Van Asperen v. Darling Olds, Inc.

• Decision Date: 12 December 1958
• Docket Number: No. 37525,37525
• Citation: 93 N.W.2d 690,254 Minn. 62
• Parties: Nick VAN ASPEREN, Appellant, v. DARLING OLDS, INC., and American National Bank, Respondents.
• Court: Minnesota Supreme Court

Page 690

93 N.W.2d 690

254 Minn. 62

Nick VAN ASPEREN, Appellant, v. DARLING OLDS, INC., and American National Bank, Respondents.

No. 37525.

Supreme Court of Minnesota.

Dec. 12, 1958.

Syllabus by the Court.

1. The owner has the right to determine the price at which he will sell his property. He may fix one price for cash and another price for credit. A sale of personal property is, therefore, not a loan or a forbearance of money and is not within the usury law unless the sale is a mere form or device to evade the usury law.

2. The increase of the credit price for the purposes of a conditional sales contract does not convert what otherwise would be a sale into a loan, and the fact that the credit price exceeds the cash price by a greater percentage than is permitted by the usury law does not make the transaction usurious for the very reason that the transaction is a sale and not a loan.

3. The power to determine the extent of the increase of the credit over the cash selling price is incident to the owner's right to fix the latter and is a matter of contract between the parties. The owner in calculating the addition to the cash price in order to arrive at the credit price may consider all factors which influence vendors in that regard, such as profit, return on investment, overhead, handling charges, risks involved, insurance, sale discount of contract for deferred payments, and such other items as may properly find a place in ascertaining how a merchant may profitably sell upon time. This rule when applied to automobile sales involving a conditional sales contract is now limited, governed, and controlled by the Motor Vehicle Retail Installment Sales Act, L.1957, c. 266 (M.S.A. § 168.66, et seq.).

4. The test of a usurious contract is whether its performance will result in producing to the lender a greater return for the use of the amount loaned than is allowed by law and whether such result was intended. In deciding whether any given transaction is usurious or not, the courts will disregard the form which it may take, and look only to the substance of the transaction in order to determine whether all the requisites of usury are present, these requisites being: (1) An unlawful intent; (2) the subject matter which must be money or money's equivalent; (3) a loan or forbearance; (4) the sum loaned must be absolutely, not contingently, repayable; (5) and there must be an exaction for the use of the loan of something in excess of what is allowed by law.

5. Whether a transaction constitutes a bona fide sale or a mere pretense to evade the usury laws is regarded as a question of fact. This court has never held as a matter of law that a sale involving a cash price plus a finance charge equalling a credit price is usurious. It has carefully distinguished between the situation involving a cash price plus a finance charge equalling a credit price and one which is closed wholly at a credit price, no cash price being involved.

6. The Motor Vehicle Retail Installment Sales Act was enacted by the 1957 legislature as a means of regulating the credit charge for the purchase of an automobile over a contractually specified period of time, and, by the controls and regulations therein provided, to standardize a maximum credit charge for the financing of automobile purchases in this state.

7. The legislature has provided, through § 168.74, constituting a part of the Motor Vehicle Retail Installment Sales Act, under what circumstances computation shall be made based upon descending balances. Section 168.74 is in no wise applicable to the facts of the instant case and we decline to follow plaintiff's contention that we have before us either a usurious contract or a contract wherein the maximum time price differential shall be computed on descending balances.

8. The Motor Vehicle Retail Installment Sales Act is not an 'interest statute.' In the instant case the computation to be applied is governed by the provision contained in § 168.72(b), providing that 'the time price differential shall be computed proportionately.' The proper method of computing the maximum time price differential under § 168.72 on a contract less than or greater than 1 year is the same as the method for computing the time price differential on a 1-year contract, and the maximum charge for a contract less than or greater than 1 year is to be computed according to the proportion (ratio) between the period of the contract under computation and 1 year.

Fred Albert, Minneapolis, Warren Dirks, St. Paul, of counsel, for appellant.

Samuel Saliterman and Michael Robins, Minneapolis, Liptschultz, Altman, Geraghty & Mulally, St. Paul, for respondent.

