Carney v. Matthewson

Hire, C. J. The sole question involved in this appeal is whether the contract evidenced by the following note was usurious : .“$300.00 YeeevielE, Ark., Nov. 23, 1903. “Twelve months after date I promise to pay to the order of Angel Matthewson three hundred dollars, for value received, negotiable and payable without defalcation or discount and with interest at the rate of 10 per cent, per annum; and if interest be not paid annually, to become as principal, and bear, the same rate of interest. Interest' and principal payable at Bank of Yellville. Secured by deed of trust, which is a second lien on 166x210 of ground in Sec. 9, Tp. 18 N., R. 17 W. “B. J. Carney.” This note was payable twelve months after date, and the interest upon the interest only became due, according to contract, in the event payment was not made pursuant to the promise. “Stipulations to the effect that if the debt be not paid at maturity it shall draw interest thereafter at a rate greater than the statutory limit are now generally regarded as penalties to induce prompt payment, and as the debtor has it in his power to avoid paying the penalty by discharging the debt when due, such agreements are held to be free from usury.” 29 Am. & Eng. Enc. of Law, 507 ; Webb on Usury, § 119. “The true test is: Has the debtor the absolute right to discharge and satisfy the contract at maturity by paying the principal debt and lawful interest? If he has, the contract is not vitiated by providing for the payment of an additional sum.” 29 Am. & Eng. Enc. of Law, 506. This is in conformity with the principle announced in Chaffee v. Landers, 46 Ark. 364. Moreover, this is not such a compounding as would render the note usurious. This subject is fully discussed in Grider v. Driver, 46 Ark. 50, and First National Bank v. Waddell, 74 Ark. 241. Judgment affirmed.