Schmitt v. Matthews

• Decision Date: 27 January 1975
• Docket Number: O-M,No. 2573--42794--I,2573--42794--I
• Parties: J. C. SCHMITT d/b/a J.C. Investment Co., Respondent, v. John J. MATTHEWS and Jane Doe Matthews, husband and wife, d/b/a Seal-atic Co., Appellants.
• Court: Washington Court of Appeals

Page 654

12 Wn.App. 654

531 P.2d 309

J. C. SCHMITT d/b/a J.C. Investment Co., Respondent, v. John J. MATTHEWS and Jane Doe Matthews, husband and wife, d/b/a Seal-O-Matic Co., Appellants.

No. 2573--42794--I.

Court of Appeals of Washington, Division 1.

Jan. 27, 1975.

Derrill T. Bastian, Seattle, for appellants.

Davis, Wright, Todd, Riese & Jones, Edward N. Lange, Marshall J. Nelson, Seattle, amicus curiae.

Montgomery, Purdue, Blankinship & Austin, Lynn O. Hurst, Peter D. Jarvis, Seattle, for respondent.

SWANSON, Chief Judge.

The underlying question presented by this appeal is whether, as a matter of law, the purchase and sale of conditional sale contracts necessarily involves a loan of money such that the transaction is subject to the state usury laws, RCW 19.52.

The undisputed findings of fact by the trial court indicate that appellants John J. Matthews and wife, doing business as Seal-O-Matic Co. ('Matthews'), were engaged in the sale of kitchenware primarily through the use of conditional sale contracts. During the course of his years of operation in this business, Matthews has sold such conditional sale contracts to various third parties at less than the balance remaining due. Commencing in September, 1968, and continuing through October, 1970, Matthews sold approximately 250 conditional sale contracts to the respondent J. C. Schmitt, doing business as J.C. Investment Co. ('J.C. Investment'). Under the terms of such sales, payments from Matthews's customers were transferred to J.C. Investment and in the event of a default by any customer, Matthews was liable to J.C. Investment for the full value of the particular contract pursuant to an 'assignment with recourse' agreement. ¹ The record reflects that J.C. Investment brought suit against Matthews for amounts allegedly owing under the terms of certain of the conditional sale contracts. In response to J.C. Investment's complaint, Matthews raised the affirmative defense that the true relationship of Matthews and J.C. Investment was that of borrower-lender and that conditional sale contracts tendered by Matthews to J.C. Investment were not the subjects of sale transactions, but merely served to measure the amount of money to be loaned by J.C. Investment to Matthews. Further, Matthews alleged that the terms of these 'loans' constituted a violation of the usury law, RCW 19.52, and demanded payment of the penalties authorized by such laws. The trial court ruled in favor of J.C. Investment, finding that the transactions in question constituted the sale of conditional sale contracts and not the loan of money, and judgment was entered in favor of J.C. Investment on April 6, 1973. Matthews appeals.

At the outset of this appeal, we are confronted by a jurisdictional challenge. Respondent J.C. Investment contends that Matthews's appeal should be dismissed because of appellant Matthews's failure timely to notify respondent that an appeal had been taken, as required by CAROA 33(8). Respondent urges that such notice is a jurisdictional requirement, and directs our attention to Myers v. Harris, 82 Wash.2d 152, 509 P.2d 656 (1973). We disagree. In Myers, our state Supreme Court held that the timely payment of the required filing fee, in addition to the timely filing of a proper written notice of appeal, is a jurisdictional prerequisite in the appeal of all civil cases. The court emphasized that CAROA 33(1) and ROA I--33(1), which set forth the filing fee requirement, make specific reference to 'jurisdiction.' Here, the appellant met the requirements of CAROA 33(1), and we are concerned with CAROA 33(8) which, although mandatory in nature, makes no jurisdictional reference and therefore is enforceable pursuant to the terms of CAROA 32. ² In this connection, J.C. Investment has made no showing of prejudice or apparent injury suffered by it because of appellant's failure to give timely notice to it that an appeal had been taken. Indeed, the record indicates that J.C. Investment received such notice within 4 days of the expiration of the 30 days permitted. CAROA 33(1). Under such circumstances and in view of our conclusion that the notice requirement of CAROA 33(8) is not a jurisdictional prerequisite, we impose no sanction against appellant Matthews and proceed to the merits of his appeal.

