Ragge v. Bryan, 5--5319

• Decision Date: 12 October 1970
• Docket Number: No. 5--5319,5--5319
• Citation: 458 S.W.2d 403,249 Ark. 164
• Parties: , 8 UCC Rep.Serv. 232 E. K. RAGGE et al., Appellants, v. Lem C. BRYAN, Receiver, Appellee.
• Court: Arkansas Supreme Court

Page 403

458 S.W.2d 403

249 Ark. 164, 8 UCC Rep.Serv. 232

E. K. RAGGE et al., Appellants, v. Lem C. BRYAN, Receiver, Appellee.

No. 5--5319.

Supreme Court of Arkansas.

Oct. 12, 1970.

Harold C. Rains, Jr., Van Buren, for appellants.

Darrell Johnson, Van Buren, for appellee.

FOGLEMAN, Justice.

This case originated as an action to foreclose a real estate mortgage and a security agreement. In decreeing foreclosure, the chancery court held that appellants had not succeeded in showing that the note evidencing the debt secured was void for usury. We find that the preponderance of the evidence supports chancellor's decree. We also find the court's holding that appellee had a right to foreclosure of the security agreement covering certain household furniture and equipment to be proper.

Appellants argue that the security agreement had never been assigned by Arkansas Loan and Thrift Co., the secured party named therein, to appellee, or to the corporation for which he was receiver. The note signed by appellants was payable to the Loan and Thrift Co. It contained a recital that it was secured by a mortgage on a lot in Van Buren and 'Security agreement and UCC on furniture as listed.' The security agreement was signed by appellants. It bore the same date as that of the note--April 19, 1967. It recited the granting of a security agreement to secure the debt evidenced by appellants' promissory note for $14,886.66. The security agreement was in appellee's possession. It is undisputed that the real estate mortgage securing the debt and all notes and indebtedness described in and secured by it were assigned to Savings Guaranty Corporation by written assignment on April 20, 1967. This note was specifically described in the real estate mortgage. We have held that assignment of a note or debt automatically effects an assignment of an instrument or conveyance given as security therefor and confers upon the assignee all rights of the assignor. Price v. Williams, 179 Ark. 12, 13 S.W.2d 822; Robertson v. Robertson, 231 Ark. 573, 331 S.W.2d 102. The failure of either party to comply with Ark.Stat.Ann. § 85--9--405 (Add.1961) did not affect the rights of appellee as against appellants. See Lehman v. First National Bk. in St. Louis, 189 Ark. 604, 74 S.W.2d 773; Rockford Trust Co. v. Purtell, 183 Ark. 918, 39 S.W.2d 733.

Appellants assert that the note and security instruments were void for usury for the following reasons:

1. a charge for crdit life insurance included in the principal debt was an improper and erroneous charge;

2. a charge of $35 for appraisal of the property was improper;

3. various small charges listed as a part of the debt in a closing statement were not properly chargeable to appellants;

4. the note and mortgage were usurious upon their face.

We shall dispose of these assertions in reverse order of their listing.

The note bore interest at the rate of 10% per annum. It recited that it was payable in 144 equal monthly installments of $177.93. It was so described in the mortgage. Appellants produced a witness who was a systems analyst for a concern in data processing. His company furnished the amortization schedule to Arkansas Loan and Thrift Co. which constituted the basis for the statement of the amount of the installment payments shown in the note. He offered another schedule which showed this amount to be $177.91, or two cents per month less than shown on the previous schedule. He stated that both schedules were correct for a 10% interest rate, but that the later schedule was produced by a newer and larger computer than the one which was used for the first schedule. The more modern computer carried the decimals further in rounding off to exact cents and was more accurate to that extent. A certified public accountant testified that in making computer calculations a monthly interest factor of .008333% is used for a true rate of .008333 1/3%. The trial court was justified in finding that the transaction was not usurious upon the fact of the instruments on the basis of this testimony.

In connection with the point just discussed, appellants also argue that since they were furnished a payment book calling for monthly payments of $202.10 and they made seven payments in that amount, the transaction was usurious. We do not agree with this argument. The loan closing statement bearing the signatures of appellants in the files of Savings Guaranty Corporation showed the monthly payment on principal and interest to be $177.93. It also showed a monthly item of $24.17 for a credit life insurance escrow account. This was the amount which would have been required to accumulate $290, the amount of the annual premium on credit life insurance on E. K. Ragge, by the time the next premium payment became due. This requirement did not render the transaction usurious.

In determining whether a charge is usurious, all attendant circumstances must be taken into consideration. Sammons-Pennington Company v. Norton, 241 Ark. 341, 408 S.W.2d 487. In order for such a charge to constitute usury, there must have been an intention upon the part of the lender to take or receive more than the maximum legal rate of interest. Peoples Loan & Investment Company v. Booth, 245 Ark. 146, 431 S.W.2d 472. We have recognized that a properly maintained escrow account is not to be considered in testing a note and the interest thereon for usury. Harris v. Guaranty Financial Corp., 244 Ark. 218, 424 S.W.2d 355. The circumstances above set out indicate that the escrow account was properly maintained in anticipation of an obligation which would probably accrue. In the absence of any evidence that the lender would profit from the account or intended to apply the funds improperly to its own profit, we cannot say that there was any evidence of an intent to make a usurious charge by requiring this payment. Actually, when the first payment was made 54 days after it was due, $20 of this amount was applied toward the interest accruing in the interim rather than to the escrow account. This was actually $34.17 less than the additional interest accrued, according to Kenton W. McCarthy, the CPA who reviewed the account for appellee. McCarthy also testified that, during the period that appellants were making payments, appellee was entitled to a total of $2,867.66 interest but actually only credited $1,642.93 of the payments to interest. According to McCarthy only $149.19 went into this escrow account, and this amount was ultimately credited to the principal and interest due on the loan. In any event, we do not find that the evidence preponderates against the holding of the chancellor on this point.

The small charges of which appellants complain consist largely of an item of $7.50 on the current loan, shown as filing fees on the closing statement. This was explained by checks in the loan files in appellee's possession as having consisted of $5.75 for recording the financing statement, the real estate mortgage and a release of a prior lien. Another $1.50 was paid to Date Tronics, Inc. for an amortization schedule for appellants. ^{1 1} This leaves an item of 25 cents unaccounted for. In view of the fact that, in advance of payment, recording fees must often be estimated, we are unwilling to say that appellee failed to properly account for this item as a part of the principal indebtedness.

Appellants also argue that the transaction was usurious because of charges of $12.50 for legal preparation and credit reports shown on a loan worksheet relating to an earlier loan to appellants by Arkansas Loan and Thrift Co., the balance of which was retired from the present loan. They contend that $3.75 of this amount was paid for recording and somehow arrive at an amount of $6.50, which they claim to be unaccounted for. We have carefully examined the abstract of the record and have been unable to find any suggestion in the record that appellants were contending that the first loan by Arkansas Loan and Thriff Co. was usurious. An issue cannot, even in trial de novo of an equity case, be first raised by appellant on appeal. Wortsmith v. Matthews Company, (Ark.1969), 447 S.W.2d 342; Anthony v. First National Bank of Magnolia, 244 Ark. 1015, 431 S.W.2d 267; Angelletti v. Angelletti, 209 Ark. 991, 193 S.W.2d 330.

Even though E. K. Ragge testified that a $35 charge for an appraisal was not authorized by him and that no appraisal of the property was made, to his knowledge, it seems to be conceded that this charge was made in connection with the first loan. A report of the appraiser appears with the papers evidencing that loan. This matter does not seem to have...