Habach v. Johnson

• Decision Date: 25 February 1918
• Docket Number: 183
• Citation: 201 S.W. 286,132 Ark. 374
• Parties: HABACH v. JOHNSON
• Court: Arkansas Supreme Court

201 S.W. 286

132 Ark. 374

HABACH v. JOHNSON

No. 183

Supreme Court of Arkansas

February 25, 1918

Appeal from Polk Chancery Court; Jas. D. Shaver, Chancellor affirmed.

Decree affirmed.

J. I Alley, for appellant.

1. There was no intent to charge more than the legal rate of interest. 62 Ark. 380.

2. If there was a mistake of fact, by error in calculation or inadvertence, it is not usury. 25 Ark. 191; 41 Id 331; 62 Id. 370.

3. The burden to prove usury is on defendant. Usury is never inferred. 83 Ark. 31; 59 Id. 366; 57 Id 251.

4. There is no proof that Ray Worthington was the agent of the lender. 57 Ark. 256; 54 Id. 40.

5. The usury, if any, should be purged. 62 Ark. 370.

H. H. Thomas, for appellee.

1. The loan was clearly usurious and so intended, and the decree of the chancellor should be sustained. 109 Ark. 69.

2. Worthington was Ellis' agent and his act was ratified by Ellis. 54 Ark. 573; 54 Id. 40; 51 Id. 546; Ib. 534.

3. There was no mistake. 2 Elliott Cont., § 967, p. 269; 50 N.Y. 437; 97 Ala. 417; 165 Mich. 498; 91 Ark. 458.

4. Ignorance of the law is no defense and the transfer gave no validity to the void contract. 41 Ark. 331; 77 Id. 103.

5. The offer to purge the usury is unavailing unless a new consideration was had and a new contract made. 62 Ark. 360, 375-6.

6. The loan was usurious under the laws of New York or Arkansas or Oklahoma. 60 Ark. 269; 72 Id. 83; 46 Id. 50, 66.

7. The findings of the chancellor are sustained by the evidence. 95 Ark. 482.

OPINION

SMITH, J.

George W. Johnson and his wife executed their joint note on March 20, 1912, to Edwin S. Ellis for the sum of $ 800.00, bearing interest at the rate of six per cent. per annum, payable semi-annually, and due five years from date. They also executed ten notes, for $ 24.00 each, covering the interest on this loan. The notes were secured by a mortgage on a tract of land owned by the Johnsons, and were assigned, before maturity, for value, to Mrs. Henrietta Habach. Six of these interest notes were paid, when, upon default being made in the payment of the next note to fall due, Mrs. Habach brought suit to foreclose the mortgage which secured its payment. After the complaint had been filed for this purpose, an amendment was filed, in which it was alleged that, by calculation, it had been ascertained that the loan to the Johnsons was usurious; and there was a disclaimer of any intention of taking usury, and a denial of the existence of any such intent at the time the notes were executed; and there was a prayer that plaintiff be allowed to remit any claim for interest beyond that allowed by law. Ellis was the president of the Jefferson Trust Company, of McAlester, Oklahoma, a corporation engaged in lending money and in negotiating sales of notes for money loaned.

Johnson applied for this loan to W. A. Worthington, who, according to Johnson's testimony, was the agent of the trust company working for a salary. He testified that Worthington stated that it was the policy of the trust company to loan money for five years at nine per cent. interest per annum, and Johnson applied for a loan of $ 800.00 on those terms. There was offered in evidence a writing signed by Johnson and his wife, in which they agreed to pay Ray A. Worthington the sum of $ 120.00 for negotiating this loan. Johnson disclaimed any recollection of having signed this agreement, and testified that he did not know Ray Worthington and that he had had no dealings with him, but that he dealt with W. A. Worthington as the agent of the trust company The loan was approved and the trust company wrote Johnson a letter, which was signed by Ellis in his official capacity, in which it was stated that "Enclosed we hand you check for $ 680.00, in full payment of your loan after deducting cash commission of $ 120.00." Johnson testified that he did not know, until after he had paid six of these interest notes, that the contract was usurious. Johnson insists that this $ 120.00 as commission was reserved by Ellis himself and that while he does not show that he knows this to be a fact no one testified to the contrary. But, at any rate, the court might well have found that the agreement to pay the commission to Ray Worthington, who had nothing to do with negotiating the loan, was a subterfuge adopted for the purpose of giving color to a transaction which would otherwise have been usurious on its face. The court did find that the loan was usurious, and the unpaid notes and the mortgage were canceled. It is conceded that the execution of the loan contract according to its terms will result in the exaction of usurious interest; and we think the court was warranted finding that, if this commission was not paid to the lender himself, it was paid to his agent, and, if so, there can be no question of the lender's knowledge of its retention, for he, himself, reserved the commission. Banks v. Flint, 54 Ark. 40, 14 S.W. 769; May v. Flint, 54 Ark. 573, 16 S.W. 575; Baird v. Millwood, 51 Ark. 548, 11 S.W. 881; Thompson v. Ingram, 51 Ark. 546, 11 S.W....