Opinion ID: 1256442
Heading Depth: 2
Heading Rank: 1

Heading: The Harper Loan

Text: In early 1976, Rufus W. Harper and Zelpha Lee Harper (the Harpers) sought to borrow a small amount of money for personal purposes. They were homeowners. They responded to an advertisement by Valley Acceptance Corporation (Valley) which stated that Valley made mortgage loans. Though they applied to Valley for a loan, the loan they ultimately received was not from Valley; it was from Virginia C. Wiesen, Valley's president. The loan documents were prepared on April 7, 1976. The principal amount of the loan was $850.00. The Harpers received $667.63 of the loan proceeds. The amount in excess of $667.63 was used to pay delinquent property taxes. In order to secure the $850.00 loan, the Harpers obligated themselves to repay Wiesen a total of $2,056.25 over five years and to give Wiesen a deed of trust on their home. The total repayment amount agreed to by the Harpers included, in addition to the loan amount, a recording fee of $25; attorney's fees of $100; appraisal fees of $50; interest of $881.25; and a broker's fee of $150, paid to Valley. The annual percentage rate of the Harper loan was 31.75%. At the time of the Harper loan, the small loan ceiling was $1,500 in principal amount. At that time, Wiesen was not licensed to make loans covered by the Act. She was in the lending business, but the loans she made were secured by real estate; and she had made ten loans in five years that were within the small loan limit, but which were nonetheless secured by deeds of trust. The Harpers sued, claiming that the loan violated the Act. The trial court ruled in favor of the Harpers and granted them summary judgment against Wiesen. In so ruling, the trial court stated the following reasons: 1. that Wiesen was engaged in the business of lending in amounts below the then established size of loan ceiling or less within the meaning of the Small Loan Act, 2. that the principal amount of the Harper Loan was below the then current ceiling for small loans, 3. that Wiesen violated the Act in three respects:

c. she took a security interest in real estate in violation of the Act, and 4. that the attempt to avoid the applicability of the Act by use of a first deed of trust on real estate constituted a device, subterfuge, or pretense to evade the Act as described in Code § 6.1-251. The trial court declared the loan void, entered summary judgment against Wiesen, and continued the case for trial on the Harpers' claim for punitive damages and attorneys fees. After a hearing on those issues, the trial court awarded the Harpers punitive damages of $450.00, with interest, against Valley. Valley and Wiesen appeal.