HODGES, Vice Chief Justice.
The questions presented by this appeal are matters of first impression in this jurisdiction and concern the criteria for determining whether a loan is a “consumer loan,” a “consumer related loan” or an “other loan” under the provisions of the Oklahoma version of the Uniform Consumer Credit Code (“UCCC”), 14A O.S. 1971 § 1-101 et seq., and a determination of the maximum permissible rate of interest that may be charged by a creditor under the laws of the State of Oklahoma for the type of loan presented by this case.
Anna Louise Helfenbein (“borrower”) borrowed $500,000.00 from B. E. Barnes (“lender”) on September 23, 1969. The lender had made infrequent small loans in the past, but the lender was an individual who was not regularly engaged in the business of making loans. The borrower had mortgaged the real property proposed as collateral for the loan on several occasions and had extinguished each prior mortgage loan by obtaining a subsequent mortgage loan. The borrower had no apparent source of funds to pay the mortgage loans, except through a sale or refinancing of the real property collateral. At the time the loan was made, the borrower’s real property was subject to a $423,000.00 mortgage loan which was in default and in the process of foreclosure. Although the borrower had received offers to sell the real property which would have discharged her obligation and yielded a profit in excess of $300,000.00, the borrower refused the offers because they did not meet the borrower’s expectation of the profit to be realized from the sale of the real property. Instead, the borrower sought a new mortgage loan to permit further speculation on land values.
The lender was contacted by a representative of the borrower who proposed the terms of the loan. The loan terms were explained to the borrower by her attorney before the loan closing. The borrower also received a letter from her attorney disclosing the terms of the loan, which was
signed and accepted by the borrower indicating her understanding and approval of the lending transaction.
At the loan closing, the borrower executed and delivered to the lender a written promissory note in the principal sum of $600,000.00 due on April 1, 1970, bearing interest at the rate of 38.502% per annum. The lender simultaneously delivered $600,000.00 to the borrower who immediately redelivered $100,000.00 to the lender as the agreed prepaid finance charge for the loan term. Payment of the loan was secured by a real estate mortgage covering land which was owned by the borrower and which was not used for homestead or agricultural purposes.
The borrower defaulted in payment of the note. The lender instituted an action for payment of the promissory note, foreclosure of the real estate mortgage, and attorney’s fees in the amount of $90,000.00 as provided by the note.
After overruling the motion for summary judgment filed by the lender, at the pretrial conference, the trial court ruled that the loan was neither a “consumer loan” nor a “consumer related loan” under the applicable provisions of the UCCC and set the case for trial before an advisory jury on the question of unconscionability of the rate of interest. At the trial of the cause, the advisory jury found that the interest rate was unconscionable. The court accepted the jury’s advisory opinion and reduced the interest rate on the loan to ten percent (10%) per annum.
The lender recovered a judgment against the borrower in the amount of $500,000.00 plus interest at the rate of ten percent (10%) per annum from the date of the note, attorney’s fees in the amount of $50,000.00, court costs and a decree of foreclosure of the real estate mortgage securing payment of the note. The borrower obtained a judgment holding that the rate of interest provided in the note was unconscionable and reducing the rate of interest to ten percent (10%) per annum. The trial court stated that the rate of interest had been reduced based on equitable principles and not under the applicable statutes.
Subsequent to the trial, the borrower discharged her counsel. He filed an attorney’s lien of $75,000.00 against the proceeds of the mortgage foreclosure sale.
The borrower’s real property was sold at the mortgage foreclosure sale on June 13, 1972, for $810,000.00. The lender received $697,000.00 in satisfaction of his judgment. The remaining sale proceeds of $113,000.00 are the subject of this appeal.
The primary questions presented for our determination are the nature of the loan involved and the maximum permissible rate of interest for loans falling into this category under the laws of the State of Oklahoma. The questions of whether the trial court’s determination of unconscionability was proper and whether an attorney’s fee may be recovered are secondary issues.
On September 17, 1968, the people of the State of Oklahoma amended art. 14, § 2 of the Oklahoma Constitution and granted the legislature the authority to fix maximum rates of interest. The amendment provides :
“The Legislature shall have authority to classify loans and lenders, license and regulate lenders, define interest and fix maximum rates of interest; provided, however, in the absence of legislation fixing maximum rates of interest, all contracts for a greater rate of interest than ten percent (10%) per annum shall be deemed usurious; provided, further, that in contracts where no rate of interest is agreed upon, the rate shall not exceed six percent (6%) per annum.”
