Nazarian v. Lincoln Finance Corp., 9121

Decision Date12 January 1951
Docket NumberNo. 9121,9121
Citation77 R.I. 497,78 A.2d 7
PartiesNAZARIAN v. LINCOLN FINANCE CORP. et al. Ex.
CourtRhode Island Supreme Court

William J. George, Pawtucket, for plaintiff.

Walter J. Hennessey, Providence, for defendant, Lincoln Finance Corp.

FLYNN, Chief Justice.

This action of the case was brought by the plaintiff under General Laws 1938, chapter 485, § 4, to recover payments made by him to the defendants for an alleged usurious loan in connection with the purchase of an automobile. It was tried before a justice of the superior court sitting without a jury and resulted in a decision for the plaintiff in the sum of $2,418 and costs against the defendant Lincoln Finance Corporation and a decision in favor of the other defendant for costs. The case is before this court solely on the bill of exceptions duly prosecuted by Lincoln Finance Corporation.

The following facts among others appear in evidence. The plaintiff desired to purchase a 1941 Buick automobile which was owned by defendant Sidney Schaffer doing business as Stadium Motor Sales Company, hereinafter called the seller. The seller's manager offered to sell and plaintiff agreed to buy the Buick for the price of $2,800 in cash at the time of delivery. During the negotiations the seller made no offer or agreement to sell the car to plaintiff on a time, credit, or deferred payment basis at a price in excess of $2,800. He was not interested in such a risk. Plaintiff had only $300 in cash and the seller agreed to allow $640 as the trade-in value of his 1940 Plymouth car. Thus it became necessary for plaintiff to obtain the balance of $1,860 to complete the transaction.

He first attempted to borrow this amount from Franklin Finance Company of Pawtucket with whom he previously had done business, but was unable to located its manager by telephone. He then asked the seller's manager for the name of the loan company which ordinarily financed his sales and was informed that it was Lincoln Finance Corporation, hereinafter called the loan company. Pursuant to plaintiff's request the seller's manager telephoned the loan company to find out if it would be interested, and in response thereto John Baker, who controlled that company, came to the seller's place of business. There he met plaintiff, talked with him apart from the seller's manager, and personally made out the credit report which ordinarily would have been obtained and written by the seller if he were selling on a time basis.

These negotiations led to an agreement between the loan company and plaintiff, but the evidence as to certain of the details is in conflict. According to plaintiff, Baker never disclosed the exact amount of the interest he was charging, but in reply to plaintiff's inquiry merely stated that the interest 'won't be too much * * *.' Plaintiff also insisted that the total amount of his obligation was not written in the agreement when he signed it, but these facts are contradicted by the testimony of Baker and the seller's manager.

In any event plaintiff signed an agreement which was drawn up by Baker in the form of a conditional sale and an attached promissory note obligating plaintiff to pay $2,330 at the rate of $50 per week. The difference between that amount and the $1,860 necessary to complete the transaction between the seller and plaintiff was $470, which represented interest and finance charges exacted by the loan company. The seller's manager merely witnessed plaintiff's signature thereon and upon receipt of only $1,860 immediately endorsed the note without recourse and assigned the agreement to the loan company. Thereafter, according to his testimony, plaintiff received by mail from the loan company a passbook and letter in which his total obligation appeared.

After receiving the passbook plaintiff felt that he had been charged too much interest and consulted an attorney. As a result of that attorney's negotiations with the loan company the latter agreed to credit $100 'on expiration of the contract,' and such a memorandum was written in the passbook. Plaintiff then made the first payment. However, after making several further payments amounting to $250 he consulted another lawyer. As a result of a conference with Baker, at which the matter of a possible violation of the usury statute was discussed, a further credit of $135 was marked in the plaintiff's passbook. Evidence for the loan company tended to explain that these credits were not connected with any alleged usury or illegal interest; that the credit of $100 was given to cover insurance which plaintiff had obtained independently; and that the second credit of $135 was the consideration for which plaintiff signed a general release to the loan company of all claims and demands, especially those arising from 'any action based on deal of Buick Sedan 1941 seven passenger * * *.'

