Robb v. Central Credit Corp.

• Decision Date: 24 December 1959
• Docket Number: No. 34653,34653
• Citation: 169 Neb. 505,100 N.W.2d 57
• Parties: Roger L. ROBB and Ardys L. Robb, Appellees, v. CENTRAL CREDIT CORPORATION, a corporation; A. C. Nelsen Company of Lincoln, Nebraska, a corporation; A. C. Nelsen Auto Sales, Inc., a corporation; and First National Bank of Omaha, a corporation, Appellants.
• Court: Nebraska Supreme Court

Page 57

100 N.W.2d 57

169 Neb. 505

Roger L. ROBB and Ardys L. Robb, Appellees, v. CENTRAL CREDIT CORPORATION, a corporation; A. C. Nelsen Company of Lincoln, Nebraska, a corporation; A. C. Nelsen Auto Sales, Inc., a corporation; and First National Bank of Omaha, a corporation, Appellants.

No. 34653.

Supreme Court of Nebraska.

Dec. 24, 1959.

Syllabus by the Court.

1. An automobile dealer may in good faith sell a car on time for a price in excess of the cash price without tainting the transaction with usury, though the difference in prices may exceed lawful interest for a loan.

2. However, in order to have the foregoing principle apply it must appear that the buyer actually was informed of and had the opportunity to choose between a time sale price and a cash sale price.

3. A loan coming within the provisions of the Installment Loan Act, when section 45-138, R.S.Supp.1955, was in effect, which was not secured by a bona fide duly recorded mortgage on real estate owned by the borrower and by the terms of which the payment of principal was extended beyond a period of 21 months from the making thereof was in violation of said section and therefore void.

4. The effect of such violation is to make such contract void and uncollectible and a lender should have nothing in such a situation, and the lender, or those to whom any payments have been made thereunder, must return the payments received.

5. It is error to refuse a request for a jury trial in an action at law, but where the one making the request has no substantial cause of action or defense, and the judgment of the trial court is the only one which could have been rendered in the case, such refusal is error without prejudice, for which the judgment will not be reversed.

6. The design of the Installment Loan Act is to license and control the business of making installment loans and to restrict the enforcement or collection of illegal loans once they have been made.

Marti, O'Gara, Dalton & Sheldon, Bernard L. Packett, Lincoln, Robert P. Miller, Omaha, for appellants.

E. D. Warnsholz, Lincoln, for appellees.

Heard before SIMMONS, C. J., and CARTER, MESSMORE, CHAPPELL, WENKE, and BOSLAUGH, JJ.

WENKE, Justice.

This is an appeal from the district court for Lancaster County. It involves an action brought by Roger L. Robb and Ardys L. Robb against Central Credit Corporation, A. C. Nelsen Company of Lincoln, A. C. Nelsen Auto Sales, Inc., and First National Bank of Omaha. The purpose of the action is to have declared null and void a certain note dated February 8, 1956, given by the plaintiffs to defendant A. C. Nelsen Company of Lincoln in the sum of $1,656.29 in connection with the purchase of an automobile because, it is claimed, it represents a loan and its terms violate certain provisions of the Nebraska Installment Loan Act. Plaintiffs also seek to recover from the defendants all of the money they paid to them under and pursuant to the provisions thereof.

The trial court found generally for the plaintiffs and granted them the relief they had prayed for, holding the note to be void and uncollectible and rendering a judgment against the defendants, or some of them, for all the money plaintiffs had paid to them under and pursuant to the note held void. Defendants filed a motion for new trial, which was overruled, and they have perfected this appeal therefrom.

Appellees are husband and wife, having been married on September 10, 1955. At all times herein material appellee Roger L. Robb was a student in the University of Nebraska from which he was graduated on August 2, 1957. They lived in Lincoln until stortly after his graduation when they moved to Mountain View, California, where they apparently now reside.

Appellant Central Credit Corporation is a Nebraska corporation with its place of business located at 2112 Harney Street in Omaha, Nebraska. At all times herein material it was licensed by the State of Nebraska to engage in the installment loan business. We shall herein refer to it as Central Credit. Appellant A. C. Nelsen Auto Sales, Inc., is a Nebraska corporation engaged in the business of selling automobiles with its place of business located at 2112 Harney Street in Omaha, Nebraska. We shall herein refer to it as Nelsens of Omaha. Appellant A. C. Nelsen Company of Lincoln is a Nebraska corporation engaged in the business of selling automobiles with its place of business located at 245 O Street in Lincoln, Nebraska. We shall herein refer to it as Nelsens of Lincoln. Appellant First National Bank of Omaha is a bank existing under the laws of the United States and is engaged in general banking with its place of business located at Sixteenth and Farnam Streets in the City of Omaha. We shall herein refer to it as the bank.

