Metro Hauling, Inc. v. Daffern

• Decision Date: 04 August 1986
• Docket Number: No. 14736-6-I,14736-6-I
• Citation: 44 Wn.App. 719,723 P.2d 32
• Parties: METRO HAULING, INC., a Washington corporation, Respondent, v. Russell DAFFERN and Jane Doe Daffern, husband and wife, Appellants.
• Court: Washington Court of Appeals

Page 719

44 Wn.App. 719

723 P.2d 32

METRO HAULING, INC., a Washington corporation, Respondent, v. Russell DAFFERN and Jane Doe Daffern, husband and wife, Appellants.

No. 14736-6-I.

Court of Appeals of Washington Division 1.

Aug. 4, 1986.

Gary M. Abolofia, Redmond, for Russell Daffern.

Jack R. Davis, Anthony C. Davis, Allison Davis & Baldwin, Seattle, for Metro Hauling, Inc.

SCHOLFIELD, Chief Judge.

Russell Daffern appeals from the trial court's denial of his counterclaim for relief under the usury statute in an action against him on a promissory note. We reverse.

On May 1, 1980, Daffern purchased a truck and trailer from Metro Hauling, Inc. Daffern executed as maker a promissory note for $27,000 at 12 percent interest, to be paid in monthly installments of $711.02. Metro retained title to the vehicles as security.

Daffern was chronically behind in payments, and Metro notified him that, as of February 15, 1981, it would begin charging additional interest as a late charge on his delinquent account. Daffern stated that he objected to the late charge, but had no more desirable alternative but to pay. In April, Metro commenced charging 18 percent interest on the delinquent balance until Daffern's account was brought current in September 1982. Later that year, the parties terminated their relationship and Metro accelerated payment of the note. Daffern refused to pay the balance demanded, and Metro brought suit for moneys due and to foreclose on its security. Daffern counterclaimed for usury.

The trial court framed the issue as one of contract law, ruling that Metro had made an invalid attempt to modify the terms and conditions of the original contract. The court rejected Daffern's usury claim, concluding that Metro had not "attempted or intended to ... commit a usurious act" since the late charge would have been lawful if contracted for. Conclusion of law 3. The court ordered the balance due on the note recalculated at 12 percent interest and held that each party should bear its own attorney's fees.

Former RCW 19.52.020 prohibited as usurious the receipt of interest, directly or indirectly, in excess of 12 percent for the loan or forbearance of money. Usury is an affirmative defense, Tacoma Commercial Bank v. Elmore, 18 Wash.App. 775, 778, 573 P.2d 798 (1977), and the party asserting it has the burden of proving by a preponderance of the evidence: (1) a loan or forbearance; (2) money or its equivalent as the subject of the loan or forbearance; (3) an agreement that the principal shall be repayable absolutely; (4) the exaction of a rate of interest in excess of that allowed by law for the use of the money loaned or for the benefit of the forbearance; (5) an intention to violate the law. Liebergesell v. Evans, 93 Wash.2d 881, 887, 613 P.2d 1170 (1980). Upon proof of usury, the debtor is entitled to costs and reasonable attorney's fees, plus other remedies depending upon whether or not the excessive interest was actually paid. RCW 19.52.030. The elements of proof at issue here are the lawfulness of Metro's attempt to extract excessive interest and the requisite intent necessary to constitute usury.

The "intent" necessary to establish usury is not intent of a culpable nature, but simply an intent to enter into a transaction which in fact carries an unlawful rate of interest. Tacoma Commercial Bank v. Elmore, supra, 18 Wash.App. at 781, 573 P.2d 798. In the instant case, therefore, Daffern was only required to prove that Metro intentionally, rather than mistakenly or inadvertently, extracted the excessive interest, not that Metro intended to violate the usury law. The trial court's unappealed finding that the 18 percent interest was charged at the direction of Metro's vice-president, and not as a result of mistake or oversight, is conclusive on that point. Pier 67, Inc. v. King Cy., 71 Wash.2d 92, 94, 426 P.2d 610 (1967). What remains to be determined is the lawfulness of Metro's attempt to collect excessive interest as a late charge.

As a general rule, a provision in a note by which the debtor agrees to pay, after maturity, interest at a rate higher than that allowed by law, does not render the transaction usurious provided the parties acted in good faith and did not intend to evade the usury law. Union Bank v. Kruger, 1 Wash.App. 622, 626, 463 P.2d 273 (1969). The debtor has it within his power to avoid the additional interest charge by prompt payment of his obligation, and therefore, the contingency upon which the excessive interest comes into existence is not solely within the lender's control. Union Bank v. Kruger, supra; 45 Am.Jur.2d Interest & Usury § 182 (1969).

Metro argues that, since such a provision would have been lawful if included in the contract initially,...