Holland-O'neal Milling Co. v. Rawlings

*472 BRADLEY, J. This is a suit to recover the balance alleged to be due on a promissory note. The cause was tried before the court without a jury, and judgment went against plaintiff on the note, and in favor of defendants on a counterclaim. Failing to get a new trial plaintiff appealed. The petition is in the conventional form. The answer in effect pleads that the payments made, excluding alleged usury, exceeded the amount due, and then follows a counterclaim to recover the alleged usury paid. The reply is a general denial. The transactions which gave rise to the note in suit were had between defendant G. T. Rawlings and Frank T. O’Neal, but it was agreed that any defense available against Frank T. O’Neal would be available against *473 plaintiff. Defendant Vivian Rawlings is the wife of G-. T. Rawlings. She did not participate in the original transactions, bnt signed the note sued on. "When we use the term defendant herein we have reference to O. T. Rawlings. Prior to November 1, 1920, Frank T. O’Neal, H. T. Hickman and defendant G. T. Rawlings, owned all of the capital stock of the O’Neal Automobile Company, a corporation, of Mount Vernon, Mo. The capital stock of the O’Neal Automobile Company was $36,000, divided into 360 shares of the par value of $100 each. Of this stock O’Neal owned two hundred eighty-three shares. Hickman fifty-six shares, and defendant twenty-one shares. Some time prior to November 1, 1920, O’Neal moved from Mount Vernon to Springfield. A valuable asset of the O’Neal Automobile Company was the Ford Agency, and the Ford Motor Company had let it be known that the Ford agency could not be held at Mount Vernon except by residents of Mount Vernon. In this situation negotiations were started leading towards the purchase by Hickman and defendant of all of O’Neal’s stock in the O’Neal Automobile Company. Finally a deal was consummated whereby Hickman purchased one hundred twenty-nine shares of O’Neal’s stock, and defendant purchased one hundred fifty-nine, shares of said stock, making one hundred eighty shares each for Hickman and defendant. O’Neal delivered to defendant eighty shares of this stock for which defendant paid him $8,000 in cash. Respecting the remaining seventy-nine shares defendant and O’Neal entered into the following contract: “This Agreement, Made and entered into this 1st day of November, 1920, by and between Frank T. O’Neal of Springfield, Missouri, the first party, and G. T. Rawlings, of Mount Vernon, Missouri, second party. Witnesseth, That Whereas, Frank T. O’Neal has in consideration of the sum of $9,480 sold, assigned, transferred, set over and delivered unto the said G. T. *474 Rawlings seventy-nine shares of the capital stock of the O’Neal Automobile Company, a corporation, organized under the laws of the State of Missouri and having its principal office and place of business in the City of Mount Vernon, in said State. The shares of the said capital stock are sold and transferred by the said O’Neal to the said Rawlings on the following terms and conditions, to-wit: The said Gr. T. Rawlings has executed and delivered to the said Frank T. O’Neal his promissory note for $9,480 dated November 1, 1920, and due on or before fourteen months after date, with interest at the rate of eight (8%) per cent per annum from, date, and to further secure the payment of said note and interest, said Rawlings has delivered to the said O’Neal ninety-five shares of the capital stock of the said O’Neal Automobile Company to be held by the said O’Neal as collateral security. “The purchase price of said seventy-nine shares of the capital stock is fixed at $7,900 to which has been added twenty per cent, or $1580, making the total consideration of $9,480, and it is understood and agreed that said twenty per cent represents the probable earnings of said seventy-nine shares of stock for the year 1921. If the said Rawlings shall fully pay the said note representing the purchase price of said seventy-nine shares of stock at any time prior to the maturity of the said note, the said' O’Neal shall refund or pay the said Rawlings that proportion of said twenty per cent unearned at the. date said note is fully paid, and for the purpose of such refund it is agreed that one-twelfth part of said twenty per cent shall represent the amount of the earnings for each calendar month. That is to say, the said O’Neal shall 'refund to the said Rawlings one-twelfth of said twenty-per cent for each calendar month of the year 1921 remaining after said note has been fully paid. “In further consideration of said sale the said Gr. T. Rawlings agrees to make or cause to be made a true and correct inventory of the assets and liabilities of the *475 said O’Neal Automobile Company on December 31, 1920, for the purpose of determining the earnings of said corporation for the year 1920, and immediately after said inventory has been made, said Rawlings will pay, or cause to be paid to the said O’Neal ten-twelfths of that part of the net earnings of the corporation, to which one hundred fifty-nine shares of the capital stock of said corporation shall