Hafer v. Spaeth
| Decision Date | 19 February 1945 |
| Docket Number | 29522. |
| Citation | 22 Wn.2d 378,156 P.2d 408 |
| Parties | HAFER v. SPAETH. |
| Court | Washington Supreme Court |
Department 1.
Action by Charles F. Hafer against John Spaeth to recover possession or the value of, and rental for, a piano sold by plaintiff's assignor to defendant's assignor under a conditional sale contract. From a judgment of dismissal plaintiff appeals.
Reversed and remanded.
Appeal from Superior Court, Spokane County; Ralph Foley, judge.
G. E Lovell, of Spokane, for appellant.
Brown & Brown, of Spokane, for respondent.
Plaintiff brought suit to recover possession of a piano which plaintiff's assignor formerly had owned and had sold under a conditional sales contract. Defendant's answer consisted of a general denial and an affirmative defense alleging usury, which, in turn, was denied by the plaintiff in his reply. The action was tried to the court without a jury, resulting in a decision unfavorable to the plaintiff. After denying plaintiff's motion for a new trial, the court made findings of fact, from which it concluded that the action should be dismissed. Judgment was entered accordingly, and plaintiff appealed.
No statement of facts has been brought to this court, and therefore the factual situation of the case is to be found in the uncontroverted portions of the pleadings, together with the findings of the trial court.
On August 4, 1936, R. B. Oslund, doing business as Oslund Piano House, the vendor, entered into a conditional sales contract with one Stanley Headrick, as vendee, wherein the former agreed to sell, and the latter agreed to purchase, a Gulbransen piano for the sum of one hundred seventy-five dollars, to be paid as follows: thirty dollars cash, upon the signing and delivery of the contract, and the balance in monthly installments of five dollars commencing September 4, 1936, 'with $3.50 handling charge per month or a fraction thereof.' It is this 'handling charge' which has given rise to the present controversy. The conditional sales contract also contained a forfeiture clause and other provisions usually found in such instruments.
During the period between August 4, 1936, and January 19, 1939, which was approximately the interval prescribed by the contract for full performance of its terms, the vendee, Headrick, paid at somewhat irregular times the total sum of one hundred sixty dollars on the stated purchase price of the piano, leaving, on the date last mentioned, an unpaid balance of fifteen dollars of the principal amount. Thereafter, but prior to the commencement of this action, Headrick transferred the piano to John Spaeth, the respondent herein, who at the same time purchased all of Headrick's rights under the terms of the conditional sales contract. The vendor, Oslund, likewise Before the commencement of the present action, assigned and transferred his claim under the contract to the appellant herein, for collection.
In his complaint appellant alleged that the piano was sold to Headrick under the conditional sales contract; that the terms of the contract 'have not been complied with'; that the vendor is entitled to the possession of the piano; that the respective interests of the original parties were transferred as above related; that the appellant had demanded of the respondent possession of the piano and rental therefor; that such rental amounted to two hundred dollars; and that the value of the piano was five hundred dollars. In the prayer of his complaint appellant asked that either he be awarded the possession of the piano or have judgment for its value, and that he also have judgment in the sum of two hundred dollars for the rental of the property. In this connection, it may be stated that the conditional sales contract contains no provision relative to the rental value of the piano or conferring upon the vendor the right to make a rental charge.
Respondent in his answer denied that there had been any failure on the part of either himself or Headrick to comply with the terms of the conditional sales contract, or that any sum was due as rental, or that the value of the piano exceeded the sum of one hundred dollars. The answer then affirmatively alleged that payments totalling one hundred sixty dollars had been made by Headrick, leaving an unpaid balance of fifteen dollars on the original purchase price; that no demand for such balance had ever been made and that no notice fixing the time of forfeiture of the contract had ever been given; that the 'handling charge' provided in the contract constituted interest; that the charge amounted to more than twelve per cent on the unpaid balance of fifteen dollars and was therefore usurious; and that the amount of such usury, being in excess of the balance owing on the purchase price, constituted an offset thereto and effected an extinguishment thereof.
