Pers. Finance Co. v. Franco.

• Decision Date: 17 July 1946
• Docket Number: No. 8744.,8744.
• Citation: 48 A.2d 355
• Parties: PERSONAL FINANCE CO. v. FRANCO.
• Court: Rhode Island Supreme Court

48 A.2d 355

PERSONAL FINANCE CO.

v.FRANCO.

No. 8744.

Supreme Court of Rhode Island.

July 17, 1946.

Exceptions from Superior Court, Providence & Bristol Counties; Mortimer A. Sullivan, Judge.

Action of the case in assumpsit by the Personal Finance Company against Joseph Martin Franco on a promissory note. Verdict for defendant and plaintiff brings exceptions.

Exceptions sustained in part, overruled in part, and case remitted.

Hinckley, Allen, Tillinghast & Wheeler, and John W. Baker, all of Providence, for plaintiff.

Lucien Capone, of Providence, for defendant.

BAKER, Justice.

This is an action of the case in assumpsit against the defendant as the maker of a certain promissory note, the plaintiff being the payee thereof. In the superior court the trial justice, at the conclusion of all the evidence, directed the jury to return a verdict for the defendant. The plaintiff thereupon duly prosecuted to this court its bill of exceptions which is now before us for determination.

The plaintiff has five exceptions, two of them, the third and fourth, being expressly waived, but the other three are pressed. As we view the case it is necessary for us to consider only the first two exceptions. These are to the action of the trial justice, first, in directing a verdict in favor of the defendant and, second, in refusing to grant the plaintiff's motion that a verdict be directed in its favor.

Certain of the facts appearing in evidence are not in dispute. The note in question bears the date of October 15, 1935, when the defendant borrowed from the New England Equity Corporation, the plaintiff corporation under an earlier name, and then and now in the business of making small loans, the sum of $150 with interest at 3 1/2% per month, payable in nineteen installments of $10.55 each on the fifteenth day of each month thereafter, and in a twentieth installment of a different amount. The undisputed balance of the principal due on the note since January 21, 1937, according to the plaintiff's books, has been $82.79. To this sum interest must be added to complete the plaintiff's claim. With the money thus borrowed the defendant purchased a 1930 used DeSoto sedan automobile which, together with certain of the defendant's furniture, was mortgaged to the plaintiff as security for the loan.

The first three installment payments were made in advance of their respective due dates. The one due November 15, 1935, was paid to the plaintiff November 7; the one due December 15 was paid November 30; and the one due January 15, 1936, was paid January 6 of that year. On these payments the plaintiffs credited from the first, $3.85 to interest and the balance to principal; from the second, $3.84 to interest and the balance to principal; and from the third, $5.75 to interest and the balance to principal. It is not questioned that the amounts thus credited to interest represented only interest actually earned and accrued up to and at the times of each respective payment and that no interest was computed or credited in advance.

After January, 1936, only a few small payments were made at intervals, the last one being on January 21, 1937. In January, 1936, the defendant attempted to persuade the seller of the automobile to take it back as its condition was unsatisfactory. The latter declined to do this and in February, 1936, the automobile was delivered to the plaintiff by the defendant. The plaintiff finally sold it with some difficulty in May, 1936, for the net amount of $45, which it credited to the principal of the note. The present action was begun by writ dated September 28, 1943.

The defendant contends that the acceptance by the plaintiff of installments or interest on the note in advance of the dates when such installments were actually due amounted to a violation of the terms of the statute then in effect regulating the conduct of the business of corporations engaged in the making of small loans and that as a result the plaintiff's claim on its note was forfeited. The defendant maintains that the payments should have been credited entirely to principal.

The statute in question is Public Laws 1923, chapter 427. Section 13 of that chapter reads in part as follows: ‘Every person, co-partnership and corporation licensed hereunder may loan any sum of money not exceeding in amount the sum of three hundred dollars and may charge, contract for and receive thereon interest at a rate not to exceed three and one-half per centum per month. Interest shall not be payable in advance, or compounded and shall be computed on unpaid balances. * * * If interest or charges in excess of those permitted by this act shall be charged, contracted for, or received, the contract of loan shall be void and the licensee shall have no right to collect, or receive any principal, interest or charges whatsoever.’ Section 17 of the statute also provides: ‘No loan for which a greater rate of interest or charge than is allowed by this act has been contracted for or received, wherever made, shall be enforced in this state * * *.'

In directing the verdict for the defendant the trial justice accepted as sound and valid the defendant's above-mentioned contention. He construed the statute strictly and narrowly, and ruled that as long as any interest whatever had been taken in advance of the due date of the installments the note was void. He based his ruling largely on Colonial Plan Co. v. Tartaglione, 50 R.I. 342, 147 A. 880. That case, however, is clearly distinguishable on its facts from the present case. There it appeared without dispute that during the first six weeks of the loan the plaintiff company had taken interest covering eleven weeks, and most of the interest payments...