Tacoma Commercial Bank v. Elmore

• Decision Date: 29 November 1977
• Docket Number: No. 2233-II,2233-II
• Citation: 18 Wn.App. 775,573 P.2d 798
• Parties: TACOMA COMMERCIAL BANK, a Washington Corporation, Appellant, v. Ernest J. ELMORE and Blanche Elmore, a marital community, Respondents.
• Court: Washington Court of Appeals

Page 775

18 Wn.App. 775

573 P.2d 798

TACOMA COMMERCIAL BANK, a Washington Corporation, Appellant, v. Ernest J. ELMORE and Blanche Elmore, a marital community, Respondents.

No. 2233-II.

Court of Appeals of Washington, Division 2.

Nov. 29, 1977.

Herbert Gelman, Gelman & Couture, Tacoma, for appellant.

Frank August Peters, Tacoma, for respondents.

PETRIE, Judge.

Plaintiff, Tacoma Commercial Bank, appeals from a judgment in its favor and against defendants, Mr. and Mrs. Ernest J. Elmore, in the amount of $19,580.31. On appeal, plaintiff contends the trial court erred (1) by permitting the defendants to raise the defense of usury by a trial amendment, and (2) by concluding that the promissory note upon which plaintiff's action was founded was usurious. We find no error and affirm the judgment.

There is no dispute as to the essential facts. On May 22, 1974, for valuable consideration, defendants executed a renewal promissory note in the principal amount of $21,300, payable quarterly with interest at 12 percent per annum. The principal amount of the renewal note was determined by adding to the delinquent principal and interest due on two prior notes an additional sum, which included an appraisal fee of $100 and a loan fee of $336.69. Both of these sums were subsequently credited to the bank as income. No appraisal was ever made, the bank's president explaining simply, "I accepted Mr. Elmore's statement as to the value." The loan fee was explained as a fee that "is usually charged (by the bank) as a percentage of the amount of the loan."

We hold, initially, that the trial court did not abuse its discretion by permitting a trial amendment to the defendant's answer. See CR 15(b); Harding v. Will, 81 Wash.2d 132, 500 P.2d 91 (1972). When the motion was made, the court reserved ruling until the conclusion of the trial. At the conclusion of the trial, the court granted the motion for the reason that evidence had been introduced to support a trial amendment. Although the preferred trial procedure would have dictated a ruling on the motion when it was made, we do not find the plaintiff was prejudiced by the manner in which the court ruled. See LaHue v. Keystone Inv. Co., 6 Wash.App. 765, 496 P.2d 343 (1972).

The more serious issue is whether or not the court erred by concluding the note was usurious.

We start with the statutory definition of a usurious contract. ¹ RCW 19.52.030, as amended in 1967, specifically defines the term as follows:

If a greater rate of interest than is allowed by statute shall be contracted for or received or reserved, the contract shall be usurious, but shall not, therefore, be void.

(Emphasis added.)

Supplementing this statutory definition is RCW 19.52.020, which provides in part:

Any rate of interest not exceeding twelve percent per annum agreed to in writing by the parties to the contract shall be legal, and no person shall directly or indirectly take or receive in money, goods, or things in action, or in any other way, any greater interest, sum or value for the loan or forbearance of any money, goods or things in action than twelve percent per annum: . . .

In the case at bench, defendants unquestionably proved that a greater rate of interest than 12 percent per annum had been indirectly contracted for, taken, or reserved. Plaintiff insists, however, that before the statutory penalties can be imposed upon the lender under an otherwise usurious contract, the trial court must find as an element of usury that at the time the transaction was executed the lender had "an intention to violate the law" or, at least, "an intent to exact more than the legal maximum for the loan or forbearance." See Baske v. Russell, 67 Wash.2d 268, 407 P.2d 434 (1965) and Hafer v. Spaeth, 22 Wash.2d 378, 156 P.2d 408 (1945). The trial court failed to enter such a finding. Thus, plaintiff asserts, usury penalties should not be imposed to reduce the judgment debt.

In support of this contention, plaintiff directs our attention to a recent opinion of another division of this court, Atlas Credit of Calif., Inc. v. Hill, 15 Wash.App. 146, 547 P.2d 894 (1976). In Atlas Credit, the essential issue was whether the transaction was a good faith time sale or a camouflaged loan. Surreptitiously included within the total conditional sales price was an acknowledged "loan" of $1,000, the reserved interest on which, if standing alone, could have categorized the transaction as usurious. The court denied the defense of usury because of the trial court's failure to find "an intent to exact more than the legal maximum for the loan or forbearance." (Quoting Hafer v. Spaeth, supra at 383, 156 P.2d at 410.) The court relied upon the oft-repeated rule that the failure of the trial judge to make an express finding on a material fact requires the appellate court to deem the fact to have been found against the party having the burden to prove that fact. Baillargeon v. Press, 11 Wash.App. 59, 521 P.2d 746 (1974); McCutcheon v. Brownfield, 2 Wash.App. 348, 467 P.2d 868 (1970). Usury is an affirmative defense, and the burden of proof is upon the party who asserts it. Malotte v. Gorton, 75 Wash.2d 306, 450 P.2d 820 (1969). Hence, the court in Atlas Credit held, quite properly, that the trial court erred by imposing the penalties for usury prescribed by RCW 19.52.030.

However, in the case at bench the nature of the transaction entered into is undisputed. Indeed, the precise nature of the entire transaction is established by the testimony of plaintiff's president. Under those circumstances, we cannot assert unequivocally that the absence of a finding of "intent" is in effect a finding that the requisite intent did not exist. That principle is inapplicable, at least for purposes of affirming the judgment, if there is uncontradicted evidence which the appellate court can hold requires a finding to the contrary. LaHue v. Keystone Inv. Co., supra.

Thus, we are forced to probe somewhat minutely into the nature of the "intent" necessary to support a conclusion that a transaction is usurious.

Under the common law promulgated in this jurisdiction, the precise nature of the requisite "intent" was articulated more than 60 years ago. In Washington Fire Ins. Co. v. Maple Valley Lumber Co., 77 Wash. 686, 692, 138 P. 553, 556 (1914), the court expressed itself quite plainly:

One of the requisites necessary to establish usury is an unlawful intent, that is, that there was an intent to do those things forbidden by the statute. It is not necessary that there be an intent to violate the usury statute as such. The law presumes the necessary unlawful intent from the mere fact of intentionally doing what is forbidden by the statute.

(Emphasis added.) See also Ridgway v. Davenport, 37 Wash. 134, 79 P. 606 (1905). No case altering that statement of the law has been brought to our attention.

Notwithstanding this clearly enunciated statement as to the requisite intent by which to test whether or not a transaction is usurious, several misleading statements have crept into the decisional law in this jurisdiction by way of obiter dictum. In Hafer v. Spaeth, supra, the court, while generally defining the essential elements of usury in a case in which "intent" was not an issue, meticulously added a prefatory statement to the fifth element by announcing at p. 383, 156 P.2d p. 410 "and, in some jurisdictions, (5) an intent to exact more than the legal maximum for the loan or forbearance." (Emphasis added.)

In subsequent cases, the prefatory statement was sometimes omitted. The omission is quite appropriate, of course, so long as the fifth element is understood in the manner in which it was declared in Washington Fire Ins. Co. v. Maple Valley Lbr. Co., supra.

More recently, another statement entered the body of the law which, if not properly explained, can lead to a misleading result. In Baske v. Russell, supra, the primary issue was the extent to which the lender was...