Wiener v. J. C. Penney Co., Inc.

• Decision Date: 14 October 1974
• Docket Number: Nos. 41--48,s. 41--48
• Citation: Wiener v. J. C. Penney Co., Inc., 222 N.W.2d 149, 65 Wis.2d 139 (Wis. 1974)
• Parties: William S. WIENER, a member of the class of persons who have paid usurious charges to the defendant on behalf of himself and all others similarly situated, Appellant, v. J. C. PENNEY CO., INC., Respondent. Michael TUCCELLI, Individually and on behalf of all others similarly situated, Appellant, v. NELSON BROS. FURNITURE CO., a foreign corp., Respondent. Robert J. MITCHELL, Individually and on behalf of all others similarly situation, Appellant, v. GIMBEL BROTHERS, INC., a foreign corp., Respondent. William S. WIENER, a member of the class of persons who have paid usurious charges to the defendant on behalf of himself and all others similarly situated, Appellant, v. SEARS, ROEBUCK & CO., Respondent. James W. MATTHEWS, Individually and on behalf of all others similarly situated, Appellant, v. BOSTON STORE, a foreign corp., Respondent. Thomas Patrick MOYLAN, Individually and on behalf of all others similarly situated, Appellant, v. SEARS, ROEBUCK & CO., a foreign corp., Respondent. Robert LASIEWICZ, Individually and on behalf of all other credit customers who paid defendant usurious charges, Appellant, v. NISS & SONS, INC., a Wis. corp., Respondent. Elco DOUGLAS, Individually and on behalf of all other credit customers who paid defendant usurious charges, Appellant, v. COMMUNITY STORES CORP., a Wis. corp., Respondent.
• Court: Wisconsin Supreme Court

Page 149

222 N.W.2d 149

65 Wis.2d 139

William S. WIENER, a member of the class of persons who have

paid usurious charges to the defendant on behalf

of himself and all others similarly

situated, Appellant, v. J. C. PENNEY CO., INC., Respondent.

Michael TUCCELLI, Individually and on behalf of all others

similarly situated, Appellant, v. NELSON BROS. FURNITURE CO., a foreign corp., Respondent.

Robert J. MITCHELL, Individually and on behalf of all others

similarly situation, Appellant, v. GIMBEL BROTHERS, INC., a foreign corp., Respondent.

William S. WIENER, a member of the class of persons who have

paid usurious charges to the defendant on behalf

of himself and all others similarly

situated, Appellant, v. SEARS, ROEBUCK & CO., Respondent.

James W. MATTHEWS, Individually and on behalf of all others

similarly situated, Appellant, v. BOSTON STORE, a foreign corp., Respondent.

Thomas Patrick MOYLAN, Individually and on behalf of all

others similarly situated, Appellant, v. SEARS, ROEBUCK & CO., a foreign corp., Respondent.

Robert LASIEWICZ, Individually and on behalf of all other

credit customers who paid defendant usurious

charges, Appellant, v. NISS & SONS, INC., a Wis. corp., Respondent.

Elco DOUGLAS, Individually and on behalf of all other credit

customers who paid defendant usurious charges, Appellant, v. COMMUNITY STORES CORP., a Wis. corp., Respondent.

Nos. 41--48.

Supreme Court of Wisconsin.

Oct. 14, 1974.

Syllabus by the Court

Each of the eight cases consolidated in this appeal arises in the wake of State v. J. C. Penney Co. ¹ handed down October 9, 1970, where this court held, in response to an action brought by the attorney general, that the 1 1/2 percent monthly service charge on retail revolving charge accounts constituted usury under sec. 138.05(1)(a), Stats. The only issues in that case were whether revolving charge accounts were subject to the usury laws and whether further imposition of usurious charges under these accounts should be enjoined. No questions were presented or decided concerning the effect of the court's decision on private civil penalty actions.

In each of these eight actions, one named plaintiff claims to sue for himself and all other Wisconsin citizens who entered into a credit agreement with defendant. The complaints allege that each member of the class was charged usurious rates of interest in connection with purchases made under the agreement and seek an accounting and penalties for usury violations occurring during a six-year period ending on the date the action was commenced. As an alternative to this class suit, each complaint also alleges a similar cause of action on behalf of the named plaintiff alone. In addition, complaints in cases 41--46 contain both class and individual causes of action seeking punitive damages for fraud.

The credit agreements in cases 41, 43, 44, and 45 are called 'revolving charge accounts,' containing terms that appear similar or identical to those considered in the 1970 Penney case. In cases 42, 46, 47, and 48, the complaint states that the credit agreement 'allowed a customer to make numerous purchases on one account' and called for 'a single monthly payment of a set amount for the agreed upon period of time.' This agreement was not given a label in No. 42, but was called the 'Sears Easy Payment Account' in No. 46, the 'Niss add-on credit account' in No. 47, and the 'Community Stores add-on charge account' in No. 48.

In each case defendant filed a demurrer challenging the named plaintiff's right to maintain a class action. In an order dated June 17, 1971, the trial court sustained demurrers to the class actions based on fraud, but in the same order and in orders dated June 29, 1971, and August 17, 1971, overruled demurrers to the class actions for penalties under the usury statute. Only the latter action was appealed; thus, issues pertaining to class actions for fraud dropped out of the case.

