Lloyd v. Gutgsell
| Decision Date | 18 October 1963 |
| Docket Number | No. 35465,35465 |
| Citation | 175 Neb. 775,124 N.W.2d 198 |
| Parties | Ernest R. LLOYD and Marion P. Lloyd, Appellees, v. John H. GUTGSELL, d/b/a Jack's Trailer Sales, Appellee, Impleaded with Mobile Home Finance Company, a Corporation, Appellant. |
| Court | Nebraska Supreme Court |
Syllabus by the Court
1. The equitable principle expressed in the maxim, 'He who comes into equity must come with clean hands,' being founded on public policy, public policy may require its relaxation or limitation.
2. The borrower as a participant in a usurious transaction is in vinculis and not in pari delicto to the lender as regards usury.
3. Even when the parties have been found to be in pari delicto, relief may be awarded on the ground that in the particular case public policy will be deemed to be best conserved by that course.
4. In a finance transaction, regardless of the term used, if the result is a charge for the loan of money or for the forbearance of a debt the result is interest.
5. In considering whether a transaction is a time sale made in good faith or a loan, the court will look through the form and examine the substance.
6. If a purported time sale is in fact a loan, and the loan is in violation of the Installment Loan Act, the penalties of the act apply to it.
7. Where a time sale price is determined by applying a certain schedule of rates or charges to the cash price, the resulting product is interest.
Crosby, Pansing, Guenzel & Binning, Donn E. Davis, Lincoln, for appellant.
Kerrigan, Line & Martin, Fremont, for Ernest R. Lloyd.
Paul E. Galter, Lincoln, for John H. Gutgsell.
Heard before CARTER, MESSMORE, YEAGER, SPENCER, BOSLAUGH and BROWER, JJ.
This is an action by Ernest R. Lloyd and Marion P. Lloyd, husband and wife, hereinafter referred to as plaintiffs, against John H. Gutgsell, doing business as Jack's Trailer Sales, and Mobile Home Finance Company, a foreign corporation with its home office at Drayton Plains, Michigan. The action seeks to cancel a conditional sales contract and a promissory note covering the purchase of a house trailer, for the return of the payments made, and to secure a certificate of title to the trailer free of encumbrance.
Judgment was entered for the plaintiffs. Only the defendant, Mobile Home Finance Company, has appealed to this court. It will hereinafter be referred to as defendant. Whenever it is necessary to mention the other defendant he will be referred to by his trade name, Jack's Trailer Sales.
About the first of September 1960, plaintiffs, desiring to purchase a Detroiter house trailer, went to Jack's Trailer Sales lot in Lincoln, Nebraska, and contacted one Able, a salesman for Jack's Trailer Sales. The exact trailer they wanted had to be specially ordered. A sales agreement was apparently drawn up and executed, but no copy of it was produced.
Plaintiffs were told that the cash price of the trailer they wanted was $4,500, and that $750 would be a sufficient downpayment. Plaintiffs testified that they asked Able if they could finance the trailer anywhere they wanted, and he said yes, but that the company Jack's Trailer Sales financed trailers through would give plaintiffs the same rate as the bank. They also testified he said this rate would be 6 percent interest, and that the company did not have too much red tape about moving a trailer around. Able did not testify, so this testimony is undisputed.