Subsequently, the Oklahoma legislature adopted a modified version of the Uniform Consumer Credit Code which became effective on July 1, 1969. The effect of the passage of the UCCC was to repeal all existing ceilings on interest rates for loans. Under the UCCC, loans are divided into three all encompassing categories: “consumer loans,” “consumer related loans” and
loans other than consumer or consumer related loans, referred to as “other loans.” The provisions of the UCCC reflect a complete legislative treatment which fixes the maximum rates of interest for all lending transactions in Oklahoma. The first proviso of the constitutional amendment fixing the maximum rate of interest in the absence of legislation is rendered inapplicable because of the enactment of the UCCC. Under the UCCC, absolute limits on maximum interest rates are imposed on loans which fall into either of the categories of “consumer loans” and “consumer related loans.” The delineation of exact charges by the legislature was deemed appropriate in consumer lending transactions in the exercise of a legislative desire to regulate practices by lenders active in the areas of consumer finance where an individual borrower is without the bargaining power to adequately discover the interest rate being charged or bargain for charges which are reasonable under the circumstances. We need not concern ourselves with the varying maximum interest rates or allowable charges applicable to “consumer loans” or “consumer related loans” because we agree with the finding of the trial court that the loan in question is not a “consumer loan” or a “consumer related loan” but an “other loan.”
The statutory standards to be utilized in determining whether a loan is a “consumer loan” are delineated by 14A O. S.1971 §§ 3-104, 3-105.
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HODGES, Vice Chief Justice.
The questions presented by this appeal are matters of first impression in this jurisdiction and concern the criteria for determining whether a loan is a “consumer loan,” a “consumer related loan” or an “other loan” under the provisions of the Oklahoma version of the Uniform Consumer Credit Code (“UCCC”), 14A O.S. 1971 § 1-101 et seq., and a determination of the maximum permissible rate of interest that may be charged by a creditor under the laws of the State of Oklahoma for the type of loan presented by this case.
Anna Louise Helfenbein (“borrower”) borrowed $500,000.00 from B. E. Barnes (“lender”) on September 23, 1969. The lender had made infrequent small loans in the past, but the lender was an individual who was not regularly engaged in the business of making loans. The borrower had mortgaged the real property proposed as collateral for the loan on several occasions and had extinguished each prior mortgage loan by obtaining a subsequent mortgage loan. The borrower had no apparent source of funds to pay the mortgage loans, except through a sale or refinancing of the real property collateral. At the time the loan was made, the borrower’s real property was subject to a $423,000.00 mortgage loan which was in default and in the process of foreclosure. Although the borrower had received offers to sell the real property which would have discharged her obligation and yielded a profit in excess of $300,000.00, the borrower refused the offers because they did not meet the borrower’s expectation of the profit to be realized from the sale of the real property. Instead, the borrower sought a new mortgage loan to permit further speculation on land values.
The lender was contacted by a representative of the borrower who proposed the terms of the loan. The loan terms were explained to the borrower by her attorney before the loan closing. The borrower also received a letter from her attorney disclosing the terms of the loan, which was
signed and accepted by the borrower indicating her understanding and approval of the lending transaction.
At the loan closing, the borrower executed and delivered to the lender a written promissory note in the principal sum of $600,000.00 due on April 1, 1970, bearing interest at the rate of 38.502% per annum. The lender simultaneously delivered $600,000.00 to the borrower who immediately redelivered $100,000.00 to the lender as the agreed prepaid finance charge for the loan term. Payment of the loan was secured by a real estate mortgage covering land which was owned by the borrower and which was not used for homestead or agricultural purposes.
The borrower defaulted in payment of the note. The lender instituted an action for payment of the promissory note, foreclosure of the real estate mortgage, and attorney’s fees in the amount of $90,000.00 as provided by the note.
After overruling the motion for summary judgment filed by the lender, at the pretrial conference, the trial court ruled that the loan was neither a “consumer loan” nor a “consumer related loan” under the applicable provisions of the UCCC and set the case for trial before an advisory jury on the question of unconscionability of the rate of interest. At the trial of the cause, the advisory jury found that the interest rate was unconscionable. The court accepted the jury’s advisory opinion and reduced the interest rate on the loan to ten percent (10%) per annum.
The lender recovered a judgment against the borrower in the amount of $500,000.00 plus interest at the rate of ten percent (10%) per annum from the date of the note, attorney’s fees in the amount of $50,000.00, court costs and a decree of foreclosure of the real estate mortgage securing payment of the note. The borrower obtained a judgment holding that the rate of interest provided in the note was unconscionable and reducing the rate of interest to ten percent (10%) per annum. The trial court stated that the rate of interest had been reduced based on equitable principles and not under the applicable statutes.
Subsequent to the trial, the borrower discharged her counsel. He filed an attorney’s lien of $75,000.00 against the proceeds of the mortgage foreclosure sale.
