Standard Oil Co. (Ind.) v. Williams

• Decision Date: 17 October 1972
• Docket Number: No. 1171A233,1171A233
• Parties: STANDARD OIL COMPANY (INDIANA), The American Oil Company, a Maryland corporation, Defendants-Appellants, v. Robert O. WILLIAMS, Individually and as a Member of the Class Described in the Complaint, and on Behalf of all Members Thereof, Plaintiff-Appellee.
• Court: Indiana Appellate Court

Page 170

288 N.E.2d 170

153 Ind.App. 489

STANDARD OIL COMPANY (INDIANA), The American Oil Company, a Maryland corporation, Defendants-Appellants, v. Robert O. WILLIAMS, Individually and as a Member of the

Class Described in the Complaint, and on Behalf of

all Members Thereof, Plaintiff-Appellee.

No. 1171A233.

Court of Appeals of Indiana, First District.

Oct. 17, 1972.

Rehearing Denied Nov. 16, 1972.

Alan W. Boyd, Thomas M. Scanlon, Robert P. Johnstone, Barnes, Hickam, Pantzer & Boyd, Indianapolis, for defendants-appellants; Luke White, Covington, of counsel.

Ward S. Williams, Robert O. Williams, Covington, for plaintiff-appellee.

Harry T. Ice, James E. Hawes, Jr., Ice, Miller, Donadio & Ryan, Indianapolis, for amicus curiae Sears, Roebuck & Co.; Lewis D. Dellinger, Jr., Dellinger & Dellinger, Monticello, of counsel.

ROBERTSON, Presiding Judge.

The plaintiff-appellee (Williams) is the holder of a credit card issued by the defendant-appellant (Standard). Williams filed a class action for recovery of certain monies paid to Standard, premised upon the theory that they constituted usury. In granting Williams' motion for partial summary judgment, the trial court held, inter alia: 'That the plaintiff and his class are entitled to recoup and recover the usurious interest charged by the defendants. . . .' This appeal ensues, with the threshold issue being whether the 1 1/2% 'Finance Charge' paid to Standard is usurious as defined by Indiana statutes.

American Oil Company (a wholly owned subsidiary of Standard Oil Company (Indiana)) adopted a 'Revolving Charge Account Agreement', which reads:

'Buyer agrees with American Oil Company, (American), 165 North Canal Street, Chicago, Illinois, 60606, that all purchases charged under any American Oil Company Credit Card or supplemental card issued to buyer or at his request is indebtedness of buyer, which may be purchased or acquired by American.

'Buyer agrees to pay American either (1) the full amount of his outstanding balance within 25 days from his statement closing date (always 30 days from purchase date) in which event no FINANCE CHARGE will accrue or (2) an installment payment based on the following minimum payment schedule in which event a FINANCE CHARGE will be incurred; If outstanding balance is $10 to $100, the minimum payment is $10, or if balance is over $100, the minimum payment is 10% of balance. Balances under $10 are payable in full. Buyer may at any time pay his balance in full.

'Buyer agrees to pay a FINANCE CHARGE computed by periodic rates of 1 1/2% per month applied to the first $500 of his previous balance after deducting current payments, credits, and past due insurance premiums, and 1% per month of his previous balance in excess of $500. such FINANCE CHARGE to become part of buyer's outstanding balance.

'1 1/2% per month is an ANNUAL PERCENTAGE RATE OF 18%. 1% per month is an ANNUAL PERCENTAGE RATE OF 12%.

'Notice to Buyer: (1) Do not sign this agreement before you read it or if it contains blank spaces. (2) You are entitled to an exact copy of this agreement at the time you sign it; save it to protect your rights. (3) You have the right to pay in advance the full amount due. Buyer hereby acknowledges receipt of a true executed copy of this agreement.'

In addition, the credit card and sales slips reiterated the substance of the above quoted agreement.

Williams elected to defer payment thereby paying the 1 1/2% Finance Charge prior to the filing of this cause.

The legal basis for this case rests upon the following Indiana statutes:

'Legal rates of interest on loans or forbearances.--The interest on loans or forbearance of money, goods, or things in action, shall be as follows:

(a) When the parties do not agree on the rate, interest shall be at the rate of six dollars ($6.00) per year per one hundred dollars ($100);

(b) By agreement in writing signed by the party to be charged thereby, and not otherwise, any obligor other than a corporation may lawfully agree to pay any rate of interest not in excess of eight dollars ($8.00) per year per one hundred dollars ($100); * * *' IC 1971 24-5-1-1, Ind.Ann.Stat. § 19-12-101 (Burns 1964).

'Usurious rate of interest in contract--Debtor's recoupment.--When a greater rate of interest than is hereby allowed shall be contracted for, the contract shall be void as to the usurious interest contracted for; and, if it appears that interest at a higher rate than eight per cent (8%) has been, directly or indirectly, contracted for by an obligor other than a corporation, the excess of interest over six per cent (6%) shall be deemed usurious and illegal, and, in an action on a contract affected by such usury, the excess over the legal interest may be recouped by the debtor, whenever it has been reserved or paid before the bringing of the suit.' IC 1971, 24-5-1-4, Ind.Ann.Stat. § 19-12-104 (Burns 1964).

(Both statutes quoted have since been repealed by Acts 1971, P.L. 366 § 10(1)).

Williams further relies upon Wisconsin v. J. C. Penney Co. (1970), 48 Wis.2d 125, 179 N.W.2d 641, and Rollinger v. J. C. Penney Co. (1971), S.D., 192 N.W.2d 699. Both cases hold that under an agreement similar to the Revolving Charge Account Agreement in this case, the 1 1/2% amounts to forebearance and is, therefore, usurious.

Standard maintains the position that the 1 1/2% is a time-price differential which, under Indiana law, does not constitute usury. Hogg v. Ruffner (1861), 66 U.S. 115, 17 L.Ed. 38; NewKirk v. Burson and Others (1867), 28 Ind. 435; Stevens v. Grossman (1935), 100 Ind.App. 417, 196 N.E. 123; and Robrock v. Ditzler (1943), 113 Ind.App. 332, 47 N.E.2d 163.

A fair summary of the law upon which Standard relies, is contained in the Stevens case, supra, which reads:

'The law is well settled that usury can only attach to a loan of money, or to the forbearance of a debt, and that on a contract to secure the price or value of work and labor done, or to be done, or of property sold, the contracting parties may agree upon one price if cash be paid, and upon as large an addition to the cash price as may suit themselves if credit be given; and it is wholly immaterial whether the enhanced price be ascertained by the simple addition of a lumping sum to the cash price, or by a percentage thereon. In neither case is the transaction usurious. It is neither a loan nor the forbearance of a debt, but simply the contract price of work and labor done and property sold; and the difference between cash and credit in such cases, whether 6, 10 or 20 per cent., must be left exclusively to the contract of the parties, and no amount of difference fairly agreed upon can be considered illegal.' (Citing authorities). 100 Ind.App. 417, 418, 196 N.E. 123, 124.

It is our opinion that Standard's position is legally correct and the trial court erred as a matter of law in ruling as it did.

We are not unmindful of our duty to...