June 10, 1946. Rehearing Denied, July 8, 1946.
1. BILLS AND NOTES: Taxation: Notes of Individuals: Federal Revenue Stamps Not Required. Federal revenue stamps were not required on the sale by a corporation of notes executed by individuals since they were not corporate securities covered by the statute.
2. BILLS AND NOTES: Sale With Recourse: Statute Not Applicable. Sec. 3053 R.S. 1939 deals with the endorsements "without recourse" and has no application to an alleged sale of a note "with recourse."
3. BILLS AND NOTES: Usury: Sale at Discount Not Usury. There is no statute making the sale of notes usurious, however great the discount or however small the price paid.
4. BILLS AND NOTES: Usury: Bona Fide Sale of Notes: No Evidence of Usury. The evidence showed a bona fide sale of notes. There was no substantial evidence that the transaction was a mere camouflage to conceal usury, which will not be presumed.
Appeal from Circuit Court of City of St. Louis. — Hon. F.E. Williams, Judge.
REVERSED AND REMANDED ( with directions).
Joseph Boxerman and Roberts P. Elam for appellant.
(1) The sale of the specified and designated installments of such notes, even though at a discount greater than the maximum legal rate of interest, and even though payment thereof was guaranteed by the seller, was not a loan, and was not usurious nor the subject of usury. General Motors Acceptance Corp. v. Weinrich, 218 Mo. App. 68, 262 S.W. 425; Nichols v. Fearson, 7 Pet. 103 ( 32 U.S. 103), 8 L.Ed. 623; State ex rel. Atty. Gen. v. Boatmen's Savs. Institution, 48 Mo. 189; Coleman v. Cole, 158 Mo. 253, 59 S.W. 106; Priest v. Garnett, 191 S.W. 1048; American Loan Plan v. Frazell, 135 Neb. 718, 283 N.W. 836; Grand Island Finance Co. v. Fowler, 124 Neb. 514, 274 N.W. 429; Commercial Credit Co. v. Tarwater, 215 Ala. 123, 110 So. 39; In re Bibbey, 9 F.2d 944; Manufacturer's Finance Trust v. Stone, 251 Ill. App. 414; 27 R.C.L., sec. 16, p. 215; 66 C.J., sec. 83, p. 186; Baker v. Butcher, 106 Cal.App. 358, 389 P. 236; O.A. Graybeal Co. v. Cook, 111 Cal.App. 518, 295 P. 1088; Seltzer v. Sokoloff, 302 Pa. 449, 153 A. 724; Acme Finance Co. v. Zapffe, 161 Wn. 312, 296 P. 1050; Metropolitan Loan Trust Co. v. Schafer, 44 App. D.C. 356; Mutual Canning Co. v. DeGuenther, 23 Ga. App. 746, 99 S.E. 319; Coast Finance Co. v. Ira T. Powers Furn. Co., 105 Or. 339, 209 P. 614; Valley Mortgage Co. v. Patterson, 30 Ala. App. 492, 8 So.2d 213; Limpert v. Walker, 65 P.2d 955; Berry v. Bank for Savings Trusts, 14 So.2d 129; Standard Motors Finance Co. v. Mitchell Auto Co., 173 Ark. 875, 293 S.W. 1026; Campbell v. Morgan, 111 Ga. 200, 36 S.W. 621. (2) If the transactions between Octozone and Sterling constituted a sale and pledge, as pointed out under Point (1), supra, the pledge to Sterling was sufficient and valid for the purposes for which it was made. Smith v. Holdoway Const. Co., 344 Mo. 862, 129 S.W.2d 894; Russell v. Empire Storage Co., 332 Mo. 707, 59 S.W.2d 1061; 49 C.J., p. 937, sec. 78; Jones on Collateral Securities (3rd Ed.), sec. 358. (3) The mesne assignments from Octozone to plaintiff were specifically subject to the prior rights of Sterling, and plaintiff could have no greater rights, and no different standing, than Octozone had subsequent to its pledge of these remaining installments to Sterling. Stewart v. Kane, 111 S.W.2d 971; Straus v. Tribout, 342 Mo. 511, 116 S.W.2d 106; In re International Raw Material Corp., 22 F.2d 920; Liebers v. Plainfield, etc., Bldg. Co., 108 N.J. Eq. 391, 155 A. 270; Miller v. Reid, 243 Mich. 694, 220 N.W. 283; Tuxedo Enterprise v. Detroit Trust Co., 272 Mich. 160, 261 N.W. 283; New York Title Mort. Co. v. Mapletree Estates, 247 N.Y.S. 449; Alston v. American Mortgage Co., 