Virgil R. Coss Mortgage Co. v. Jordan

Humphreys, J. This is a companion suit with the case of B.F. Dupree v. Virgil R. Coss Mortgage Company, ante p. 18, in so far as the issues are concerned. The instant suit was commenced by the lender instead of the borrower, as in the Dupree case, but there was a cross-bill filed by the borrowers, Marcus Jordan and Melvina Jordan, seeking to cancel all the notes and two mortgages executed by appellees to appellants on May 23, 1918. The notes and mortgages were executed contemporaneously, and consisted of a $600 note, payable in ten years, with interest at the rate of 6 per cent, per annum from date until paid, secured by a first mortgage on certain real estate in Drew County, Arkansas, the interest on the note being evidenced by eleven interest coupon notes attached, the first being for $19.36, due 12-1-1918, nine others being for $36 each, due December 1 for the next nine years, and the last for $18, due 6-1-1928; also four commission notes for $60 each, due respectively. on December 1, 1918, 1919, 1920, and 1921, secured by a second mortgage on the same real estate. All of the notes and both mortgages were made payable directly to appellant, but the understanding between appellant and the American Farm Mortgage Company was that the commission notes should be divided equally between them. The first commission note was paid by appellees, but default was made in the payment of the second and third, and, under a clause in the mortgage that all should become due upon failure to pay either, appellant brought this suit to foreclose the second mortgage for the three unpaid commission notes. The defense of usury was interposed to all the notes, and a cancellation of the notes and both mortgages was sought. This and the Dupree case were pending in different counties at the same time, and, by agree ment, the testimony taken was to be used in each case. The statement of facts in the Dupree case is therefore adopted as the statement of facts herein, as far as same is applicable. On December 12, 1921, a decree was rendered in favor of appellant for $180 with interest, and the mortgaged lands were condemned to sale to satisfy the indebtedness. On an adjourned day of the same term of court the decree was set aside on motion of appellees, over the objection of appellant, and appellees were permitted to interpose the defense of usury and try out the issue. Appellant contends that the court committed reversible error in setting aside the decree. Not so, for courts of record have complete power over their judgments during the term at which same are rendered. The cause was submitted to the court upon the pleadings and testimony, which resulted in a finding that the contrast was usurious, and a decree canceling the notes and mortgages. From that decree an appeal has been duly prosecuted to this court. The first question arising for determination on the appeal is whether the contract is usurious under the law of Arkansas. Treating the American Farm and Mortgage Company as the agent of appellant, as decided in the Dupree case, we think so. The principal note bore interest at the rate of 6 per cent, per annum for ten years, and the commission or bonus notes were a part of the same transaction, and amounted to 4 per cent, per annum additional interest on the principal notes for ten years. The bonus was made payable in one, two, three and four years after date. The effect of this arrangement was to collect 4 per cent. per annum in one, two, three and four years instead of distributing it over the ten-year period. This method of collecting the interest brings the contract within the rule of partial payments provided by § 7358 of Crawford & Moses’ Digest. This was the method of calculation applied to a contract similar to this, to ascertain whether same was usurious, in the case of Green v. Conservative Loan Company, 153 Ark. 222. When calculated by this method, the interest contracted for was greatly in excess of 10 per cent, per annum. This court, however, ruled in the Dupree case that the parties therein contracted with reference to the Oklahoma law, and, as the facts in the two cases are alike, this case is ruled by the Dupree case. Under the Oklahoma law, of which the courts of this State take judicial knowledge, the penalty imposed upon usurious contracts is a forfeiture of the interest contracted for and twice the amount of any interest paid. The decree of the court was correct in so far as it canceled the commission notes and mortgages securing’ same, but was incorrect in canceling the principal note and mortgage. Instead of canceling the principal note and mortgage, a credit should have been given thereon for $120, double the amount of the bonus note which appellees paid. On account of the error indicated the decree is reversed, in so far, as it canceled the original $600 note and mortgage, and the cause is remanded with directions to enter a credit of $120 on said note and mortgage. In other respects the decree is affirmed.