be entitled, whether the same is declared as dividends or allowed to remain as surplus or undivided profits; and the said O’Neal shall hold the said ninety-five shares of stock deposited with him as security in payment of said promissory note aforesaid as security to the payment of this last named sum representing that share of the earnings for 1920 aforesaid. “To the faithful performance of all the terms and conditions of this agreement the parties hereto bind their respective heirs, executors, administrators and assigns. “In Witness Whereof, Parties have hereunto and to duplicate copies hereof set their hands and seals this first day of November, 1920. Frank T. O’Neal, First Party. G. T. Rawlings, Second Party.” On December 31, 1921, the balance due on the $9,480 note provided for in the contract, according to the tenor of said note, was $6,480, and on that date the note sued on was given to take the place of the original note. Deducting amount paid on note sued on and figuring on the theory that usury was involved the court found for defendant on the counterclaim in the sum of $1,333.34, and allowed $100 additional for attorney’s fee. Prior to November 1, 1920, the O’Neal Automobile Company had never failed to earn annually less than twenty per cent. Plaintiff’s contention is that O’Neal was willing to sell his stock for par if cash was paid, but that he was not willing to sell at that price on a credit; that his credit price was par, plus twenty per cent, the minimum amount the O’Neal Automobile Com *476 pany had theretofore earned. On this basis the credit price of the seventy-nine shares was $7,900, plus twenty per cent, making $9,480 as stated in the contract. For this amount the original note was given drawing interest from date at eight per cent. Defendant contends that the actual sale price of the stock was $100 per share or $7,900 for the seventy-nine shares, and that the $1580 was added in the face of the note and exacted and demanded by O’Neal for his forbearance in extending credit on the $7,900. Defendant introduced the contract in evidence, and, over plaintiff’s objection, was permitted to go into the details leading up to the contract on the theory that it was tainted with usury. It was proper for the court to know the complete history of the transactions between defendant and O’Neal, for how else could the issue of usury be determined. In most usury cases it is found that there was a loan of money, express or implied, but our statute includes the forbearance as well as the use of money. [Sec. 6494, R. S. 1919; White v. Anderson, 164 Mo. App. 135, 147 S. W. 1122; General Motors Acceptance Corporation v. Weinrich, 262 S. W. (Mo. Sup.) 425, 428, and cases therein cited.] In the last cited case the court said: “In order for a transaction to be usurious there must be in it a loan at more'than the legal rate of interest, or the exaction of a greater amount than the legal rate for the forbearance of a debt or sum of money due. ’’ On direct examination defendant stated that the original note was given “for money to buy stock in an automobile company. Q. From whom did you get the money? A. From Mr. O’Neal.” But when conclusions are eliminated defendant says no more than that O ’Neal .exacted the $1,580 included in the note for the forbearance of a debt. On cross-examination defendant testified as follows: “Q. When was the O’Neal Auto Company incorporated? A. In 1919, I believe. Q. Before that time it was just a partnership between you three? A. In 1919 it was when we bought it. Q. When you bought *477 it you incorporated the business in the name of the O’Neal Auto Company? A. Yes. Q. You three were the original stockholders of that company? A. Yes. Q. O’Neal was in the Milling business. A. Yes. Q. Devoted all his time to that business? A. Yes. Q. And was not active in the management of the Auto Company? A. Yes, he kept the books up there for quite a while. Q. But you and Mr. Hickman looked after the balance? A. Yes. Q. You were the ones that were on the ground? A. Yes. Q. You were stockholders from that time until when? A. I believe I sold out in May of this year. Q. You sold to Mr. Hickman? A. Yes. Q. Up until this transaction of November 1, 1920, the .corporation had never paid less than twenty per cent? A. No. Q. What was the dividend for 1919? A. Twenty-five per cent. Q. How much did you lay aside as a surplus over and above your dividend? A. I don’t know just what it was. Q. What was the dividend for 1920? A. Around twenty per cent. Q. At least that much? Something over that? A. I don’t think it was. Q. So it never had earned less than twenty per cent? A. Not at that time. Q. When you got ready to buy O’Neal’s interest, you didn’t have enough money to buy all the stock you wanted to buy? A. No. Q. You paid him as much as you had and gave him your note for the balance? A. Give a note for the balance we owed. Q. That was for seventy-nine shares? A. That was what the note was given for, yes. Q. You bought a total of how many shares ? A. One hundred fifty-nine. Q. The rest of the one hundred eighty shares you paid for in cash? A. Yes. Q. Now you say this note