State v. J. C. Penney Co.
| Decision Date | 09 October 1970 |
| Docket Number | No. 173,173 |
| Citation | 179 N.W.2d 641,48 Wis.2d 125 |
| Parties | , 41 A.L.R.3d 660 STATE of Wisconsin, Appellant, v. J. C. PENNEY CO., Respondent. |
| Court | Wisconsin Supreme Court |
The respondent is now, and for some time past has been offering to the citizens of Wisconsin a plan described as 'Penney's Charge Account Agreement,' which is designed for the purpose of extending credit to persons who purchase merchandise from respondent. The charge account agreement operates for an indefinite period of time, allows a customer to make numerous purchases on one account and provides for a single monthly builling with a charge on the unpaid balance of the entire account. Because of these distinctive features, credit arrangements of this nature are commonly referred to as revolving charge account plans.
The undisputed facts regarding the operation of respondent's revolving charge account plan are as follows: When a prospective customer expresses an interest in opening a revolving charge account he is asked to fill out a credit application form which contains on the back side the terms of Penney's Charge Account Agreement. The customer then signs the agreement and is given the explanatory brochure entitled The agreement is entered into prior to the purchase of marchandise under the account. The sales clerk negotiating the sale will typically ask, 'Is this cash or charge?' If the customer indicates that he wishes to charge the purchase, he will hand his charge card to the sales clerk who stamps the name and number appearing on the face of the card on the sales check. The customer is then asked to sign the sales check which recites that the purchase is to be charged to the customer's account and that he agrees to pay for it in accordance with the terms of Penney's Charge Account Agreement which he has signed. The customer is given either a cash register tape or a copy of the sales check as a memorandum of his purchase.
The customer may pay the cash price of purchases made on his revolving charge account without paying a monthly charge until the second billing date following his purchases. At that time, if the customer has still not paid the cash price for his purchases, the purchases are merged into the account for the purpose of striking an unpaid balance upon which the one and one-half percent monthly charge is assessed. Payments made on the account and credits for returned merchandise are deducted and purchases made during the current billing period are excluded in arriving When a customer has not paid the cash price for his purchases by the second billing date, a statement is sent to him stating his unpaid balance and his charge for not paying within the specified time. The monthly billing statement also states the minimum amount which the customer must pay before the next billing date. The minimum amount is determined by applying the payment schedule set forth in the agreement to the unpaid balance of the account. The payment schedule is graduated so that a customer pays a minimum of $10 if his balance if $100 or less and $5 additional for each successive $50 bracket that he falls within. Thus, if a customer's balance is between $100 and $150 his minimum payment is $15, if his balance is between $150 and $200 his minimum payment is $20, and so on up to $500. Thus, an additional purchase may increase the balance owing so as to bring it within a higher bracket and increase the size of the customer's monthly payments.
at the unpaid balance of the account. The current billing period purchases, if unpaid before the following billing period, are then in turn merged into the account so that a new unpaid balance can be arrived at and the one and one-half percent charge assessed.
The respondent admits that its one and one-half percent monthly charge frequently exceeds the 12 percent per annum maximum rate permitted under secs. 138.05(1), 138.09(9)(a), and 214.20, Stats. Respondent also admits that it is not licensed under ch. 214, Stats., which permits licensees to charge in excess of the 12 percent maximum. Respondent apparently takes the position that its monthly charge is a 'timeprice differential' and not subject to the above statutes because when it sells merchandise under its revolving charge account plan 'it charges a higher sale price than the price at which it is willing to sell the merchandise for cash.' The lower court rejected this argument and concluded that, when stripped of its verbiage, respondent's one and one-half percent monthly charge amounts to nothing more than interest for the forbearance of an indebtedness. This was held by the trial court to be a violation of the usury statute, sec. 138.05(1).
However, the court concluded:
'That the right to assert the violation of section 138.05(1)(a) is a right personal to the persons who contract with defendant under said plan and is not a matter in which the state of Wisconsin has any right or interest nor does it create any common or public nuisance requiring defendant to be enjoined at the instance of the state.'
The state appeals from the trial court's order denying injunctive relief and dismissing plaintiff's complaint seeking such relief; respondent also appeals, challenging, as permitted by sec. 274.12(2), Stats., the validity of the trial court's finding that its practices violated sec. 138.05(1).
'138.05 * * * (1) Except as authorized by other statutes, no person shall, directly or indirectly, contract for, take or receive in money, goods or things in action, or in any other way, any greater sum or any greater value, for the loan or forbearance of money, goods or things in action, than:
'(a) At the rate of $12 upon $100 for one year computed upon the declining principal balance of the loan or forbearance; * * *.'
'138.06 * * * (2) Any lender or agent of a lender who violates s. 138.05 may be fined not less than $25 nor more than $500, or imprisoned not more than 6 months, or both.'
'214.01 * * * (3) 'Small loan' means the loan, use or forbearance of money, goods or things in action of the amount or value of three hundred dollars or less, or the loan, use or sale of credit of the amount or value of three hundred dollars or less.'
'214.20 * * * No person other than a licensee shall engage in the business of making small loans and, directly or indirectly, charge, contract for or receive a greater rate of interest or consideration upon any such loan than he is permitted by law to charge, contract for or receive without being licensed under this chapter.'
'214.21 * * * The provisions of this chapter shall apply to any licensee or other person who, by any devise, subterfuge or pretense whetever, shall charge, contract for or receive greater interest, consideration or charges than is authorized by this chapter upon any small loan.'
'214.23 * * * This chapter shall not apply to any person doing business (1) under s. 138.09 nor (2) under and as permitted by any law of this state or of the United States relating to banks, savings banks, trust companies, savings and loan associations, credit unions, or licensed pawnbrokers, or investment associations governed by ch. 216.'
'282.02 * * * An action to enjoin a public nuisance may be commenced and prosecuted in the name of the state, * * * by the attorney-general upon his own information, * * *.'
Robert W. Warren, Atty. Gen., James D. Jeffries, Asst. Atty. Gen., Madison, for appellant.
Joseph F. Preloznik, Charles H. Johnson, Madison, for Wisconsin Judicare as amicus curiae.
Orr, Isaksen, Werner, Lathrop & Heaney, Madison, Charles W. Totto, Madison, of counsel, for respondent.
Two issues are presented on this appeal:
1. Does respondent's one and one-half percent momthly charge on the declining unpaid balance of its revolving charge account constitute forbearance of money, goods or things in action within the meaning of sec. 138.05(1), Stats.?
2. If respondent's revolving charge account does violate sec. 138.05(1), Stats., should an injunction be issued as requested by the state against the respondent?
Sec. 138.05(1), Stats., provides, in pertinent part, that no person shall
'* * * directly or indirectly, contract for, take or receive in money, goods or things in action, or in any other way, any greater sum or any greater value, for the loan or forbearance of money, goods or things in action, than:
'(a) At the rate of $12 upon $100 for one year computed upon the declining principal balance of the loan or forbearance; * * *.'
In Zang v. Schumann, 1 this court recognized the basic elements which are essential to constitute a usurious transaction:
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