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June 2, 1959


The opinion of the court was delivered by: John E. Miller, Chief Judge.


On July 11, 1957, the plaintiffs herein filed their complaint in the Texarkana Division against the defendants, General Contract Corporation and Securities Investment Company of St. Louis, hereinafter referred to collectively as General. The complaint is extremely prolix but in essence it alleged that the plaintiffs, who will be identified more particularly in the findings of fact, were engaged in four business operations in various parts of Arkansas and using various forms of business enterprise, all of which businesses were engaged in the sale of automobiles at retail. After setting forth the jurisdictional facts, the complaint alleged that for over two years prior to January 7, 1956, Glenn Bellinger, manager of the defendants in Hot Springs, Arkansas, actively solicited the businesses to finance their new and used cars through an arrangement with the defendants, and in the course of such solicitation represented to the plaintiffs that General would stand by them in their financing operations "through thick and thin." The complaint alleged that relying upon such representations and assurances, the plaintiffs curtailed their financing operations with other companies and gave their financing business to General until the 7th day of January 1956, when General refused to accept any further financing. The complaint also alleged with particularity representations by Bellinger as defendants' manager that the defendants would finance up to $80,000 on a new business to be opened by three of the plaintiffs in the City of Hot Springs, Arkansas; that a contract was thereafter signed on January 6, 1956, with General, but that on January 7, as set out above, defendants refused to deal further with the plaintiffs.

In various particulars the plaintiffs then alleged that the sudden termination of credit and financing caused rumors among financial institutions, which resulted in the plaintiffs' inability to obtain adequate financing elsewhere; that by reason of the loss of their commercial credit some of the plaintiffs were obliged to and did sell at a loss various properties in an attempt to finance their own automobiles, and that each of the plaintiffs was damaged in specified sums as a result thereof.

The plaintiffs also alleged an agreement between the plaintiffs and General to the effect that when a purchaser of an automobile from one of the plaintiffs became delinquent on his note (which was guaranteed by the plaintiffs), the defendants would promptly notify the particular plaintiff involved and that upon receipt of such notice, the plaintiff would contact the delinquent purchaser and usually succeed in an arrangement for payment which would avoid costly repossessions. The plaintiffs alleged that following the termination of their financing with General, that General would consistently delay in repossessing automobiles so that when repossessed such automobiles were damaged and of little value; that the plaintiffs having obliged themselves to purchase such repossessions from General for the amount due thereon, thereby were forced to take automobiles of comparatively little value.

The plaintiffs attached a copy of two agreements signed by the plaintiffs and defendants, which on their face constituted the full contracts between the parties, but the plaintiffs alleged that such contracts are a ruse to avoid the laws of the State of Arkansas governing usury, and that they are illegal and void on that ground. Following this allegation the plaintiffs pray that all of their contracts executed by the plaintiffs' customers and upon which the plaintiffs are guarantors by reason of separate contracts be declared illegal and void. The plaintiffs also alleged that as an additional scheme to avoid the usury laws, the defendants established a dealer's reserve and a dealer's special reserve in favor of the various plaintiffs, which reserves were credited from payments made by the purchasers of automobiles and which when considered as a part of the payment rendered the notes usurious.

Finally, the plaintiffs alleged that the action of General in abruptly cutting off credit and in uttering and publishing degrading words with respect to the credit and business standards of the plaintiff H.T. Crawford was willful, wanton, and malicious conduct, which damaged the plaintiff H.T. Crawford, and injured his credit and business standing, for which he prays damages in the sum of $50,000 and punitive damages in the sum of $50,000. Each of the plaintiffs prayed damages for the damage to his business, for punitive damages, and certain plaintiffs also prayed damages for losses incurred in an attempt to finance their own businesses and for the amounts paid to the defendants as guarantors under their written contract for the usurious paper.

Prior to the filing of answers by the defendants, the cause was transferred by Honorable Harry J. Lemley to the Western Division of the Eastern District of Arkansas, and subsequently by the Honorable Axel J. Beck to the Hot Springs Division of the Western District of Arkansas.

Various interlocutory matters which are not relevant here came before the court, and on December 23, 1958, the defendants filed their separate answers to the complaint, and at the same time filed a joint motion to dismiss the allegations of the complaint relating to the claim of usury on the ground that the plaintiffs, being a party to the allegedly usurious contracts, could not take advantage of any claim of usury. On January 9, 1959, the court advised the parties that a ruling on this motion to dismiss would be reserved until the case had been fully developed at trial.

On April 1, 1959, a pretrial conference was held at which all of the parties were represented, and the court at that time advised the parties that in the interest of economy of time and money, the case should be tried upon all the issues of the complaint except those relating to the allegations of usury, and that if upon consideration of the defendants' motion to dismiss those allegations, the motion were denied, a second hearing could be held to determine whether the contracts were usurious and the amount of damages to which the plaintiffs would be entitled thereunder.

