Summary
In Early v. Williams, 239 Miss. 320, 123 So.2d 446 (1960), these statutory formulas were first approved, as they were later in Powell v. Sowell, 245 Miss. 53, 145 So.2d 168 (1962); Giles v. Friendly Finance Co. of Biloxi, 185 So.2d 659 (Miss.
Summary of this case from Jackson Inv. Co. v. BatesOpinion
No. 41530.
October 10, 1960.
1. Pawnbrokers and moneylenders — transaction not in violation of Small Loan Regulatory Act.
Where note for $1,140 was for a loan of $715 for 24 months, interest of $122.14, service charge of $221.06, of which $73 was subsequently rebated to borrower, and $22.80 for life insurance on borrower, and $34.20 for health and accident insurance on borrower, and $22.80 for insurance on property securing debt, and $2 for recording papers, there was no violation of the Small Loan Regulatory Act. Chap. 170, Secs. 9(a-d), 11, Laws 1958.
2. Pawnbrokers and moneylenders — transaction not in violation of Small Loan Regulatory Act.
Where note for $1,440 was for loan of $1,045 for 24 months, and service charge of $393.50, consisting of interest in sum of $154.29 and broker's fee of $239.21, and $1.50 for recording, there was no violation of the Small Loan Regulatory Act. Chap. 170, Secs. 9(a-d), 11, Laws 1958.
3. Brokers — usury — right of broker to charge fee for service in procuring and guaranteeing a small loan.
Broker has right to charge fee for his service in procuring and guaranteeing a loan.
4. Courts — contracts — position of court as to the making of improvidential contracts.
Courts cannot prevent people, who are in their right mind and under no disability, from making contracts or rescue them from their folly.
5. Pawnbrokers and moneylenders — service charges — transaction not in violation of Small Loan Regulatory Act.
Where first loan was fully paid out of second loan, which was made more than 90 days after first loan, and the two loans were separate transactions, lender did not violate the Small Loan Regulatory Act when it included, in both instances, service charges which were in strict compliance with the provisions of the Small Loan Regulatory Act. Chap. 170, Secs. 9(a-d), 11, 12, Laws 1958.
Headnotes as approved by Lee, J.
APPEAL from the Circuit Court of Yalobusha County; CURTIS M. SWANGO, JR., Judge.
Horan Horan, Water Valley, for appellants.
I. This was an action in replevin by lender to obtain possession of chattels which was given as collateral by borrower to secure a loan. The defendant borrower plead not guilty in the replevin action. Such plea made an issue to all questions pertaining to right of the plaintiff to possession of the property. Ables v. Belzoni Loan Agency, 233 Miss. 369, 102 So.2d 122; Alt v. Bailey, 211 Miss. 547, 52 So.2d 283; Associates Discount Corp. v. Ruddock, 224 Miss. 533, 81 So.2d 249; Jones v. Lamensdorf, 175 Miss. 565, 167 So. 624; McCashill v. Little, 214 Miss. 331, 58 So.2d 801; Munn v. Potter, 111 Miss. 180, 71 So. 315; Puckett v. Fore, 77 Miss. 391, 27 So. 381; Richardson v. Cortner, 232 Miss. 885, 100 So.2d 854; Strider v. Calvert Fire Ins. Co., 226 Miss. 773, 85 So.2d 183; Secs. 36, 2859, Code 1942; 46 Am. Jur., Sec. 100 p. 56; 91 C.J.S., Sec. 11 p. 582.
