Transportation Equipment Rentals, Inc. v. Ivie, 11441

• Decision Date: 16 September 1974
• Docket Number: No. 11441,11441
• Citation: 96 Idaho 223,526 P.2d 828
• Parties: TRANSPORTATION EQUIPMENT RENTALS, INC., Plaintiff-Respondent, v. Mike IVIE, Defendant-Appellant.
• Court: Idaho Supreme Court

Page 828

526 P.2d 828

96 Idaho 223

TRANSPORTATION EQUIPMENT RENTALS, INC., Plaintiff-Respondent, v. Mike IVIE, Defendant-Appellant.

No. 11441.

Supreme Court of Idaho.

Sept. 16, 1974.

Stephan, Balleisen & Slavin, Twin Falls, for defendant-appellant.

Cecil D. Hobdey, James & Hobdey, Gooding, for plaintiff-respondent.

McQUADE, Justice.

This action involves a dispute over the character of an agreement entered into by the plaintiff respondent. Transportation Equipment Rentals, Inc., and the defendant-appellant, Mike Ivie. The appellant is engaged in the construction business, and in 1965, he was in need of a scraper. The appellant and respondent entered into negotiations for the rental by the respondent to the appellant of a new Caterpillar DW-20 Scraper. The scraper was purchased for $26,000, and the appellant paid $3,000 of the total purchase price. On April 26, 1965, the parties entered into a 'Lease Agreement' providing for the rental of the scraper to the appellant for 60 months in return for monthly payments by the appellant. The appellant made regular monthly payments in accordance with the agreement until September, 1967, when he sought to terminate the agreement. The agreement provided that upon its termination the scraper would be sold for the highest cash offer. The proceeds of this sale were to be added to the accrued monthly depreciation reserve which was a designated portion of the appellant's monthly payment. If the total were less than the original value of the scraper which was set at $23,000, the difference was to be paid to the respondent, but if the total was in excess $23,000 then the excess was to be paid to the appellant. The respondent received an offer of $6,000 for the scraper and the appellant's accrued depreciation reserve totaled $11,040 making a deficienct of $5,960 owed by the appellant to the respondent under the terms of the agreement.

The appellant refused to pay the $5,960 deficiency and the respondent filed an action seeking payment of the deficiency and reasonable attorney's fees. The action was submitted to the trial court for decision pursuant to a pre-trial order and stipulation of the parties and pursuant to an order of the trial court concerning the admissibility of evidence. Findings of fact were entered by the trial court and a judgment was entered for the respondent for the deficiency sum of $5,960 and the sum of $1,986.66 for attorney's fees and costs. This appeal is from the judgment.

The appellant contends that the trial court erred in failing to find that the agreement was a security device in which usurious interest was charged. The trial court did not reach a conclusion as to the character of the 'Lease Agreement'. The classification of the agreement as a 'Rental Agreement' or 'Security Device' is not determinative as to the question of whether its provisions charged usurious interest.

It has been established that to constitute usury there must be excessive interest or compensation on either a loan of money or forbearance or extension of time of payment on an existing debt. ¹ On its face, the 'Lease Agreement' does not appear to be a loan of money or forbearance on an existing debt, but it has been held that the courts must consider all the facts and circumstances surrounding an agreement to determine the real nature of the transaction. ² 'We will not hesitate to pierce a device or form which is designed to circumvent the usury laws in order to reach the economic substance of a transaction.' ³

Upon termination of the 'Lease Agreement' either at its stated expiration date of 60 months or upon the appellant's notice of termination, there is no provision for title of the scraper to pass to the appellant. If the ownership of the scraper does not pass to the appellant, it cannot be said that the Lease Agreement was actually a loan to the appellant for purchase of the scraper. The appellant argues that although title does not automatically pass to him at termination of the agreement, he will be forced to purchase title to the scraper because of the build-up of his interest in the scraper by the accumulation of the depreciation reserve payments. The appellant's allegation that he will be economically coerced into purchasing the scraper at termination of the agreement is without merit. The agreement provides that the scraper is to be sold at the highest cash offer obtainable. Since any deficiency under the 'Lease Agreement' is based on the difference of the original value and the sum of the accumulated depreciation reserve and the sale price of the scraper, the appellant would of course want a high cash offer to be received for the scraper. If the appellant believed that the cash offers were below the market value of the scraper, he might decide to purchase it and sell it at a later date to protect himself from being charged an unwarranted deficiency, but the protection in the agreement that he be notified of the cash offers inures to his benefit and does not convert the agreement into a contract for the purchase of the scraper. Since the title to the scraper does not pass to the appellant at the termination of the contract, the agreement cannot be characterized as a security device or contract for the purchase of the scraper.

The appellant bore the burden of providing that the 'Lease Agreement' was a purchase agreement that...