116 Ohio St. 643, 157 N.E. 374; Dorothy v. Commonwealth Commercial Co., 278 Ill. 629, 116 N.E. 143. (4) If, on the other hand, the transactions between Octozone and Sterling constituted mere loans, there was nevertheless coupled with it a pledge of the later due installments of the notes involved as security for the purposes designated in the instruments evidencing those transactions, and the pledge was nevertheless a valid and binding one, irrespective of what rate of interest might have been charged upon such loans. This, because Octozone, being a corporation, was deprived of the benefits of the usury laws, including Sec. 3231, R.S. 1939, by the proviso to Sec. 3230, R.S. 1939. In re Champion Shoe Machinery Co., 17 F. Supp. 985; Brierley v. Commercial Credit Co., 43 F.2d 734; Buchholz v. Granite Savings Bank Trust Co., 261 F. 75; Hubbard v. Tod, 171 U.S. 474, 19 S.Ct. 14, 43 L.Ed. 246; Curtis v. Leavitt, 15 N.Y. 9; Carozza v. Federal Finance Credit Co., 149 Md. 223, 131 A. 332, 43 A.L.R. 1; Jenkins v. Moyse, 254 N.Y. 319, 172 N.E. 521, 74 A.L.R. 205; Silverman Kantrowich, Inc., v. Liebers, 224 N.Y.S. 332; Alston v. American Mortgage Co., 116 Ohio St. 643, 157 N.E. 374; Ex parte Washer, 200 Cal. 598, 254 P. 951; Wm. S. John H. Thomas v. Union Trust Co., 251 Mich. 279, 231 N.W. 69; Smoot v. Peoples Perpetual Loan Bldg. Assn., 95 Va. 686, 29 S.E. 746, 41 L.R.A. 589; State v. Hurlburt, 92 Conn. 232, 72 A. 1079; Matlock Properties v. Citizens Southern Natl. Bank, 120 Fla. 77, 162 So. 148; Miller v. Reid, 243 Mich. 694, 220 N.W. 748; Liebers v. Plainfield Spanish Homes Bldg. Co., 108 N.J. Eq. 391, 155 A. 270. (5) The title to the Act of 1935 (Laws 1935, p. 267), showing it to be an act to repeal Sec. 2843, Art. I, Chap. 14, R.S. 1929, relating to interest, and to enact a new section in lieu thereof relating to the same subject, was obviously a sufficient title to that act. Young v. Greene County, 342 Mo. 1105, 119 S.W.2d 369. (6) Under the circumstances, the title to the original Act of 1891 is to be looked to in considering whether there was any violation of said Sec. 28 of Art. IV of our Constitution. State ex rel. Mueller Baking Co. v. Calvird, 338 Mo. 601, 92 S.W.2d 184. (7) And the title to the Act of 1891, showing that the act relating to usurious interest, would have been a sufficient title even if the act had then contained the proviso added in 1935. To constitute a compliance with Sec. 28 of Art. IV of the Constitution, it is not necessary that a bill relating to a particular subject set out provisos and exceptions appearing in the body of the bill. 25 R.C.L., p. 857, sec. 102; State ex rel. Department of Penal Institutions v. Becker, 329 Mo. 1041, 47 S.W.2d 781; Pottorff v. El Paso-Hudspeth Counties Road District, 62 F.2d 498; State v. Schlitz Brewing Co., 104 Tenn. 715, 59 S.W. 1033, 78 Am. St. Rep. 941. (8) Said proviso, depriving corporations of the right to set up usury, is not in any sense a special or local law, but a general law applying to all alike of a given class, namely, all corporations. A statute is not special or "class legislation" if it applies to all alike of a given class, provided the classification is not arbitrary or without a reasonable basis. Corporations constitute a distinct class for many species of legislation. Indeed, the Legislature is not prohibited from passing laws relating alone to corporations of a particular kind or class if there is a reasonable basis for the classification. Cheek v. Prudential Ins. Co. of America, 192 S.W. 387; Prudential Ins. Co. v. Cheek, 259 U.S. 530, 42 S.Ct. 516, 66 L.Ed. 1044; Mallinckrodt Chemical Works v. State of Missouri ex rel. Jones, 238 U.S. 41, 35 S.Ct. 671, 59 L.Ed. 1192; Thompson v. St. L.