Barnes v. Huck

• Decision Date: 07 October 1975
• Docket Number: No. 11654,11654
• Parties: Earl BARNES, Plaintiff-Respondent, v. Sam HUCK, Defendant-Appellant.
• Court: Idaho Supreme Court

Page 1352

540 P.2d 1352

97 Idaho 173

Earl BARNES, Plaintiff-Respondent, v. Sam HUCK, Defendant-Appellant.

No. 11654.

Supreme Court of Idaho.

Oct. 7, 1975.

A. L. Blandford of Blandford & Blandford, Kimberly, for defendant-appellant.

William J. Langley, Twin Falls, for plaintiff-respondent.

McQUADE, Chief Justice.

This dispute arises out of an oral agreement to purchase farm machinery. On or about January 1, 1961, Sam Huck, defendant-appellant (hereinafter appellant) entered into an oral agreement to purchase from his landlord, Earl Barnes, plaintiff-respondent (hereinafter respondent) farm machinery which respondent owned for the sum of $8,255.00. Appellant also agreed at that time to reimburse respondent $350.00 for this share of the fertilizer previously applied to land he was leasing from respondent. The parties further agreed that appellant would pay respondent the principal (8,605.00), plus interest at a rate equivalent to that charged by the Southern Idaho Production Credit Association (hereinafter P.C.A.). According to respondent:

'. . . he (appellant) was to pay each year as he had monies left over on this (farming operations) account. And it was agreed that he would pay me basically an interest rate equivalent to what he was paying P.C.A.'

Appellant has not disputed that this was the nature of his arrangement with respondent.

The record discloses that appellant began making payments in March of 1962 in varying dollar amounts and continued to make payments through December 26, 1968, when he tendered what proved to be his last payment. Respondent recorded each payment as he received it, applied the money first against the accrued interest which he had calculated, with the remainder being applied against the balance left on the principal. The trial court found that while no effort was made to determine the precise interest rate charged by respondent, at no time did he charge interest in excess of the appropriate P.C.A. rate in effect during the period involved. On December 26, 1968, when appellant made his last payment there still remained $1,600.00 outstanding on the principal balance.

On October 20, 1970, respondent sent appellant a letter requesting payment of the balance still outstanding on his account. Correspondence was sent to appellant later that same year requesting payment of the remaining balance due on the account which had at that time been adjusted to $1,350.00. The second correspondence made a demand for the remaining balance plus interest calculated at 9 3/4% for the period of January 1, 1970 to November 30, 1970. In December of 1970 respondent met with appellant at which time they tried to settle the account. Appellant advised respondent that he would pay him once he sold his calves, but this was never done.

Respondent brought this action in April of 1972. He sought the sum of $1,350.00 for payment of the remaining principal together with interest at 6% per annum, computed from December 26, 1968, (when appellant tendered his last payment) until April 17, 1972 (when the action was filed). In addition respondent asked for interest at 6% per annum on the unpaid principal from April 17, 1972, until the date of judgment, and 6% per annum on the amount of judgment entered plus costs. In his answer, appellant asked that respondent's complaint be dismissed for failure to state a claim upon which relief could be granted, and asserted as an affirmative defense, that respondent charged usurious interest rates. Appellant also counterclaimed; first alleging that he was entitled to a setoff against respondent (based upon moeny he claimed he was owed as a result of work furnished to respondent); and second, alleging that by reason of the usurious interest rates charged, respondent was indebted to him for the interest charged, together with the statutory penalty of twice the amount thereof.

The trial court found in respondent's favor, concluding that the oral agreement for the sale of the farm machinery was valid and enforceable; that the parties intended from the outset that the indebtedness would be paid within a reasonable time, taking into consideration the uncertainties of a farmer's yearly income; that a reasonable time had elapsed and therefore, respondent could recover the remaining balance due and payable. The trial court also concluded that respondent had neither charged nor received usurious interest rates. Rather, the court found that the maximum amount of interest allowable under the applicable usury statute for the principal involved was $3,204.17, but that respondent had only charged appellant $2,073.68 in interest, or which sum only $1,716.57 had been collected. It therefore entered judgment against appellant in the sum of $1,350.00 together with accrued interest to April 17, 1972, (calculated to be $283.50), plus interest at 6% per annum from April 17, 1972, to the date of judgment on the $1,350.00, together with interest [97 Idaho 176] at 6% per annum on the total of these sums from the date of judgment until paid, plus costs. Appellant's counterclaim was dismissed. Appellant thereupon made a motion for a new trial and a motion to amend and supplement the trial court's findings of fact, conclusions of law, and judgment. These motions were denied. Appellant appeals from the judgment entered and from the order denying his two motions. We affirm.

