Johnston v. Beneficial Management Corp. of America

• Decision Date: 17 July 1975
• Docket Number: No. 43338,43338
• Parties: Paul W. JOHNSTON et al., Appellants, v. BENEFICIAL MANAGEMENT CORPORATION OF AMERICA, a Foreign Corporation, et al., Respondents.
• Court: Washington Supreme Court

Page 637

85 Wn.2d 637

538 P.2d 510

Paul W. JOHNSTON et al., Appellants, v. BENEFICIAL MANAGEMENT CORPORATION OF AMERICA, a Foreign Corporation, et al., Respondents.

No. 43338.

Supreme Court of Washington, En Banc.

July 17, 1975.

Rehearing Denied Nov. 17, 1975.

Schroeter, Jackson, Goldmark & Bender, Roger M. Leed, Steven M. Rosen, Seattle, for appellants.

Perkins, Coe, Stone, Olsen & Williams, Theodore J. Collins, Douglas S. Little, Seattle, for respondents.

ROSELLINI, Associate Justice.

Several persons joined as plaintiffs in this action, representing various classes of persons who had purchased vacuum cleaners from the defendants National Appliance Company and National Appliance Company, Inc. They named as defendants the sellers of the vacuum cleaners and various finance companies which had purchased the installment contracts under which the vacuum cleaners were sold. The appellant Kirkland intervened in the action when the respondent Nationwide Finance Corporation of Washington, which will be referred to herein as Nationwide, was named as a defendant in an amended complaint filed in August 1973. Kirkland represented the class of purchasers whose contracts had been bought by Nationwide.

According to Kirkland's allegations, he purchased a vacuum cleaner and a membership in a 'family buying power' plan on November 11, 1968. He completed his payments in full on November 25, 1970.

Nationwide acquired the Kirkland contract as part of a bulk purchase in July of 1969 and collected the remaining payments until the contract was paid in full. The complaint in intervention filed on behalf of Kirkland was served upon Nationwide on August 17, 1973.

The complaint alleged that both the defendant sellers and the finance companies had violated provisions of the Consumer Protection Act (RCW 19.86.020), the retail installment sales act (RCW 63.14.130 and .180), and the usury statute (RCW 19.52.020).

It was alleged that the sellers, through their representatives, had used high-pressure sales tactics to induce Kirkland to purchase a vacuum cleaner and a membership in the family buying power plan and had grossly misrepresented the value of both the appliance and the plan. There were allegations that the service charge was in excess of the amount allowed under the retail installment sales and the usury statutes. It was alleged that the finance companies knew of the sellers' unlawful practices when they purchased the contracts and that they made a profit from these transactions.

The trial court granted Nationwide's motion for summary judgment, holding that the Consumer Protection Act did not apply to the Kirkland transaction and that the other claims stated in the complaint were barred by the statutes of limitations. The action was allowed to proceed as a class action against the other defendants.

Kirkland appealed directly to this court and we agreed to retain the cause for decision.

The question before the court is whether Kirkland has a cause of action against Nationwide under any of the statutes relied upon in this action.

The Consumer Protection Act as it existed prior to the 1970 amendment of RCW 19.86.090 (Laws of 1970, 1st Ex.Sess., ch. 26, § 2), made no provision for private suits for damages for violations of RCW 19.86.020. As we observed in Seaboard Sur. Co. v. Ralph Williams' Northwest Chrysler Plymouth, Inc., 81 Wash.2d 740, 504 P.2d 1139 (1973), the concept of unfair methods of competition was new to the law when it was employed in the Federal Trade Commission Act, 15 U.S.C. § 45, first enacted in 1914, and has a broader meaning than the common law concept of 'unfair competition.' The federal act does not authorize private lawsuits but reposes the duty of enforcement in the Federal Trade Commission.

Under RCW 19.86.020, unfair methods of competition and unfair acts or deceptive practices in the conduct of any trade or commerce are thereby declared unlawful. Insofar as the court has been made aware, 'unfair or deceptive acts or practices,' like 'unfair methods of competition,' is a new concept and has no common law equivalent. Thus, until the 1970 amendment, there was no statutory or common law private right of action based upon such acts or practices. Assuming that the acts alleged were 'unfair or deceptive acts or practices' within the meaning of the statute, when the Kirkland-National Appliance Company contract was entered into, the statute did not give Kirkland a private remedy.