Accordingly, the case proceeded to trial to the court without a jury on April 29 and 30, 1959, and was tried upon all issues except those raised by the plaintiffs' allegations of usury. By agreement of the parties leave was given to submit in written form by stipulation the testimony of Olin Hendrix and A.C. Stone, which testimony has been received in the form of affidavits, together with the stipulation of the defendants for the admissibility of such testimony subject to objections of relevancy and materiality.

Following the trial, the case was submitted subject to the receipt of the written testimony of Olin Hendrix and A.C. Stone. That testimony has now been received and considered along with all of the ore tenus testimony in the case, the exhibits and the pleadings and briefs of the parties, and the court now makes and files its formal Findings of Fact and Conclusions of Law.

Findings of Fact


The plaintiffs, H.T. Crawford, W.I. Meeks, Wayne Caldwell, Dwain Crawford, Waldo Pool, Joe Shirley, and Milton Crawford, are citizens of the State of Arkansas, and in various combinations more fully set forth below were partners doing business under the names Crawford Chevrolet Company at Glenwood, Arkansas; Crawford Motor Company at Benton, Arkansas; Dwain Crawford Buick Company at Magnolia, Arkansas; and Crawford Auto Sales at Hot Springs, Arkansas. The plaintiff Crawford Chevrolet Company, Inc., is an Arkansas corporation and was doing business in the town of Glenwood, Arkansas, as successor to the Crawford Chevrolet Company. The defendant General Contract Corporation is a Missouri corporation authorized to do business within the State of Arkansas, and the defendant Securities Investment Company, is a corporation organized under the laws of Delaware and authorized to do business in the State of Arkansas.

The amount in controversy exceeds the sum of $3,000, exclusive of interest and costs.


The central figure in the development of the business enterprises of the plaintiffs and in this litigation is the plaintiff Mr. H.T. Crawford. Sometime in the 1930's, H.T. Crawford entered business at Glenwood, Arkansas, as an automobile dealer, which business he pursued for some time under the name of Crawford Chevrolet Company. For convenience this dealership will be referred to as the Glenwood business. This business was a prosperous one, and in 1947 Crawford invested $108,000 in a new building for the Glenwood business.

In 1952 Mr. W.I. Meeks, a former employee, became a partner upon the investment of $4,500, and continued his partnership with Crawford in the Glenwood business thereafter until that business was incorporated on December 9, 1955, at which time he became a small shareholder. Although he owned only a small percent of the stock in the corporation, he was listed as holding one-third of the shares for purposes of dealing with automobile manufacturers.

As Crawford's business in Glenwood prospered, he decided to extend his operations, and in 1953 he built a plant and opened a business at Benton, Arkansas, as an individual proprietorship, known as the Crawford Motor Company, which for convenience will be referred to hereafter as the Benton business.

Thereafter he "staked" his son, Dwain Crawford, in the opening of an automobile dealership in Magnolia, Arkansas, known as the Dwain Crawford Buick Company, and operated as a partnership between Dwain Crawford and Wayne Caldwell. This partnership for convenience will be referred to hereafter as the Magnolia business.

At that time Crawford was concerned because, as he expressed it, he had all of his financial eggs in one basket. He originally intended to do his financing in the Hot Springs business with another finance company, but Bellinger was successful in persuading him and his partners from this move, and on January 6, 1956, a standard form agreement, known somewhat inaptly as the "Dealer Protection Agreement," was signed on behalf of the Hot Springs business.

The following afternoon Mr. Bellinger hastily arranged a conference with H.T. Crawford and W.I. Meeks, which took place in Hot Springs late in the afternoon. At that time he advised Crawford and Meeks that General would finance no further automobiles for the Hot Springs, Benton or Glenwood businesses. Within a few days the defendants' manager at Texarkana, Arkansas, whose district covered the Magnolia business, advised Caldwell and Dwain Crawford that the defendant would cease floor-planning automobiles for the operation at Magnolia. This is the action out of which this suit grows.


Prior to 1954 the plaintiff H.T. Crawford and the other plaintiffs had been financed in their various dealerships through several different finance companies and largely through General Motors Acceptance Corporation. Financing for a dealer in new and/or used automobiles is essential to the operation of the business. Except for the proposed business at Hot Springs, all of the dealerships involved here were either franchised dealers for Buick or Chevrolet cars, or were purchasing them directly from the factory. In addition, at least at Hot Springs, other cars, both new and used, were purchased from other dealers or accepted on trade-ins. The purchase of cars for resale, that is, wholesale purchases, were "floor-planned" largely by General Motors Acceptance Corporation, hereafter referred to as GMAC. This type of wholesale financing contemplated that the dealer would be furnished the purchase price of the automobiles bought by him for resale and would immediately repay the same upon their sale at retail. In addition to this type of financing, it is necessary for dealers in automobiles to have available financing arrangements for purchasers of their cars at retail. This was the financing aspect in which the defendant General was primarily interested, although it also did wholesale financing or floor-planning.

