{ "id": 5683165, "name": "Shawn HICKMAN v. Chester J. COURTNEY", "name_abbreviation": "Hickman v. Courtney", "decision_date": "2005-02-17", "docket_number": "04-1065", "first_page": "5", "last_page": "12", "citations": [ { "type": "official", "cite": "361 Ark. 5" }, { "type": "parallel", "cite": "203 S.W.3d 632" } ], "court": { "name_abbreviation": "Ark.", "id": 8808, "name": "Arkansas Supreme Court" }, "jurisdiction": { "id": 34, "name_long": "Arkansas", "name": "Ark." }, "cites_to": [ { "cite": "348 Ark. 259", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 74137 ], "weight": 2, "year": 2002, "opinion_index": 0, "case_paths": [ "/ark/348/0259-01" ] }, { "cite": "320 Ark. 333", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1451271 ], "weight": 2, "year": 1995, "opinion_index": 0, "case_paths": [ "/ark/320/0333-01" ] }, { "cite": "355 Ark. 28", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 2650866 ], "weight": 2, "year": 2003, "opinion_index": 0, "case_paths": [ "/ark/355/0028-01" ] }, { "cite": "358 Ark. 89", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 8451533 ], "weight": 2, "year": 2004, "pin_cites": [ { "page": "n.2" } ], "opinion_index": 0, "case_paths": [ "/ark/358/0089-01" ] }, { "cite": "306 Ark. 4", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1900926 ], "weight": 2, "year": 1991, "opinion_index": 0, "case_paths": [ "/ark/306/0004-01" ] }, { "cite": "235 Ark. 481", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1684750 ], "weight": 4, "year": 1962, "opinion_index": 0, "case_paths": [ "/ark/235/0481-01" ] }, { "cite": "302 Ark. 547", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1884271 ], "weight": 2, "year": 1990, "opinion_index": 0, "case_paths": [ "/ark/302/0547-01" ] }, { "cite": "351 Ark. 637", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1158962 ], "weight": 10, "year": 2003, "pin_cites": [ { "page": "653" }, { "page": "653" } ], "opinion_index": 0, "case_paths": [ "/ark/351/0637-01" ] } ], "analysis": { "cardinality": 577, "char_count": 11908, "ocr_confidence": 0.746, "pagerank": { "raw": 1.1138024778257588e-07, "percentile": 0.5713400665444202 }, "sha256": "0fec2299c1d2d9fa127ebe0e7279d1be76406a3a0d6b9e1324e498b388830b71", "simhash": "1:4a6ab03cd6805112", "word_count": 2011 }, "last_updated": "2023-07-14T21:38:22.368604+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "Shawn HICKMAN v. Chester J. COURTNEY" ], "opinions": [ { "text": "Betty C. Dickey, Justice.\nThis is a usury case arising from a loan agreement between Shawn Hickman and Chester J. Courtney. Ms. Hickman sued Mr. Courtney in the Ashley County Circuit Court, alleging that the parties\u2019 loan agreement imposed a usurious rate of interest and requesting appropriate relief. On appeal, Ms. Hickman argues that the trial court\u2019s determination that Mr. Courtney lacked the requisite intent to commit usury is clearly erroneous. We agree, and reverse and remand.\nFacts\nMr. Courtney had been a Certified Public Accountant for over forty years and, anticipating retirement, decided in 2002 to sell his accounting firm to Ms. Hickman, his employee of three years. Ms. Hickman initially agreed to buy the firm outright for $253,000, but was unable to obtain financing for that amount. The parties then agreed that Ms. Hickman would make a down payment of $40,000 and pay the balance in monthly installments. Mr. Courtney\u2019s lawyer prepared a loan agreement reflecting this arrangement. The agreement specifically provided that, after Ms. Hickman\u2019s down payment had been made, \u201cthe remaining balance shall be paid in 120 monthly installments, with each such payment to be made on or before the 10th day of each month beginning on February 10, 2002. The amount of each installment shall be calculated annually by amortizing the balance of the purchase price over ten years at the then prevailing commercial loan rate. The parties agree that the payment shall be $2,640.90 for the first twenty-four (24) months.\u201d\nMs. Hickman made full payments pursuant to the agreement until September of 2002, and then, per the parties\u2019 agreement, made reduced payments of $1,800 from5 October of that year through February of 2003. Ms. Hickman first discovered that she was being charged a usurious rate of interest in January of 2003, when her bank, as part of a loan renewal process, requested that she provide it with an amortization schedule for her loan with Mr. Courtney and a 1099 tax form reflecting the interest she had paid Mr. Courtney during the year. These documents indicated that Ms. Hickman was paying an annual percentage rate of 8.5% on her loan with Mr. Courtney. At the time the agreement was made, the maximum interest rate allowed under Arkansas law was 6.25%. After learning about these rates, Ms. Hickman sued Mr. Courtney, claiming that the contract was usurious and asking the trial court to reform the contract to void the usurious unpaid interest and award her $38,325.24, an amount equal to twice the interest she had already paid on the loan.