-S.F. Ry. Co., 334 Mo. 958, 69 S.W.2d 936; Massey-Harris Harvester Co. v. Federal Reserve Bank, 340 Mo. 1133, 104 S.W.2d 385, 111 A.L.R. 133; Miners Bank v. Clark, 252 Mo. 20, 30, 158 S.W. 597; White v. Missouri, K. T. Ry. Co., 230 Mo. 287, 130 S.W. 325. (9) And to distinguish between corporations and natural persons as distinct classes with respect to the application of the usury laws, denying, the former the benefit of such laws, is by no means an unreasonable or arbitrary classification, but a valid distinction resting upon principles of sound public policy. Laws prohibiting corporations from setting up usury have been consistently upheld as against all attacks upon their alleged unconstitutionality. Brierley v. Commercial Credit Co., 43 F.2d 724; Carozza v. Federal Finance Credit Co., 149 Md. 223, 131 A. 332, 43 A.L.R. 1; Thomas v. Union Trust Co., 251 Mich. 279, 231 N.W. 619; Griffith v. Connecticut, 218 U.S. 563, 31 S.Ct. 132, 54 L.Ed. 1151; State v. Hurlburt, 92 Conn. 232, 72 A. 1079; Smoot v. People's Loan Building Assn., 95 Va. 686, 29 S.E. 746, 41 L.R.A. 589.
Franklin E. Reagan, Adolph K. Schwartz and Sievers Reagan for respondent.
(1) The court properly found that the dealings between appellant and Octozone were loans and not bona fide sales of commercial paper. Courts are not bound by words or language used to cover up usurious transactions. Kreinbohm v. Yancey, 55 S.W. 260; Securities Inv. Co. v. Rottweiler, 7 S.W.2d 484; Brierley v. Commercial Credit Co., 43 F.2d 724. (2) Cancelled revenue stamps, necessary to show a bona fide sale, were not placed on the so-called transfer of notes. 26 U.S.C.A. 1801. (3) The transfer of various notes to appellant was by an instrument prepared by appellant and provided that the transfer of such notes was "with recourse" against Octozone in the event of a default. A sale cannot take place under a "with recourse" assignment. Sec. 3053, R.S. 1939. (4) The pledge of personal property to secure a loan exacting usurious interest is invalid and illegal. Sec. 3231, R.S. 1939; Gelhart v. Smiley, 114 S.W.2d 1029; Tourse v. Mound City Trust Co., 52 S.W.2d 611; Securities Inv. Co. v. Rottweiler, 7 S.W.2d 484; Missouri Discount Corp. v. Mitchell, 261 S.W. 743; Service Purchasing Co. v. Brennan, 42 S.W.2d 39. (5) The pledge of a note as collateral security is a pledge within Section 3231, R.S. 1939. Bahl v. Miles, 6 S.W.2d 661. (6) An assignee can raise the defense of usury. Smith v. Becker, 192 Mo. App. 597, 184 S.W. 943. (7) Section 3230, R.S. 1939, is unconstitutional and void as being in violation of Article IV, Section 28, of the Constitution of 1875 of Missouri, and in violation of Article III, Section 23, of the New Constitution of Missouri, which provide that no bill passed by the Legislature shall contain more than one subject which shall be clearly expressed in its title. Young v. Greene County, 119 S.W.2d 369, 342 Mo. 1105; Sherill v. Brantley, 66 S.W.2d 528, 334 Mo. 347; State v. Revelle, 165 S.W. 1084, 257 Mo. 529. (8) Section 3230, R.S. 1939 is unconstitutional and void as being in conflict with Article IV, Section 53, Paragraph 26, of the Constitution of 1875 of Missouri, and in violation of Article III, Section 40, Paragraph 28, of the New Constitution of Missouri, which prohibit the passage of special or local laws granting exclusive rights. Idel v. Hamilton-Brown Shoe Co., 121 S.W.2d 817. (9) Section 3230, R.S. 1939, is unconstitutional and void as being in conflict with Article IV, Section 53, Paragraph 33, of the Constitution of 1875 of Missouri, and in violation of Article III, Section 41, of the New Constitution of Missouri, prohibiting the passage of special or local laws by the partial repeal of a general law. State v. Julow, 129 Mo. 163; State v. Baskowitz, 156 S.W. 945. (10) Section 3230, R.S. 1939, is unconstitutional and void as being in volation of the Fourteenth Amendment to the Constitution of the United States, in that it denies to persons the equal protection of the law. State v. Cairo Bridge Terminal Co., 100 S.W.2d 441, 340 Mo. 190; Idel v. Hamilton-Brown Shoe Co., 121 S.W.2d 817.
