Court Opinion

ID: 7822155
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:58:42.403906+00
Date Added: 2024-06-11T16:30:45.844165
License: Public Domain

Steele Hays, Justice, dissenting. I am unwilling to join in declaring this loan usurious. Like the trial court, the majority concentrates on mathematical considerations and methods of computing interest, ignoring other important aspects of the case: a) the opinion notes that Ford initially prepared the note with the first monthly installment due 45 days after the sale, admittedly not usurious, but fails to mention that the date was fixed at the request of the borrower, thereby becoming usurious by 6 days; b) the overcharge in this case was the result of an unintentional mistake in a single, isolated transaction induced by the borrower; c) the motivation of the lender was not to obtain a greater return of interest but simply to accommodate a borrower; d) the overcharge was in a miniscule amount — approximately $20.00 on an indebtedness of $12,700, which the lender tried to refund when the mistake was pointed out. We have said that a timely offer to remit by the lender is a significant fact. Holland v. Doan, 228 Ark. 340, 307 S.W.2d 538 (1957). And we have often ruled a contract may be over ten percent without being usurious. First American National Bank v. McClure Constr. Co., 265 Ark. 792, 581 S.W.2d 550 (1979); Davidson v. Commercial Credit Equipment Corp., 255 Ark. 127, 499 S.W.2d 68 (1973); Sammons-Pennington Co. v. Norton, 241 Ark. 341, 408 S.W.2d 487 (1966). Exceeding the limit, with nothing more, is not enough to transform a contract into a usurious instrument. As we stated in Winkle v. Grand National Bank, 267 Ark. 123, 601 S.W.2d 559 (1980): When usury is alleged, the test is whether the borrower promised to pay a greater rate of interest than the law permits and the lender knowingly entered into a usurious contract intending to profit by the methods employed. and in Davidson, supra: A lender who makes an excessive charge through a mistake or ignorance of the fact it was excessive has no intent to unlawfully charge interest. The critical factor in determining whether a contract is usurious is not the mathematical result alone, but whether, after looking at all the circumstances, it can be said there was intent: It appears that, in determining whether a usurious charge has been made, all attendant circumstances must be taken into consideration. When this is done, we think it is plain that the overcharge in the instant litigation was the result of an error, made in good faith, rather than being based on an intent to violate the usury law. Sammons-Pennington, supra. Yet neither the trial court nor the majority give any consideration to these factors. The plain import of the majority opinion is that all a lender has to do is to intend to charge a certain rate and if that rate is in excess of 10%, the intent to charge usuriously is present. The majority opinion relies wholly on the assertion that Ford made a mistake of law in misapplying a formula, and that is enough to constitute intent. The case the majority points to as exemplifying this reasoning is Holland v. Doan, 228 Ark. 340, 307 S.W.2d 538 (1957). I disagree with their interpretation of that case. In Holland, a used car dealer had charged interest on a basis of one year (52 weeks) instead of 48 weeks as provided in the contract. The first point the court in Holland makes is that there were other cases where usurious charges had been exacted by mistake, but the lender offered to credit the borrower’s account: “Here, no offer was made until after both sides had rested, and the case had been reopened . . . though the contribution was very clearly brought to his attention, no offer of remittance was made, nor defense interposed that said charges were the result of unintentional error. This to us is a most significant fact in the litigation.” Holland at 342. I do not read that decision as saying the lender made a mistake of law, and the court goes on to say: One of two conclusions must be reached; either appellee did not know how to figure the interest, or else he carelessly figured same. In neither instance could the excessive charge be legally justified or excused. If the former were true, he should have had his calculations checked by one who was familiar with figuring interest, If the latter, appellee should have been even more careful in this instance, for he was dealing with a man who could neither read nor write. Holland at pg. 345. (my emphasis). The differences between the case before us and Holland are striking and to say that Holland turned solely on the point of misapplying a formula is fallacious. In any event, if misapplying the formula or using the wrong formula is the problem, how do we reconcile First American, supra, where an experienced financing institution used the wrong formula but we still held the contract not to be usurious? I emphasize the point from Sammons-Pennington, supra, that all attendant circumstances must be considered. The majority opinion does mention that there are exceptions to the rule and notes two of them: honest error of fact in calculation and interest attempted by a person not skilled in computation of interest who looked to an expert for advice. The second exception was drawn from SammonsPennington, supra, but in that case the person who drew up the contract was not inexperienced in computing interest, as the majority states. To the contrary, he was the president of the company and evidently experienced in computing interest. He had drawn up the terms for other loans within that case without any problem. His only area of inexperience was in preparing documents for a loan for a longer duration than he was accustomed to. The expert’s advice he relied on was the finance company which eventually bought Sammons-Pennington’s paper. I find that situation to be analogous to Ford’s position. And in First American, supra, an error was made by an experienced lending institution, yet the contract was not found to be usurious. I am hard pressed to find the exceptions to be as narrow and limiting as the majority opinion suggests. Considering all the attendant circumstances of this case in light of what we have found in the past not to be usurious, I cannot find Ford to have the requisite intent to charge a usurious rate. Ford had originally drawn up a contract with the first payment due at 45 days, which would not have been usurious. It was the borrower who proposed the earlier due date — which resulted in the usurious excess. As the majority notes, the borrower here was an experienced bank examiner especially knowledgeable in interest computation and trained in the detection of usury. Contrast this to the consumer in Holland, who could neither read nor write. Too, when Ford discovered the possible excess it immediately attempted to remit it to the borrower, who just as quickly refused it. A similar tender was conspicuously absent in Holland. True, Ford is an experienced lender, but what of the allowances made in First American and Sammons-Pennington? Even experts are allowed some tolerance for honest mistakes. I fail to see enough evidence to constitute intent and I see the exceptions as broad enough to easily encompass this situation. Ford had not been preparing its contracts in this fashion regularly. Where intent is lacking and it is clear that no systematic pattern is being practiced to circumvent our usury laws, I believe it is wrong to impose the highly punitive result that enables a borrower to drive away in a $12,700 automobile when the only reason the contract was usurious is because he asked that the due date of the first installment be changed. Whether his motive was innocent or ulterior, the trial court did not address. That issue was especially relevant here. But even assuming good faith, it was still done purely at the borrower’s behest and he ought to be estopped from claiming the harsh remedy our law affords. Judges Hickman and Purtle join in this dissent.