Hollan v. American Bank of Commerce & Trust Company

• Decision Date: 21 May 1923
• Docket Number: 392
• Citation: 252 S.W. 359,159 Ark. 141
• Parties: HOLLAN v. AMERICAN BANK OF COMMERCE & TRUST COMPANY
• Court: Arkansas Supreme Court

252 S.W. 359

159 Ark. 141

HOLLAN v. AMERICAN BANK OF COMMERCE & TRUST COMPANY

No. 392

Supreme Court of Arkansas

May 21, 1923

Appeal from Pulaski Chancery Court; John E. Martineau, Chancellor reversed in part.

Decree affirmed in part, reversed in part and cause remanded.

J C. Marshall, for appellant.

The first five mortgage loans were usurious, and the court erred in not so holding, and especially is this true of the second third and fourth loans. 39 Cyc. 971; 135 Ark. 578; 54 Ark 155. Renewal also usurious. 39 Cyc. 1093. The exactions by the bank officers personally for their individual benefit made the first and fifth loans usurious. 27 R. C. L. 239; 39 Cyc. 975; 63 N.W. 108.

Moore, Smith, Moore & Trieber, for appellee.

The personal gratuities given one of the bank officials did not render loans usurious, and the burden was on appellant to prove usury. 105 Ark. 653; 123 Ark. 612; 32 N.E. 534. Case cited by appellant, 63 N.W. 108, not applicable to facts herein. Collection of 1 per cent. brokerage did not render other loans usurious, as the loans were to be carried till automobiles could be sold. There must be an intention to take usurious interest in order to constitute usury. 25 Ark. 258; 91 Ark. 458. The notes were extended indefinitely to carry out intention of parties. 27 R. C. L. 212. Rate of interest was uncertain and could not be definitely known until loans were paid off. 56 Ark. 335; 69 Ark. 352; 118 N.E. (N. Y.) 622. Usury will not be inferred, where, from the circumstances, the opposite conclusion can be reasonably and fairly reached. 83 Ark. 31; 74 Ark. 241; 153 Ark. 219. The increase of the rate afterwards was an oversight, and certainly does not show an intention to make such charge at time loan was made. 25 Ark. 258; 67 Ark. 426; 63 Ark. 225; 138 Ark. 11.

J. C. Marshall, in reply.

Bank had to enter into written contract to charge over 6 per cent. interest, and writing shows intention of parties as to interest and brokerage is undisputed. 62 Ark. 370; 135 Ark. 578; 39 Cyc. 951. Cases of 64 Ark. 426, 153 Ark. 219, have no application here. 115 N.W. 577; 68 S.W. 917; 46 N.W. 360; 88 N.W. 845; 64 N.W. 898. Notice or knowledge of usurious charge is presumed where agent making loan has general authority. 45 N.W. 439. The notes sued on, except those for the sixth loan, are usurious and void, and a decree should be entered accordingly.

WOOD J. MCCULLOCH, C. J., dissenting. Mr. Justice SMITH concurs in these views.

OPINION

WOOD, J.

Claud L. Hollan, hereafter called appellant, doing business under the name of Hollan Auto Company, executed certain notes to the American Bank of Commerce & Trust Co., hereafter called the appellee. We will refer to these loans as the first, second, third, fourth, fifth and sixth loans, in the order in which the notes were executed.

The first note was for $ 4,000 dated October 23, 1919, due in thirty days. The note contained this recital: "Negotiable and payable without defalcation or discount at the office of the American Bank of Commerce & Trust Company at Little Rock. Arkansas, with interest from date at the rate of eight per cent. per annum until paid." This note was extended from thirty days without renewal until June 23, 1920, and from the last mentioned date was extended by renewal notes each month until April 20, 1921. Two credits were made on the note, representing the proceeds of sales of cars, the balance of the indebtedness being represented by a renewal note for $ 1,000 executed April 20, 1921, bearing interest at the rate of 10 per cent. per annum from date until paid.

The second note was for $ 2,750, due in thirty days after date, at 8 per cent. per annum, bearing the recital, "negotiable and payable without defalcation or discount at the office of the appellee," etc. This note was extended without renewal from thirty days to June 6th. From the last named date it was extended monthly by renewal notes until April 3, 1921. Two credits were made upon the renewal notes, representing proceeds of sales of cars, and the balance of the indebtedness on the second loan is represented by note of April 3, 1921, for $ 850.