On appeal, appellant concedes that the dispositive issue is whether the transactions he entered into with J.C. Investment constituted usurious loans, or the sale of conditional sale contracts exempt from the provisions of the usury statutes. In this context, he makes seven assignments of error to the judgment and certain findings of fact and conclusions of law entered by the trial court, including the following crucial findings and conclusions:

Both the plaintiff (J.C. Investment) and the defendant (Matthews) intended these transactions to be bona fide sales of conditional sales contracts and not a subterfuge for loans.

Finding of fact No. 4, in part.

In each case when the defendant sold a conditional sales contract to the plaintiff, he did so by executing an assignment with recourse agreement either on the back of or attached to the conditional sales contract. Examples of these assignment agreements are found on the contracts in Exhibit 1.

Finding of fact No. 5. The relationship between the plaintiff and the defendant was that of purchaser and seller of the conditional sales contracts.

Conclusion of law A.

The transactions in which the plaintiff purchased and the defendant sold conditional sales contracts did not involve a loan or forbearance of money or something circulating as such and therefore not subject to the usury statutes.

Conclusion of law B.

Appellant makes little effort to challenge the findings of the trial court which are supported by substantial evidence. At the same time, appellant recognizes the well-settled doctrine which defines usury in this state pointing out that our state Supreme Court, quoting from Hafer v. Spaeth, 22 Wash.2d 378, 382, 156 [531 P.2d 312] P.2d 408 (1945), in National Bank of Comm. v. Thomsen, 80 Wash.2d 406, 410, 495 P.2d 332, 336 (1972), identified the essential elements of usury as follows:

(1) a loan or forbearance, express or implied; (2) money or its equivalent constituting the subject matter of the loan or forbearance; (3) an understanding between the parties that the principal shall be repayable absolutely; (4) the exaction of something in excess of what is allowed by law for the use of the money loaned or for the benefit of the forbearance; and, in some jurisdictions, (5) an intent to exact more than the legal maximum for the loan or forbearance.

To determine whether all these essential elements are present, the courts will look through the form of the transaction and consider its substance. If all the requisites are found to be present, the transaction will be condemned as usurious, but, if any one or more of them are lacking, the parties cannot be charged with a usurious practice.

The striking attribute of the present record is that not only are the findings challenged by the appellant supported by substantial evidence, but also there is no finding by the trial court that any of the essential elements of usury, as set forth in the quoted language, existed with relation to any of the transactions between the appellant and respondent. Appellant has assigned no error to the failure of the trial court to make any such finding; here, where the burden of proving usury is upon the appellant, the trial court must find that each of the elements of usury exists, and the absence of such findings where the evidence is controverted amounts to a finding that such elements do not exist. Baillargeon v. Press, 11 Wash.App. 59, 521 P.2d 746 (1974); McCutcheon v. Brownfield, 2 Wash.App. 348, 467 P.2d 868 (1970). In this regard, there is no requirement that the trial court expressly make such a negative finding, which, in any event is implicit in its decision. Fugitt v. Myers, 9 Wash.App. 523, 513 P.2d 297 (1973). Appellant emphasizes the superiority of substance over form, which is particularly appropriate in usury cases, by directing our attention to the following language in Busk v. Hoard, 65 Wash.2d 126, 127, 396 P.2d 171 (1964):

Usury has long been recognized as a social and economic evil affecting not only the parties to the transaction but society in general. Being widely regarded thus and condemned by law as well, it is frequently hidden by legalistic devices and cloaked in dissimulation. When, therefore, usury is claimed as a defense, the courts must, after looking beneath the surface of a transaction, examine it in all its ramifications to see if the defense is valid.

See also Baske v. Russell, 67 Wash.2d 268, 271, 407 P.2d 434 (1965). Appellant has made no showing, nor does the record indicate, that the required examination was not made by the trial court which otherwise is presumed to have applied the law. Thus, for the reasons stated, the court's findings of fact clearly support its conclusions of law to the effect that no usurious loan was involved in the sale of the conditional sale contracts here in question. See Flannery v. Bishop, 81 Wash.2d 696, 504 P.2d 778 (1972).

Appellant, however, contends that the trial court's previously quoted findings of fact Nos. 4 and 5 properly must be considered to be erroneous conclusions of law. In effect, appellant contends that, as a matter of law, any sale of a conditional sale contract must be viewed as a transaction involving a loan of money and, as such, must be subject to the state usury statutes, RCW 19.52. Both respondent and amicus curiae ³ argue that at least since Martin v. McAvoy, 130 Wash. 641, 228 P. 694 (1924), was decided, the rule in Washington has been that the sale or assignment of a conditional sale contract is a transaction which is exempt from the prohibition of the usury laws. Appellant suggests that Martin v. McAvoy, Supra, is 'virtually identical' to Hafer v....