Kirkland cites Hockley v. Hargitt, 82 Wash.2d 337, 510 P.2d 1123 (1973), for the proposition that the Consumer Protection Act, prior to the 1970 amendment, impliedly authorized private damage actions. We held in that case that RCW 19.86.090, as amended in 1970, authorizes a person injured to bring a civil action to enjoin violations as to others, as well as to himself. We were concerned with the construction of the language used in the amended act, and found the authority to enjoin future violations expressed in the act itself. The issue was not whether there was an implied right to sue but whether there was an express right.

The trial court in this action held that the statute was not intended to apply to transactions entered into before its effective date. We agree. RCW 19.86.090 authorizes an award of treble damages. Not only does it create a new cause of action but it also imposes a penalty.

A statute ordinarily operates prospectively unless it is remedial in nature or the legislature indicates that it is to operate retrospectively. A statute is remedial and has a retroactive application when it relates to practice, procedure or remedies and does not affect a substantive or vested right. Tellier v. Edwards, 56 Wash.2d 652, 354 P.2d 925 (1960).

In Earle v. Froedtert Grain & Malting Co., 197 Wash. 341, 344, 85 P.2d 264, 265 (1938), we said:

It is a fundamental rule of statutory construction that a statute is presumed to operate prospectively and ought not to be construed to operate retrospectively in the absence of language clearly indicating such a legislative intent.

This statement was again approved in Bodine v. Department of Labor & Indus., 29 Wash.2d 879, 190 P.2d 89 (1948), where we said that if a statute affects the remedy merely and does not impair vested rights or obligations of contract, it may be given retrospective effect.

RCW 19.86.090 is not merely remedial. It creates a new right of action. It must therefore be presumed that the legislature intended it to apply to future transactions only. Furthermore, it is couched in language expressed in the present and future tenses rather than the past tense ¹ and we have said that use of the present and future tense manifests an intent that the act should apply prospectively only. Washington State School Directors Ass'n v. Department of Labor & Indus., 82 Wash.2d 367, 510 P.2d 818 (1973).

Kirkland seeks support in the case of Godfrey v. State, 84 Wash.2d 959, 530 P.2d 630 (1975), where we held that a statute altering the defense of contributory negligence was intended to apply to pending litigation. We expressly recognized the rule to be that a statute which creates a new liability or imposes a penalty will not be construed to apply retroactively.

It is suggested that the rule applicable to statutes which impose a penalty should not be applied here, because the penalty provided in RCW 19.86.090 is imposed only in the discretion of the trial court. No authority is cited supporting this proposition. Suffice it to say that Kirkland seeks treble damages in this action and thus invokes the penalty provision of the statute. The statute as thus invoked must be construed as one which was not intended to be applied retroactively.

The trial court correctly held that the statute should not be given retroactive effect and consequently did not apply to the contract between Kirkland and National Appliance.

Kirkland insists, however, that the unfair and deceptive acts or practices continued after the effective date of the statute. He asserts that it was unfair and deceitful to accept payments under the contract and to refrain from affirmatively advising him that he was paying a service charge that was higher than that allowed by statute and further advising him that the vacuum cleaner which he received was overpriced.

This court has said that although the statute imposes civil penalties, it is not subject to the strict construction which is ordinarily required where a statute imposing criminal penalties is involved. State v. Ralph Williams' North West Chrysler-Plymouth, Inc., 82 Wash.2d 265, 510 P.2d 233 (1973). In that case it was contended that the statute was unconstitutional because the phrase 'unfair or deceptive acts or practices,' as well as other terms used in RCW 19.86.020 and .920, was too vague to meet the requirements of due process. While recognizing that the statute itself does not define the scope of this phrase or provide standards for determining whether particular conduct is prohibited, we held that the words have acquired a well-settled meaning in federal trade regulation law, under federal court decisions, to which reference is made in the act for guidance in determining its meaning. RCW 19.86.920.

Turning to the cases decided under the act, as digested in 15 U.S.C.A. § 45, nn. 64--90, and F.C.A. 15 § 45, §§ 23--29, we find that 'unfair or deceptive acts or practices,' under the Federal Trade Commission Act, 15 U.S.C. § 45, fall into the following general categories: deceptive or false advertisements, including deceptive pictorial representation in advertisements; selling by means of punchboard or lottery; misrepresentations, including misrepresentations regarding price; and use of deceptive trade names or trademarks.

It will be seen that all of these acts or practices are designed to induce a potential buyer to purchase goods or services. They all involve affirmative acts, even in a case where the deception consists of the failure to...