Nelsens of Lincoln, Nelsens of Omaha, and Central Credit are corporations which, for all practical purposes, have the same officers and stockholders and are managed by these officers. A. C. Nelsen was, at all times herein material, the president of all three and the principal stockholder therein. Joseph J. Sharp, to whom we shall refer as Sharp, was during that time, vice president of all three and although employed by Nelsen of Omaha in its Omaha office as credit manager he had authority to bind not only Nelsens of Omaha but Nelsens of Lincoln and Central Credit in the sale and financing of such sales.

The burden of proof to show the nature of the transaction out of which the note in suit had its origin was on the appellees, since they claim the note given by them on February 8, 1956, to Nelsens of Lincoln was a loan and not a time sale. See, State ex rel. Beck v. Associates Discount Corp., 168 Neb. 298, 96 N.W.2d 55; McNish v. General Credit Corp., 164 Neb. 526, 83 N.W.2d 1; Kucaba v. Kucaba, 146 Neb. 116, 18 N.W.2d 645.

There is really no dispute as to just how the transaction herein involved was handled. On September 11, 1955, appellees had purchased from Nelsens of Lincoln a 1950 Safeway housetrailer and, at that time, executed to it a note in the sum of $1,186.20 in payment thereof and a chattel mortgage on the trailer as security therefor. This note was payable in 30 installments of $39.54 each, the first being due on October 11, 1955. Before February 8, 1956, four installments had been paid on this note, leaving a balance owing thereon on that date of $1,028.04.

On February 8, 1956, Mel A. Bullock, a salesman employed by Nelsens of Omaha but working for Nelsens of Lincoln, contacted the appellees and took them to Omaha. There appellees purchased a 1949 Mercury from the display floor of Nelsens of Omaha for a consideration of $525, trading in a 1940 Buick on the deal. They were allowed a tradein value of $75 for the Buick, thus leaving a balance of $450 owing on the purchase price of the Mercury. Appellees had previously advised Bullock they would have to finance any balance owing if they purchased a car as they could not pay cash but would need time in which to pay for it. And, in this respect, they had also advised him they would like to combine such loan, if possible, with the balance owing on the indebtedness they had on the trailer. Bullock assured them that could be done.

After the deal had been made Bullock introduced the appellees to Sharp and advised Sharp of the arrangements. Sharp then took appellees into his office and arranged a loan to cover both obligations, being familiar with the obligation owing on the housetrailer. Sharp advised appellees there would be an insurance premium of $62 and a finance charge of $116.25 in connection with the loan and that the loan would be payable in installments, the first being in the sum of $39.54 and the balance would be payable in 25 installments of $64.67 each, or a total of $1,656.29 to cover the following items: Balance owing on purchase of 1949 Mercury, $450; balance owing on indebtedness to Nelsens of Lincoln on the housetrailer, $1,028.04; insurance premium, $62; and finance charges, $116.25. These are all shown on the purchase agreement prepared by Sharp, executed by appellees at that time, and witnessed by Bullock and pursuant to which the note herein involved was prepared by Sharp and executed by appellees along with a chattel mortgage on both the car and housetrailer. The chattel mortgage was given as security for the note.

'An automobile dealer may in good faith sell a car on time for a price in excess of the cash price without tainting the transaction with usury, though the difference in prices may exceed lawful interest for a loan.' State ex rel. Beck v. Associates Discount Corp., 168 Neb. 298, 96 N.W.2d 55, 60. See, also, Curtis v. Securities Acceptance Corp., 166 Neb. 815, 91 N.W.2d 19; Nelson v. General Credit Corp., 166 Neb. 770, 90 N.W.2d 799; McNish v. General Credit Corp., supra; State ex rel. Beck v. Associates Discount Corp., 162 Neb. 683, 77 N.W.2d 215.

However, 'In order to have the foregoing principle apply it must appear that the buyer actually was informed of and had the opportunity to choose between a time sale price and a cash sale price.' State ex rel. Beck v. Associates Discount Corp., 168 Neb. 298, 96 N.W.2d 55. See, also, Curtis v. Securities Acceptance Corp., supra; Nelson v. General Credit Corp., supra; McNish v. General Credit Corp., supra.

It is not a time sale if a car dealer, in selling a car, actually agrees with the buyer that he will finance the balance of the cash purchase price agreed upon, and does so, even though at the time he informs the buyer of the amount he will be required to pay and the terms thereof. Such a transaction would be a loan to finance the balance of the cash purchase price and, if payable in installments, must meet the requirements of the statutes relating thereto. And the fact that the buyer knew the terms and provisions of such loan at the time it was made and voluntarily entered into it would not have the effect of waiving the illegality of any provision thereof, if such provision was...