The next conversation material to this transaction was on September 9, 1960, the day the trailer was delivered to the plaintiffs at Fremont, Nebraska. Ernest R. Lloyd testified that he called Lincoln to check on the delivery of the trailer, and was told that it was on the way. He was told that the driver was bringing the papers and that the price of the trailer had been raised $500 but that a $500 credit had been given, supposedly for some trade-in furniture. He testified he was told this was done so that it would go through the finance company more easily. There was no other conversation relative to financing the transaction. The sales contract, exhibit No. 1, brought up by the driver, was signed by the plaintiffs and delivered to the driver. It provides in part as follows:
'CONDITIONAL SALE CONTRACT
VENDOR Jack's Trailer Sales (Print Name of Dealer) of Lincoln, (City) Nebraska (State)
VENDEE Ernest R. Lloyd--Marion P. Lloyd (Print Purchaser's Name) of A. C. Nelsen Trailer (Street) Court, (City) Fremont, (Township) Dodge, (County) Nebr (State)
'The undersigned Seller hereby sells, and the undersigned Buyer hereby purchases, subject to the terms and conditions herein set forth, the personal property described below, (hereinafter referred to as 'property'), delivery and acceptance of which, in good order, is hereby acknowledged by Buyer to-wit:
New or Make or Trade Name Year Length, Color Serial
Used and Model Number
-------------------------------------------------------------
New Detroiter 1960 51' Desert Rose FJ-51-3FK-
& White IOW-
MOBILE HOME 51-3FK-10W-CA CA-K-3628
-------------------------------------------------------------
Upon the following terms
(1) Total Cash Price ............................ $5000.00
-----------
(2) Down Payment Cash $750.00
-------
Trade $500.00 ................... $1250.00
------- ................... --------
(3) Unpaid Balance of Cash Price
(1 minus 2) ............................. $3750.00
-----------
(4) Cost of Insurance to Buyer .................. $ 340.00
-----------
Insurance Coverage: [ ] $_________ Fire and Theft
[ ] $_________ Deductible Collision
[ ] Vendor's Single Int. and Emb't
[ ] Life and Disability (Restricted) For ---- months
(5) Other charges (Itemize) ..................... $-------
(6) Net Principal Balance Due
(3 plus 4 plus 5) ....................... $4090.00
-----------
(7) Time Price Differential
(Finance and Service Charge) ............ $1229.00
-----------
AMOUNT (8) TIME BALANCE OWED
OF (6 plus 7) ............................... $5319.00
--------
NOTE (9) Time Selling Price (2 plus 8) ................ $6569.00
--------
which time balance Buyer hereby promises and agrees to pay in 60 installment(s) of $88.65 and _____ installments of $_____ each, payable on the October 15, 1960 day of each and every month hereafter, with interest at the highest lawful rate after maturity, as is evidenced, by Buyer's note of even date herewith, * * *.'
The promissory note is attached to the contract in such a manner that it could be detached by tearing a perforated line separating it from the contract, but this has not been done and it is still attached to the contract. Exhibit No. 1 is a form prepared and furnished to the dealer by the defendant. The name of the defendant does not appear in the body of the contract, but the promissory note is made payable at the office of Mobile Home Finance Company, 4615 Dixie Highway, Drayton Plains, Michigan. There is a printed assignment on the back of the contract as well as on the back of the note. Both of these run to the defendant and both of them were completed by the dealer under date of September 13, 1960. These indicate that it was contemplated that the financing was to be done by the defendant.
Defendant alleges five assignments of error, which we condense to the points argued in defendant's brief, as follows: Was the transaction a loan or a bona fide purchase on time; and, are the plaintiffs barred from equitable relief under the 'clean hands' doctrine? Considering the last point first, it is true that the plaintiffs, at the time they signed the contract, knew that they were being given a fictitious credit for $500, but they also knew that this merely offset the inflated sales price. They were purchasing the trailer on the basis of the quoted $4,500 cash sale price.
The evidence is undisputed that the defendant is affiliated with the manufacturer of Detroiter Mobile Homes, and secures its finance business contacts through the manufacturer's representatives in the field. Defendant was peculiarly situated to know the actual value of the trailer. Its representative testified that defendant had a rule requiring a 25 percent downpayment but the maximum it would advance on the contract would be the invoice price of the unit plus freight. The invoice price was $3,759.10, and the freight was approximately $115. He further testified the defendant actually advanced $3,750 on this contract to Jack's Trailer Sales. Three thousand seven hundred fifty dollars was the exact balance of the quoted cash price. This would indicate that the $340 included for cost of insurance was not advanced by Jack's Trailer Sales but was loaned to the plaintiffs as a part of the transaction with the defendant. It was the defendant who was getting the benefit of the charges made for financing the cash price.
Defendant's representative testified it was not bound to take all finance contracts on Detroiter trailers from Jack's Trailer Sales, but checked each one presented and took only those it wanted. It did take this one. Further, as noted, the promissory note was drawn payable at its place of business in Michigan.
This court has in the past refused to apply the so-called 'clean hands' doctrine in usury cases against the borrower as a participant in a usurious transaction, on the...
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