was for a loan, that you got the money from Mr. O’Neal? A. It had to be, to get the stock. Q. You didn’t get any money from Mr. O’Neal? A. No. Q. You gave your note and he turned over to you one hundred fifty-nine shares of stock? A. He turned over one hundred fifty-nine shares, it was bought all at that time. Q. But eighty of it you paid for? A, Yes. Q. So your note *478 was given for the balance of seventy-nine shares? A. Yes. Q. That is correct; there was no loan about it? A. To be sure. It had to be a sale or it wouldn’t have went with the Ford Company. Q. What you mean by a loan is, that you bought this stock and you couldn’t pay for it in cash, so you paid for it with a note due fourteen months after date? A. Yes. Q. That is what you mean by a loan? A. Practically the same. Q. You didn’t go out and borrow the money? A, No. Q. You hadn’t bought the stock before that and put it back up as collateral? A. I put up collateral right there. Q. But it was stock you got for the note? A. Yes, and some other. Q. That was to secure the dividend for the year 1920, for which you were to pay O’Neal ten-twelfths of? A. I put up all the stock I had. Q. To secure the payment of your note? A. Yes. Q. You were expecting, at the time this note was executed, that the business would continue paying twenty per cent, you had no reason to believe otherwise? A. Yes, I told Hickman I didn’t think it would. Q. Did you tell O’Neal that? A. Yes. Q. When you executed this contract you were up in Mr. O’Neal’s office? A. Yes. Q. At that time you expressed no other thought than this stock would earn twenty per cent? A. No, but I didn’t think it would. Q. You set forth in that agreement that that was the estimated profit for that year? A. They said, suppose we estimate it, I says, suppose you do, how do you know it will make it? Q. That is what you did estimate it there? A. Yes. Q. Mr. O’Neal told you if you would pay for the stock in cash you could have it for $100 a share? A. Yes. Q. But if you bought it on a credit it would have to be more? A. No. Q. That is what you did do? A. Yes, of course we did, yes. Q. You don’t mean to have the court understand that you thought Mr. O’Neal was so void of any business sense that he would sell you that stock for par and get eight per cent, and you go ahead and get twenty per cent? A. Mr. O’Neal was awful *479 anxious to get the money. Q. That was the reason he was willing to sell you the stock at par? A. He said he would like to have some money at twenty per cent or more. Q. There was no market price fixed on this stock, none of it had ever been offered for sale? A. No. Q. The book value of the stock was carried in excess of par at that time? A. No. Q. In view of the fact that you had been paying twenty per cent dividends ? A. If you would go back and look at the books —Q. What was the book value at the time of this transaction, the book value of the stock? A. $36,000 was all it was worth and a little more. Q. One thing, you were carrying this Ford contract at a thousand dollars? A. Yes, and was glad to do it. Q. And it was the biggest paying thing in the whole investment? A. Yes. Q. Made more money off that than all the rest of it? A. Yes. Q. And carried it on the books at one thousand dollars, for tax purposes and everything? A. Yes.” The owner of property whether real or personal has a right to name the price at which he is willing to sell. He may offer to sell at a designated price for cash or at a much higher price on a credit, and a credit sale will not constitute usury however great the difference between the cash price and the credit price unless the whole transaction was in fact a mere pretense and a sham in order to camouflage the real facts. [27 Rul. Cas. Law, page 214; White v. Anderson, and General Motors Acceptance Corporation v. Weinrich, supr.] Hickman was a witness for defendant, and gave substantially the same evidence as did defendant. There is nothing substantial in the record before us which tends to show that the transaction whereby defendant purchased the seventy-nine shares of stock and gave his note therefor was tainted with usury. We think, considering the evidence of Hickman, and defendant, together with the contract, that the conclusion is inevitable that defendant purchased the seventy-nine shares of stock, and agreed in good faith to *480 pay $120 per share therefor. According to the previous earnings of the O’Neal Automobile Company its stock on November 1, 1920, when defendant purchased, was worth at least $120 per share. The mere fact that O’Neal was willing to sell for par if he got cash cannot alter the situation. O’Neal had the right, as we have shown, to fix a cash price and a credit price, and not be guilty of usury in the credit transaction if such transaction was on the level and not concocted to indirectly exact tribute for the extension of credit. The judgment should be reversed and cause remanded with directions to enter judgment in favor of the plain.tiff according to the prayer of its petition and in favor of plaintiff on defendants’ counterclaim, and it is so ordered. Cox, P. J., concurs; Bailey, J., not sitting.