, Oklahoma, through its agent, American Farm Mortgage Company, a partnership composed of H. D. Price and Guy V. Busenburg, which had its office at Pine Bluff, Arkansas; that the loan was for $ 1,300 on its face, payable in ten years, bearing interest at the rate of 7 per cent. per annum from date until paid, and it was agreed in the written application for the loan that $ 300 of the amount should be deducted as a commission to the American Farm Mortgage Company for procuring the loan, and that, pursuant to the contract, the cash bonus was deducted from the $ 1,300, which rendered the contract usurious. The mortgage in which the note was described was made an exhibit to the bill. The mortgage and note were executed in Arkansas, and made payable at the office of Virgil R. Coss Mortgage Company in Muskogee, Oklahoma. The mortgage also contained the following paragraph:

"It is agreed that the rate of interest herein reserved and charged shall not in any event exceed the maximum legal rate permitted by the laws of Arkansas. If interest in excess of the maximum legal rate has been charged, it is through an error in computation, and it is agreed that any excess collected above the maximum legal rate shall be credited upon any amount, either principal or interest, remaining unpaid when such overcharge is discovered."

The American Farm Mortgage Company filed a demurrer to the bill, which was sustained by the court.

The other appellees filed separate answers to the bill, denying each material allegation therein.

The cause was submitted upon the pleadings and testimony adduced, which resulted in a finding that there was no usury in the transaction, and a decree dismissing appellant's bill for the want of equity, from which finding and decree an appeal has been duly prosecuted to this court.

This is a companion case with that of Virgil R. Coss Mortgage Company v. Marcus and Malvina Jordan, appealed to this court from the chancery court of Drew County, involving the same issues. Much of the testimony was taken at the same time to be used and treated as testimony in each case. Learned counsel for appellant has summarized the facts disclosed by the testimony, which we adopt in the main, with some necessary additions, as a statement of the facts by the court. It is as follows:

"About twenty-five years ago, H. D. Price, who had for a number of years been engaged in the farm loan business, moved from Oklahoma City to Wilburton, Oklahoma, and opened up a bank. This placed him so far out of touch with his Eastern investors that he turned over, or was instrumental in turning over, his loans to the Virgil R. Coss Mortgage Company. From Wilburton, H. D. Price went to Keota, where, in addition to the banking business, he was at all times a farm loan man. When Price and Coss first became acquainted, they were competitors in Oklahoma City; afterwards Coss moved to Muskogee, where he is now operating the Virgil R. Coss Mortgage Company. For a number of years H. D. Price lived at Stigler, Oklahoma, where Price and Busenburg and a Mr. Zebold operated a farm loan brokerage under the name of the American Farm Mortgage Company. About eight years ago Mr. Price disposed of his business at Stigler and Keota Oklahoma, and moved to Pine Bluff, Arkansas, where he and Guy V. Busenburg formed a partnership under the name of American Farm Mortgage Company. Mr. Zebold, who had formerly been with Price and Busenburg at Stigler, moved to Muskogee and became associated with the Virgil R. Coss Mortgage Company as vice president. For several years prior to this time the Coss Mortgage Company had been handling loans for the American Farm Mortgage Company. Mr. Coss states that it was generally understood that if, upon the investigation of the Arkansas territory, he found it a desirable place to make loans, he would handle their business. At that time the Virgil R. Coss Mortgage Company had never done business in Arkansas, but, shortly after the American Farm Mortgage Company was organized at Pine Bluff, it entered the State of Arkansas as a foreign corporation, for the sole purpose of handling loans secured by the American Farm Mortgage Company, and named H. D. Price as its agent for service...