Action for money had and received. Plaintiff obtained judgment for $4723.11 and defendant appealed. Jurisdiction of the appeal is in the supreme court because the constitutional validity of a proviso to a statute [Sec. 3230 R.S. 1939] is involved.
This is the third time for this cause to be in the supreme court. In the first appeal it was held that the appeal was premature and the appeal was dismissed. See Webster v. Sterling Finance Co., 165 S.W.2d 688. The second appeal was from an order sustaining a demurrer to the petition and dismissing the cause. Held on the second appeal that the petition stated a cause of action for money had and received. See Webster v. Sterling Finance Co., 351 Mo. 754, 173 S.W.2d 928.
The second amended petition, as amended March 27, 1945, by leave and over defendant's objection, after the evidence was all in, is in 12 counts. Each count is based upon facts growing out of a note given by different individuals for equipment sold to them by Octozone Equipment Company, a corporation, hereinafter referred to as Octozone. Count 1 is based on these alleged facts:
August 1, 1938, one Nuckles gave his $1500 note to Octozone, payable in 15 installments of $100 each, beginning October 15, 1938, without interest until maturity. September 1, 1938, Octozone pledged to defendant the first 8 installments to secure a loan of $720. Also, on September 1, 1938, plaintiff alleges Octozone assigned the remaining 7 installments to Leach, Barker, Morse, and Stephan, with notice to defendant, and that on July 2, 1940, Leach et al. assigned the said 7 installments to plaintiff. And plaintiff alleges that defendant "collected said note in full and converted said note to its own use, and even though plaintiff has made demand . . . for said note defendant has refused to deliver same to plaintiff." It is alleged that the 7 installments assigned to plaintiff were of the value of $700, and judgment for $700 is asked in count 1.
Plaintiff also alleges in count 1 that the interest charged and collected by defendant from Octozone for the $720 loan was $80 for a period less than one year, and that such interest was usurious and that, therefore, the pledge of the 8 installments to secure the loan was void under Sec. 3231  R.S. 1939, Mo. R.S.A., Sec. 3231. Octozone is a corporation, and plaintiff's ownership of the last 7 installments of the Nuckles note is derived from Octozone. The proviso in Sec. 3230 R.S. 1939, Mo. R.S.A., Sec. 3230, denies to a corporation the defense of usury to such actions as amended therein. Plaintiff, in the amendment to which defendant objected, alleges that the proviso is unconstitutional [Const. 1875] and void because:
(1) In violation of Sec. 28, Art. 4 (no bill shall contain more than one subject, etc.); (2) in violation of paragraph 26 of Sec. 53, Art. 4 (prohibiting passage of special laws granting exclusive rights); (3) in violation of paragraph 33 of Sec. 53, Art. 4 (prohibiting passage of a special law by the partial repeal of a general law); and (4) in violation of Sec. 1, 14th Amendment — U.S. Constitution (no state shall make or enforce any law denying equal protection of the law). The allegations as to usury in count 1 of the amended petition was applicable to all 12 counts, and were not repeated in counts 2 to 12, inclusive.
