Cecil v. Allied Stores Corp.

• Decision Date: 20 September 1973
• Docket Number: No. 12308,12308
• Citation: 162 Mont. 491,513 P.2d 704
• Parties: Betty Jane CECIL, on behalf of herself and and all others similarly situated, Plaintiff and Respondent, v. ALLIED STORES CORPORATION, a Delaware corporation and 'the Paris of Montana' a division of Allied Stores Corporation, Defendants and Appellants.
• Court: Montana Supreme Court

Page 704

513 P.2d 704

162 Mont. 491

Betty Jane CECIL, on behalf of herself and and all others similarly situated, Plaintiff and Respondent, v. ALLIED STORES CORPORATION, a Delaware corporation and 'the Paris of Montana' a division of Allied Stores Corporation, Defendants and Appellants.

No. 12308.

Supreme Court of Montana.

Submitted March 26, 1973.

Decided July 27, 1973.

Rehearing Denied Sept. 20, 1973.

Jardine, Stephenson, Blewett & Weaver, Great Falls, John D. Stephenson argued, Great Falls, for defendants-appellants.

Smith, Emmons & Baillie, Great Falls, Robert J. Emmons argued and Marvin J. Smith and William L. Baillie appeared, Great Falls, for plaintiff-respondent.

Wesley W. Wertz argued, Helena, Kendrick Smith argued, Butte, Edward C. Alexander argued, Great Falls, Cale Crowley appeared, Billings, A. W. Scribner appeared, Helena, and Geoffrey L. Brazier appeared, Helena, for amicus curiae.

PER CURIAM:

This is a class action by a revolving charge account customer against a retail department store seeking a declaratory judgment (1) that the Montana Retail Installment Sales Act is unconstitutional, or in the alternative (2) that the revolving charge account plan of the store violated the Act prior to its amendment in 1971, and (3) that relief should be granted to all revolving charge account customers of the store in the form of refunds of finance charges, punitive damages, attorney's and accountant's fees, interest and costs. The district court of the eighth judicial district, Cascade County, granted summary judgment to the customers; the store appeals.

Plaintiff is Betty Jane Cecil who has had a revolving charge account for several years with a retail department store in Great Falls, The Paris of Montana, one of the defendants. The other defendant is the parent corporation of The Paris, Allied Stores Corporation. Plaintiff has incurred and paid finance charges on her revolving charge account with The Paris for the past several years. Also appearing either by brief, oral argument, or both as Amicus Curiae were: Cale Crowley, Esq. (Montana Retailers Association); Kendrick Smith, Esq. (numerous Montana retail stores); Geoffrey L. Brazier, Esq. (State and local Chambers of Commerce); Edward C. Alexander, Esq. (oil companies); A. W. Scribner, Esq. (Montana Automobile Dealers Association); and Wesley W. Wertz, Esq. (Montana Bankers Association).

The Paris has operated its revolving charge account plan since about 1955. Under the plan the customer and The Paris enter into a written agreement covering future retail purchases of merchandise on credit. If the customer does not wish to pay cash for a particular item of merchandise, the sale is recorded for billing purposes subject to the prior revolving charge account agreement. The purchase is recorded on the customer's account and a monthly statement is mailed to him. Prior to July 1, 1971, the finance charge was imposed upon the balance from the previous monthly billing cycle; since then finance charges have been compiled on the average daily balance in the account during the billing cycle (excluding current purchases and unpaid finance charges). Thus, the customer can avoid payment of any finance charges by paying the unpaid balance of his account within ten days after recipt of the billing following the close of the billing cycle.

If the customer chooses to pay the unpaid balance of his account over a longer period of time, he does so in accordance with the payment schedule in the revolving charge account agreement. The minimum monthly payment under the agreement is ten percent of the unpaid balance, subject to a flat minimum charge of fifty cents per month in any case. In exercising his choice to make installment payments over a longer period of time, the customer agrees to pay a finance charge of one and one-half percent per month (computed on the previous month's unpaid balance prior to July 1, 1971 and computed on the average daily balance in the billing cycle thereafter). All revolving charge account customers of The Paris are subject to this plan. The revolving charge account agreement has been revised from time to time over the years but its essential features have remained unchanged.