Mackall, Crounse, Moore & Helmey, Minneapolis (Commercial Credit Co. and General Motors Acceptance Corporation), Jerome B. Simon and Bundlie, Kelley & Maun, St. Paul (Industrial Credit Co), Clarence O. Holten, Minneapolis (Minnesota Automobile Dealers Ass'n), Raymond J. Julkowski, Minneapolis (Minnesota Bankers Ass'n), Claude H. Allen and Allen, Courtney & Keyes, St. Paul (Minnesota Finance Conference), amici curiae.

NELSON, Justice.

This litigation arises under the Motor Vehicle Retail Installment Sales Act enacted by the legislature effective July 1, 1957, by L.1957, c. 266 (M.S.A. § 168.66, et seq.), and involves the purchase of a 1957 Oldsmobile under a conditional sales contract between plaintiff as purchaser and defendant Darling Olds, Inc., an automobile dealer, as seller, executed on or about August 12, 1957.

The cash sale price of the vehicle was $4,097.95. Plaintiff was given a trade-in allowance of $1,153 on his 1956 Oldsmobile and made a downpayment of $279.24 in cash, leaving an unpaid balance of $2,665.71. It was necessary for him to pay off the balance by means of a conditional sales contract providing for installment payments over a period of greater than 1 year; i.e., 36 equal monthly installments, these to include finance charges amounting to $560.25, described in the conditional sales contract as a time price differential. The credit price was therefore $4,658.20. After completion of the transaction the contract was sold and assigned to defendant American National Bank.

It is plaintiff's claim according to the complaint that the time price differential of $560.25 specified in said conditional sales contract exceeds the maximum permitted under the aforesaid 1957 act. The defendant Darling Olds, Inc., moved the court below for an order dismissing plaintiff's claim against it for failure to state a claim upon which relief might be granted, said defendant further stating that it sought relief upon grounds as provided by the Minnesota rules of civil procedure and upon such other grounds as to the court might seem just and equitable. For the purposes of the motion it admitted all of the allegations and facts as set forth in plaintiff's complaint to be true. The court granted the motion to dismiss, and plaintiff appeals from the order.

Plaintiff contends that one of the questions involved is: 'Whether the time price differential shall be computed on the original principal balance for duration of the indebtedness notwithstanding regular periodic payments, or whether the time price differential shall be computed on the declining balances.' Plaintiff apparently has no fault to find with the statute where an installment contract provides for payments extending for a period of 1 year or less but contends that, if the installment payments extend for a period greater than 1 year, then the time price differential should be computed on the declining balances only. Plaintiff also urges that because sellers of automobiles under an installment plan are required to set a cash price as though the sale were for cash instead of under an installment plan, the deferred payments thereby become a 'forbearance,' and that it follows that under such a situation such unlicensed seller must be regulated by the interest laws of our state; namely, M.S.A. § 334.01. Plaintiff further suggests another question as being involved on this appeal; namely, 'Whether or not plaintiff was entitled to an injunction enjoining the defendants from interfering with his use and possession of the vehicle, and leave to pay his installments into court pending disposition of the case.' It is clear, however, that the latter question does not go to the main issue involved on this appeal.

Defendants contend that the time price differential charge is well within the maximum amount permitted by the 1957 act and that had defendants insisted upon the full price differential permitted under its provisions the same would have amounted to $639.78 under § 168.72, which provides:

'(a) The time price differential authorized by sections 168.66 to 168.77 in a retail installment sale shall not exceed the following rates:

'Class 1. Any motor vehicle designated by the manufacturer by a year model of the same or not more than one year prior to the year in which the sale is made--$8 per $100 per year.

'Class 2. Any motor vehicle designated by the manufacturer by a year model of two or three years prior to the year in which the sale is made--$11 per $100 per year.

'Class 3. Any motor vehicle not in Class 1 or Class 2--$13 per $100 per year plus a flat charge of $3 for each such retail installment sale.

'(b) Such time price differential shall be computed on the principal balance as determined under section 168.71(b) and shall be computed at the rate indicated on contracts payable in successive monthly installment payments substantially equal in amount extending for a period of one year. On contracts providing for installment payments extending for a period less than or greater than one year, the time price differential shall be computed proportionately.

'(c) When a retail installment contract provides for unequal or irregular installment payments, the time price differential shall be at the effective rate provided in subsection (a) hereof, having due...