II. The Valley Loan Company is a partnership composed of B.D. Chittom and Charles E. Jenkins, engaged in the handling of loans and lending money and taking security thereby, and brought this suit by Murray L. Williams, trustee. The borrower signed the application for this loan in the office of the Valley Loan Company and within a few hours on October 14, 1958, he received a check payable to him and his wife for $715, signed by Valley Loan Company, Charles E. Jenkins, and executed a Chattel Deed of Trust against his household furniture, and his automobile to the Valley Loan Company to save harmless and secure, by this Deed of Trust, the Valley Loan Company, from any loss by reason of its said unconditional endorsement and guarantee of the note representing the loan of $715. The Chattel Deed of Trust merely stated that the Valley Loan Company, acting for and as the agent for the undersigned, has by virtue of its unconditional endorsement and guarantee of note hereinafter described, secured, from others a loan for the undersigned in the sum of $1,140. The check representing the money loaned to the borrower was issued by the Valley Loan Company. The payments made by the borrower was paid to the Valley Loan Company. In such case the Valley Loan Company was the lender and was not in fact the broker. Alt v. Bailey, supra; Brown v. West, 80 Miss. 764, 32 So. 52; Hiller v. Ellis, 72 Miss. 701, 18 So. 95, 41 L.R.A. 707; Kennedy v. Porter, 176 Miss. 742, 170 So. 286; McLauri v. Parker, 24 Miss. 509; Parchman v. McKinney, 12 Sm. M. 631; Richardson v. Cortner, supra; State v. Abbott Loan Service (Texas), 195 S.W.2d 416; Sec. 36, Code 1942; 55 Am. Jur., Sec. 16 p. 334; 66 C.J., Sec. 299 p. 305; 91 C.J.S., Sec. 11 p. 582.
III. On October 14, 1958 the appellee, Valley Loan Company loaned appellants $715 and took a note for $1,140 payable twenty-four payments at $47.50 each. The appellants paid $215 on this note and asked the Valley Loan Company to give them additional time within which to pay the note. The Valley Loan Company by one of its partners, Charles E. Jenkins, agreed to renew the note, but made them wait until after ninety days from the date of the execution of the first note because, as he claimed he could not make two loans to the same party within ninety day period. After the ninety days had expired and on February 5, 1959, the note was renewed and the lender the Valley Loan Company charging an additional service charge and the interest on the service charge and interest on interest and exacted a note from the borrower for $1,440 payable at $60 per month for twenty-four months. This constituted an usury interest, a violation of the small loan law and made void the entire contracts. And by such act the lender forfeited his right to collect the interest or the principal. Associates Discount Corp. v. Ruddock, supra; Brown v. Nevitt, 27 Miss. 801; Chandler v. Cooke, 163 Miss. 147, 137 So. 496; Connor v. Minier, 109 Cal. 770, 288 P. 23; Dickey v. Bank of Clarksdale, 183 Miss. 748, 184 So. 314; Discount Corp. v. Mitchell, 216 Mo. App. 100, 261 S.W. 743; Hardin v. Grenada Bank, 182 Miss. 689, 180 So. 805; Kennedy v. Porter, 176 Miss. 742, 170 So. 286; Krulik v. Confidential Personal Loan Co., 176 Misc. 138, 26 N.Y.S.2d 676; San Joaquin Finance Corp. v. Allen, 102 Cal.App. 400, 283 P. 117; Terry Trading Corp. v. Barsky, 210 Cal. 428, 292 P. 474; Annos. 53 A.L.R. 743, 105 A.L.R. 795, 143 A.L.R. 1323; Secs. 1946, 5591-09(b), 5591-09(d), Code 1942; Chap. 170, Laws 1958; 55 Am. Jur., Secs. 60, 94 pp. 367, 388.
IV. The evidence shows, without dispute, by the testimony of Charles E. Jenkins, one of the copartners in the partnership of Valley Loan Company, that the Valley Loan Company loaned the appellants $715 and took a note dated October 14, 1958, signed by appellant, for $1,140; that the appellants paid $215 on the note, and that on February 5, 1959 the note was renewed, and without lending or advancing to the appellants any more money the Valley Loan Company exacted a note for $1,440 payable in twenty-four monthly payments, which would extend the time from the date of the execution of the first note to the date of the payment of the renewal note possibly twenty-seven months; and then on June 8, 1959, the Valley Loan Company by its trustee sued out a writ of replevin for the appellants' household furniture and automobile on which they held a chattel deed of trust and demanded judgment for $1,440. The copartner, Charles E. Jenkins, testified that he made no mistake in the calculation of the interest. That he knew what he was doing and that there was no error or accident or mistake made in the charges. This resulted in usurious interest and the appellants are entitled to recover what money they paid and the appellees are not entitled to collect any interest or principal or service charges and other charges. Chandler v. Tharp, 161 Miss. 623, 137 So. 540, 78 A.L.R. 445; Cortner v. Bennett, 230 Miss. 369, 92 So.2d 559; Jones v. Lamensdorf, 175 Miss. 565, 167 So. 624; Secs. 36, 5591-10, Code 1942; Chap. 170, Sec. 10, Laws 1958.
