Dennis v. Sears, Roebuck & Co.

• Decision Date: 24 October 1969
• Citation: 1 Pack 415,446 S.W.2d 260,223 Tenn. 415
• Parties: , 223 Tenn. 415 Anna R. DENNIS et al., Appellants, v. SEARS, ROEBUCK & COMPANY et al., Appellees.
• Court: Tennessee Supreme Court

Page 260

446 S.W.2d 260

1 Pack 415, 223 Tenn. 415

Anna R. DENNIS et al., Appellants, v. SEARS, ROEBUCK & COMPANY et al., Appellees.

Supreme Court of Tennessee.

Oct. 24, 1969.

George E. Barrett and Larry Helm Spalding, Nashville, of counsel; Barrett, Creswell & Mitchell, Nashville, for appellants.

George F. McCanless, Atty. Gen., and Paul E. Jennings, Asst. Atty. Gen., Nashville, for the State, and Reber Boult and Edwin F. Hunt, Nashville, of counsel.

Boult, Hunt, Cummings & Conners, Nashville, for Sears, Roebuck & Co.

OPINION

HUMPHREYS, Justice.

As the case has been presented to this Court, it involves only one question: Is Tennessee Code Annotated, § 47--11--104, unconstitutional, because it violates Article XI, Section 7, of the Tennessee Constitution, which prohibits interest rates in excess of 10% Per annum.

In the court below two other questions were presented: (1) Whether the suit was an appropriate one to be maintained as a class action? And, (2) whether the president of the Tennessee State Labor Council, AFL-CIO had such special interest, because some members of the labor organizations might be purchasers of goods under T.C.A. § 47--11--104, as would permit him to be a party complainant?

Appellant has abandoned these two issues, not assigning error, briefing, or arguing them. ¹ Tennessee Supreme Court Rules, 14, 15; McDonnell v. Amo, 162 Tenn. 36, 34 S.W.2d 212 (1931); State ex rel. v. Retail Credit Men's Assn. of Chattanooga, 163 Tenn. 450, 43 S.W.2d 918 (1931).

This suit is before the Court on a bill as amended and a demurrer thereto. The bill and amendment aver that appellant, Anna R. Dennis, has an outstanding obligation in the amount of $293.58 owing to appellee, Sears, Roebuck & Co., by reason of a purchase she made from Sears under what is known as a Revolving Charge Account. A copy of the account agreement was attached to the amendment to the bill and is as follows:

'SEARS REVOLVING CHARGE.

Agreement

Sears, Roebuck & Co.

In consideration of your selling merchandise to me on Sears Revolving CHARGE ACCOUNT, I agree to the following regarding all purchases made by me or on my Sears Revolving CHARGE ACCOUNT identification:

1. I have the privilege of a 30-day charge account, in which case I will pay the full amount of all merchandise purchased within 30 days from the date of each billing statement.

2. If I do not pay the full amount for all merchandise purchased within 30 days from the date of each billing statement, the following terms shall be in effect:

(A) I will pay the time sale price for each item purchased consisting of:

(1) The cash sale price, and

(2) An amount of time price differential, computed at 1 1/2% Of the balance at the beginning of each month, until the full amount of all purchases and time price differentials thereon are paid in full.

(B) I will pay for the merchandise purchased in monthly instalments which shall be computed according to the following schedule:

I will pay each monthly instalment computed according to the schedule as stated above upon the receipt of each statement. If I fail to pay any instalment in full when due, at your option the full balance shall become immediately due.

(C) You are to send me a statement each month which will show the unpaid balance for merchandise purchased, your time price differential computed on the balance at the beginning of the month, and the amount of the monthly instalment coming due.

NOTICE TO BUYER: (a) Do not sign this before you read it or if it contains any blank spaces. (b) You are entitled to an exact copy of the paper you sign. (c) You have the right to pay in advance the full amount due.

ACCEPTED:

Anna R. Dennis

Customer's Signature

SEARS, ROEBUCK AND CO.,

Address_ _Address_ _

by R.M.D. Date 3/27/64'

It was alleged that this agreement is usurious. That Tennessee Code Annotated, § 47--11--104, which authorized the agreement violates Article XI, Section 7 of the Tennessee Constitution, in that the time price differential of 1 1/2% Of the balance of the account each month would permit a charge of 18% Of the account balance, that this charge is interest and so violates Article XI, Section 7, which stipulates that the legislature may not 'provide for a conventional rate of interest' in excess of 10% Per annum.

Upon appellees' demurrer raising the questions hereinabove stated the Chancellor held the challenged statute to be constitutional and, without discussing the second and third questions, sustained the demurrer in its entirety, and dismissed the suit. Anna R. Dennis appealed and the case is before us on the single issue mentioned. We agree with the Chancellor and affirm his decree.

In considering the issue presented we are governed by certain well-established propositions of law. These propositions are:

There is a strong presumption in favor of the constitutionality of acts passed by the Legislature. Koen v. State, 162 Tenn. 573, 39 S.W.2d 283 (1931); Joyner v. Priest, 173 Tenn. 320, 117 S.W.2d 9 (1937); Federal Firefighters of Oak Ridge v. Roane-Anderson Co., 185 Tenn. 320, 206 S.W.2d 369 (1947); State ex rel. Gallaher v. Hickman, 190 Tenn. 310, 229 S.W.2d 495 (1950).

