Hare v. General Contract Purchase Corp.
| Decision Date | 26 May 1952 |
| Docket Number | No. 4-9723,4-9723 |
| Citation | 220 Ark. 601,249 S.W.2d 973 |
| Parties | HARE v. GENERAL CONTRACT PURCHASE CORP. |
| Court | Arkansas Supreme Court |
P. L. Smith, Antoine, for appellant.
Guy B. Reeves, Little Rock, for appellee.
This case involves the issue of usury in connection with a sale. 1
Appellant, Clyde Hare, purchased a used truck from Earl Meeks, a secondhand automobile dealer in Arkadelphia, for $1,750. After making a cash payment of $100, and trading in a car for a credit of $500, the balance due by Hare to Meeks was $1,150. To handle this balance, Hare executed to Meeks a title retaining contract and note for $1,439.13. The note and contract were on forms supplied Meeks by appellee, General Contract Purchase Corporation; and Meeks and Hare understood that the said $1,150 was increased $289.14 to take care of insurance, interest and service charges on the delayed payments; and that the note for $1,439.13 was payable $68.53 per month for twenty-one months.
A day or two after the completion of the trade between Meeks and Hare, Meeks transferred the title retaining contract and note to the General Contract Purchase Corporation, without recourse, and received $1,150. Hare made six of the monthly payments to General Contract Purchase Corporation, and then filed suit alleging usury, and claiming the relief stated in Sec. 68-609 et seq., Ark.Stats. The General Contract Purchase Corporation, for its defense, claimed:
I. That General Contract Purchase Corporation was a bona fide purchaser, for value, without notice, and was therefore, a holder in due course of the Hare note, and that the claim of usury was unavailable against such holder.
II. That the contract price of the truck was increased from $1,750 for a cash sale, to $2,039.13, because it was a credit sale.
III. That the difference between the face of the note ($1,439.13) and the balance of the truck trade ($1,150) represented two items: one being $148.24, which was the amount of insurance premium, and the other being $140.89, which was not only for interest but for service charge; and that such service charge has been approved by this Court.
The Chancery Court refused Hare's plea of usury, and entered a decree for General Contract Purchase Corporation; and from that decree, Hare has appealed. We discuss the defenses of General Contract Purchase Corporation in the order listed.
I. Bona Fide Holder. This defense is without merit. If the note be in fact usurious, then transferring it to a bona fide purchaser would not improve the situation. Our Constitution, Art. 19. Sec. 13, provides:
'All contracts for a greater rate of interest than ten percent per annum shall be void, as to principal and interest, and the General Assembly shall prohibit the same by law; * * *.'
In the case of German Bank v. DeShon, 41 Ark. 331, this Court held that a note usurious in the hands of the payee is also usurious in the hands of a subsequent purchaser, though he purchased in good faith, before maturity of the note, and without any notice of the usury; and that the reason for such holding is that the Constitution makes a usurious note void, and therefore, it can gain no validity by circulation. The case of German Bank v. DeShon is an outstanding decision in our reports, and has been consistently followed. Under that holding--which we now reaffirm--the defense of bona fide holder, for value, without notice, is without merit against the plea of usury.
II. Increased Selling Price Because Of Credit Sale. Appellee says that the price of the truck was increased because the truck was sold on credit and appellee claims that there are many cases from this Court, 2 and from other jurisdictions, 3 which permit a 'credit price', as distinguished from a cash price. The cases cited by appellee sustain the general theory, but even the credit price may be attacked as a cloak for usury. 4
But the facts in the case at bar disclose that there was never any 'credit price' actually stated. We have before us the original Conditional Sales Contract between Hare and Meeks, and it recites:
'Total cash price of automobile and all extra equipment .............. $1750.00
Cash on or before delivery .................................. $100.00
Allowance on car traded in ................................... 500.00
-------
Total down payment ..................................................... 600.00
--------
Deferred Balance of Cash Price ........................................ 1150.00
Time Price Differential (Including any Insurance), ................... 289.13
--------
Balance of Time Price ................................................ $1439.13
Which said balance of time price is payable in 21
consecutive equal monthly installments of $68.53 each.'
On the reverse side of the original contract, there is the assignment from Meeks to General Contract Purchase Corporation and also an affidavit, duly acknowledged by Hare and Meeks, which, omitting signatures and acknowledgment, reads 'The undersigned Purchaser and Seller of the within motor vehicle hereby swear and affirm that the within Conditional Sales Contract is bona fide, given to secure an unpaid just debt of $1150.00 due from Purchaser to Seller * * *.'
From the foregoing, and from other evidence in the record, it is clearly established that the truck was priced at $1,750, and that there was no 'credit price', as distinguished from the $1,750. There is no fact in this record which makes applicable the rule of a bona fide credit price. Therefore, we need not discuss credit price as a cloak for usury and further than is discussed in the subsequent topics of this opinion.
