Davis v. General Motors Acceptance Corp.

• Decision Date: 24 April 1964
• Docket Number: No. 35706,35706
• Citation: 127 N.W.2d 907,176 Neb. 865
• Parties: James A. DAVIS and Joan B. Davis, Appellants, v. GENERAL MOTORS ACCEPTANCE CORPORATION, a corporation and Kinman Chevrolet-Cadillac, Inc., a corporation, Appellees.
• Court: Nebraska Supreme Court

Page 907

127 N.W.2d 907

176 Neb. 865

James A. DAVIS and Joan B. Davis, Appellants, v. GENERAL MOTORS ACCEPTANCE CORPORATION, a corporation and Kinman Chevrolet-Cadillac, Inc., a corporation, Appellees.

No. 35706.

Supreme Court of Nebraska.

April 24, 1964.

Syllabus by the Court

1. Chapter 8, Laws 1963, Special Session, page 98 (L.B. 16), relating to agreements for the sale of personal property upon an installment basis which are judicially determined to constitute loans, is special legislation in violation of Article III, section 18, Constitution of Nebraska, and, therefore, unconstitutional.

2. Chapter 6, Laws 1963, Special Session, page 85 (L.B. 19), which provides that the judicial determination that certain statutes are unconstitutional shall have prospective effect only and that agreements entered into in accordance with such statutes prior to such determination shall be valid and enforceable is an invasion of the powers and authority of the judiciary in violation of Article II, section 1, Constitution of Nebraska, and, therefore, unconstitutional.

3. Chapter 9, Laws 1963, Special Session, page 103 (L.B. 17), is valid and constitutional legislation and is applicable to all loans which are subject to the Installment Loan Act except where an action on such a loan has been reduced to final judgment.

4. The prohibition in the Constitution of Nebraska against retroactive legislation affecting civil rights or regulating civil remedies is in the Bill of Rights which provides that no person shall be deprived of his property without due process of law, and that no law impairing the obligation of contracts shall be passed. Art. I, secs. 3 and 16, Constitution of Nebraska.

5. The repeal of a statute without any provision for saving the rights founded on the statute determines an action founded upon the statute.

6. The purpose of the general saving clause, section 49-301, R.R.S.1943, which provides that the repeal of a statute shall not affect pending actions founded thereon, nor causes of action not in suit that occurred prior to the repeal 'except as may be provided in such repealing statute' is to avoid the effect of the rule stated above unless the Legislature expressly provides that the repealing act shall apply retroactively.

7. The general saving clause, section 49-301, R.R.S.1943, does not apply to Chapter 9, Laws 1963, Special Session, page 103 (L.B. 17), because the Legislature expressly provided in that act that it should have retroactive effect.

8. An action against a lender under the Installment Loan Act is an action to enforce a forfeiture which, in practical effect, is punitive as to him.

9. Usury statutes are generally held to be penal in nature and subject to amendment or repeal by retroactive legislation.

10. There is no vested right in a usury law and it may be repealed or changed so as to affect causes of action and defenses in pending suits.

11. Parties to usurious contracts hold any right they may have to penalties given by law, subject to a modification or repeal by the Legislature, and the repeal of a statutory prohibition against usury releases any penalties imposed, and thus validates the contract.

12. The right of a party to avoid his contract which is given to him by a usury statute, is given to him for purposes of its own, and not because it affects the merits of his obligation. It is a privilege that belongs to the remedy, and forms no element in the rights that inhere in the contract. It is a naked legal right which is not protected by any constitutional provision.

13. The repeal of a usury statute by a retroactive act does not impair the obligation of a previous contract but confirms the obligation which the parties assumed and permits its enforcement in accordance with the agreement of the parties.

14. A party who has made an illegal contract has no right to insist that it remain permanently illegal. Public policy cannot be made static for those who, for reasons of their own, make contracts beyond their legal powers. No person has a vested right to be permitted to evade contracts which he has illegally made. 15. The Legislature may validate contracts which were illegal when made by the retroactive repeal of a previous law. Where the Legislature provides that a repeal shall be retroactive, contracts which were illegal when made, because of the law which has been repealed, are validated.

16. The violation of the Installment Loan Act is a defense, and only a defense, which is available to the borrower and his privies, and a contract made in violation of the act is enforceable as against all others.

Wellensiek & DeBacker, Grand Island, for appellants.

Luebs, Elson, Tracy & Huebner, Cunningham & Cunningham, Grand Island, Charles S. Reed, Omaha, Clarence A. Davis, Lincoln, for appellees.

