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No. 95-1819EA

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Venture Properties, Inc., *

*

Appellant, *

* Appeal from the United States

v. * District Court for the Eastern

* District of Arkansas.

First Southern Bank, *

*

Appellee. *

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Submitted: November 17, 1995

 Filed: March 7, 1996

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Before RICHARD S. ARNOLD, Chief Judge, HENLEY, Senior Circuit

Judge, and FAGG, Circuit Judge.

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FAGG, Circuit Judge.

Venture Properties, Inc. (Venture) appeals following a jury verdict

in favor of First Southern Bank (First Southern) on Venture's usury claim.

We affirm.

Venture owed a total of about $2 million on two promissory notes.

After the notes came due and Venture was unable to pay, the creditors

holding the notes offered to accept $1.3 million in full satisfaction of

the debts if Venture could make the payment by the end of the year.

Because Venture did not have $1.3 million available, Venture worked out a

special arrangement with First Southern, an Arkansas bank. First Southern

bought the promissory notes from Venture's creditors for $1.3 million.

Venture agreed to make three monthly payments of $20,000 to First Southern

and then purchase the notes for about $1.34 million. Although Venture made

the monthly payments as agreed, Venture had not raised enough money
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to purchase the notes from First Southern at the end of the three months.

First Southern then imposed some financial penalties on Venture, and

Venture protested. In the following weeks Venture was able to raise some

capital, the parties reached a compromise about how much Venture owed, and

First Southern accepted about $1.4 million as payment in full. 

Venture then brought this lawsuit, contending the financial

arrangement with First Southern was in essence a usurious $1.3 million loan

from First Southern to Venture. Based on all the payments Venture made to

First Southern, Venture calculated the "loan" had an annual interest rate

of almost 30% that greatly exceeded the maximum interest rate permitted by

federal usury law. See 12 U.S.C. § 1831d (1994). First Southern argued

its arrangement with Venture was not a loan, but a legitimate purchase and

sale agreement not subject to usury restrictions. First Southern also

raised several affirmative defenses. A jury returned a general verdict in

favor of First Southern and the district court entered judgment on the

verdict. 

On appeal, Venture argues the district court should have granted

Venture's motion for judgment as a matter of law. We disagree. Because

First Southern is located in Arkansas, 12 U.S.C. § 1831d allowed First

Southern to charge the maximum interest rate that Arkansas law would permit

on the transaction with Venture, and § 1831d requires us to apply

Arkansas's entire substantive law of usury to determine what that rate was.

See First Nat'l Bank v. Nowlin, 509 F.2d 872, 876 (8th Cir. 1975) (holding

12 U.S.C. § 85 incorporates state substantive usury law); Greenwood Trust

Co. v. Massachusetts, 971 F.2d 818, 826-27 (1st Cir. 1992) (stating 12

U.S.C. § 1831d parallels 12 U.S.C. § 85 and should be interpreted the same

way), cert. denied, 506 U.S. 1052 (1993). Under Arkansas law, purchase and

sale agreements are not subject to any usury restrictions unless the

agreements are merely disguised loans. General Elec. Credit Corp. v.

Robbins, 414 F.2d 208, 209-210 (8th
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Cir. 1969); Estate of Traylor v. Harmon, 576 S.W.2d 201, 202-03 (Ark.

1979) (en banc); Haley v. Greenhaw, 360 S.W.2d 753, 756-57 (Ark. 1962).

Whether a purchase agreement is actually a disguised loan is a question of

fact, Haley, 360 S.W.2d at 758, and First Southern presented sufficient

evidence for a reasonable jury to conclude the agreement in this case was

not a loan and thus was not usurious. For example, First Southern

officials testified they refused Venture's request for a loan and proposed

the purchase and sale agreement as an alternative. See Geominerals Corp.

v. Grace, 338 S.W.2d 935, 938 (Ark. 1960). First Southern also presented

evidence that neither Venture nor First Southern treated the transaction

as a loan in their financial records. See id. at 938-39. In our view, the

district court properly denied Venture's motion for judgment as a matter

of law and allowed the jury to determine the transaction's true nature.

Venture also challenges several of the district court's jury

instructions. After carefully reviewing Arkansas usury cases, we conclude

the district court correctly instructed the jury that Venture was required

to prove usury by clear and convincing evidence. See Renfro v. Swift

Eckrich, Inc., 53 F.3d 1460, 1466 (8th Cir. 1995) (citing Smith v. MRCC

Partnership, 792 S.W.2d 301, 305 (Ark. 1990)). Venture cannot shift the

burden of proof to First Southern because the transaction was not usurious

on its face. Medford v. Wholesale Elec. Supply Co., 691 S.W.2d 857, 858-59

(Ark. 1985). Moreover, the district court did not abuse its discretion in

framing the jury instruction about discounting or by rejecting Venture's

proposed instruction about profit, because the jury instructions as a whole

fairly and adequately explain the applicable law. See Resolution Trust

Corp. v. Eason, 17 F.3d 1126, 1132 (8th Cir. 1994). 

We also reject Venture's contention that the district court should

not have instructed the jury to consider First Southern's affirmative

defenses of compromise and settlement, accord and
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satisfaction, and estoppel. Unlike Venture, we believe the record would

allow a reasonable jury to conclude Venture settled its usury claim against

First Southern when Venture negotiated the final "payment in full" for the

notes, and then Venture changed its position and filed a usury claim.

Thus, the district court correctly submitted the affirmative defenses to

the jury.

Venture also claims the district court violated Federal Rule of Civil

Procedure 39 and abused its discretion by granting First Southern's

untimely request for a jury trial. We need not consider whether the

district court committed a procedural error because any error would be

harmless. See Fed. R. Civ. P. 61. Venture has not asserted it was

prejudiced by the district court's decision to conduct a jury trial rather

than a bench trial, and the record does not reveal any prejudice. Id.

Having decided Venture received a fair trial in the district court,

we affirm the judgment for First Southern.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.