In 1954 GMAC terminated its financing arrangements with Crawford at the Glenwood business. GMAC had been, up until that time, one of the principal finance companies through which the Glenwood business operated. Mr. Glenn Bellinger, the defendant's manager in Hot Springs, took that opportunity to gain more financing business for his company with the plaintiff H.T. Crawford. He advised Crawford that his company could furnish personal supervision and advice and that he would have good men collecting the accounts. Crawford had previously given some of his business to General, and these representations convinced him that at least under the circumstances as they existed at that time, he should work with General. Bellinger desired to obtain as much business from Crawford through his various dealerships as possible, and actively solicited Crawford to give General all of the financing business at the various dealerships. He advised Crawford in substance that if Crawford would give General all of his business and would stay with General, then General would always "stay" with Crawford as long as Crawford stayed with General. Accordingly, a "Dealer Protection Agreement" was subsequently executed on behalf of the Glenwood business and the Benton business on or about February 16, 1954, which agreement in its entirety is as follows:

"Dealer Protection Agreement

  "To General Contract
    Corporation February 18, 1954
    "614 Ouachita Avenue,
       Hot Springs, Ark.
    "1. We plan to offer for sale to you from time
  to time notes, contracts, chattel mortgages
  (hereinafter called "notes") as may be acceptable
  to you, arising out of the sale at retail of new
  or used motor vehicles (hereinafter called
  "cars"), the purchase price of such notes to be
  agreed upon at the time of such purchase, and
  this agreement shall apply to all notes (Whether
  endorsed with or without recourse except that the
  obligations assumed by you in Section 3 hereof
  shall not apply to notes endorsed with recourse)
  purchased by you during the continuance hereof,
  and to all cars covered thereby. `Repossessed
  cars' shall mean cars, the actual possession of
  which you regain after default in the notes
  covering the same, by virtue of the powers
  contained in, or by foreclosure of, any
  conditional sales contract or chattel mortgage or
    "2. In addition to any obligation we may have
  with respect to any note or car as evidenced by
  our endorsement of such note or otherwise, you
  shall have the option (which you shall not be
  obligated to exercise) at any time after
  repossession of any car to require us to
  repurchase said car by tendering the same at our
  place of business, or if we are out of business
  or in default in any obligation to you by
  tendering the same by letter mailed to our last
  known business address. The purchase price shall
    "The balance owing on the note covering such
  car at the time of repossession (a) if tendered
  within ninety (90) days after the original or any
  extended maturity of the earliest installment
  unpaid at the time of such tender, or (b) if
  tender is delayed by litigation or the existence
  of a redemption period either before or after
  repossession, or by your inability after
  repossession without your fault to obtain the
  legal right to sell such car. We agree to store
  every such car for you at our expense until paid
  for and to deliver the same to you at any time on
  demand, the sale of such car being a cash sale
  and the car remaining your property until paid
  for, with no authority in us to sell or dispose
  of the same.
    "3. You are to assume the risks of a loss by
  reason of collision, conversion and confiscation,
  as defined below (except that you shall not
  assume such risks in the case of notes endorsed
  with recourse):
    "(a) Collision: Single interest collision,
  meaning the accidental collision of a car with
  another object or accidental upset of a car. The
  risk of a collision with respect to any car is
  assumed by you when the repossession is the
  result of one such collision only. The risk of
  any collision damaging fenders, radiators,
  grillwork or other material protecting radiators,
  lights, hub-caps, tires, windshields, windows, or
  any of them, unaccompanied by damage to parts of
  the car other than one or more of those parts
  mentioned, is not assumed by you, it being
  conclusively presumed in each case that any
  default did not result from such collision, and
  the risk of any other collision not resulting in
  default is likewise not assumed by you.
    "(b) Conversion: The fraudulent concealment or
  fraudulent disposal of a car by the purchaser of