Appellant in his reply denied the affirmative matter contained in the answer, except as alleged in his complaint.
The trial court made findings affirming the fact that the piano had been sold under conditional sales contract as hereinBefore stated, and incorporated in its findings a copy of that instrument. The court also found that the respective interests of the original parties to the contract had been transferred as above described; that the balance owing on the principal amount on January 19, 1939, was fifteen dollars; and that the piano was worth three hundred dollars. The court then specifically found, with respect to the issue here involved, as follows:
'That said contract provides for a handling charge of $3.50 for each month or fraction thereof; that said charge amounted to more than 12 per cent per annum on the contract price of said piano; that said charge constituted interest on said account and was usurious and the amount thereof so reserved amounts to more than $15.00, the balance of the purchase price, and is an offset to and extinguishes the same.' (Italics ours.)
The questions presented on this appeal relate solely to the matter of usury. Appellant's contentions are (1) that the usury law of the state of Washington does not apply to conditional sales of personal property; and (2) that, in any event, the respondent, who was not the original vendee in the conditional sales contract, cannot take advantage of any usury affecting the original transaction.
Usury is of purely statutory creation, and in the absence of statutory restriction parties may ordinarily contract for any interest they see fit. Missouri, Kansas & Texas Trust Co. v. Krumseig, 172 U.S. 351, 19 S.Ct. 179, 43 L.Ed. 474; 66 C.J. 160, Usury, § 37; 27 R.C.L. 203, Usury, § 1; Webb, Usury, 3, § 5.
In the state of Washington, the statutory law with reference to usury, in so far as it is pertinent to this case, is contained in Rem.Rev.Stat. § 7300 [P.C. § 3156], reading as follows:
'Any rate of interest not exceeding twelve (12) per centum per annum agreed to in writing by the parties to the contract, shall be legal, and no person shall directly or indirectly take or receive in money, goods, or thing in action, or in any other way, any greater interest, sum or value for the loan or forbearance of any money, goods or thing in action than twelve (12) per centum per annum.' (Italics ours.)
The essential elements of usury are (1) a loan or forbearance, express or implied; (2) money or its equivalent constituting the subject matter of the loan or forbearance; (3) an understanding between the parties that the principal shall be repayable absolutely; (4) the exaction of something in excess of what is allowed by law for the use of the money loaned or for the benefit of the forbearance; and, in some jurisdictions, (5) an intent to exact more than the legal maximum for the loan or forbearance.
To determine whether all these essential elements are present, the courts will look through the form of the transaction and consider its substance. If all the requisites are found to be present, the transaction will be condemned as usurious, but, if any one or more of them are lacking, the parties cannot be charged with a usurious practice. The cases are uniform in their acceptance of these principles. 66 C.J. 174, Usury, § 65; 27 R.C.L. 208, Usury, § 9.
Furthermore, the character of a contract with respect to usury is determined at the time the contract is made, and, if the contract in its inception is unaffected by usury, it cannot be invalidated by a subsequent transaction. Siebert v. Hall, 8 Cir., 63 F.2d 517, and cases therein cited; 66 C.J. 173, Usury, § 63; 27 R.C.L. 208, Usury, § 9.
The substructure of a usurious transaction is found in the first two elements above enumerated. To constitute usury there must be a loan or forbearance of money or its equivalent, and where there is no such loan or forbearance there can be no usury. A wealth of cases upholding this pronouncement may be found in the footnotes appearing in 66 C.J. 180, Usury, § 73, and in 27 R.C.L. 213, Usury, § 14. The principle is forcefully expressed in Nichols v. Fearson, 32 U.S. 103, 7 Pet. 103, 108, 8 L.Ed. 623, in the following language:
Later digests furnish citations of an equal wealth of cases recognizing and affirming the principle above expressed. Of the many recent cases, we cite but a few Siebert v. Hall, supra; General Motors Acceptance Corporation v. Mid-West Chevrolet Co., 10...
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