Langille v. Central-Penn Nat. Bank of Philadelphia, CENTRAL-PENN

Decision Date08 July 1959
Citation38 Del.Ch. 382,153 A.2d 211
PartiesClyde W. LANGILLE and Jennie Langille, Plaintiffs, v.NATIONAL BANK OF PHILADELPHIA, a corporation of the United States of America, Defendant.
CourtCourt of Chancery of Delaware

John S. Walker and Frank J. Miller, Wilmington, for plaintiffs.

H. James Conaway, Jr., of Morford, Young & Conaway, Wilmington, for defendant.

SEITZ, Chancellor.

The plaintiffs seek to have discharged a bond and mortgage executed by the plaintiffs and held by the defendant, Bank, on the ground that the party through whom the defendant acquired the bond and mortgage in effect made a a usurious loan. The defendant has moved for summary judgment and this is the decision thereon.

No material facts are in dispute. On May 29, 1953, Washington Lumber and Millwork Co. ("Washington") and Barco Inc. ("Barco") made an agreement whereby Washington was to sell and Barco to buy all of Washington's deferred payment sales contracts of the type involved in this case. Barco was given an option to reject any contract if it did not approve the creditor as a purchase risk. In case of default by a creditor, Barco had full recourse to Washington.

On August 18, 1954, plaintiffs signed a contract with Washington to purchase certain building materials used to erect a prefabricated house. At the time both plaintiffs and Washington were "citizens" of Pennsylvania and the contract was executed there. The invoice, drawn the same day by Washington, indicated that the price was to be $3,990. The contract, however, called for payment of $6,191.90 as a deferred payment price. Plaintiffs further agreed to give a bond and mortgage to secure the deferred payment purchase price. At the same time, plaintiffs signed an application for deferred payment purchase. The agreement provided that if this application should be rejected, the agreement would be null and void.

On September 1, 1954, Washington forwarded the agreement to Barco. On October 27, 1954, Barco applied to defendant, Bank, for a loan, security to include plaintiffs' bond and mortgage. Sometime before January 12, 1955, the amount of the loan was agreed upon.

On December 10, 1954, Barco had notified plaintiffs that it approved plaintiffs' application for deferred payment purchase. On January 12, 1955, plaintiffs executed their bond and mortgage to Barco, which bond and mortgage were assigned by Barco the same day to defendant as security for loans made by defendant to Barco.

Plaintiffs paid a $100 deposit and 22 monthly installments of $72.53 each. Plaintiffs now seek to discharge the bond and mortgage by a present payment of $2,900 on the theory that the transaction giving rise to the bond and mortgage was in fact a usurious loan by Barco to the plaintiffs. It is agreed that if the transaction comes within the statute the rate of interest exceeded that which the statute permits. It is further agreed, for present purposes, that the defendant, Bank, holds subject to the same infirmity.

Since plaintiffs do not argue to the contrary, I shall assume that Pennsylvania law governs. What about the Pennsylvania case law?

The Pennsylvania cases cited by the defendant are not precisely in point. Equitable Credit & Discount Co. v. Geier, 342 Pa. 445, 21 A.2d 53 and Melnicoff v. Huber Investment Co., 12 Pa.Dist. & Co. R. 405, state that the financing of sales of merchandise by the extensions of credit is not subject to the prohibition against usury. But whether the case before the court involves the extension of credit or some other kind of non-usurious loan rather than a usurious loan is the very question to be decided.

In Lansdowne Finance Co. v. Prusky, 120 Pa.Super. 555, 182 A. 794, there was no prior agreement between the vendor and the finance company that the latter would accept an assignment of the credit contract. In the present case the May 29, 1953, agreement between Washington and Barco is the basis of the plaintiffs' usurious loan theory.

In Personal Discount Co. v. Lincoln Tire Co., 1949, 67 Pa. Dist. & Co. R., 35, where the finance company sued the lessor on the finance company's right of recourse, the defense of usury was disallowed on the grounds that as between the lessor and the lessee, there was a bona fide credit transaction and as between the finance company and the lessor, there was a legitimate sale of negotiable instruments. The relationship between the finance company and lessee was not discussed. Moreover, it is not quite clear that the agreement between the finance company and the lessor predated the execution of the lessee's notes and bailment leases.

In Hare v. General Contract Purchase Corp., 220 Ark. 601, 249 S.W.2d 973 cited by the plaintiff, the Arkansas court first felt obliged by precedent to uphold a transaction as not being covered by the usury provision of the State Constitution. However, the court issued a "caveat"...

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2 cases
  • Saul v. Midlantic Nat. Bank/South
    • United States
    • New Jersey Superior Court — Appellate Division
    • April 10, 1990
    ...'loan' a loan within the meaning to [sic] the statute. [Id. 87 N.J.Super. at 517, 210 A.2d 88 (quoting Langille v. Central-Penn Nat. Bank of Philadelphia, 38 Del.Ch. 382, 153 A.2d 211, aff'd 156 A.2d 410 (Sup.Ct.1959) ]. Plaintiff chose to purchase a luxury automobile on a credit basis. He ......
  • Steffenauer v. Mytelka & Rose, Inc.
    • United States
    • New Jersey Superior Court
    • May 3, 1965
    ...445, 21 A.2d 53 (Sup.Ct.1941); Melnicoff v. Huber Investment Co., 12 Pa.D. & C.Rep. 405 (Mun.Ct.1929); Langille v. Central-Penn. Nat. Bank of Philadelphia, 153 A.2d 211 (Del.Ch.1959), affirmed 156 A.2d 410 (Del.Sup.Ct.1959); Brooks v. Auto Wholesalers, Inc., 101 A.2d 255 (D.C.Mun.App.1953);......

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