Court Opinion

ID: 9645187
Source: CourtListenerOpinion
Date Created: 2023-08-22 21:15:46.794368+00
Date Added: 2024-06-11T13:09:15.401814
License: Public Domain

George Rose Smith, Justice, concurring. I agree that the Rule of 78ths is valid, simply because an otherwise lawful promissory note is not rendered usurious by a provision requiring the debtor to pay a premium for the privilege of paying the principal debt in advance of its due date. That issue is purely one of law, presented in this case upon undisputed facts. But the majority opinion, by applying to this question of law certain presumptions that are properly applicable only to questions of fact, goes so far astray that I am compelled to make this effort to set the record straight. Our Constitution, written more than, a hundred years ago, provides that contracts for more than 10% interest are void as to principal and interest. Constitution of 1874, Art. 19, § 13. That penalty is so severe that in an early case, turning solely upon an issue of fact, we held that the debtor had the burden of clearly showing that the note in question was usurious. Leonhard v. Flood, 68 Ark. 162, 56 S.W. 781 (1900). There we said: Our law visits on a lender who contracts for usurious interest, however small, a forfeiture of his entire loan and the interests thereon. It follows from the plainest principles of justice that such a defense should be clearly shown before the forfeiture is declared. For this reason, usury will not be inferred where, from the circumstances the opposite conclusion can be reasonably and fairly reached. Thus the rule of clear and convincing evidence in usury cases was born, though it has had its ups and downs. That is, in some later cases we have specifically said that a preponderance of the evidence is all that is needed to sustain a plea of usury. Tisdale v. Tankersley, 192 Ark. 70, 90 S.W. 2d 225 (1936); Dickinson-Reed-Randerson Co. v. Stroupe, 169 Ark. 277, 275 S.W. 520 (1925). Thus we actually have two inconsistent lines of cases. Even so, I have no quarrel with the clear and convincing rule in its proper place, which I take to be the situation in which the debtor seeks to contradict the terms of his written obligation. Thus if the debtor signs a $500 note, bearing 10% interest, he may fairly be required to show by clear and decisive testimony that he received only $450. The corollary presumptions against usury with regard to questions of fact have no reasonable application to questions of law. Here the intent of the Constitution cannot be misunderstood: Any attempt by a lender to extort more than 10% interest is so strongly and unequivocally condemned that he forfeits his entire principal as well as his usurious interest. Thus there is no basis whatever for taking the position, as the present majority opinion seems to do, that excessive interest is somehow a favorite of the law, to be zealously protected by the courts. By and large, this court has discharged its duty to uphold the Constitution. We did hold, in an early case, that it was not usury for a seller to fix a credit price that was in excess of the cash price plus legal interest. Ford v. Hancock, 36 Ark. 248 (1880). Regardless of the merits of that decision, we later faltered badly be permitting its doctrine to be used as a subterfuge allowing finance companies to charge excessive interest in what were really sales for a cash price. Our failure to give effect to the spirit of the Constitution came to a sudden halt with the landmark decision in Hare v. General Contract Purchase Corp., 220 Ark. 601, 249 S.W. 2d 973 (1952). There we overruled many decisions and effectively put a stop to the use of installment sales as a cloak for usury. There quickly followed a series of decisions that were hammer blows nailing down our position. We rejected a retailer’s attempt to use a credit sale as a means of exacting excessive interest, even though no finance company was involved. Sloan v. Sears, Roebuck & Co., 228 Ark. 464, 308 S.W. 2d 802 (1957). We required lenders, in writing contracts, to put down in black and white a clear statement of every charge that was being added to the principal and to shoulder the burden of proving that meaningless labels were not concealing usury. Jones v. Jones, 227 Ark. 836, 301 S.W. 2d 737 (1957). We rejected an unsophisticated lender’s testimony that he did not really mean to charge more than 10%, warning lenders that they must at their peril familiarize themselves with the law. Brooks v. Burgess, 228 Ark. 150, 306 S.W. 2d 104 (1957). Many other cases might be cited to confirm the position we have steadfastly adhered to since the Hare case, that the Constitution means what it says. Finally, it may be observed in passing that our constitutional ceiling on interest rates is not fundamentally or necessarily bad. The men who wrote the Constitution may have believed in 1874, and might believe today, that high interest rates not only are inflationary but also are a means by which the rich have oppressed the poor since as long ago as Biblical times. That our constitutional ceiling is under fire today results not so much from any inherent defect in the ceiling but from the fact that the other 49 states have no equally low limitation upon interest rates. Until the people change the Constitution, however, our plain duty is to enforce it.