Court Opinion

ID: 9764072
Source: CourtListenerOpinion
Date Created: 2023-08-29 03:09:08.301277+00
Date Added: 2024-06-11T07:29:53.031352
License: Public Domain

John A. Fogleman, Chief Justice, dissenting. It appears to me that this court has established a standard of review in usury cases that is different from that applied in other cases. The appellant had the burden of showing clearly that appellee contracted for, extracted or received usurious interest. Poole v. Bates, 257 Ark. 764, 520 S.W. 2d 273; Textron, Inc. v. Whitener, 249 Ark. 57, 458 S.W. 2d 367. We have said that the plainest principles of justice require that the defense of usury be clearly shown. Arkansas Real Estate Company v. Buhler, 247 Ark. 582, 447 S.W. 2d 126. The circuit court held that appellant had failed to prove its affirmative defense and counterclaim, which included allegations raising the -issue of usury. This court should not overturn that holding unless it is clearly against the preponderance of the evidence. Winkle v. Grand National Bank, 267 Ark. 123, 601 S.W. 2d 559 (1980). The usury charge, an affirmative defense and counterclaim in appellee’s suit to recover for merchandise sold to appellant, allegedly was imposed by appellee’s “Levying” service charges of: $241.83 on an unpaid balance of $24,183.36 as reflected by an invoice dated February 20, 1978, $241.83 on a balance of $25,298.36 as reflected by an invoice dated April 4, 1978, $449.21 as reflected by an invoice dated May 30, 1978, and $370.14 as reflected on an invoice dated June 23, 1978. The evidence showed that the service charges reflected by appellee’s invoices amounted to a total of $1,752.22. Each of the numerous statements sent appellant by appellee bore the typed (or computer printed) statement, “NET 30 DAYS.” They also contained the following statements: “PAST DUE AMOUNTS WILL BE SUBJECT TO SERVICE CHARGES. EFFECTIVE ANNUAL RATE 12% OR MAXIMUM ALLOWED BY LAW.” This clearly showed that the terms of sale of the goods called for payment of the net price shown by each invoice within 30 days, that service charges would be made on past due accounts and that the effective rate was either 12% or the maximum allowed by law. All appellant had to do to avoid any service charge was to pay the account when it became due. This, in itself, should be a sufficient basis for affirming the judgment. Harris v. Guaranty Financial Corp., 244 Ark. 218, 424 S.W. 2d 355; Carney v. Matthewson, 86 Ark. 25, 109 S.W. 1024. It is clear from the testimony and exhibits presented that invoices were issued for each charge made and that the monthly statements rendered by appellee listed all unpaid invoices issued but indicated separately the invoices that were past due, i.e., those which had been issued more than 30 days prior to the date of the statement. The statements included only unpaid charges. According to appellee’s assistant treasurer and credit manager, the net charge shown on an invoice was due 30 days after the date of the invoice, as clearly indicated on the statements, but the company had a monitoring system to assure compliance with the statement that service charges would be billed at the rate allowed by law. The first billing of service charges would go out more than 60 days after invoices had been sent out. Each billing was for the amount of a flat 1% of past due items, but would result in a charge less than that allowed by law, because of the lapse of time between the date the invoices were due and the date of billing. As additional billings went out, the company checked them against the total allowable under the law of the state having jurisdiction in order to see that the billing did not exceed the amount allowed by law. Service charges were billed by a computer, but Arkansas and Tennessee accounts were monitored so the computations could be checked to see that the allowable maximum had not been exceeded. This witness said that the company had determined that after nine months, the effective rate would amount to 7-1/2%, so, between the sixth and seventh months, they checked by manual computations to be sure there was no problem. He said that the total service charges allowable as of May 30, 1978 would have been $1,-706.21, but that appellant had been billed for only $1,382.08 in service charges. He also testified that on June 23, 1978, the total interest allowable would have been $2,023.14 but the total billings were only $1,752.22. The only evidence that the service charges were usurious was the testimony of an accountant who found excessive interest charges by assuming that the service charge was applicable only to an invoice that was over 60 days old. His explanation of his reason for doing so is rather baffling because he said that there was no pattern on the time for the charge and that computations of service charges based on either amounts due 30 days from the due date or on invoices that were over 60 days old resulted in the same charge each month. His efforts to explain his 60-day assumption are absolutely contrary to the statements on the statements rendered. Accordng to this witness, “net 30 days” meant that there was no charge for 30 days and that 30 more days had to expire before a charge could be imposed. There was no basis for this assumption. The trial court correctly stated, and the witness once agreed, that there could be a charge, computed on the basis of one day, on the thirty-first day. But the witness could not answer “yes or no” when asked if that was what he had computed. The accountant, even then, figured the rate of interest only on the basis of the particular month in which an invoice for interest was issued. He ignored the fact that no charge was made during April, even though the balance past due on April 22 was exactly the same as the balance due on March 18. He positively stated that each month stood on its own in his calculations. Neither the act of usury, nor the intent to charge, reserve or receive unlawful interest, will be presumed, or imputed, to the parties or inferred if the opposite conclusion can be fairly and reasonably reached. First American National Bank v. McClure Construction Co., 265 Ark. 792, 581 S.W. 2d 550; Davidson v. Commercial Credit Equipment Corp., 255 Ark. 127, 499 S.W. 2d 68; Commercial Credit Plan, Inc. v. Chandler, 218 Ark. 966, 239 S.W. 2d 1009; Cammack v. Runyan Creamery, 175 Ark. 601, 299 S.W. 1023; Briggs v. Steele, 91 Ark. 458, 121 S.W. 754; Key v. Worthen Bank & Trust Co., 260 Ark. 725, 543 S.W. 2d 496; McCoy Farms, Inc. v. McKee, 263 Ark. 20, 563 S.W. 2d 409, cert. den. 439 U.S. 862, 99 S.Ct. 184, 58 L.Ed. 2d 171; Pulpwood Suppliers, Inc. v. Owens, 268 Ark. 324, 597 S.W. 2d 65 (1980). Appellee’s officer used the correct test for usury, i.e., was the debtor required to pay more over the term the debt was outstanding than he could legally have been required to pay? Davidson v. Commercial Credit Equipment Corp., supra. This is exactly the method used in Parks v. E. N. Beard Hardwood Lumber, Inc., 263 Ark. 501, 565 S.W. 2d 615, where we affirmed a summary judgment holding that the interest charges were not usurious. Actually Parks is authority supporting the trial court’s judgment in this case. The majority has not attempted to distinguish it. I submit that it cannot be distinguished. Certainly, there is a stronger case here than there was in Parks in view of the testimony of the company official as to the monitoring system used by appellee and to appellee’s clear recognition on its statement forms that the transactions were subject to the legal maximum interest rate. The trial court believed this witness. Is the majority saying that his testimony was incredible? The statement as to the service charge is not a disavowal or disclaimer. Obviously, it appeared on the statements because appellee did business in Arkansas and Tennessee and knew of the limitations in those states. It is a limitation on the maximum service charge. As such, it was at least a strong circumstance to be considered by the trier of facts. Lyttle v. Mathews Investment Co., 193 Ark. 849, 103 S.W. 2d 47. Actually its impact is greater than a mere circumstance. It should be given the same effect as was given a like statement in Taylor v. Van Buren Building & Loan Ass’n., 56 Ark. 340, 19 S.W. 918. There we said: ***[I]n the three mortgages involved in this case there could not be usury, because in each it is provided that “it is also understood that in no instance shall any claim be made by said building association for any interest or any moneys mentioned herein, or any money in lieu of interest, which shall exceed the rate of ten per cent per annum.” It would seem that there can be no usury in a contract that expressly provides that no unlawful interest shall be paid, unless in fact the transaction was a device or cloak to cover usury. ***. Even if it could be said that the contract is ambiguous, it is the duty of the courts to so construe a contract so that it would be legal, if it is subject to one construction that would make it legal and another that would render it illegal. The penalty for usury is forfeiture of both principal and interest. Citizens Bank v. Murphy, 83 Ark. 31, 102 S.W. 697. Every effort should be made to interpret a contract favorably to its enforcement and to prevent a forfeiture. Scrinopskie v. Meidert, 213 Ark. 336, 210 S.W. 2d 281. When there are two probable conflicting interpretations of a contract, and one would render the contract unlawful and the other lawful, the courts should adopt the latter construction. Gauss v. Orr & Lindsey, 46 Ark. 129. It is the duty of the courts, when contracts are fairly susceptible of more than one construction to adopt a construction which will not work a forfeiture. Singer Manufacturing Co. v. Brewer, 78 Ark. 202, 93 S.W. 755; Scrinopski v. Meidert, supra. As between reasonable constructions, one of which would make the contract unenforceable and the other would make it enforceable, the latter will be preferred. Hastings Industrial Co. v. Copeland, 114 Ark. 415, 169 S.W. 1185. The majority does not seem to rely very heavily on Redbarn Chemicals, Inc. v. Bradshaw, 254 Ark. 557, 494 S.W. 2d 720. It is easily distinguished. In the first place, we there affirmed a circuit court’s finding of usury, when review of a trial judge’s findings called only for a determination whether they were supported by substantial evidence. Furthermore, in that case monthly computerized statements including a service charge had been sent to the debtor for a full year before the charge in question there was ever imposed. On the other hand, the statements clearly show that the service charge here was to be based upon an annual rate, not a monthly one. That was not the case in Redbam. I do not see how this court can avoid affirming the circuit court judgment. I am authorized to state that Mr. Justice Hickman and Mr. Justice Mays join in this dissent.