Court Opinion

ID: 4001576
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:58:10.516997+00
Date Added: 2024-06-11T07:44:33.225771
License: Public Domain

I dissent. *Page 485 
Section 7300, Rem. Comp. Stat. [P.C. § 3156], provides as follows:
"Any rate of interest not exceeding twelve (12) per cent per annum agreed to in writing by the parties to the contract, shall be legal, and no person shall directly or indirectly take orreceive in money, goods, or thing in action, or in any otherway, any greater interest, sum or value for the loan or forbearance of any money, goods or thing in action than twelve (12) per centum per annum."
Appellant in this case took a note for a larger sum than the amount loaned. The note was for $10,000, $9,500 was received by the borrower. Nine thousand five hundred dollars at twelve per cent per annum would amount to an interest of $3,420 in three years. The note given, according to its terms, bears ten per cent interest on $10,000. This would be $3,000 for three years. Had the contract run for the full period of three years appellant would have received $10,000 as principal in the note, $3,000 at ten per cent interest on this amount, and $500 deducted at the time of the execution of the note, making a total of $13,500, when under the law, upon the actual amount received by the borrower of $9,500, at the maximum rate of twelve per cent for three years, he could receive but $12,920. By having the interest, or portion of it, paid in advance, appellant is receiving upon the actual money he paid out the sum of $580 more than the maximum allowed by law.
The majority opinion says that:
"The authorities quite unanimously hold that if the amount of interest paid in advance be less than the maximum legal rate, or if the interest paid in advance, together with that provided for in the note, when computed on the full term of the note, does not amount to more than the maximum rate, there is no usury."
Upon my investigation of the authorities I find that the authorities unanimously hold to the contrary. In *Page 486 
fact, the authority relied on by the majority opinion, 27 R.C.L. 225, 235, holds that a statute like ours does not permit of the interest being paid in advance, when in fact the amount paid by the borrower is in excess of the legal rate allowed by law upon the sum actually received by the borrower.
"A statute making it unlawful to reserve or take for any loan of money any rate of interest greater than a certain per cent per annum, either directly or indirectly by way of commission, discount, exchange, or by any contract or contrivance or device whatever, has been construed to prohibit the taking of interest in advance; and express authority by statute given to banks and other corporations to reserve interest in advance has been regarded as furnishing a strong implication that other persons were not entitled to take interest in this way." 27 R.C.L. 226.
"Taking the highest rate of interest in advance, so that the borrower receives less than the principal sum he contracts to repay, is unquestionably usurious on principle, and seems at first to have been so considered in all cases. But an early concession was made to the usage among banks and other persons dealing in commercial paper whose customary short term loans made the violation of the law involved insignificant. The usage has widened, however, as is the custom of the law merchant, until at the present time it is the settled rule that upon any short term loan interest may be reserved in advance at the highest legal rate without rendering the loan usurious. But some American courts still insist that the right to take such advance interest is strictly confined to commercial transactions. It is manifest that the rule permitting interest in advance must be limited to short term loans, since otherwise the borrower might incur an obligation to repay a large sum in consideration of the present receipt of an insignificant amount. But no limit has been fixed by the cases by which to determine the maximum period that will be permitted. The taking of interest in advance on loans for one year has been held to be legal; but with a single exception there seems to be *Page 487 
no case in which a loan stipulating for full legal interest in advance for a longer period has been held enforceable in the absence of special statutory provision." 39 Cyc. 948.
The single exception referred to was in the case of Grider v.Driver, 46 Ark. 50, wherein a loan was made for two years, while the loan in question in this case is for three years.
The judgment of the trial court holding the note usurious should be affirmed.