The allegations in the remaining 11 counts are similar to those in the first. Each count pertains to a different note. In each count it is alleged that certain first due installments of the particular note were pledged by Octozone to defendant to secure a loan, and that some or all of the remaining installments were assigned to plaintiff, and that defendant collected, etc., as charged in count 1.
Defendant did not refile its answer after the amendment of March 27, 1945, was made. The answer was a general denial and a separate answer to each count of the petition. Defendant alleged that the installments which plaintiff alleged were pledged to it by Octozone to secure a loan, were not pledged, but were sold to it by Octozone, and that the installments which plaintiff claims were assigned to him were, at the time of the sale of the designated installments to defendant by Octozone, pledged by Octozone to defendant to secure the payment of the sold installments, and also to secure installments of other notes theretofore sold to defendant by Octozone, and other liabilities which Octozone owed defendant. Defendant alleges that at the time of the sale and pledging to it of the installments of the 12 notes mentioned in the 12 counts of the petition, Octozone delivered these notes to defendant, and that whatever sum defendant collected on these notes it applied the proceeds thereof to the payment of the installments sold to it, and the balance on the payment of other notes and installments theretofore sold by Octozone to defendant and on other liabilities owed defendant by Octozone. Defendant alleged that Octozone still owed it $2695 "on notes and installments of notes sold by" Octozone to defendant. Originally plaintiff had pleaded usury in his reply, but that was struck and was the principal subject of controversy on the second appeal.
The trial court found that the specified installments of the 12 notes were not sold to defendant, but were pledged for loans as plaintiff claims, and that all these loans were tainted with usury, and that the pledges were void under Sec. 3231. The court also held that the proviso to Sec. 3230, denying the defense of usury to a corporation, is unconstitutional and void on the grounds alleged by plaintiff. And the court found that defendant collected installments assigned to plaintiff and aggregating $3790. These were installments of the Nuckles, Vail, Reese, Dougherty, Rastikis, Fleener, and Becker notes, the notes mentioned in counts 1, 3, 4, 6, 9, 10 and 12 of the petition. Interest at 6% was allowed, which brought the total to $4723.11.
On each transaction between Octozone and defendant, and pertaining respectively to the 12 notes mentioned in plaintiff's petition, Octozone, by its president, Augustus Schlessing, signed an instrument which we may term a sale and pledge agreement upon which defendant relies to support its contention that the specified first due installments were sold to it and not pledged, and that the remaining installments were pledged as defendant contends. These 12 sale and pledge agreements are of the same purport, but deal with notes of different makers, of different date, amount, etc. The agreements were in two parts, and each part signed by Schlessing for Octozone.  The agreement pertaining to the Nuckles note is typical and is as follows:
"For and in consideration of the sum of seven hundred twenty ($720.00) dollars, receipt of which is hereby acknowledged, the undersigned, Octozone Equipment Company, a corporation, hereby sells, assigns, transfers and delivers, with recourse, unto Sterling Finance Company, note and installments aggregating $800.00, described as follows, to wit:
"The first eight (8) installments in the amount of $100.00 each, aggregating $800.00 payable on the 15th of each month beginning October 15th, 1938, mentioned and described in note executed by Geo. T. Nuckles, 687 W. Clay, Marshall, Mo., dated August 1st, 1938, in the amount of $1500.00. Said note is secured by chattel mortgage.
"The undersigned does hereby waive demand, presentation for payment, notice of non payment, protest and notice of protest, and consents that extensions of time may be made the maker without notice to or releasing the undersigned.
"Dated at St. Louis, Missouri, this 1st day of September, 1938.
