Wood v. Commonwealth Trailer Sales, Inc.
| Decision Date | 07 July 1961 |
| Docket Number | No. 35003,35003 |
| Citation | 110 N.W.2d 87,172 Neb. 494 |
| Parties | Dallas L. WOOD and Doris I. Wood, husband and wife, appellees, v. COMMONWEALTH TRAILER SALES, INC., a corporation, appellant. |
| Court | Nebraska Supreme Court |
Syllabus by the Court.
1. An essential of a time sale price is a price agreed upon between the parties where the buyer is actually informed of and has at the time the sale is made an opportunity to choose between a cash and a time sale price.
2. A time sale made in good faith at a price in excess of a cash price, even though the difference exceeds lawful interest for a loan, may not be regarded as invalid as being tainted with usury.
3. The form of a transaction may properly be considered in determining whether the price charged was a cash or time sale price.
4. Legal necessity requires looking beyond the form to the substance to ascertain whether a sale is a cash or time sale.
5. Under the terms of section 45-138, R.R.S.1943, and pursuant to the declaration of Powell v. Edwards, 162 Neb. 11, 75 N.W.2d 122, neither a licensee nor any other person may legally, directly or indirectly, charge, contract for, or receive a greater rate of interest than 9 percent per annum upon any loan or upon any part or all of any aggregate indebtedness of the same person, in excess of $3,000.
6. The rate of interest on a debt payable in installments or partial payments is ascertained by applying the payments first to interest and the balance to the reduction of principal.
7. Under section 45-138, R.R.S.1943, an installment loan is unlawful if payments are contracted to be made over a period exceeding 36 calendar months from the date of making the contract.
8. By the terms of section 45-138, R.R.S.1943, it is required that installments for repayment of principal and charges shall be arranged, with exceptions which are not important to note here, so that no installment is substantially greater than any preceding installment.
9. Any contract of loan made knowingly or without the exercise of due care to prevent the same in violation of section 45-138, R.R.S.1943, is void and the lender has no right to collect or receive any principal, interest, or charges thereon.
Wright & Simmons, James R. Hancock, Scottsbluff, for appellant.
R. L. Gilbert, Morrill, for appellees.
Heard before CARTER, MESSMORE, YEAGER, SPENCER, BOSLAUGH and BROWER, JJ.
This is an action in equity instituted by Dallas L. Wood and Doris I. Wood, husband and wife, plaintiffs and appellees, against Commonwealth Trailer Sales, Inc., a corporation, defendant and appellant, to have declared null and void a certain conditional sales contract, to enjoin and restrain enforcement of the contract, to recover judgment for $2,200 paid on the contract with interest, to recover payments made into court, and for the costs of the action.
A trial was had to the court which resulted in a decree and judgment in favor of the plaintiffs and against the defendant for injunction on the ground that the contract was void, for $2,200 which had been paid to the defendant, for $440 which had been paid into court, and for interest and costs.
The defendant filed a motion for new trial which was overruled. From the judgment and the order overruling the motion for new trial the defendant has appealed.
As grounds for reversal the defendant has set forth seven assignments of error. Of these, five deal with the kind and character of the transaction involved and in that view separate reference to these is not required. The other two will be mentioned in due course herein.
For the most part the pertinent facts in this case are not in dispute. At the inception of the transaction involved the plaintiffs lived in a trailer in Scottsbluff, Nebraska, which had been purchased from the defendant, a portion of the cost price of which had not been paid. The defendant was engaged in the maintenance and operation of a trailer sales lot also in Scottsbluff, Nebraska. In November 1958, the plaintiffs discussed with the agent of the defendant the purchase of a trailer which was on the lot, the named price of which was $5,895. Following discussions this agent communicated with the president of the defendant at Wichita, Kansas, the home office of the defendant. After this incident the agent of the defendant again communicated with the plaintiffs. Whether this was late in November 1958 or on December 1, 1958, is in dispute. Whether or not there was an oral agreement as to the purchase is in dispute. The plaintiffs in their testimony assert that in November the parties orally agreed upon a plan of purchase and exchange of their trailer for one on the lot the price of which was $5,895. The agent of the defendant says that there was no agreement as to purchase and exchange until, as he believes, December 1, 1958. The agent said in effect that he thought that on December 1, a written contract was presented to and signed by plaintiffs and by him as agent for the defendant. He testified that if he is mistaken as to the exact date at least no plan of purchase was presented or agreed upon until the contract to which he had reference was actually presented to the plaintiffs, which is dated December 1, 1958.
