Elder v. Doerr

• Decision Date: 28 June 1963
• Docket Number: No. 35484,35484
• Citation: 175 Neb. 483,122 N.W.2d 528
• Parties: William F. ELDER and Helen E. Elder, Appellants, v. Thomas C. DOERR, Appellee.
• Court: Nebraska Supreme Court

Page 528

122 N.W.2d 528

175 Neb. 483

William F. ELDER and Helen E. Elder, Appellants, v. Thomas C. DOERR, Appellee.

No. 35484.

Supreme Court of Nebraska.

June 28, 1963.

Syllabus by the Court.

1. Every person possesses the legal right to acquire the absolute and unqualified title to every species of property recognized by law, with all rights incidental thereto, including the right to sell it at such price as he can obtain in fair barter.

2. The right to engage in a lawful and useful occupation may be subjected to reasonable regulation in the public interest, even though it results in some degree of limitation of the rights of property.

3. A dealer in automobiles may in good faith sell a car on time for a price in excess of the cash price without tainting the transaction with usury, though the difference in prices may exceed lawful interest for a loan.

4. Whether or not a transaction is a bona fide time sale or the financing of the balance of a cash purchase price is a question of fact.

5. In considering whether or not a transaction is a time sale made in good faith or a loan of money or the forbearance of a debt, the court will look through form and examine its substance.

6. A transaction is not a valid time sale made in good faith unless the seller informs the buyer at the time of the sale of the cash and time sale prices and gives the buyer the opportunity to choose the one he will accept.

7. Where usury is established, the lender alone is the violator of the law and the borrower has no equitable duty to the lender with reference thereto.

8. The Legislature may, in the exercise of the police power, fix maximum interest rates for the hire of money or the forbearance of debt.

9. Interest is defined as the number of dollars that may be charged per year on one hundred dollars upon any loan or forbearance of money, goods, or things in action.

1. Under Article III, section 18, Constitution of Nebraska, an act regulating interest on money must be general and not special; the act must be made by general law on a reasonable classification of persons or things.

11. The price differential provided in section 45-305, R.R.S.1943, of the Nebraska Installment Sales Act, is a charge for the hire of money or the forbearance of debt, and is therefore a regulation of interest within the meaning of Article III, section 18, Constitution of Nebraska.

12. The fixing of different interest rates for installment sales contracts in sales of automobiles based on classifications of automobiles according to their ages, is special legislation inhibited by Article III, section 18, Constitution of Nebraska.

13. The fixing of different interest rates on automobiles and other personal property is special legislation inhibited by Article III, section 18, Constitution of Nebraska, in that there is no substantial difference of situation or circumstances that would naturally suggest the justice or expedience of diverse legislation with respect to the object of their classification.

14. The Nebraska Installment Sales Act is unconstitutional in that it contravenes Article III, section 18, Constitution of Nebraska, and it is of no force and effect.

15. An installment sales contract, in which the seller is a nonlicensee, which exacts interest in excess of 9 percent, is usurious and void in that it violates the provisions of the Nebraska Installment Loan Act.

Seymour L. Smith, Omaha, for appellants.

Clarence A. Davis, Lincoln, for appellee.

Lane, Baird, Pedersen & Haggart, Omaha, for amicus curiae.

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

CARTER, Justice.

Plaintiffs bring this action for a declaratory judgment to determine their rights in a retail motor vehicle installment contract and for injunctive relief. Issues were made up by the pleadings and a trial was had. The trial court found for the defendant and the plaintiffs have appealed.

The evidence discloses that on March 31, 1962, plaintiffs purchased a 1959 automobile from an Omaha dealer under a retail installment contract which was subsequently assigned to the defendant. The dealer informed the plaintiffs that the cash sale price of the automobile was $2,095. The trade-in value of their old car and the cash down payment amounted to $660, leaving an amount due of $1,435 if the car was sold for the cash price. The dealer advised plaintiffs that the time sale price of the automobile was $2,352.96 and, after crediting the $660 thereon, the unpaid balance of the time price would be $1,692.96, which could be paid off in 24 monthly installments of $70.54 each. The plaintiffs accepted the time sale offer. The parties executed a retail motor vehicle installment contract in accordance therewith which is the subject of this action.