On his way home, according to plaintiff, he was still not satisfied and decided to pay up the entire balance claimed by the loan company. Accordingly he obtained a loan from the Franklin Finance Company and on the same day paid the defendant loan company the balance of $1,795 as shown on the passbook after the credits of $100 and $135 were allowed. Thereafter the instant cause of action was commenced under the so-called usury statute, G.L.1938, chap. 485, § 4, to recover such payments of principal and interest.

The trial justice, after discussing the evidence, found that the seller and plaintiff actually had agreed upon a sale of the Buick for $2,800 in cash at the time of delivery; that the seller was interested only in a cash sale and did not intend to make a sale at any additional price upon a time or credit basis; that he was not concerned with where plaintiff obtained the money or the terms of the loan agreement; and that the seller did not make any loan. He therefore rendered a decision in favor of the seller for costs.

As to the loan company, however, he found in substance and effect that the agreement to finance the plaintiff was negotiated entirely by Baker and plaintiff; that it was separable from the real sales agreement between plaintiff and seller; that Baker did not come to seller's place of business to make a loan to the seller or to purchase an automobile, but that he intended to loan and did loan $1,860 to the plaintiff; that Baker who did not own the car drew the agreement in the form of a conditional sale from the seller to plaintiff to cloak the real intended transaction; and that the charges exacted for making such loan and for forbearance of the debt were in violation of the statute against usury. He therefore rendered a decision for the plaintiff against the loan company in the amount of $2,418, representing the principal and interest payments made by plaintiff to the loan company under the usurious agreement, and costs.

The defendant loan company, in support of its bill of exceptions, contends that conditional sales generally do not come within the purview of a usury statute which, as here, deals only with loans and forebearance of a debt, and it has cited a number of cases from other jurisdictions to that effect. A leading example of such cases is Commercial Credit...

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26 cases
  • Bell v. Idaho Finance Co.
    • United States
    • Idaho Supreme Court
    • April 1, 1953
    ...v. American Finance Corp., 172 Okl. 419, 45 P.2d 497; Henry v. P. & E. Finance Co., 197 Okl. 676, 174 P.2d 373; Nazarian v. Lincoln Finance Corp., 77 R.I. 497, 78 A.2d 7; Levine v. Nolan Motors, Inc., 169 Misc. 1025, 8 N.Y.S.2d 311; Monk v. Goldstein, 172 N.C. 516, 90 S.E. 519; Jackson v. S......
  • DeFusco v. Giorgio
    • United States
    • Rhode Island Supreme Court
    • January 29, 1982
    ...of usurious agreements but also entitles them to recover any payments made of either principal or interest. In Nazarian v. Lincoln Finance Corp., 77 R.I. 497, 78 A.2d 7 (1951), we had occasion to interpret the remedial provisions of the precursor of our current usury statute, G.L.1938, ch. ......
  • Rowell v. Kaplan
    • United States
    • Rhode Island Supreme Court
    • November 6, 1967
    ...an action at law for usury under § 6-26-4. Without it the action which the legislature provided for will not lie. Nazarian v. Lincoln Finance Corp., 77 R.I. 497, 78 A.2d 7. The plaintiff's claim for monetary damages, therefore, raised no basic legal issue, and for that reason gave her no ri......
  • Holden v. Salvadore
    • United States
    • Rhode Island Supreme Court
    • February 5, 2009
    ...of time to pay debt in exchange for note and mortgage was a business transaction rather than a loan); Nazarian v. Lincoln Finance Corp., 77 R.I. 497, 503, 78 A.2d 7, 9 (1951) (upholding trial justice's factual determination that transaction was a loan rather than a conditional sale); Daniel......
  • Request a trial to view additional results

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