Arkansas Real Estate Co. v. Buhler

Citations: 247 Ark. 582; 447 S.W.2d 126; 1969 Ark. LEXIS 1144Docket: 5-5027

Court: Supreme Court of Arkansas; November 10, 1969; Arkansas; State Supreme Court

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Lyle Brown, Justice, presided over a case where H. F. Buhler and his wife obtained a judgment against Arkansas Real Estate Company, Inc. concerning four notes secured by mortgages on property in Saline County. The defense argued that the notes were usurious, asserting that they stemmed from an original usurious note, which tainted the subsequent notes. The trial court rejected these claims, prompting Arkansas Real Estate to appeal.

Arkansas Real Estate Company, Inc. is a domestic corporation involved in the bauxite industry, primarily managed by R. M. Traylor. In 1948, Traylor engaged Buhler in bauxite ventures, leading to a contract that granted Buhler ownership of forty-six acres and restricted him from joining Traylor on bauxite options for twelve months. They collaborated on various bauxite transactions, with Buhler providing funding for Traylor’s acquisitions. 

By 1954, Buhler sought to formalize his financial contributions, presenting an itemized account of cash advancements totaling approximately $67,268.50, though discrepancies in the exact total existed. Traylor disputed the amount owed, providing handwritten notes that suggested credits reducing the account to $50,150. Disagreements on interest and additional charges led to a final note of $67,000, which was due January 1, 1957, and bore interest rates of five percent until maturity and ten percent thereafter. 

The original note included a handwritten notation indicating that $10,000 was for interest and $57,000 was principal, confirmed by Buhler's signature. Traylor contended that he executed the note as a favor to Buhler and claimed that the arrangement was a partnership where Buhler would cover three-fourths of the capital, with Traylor contributing services and a quarter of the capital, expecting equitable compensation from future sales.

Traylor was the sole witness regarding the transactions in question. Buhler, who testified about his ownership of the notes, could not confirm his handwriting but acknowledged it was his signature. At 88 years old, Buhler stated his memory was nearly gone, a fact not contested by the appellant, leading to limited questioning. Prior to this case, Buhler had sued Arkansas Real Estate Company over the original note, which was settled with Traylor without legal counsel, resulting in Buhler receiving four notes central to the current litigation. Traylor argues the original note is usurious based on four points: 1) Uncontradicted testimony and documentation support claims of usury. 2) Buhler's signature on the original note's notation suggests usury. 3) Two letters from Buhler indicate usury. 4) An omission of a handwritten notation when the original note was presented in a previous suit misled Traylor, preventing him from asserting a usury defense.

In addressing these points, Traylor's testimony, mostly from memory, contradicted key written agreements, such as the 1948 contract stipulating Buhler's financial contribution. Traylor claimed the $67,000 note was merely an accommodation to Buhler, despite having paid $31,000 over eight years on the alleged debt. He also attempted to exclude $13,000 in credits from the written account supporting the original note, lacking receipts. Regarding Buhler's notation and letters, the chancellor found Buhler’s itemized account, totaling approximately $66,000 or $67,000, to be credible. One of Buhler's letters from December 1958 noted that Traylor received $67,000 without interest over four months, with Buhler allowing Traylor to characterize $10,000 as interest to facilitate the note's creation, reflecting a long-standing informal financial arrangement.

In a letter from April 1964, Traylor emphasizes a statement regarding a $67,000 amount, clarifying that Buhler contributed $50,000 in cash rather than questionable assets. Traylor argues that this indicates the original note represented only a $50,000 advancement from Buhler, but this claim is not definitive given contrary evidence. A copy of the original note was included in a prior complaint, but its omission of a handwritten interest notation misled Traylor, preventing him from asserting usury as a defense at that time. He acknowledged an invalid note existed between them but attributed his failure to recall its usurious nature to the passage of time. Traylor’s actions, including making eight payments totaling $31,000 on the note after being informed by Buhler about the interest notation, contradict his defense claims. It took him eighteen months after obtaining the original note to raise the usury allegation, leading the trial court to doubt the validity of his argument. The court observed that Buhler's account, close to $67,000, did not support a usury claim, as the formal note was not inherently usurious. Traylor attempted to counter this with parol evidence of credits and claimed inflated interest totals. However, under existing usury law, which requires clear evidence if the questioned instrument is not obviously usurious, Traylor failed to meet this burden. The chancellor concluded that Traylor did not establish the note as usurious, and this finding was upheld.