Bell v. Idaho Finance Co.

• Decision Date: 01 April 1953
• Docket Number: No. 7903,7903
• Citation: 255 P.2d 715,73 Idaho 560
• Parties: BELL v. IDAHO FINANCE CO. et al.
• Court: Idaho Supreme Court

Page 715

255 P.2d 715

73 Idaho 560

BELL v. IDAHO FINANCE CO. et al.

No. 7903.

Supreme Court of Idaho.

April 1, 1953.

Rehearing Denied April 27, 1953.

Charles F. Reddoch and Charles S. Stout, Boise, for appellant.

David Doane, Nash J. Barinaga and Raymond D. Givens, Boise, for respondents.

BAKER, District Judge.

General Demurrer to plaintiff's complaint was sustained without disclosure of reason and without application or leave to amend. Plaintiff has appealed from the consequent judgment of dismissal.

Plaintiff asserts he paid usurious interest to the defendant, finance company assignee of conditional sale contract, and accordingly seeks to recover the statutory penalty of the amount paid 'plus twice the amount' of such interest, section 27-1907 Idaho Code. He alleges that on November 9, 1948, he purchased an automobile from the McCormick Used Cars under conditional sale contract which was prepared in the office of the finance company on form furnished by it and that upon execution the contract was assigned to it. The seller of the automobile, assignor of the contract, is not a party to the action.

The contract, a copy of which is attached to the complaint, recites that the seller agrees to sell and the plaintiff agrees to purchase the automobile particularly described 'for the following payments--$1,000 upon the signing of this contract--and $95 December 10, 1948, and $95--on the 10th day of each month for 16 months--with a final payment of $920.50 due May 10, 1950', payable at the office of the defendant. The contract contains no provision for the payment of interest except 'after maturity at the highest rate permitted by law'. It reserved title to the automobile in the seller 'until all payments herein provided for are made and all conditions hereof fully complied with' and contained other provisions usually found in contracts of that character.

The plaintiff alleges:

'That said conditional sales contract--is usurious in that the amount which was financed thereby was the sum of $2,000.00 balance owing on said automobile, plus $194.50 for insurance thereon, aggregating $2,194.50; that the payments as arranged in said conditional sales contract, when fully paid, aggregate the sum of $2,535.50 and includes interest in the sum of $341.00 on said contract, which amount represents an interest rate greater than 8% allowed by the laws of the State of Idaho, which usurious interest was knowingly reserved and charged by the defendants'.

It is also alleged that the plaintiff paid twelve of the monthly installments. He does not say he made further payments but alleges in effect that on December 14, 1949, 'when said contract was in good standing' the defendant wrongfully converted the automobile then of the value of $1,700; that there was available to him a credit of $128.50, exceeding the amount of the December 10th payment, from cancellation of insurance which credit defendant applied on the contract. He asserts that in such manner he paid the usurious interest of $341 and seeks to recover that sum 'plus twice the amount' thereof in addition.

While it might be contended the facts thus pleaded disclose that upon the date of the alleged conversion, plaintiff was in fact in default and the defendant was entitled to avail itself of the rather summary remedies given by the contract, the parties present to this court only the question of usury.

The accepted definition of 'interest' is that it is compensation allowed by law or fixed by contract for the use or forbearance of money, 47 C.J.S., Interest, § 1; 30 Am.Jur. 6. 'Usury', also a subject of legislative control, is 'The taking, receiving, reserving, or charging a rate of interest greater than is allowed by this chapter * * *', section 27-1907 Idaho Code, 'on money due or to become due on * * * contract', section 27-1905 Idaho Code. Obviously, the first essential to right to fix interest by contract is that there be a contractual liability to pay a principal. It has become an accepted and settled rule of law that to constitute usury there must be excessive interest or compensation on either a loan of money or forbearance or extension of time of payment of an existing debt. 66 C.J. 180; 55 Am.Jur. 336; Hogg v. Ruffner, 1 Black. 115, 66 U.S. 115, 17 L.Ed. 38; Rose v. Wheeler, 140 Cal.App. 217, 35 P.2d 220; Dunn v. Midland Loan Finance Corp., 206 Minn. 550, 289 N.W. 411; London v. Toney, 263 N.Y. 439, 189 N.E. 485, 91 A.L.R. 1100; Stevens v. Grossman, 100 Ind.App. 417, 196 N.E. 123; General Motors Acceptance Corp. v. Weinrich, 218 Mo.App. 68, 262 S.W. 425; Commercial Credit Co. v. Tarwater, 215 Ala. 123, 110 So. 39, 48 A.L.R. 1437; Hafer v. Spaeth, 22 Wash.2d 378, 156 P.2d 408.