III. Interest And Service Charge. Thus, we come to appellee's final defense, which, as previously stated, is that the $140.89 was not only for interest, but for a service charge in connection with the sale of the truck. The balance on the truck was $1,150, and the insurance premium was $148.24, so the debt was $1,298.24. But the note was for $1,439.13. The question is whether such interest and service charge, which when added together exceed 10%, 5 make the transaction usurious. It is clear: (a) that Hare and Meeks agreed that $289.13 would be added to the $1,150, in order to cover insurance, interest, and carrying charges; (b) that the parties thought the $289.13 listed as 'time price differential (including any insurance)', was a perfectly legal addition; and (c) that it was not until months after the trade was made and after Hare claimed usury, that it was ascertained that the insurance premium was $148.24, and the interest and other charges were $140.89.
The evidence fails to show that Meeks acted as the agent of General Contract Purchase Corporation in this case, so there was a sale by Meeks to Hare, and the transfer of the note and papers by Meeks to General Contract Purchase Corporation. The question is whether such 'time price differential' is legally permissible against the plea of usury even when there is a sale on which to predicate such increased price.
In a long line of cases, we have permitted the seller, under one guise or another, to do exactly what was done in the case at bar, and we have permitted the transferee of the paper to recover in just such a situation. Some of such cases are: Garst v. General Contract Purchase Corp., 211 Ark. 526, 201 S.W.2d 757; Harper v. Futrell, 204 Ark. 822, 164 S.W.2d 995, 143 A.L.R. 235; General Contract Purchase Corp. v. Holland, 196 Ark. 675, 119 S.W.2d 535; Cheairs v. McDermott Motor Co., 175 Ark. 1126, 2 S.W.2d 1111; Standard Motors Finance Co. v. Mitchell, 173 Ark. 875, 298 S.W. 1026, 57 A.L.R. 877; and Smith v. Kaufman, 145 Ark. 548, 224 S.W. 978.
In the case at bar, the parties dealt on the strength of the aforesaid holdings, which have become a rule of property, and we must not overrule these cases retroactively. 6 6 Therefore, insofar as the case at bar is concerned, it must be affirmed on the strength of our previous holdings.
IV. Caveat. But the time has come when we must re-examine these holdings, so we now give the public a caveat 7 that the effect of transactions, such as in the case at bar, may impinge on the constitutional mandate against usury, and transactions entered into after this appeal becomes final, may be subjected to the taint of usury with the aforementioned decisions affording no protection. Illustrative of our earlier holdings in this regard, we call attention to two cases. In Ford v. Hancock, 36 Ark. 248, there had been a credit sale of chattels, with a note and mortgage to secure the seller. The buyer pleaded usury in the sale, and that plea was successful. This Court said:
Likewise, in Tillar v. Cleveland, 47 Ark. 287, 1 S.W. 516, 517, the Court used pertinent language. Cleveland sought to borrow $270 from Tillar in order to buy some property. But Tillar insisted on taking title to the property and then selling it to Cleveland for $360. This Court held that Tillar had used the deed and contract of sale to...
To continue reading
Request your trial
-
Simpson v. Union Oil Company of California
...Supply Co. v. Abell, 95 Mont. 148, 24 P.2d 133 (1933), where the court was badly split on the issue; Hare v. General Contract Purchase Co., 220 Ark. 601, 249 S.W.2d 973 (1952); Spanel v. Mounds View School District, 264 Minn. 279, 118 N.W.2d 795 (1962); Williams v. City of Detroit, 364 Mich......
-
Smith v. State
...Jones, 44 N.M. 623, 107 P.2d 324 (1940); Continental Supply Co. v. Abell, 95 Mont. 148, 24 P.2d 133 (1933); Hare v. General Con. Purchase Corp., 220 Ark. 601, 249 S.W.2d 973 (1952).1 State ex rel. Walton v. Parsons, 58 Idaho 787, 80 P.2d 20 (1938); Nordby v. Dept. of Public Works, 60 Idaho ......
-
Carper v. Kanawha Banking & Trust Co.
...801 (5th Cir. 1956); Daniel v. First National Bank, 227 F.2d 353, reh. den. 228 F.2d 803 (5th Cir. 1955); Hare v. General Contract Purchase Corp., 220 Ark. 601, 249 S.W.2d 973 (1952); Ford v. Hancock, 36 Ark. 248 (1880); E. Tris Napier Co. v. Trawick, 164 Ga. 781, 139 S.E. 552 (1927); Dorot......
-
Fields v. Southern Farm Bureau Cas. Ins.
...as the case at bar is concerned, it must be affirmed on the strength of our prior holdings." Hare v. General Contract Purchase Corp., 220 Ark. 601, 606-607, 249 S.W.2d 973, 977 (1952). Fields observes, however, that this court in Spears v. Spears, supra, announced that it intended to reexam......