Gulfco of La., Inc. v. Brantley
| Decision Date | 07 November 2013 |
| Docket Number | No. CV–13–135.,CV–13–135. |
| Parties | GULFCO OF LOUISIANA, INC. d/b/a Tower Loan of Springhill, Louisiana, Appellant v. MacArthur BRANTLEY and Pamela Brantley, Appellees. |
| Court | Arkansas Supreme Court |
OPINION TEXT STARTS HERE
John D. Lightfoot, El Dorado; and Robert S. Tschiemer, Mayflower, for appellant.
Claudell Woods, Magnolia, for appellees.
Appellant Gulfco of Louisiana, Inc., d/b/a Tower Loan of Springhill, Louisiana (Gulfco), appeals the decision of the Columbia County Circuit Court denying its request to foreclose on the home of appellees Pamela and MacArthur Brantley. For reversal, Gulfco argues that the circuit court erred in applying Arkansas usury law to decline enforcement of the debt instruments that it contends are governed by the laws of the State of Louisiana. Gulfco also asserts that the circuit court erred in concluding that it was required to be licensed by the Arkansas Secretary of State and in ruling that the transactions were unconscionable and the product of predatory lending practices. We affirm the circuit court's decision.
The record reflects that Gulfco is in the business of extending high-risk loans to customers with poor credit ratings. It operates primarily in Louisiana, Mississippi, and Missouri. The Brantleys, who reside in Waldo, Arkansas, obtained four loans over a two-year period from Gulfco at its location in Springhill, Louisiana, that is near the Arkansas–Louisiana border. First, on May 13, 2009, they borrowed $1,580.36 with an annual interest rate of 40.20 percent. After deductions for fees and insurance, the Brantleys received $1,031.63 in cash. Applying the stated interest rate, the finance charge amounted to $811.64, yielding a total indebtedness of $2,392, payable in twenty-six monthly installments of $92. The promissory note evidencing the debt stated that the loan was secured by “personal property.”
On December 17, 2009, the Brantleys obtained another loan of $20,887.71 at an annual interest rate of 24.09 percent. Out of that sum, Gulfco satisfied the first loan and paid both a hospital bill owed by the Brantleys and their delinquent property taxes. After deducting those sums and $850 in fees, they received $17,388.32. With the finance charge of $18,784.29, the Brantleys were to pay a total of $39,672 over the course of seventy-two months at the rate of $551 per month. To secure the note for this loan, the Brantleys executed a mortgage on their home in Waldo. Gulfco appraised the value of the home at $32,000 with a quick-sale value of $27,000.
On June 2, 2010, Gulfco loaned the Brantleys an additional $2,779.82. On this loan, Gulfco charged an annual interest rate of 35.67 percent, and after deductions for fees and prepaid interest, the Brantleys received $2,501.83. Adding the finance charge of $1,250.18, the total debt amounted to $4,030 to be satisfied in twenty-six monthly installments of $155. This loan was secured by a list of personal property that included a riding lawn mower, a drill, a chainsaw, televisions, and cameras.
On March 11, 2011, the Brantleys borrowed an additional $3,345.34 with interest at 34.32 percent. Gulfco charged $400.72 in fees, and the proceeds were used to retire the June–2010 note. After these deductions, the Brantleys received cash in hand of $598.71. Including the finance charge of $1,464.66, they were obligated to pay $4,810 over twenty-six months at the rate of $185 per month. This note was secured by the same personal property as was the June–2010 loan.
The Brantleys made no payments on the loans after March 31, 2011. On July 1, 2011, Gulfco filed in the Circuit Court of Columbia County a pleading styled “Notice of Default and Intention to Sell,” alleging that the mortgage on the Brantleys' home was in default and stating that a sale of the home would occur on August 19, 2011. Gulfco attached a copy of the mortgage to the notice of default. On July 14, 2011, Pamela Brantley filed a pro se answer that was followed by a response filed by the Brantleys' attorney. In the response, the Brantleys denied the substantive allegations of the notice of default, and they asserted the defenses of usury, unconscionability, estoppel, illegality, unclean hands, predatory lending practices, and a violation of the Arkansas Deceptive Trade Practices Act (ADTPA).