Acts of the Legislature cannot be declared unconstitutional merely for reasons of policy. Nashville, C. & St. L. Ry. v. Marshall County, 161 Tenn. 236, 30 S.W.2d 268 (1930); Quinn v. Hester, 135 Tenn. 373, 186 S.W. 459 (1916).

It has long been the established rule of law in Tennessee that the sale of merchandise, either personal property or land, is not usurious when the sale is made for one price if cash is paid and for a higher price if payment is deferred or if payment is made in future installments. Garrity v. Cripp, 63 Tenn. 86 (1874). First Nat. Bank of Johnson City v. Mann, 94 Tenn. 17, 27 S.W. 1015, 27 L.R.A. 565 (1894); See also Wilson v. Dealey, 222 Tenn. ---, 434 S.W.2d 835 (1968).

The decisions of this Court in Garrity v. Cripp and the other cases above are in accord with the overwhelming weight of authority in other jurisdictions. Floyer v. Edwards, 1 Cowp. 112, 98 Eng.Rep. 995 (K.B. 1774); Hogg v. Ruffner, 1 Black (66 U.S.) 115, 17 L.Ed. 38 (1861); Skipworth v. Gibson, 14 Va. (4 Hen. & M.) 490 (1810); Coleman v. Garlington, 2 Speers 238 (S.C. 1843); Bass v. Patterson, 68 Miss. 310, 8 So. 849 (1890); Commercial Credit Company v. Tarwater, 215 Ala. 123, 110 So. 39, 48 A.L.R. 1437 (1926); Rushing v. Worsham, 102 Ga. 825, 30 S.E. 541 (1898); Milo Theater Corp. v. National Theater Supply, 71 Idaho 435, 233 P.2d 425 (1951); Borel v. Living (La.Appeals), 28 So.2d 392 (1946); Hafer v. Spaeth, 22 Wash.2d 378, 156 P.2d 408 (1945); Keefe v. Bush & Lane Piano Co., 247 Mich. 82, 225 N.W. 585 (1929); Verbeck v. Clymer, 202 Cal. 557, 261 P. 1017 (1927); Cady L. Daniels, Inc. v. Fenton, 97 Colo. 409, 50 P.2d 62 (1935); Zazzaro v. Colonial Acceptance Corp., 117 Conn. 251, 167 A. 734 (1933); General Motors Acceptance Corp. v. Weinrich, 218 Mo.App. 68, 262 S.W. 425 (1924); Atlas Securities Co. v. Copeland, 124 Kan. 393, 260 P. 659 (1927); Standard Supply & Hardware Co. v. Christian, etc., 183 S.W.2d 657 (Tex.Civ.App. 1944); Davidson v. Davis, 59 Fla. 476, 52 So. 139, 28 L.R.A.,N.S., 102 (1910); Uni-Serve Corp. of Mass. v. Commissioner of Banks, 349 Mass. 283, 207 N.E.2d 906 (1965).

In only two states has it been held that time price differential charges are interest and subject to the usury statutes. Sloan v. Sears, Roebuck & Co., 228 Ark. 464, 308 S.W.2d 802 (1957); and Lloyd v. Gutgsell, 175 Neb. 775, 124 N.W.2d 198 (1963). And in Nebraska this holding of the Nebraska Supreme Court was set aside by an amendment to the Nebraska constitution expressly validating such charges. As for the Arkansas case, it had to be decided as it was, contrary to all of the holdings in the United States, because of the particular language of the Arkansas constitution, which made this result mandatory.

Text authority with virtual unanimity supports the rule in Tennessee and elsewhere that a bona fide credit sale is not usurious when a higher price is charged and paid for a credit sale than for a cash sale. Williston on Contracts (Rev. ed.), Vol. 6, Sec. 1685; Page on Contracts, Vol. 1, 1919--1929 Supp., p. 580; Corbin on Contracts, 1962, Vol. 6A, Sec. 1500; Restatement of Law of Contracts, Sec. 527, Illus. 4; 55 Am.Jur. 338 Usury, Sec. 21.

When our Constitution was adopted it had long been the settled common law rule that the term interest did not apply to the price differential charged on a credit sale. In other words, that where goods were sold for one price for cash and a higher price for credit, the difference charged was not interest. Floyer v. Edwards, supra; Skipworth v. Gibson, supra; Greenhow v. Harris, 20 Va. 472 (1820); Selby v. Morgan, 30 Va. 577 (1832); Coleman v. Garlington, supra.

This proposition is discussed in an annotation in 14 A.L.R.3rd 1065, where literally scores of cases sustaining it are annotated.

It would serve no good purpose to extend this opinion by referring in detail to the specific language in the cases cited. The legal basis for these holdings has been summarized in text authority where it is so clearly stated that anyone, it would seem, can understand.

In Williston on Contracts (Rev. ed.), vol. 6, Section 1685, it is declared in part:

'Loan or forebearance of money.

The statute of Anne applied only to a loan or forbearance of money, and in the construction of this statute it was held that where property was sold, even though the contract provided in terms for the payment of a fixed price payable in the future with interest at a greater rate than that allowed by the statute, the transaction was, nevertheless, not usurious since everything that the buyer promised must be deemed consideration for the sale of property, not interest on a loan or forbearance of money. In the United States like statutes have been similarly construed, so that where property is sold the parties may agree that the price, if paid after a...