Lyles v. Union Planters Nat. Bank of Memphis

• Decision Date: 27 September 1965
• Docket Number: No. 5-3630,5-3630
• Citation: 393 S.W.2d 867,239 Ark. 738
• Parties: , 2 UCC Rep.Serv. 1077 Robert C. LYLES, Appellant, v. UNION PLANTERS NATIONAL BANK OF MEMPHIS, Tennessee, Appellee.
• Court: Arkansas Supreme Court

Page 867

393 S.W.2d 867

239 Ark. 738, 2 UCC Rep.Serv. 1077

Robert C. LYLES, Appellant, v. UNION PLANTERS NATIONAL BANK OF MEMPHIS, Tennessee, Appellee.

No. 5-3630.

Supreme Court of Arkansas.

Sept. 27, 1965.

Ralph E. Wilson, Osceola, for appellant.

Swift & Alexander, Osceola, for appellee.

McFADDIN, Justice.

This is a usury case. The appellee, Union Planters National Bank, filed action in replevin against appellant Lyles to repossess a motor vehicle purchased by Lyles on time payments. Lyles pleaded usury. The Trial Court held there was no usury because the law of Tennessee governed the transaction; and from that holding Lyles brings this appeal.

The cause was submitted to the Trial Court on the original contract and a stipulation, from which we copy the germane portions:

'1. That on the 25th of May, 1964 Robert C. Lyles, who at that time resided at 933 Jackson Avenue, Memphis, Tennessee, purchased a motor vehicle * * * from McCaa Chevrolet Company at its place of business at West Memphis, Arkansas.

'2. That a conditional sales contract was executed on said date at West Memphis, Arkansas in favor of Union Planters National Bank of Memphis, Tenessee * * *

'3. That at the time of said contract Robert C. Lyles was a resident citizen of Memphis, Tennessee, where he was employed * * * and where he had been extended credit on several occasions by the plaintiff [appellee]; and that on or about October 16, 1964, the defendant Lyles moved to and resided in Osceola, Arkansas * * *.'

It is agreed by all parties that the amount of the 'finance charge' (i. e., interest) exceeds 10%. It is also agreed that if the law of Tennessee governs the transaction there is no usury, but if the law of Arkansas governs the transaction there is usury under our cases, some of which are: Hare v. General Contract, 220 Ark. 601, 249 S.W.2d 973; Winston v. Personal Finance, 220 Ark. 580, 249 S.W.2d 315; Strickler v. State Auto, 220 Ark. 565, 249 S.W.2d 307; and Commercial Credit Corp. v. Kitchens, 231 Ark. 104, 328 S.W.2d 335. Furthermore, if there was usury in the original contract then the transfer of the contract to the appellee bank did not eliminate the purchaser's right to plead usury. German Bank v. Deshon, 41 Ark. 331; and Hare v. General Contract Purchase Corporation, 220 Ark. 601, 249 S.W.2d 973.

Ordinarily in a case like this one, the lex loci contractus (i. e., the law of the place of the making of the contract) governs unless: (1) there is an agreement between the parties that the law of another State shall govern; and (2) there is a reasonable and bona fide basis for the parties so agreeing. Cooper v. Cherokee Village, 236 Ark. 37, 364 S.W.2d 158; and Hutchingson v. Republic Finance Co., 236 Ark. 832, 370 S.W.2d 185. These cited cases are our most recent holdings on the issue of the law applicable to such transactions. In the Cooper case we held that the law of Law York applied to the transaction because: (a) the contract was made in New York; (b) it was to be performed in New York; and (c) the parties expressly stated that the law of New York was to govern. In the Hutchingson case we held that the law of Iowa did not govern because: (a) the contract was made in Arkansas; (b) the work was done in Arkansas; and (c) the law of Iowa bore no reasonable relationship to the transaction, even though the payments were to be made in Iowa. In the Hutchingson case we said:

'To hold that the mere fact that the note was payable in Iowa made the agreement subject to Iowa law, when all other essential elements of the contract were entered into, and were to be performed in Arkansas, would be to henceforth furnish a loophole whereby an unscrupulous individual, or company, from a state which permitted liberal interest rates, could enter into contracts in this state, and simply by making the note payable in his, or its, own state, safely evade the usury laws of this jurisdiction. Arkansas has a strong public policy on this subject, as indicated by the fact that...