On August 11, 2011, the Brantleys filed a petition for a preliminary injunction to halt the proposed sale of their home. In the petition, they asserted that the promissory notes were unconscionable, as Gulfco took advantage of their lack of sophistication and induced them to mortgage their home with knowledge that they did not have stable, full-time employment. The Brantleys also alleged that the interest rates Gulfco charged were usurious under the Arkansas Constitution. Gulfco did not file a response to the petition. On August 12, 2011, the circuit court entered an order granting the Brantleys' request for a preliminary injunction.
At the trial held on May 11, 2012, MacArthur Brantley testified that he worked part-time for a moving company. He said that he learned about Gulfco through a friend and that he and Pamela took out the first loan to pay personal bills that were about to become delinquent. MacArthur said that they fell behind on their payments of $92 per month because his work was slow and because Pamela had become ill. He stated that “Dee,” Gulfco's loan agent, called him about their delinquency and suggested that they take out a second loan. MacArthur said that Dee already had the papers prepared when he arrived at the office. He stated that he did not read well and that he read what he could of the loan disclosure statement and promissory note. MacArthur testified that the money for the second loan was used to pay the first note and to buy a logging truck. He stated that he purchased the truck for $1,500 and spent $2,300 for welding in addition to buying tires and paying insurance. With regard to the June–2010 loan, MacArthur testified that the money was used to catch up the arrearages on the December–2009 loan. He said that they borrowed more money in March 2011 to again bring their loans current. MacArthur testified that they did not have the money to pay the loans and that they were faced with the choice of either accepting more loans or losing their home.
Pamela Brantley testified that she and MacArthur began construction of their home in 2000 and that they had built it a little at a time when money was available. Pamela said that she graduated from high school with a B average and that MacArthur had taken remedial classes in high school. Pamela stated that the county assessor had appraised the value of their home at $51,450. She said that she had heard from friends that Gulfco offered easy money and that she and MacArthur sought a loan because they were behind on their household bills. She said that they told the loan agent, Demetrius Wilson, that she earned $120 per week sitting for an elderly woman and that MacArthur worked part-time for a moving company and sometimes mowed yards. She said she also advised Wilson of her medical problems. Pamela stated that Wilson knew that they had a home and about MacArthur's idea of obtaining a logging truck as a means to generate income. She testified that she advised Wilson that they were having a hard time making their payments on the first loan and that it was Wilson who suggested mortgaging their house and purchasing a logging truck. Pamela said that Wilson mentioned this idea many times in their conversations and that they finally agreed to another loan with a mortgage on their home. She testified that having the logging truck did not work out due to problems keeping the truck running, the high cost of gasoline, and a downturn in the logging business. Pamela said that they used the June–2010 loan to make a past-due payment on the previous loan and to pay household bills. She said that she was having medical problems at the time and could not work and that they “were going in circles” and getting deeper and deeper in a hole. Pamela stated that she did not read the loan documents because she and MacArthur were broke and in need of money.
Lori Spence, Gulfco's district manager, testified that between the first loan in May 2009 and the second one in December 2009, appellees were assessed three late charges and had missed two $92 monthly payments. She acknowledged that, when the June–2010 loan was made, appellees had missed the June payment. Spence stated that with the December–2009 and June–2010 loans, appellees were paying $551 a month on the note and mortgage in addition to $155 per month on the June–2010 note. She said that they continued to miss payments and garner late charges. Introduced into evidence was a receipt appellees received dated February 18, 2011, stating that Spence stated that they were one payment behind on the mortgage when the final loan was made in March 2011, and the loan proceeds were used to pay that arrearage. Further, she testified that Gulfco has several offices located near the Arkansas border.
After the conclusion of testimony, the circuit court took the case under advisement and asked for posthearing briefs, directing the Brantleys' attorney to submit his brief first and Gulfco's attorney to file his brief in response. In their brief, the Brantleys argued that the law of Arkansas applied and that the series of loans and conduct of Gulfco were unconscionable and unjust. In response, Gulfco maintained that the loans and mortgage were executed in good faith and in compliance with Arkansas law.
The court entered an order setting forth its decision on August 12, 2012. The circuit court described what it referred to as a “disturbing pattern of lending.” The court found that Gulfco made four loans to the Brantleys despite their lack of stable...
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