Court Opinion

ID: 9638688
Source: CourtListenerOpinion
Date Created: 2023-08-22 15:50:37.403721+00
Date Added: 2024-06-11T18:10:08.862840
License: Public Domain

John F. Stroud, Justice, concurring. I concur with the court, this court has ventured far from the path necessary to affirm that decision. The majority has by dictum reached out arid overruled a line of cases dating back to 1895. In Bank of Newport v. Cook, 60 Ark. 288, 30 S.W. 35 (1895), this court held that reserving the highest legal rate of interest in advance on negotiable paper having 12 months to run is not usurious. That decision was reaffirmed 44 years later in Simpson v. Smith Savings Society, 178 Ark. 921, 12 S.W. 2d 890 (1929), where a 10% discount was reserved and deducted at the time the loan was extended and held not to constitute usury. In Hickingbotham v. Industrial Finance Corp., 192 Ark. 429, 91 S.W. 2d 1023 (1936), a 10% deduction of interest at the time the loan was made was again upheld as non-usurious on a one year obligation. The history of this particular type of financing was reviewed in Bank of Newport and the court noted that the custom of discounting arose in commercial transactions in England for the convenience of trade. The custom was clearly recognized in Arkansas at the time our present constitution was adopted and surely was not intended to be barred by the drafters of that document. In 1875, just a few months after the constitution was adopted, the General Assembly recognized the custom by adoption of an act which provided: It shall be lawful for all parties loaning money in this State to reserve or discount interest upon any commercial paper, mortgages, or other securities at any rate of interest agreed upon by the parties, said rate not to exceed ten per cent per annum. It was not the intent of the legislature in 1875 to adopt a statute in direct violation of the usury provision of the constitution, nor was it the intent of this court in 1895, 1929 or 1936 to sustain a practice contrary to that constitutional limitation. It is true that the effective rate of simple interest in this type of discount exceeds 10% per annum and the majority indicates that in all future loans where the discount causes the rate of interest to exceed 10% the loan will be declared usurious. We held just last week in Martin v. Moore, 269 Ark. 375, 601 S.W. 2d 838 (1980), that a 360-day interest book did not void a loan for usury even though the effective interest rate as a result was in excess of 10% per annum. Not only do I agree with this court’s overruling the Bank of Newport case, I even more vigorously disapprove of doing so by dictum in a case where the discount was not for 10% but for only 1%, a clearly different set of facts. Fogleman, C.J., joins in this opinion.