The borrower’s real property was sold at the mortgage foreclosure sale on June 13, 1972, for $810,000.00. The lender received $697,000.00 in satisfaction of his judgment. The remaining sale proceeds of $113,000.00 are the subject of this appeal.
The primary questions presented for our determination are the nature of the loan involved and the maximum permissible rate of interest for loans falling into this category under the laws of the State of Oklahoma. The questions of whether the trial court’s determination of unconscionability was proper and whether an attorney’s fee may be recovered are secondary issues.
On September 17, 1968, the people of the State of Oklahoma amended art. 14, § 2 of the Oklahoma Constitution and granted the legislature the authority to fix maximum rates of interest. The amendment provides :
“The Legislature shall have authority to classify loans and lenders, license and regulate lenders, define interest and fix maximum rates of interest; provided, however, in the absence of legislation fixing maximum rates of interest, all contracts for a greater rate of interest than ten percent (10%) per annum shall be deemed usurious; provided, further, that in contracts where no rate of interest is agreed upon, the rate shall not exceed six percent (6%) per annum.”
Subsequently, the Oklahoma legislature adopted a modified version of the Uniform Consumer Credit Code which became effective on July 1, 1969. The effect of the passage of the UCCC was to repeal all existing ceilings on interest rates for loans. Under the UCCC, loans are divided into three all encompassing categories: “consumer loans,” “consumer related loans” and
loans other than consumer or consumer related loans, referred to as “other loans.” The provisions of the UCCC reflect a complete legislative treatment which fixes the maximum rates of interest for all lending transactions in Oklahoma. The first proviso of the constitutional amendment fixing the maximum rate of interest in the absence of legislation is rendered inapplicable because of the enactment of the UCCC. Under the UCCC, absolute limits on maximum interest rates are imposed on loans which fall into either of the categories of “consumer loans” and “consumer related loans.” The delineation of exact charges by the legislature was deemed appropriate in consumer lending transactions in the exercise of a legislative desire to regulate practices by lenders active in the areas of consumer finance where an individual borrower is without the bargaining power to adequately discover the interest rate being charged or bargain for charges which are reasonable under the circumstances. We need not concern ourselves with the varying maximum interest rates or allowable charges applicable to “consumer loans” or “consumer related loans” because we agree with the finding of the trial court that the loan in question is not a “consumer loan” or a “consumer related loan” but an “other loan.”
The statutory standards to be utilized in determining whether a loan is a “consumer loan” are delineated by 14A O. S.1971 §§ 3-104, 3-105.
In order for this loan to be a “consumer loan,” it must meet all of the criteria set forth in both these sections. Any other interpretation would frustrate the intent of the Commissioners on Uniform State Laws and the Oklahoma legislature, and place a category of loans within the definition of “consumer loans” that would be contrary to reason.
To determine whether the instant loan is a “consumer loan,” a determination must first be made as to whether the loan is excepted from the category of “consumer loans” by definition as a “loan primarily secured by an interest in land” under § 3-105. To be automatically exempted from the category of a “consumer loan” under § 3-105, the value of the collateral must be substantial in relation to the amount of the loan, and the loan finance charge must not exceed ten percent per annum. Here the value of the collateral was substantial, but the interest rate exceeded ten percent per annum. Therefore, the loan in question is not automatically excluded from the definition of “consumer loan” by virtue of § 3-105. To determine whether the instant loan is a “consumer loan,” we must then apply the remaining criteria set forth by §
3-104. The initial requirement of § 3-104 is not satisfied because the lender was not regularly engaged in the business of making loans. The loan also fails to satisfy the requirement that the debt be incurred for a personal, family, household or agricultural purpose. It is obvious that the loan was made in pursuit of the borrower’s commercial ventures.
Section 3—105 is identical to the Uniform Consumer Credit Code. It is apparent from an analysis of the comment to the Model Act that the two sections are to be construed together to exclude the classic home mortgage from all provisions of the UCCC except those on disclosure and debt- or’s remedies. The Official Comment to § 3-105 of the Model Act states that the ten percent limitation was intended to include as “consumer loans” those loans made at high rates of interest which are best exemplified by the second mortgage small loan business, i. e., where the value of the real property is not substantial in relation to the amount of the loan.
A loan which does not satisfy the statutory requirements of a “consumer loan” may be made subject to the provisions of the UCCC by written agreement among the parties to the lending transaction pursuant to 14A O.S.1971 § 3-601.