Murray L. Williams, Water Valley, for appellee.
I. There were two separate and distinct transactions between appellants and appellee. The contracts made and entered into and the fees and interest charged were not usurious but were authorized by Chapter 170 of the Laws of 1958. Tower Underwriters v. Lott, 210 Miss. 389, 49 So.2d 704; Secs. 5591-06, 5591-09(b), 5591-11, 5591-12, Code 1942.
Luther M. Early, on October 13, 1958, applied to Valley Loan Company, a copartnership, composed of D.B. Chittom and Charles E. Jenkins, loan brokers, for a loan of $715.00. On the next day, he and his wife, Bessie Lou Early, executed a note to Consumers Credit Corporation of Mississippi in the sum of $1,140.00, payable in twenty four equal monthly installments of $47.50 each. At the same time, they executed to Valley Loan Company, as their agent, endorser and guarantor of the note to the named lender, Consumers Credit Corporation of Mississippi, a chattel deed of trust, in the like amount of $1,140.00, on an automobile and certain household equipment, the property involved in this lawsuit, to secure the payment thereof.
The note of $1,140.00 comprised the amount of the loan, towit: $715.00, plus interest of $122.14, plus a service charge of $221.06 ($73.00 of which was subsequently rebated to the borrower), plus $22.80 for life insurance on the borrower, plus $34.20 for health and accident insurance on the borrower, plus $22.80 for insurance on the property securing the debt, and plus $2.00 for recording the papers.
The Earlys thereafter defaulted in their payments, and, in fact, paid only two installments for a total of $95.00.
On February 5, 1959, the Earlys executed to Consumers Credit Corporation of Mississippi a note in the sum of $1,440.00, payable in twenty four monthly installments of $60.00 each. The note contained the recitation that it was secured by a chattel deed of trust, and it was endorsed by Valley Loan Company. The instrument also recited that it comprised $1,045.00 paid to Consumers Credit Corporation of Mississippi, plus a service charge of $393.50 (made up of interest in the sum of $154.29 and the broker's fee of $239.21), and plus $1.50 for recording.
The Earlys defaulted in these payments, in fact paying only $60.00 thereon. Thereafter on June 8, 1959, Murray L. Williams, trustee, made an affidavit in replevin in order to effect the seizure of the property, and the Earlys gave bond. The declaration in replevin was filed in the Circuit Court of Yalobusha County, and a general issue plea was filed by the defendants.
The evidence clearly established the facts as hereinbefore stated; and the trial judge gave a directed verdict for the plaintiff. From the judgment entered, the Earlys appealed.
The question here involves a construction of certain provisions of Chapter 170, Laws of 1958, known as the "Small Loan Regulatory Act". The first eight sections are not involved. Section 9(a), in regard to service charges, interest and the period of time to run for loans under $99.00, provides as follows:
"No loan of ninety-nine dollars ($99.00) or less shall extend for a period of time greater than that shown herein and no loan shall be made for less than fifteen dollars ($15.00), and the service charges and the legal rate of interest, when combined, upon loans handled by a licensee for a borrower for a fee, commission or charge to be paid by the borrower, shall not exceed the following amounts:
Maximum Monthly Amount of Loan Charge for Interest Maximum Period Not less Not more Service Charges of Time of Loan than than Combined
$15.00 $20.00 $1.90 3 Months 21.00 30.00 1.94 4 Months 31.00 40.00 1.98 5 Months 41.00 50.00 2.02 6 Months 51.00 60.00 2.06 8 Months 61.00 70.00 2.10 8 Months 71.00 80.00 2.15 10 Months 81.00 90.00 2.19 10 Months 91.00 99.00 2.25 12 Months"
Paragraph (b) thereof, which applies in this case, provides as follows: "On loans of one hundred dollars ($100.00) or more the service charges and the legal rate of interest, when combined, shall not exceed an amount equal to two per cent (2%) of the amount of cash received by the borrower multiplied by the number of months for which the loan is extended."
