Case Name: Bauer v. Wade (two cases)
Court: Arkansas Supreme Court
Jurisdiction: Arkansas
Decision Date: 1926-04-19
Citations: 170 Ark. 1020
Docket Number: 
Parties: Bauer v. Wade (two cases).
Judges: Humphreys, J., not participating.
Reporter: Arkansas Reports
Volume: 170
Pages: 1020–1029

Head Matter:
Bauer v. Wade (two cases).
Opinion delivered April 19, 1926.
John W. Nance and Earl G. Blansett, for appellants.
John Mayes and W. N. Ivie, for appellees.

Opinion:
Hart, J.,
(after stating the facts). Article 19, § 13, of our 'Constitution provides that all contracts for a greater rate of interest than 10 per cent, per annum shall be void as to principal and interest, and that the General Assembly shall prohibit the same by law. In construing this section of the Constitution and the statutes passed pursuant to its directions, it had been held that a mutual agreement to give and receive unlawful interest is not necessary to constitute usury, but that there must have been an intention on the part of the lender to take or receive more than the legal rate of interest. Garvin v. Linton, 62 Ark. 370, and Jones v. Phillippe, 135 Ark. 578.
In this connection it may be also stated that, under this case and other eases decided by this court, the burden of proof is upon the party pleading usury to establish it. Briant v. CarlLee Brothers, 158 Ark. 62, and Hollan v. American Bank of Commerce & Trust Co., 159 Ark. 141.
In the case at bar, we have a specific finding of the chancellor in favor of the plaintiffs on the question of usury, and, after due consideration of the whole matter, we are of the opinion that it cannot be said that a clear preponderance of the evidence is against his finding on this question.
In the first place, counsel for the defendants seek to sustain their plea of usury on the facts established with regard to the conveyance of the 40 acres of land in Washington County by Wade to Bauer. The preponderance of the evidence 'shows that' this land was of but little value, and it is insisted that the fact that Wade conveyed it to Bauer in consideration of a thousand dollars shows that it was intended as a cover for usury. On this point, Wade testified that all the lands embraced in the mortgage were timber lands, and that, when Bauer applied for the loan, he told him that he had a 40-acre tract he had never seen which he would sell him for a thousand dollars, and that there was no intention whatever to use this as a cloak for usury. In other words, according to his testimony, it was a bona fide sale of the 40-acre tract of Bauer for one thousand dollars.
On the other hand, Bauer testified that, at the time the arrangement was made for him to borrow the money, nothing whatever was said about Wade deeding him 40 acres of land for a thousand dollars. According' to his testimony, the additional thousand was put in the mortgage on an entirely different ground, which will be separately discussed in this opinion.
Bauer further states that, when his attorney explained the deed to the 40 acres of land in Washington County to him, he refused to accept it on the ground, that it was not in the contemplation of the parties when the agreement for the loan was made and was no part of that transaction. If his version be accepted as true, there was no usury on this account, because the deed from Wade to him to the 40 acres in Washington County did not enter into their original transaction at all, and anything done by Wade subsequently which was not a part of the original transaction could not now be used by the defendants as a predicate for usury.
According to the testimony of Bauer, he based his defense of usury entirely upon the fact that Wade required him to convey to him 40 acres of land in Benton County as a bonus before he would make the loan. As a part of the same transaction, Wade agreed to reconvey this 40 acres to Bauer when he should pay off the mortgage indebtedness of $4,500 and the thousand dollars additional which were to be considered as a bonus for making the loan. According to the testimony of Bauer, he executed a deed to Wade to this 40 acres of land, and at the same time signed the contract, and that he delivered the deed and the contract to his attorney to he sent to Wade. In this respect he is corroborated by the attorney, who says that the contract has been lost, and that after diligent search he has been unable to find it.
On this point, Wade denied that he ever executed any such contract or that he ever received a deed to 40 acres of land from Bauer. In this connection, it may be stated that the 40 acres of land to which it was claimed that he was to receive a deed was a part of the 640 acres embraced in the mortgage.