"Octozone Equipment Company, "By Augustus Schlessing, President.
"To further secure to Sterling Finance Company the payment of the note and installments above described, the undersigned hereby deposits and pledges with Sterling Finance Company the following note and installments:
"Seven (7) installments in the amount of $100.00 each aggregating $700.00, payable on the 15th of each month beginning June 15th, 1939, mentioned and described in note executed by Geo. T. Nuckles, dated August 1st, 1938, in the amount of $1500.00.
"In the event the note and installments hereby sold and assigned as aforesaid and all notes and installments sold and assigned heretofore, are paid as agreed, then the note and installments pledged as further security will be returned to Octozone Equipment Company.
"In the event of non payment of the note and installments hereby sold and assigned, the holder hereof is hereby invested with full authority to use, transfer, sell and convey the notes and installments deposited herewith as further security, with or without notice or demand of any sort. From the proceeds of any sale hereunder there shall be deducted the amount of all expenses, legal or otherwise, in connection therewith, and the balance shall be applied, first in payment of the note hereby sold and assigned, and any other liability of the Octozone Equipment Company, who shall remain liable in the event of any deficiency.
"The undersigned does hereby waive demand, presentation for payment, notice of non payment, protest and notice of protest, and consents that extension of time may be made the maker without notice to or releasing the undersigned.
"Dated at St. Louis, Missouri, this 1st day of September, 1938.
"Octozone Equipment Company, "By Augustus Schlessing, President."
Plaintiff's assignors, Leach et al., were stockholders in Octozone, and had assisted Octozone financially, and Octozone was their debtor. The 12 sale agreements executed by Octozone and delivered to defendant, along with the notes, were executed in duplicate and Octozone retained a duplicate copy. By a writing on the back of these duplicates, Octozone assigned to Leach et al. whatever remaining interest it had in the 12 notes theretofore delivered to defendant. Plaintiff alleges that the assignment to Leach et al. was on the same day that the respective sale and assignment agreements were executed, and the notes delivered to defendant, and the assignments to Leach et al. are so dated. However, the evidence of Schlessing, Octozone's president, was to the effect that these assignments to Leach et al. were subsequent to the time of the execution of the sale and pledge agreements, and delivery of the notes to defendant. The writing on the back of the duplicates is as follows:
"For value received, including loans to and endorsements for the benefit of the Octozone Company the undersigned (Octozone) hereby assigns the within account to B.K. Leach, H.C. Barker, Matt F. Morse and O.H. Stephan of St. Louis, Mo., subject only to the prior claims of the Sterling Finance Company or its assigns and the  undersigned irrevocably constitutes said assignees or their nominee, the attorneys for the undersigned to collect same either in their names or in the name of their nominee or in the name of the undersigned and to so endorse any notes, checks, drafts or other negotiable instruments payable to the undersigned given in full or partial settlement of said notes or account. The undersigned hereby warrants that its records and books of account have been properly marked to indicate that this account has been assigned to said parties. The debtor is hereby authorized and directed to pay the amount due on this indebtedness to said assignees or their nominee at the office of B.K. Leach, St. Louis, Missouri."
May 2, 1939, Octozone mailed or delivered to defendant a letter signed by it and pertinent to the assignment to Leach et al. A paragraph in this letter follows:
"The intention of this assignment (to Leach et al.) is that only upon the payment of all indebtedness and obligations due, or to become due from the Octozone Equipment Company to the Sterling Finance Company, and the payment of all the notes and chattel mortgages heretofore or hereafter sold by Octozone Equipment Company to Sterling Finance Company, shall said B.K. Leach, O.H. Stephan, Matt F. Morse and Harry C. Barker, have any right to claim any part of the notes and chattel mortgages in which Octozone Equipment Company may have an interest."
Between November 10, 1938, and May 18, 1939, defendant got 6 notes from Octozone, obtained, as we understand, in about the same way as the 12 notes were obtained. These 6 notes were by makers different to the makers of the 12 notes, and default had been made in the payment of the 6 notes. The evidence showed that the proceeds of the installments, which plaintiff claims, in the notes mentioned in counts 1, 3, 4, 6, 9, 10, and 12 and found by the court to have been collected by defendant, were by defendant applied on the 6 notes, and still left a balance due defendant.
