Worthen v. Dillard

Richard B. Adkisson, Chief Justice. Appellant brought suit under the Declaratory Judgment Act, Ark. Stat. Ann. §§ 34-2501 — 2512 (Repl. 1962), to have a Bond Purchase Agreement entered into by appellees declared invalid as violating Arkansas’ usury provision, Art. 19, § 13 of the Arkansas Constitution. The Baxter County Chancery Court’s ruling in favor of appellees is now appealed. On August 27, 1981, appellees, the County Judge and the County Clerk of Baxter County, authorized a contract for the sale of Baxter County Hospital Revenue Bonds for the purpose of upgrading and expanding the Baxter General Hospital, a county owned and operated hospital. This contract called for an interest rate on the bonds in excess of ten percent for the years 1988—2011. Appellant, a citizen, resident, and taxpayer of Baxter County, brought this action individually and as a representative of other residents of Baxter County to enjoin the sale and issuance of the bonds as an illegal county expenditure in violation of Art. 19, § 13. This section provides: All contracts for a greater rate of interest than ten percent per annum shall be void, as to principal and interest, . . . The trial court held that the Depository Institutions Deregulation and Monetary Control Act of 1980, as amended, preempted the ten percent limit on interest rates as applied to the bonds at issue here. Section 511 of this Act is codified in Title 12 U.S.C.A. § 86a (a) and provides: (a) If the applicable rate prescribed in this section exceeds the rate a person would be permitted to charge in the absence of this section, such person may in the case of a business or agricultural loan in the amount of $1,000 or more, notwithstanding any State constitution or statute which is hereby preempted for the purposes of this section, take, receive, reserve, and charge on any such loan, interest at a rate of not more than 5 per centum in excess of the discount rate, including any surcharge thereon, on ninety-day commercial paper in effect at the Federal Reserve bank in the Federal Reserve district where the person is located. (Emphasis added) Appellant argues that the loan as evidenced by the bonds is not a “business loan” within the meaning of § 86 (a). We agree. The Act does not define “business or agricultural loan” and there is nothing in the legislative history to clarify congressional intent except a Senate report which contrasts “business and agricultural loans” with “consumer and personal loans.” Therefore, in absence of any guidance in the statute or legislative history, the term “business loan” must be given its plain and ordinary meaning. We conclude that a loan to upgrade a county owned and operated hospital is not within the plain meaning of the term “business loan” as used in the Monetary Control Act. Reversed. Hays, J., concurs.