The contract which was presented was denominated 'Conditional Sale Contract' and is exhibit 1 in evidence in this case, and which, along with exhibit 2, is the contract which the plaintiffs seek to have declared null and void. Exhibit 2 is the same as exhibit 1 except as to the absence of the signature of Mrs. Wood. The two bear the same date but exhibit 2 was executed on a later date than was exhibit 1. The two cover the same transaction. The only purpose of exhibit 2 was to provide additional security to the defendant on the conditional sales contract. It was not designed to and did not change in any material respect the obligations of the parties as contained in exhibit 1.
The undisputed testimony is that before exhibit 1 was signed the agent went over it in all of its details with the plaintiffs, and that it was at this time and by this instrument, and it alone, that the obligations of the parties were created except as to the matter of additional security. On the record of the evidence this must be accepted as true. The plaintiffs contend that the transaction was made under an oral agreement entered into on November 27, 1958, but clearly on that date there were only negotiations which preceded the contract as it appears in exhibit 1. It is this instrument that the plaintiffs contend is void and entitles them to the relief they seek in this action.
The details of the exhibit which it is deemed necessary to set out herein are as follows:
Price (if this were a cash sale) $5,895.00
Down payment 885.00
Unpaid balance $5,010.00
Insurance premium 334.40
Official fees 10.00
Principal balance $5,354.40
Finance charge 1,924.04
Time balance $7,278.44
59 monthly installments each $110.00
Final payment in 60th month $788.44
Time sale price $8,163.44
On the face of this instrument, as is apparent, a cash sale price of $5,895 is set out, also a time sale price of $8,163.44. It appears further that at the time the instrument was executed on the basis of the named cash sale price, the plaintiffs became obligated under the terms of the instrument, if it is valid, to the defendant in the amount of $7,278.44 as a time sale balance on a time sale price of $8,163.44.
The plaintiffs contend that this was not a valid and binding time sale but on the contrary it was in truth a loan in violation of the terms of the Installment Loan Act. As a loan payable in installments, the contention is that the amount which the plaintiffs became obligated to pay by exhibit 1 in excess of $5,354.40 amounted to interest at a greater rate than was allowable under the Installment Loan Act, that the final payment was substantially greater in amount than the preceding installments, and that the period over which payments were to be made exceeded the period permitted. Further it is contended that this being a loan, the defendant was required under law to deliver a statement of insurance procured by it and, within 15 days, to deliver to plaintiffs an executed copy of the insurance policy or certificate, which it failed to do.
It is pointed out here that the defendant is not a licensee and entitled to make loans under the Installment Loan Act. It follows that if the position of the plaintiffs is to be sustained it must be done on the theory that what was done in this instance by a nonlicensee in violation of the Installment Loan Act was as much a violation of the act as if it had been done by a licensee. This court has held that by a violation of the terms of the act a nonlicensee is subject to the same burdens as those of a licensee. In Powell v. Edwards, 162 Neb. 11, 75 N.W.2d 122, 123, it was said: 'An installment loan in excess of $1,000 wherein an interest rate in excess of 9 percent per annum is contracted for, which would be void if made by a licensee under the installment loan law, is void and the lender shall have no right to collect or receive any principal or collect any interest on such loan.' See, also, State ex rel. Beck v. Associates Discount Corp., 162 Neb. 683, 77 N.W.2d 215; Thompson v. Commercial Credit Equipment Corp., 169 Neb. 377, 99 N.W.2d 761; Robb v. Central Credit Corp., 169 Neb. 505, 100 N.W.2d 57.
The defendant seeks in its brief to distinguish this case from the case of Powell v. Edwards, supra, which case, as does the one here, involved a sale made by a dealer not engaged in making loans and not licensed to do so under the installment loan laws. It is not capable of the attempted distinction. The two transactions in all material matters were alike. The only difference at all between the two is that...
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