If the specified installments in the 12 notes were sold by Octozone and not pledged to secure loans, and the remaining installments were pledged by Octozone for the purposes claimed by defendant, then it will be conceded that plaintiff cannot recover, because, in such situation, there would be no question of usury, and because there is no substantial evidence that defendant did not apply the proceeds of the installments claimed by plaintiff to the payment of the 6 notes mentioned, supra, that is, these proceeds were applied as provided in the sale and pledge agreements executed respectively by plaintiff when the 12 notes were delivered to defendant.
By the express terms of the sale and pledge agreements, the transactions respecting the specified first due installments of the 12 notes were sales. Notwithstanding these agreements plaintiff contends that the transactions were not sales, and cannot be held to be sales (1) because revenue stamps required by 26 U.S.C.A., Sec. 1801, were not placed on the notes; (2) because the alleged sales were "with recourse" against Octozone; and (3) because of the attending facts and circumstances.
[1, 2] Sec. 1801, 26 U.S.C.A., deals with bonds, debentures and certificates of indebtedness issued by corporations, that is, the section deals with corporate securities. The 12 notes were not issued by a corporation. All were obligations of individuals, hence Sec. 1801 could have no application. To support the contention that the transactions were not sales because the alleged sales were "with recourse" against Octozone, plaintiff relies on Sec. 3053 R.S. 1939, Mo. R.S.A., Sec. 3053. This section provides:
"A qualified endorsement constitutes the endorser a mere assignor of the title of the instrument. It may be made by adding to the endorser's signature the words `without recourse', or any words of similar import. Such an endorsement does not impair the negotiable character of the instrument." This section concerns endorsements without recourse, and has no application to the present facts.
Were the transactions as to the alleged sold installments sales as defendant contends, or was each sale agreement a mere camouflage to disguise a usurious loan, as plaintiff contends? It is true that  "a loan may be cloaked in the outward form and appearance of a purchase, in which case that will not change the substance of the transaction nor hide the usury. But if there is a real and bona fide purchase, not made as the occasion or pretext for a loan, the transaction will not be usurious even though the sale be for an exorbitant price." General Motors Acceptance Corporation v. Weinrich, 218 Mo. App. 68, 262 S.W. 425, l.c. 428. There is no statute making the sale of notes usurious, however great the discount or however small the price paid. General Motors Acceptance Corporation case, supra [262 S.W. l.c. 429]; State ex rel. Attorney General v. Boatmen's Savings Institution, 48 Mo. 189; Priest v. Garnett et al. (Mo. App.), 191 S.W. 1048; Coleman et al. v. Cole et al., 158 Mo. 253, 59 S.W. 106; 27 R.C.L., p. 215, Sec. 16; 66 C.J., p. 186, Sec. 83.
Augustus Schlessing was president and general manager of Octozone during the transactions with defendant involved here, and handled for Octozone all the transactions with defendant and here involved, and for Octozone. Schlessing signed the sale agreements which in terms are sales and in these same instruments, in separate paragraphs and separately signed by Schlessing, as appears, supra, the installments claimed by plaintiff were pledged to defendant to secure the installments sold and to secure other notes, etc., theretofore similarly obtained by defendant from Octozone, and, as stated, these pledges separately signed by Schlessing were prior to the assignment to Leach et al. And, as stated, the evidence is, and nothing to the contrary, that defendant applied the proceeds of the installments claimed by plaintiff to the payment of the balance due on the 6 notes mentioned, supra, and there is yet a balance due defendant.
George Bromeyer was president of defendant and represented defendant in the transactions with Octozone here involved. He prepared the sale and pledge agreements, etc., which Schlessing signed. Schlessing testified, in effect, that Bromeyer knew that Octozone was going to assign the installments claimed by plaintiff to Leach et al., but the assignments to Leach et al., as appears supra, were subject "to the prior claims" of defendant. And if the prior lawful claims of defendant consumed all the proceeds of the installments collected by defendant and claimed by plaintiff, then there was nothing on these installments assigned to Leach et al. and there was nothing assigned by Leach et al. to plaintiff.