Subsequent to the filing of briefs and oral argument in this court, two additional subsections were added to sec. 138.06, Stats., during a special session of the legislature: ²

'138.06(6) In connection with a sale of goods or services on credit or any forbearance arising therefrom prior to October 9, 1970, where shall be no allowance of penalties under this section for violation of s. 138.05, except as to those transactions on which an action has been reduced to a final judgment as of the effective date of this subsection (1972).

'(7) Notwithstanding sub. (6), a seller shall, with respect to a transaction described in sub. (6), refund or credit the amount of interest, to the extent it exceeds the rate permitted by s. 138.05(1)(a), which was charged in violation of s. 138.05 and paid by a buyer since October 8, 1968, upon individual written demand therefor made on or before March 1, 1973, and signed by such buyer. A seller who fails within a reasonable time after such demand to make such refund or credit of excess interest shall be liable in an individual action in an amount equal to 3 times the amount thereof, together with reasonable attorney's fees.'

As a result of this legislative action, this court reversed the orders overruling the demurrers, and remanded the cases to the lower court for 'consideration of the scope of the new legislation and its effect upon plaintiffs' causes of action.' ³ The court did not rule on the meaning of the new subsections but did note: 'This bill on its face eliminates the allowance of penalties,' and further commented:

'The effect, if any, of this statute on class actions of the type brought on these appeals was not and could not have been considered in the filed briefs. It is at least arguable that the legislature's intent was to affect the type of cases now before us.' ⁴

On remand, in the lower court, defendant filed amended demurrers in each case asserting that the complaint improperly united several causes of action, that the new statutes deprived plaintiffs of the right to maintain a class action, and that the class alleged in the complaint was an improper class. The trial court found that the new legislation eliminated plaintiffs' right to recover penalties and to maintain a class action, and in an order dated October 22, 1973, sustained the demurrers in each case. Plaintiffs appeal from this order.

Meldman & Kahn, Milwaukee, for appellant Wiener; Pressman & Hartunian, Chicago, Ill., of counsel.

Warshafsky, Rotter & Tarnoff, Milwaukee, for appellants Tuccelli, Mitchell, Matthews, Moylan, Lasiewicz and Douglas.

Foley & Lardner, Milwaukee, for respondents J. C. Penney Co., Gimbels, Nelson Bros., Niss & Sons, Inc.; Isaksen, Werner, Lathrop & Heaney, Madison, of counsel for respondent J. C. Penney; Hoyt, Greene, Meissner & Walsh, Milwaukee, of counsel for respondent Gimbel Bros.; Quarles & Brady, Milwaukee, for respondents Sears, Roebuck & Co., Boston Store and Community Stores.

WILKIE, Chief Justice.

One issue is presented by this consolidated appeal, to wit:

Is sec. 138.06(7), Stats., constitutional?

Under sec. 138.06(3), Stats., a borrower who pays usurious interest may recover all the interest, principal (up to $2,000), and charges paid on the loan or forbearance within two years of the date the action is commenced. The trial court held, however, and plaintiffs do not dispute on appeal, that secs. 138.06(6) and (7) remove the right of pre-October 9, 1970, credit sale usury victims to recover penalties and to maintain any class actions. As plaintiffs' brief unequivocally concedes at page 14:

'These amendments effectively wrought two changes in the law with respect to persons who were charged usurious interest rates on transactions prior to October 9, 1970 (emphasis in original):

'(1) The measure of damages was changed to eliminate penalties;

'(2) Class actions were forbidden.'

Thus, plaintiffs acknowledge that the procedure outlined in sec. 138.06(7) for recovery of excess interest provides them their sole statutory recourse for pre-October 9, 1970, credit sale usury violations.

Plaintiffs do not contest the constitutionality of sec. 138.06(6), Stats., which eliminated penalties and only allows recovery of excess interest. They do, however, argue that sec. 138.06(7), which outlaws class actions, is unconstitutional in two respects: because it denies them equal protection of the laws in violation of the fourteenth amendment to the United States Constitution ⁵ and art. I, sec. 1 of the Wisconsin Constitution ⁶ and because it violates art. I, sec. 9 of the Wisconsin Constitution. ⁷

A. Equal Protection.

Plaintiffs claim that the prohibition on class actions contained in sec. 138.06(7), Stats., violates their right to the equal protection of the laws in two ways:

'. . . First, it distinguishes one group of usury victims from all other persons having legal claims of various kinds and denies to that group the right to bring a class action. Second, while the amendment imposes this serious deprivation on the pre-Penney group, it does not do so to post-Penney usury victims.'

Before evaluating these contentions it is first necessary to set forth the standard of review applicable to equal protection claims arising under the fourteenth amendment to the United States Constitution and art. I, sec. 1, of the Wisconsin Constitution. As this court has stated many times, both amendments guarantee the same individual rights and impose the same restrictions on the legislature. ⁸

Legislation regulating economic and fiscal affairs enjoys a presumption of constitutionality. As stated in Simanco, Inc. v. Department of Revenue: ⁹

'Only if a challenger can show that the classification is arbitrary and has no reasonable purpose or relationship to the facts or a justifiable and proper state policy will a legislative classification fall on the grounds of a denial of equal protection. Dandridge v. Williams (1970), 397 U.S. 471, 90 S.Ct. 1153, 25 L.Ed.2d 491; Morey v. Doud (1957), 354 U.S. 457, 77 S.Ct. 1344, 1...