Under Paragraph (c) lenders may perform their service for smaller charges. Paragraph (d) thereof permits the lender to charge interest at six per cent for the entire period of the loan and "aggregate the principal and interest for the entire period of the loan, and divide the same into monthly (or weekly) installments."
Section 11 of the act provides that a licensee may charge any borrower on loans of $100.00 or more the actual cost of recording the security instrument; a reasonable fee paid to an attorney for investigating the title to any property given as security for a loan; the actual cost of the premium for insurance upon the property given as security for the loan in a company of the borrower's choice, licensed to do business in this state; and the actual cost of any premium paid for regular life, health, and/or accident insurance on the borrower, not in excess of the amount of the loan.
Section 12 provides in part: "If any licensee shall arrange, obtain, negotiate, procure, loan direct, or guarantee more than one loan for any borrower within a ninety-day period of time, the total service charge, or interest, charged or collected shall not exceed the service charge or interest which would have been allowable under this act had the aggregate sum received by the borrower in the several loans been handled, negotiated or loaned in one loan originally."
Thus it may be seen that, under the provisions of paragraph (b) supra, the appellee had the authority to collect as service charges and interest, combined, "two per cent (2%) of the amount of cash received by the borrower multiplied by the number of months for which the loan is extended". Two per cent of $715.00 is of course $14.30. When this is multiplied by twenty four, the number of months over which the loan is extended, the total becomes $346.20. Now the appellee, in the first instance, collected $343.20, and thereafter rebated $73.00 thereof.
(Hn 1) Under paragraph (d), it was permissible to "aggregate the principal and interest for the entire period of the loan". The sum of the several items, other than interest, was $1,017.86. Permissible interest on that amount at six per cent, under said paragraph (d), for twenty four months equaled $122.14, the amount of interest actually charged. This complied with the law. The combination of this amount of interest with the broker's fee of $221.06 ($73.00 of which was later rebated) did not violate the provisions of paragraph (b), supra. The other items were clearly chargeable under Section 11. (Hn 2) What has been said in regard to the first loan is likewise applicable to the second where the service charge of $393.50 (made up of interest in the amount of $154.29 and the broker's fee of $239.21) did not violate paragraph (b), supra. This is clearly true because more than ninety days elapsed between the making of the two loans.
(Hn 3) It seems incredible that any borrower, to get the sum of money which appellants received, would be willing to incur the stated expenses incident thereto. This is especially true as to the enormous brokerage fee. The right of a broker to charge a fee for his service in procuring and guaranteeing a loan has long been recognized in the jurisprudence of this state. See Tower Underwriters Inc. v. Lott, 210 Miss. 389, 49 So.2d 704. (Hn 4) The Court cannot prevent people, who are in their right mind and under no disability, from making contracts nor rescue them from their folly. Obviously this was an improvident contract that the appellants should not have made. But Chapter 170, Laws of 1958, supra, expressly authorizes contracts such as are found in this case; and a party cannot be penalized as long as he complies with the law.
(Hn 5) The first loan was fully paid out of the second. Under the evidence, these two loans were separate transactions. Thus the appellee did not violate the law when it included, in both instances, the service charges as made, inasmuch as those charges were in strict compliance with the provisions of the "Small Loan Regulatory Act", supra.
These transactions were within the law. There was no obligation on the part of the appellee to execute a second loan. The Earlys could have gone to a different broker for the second loan. Manifestly the two notes constituted separate transactions. The learned trial judge so held. Consequently the judgment must be affirmed.
Affirmed.
Hall, P.J., and Holmes, Ethridge and McElroy, JJ., concur.