Kerrigan, Line & Martin, Fremont, Nelson, Harding & Acklie, Charles F. Noren, E. D. Warnsholz, Lincoln, for amici curiae.

Heard before WHITE, C. J., and CARTER, MESSMORE, YEAGER, SPENCER, BOSLAUGH and BROWER, JJ.

BOSLAUGH, Justice.

On January 31, 1963, James A. Davis and Joan B. Davis, the plaintiffs, entered into a contract of conditional sale for the purchase of a truck from the defendant, Kinman Chevrolet-Cadillac, Inc. Later the contract was assigned to the defendant, General Motors Acceptance Corporation. This action was brought to declare the contract void and to recover the payments which the plaintiffs have made under the contract.

The petition alleged that the contract for the purchase of the truck conformed to the 1959 Nebraska Installment Sales Act; that it was in fact a loan made in violation of the Nebraska Installment Loan Act; and that it was, therefore, void and unenforceable. A motion to strike certain allegations of the petition relating to the plaintiffs' right to relief filed by General Motors Acceptance Corporation was sustained. Thereafter, general demurrers filed by both defendants were sustained and the action dismissed.

The plaintiffs' motion for new trial was overruled and they have appealed. The assignments of error relate to the sustaining of the motion to strike and the general demurrers. Because the action was determined upon the motion to strike and the demurrers of the defendants, there is no issue of fact presented. The allegations of the petition must be accepted as true and the question which is to be determined is whether the plaintiffs have any right to the relief requested.

In Elder v. Doerr, 175 Neb. 483, 122 N.W.2d 528, this court held that the 1959 Nebraska Installment Sales Act was unconstitutional and that a contract made in conformity with it violated the Nebraska Installment Loan Act and was subject to the penalties prescribed in that act. A subsequent decision reached the same result concerning the 1963 Nebraska Installment Sales Act. Stanton v. Mattson, 175 Neb. 767, 123 N.W.2d 844.

The Seventy-fourth (Extraordinary) Session of the Legislature, which convened on October 21, 1963, enacted legislation relating to installment sale contracts and installment loans. The defendants contend that three of the statutes passed at that session of the Legislature are applicable to this action and defeat the plaintiffs' right to relief. The defendants rely upon Legislative Bills 16, 17, and 19 enacted by the Special Session of the 1963 Legislature. For convenience, these acts, which appear respectively as Chapters 8, 9, and 6 of the Session Laws, Seventy-fourth (Extraordinary) Session of the Legislature of Nebraska, will be referred to as L.B. 16, L.B. 17, and L.B. 19.

The plaintiffs contend that the statutes referred to are unconstitutional and, therefore, are of no effect so far as this action is concerned. Thus, the issue presented is the validity and effect of L.B. 16, L.B. 17, and L.B. 19 with respect to this action.

The Installment Loan Act originally provided that a loan made in violation of the act was void and that the licensee had no right to collect or receive any principal, interest, or charges whatsoever. Sections 45-137, 45-138, 45-154, 45-155, R.R.S.1943. L.B. 17 amends sections 45-137, 45-138, 45-154, and 45-155 of the Installment Loan Act to provide that a loan made in violation of the act shall not on that account be void, but the licensee shall have no right to collect or receive any interest or charges, and any interest or other charges which have been collected shall be forfeited and refunded to the borrower. L.B. 17 further provides that the penalty provisions as amended shall apply to all transactions made prior to the effective date of the act except where an action on such a transaction has been reduced to final judgment. L.B. 17 contained an emergency clause, was approved on November 15, 1963, and became effective on that date.

L.B. 17 is general in nature and applies to all loans which are subject to the Installment Loan Act. The plaintiffs do not contend that the Legislature has no power to change the penalty provisions of the Installment Loan Act, or that the power was defectively exercised, except insofar as L.B. 17 was intended to apply to transactions which occurred before its effective date. The contention that the Legislature cannot make such legislation retroactive is made with respect to all three acts and will be considered later.

L.B. 16 relates to contracts for the sale of property upon an installment basis. The act defines an 'agreement' as an agreement for the sale of personal property upon an installment basis including contracts entered into pursuant to the 1959 and 1963 Installment Sales Acts. It further provides that in the event such an agreement is judicially determined to constitute, in whole or in part, a loan with interest, the applicable limit on such interest shall be that set forth in section 45-101, R.S.Supp., 1961, as amended, and the sole remedy or defense available to such a buyer by reason thereof shall be that prescribed in section 45-105, R.R.S.1943.

Section 45-101,...