  same executing as maker the note covering such
    "(c) Confiscation: Confiscation of a car by
  duly authorized governmental authorities.
    "4. We hereby warrant with respect to each and
  all notes to which this agreement is or shall be
  applicable, and all cars covered thereby: (a)
  that we have not made and will not make known to
  the purchaser of any car directly or indirectly
  the fact that you have assumed the risks above
  mentioned or any of them; (b) that the purchaser
  has made an actual down payment in cash not
  advanced by us or trade-in allowance; (c) that
  unless expressly otherwise provided in the note
  or lien instrument covering the same, no car is
  or will be used for taxi, jitney or `Drive
  Yourself' service; (d) that all persons signing
  notes have legal capacity to do so; that all
  notes (including all chattel mortgages,
  conditional sales contracts and other lien
  instruments) are genuine, valid and in all
  respects what they purport to be; that all
  descriptions therein contained are correct; (e)
  that no settlement will be made by us with the
  maker of any note except as we may be
  specifically authorized by you.
    "5. In case of any breach of any warranty
  herein contained with respect to any note
  purchased during the continuance hereof or any
  car covered thereby, we will on demand at any
  time pay you the total unpaid balance owing on
  such note.
    "6. Upon the purchase of any note with or
  without recourse, you may withhold out of such
  purchase price an amount to be held with other
  amounts similarly withheld as a reserve. The
  method of computing the amount to be withheld in
  said reserve may be varied from time to time or
  changed by mutual agreement without in any way
  affecting this agreement. The amount of any
  reserve now held by you for us shall also be a
  part of said reserve. Said reserve shall be held
  as security for the performance of all
  obligations of us to you now existing or held by
  you, or which may come into existence, or be held
  by you at any time during the continuance of this
  agreement. If any obligation secured by said
  reserve shall not be paid when due, you may apply
  all or any part of said reserve to such
  obligation. Periodically we shall be entitled to
  withdraw a portion of the reserve withheld,
  provided that such withdrawal will not reduce
  said reserve below $1000.00 or 5% of the total
  unpaid balance of all notes, whichever is the
  larger. Said reserve is specifically understood
  to be the withheld portion of the purchase price
  of notes and not a deposit, and said reserve
  shall, therefore, earn no interest nor be subject
  to withdrawal by us except as herein provided.
    "7. Presentment for payment, demand, protest
  and notice of dishonor are waived with respect to
  all notes, and it is agreed that you may renew or
  extend any note, in whole or in part, once or
  more often, with or without notice to us, without
  affecting our liability with respect to such note
  hereunder. If, with or without notice to us, you
  settle with the maker of any note or repossess or
  accept the surrender of any car in such manner as
  to extinguish the maker's obligation to pay such
  note, and if the note is one which we are or
  shall be obligated to pay to you, either under
  the terms hereof or by virtue of any endorsement
  of said note or guaranty or other obligation,
  then we shall be and remain liable for the
  deficiency remaining after applying to the
  balance unpaid on such note at the time of such
  settlement, repossession or surrender, the cash
  realized (by resale of the car by you after
  repossession, or otherwise) as a result of such
  settlement, repossession, or surrender.
    "This agreement shall continue in force until
  notice of termination given to you by us by
  registered mail at 614 Ouachita Avenue, City of
  Hot Springs, State of Arkansas, but such
  termination shall have no effect except as to
  notes purchased after the receipt of such notice.
  This agreement shall apply to, inure to the
  benefit of and bind the executors,
  administrators, successors and assigns of both
  you and us and any company affiliated with you
  which may acquire any note to which this
  agreement is applicable.
                   "Crawford Motor Company
                   "By /s/ H.T. Crawford
  "Accepted at Hot Springs, Arkansas, this 16th day
  of February, 1954.
      "General Contract Corporation
      "By /s/ Wm. A. Swink"

Subsequent, apparently, to similar inducements, an identical agreement was executed on behalf of the Magnolia business and accepted September 19, 1955, by the defendant.

Crawford never at any time gave all of his financing business to the defendant, but he did give a large part of the retail financing to General. The wholesale financing at the Benton business, which was a Buick agency, was continued through GMAC until terminated by that company, as hereafter set forth. Crawford understood the oral statements by Bellinger prior to the execution of the Dealer Protection Agreement as leaving him an option to place his financing business with any company, but testified that he regarded General as obligated to continue to finance him indefinitely so long as he desired such financing, notwithstanding the termination provision in the Dealer Protection Agreement.


The parties operated under the provisions of the Dealer Protection Agreement for some time. On all retail financing the conditional sales contract, which the purchaser of an automobile from one of the Crawford agencies was required to sign, was furnished by the defendant General. The conditional sales contract was required to be made out in accordance with instructions from General and various schedules and tables furnished by it. Any contract not so filled out was not acceptable to General, and it would not be purchased by that company. Each conditional sales contract was accompanied by a note signed by the purchaser and payable to the dealer selling the automobile. Each such note was endorsed "Without Recourse" by the dealer and offered to General which would customarily purchase the same, subject to the contractual provisions of the Dealer Protection Agreement, which provided that the dealer would repurchase any car upon which default had been made.

When payments by a purchaser would become delinquent, General would attempt to bring the account up to date, and if unsuccessful, would repossess the automobile, and ordinarily exercise the option provided in the Dealer Protection Agreement to require a repurchase by the dealer for the balance of the purchase price due on the automobile. Upon the exercise of this option, the dealer was allowed either to pay the balance due by check or to ...

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