Because the parties did not so agree and because the loan fails to meet the statutory requirements of 14A O.S.1971 § 3-104 and § 3-105, it is not a “consumer loan.” •
Another category of loans defined by the UCCC and made subject to most of its provisions is the “consumer related loan.” This loan does not meet the descriptive criteria for a “consumer related loan” set forth in 14A O.S.1971 § 3-602 because the principal exceeds $25,000.00.
Because the loan is neither a “consumer loan” nor a “consumer related loan,” it falls into the category of “other loans.” Pursuant to the authority granted by art. 14 § 2 of the Oklahoma constitution, the legislature by its enactment of 14A O.S. 1971 §§ 3-605 and 5-107(2) has established the maximum permissible rate of interest for all loans other than consumer loans and consumer related loans to be forty-five percent (45%) per annum calculated according to the actuarial method.
The ra
tionale for this as stated in the Comment to Section 3-605 of the Model Act is that there is no need for usuary limitations in sophisticated business transactions.
With respect to commercial lending transactions (i. e. those which were not “consumer loans” or “consumer related loans”), the legislature fixed a single maximum permissible rate thus allowing parties of equal bargaining position to contract freely for any interest rate which did not constitute an extortionate extension of credit. We therefore find that the maximum permissible rate of interest in Oklahoma for all loans other than “consumer loans” and “consumer related loans” is forty-five percent (45%) per annum calculated according to the actuarial method.
The trial court’s reduction of the rate of interest to ten percent per annum based on an equitable basis after the advisory jury found the interest rate of 38.502% to be unconscionable was error.
The UCCC, 14A O.S.1971 § 5-108(1), even as it relates to a “consumer loan,” provides that the issue of unconscionability is a matter for the court to determine as a matter of law, and not as a question of fact for the jury.
The court may refuse to enforce a “consumer loan” if it finds any clause in the agreement to be unconscionable. However, to avoid the possibility that some court might capriciously decide that some rates are too high or some conduct is not proper, there is a specific provision, 14A O.S.1971 § 5-108(3), that a charge or practice expressly permitted by the Code is not in itself unconscionable.
Guidelines are set forth in the UCCC to assist the court in its determination of what type of misconduct might be considered unconscionable.
Sections 4-106 and 6-111(3), 14A O.S.1971 are helpful in establishing criteria of unconscionability.
The equitable concept of uncon-scionability is meaningful only within the context of otherwise defined factors of onerous inequality, deception and oppression. Unconscionability is directly related to fraud and deceit. An unconscionable contract is one which no person in his senses, not under delusion would make, on the one hand, and which no fair and honest man would accept on the other. The basic test of unconscionability of a contract is whether under the circumstances existing at the time of making of the contract, and in light of the general commercial background and commercial needs of a particular case, clauses are so one-sided as to oppress or unfairly surprise one of the parties. Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties, together with contractual terms which are unreasonably favorable to the other party.
An excellent discussion of the concept is found in
Williams v. Walker-Thomas Furniture Co.,
121 U.S.App.D.C. 315, 350 F.2d 445, 449-450 (1965).
The lender did not behave in an unconscionable manner. The borrower’s representative sought him out to make the loan. The record is replete with references to the borrower’s extensive business acumen: by her own admission, she is an astute businesswoman and very familiar with the land and its value; she had managed the real property in question since 1946 and had mortgaged it many times; the interest rate was explained to her verbally and in writing at least four times by her attorney; she also signed an acknowledgment that the loan was entered into as her independent judgment without pressure or undue influence. The borrower had other viable alternatives which she could have exercised : she could have sold the property for a substantial profit; she could have undergone foreclosure proceedings and retained the excess from the sale. Instead, the borrower elected to gamble on prospective land values.
This loan was an “other loan” in which the parties were free to contract for any rate of interest as long as it did not exceed forty-five percent (45%) per annum. The parties in the exercise of their inherent contractual rights may make whatever bargain they desire. It is the duty of the court to enforce valid voluntary contracts. The court will not interfere with the contract of parties in the absence of fraud, duress, undue influence or mistake. Courts are concerned only with the legality of the contract. The fairness or unfairness, folly or wisdom, or inequality of contracts are questions exclusively within the rights of the parties to adjust at the time the contract is made. The courts have no authority to relieve parties of their solemn obligations assumed under contracts in the absence of fraud, duress, undue influence or mistake.
The final issue to be decided is the right of the borrower’s original attorney to recover an attorney’s fee under 14A O.S.1971 § 5-202(8).
This section of the UCCC provides that the court may award reasonable attorney’s fees incurred by the debtor in any case in which it is found that a lender has violated the UCCC. We find no violations of the UCCC by the lender and, therefore, the borrower’s attorney is not entitled to recover attorney’s fees from the lender under the UCCC.
REVERSED.
All Justices concur.