Lee v. Household Finance Corporation, 4822.

• Decision Date: 31 March 1970
• Docket Number: No. 4822.,4822.
• Citation: 263 A.2d 635
• Parties: William LEE, Appellant, v. HOUSEHOLD FINANCE CORPORATION, a corporation, Appellee.
• Court: D.C. Court of Appeals

263 A.2d 635

William LEE, Appellant, v. HOUSEHOLD FINANCE CORPORATION, a corporation, Appellee.

No. 4822.

District of Columbia Court of Appeals.

Argued February 2, 1970.

Decided March 31, 1970.

Lawrence P. Lataif, Washington, D. C., for appellant.

Harry Protas, Washington, D. C., with whom Robert L. Kay, Washington, D. C., was on the brief, for appellee.

Before HOOD, Chief Judge, and FICKLING and NEBEKER, Associate Judges.

FICKLING, Associate Judge:

This is an action for the recovery of the balance due on an "installment sales agreement (conditional sales contract)" entered into by the appellant, Lee, and Brown's Furniture Center, Inc. (Brown's), the assignor to the appellee, Household Finance Corporation (HFC).

Mr. Lee's daughter and her husband were unable to purchase a sectional sofa which they had selected at Brown's because they lacked the required credit standing. As a result Mr. Lee went to Brown's on October 21, 1966, agreed to purchase the sofa for his daughter and son-in-law, and entered into the contract in issue. This contract provided for a cash price of $400 less the down payment of $25, plus a sales tax of $12, and insurance premium of $7.03, and a finance charge and fee for related services in the amount of $94.56, producing a time balance of $488.59. Brown's assigned the contract to HFC without recourse on the same day of its execution, and the sofa was delivered that day to the home of the daughter and son-in-law, who lived at a different address than that of Mr. Lee. Brown's salesman testified that the actual cash price of the sofa was $320 which represented a 20% discount from the $400 cash price quoted in the agreement.¹ HFC had approved Mr. Lee's credit prior to the day of assignment and paid Brown's $402.48 for the contract. Also, it had purchased 300 similar contracts from Brown's within the past 2 years.

Upon Mr. Lee's default, this litigation followed and was concluded in a judgment by the trial court for HFC.

The question raised on appeal is whether this conditional sales contract was in fact and law a loan which bore a usurious rate of interest.

A cash sale accompanied by a loan bearing a usurious rate of interest is condemned by our courts. And a purported sale on credit will not be allowed to cloak a usurious loan. If the contract of sale on deferred payments is but colorable and the real transaction a loan providing for illegal profit, it will be held usurious. The determination of whether a transaction is a loan and forbearance or a sale on time or credit is controlled by the intention of the parties, and each case must be decided on its particular facts. Whether the transaction constitutes a sale at a time price or a loan and a cloak for usury generally is a question for the finder of fact. Beatty v. Franklin Investment Co., 115 U. S.App.D.C. 311, 319 F.2d 712 (1963); Calvert Credit Corp. v. Williams, D.C.App., 256 A.2d 902 (1969). And findings of fact will not be disturbed on appeal unless clearly erroneous. E. g., Freas v. Gitomer, D.C.App., 256 A.2d 573 (1969); D.C.Code 1967, § 17-305(a).

With these rules in mind, we are convinced that the undisputed evidence demonstrates, as a matter of fact and of law, that the transaction was a loan and a cloak for usury. Any finding to the contrary by the trial court was clear error² and we reverse the judgment below.

It is abundantly plain to us that the so-called cash price listed on the agreement, and used by Brown's as the basis for computing the time balance owed, was nothing of the kind. By Brown's salesman's own admission, the true cash price was 20% less than $400, or $320....