The third loan was represented by two notes, one for $ 2,511 and the other for $ 2,631, executed March 10, 1921, due in thirty days after date, bearing interest at the rate of 8 per cent. per annum from date until paid, with similar recitals as to defalcation and place of payment. The note for $ 2,511 was extended from thirty days without renewal until June 9, 1920, and by renewal note from thirty days thereafter until February 7, 1921. On October 13, 1920, a payment of $ 850 was credited on one of the renewal notes, and the original indebtedness on the note for $ 2,511 is now represented by a balance of $ 1,660, evidenced by note of February 7, 1921. The note for $ 2,631 was extended without renewal from thirty days until June 9, 1920, and from the last named date by renewal each month until April 9, 1921. On November 6, 1920, a payment of $ 881, representing the proceeds of a sale of a car, was credited on the back of one of the extension notes, and the balance of the original indebtedness on the note for $ 2,631 is represented by note of April 8, 1921, for $ 1,750.

The fourth loan is represented by a note for $ 2,650 executed April 5, 1920, due in thirty days after date, with interest at 8 per cent. per annum from date until paid, with similar recitals as to defalcation and place of payment. This note was extended without renewal from thirty days until June 4, and from the last mentioned date from thirty days by renewal until April 3, 1921. On June 7, 1920, and Sept. 18, 1920, credits of $ 850 and $ 900, respectively, were made on this loan, and the balance of $ 900 is now represented by note dated April 3, 1920, for that amount.

The fifth loan is represented by two notes of $ 2,000 each, executed September 20, 1920, due in thirty days, bearing interest at 10 per cent. per annum from maturity until paid, with similar recitals as to defalcation and place of payment. No payments were made upon these notes, and the indebtedness is now represented by renewal notes executed January 19, 1921.

The sixth loan is represented by two notes dated May 4, 1921, due on or before ninety days, in the respective sums of $ 1,235.26 and $ 1,200, bearing interest at the rate of 8 per cent. per annum from date until paid. These notes were never renewed.

This action was instituted by the appellee against the appellant to recover the balance alleged to be due on the above loans and to foreclose the mortgages on certain automobiles given as security. The notes and mortgages are set up and described in the complaint. The defense was the plea of usury. The appellant alleged that the loans were usurious because of interest and brokerage and bonus required to be paid by appellant to the appellee, which amounted to a greater rate of interest than 10 per cent. per annum for the use of the money loaned.

The court rendered a decree in favor of the appellee for the balance due on the several loans in the sum of $ 13,231.86, with interest at the rate of 8 per cent. per annum from date of the decree until paid, and foreclosed the mortgages on certain automobiles executed to secure the indebtedness to satisfy the same. From that decree is this appeal.

1. The appellant contends that the first and fifth loans were usurious, because of certain bonuses or commissions exacted by and paid to J. F. Walker as a condition upon which the loans were obtained, and a consideration therefor, in addition to the 8 per cent. interest. Concerning the first loan for $ 4,000, dated October 23, 1919, the appellant testified as follows: "There was no brokerage to the bank on this first loan. I did not pay Mr. Walker a premium in getting a loan, but I did pay him $ 25 each for the sale of the two cars which I sold from that shipment. I had an agreement with him beforehand to do this. * * * He told me beforehand that he would charge $ 25 for each car. I paid the $ 50 on the first two. I haven't paid it on the last because I haven't sold the car. This made $ 50 I paid for the loan, in addition to the small items charged for exchange, stamps, and notary fee."

Walker testified concerning this as follows: "I am vice- president and treasurer of plaintiff bank, and was in 1919-20. I have had charge of the lending of money to the Hollan Auto Company for which the notes in suit were given, beginning in the fall of 1919. * * * In regard to the $ 4,000 of October 23, 1919, secured by King cars, he came to my office with a draft and bill of lading attached and wanted the loan. * * * I told him I would let him have the money, and so the loan was fixed up. After this he said, 'It is certainly a relief to get these cars unloaded. You are the only one that takes any interest in helping me.' He said, 'I am going to give you personally $ 25 out of each car sold.' I said, 'You don't owe me anything.' That was no part of the making of the loan and no part of the consideration. In April, six months later, he handed me a check for $ 50 and said 'That is for you individually. The bank has got nothing to do with it.' I took the check and used it. The bank got none of the proceeds."

In regard to the fifth loan the appellant testified as follows "This deal was a little different from the others. At the time the cars came Walker refused to unload them for me; he said the banks had quit loaning money on the cars at 80 per cent. of the value. They remained on the tracks for about three weeks. I went to him several times, and he finally told me that he would loan me the $ 4,000 if I would pay the interest in advance and pay him something for giving the loan. I told him I wouldn't have anything to pay him with. I...