\nThe trial court ruled in favor of Mr. Courtney, explaining that Ms. Hickman\u2019s claim had failed because she had not met her burden of clear and convincing proof with respect to Mr. Courtney\u2019s intent to violate the law. The trial court observed that the agreement did not expressly state a rate of interest to be . charged but said that it interpreted the phrase \u201cat the prevailing commercial rate\u201d to mean any rate of interest that does not exceed the maximum lawful rate. The trial court acknowledged that the interest rate reflected in the amortization schedule was a clearly usurious 8.5%, but said that it did not view that rate as controlling, because the evidence did not establish that Mr. Courtney had either created the amortization schedule or that the schedule was consistent with his intent. The trial court reformed the contract to specify that the rate of interest will not exceed the maximum lawful rate and ordered that any interest already paid in excess of this rate be applied to future unpaid interest.\nMs. Hickman appealed, arguing that the trial court\u2019s determination that Mr. Courtney lacked the requisite intent to commit \u00fcsury was clearly erroneous. In response, Mr. Courtney argues that Arkansas\u2019 usury provision is either unconstitutional or invalid because the provision bases the maximum lawful rate of interest on the Federal Reserve Discount Rate, and the Federal Reserve Discount Rate no longer exists.\nStandard of Review\nWhile a trial court\u2019s conclusions of law are reviewed de novo, we recognize the lower court\u2019s superior position to assess the facts and will not reverse its factual findings unless they are clearly erroneous. A finding of fact made by a trial court sitting in equity is clearly erroneous when, despite supporting evidence in the record, the appellate court viewing all of the evidence is left with a definite and firm conviction that a mistake has been made. Carter v. Four Seasons Funding Corp., 351 Ark. 637, 97 S.W.3d 387 (2003). When the intent to commit usury is not apparent on the face of the challenged document, the question of whether a lender possessed the requisite intent is for the finder-of-fact to decide. Id.\nUsury\nArkansas\u2019 usury law is set out in our Constitution: \u201cThe maximum lawful rate of interest on any contract... shall not exceed five percent (5%) per annum above the Federal Reserve Discount Rate at the time of the contract.\u201d Ark. Const. Art. 19, \u00a7 13(a)(i) (1987). Usurious contracts are void as to the amount of unpaid interest in excess of the maximum lawful rate, and a borrower may recover twice the amount of usurious interest already paid on the loan. Ark. Const. Art. 19, \u00a7 13(a)(ii). For a contract to be usurious, it must be so at the time it is entered into. Smith v. MRCC Partnership, 302 Ark. 547, 792 S.W.2d 301 (1990). The Federal Discount Rate at the time this contract was entered into was 1.25%, so the maximum lawful rate of interest for Ms. Hickman\u2019s and Mr. Courtney\u2019s loan agreement was 6.25%.\nBecause the \u201cpenalty for a usurious transaction is indeed heavy,\u201d the plaintiff has the burden of proving by clear and convincing evidence that the lender possessed the intent to commit usury. Haley v. Greenhaw, 235 Ark. 481, 360 S.W.2d 753 (1962). Usury will not be presumed, imputed, or inferred where an opposite result can be fairly and reasonably reached. McElroy v. Grisham, 306 Ark. 4, 810 S.W.2d 933 (1991). The intent that is required, however, is not an intent to violate the law, but merely the intent to charge a rate of interest that proves to be usurious. Carter v. Four Seasons Funding Corp., 351 Ark. 637, 97 S.W.3d 387 (2003). In ascertaining intent, the fact-finder must look beyond the four corners, of the challenged agreement \u201cto determine, considering all of the attendant facts and circumstances, if the contract is usurious in effect.\u201d Id.\nIn this case, Ms. Hickman had the burden of proving by clear and convincing evidence that Mr. Courtney intended to charge an interest rate in excess of 6.25%, the maximum lawful rate at the time this agreement was made. The trial court did not believe that the 8.5% rate in the amortization schedule was reflective of Mr. Courtney\u2019s intent, because the evidence did not prove that the schedule was either created or approved of by Mr. Courtney. The amortization schedule was not, however, the only evidence to indicate that Mr. Courtney was aware that he was charging an 8.5% rate of interest. Mr. Courtney testified on more than one occasion that he intended the interest rate on his loan with Ms. Hickman to exceed the 7% rate that he was paying on another note, saying that Ms. Hickman \u201cagreed to pay a percent and a half more than [the 7%] I was paying at the bank,\u201d and that this was \u201cthe only reason I financed.