Schlessing testified that in some instances Octozone "had to take back" the note delivered to defendant under the sales and pledge agreement because Bromeyer "didn't consider it good to carry the balance." And Schlessing testified that when Octozone made an assignment to Leach et al., defendant was then notified, but it is quite apparent that Schlessing, as to such notice, was speaking principally from hearsay. Bromeyer said that the first time he heard of the assignments to Leach et al. was in April, 1939. The assignments to Leach et al. cover the period from perhaps shortly after September 1, 1938, to and including some date shortly after February 17, 1939. The assignment to Leach et al. was made on the back of the copies of the sales agreements retained by Octozone when the agreements were executed and the originals, along with the notes, were delivered to defendant. A copy of the assignments to Leach et al. was not on the back of the sales and pledge agreements retained by defendant. However, if defendant was given notice of the assignments to Leach et al., such would not be any evidence that the respective installments were not sold to defendant and the others pledged as defendant claims.
The law will not tolerate any camouflage disguising a usurious transaction to make it seem innocent. "The law looks at the nature and substance of the transaction, and not to the color or form which the parties in their ingenuity have given it. No imaginable act or contrivance to cover up and conceal the usury will avail the parties. They will not be permitted successfully to evade the provisions of the statute by any conceivable scheme or expedient. The courts will follow them through all their shifts and devices, and ascertain the true character and design of the transaction. And if upon such investigation, it appears that there was in substance  a loan at an illegal rate of interest, no matter what form or shape the contract has been made to assume, it will be declared to be usurious, and the proper remedy applied." Kreibohm v. Yancey et al., 154 Mo. 67, l.c. 86, 55 S.W. 260. See also, Securities Inv. Co. v. Rottweiler et al. (Mo. App.), 7 S.W.2d 484, l.c. 486. No doubt such is the law respecting usury, but there must be substantial evidence that the transaction and instrument suspected is a camouflage or cloak to conceal the forbidden usury, and unless there is such evidence the charge of usury must fail as would any other issue fail if not supported by substantial evidence. Usury will not be presumed. The burden to establish usury rests upon the party seeking to impeach a transaction on the ground that it is tainted with usury. Missouri Discount Corp. v. Mitchell, 216 Mo. App. 100, 261 S.W. 743, l.c. 747; C.I.T. Corporation v. Byrnes (Mo. App.), 38 S.W.2d 750.
We do not find any substantial evidence in the record tending to show that the transaction stated in the sale agreements were loans and not sales. It is true that witness Schlessing was permitted to testify that these transactions were loans, but manifestly such is a mere conclusion and contrary to the sale agreements executed by him. Also, there is the fact that some or all of the unsold installments in each note were pledged to secure the payment of the alleged sold installments, but we find no case or text that such would be evidence tending to show that the transactions were not sales, as stated in the sale agreements.
As we see it, a ruling that the transactions in question were pledges and not sales would be based upon no more than a suspicion, and a mere suspicion is not sufficient to support a judgment. Leavitt v. Taylor, 163 Mo. 158, 63 S.W. 385; State v. Nagle, 326 Mo. 661, 32 S.W.2d 596. In the situation we are constrained to rule that there was no substantial evidence tending to show that the transactions stated in the sale agreements were pledges and not sales. Having reached such conclusion it will not be necessary to rule other questions. The trial court found for plaintiff on counts 1, 3, 4, 6, 9, 10 and 12, and for defendant on counts 2, 5, 7, 8, and 11. The judgment should be reversed and cause remanded with direction to enter judgment also for defendant on said counts 1, 3, 4, 6, 9, 10 and 12. It is so ordered. Dalton and Van Osdol, CC., concur.
The foregoing opinion by BRADLEY, C., is adopted as the opinion of the court. All the judges concur.