Appellant makes eleven assignments of error which can be summarized into four major contentions:

(1) Appellant's major thrust is that the agreement was usurious at its inception and that usury was apparent on the face of the transaction. Therefore, he submits, respondent should not be allowed to collect interest on the transaction, but rather appellant should recover the amount of interest paid, plus the statutory penalty of twice that amount.

(2) Appellant contends he should be granted a new trial so that he can introduce evidence that respondent refused to accept his tender of payment of the total balance allegedly made in 1966. Appellant argues that such a tender of payment halts the accrual of interest after that date.

(3) Appellant maintains that the oral agreement between the parties was so vague, indefinite and uncertain as to be unenforceable.

(4) Appellant argues that the complaint based upon the original account should be dismissed because a subsequent account had been stated between the parties.

I.

Appellant submits that at the inception of the agreement, the interest rate being charged by P.C.A. was 6 1/4% per annum, wherease the maximum rate of interest allowable on an oral agreement at that time under I.C. § 27-1904 ¹ was 6% per annum. Since the parties agreed that appellant would pay the principal at an interest rate equivalent to that charged by P.C.A., and that rate exceeded the maximum rate of interest then legally allowable on accounts of this nature by 1/4 of one per cent, appellant contends that it is apparent on its face that this transaction was usurious at its inception. Furthermore while acknowledging that the amount of interest received and credited by respondent did not exceed the maximum interest rate allowable by law for the full period of the loan, and that therefore under the socalled 'Eagle Rock' ² rule, the transaction would not be deemed usurous, appellant seeks to limit the applicability of that rule to cases involving the withholding of prepaid interest, service fees, interest on interest, interest on deliquent taxes, assessments, and prepayment of the entire principal before maturity. Appellant maintains that in determining whether an agreement is usurious at its inception or on its face, the court must look at the obligation of the borrower for the full term, and not apply the 'Eagle Rock' rule which looks to what has been charged or paid for such period. Under this proposed standard, because the P.C.A. interest rate from 1961 through 1972 never declined below a rate of 6% per annum, appellant argues he was at all times after the inception of the agreement obligated to pay a rate of interest exceeding the maximum permitted by law. We do not agree with these contentions.

A review of the record discloses that at the time this agreement was entered into on or about January 1, 1961, the current P.C.A. rate of interest was 6% per annum and not 6 1/4% per annum as appellant argues. Appellant throughout the course of the trial attempted to demonstrate that his agreement with respondent was entered into during the late fall of 1960, when the P.C.A. rate of interest was 6 1/4% per annum. However, the trial court's finding that January 1, 1961, was the pertinent date, is supported by substantial, competent, although conflicting evidence, and will be sustained on appeal. ³ Furthermore, it is undisputed that the parties mistakenly believed the going rate of interest being charged by the P.C.A at the time the agreement was made to be 5% per annum, and that this mistaken belief was attributable to appellant's erroneous statement to respondent that he was paying 5% interest to P.C.A. at that time. Respondent had no reason to question the veracity of this statement, and in fact relied and acted upon its accuracy as the basis for the agreement. Thus, even if the agreement was entered into in the fall of 1960, (when the P.C.A. rate of interest was at 6 1/4% per annum) appellant is nevertheless estopped from asserting that the agreement was usurous at its inception. As stated in Mountain States Telephone and Telegraph v. Lee: ⁴

'Estoppel is a bar by which a party is precluded from denying a fact in consequence of his own previous action which has led another party to conduct himself in such a way that the other party would suffer.'

Finally, as this Court has repeatedly recognized, usury is a matter of intention. It does not appear from a review of the circumstances surrounding the entering into this transaction that respondent '. . . knowingly and with corrupt intent charged usurous interest.' ⁵

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