It was stipulated by the parties that the time sale differential is $257.96 and that this amount is less than the maximum time price differential authorized by the Nebraska Installment Sales Act (sections 45-301 to 45-312, R.R.S.1943). It is also stipulated that the amount of $257.96 is in excess of an amount equal to 9 percent per annum on the unpaid balance if each payment is made in the manner and at the time scheduled. It is further stipulated that the sale and contract complied with all the requirements of the Nebraska Installment Sales Act.

The plaintiffs allege that the installment contract is void in that it violates the Nebraska Installment Loan Act (sections 45-114 to 45-158, R.R.S.1943); that the Nebraska Installment Sales Act is unconstitutional in that it violates Article I, section 16, and of Article III, section 18, of the Nebraska Constitution; that the plaintiffs have notified the defendant they will make no further payments under the installment contract; and that defendant has threatened to repossess plaintiffs' automobile. A copy of the contract is attached to and made a part of the petition. Plaintiffs pray that the Nebraska Installment Sales Act be declared unconstitutional; that the contract be adjudged void and canceled; and that the defendant be enjoined from attempting to enforce the contract. The defendant alleges that the Nebraska Installment Sales Act is constitutional, but even if it is not, the transaction was a valid time sale and not in violation of the Nebraska Installment Loan Act.

The plaintiffs allege that the installment contract is void because it violates the Nebraska Installment Loan Act. Defendant contends the installment contract is valid in that it complies with all the requirements of the Nebraska Installment Sales Act and, further, that it is a time sale made in good faith and is valid whether or not the Nebraska Installment Sales Act is constitutional. The first question to be determined is whether or not the installment contract is valid irrespective of the constitutionality of the Nebraska Installment Sales Act.

In the determination of this case we must give consideration to the right of property and its incidents as guaranteed by Article I, sections 1 and 25, of our state Constitution. This court has held that these provisions give to every citizen the right of acquiring the absolute and unqualified title to every species of property with all rights incidental thereto, including the right to dispose of such property in such innocent manner as he pleases and to sell it at such a price as he can obtain for it in fair barter. State ex rel. English v. Ruback, 135 Neb. 335, 281 N.W. 607; Nelsen v. Tilley, 137 Neb. 327, 289 N.W. 388, 126 A.L.R. 729. See, also, 55 Am.Jur., Usury, s. 21, p. 338. The right to engage in a lawful and useful occupation, however, may be subjected to reasonable regulation in the public interest, even though it results in some degree of limitation on the rights of property. In Althaus v. State, 99 Neb. 465, 156 N.W. 1038, this court upheld a legislative act requiring the licensing of money lenders and authorizing licensed money lenders to charge a brokerage fee in excess of the maximum rate of interest authorized by law, and in certain specified cases to charge an examination fee of 50 cents in addition to interest. The licensing of money lenders and the regulation of interest is there held to be within the police power of the state. See, also, Mack Investment Co. v. Dominy, 140 Neb. 709, 1 N.W.2d 295. But this court has adhered to the principle that the Legislature, under the guise of regulation, may not indulge in arbitrary price fixing, the destruction of lawful competition, or the creation of trade restraints tending to establish a monopoly.

Pursuant to this fundamental concept this court has recognized the right of an owner of a motor vehicle to sell it for what he can get for it in fair barter, even though the whole or a part of the purchase price may be on credit. In a line of cases beginning with Grand Island Finance Co. v. Fowler, 124 Neb. 514, 247 N.W. 429, to the present time, this court has consistently held that a time sale made in good faith at a price in excess of a cash price, even though the difference between the two prices exceeds the lawful interest for a loan, is not invalid as usurious. We adhere to the fundamental principle that a seller may sell his property for what he can get for it so long as the transaction is a sale and purchase made in good faith. See, Trailmobile, Inc. v. Hardesty, 173 Neb. 46, 112 N.W.2d 535; Berg v. Midwest Laundry Equipment Corp., 175 Neb. 423, 122 N.W.2d 250.

Difficulties arise in this class of cases when the transaction appears to be a time sale made in good faith but is in fact a loan at a usurious rate of interest. Many see no practical difference in a time sale and a cash sale with interest on the portion on which credit is extended. It is the result of the fact that a purchaser may desire to pay a larger sum to gain time and a vendor may prefer payment of a specified sum in cash to a larger amount in expectancy. The courts are confronted with the problem of...