The original complaint in this case was filed on January 6, 1971, in the district court of Cascade County. Two months later an amended complaint was filed which forms the basis of this action. Count I alleged the revolving charge account finance charges of The Paris were illegal because those sections of the Montana Retail Installment Sales Act permitting such charges were unconstitutional. Count II presented an alternative theory of recovery: that presuming the Act is constitutional, The Paris nonetheless violated its terms prior to the 1971 amendment in imposing and collecting finance charges on its revolving charge accounts.

Following defendants' answer containing a denial, a variety of other defenses unnecessary to detail herein, and extensive pretrial discovery proceedings, plaintiff filed a motion for summary judgment and a motion seeking determination of whether the case was maintainable as a class action. The district court granted both motions and entered summary judgment for Betty Jane Cecil and all members of her class.

The summary judgment on Count I declares the maximum finance charges contained in the Montana Retail Installment Sales Act (other than those applicable to motor vehicles) unconstitutional on three grounds: (1) Violation of Art. V., Sec. 26, 1889 Montana Constitution, prohibiting special laws regulating interest. (2) Violation of Art. V., Sec. 26, 1889 Montana Constitution, prohibiting grants of special or exclusive privileges, immunities or franchises. (3) Violation of Art. III., Sec. 3, 1889 Montana Constitution, permitting every person to acquire or possess property. The summary judgment on Count I accordingly requires The Paris to refund to all its revolving charge account customers all finance charges collected from January 6, 1966 to date of judgment, less a credit of six percent interest on delinquent accounts during the period of delinquency.

The summary judgment on Count II alternatively declares that The Paris violated sections 74-607 and 74-608, R.C.M.1947, of the Montana Retail Installment Sales Act prior to the 1971 amendment, and consequently was barred from charging or receiving any finance charges collected between March 9, 1969 through June 30, 1971, and requires refund of such charges. It held in abeyance, pending appeal, determination of whether revolving charge account customers were entitled to punitive damages. The summary judgment on Count II was expressly made operative only in the event the judgment on Count I was reversed on appeal.

This appeal is from the summary judgment of the district court.

In view of our rulings hereinafter set forth, the controlling issues can be summarized in this fashion: (1) Is the Montana Retail Installment Sales Act unconstitutional? (2) Did the revolving charge account plan of The Paris violate the Act prior to its 1971 amendment? The additional issues assigned for review concern damages, the existence of genuine issues of material fact precluding summary judgment for plaintiff, and the maintenance of this suit as a class action. None of these additional issues are material to our decision herein.

By way of background we note that Montana has a general usury statute prohibiting the charging or receiving of any rate of 'interest' exceeding ten percent per year. Section 47-125, R.C.M.1947. It also has a statute defining interest as 'the compensation allowed by law or fixed by the parties for the use, or forbearance, or detention of money.' Section 47-122, R.C.M.1947. Since 1959, Montana has had a Retail Installment Sales Act, section 74-601 et seq. R.C.M.1947, containing finance charge limitations for covered retail installment transactions which allows finance charges in excess of the maximum interest rate permitted under the foregoing general usury statute.

The Act generally covers sales of goods and services by retail sellers to retail buyers pursuant to installment transactions. It covers in detail the requirements, prohibitions, and contents of such contracts, imposes ceilings on finance and service charges, and provides the method of computation of finance charges. The ceilings on automobiles vary according to the age of the automobile from $7 per $100 per year for new cars to $11 per $100 per year on used cars over two years old. The ceilings on other goods and services vary according to the principal balance owed: on that portion of the principal balance owed up to 300 at the rate of $11 per $100 per year; on that portion of the principal balance owed from $300 to $1,000 at the rate of $9 per $100 per year; and on that portion of the principal balance owed exceeding $1,000 at the rate of $7 per $100 per year. The Act also provides for a system of licensing and regulation of sales finance companies engaged in the business of purchasing retail installment contract from retail sellers. Civil and criminal penalties are provided for violations of the Act. The Act was amended effective July 1, 1971 to expressly cover revolving charge account transactions and to prohibit finance charges thereon exceeding one and one-half percent per month.

Plaintiff's constitutional attack is directed against the finance charges authorized in section 74-608 of the Act, both before and after the 1971 amendment. Plaintiff's contentions are threefold: (1) The finance charges violate that part of Art. V., Sec. 26, 1889 Montana Constitution, prohibiting enactment of local or special laws 'regulating the rate of interest on money'; (2) the finance charges violate that part of Art. V., Sec. 26, 1889 Montana Constitution, prohibiting enactment of local or special laws granting 'any special or exclusive privilege, immunity or franchise'; and (3) the finance charges violate that part of ...