Case Name: Boston Mutual Life Insurance Company v. Newton
Court: Arkansas Supreme Court
Jurisdiction: Arkansas
Decision Date: 1927-06-27
Citations: 174 Ark. 547
Docket Number: 
Parties: Boston Mutual Life Insurance Company v. Newton.
Judges: 
Reporter: Arkansas Reports
Volume: 174
Pages: 547–552

Head Matter:
Boston Mutual Life Insurance Company v. Newton.
Opinion delivered June 27, 1927.
M. F. Elms and George A. McConnell, for appellant.
'George C. Lewis, for appellee.

Opinion:
Kirby, J.,
(after stating the facts). It is urged for reversal on the cross-appeal that the chancellor's finding that A. A. Newton was of sound mind land competent to contract at the time of the execution .of the application, notes and mortgages, in 'borrowing the money, is not supported by the testimony, but we find no merit in the contention.' No useful purpose would be served by setting oiit the testimony or arguing at length about it, and it will suffice to say that, after a careful consideration of it all, we cannot say the finding is not supported by the- preponderance of the evidence.
The chancellor also correctly held the transaction an Oklahoma contract governed by the laws of that State, but erred in the construction and application of its laws. Dupree v. Virgil B. Coss Mortgage Co., 167 Ark. 18, 267 S. W. 586, 1119; Virgil R. Coss Mtg. Co. v. Jordan, 167 Ark. 36, 267 S. W. 590, and Smith v. Brokaw, post p. 609.
This case is ruled by the opinion in Smith v. Brokaw of this date. Under the laws of Oklahoma a contract is not usurious where' the whole amount of the interest charged or reserved for the whole term or period of the loan does not exceed the rate of 10 per cent, upon the amount of the loan. The 7 per cent, interest reserved in the principal note for $4,000 amounts to $280 yearly, or $2,800 for the term of the loan, and the three $400 commission notes, amounting to $1,200, which is but 3 per cent, of the amount of the principal note for the term, showing that, although the rate seems excessive computed from the maturity of the commission notes, which is only a part of the time the loan had to run, it is not excessive nor more than 10 per cent., the rate allowed to be charged under the Oklahoma law, when the payments are spread out over the entire time the contract, if performed, had to run.
Moreover, the laws of Oklahoma do not declare a contract void for usury upon the exaction of the payment of more than 10 per cent, interest for a loan of money, but only that double the amount of the interest charged, reserved or paid shall be forfeited and may be recovered upon a separate suit brought, or upon a counter-claim or set-off pleaded in the suit for collection of the money loaned.
Such forfeiture, however, does not extend to a bona fide purchaser before maturity of the note or evidences of debt in which usurious interest is reserved. Section 5100, Okla. Compiled Statutes, 1921; Stockyards State Bank v. Johnston, 152 Pac. 585, 52 Okla. 32; Daniels v. Bunch, 223 Pac. 841, 98 Okla. 47.
In City Nat. Bank v. DeBaum, 166 Ark. 18, 265 S. W. 648, our court said (quoting syllabus): "The right of an innocent purchaser to recover on a negotiable instrument cannot be defeated merely because it is based on an illegal transaction, or one prohibited by law, unless the statute makes such instrument absolutely void."
It follows that there will be an affirmance on the cross-appeal, but the decree will be reversed for the error in holding the contract usurious; and the cause remanded with directions to enter a decree in favor of the respective parties for the amounts due on the notes and the foreclosure of the mortgages for the payment, with priority payment of the amount due the insurance company out of the proceeds of the sale of the lands, and further proceedings in accordance with the principles of equity and not inconsistent with this opinion. ' It is so ordered.