\u201d Mr. Courtney\u2019s wife testified to the same effect.\nMs. Hickman also introduced into evidence a tax return and a 1099 tax form from the year 2002, in which Mr. Courtney represented that he was receiving 8.5% in interest on his loan with Ms. Hickman. An 8.5% rate of interest on this loan would yield an annual total of $16,191, the exact amount that Mr. Courtney reported on his tax return as income paid by Ms. Hickman. On the 1099 form, Mr. Courtney made handwritten corrections amending the amount of interest income to reflect this same amount. These documents were introduced at trial without objection from Mr. Courtney. The way a lender treats a transaction on his tax returns can be an important indicator of whether the lender has the intent to commit usury. See Carter, 351 Ark. at 653; Haley v. Greenhaw, supra, 235 Ark. 481. Mr. Courtney was a C.P.A. with over forty years of experience, holding advanced degrees in both business and accounting. At the time of the trial, he was working as a tax return preparer. Mr. Courtney\u2019s professional experience with tax returns and interest rates suggests that the representations he made on his tax forms were accurate reflections of his intent.\nThe intent to commit usury is clearly evidenced by these tax forms as well as by Mr. Courtney\u2019s own testimony that he intended to charge 8.5% in interest on Ms. Hickman\u2019s loan. This is especially true in light of Mr. Courtney\u2019s professional background and experience. In fact, the only evidence that Mr. Courtney might not have intended to charge 8.5% is the agreement\u2019s somewhat ambiguous phrase \u201cat the then prevailing commercial rate.\u201d While this language may not, in and of itself, evidence an intent to commit usury, the trial court is obligated to look beyond the four comers of the document at all the attendant circumstances to determine if the contract is usurious in effect. Carter v. Four Seasons Funding Corp., 351 Ark. at 653. The circumstances clearly indicate that Mr. Courtney intended to charge a rate of interest that proved to be usurious. The trial court\u2019s holding to the contrary is clearly erroneous, and we remand for findings consistent with this opinion.\nConstitutionality of Arkansas\u2019s Usury Provision\nMr. Courtney argues that Arkansas\u2019 usury provision is either unconstitutional or invalid because the provision is based on the Federal Discount Rate, and the Federal Reserve Discount Rate no longer exists. Mr. Courtney\u2019s argument has no bearing on the outcome of this case, however, because a Federal Reserve Discount Rate was still in existence at the time that the loan agreement was made. See Hartford Fire Insurance Company v. Sauer, 358 Ark. 89, 186 S.W.3d 229 n.2 (2004).\nAt any rate, this court will not address the merits of this argument on appeal, because the issue was not ruled on by the court below. This court has repeatedly held that the \u201c[fjailure to obtain a ruling, even with respect to a constitutional question, precludes the issue on appeal.\u201d State Farm Fire & Casualty Company v. Ledbetter, 355 Ark. 28, 129 S.W.3d 815 (2003); Technical Services of Arkansas, Inc. v. Pledger, 320 Ark. 333, 896 S.W.2d 433 (1995). In this case, the trial court\u2019s order did not include a ruling on the constitutionality of Article 19, Section 13, and Mr. Courtney did not seek to set aside the order to obtain a ruling on the issue. See Doe v. Baum, 348 Ark. 259, 72 S.W.3d 476 (2002). Because there was no ruling below, this court is procedura\u00fcy barred from addressing the issue on appeal.\nReversed and remanded.\nWhile the trial court\u2019s order states that Ms. Hickman made reduced payments in the amount of $1,600, it is clear from the record that the actual amount was $1,800.\nMs. Hickman also asserts that the trial court\u2019s holding that Mr. Courtney lacked the intent to commit usury was a mistake of law. Whether the requisite intent exists, however, is a finding of fact and not a legal conclusion. Carter v. Four Seasons Funding Corp., 351 Ark. 637, 97 S.W.3d 387 (2003). Ms. Hickman does not argue that the judge misinterpreted or misapplied the law, but that the court\u2019s ultimate conclusion was wrong because the evidence shows that Mr. Courtney did intend to charge a usurious rate of interest. This is an argument that the court\u2019s finding was clearly erroneous, not that it was a mistake of law.", "type": "majority", "author": "Betty C. Dickey, Justice." } ], "attorneys": [ "Bruce D. Switzer, for appellant.", "Haddock & Tisdale, P.A., by: James W. Haddock, for appellee,." ], "corrections": "", "head_matter": "Shawn HICKMAN v. Chester J. COURTNEY\n04-1065\n203 S.W.3d 632\nSupreme Court of Arkansas\nOpinion delivered February 17, 2005\nBruce D. Switzer, for appellant.\nHaddock & Tisdale, P.A., by: James W. Haddock, for appellee,." }, "file_name": "0005-01", "first_page_order": 25, "last_page_order": 32 }