The chancellor made a specific finding in favor of the plaintiffs on this phase of the case, and it cannot be said that his finding is not sustained by the evidence. As we have already seen, the burden of proof was upon the defendants to establish their plea of usury by a clear preponderance of the evidence, and the chancellor did not err in holding that they had not fairly met the burden of proof in this respect.
The chancellor did allow a credit of $1,000 on the mortgage indebtedness; but this was upon the ground that the minds of the parties never met upon the trade for the 40 acres of land in Washington County. As we have already seen, Wade testified that this was a separate transaction from the mortgage, and that the thousand dollars which was to be the purchase' price of the land was embraced in the mortgage as additional security. On this point the defendants denied that any such trade had been made, and, the court being of the opinion that, the minds of the parties having never met, the contract in this respect should be annulled and set aside. Hence it was decreed that the title to the 40 acres of land in Washington County should be quieted in the plaintiffs, and that the defendants should receive a credit on the mortgage indebtedness for a thousand dollars. According to the testimony of Wade, the sale by him of the Washington County land to .Bauer was separate and apart 'from the loan of the $4,500, and it was embraced in the mortgage merely so that he might have additional security for the payment of the $1,000. Oh the other hand, according to the testimony of Bauer, there was no trade whatever for the Washington 'County land. Hence the court did not err in eliminating it entirely from the foreclosure proceedings. This left the foreclosure decree for $4,500 and the accrued interest, which was the amount of money actually received by the defendants from the plaintiffs.
It follows that the decree in the' foreclosure proceeding should be affirmed.
We now come to a consideration of the decree refusing to set aside the bid of H. K. Wade for the lands embraced in the mortgage at the foreclosure sale. The record shows that he became the purchaser of the lands for $2,500, and that they were worth at least $9,000. Some of the witnesses placed the value of the lands at $10,000 and upwards. In áddition to this, the defendant had executed a supersedeas bond, as he understood it, in the foreclosure suit for the purpose of preventing a sale of the land under the foreclosure decree.' He was informed by his attorney that this would stop the sale under the foreclosure decree, and so informed the people in his part of the county who might be prospective purchasers at the sale. On this account the prospective bidders for-the property did not attend the sale, and the defendant Bauer himself failed to attend it. The bond was not accepted, but Bauer did not know of this fact until after the property had been stricken off to Wade.
Under this state of the record we are of the opinion that the court should have rejected the bid of Wade and have resold the lands under the foreclosure decree. While this court is committed to the rule that a judicial sale will not be set aside for inadequacy of consideration merely, still a court of equity will seize upon any other ground which tends to show unfairness in the conduct of the sale, or that the defendant in the case or other parties were prevented by unavoidable casualty from attending the sale, in connection with inadequacy of con sideration, to set aside the sale. Stevenson v. Gault, 131 Ark. 397; Moore v. McJudkins, 136 Ark. 292; and Chapin v. Quisenberry, 138 Ark. 68.
In the case at bar, H. K. Wade, one of the plaintiffs, purchased the property, and, while he was not guilty of fraud in connection with the purchase, he did purchase it at a grossly inadequate price. This fact, together with the other circumstances, was sufficient to have caused the court to set aside the sale and order the property resold. The defendants executed a bond-in good faith, which they were informed would stop- the sale. Bauer told his neighbors and prospective purchasers of the lands that the sale would not take place, and was not informed that the bond had not been accepted until after the sale was made. He was guilty of no negligence in the premises. The sale was not complete until it was confirmed by the chancery court.
For the error in confirming the sale to H. K. Wade the decree will be reversed,'and the cause remanded with directions to reject his bid and to order a resale of the property according to the terms of the foreclosure decree, and for such other proceedings as may be necessary and not inconsistent with this opinion; and the foreclosure decree will be affirmed.
Humphreys, J., not participating.