A sale of property on contract is in no sense a loan and usury statutes have no application to such sales. Verbeck v. Clymer, 202 Cal. 557, 261 P. 1017; Blackmore Inv. Co. v. Johnson, 9 Cir., 32 F.2d 433; Hafer v. Spaeth, 22 Wash.2d 378, 156 P.2d 408; Commercial Credit Co. v. Tarwater, 215 Ala. 123, 110 So. 39, 48 A.L.R. 1437; Brown v. Crandall, 218 S.C. 124, 61 S.E.2d 761; Cohen v. Williams, 164 S.C. 499, 162 S.E. 758; Pierce v. C. I. T. Corp., 170 Okl. 633, 41 P.2d 481; Mayer v. American Finance Corp., 172 Okl. 419, 45 P.2d 497; Henry v. P. & E. Finance Co., 197 Okl. 676, 174 P.2d 373; Nazarian v. Lincoln Finance Corp., 77 R.I. 497, 78 A.2d 7; Levine v. Nolan Motors, Inc., 169 Misc. 1025, 8 N.Y.S.2d 311; Monk v. Goldstein, 172 N.C. 516, 90 S.E. 519; Jackson v. State, 5 Ga.App. 177, 62 S.E. 726; Rattan v. Commercial Credit Co., Tex.Civ.App., 131 S.W.2d 399; Harper v. Futrell, 204 Ark. 822, 164 S.W.2d 995, 143 A.L.R. 235; Cheairs v. McDermott Motor Co., 175 Ark. 1126, 2 S.W.2d 1111; Nelson v. Scarritt Motors, Inc., Fla., 48 So.2d 168.

A bona fide sale of property under contract providing for the payment of the purchase price, in whole or in part, in the future in one or more installments is not a 'forbearance' of debt; unless the form is but a disguise for usury, it is a contract for the purchase of property, Upton v. Gould, 64 Cal.App.2d 814, 149 P.2d 731; Rose v. Wheeler, 140 Cal.App. 217, 35 P.2d 220; Henry v. P. & E. Finance Co., 197 Okl. 676, 174 P.2d 373; Dunn v. Midland Loan Finance Corp., 206 Minn. 550, 289 N.W. 411; Pierce v. C. I. T. Corp., 170 Okl. 633, 41 P.2d 481; Seebold v Eustermann, 216 Minn. 566, 13 N.W.2d 739, 152 A.L.R. 585; General Motors Accept. Corp. v. Weinrich, 218 Mo.App. 68, 262 S.W. 425; Jackson v. State, 5 Ga.App. 177, 62 S.E. 726; Blackmore Inv. Co. v. Johnson, 9 Cir., 32 F.2d 433. However the legislatures of some states have extended the coverage of the usury statute by fixing a limitation of the charge which may legally be made not only on loan or forbearance of money but also on contracts for the purchase of chattels. Of this type are the Utah statute quoted in Morgan Motor & Finance Co. v. Oliver, 101 Utah 492, 124 P.2d 778 and Mathis v. Holland Furnace Co., 109 Utah 449, 166 P.2d 518 and the Minnesota statute referred to in several of the decisions of the Supreme Court of that state including Seebold v. Eustermann, 216 Minn. 566, 13 N.W.2d 739.

Contracts for the purchase of property are usurious where a debt is created by an agreement to buy followed by excessive consideration paid or promised for extension or postponement of time for payment or forbearance of the debt. 55 Am.Jur. 339; Brown v. Crandall, 218 S.C. 124, 61 S.E.2d 761; Morgan Motor & Finance Co. v. Oliver, 101 Utah 492, 124 P.2d 778; Seebold v. Eustermann, 216 Minn. 566, 13 N.W.2d 739; Dunn v. Midland Loan Finance Corp., 206 Minn. 550, 289 N.W. 411; G. F. C. Corp. v. Williams, Tex.Civ.App., 231 S.W.2d 565; Associates Inv. Co. v. Ligon, Tex.Civ.App., 209 S.W.2d 218; Associates Inv. Co. v. Thomas, Tex.Civ.App., 210 S.W.2d 413; Associates Inv. Co. v. Baker, Tex.Civ.App., 221 S.W.2d 363; Associates Inv. Co. v. Sosa, Tex.Civ.App., 241 S.W.2d 703; Associates Inv. Co. v. Hill, Tex.Civ.App., 221 S.W.2d 365. In several of the Texas cases the buyer and the seller had considered but one price and when the contract was prepared other items and sums were included in the unpaid balance.

In case of forbearance of an existing debt, the consideration for the obligation, payment of which is deferred, is not important; it may be for money loaned, property sold, services rendered or other consideration sufficient to support a contract. So it is generally, if not universally, held that when a purchaser of property on conditional sale contract defaults and requires additional time, which the creditor or another is willing to give, where 'refinancing' becomes necessary, the compensation paid for the extension or forbearance may not exceed the permissible maximum. 55 Am.Jur. 340; Bangs v. Midland Loan Finance Co., 200 Minn. 310, 274 N.W. 184; San Joaquin Finance Corp. v. Allen, 102 Cal.App. 400, 283 P. 117; Liebelt v. Carney, 213 Cal. 250, 2 P.2d 114, 78 A.L.R. 405; Bonetti v. United Beauty Supply, Sup., 31 N.Y.S.2d 463; London v. Toney, 263 N.Y. 439, 189 N.E. 485, 91 A.L.R. 1100; Comment author note, 91 A.L.R. 1110.

The owner and prospective purchaser of property have full right to negotiate and to contract. Each is entitled to deal with his own interest in mind. Absent some disabling factor, it is a matter of no concern to the court what sum a purchaser may agree to pay or how the parties arrive at, or what items either considers in determining, that price which the seller is willing to take and the buyer is willing to pay. The owner may prefer a dollar in hand to a promise to pay two dollars and accordingly may fix one price for cash and another and highly disproportionate, even exorbitant, price for sale on time or credit. The requirements of the purchaser, his financial condition, and his prospects may induce him to agree to pay the higher price although the difference may exceed the maximum interest on the cash price. In such case the buyer may not complain of his bargain. This court adopted...