Yeager v. Ainsworth

• Decision Date: 10 November 1947
• Docket Number: 36530.
• Court: Mississippi Supreme Court
• Parties: YEAGER et al. v. AINSWORTH et al.

32 So.2d 548

202 Miss. 747

YEAGER et al. v. AINSWORTH et al.

No. 36530.

Supreme Court of Mississippi

November 10, 1947

Stennett & Stennett, of Jackson, Broach &amp Ethridge, of Meridian, and Jackson, Young Daniel & Mitchell, of Jackson, for appellants.

Satterfield, Ewing & Hedgepeth and Frank, T Williams, both of Jacskon, for appellees.

E. L. Trenholm, of Jackson, amicus curiae.

McGEHEE, Justice.

This is a suit brought in chancery by the appellees, Mrs. D. O Ainsworth and her son Willard Ainsworth, for an accounting and to recover all sums of money paid in connection with the purchase of a used automobile, upon the theory that the difference between what the car could have been purchased from the dealer for in cash and the amount which the purchaser had to pay for the same on credit amounted to more than 20% interest per annum, and was therefore usurious provided the amount which the dealer and the finance company term a 'time price differential (including finance, insurance, and recording charge, if any),' was in realty for the most part a charge of interest on the deferred balance after the cash down payment had been made.

The suit is against the appellant Stanley Yeager, and also R. J. Hare, who were formerly doing business as Hines Motor Sales, as seller of the automobile, and the Friendly Finance Company, Inc., as purchaser of the deferred payment note and conditional sale contract, respectively. The appeal is from a decree against the seller for all sums paid for the car, including a cash payment of $205 made by check, and an overpayment of $138 alleged to have been made in cash at the time of the purchase of the car, aside from the sums mentined in the note and conditional sale contract, in alleged violation of the regulation of the Office of Price Administration under the Emergency Price Control Act of Congress of 1942, 50 U.S.C.A.Appendix, § 901 et seq., and for which said sum of $138, or rather treble the amount thereof and attorneys fees, a suit was pending in the Federal Court on behalf of the Administrator of the Office of Price Administration at the time the instant case was heard in the trial court; and the said decree is also against the Friendly Finance Company for all sums paid to it under the note and conditional sale contract purchased from the seller by the said Finance Company, it having been shown that at the time of the trial the Ainsworths had paid all sums agreed to be paid by them in connection with the purchase of the car in question.

The decree appealed from is predicated upon the finding of the chancellor that all sums paid as the difference between what the seller and the finance company alleged to be the cash price of the car under the conditional sale contract and the total amount paid thereunder was in reality an interest charge, less the sum of $36.25 paid out by the finance company on the day of the sale of the car, and included in the finance (or carrying) charge, for the cost of an insurance policy thereon for its protection, and for the benefit of the purchasers, although such difference is designated in the conditional sale contract as 'time price differential (including finance, insurance and recording charges, if any)' amounting to the sum of $151.20, and therefore in excess of 20% per annum on the deferred balance, if considered as interest.

The conditional sale contract provides, among other things, as follows:

'The undersigned seller hereby sells, and the undersigned purchaser (s) jointly and severally hereby purchase (s), for the time price and subject to the terms and conditions hereinafter set forth, the following property, delivery and acceptance of which in good order and in its present condition, after thorough examination, is hereby acknowledged by purchaser, viz.:

'(Here is set forth the automobile and equipment sold.)

Cash Price

Bona Fide Cash Purchase or Delivered Price (including any Sales

Taxes) $616.00

Accessories and Extra Equipment (Including any Sales Taxes)

Itemized ......................................................... $.....

Service, installation and handling ................................. $.....

(Any Additional Cost) .............................................. $.....

Total Cash Price ................................................... $616.00(A)

Time Price

Cash on or Before Delivery ......................................... $205.00

Trade in: Article

Year

Make

Model ............................................................ $_____

Total Down Payment ................................................. $205.00(B)

Deferred Balance (Subtract B from A) ............................... $411.00(C)

Time Price Differential (including finance, insurance and recording

charges, if any) ................................................. $151.20(D)

Time Balance (Add C and D) ......................................... $562.20;

which Time Balance, evidenced by note of even date herewith, is payable to order of seller in 15 instalment (s) of $37.48 each, followed by _____ instalment (s) of $_____, each, the first instalment commencing February 19, 1946, and the remaining instalments becoming due monthly on the same day of each successive month thereafter; with interest on instalments after maturity at 6% per annum, and the undersigned agreeing to pay a reasonable attorney's fee (not less than 15% of any unpaid balance) for collection and/or enforcement of this contract and note. The total of the above Time Balance and Total Down Payment is the Total Price of the above described article; * * *.'

We are not unmindful of the well-settled rule that when a case involves the question of whether or not usury has been contracted for or received, it is permissible to introduce parol testimony to show that the written contract does not in fact represent the real agreement between the parties thereto on the issue of whether the sums mentioned therein include interest in excess of the rate allowed by law, and that the question involved in such a case is whether or not a payment of interest is contracted for or received, in accordance with the intention of the parties, in excess of the maximum rate provided for by law, and in such manner as to evade the law against usury and for that purpose.

In instance case, the question is therefore whether the buyer understood that the seller had a cash price and a time or credit price for the sale of the car, and elected to buy at the time or credit price, such practice not being violative of the law against usury, even though the difference, if considered as interest, amounts to more than the rate of interest allowed by law, as held in the cases of Bass v. Patterson, 68 Miss. 310, 8 So. 849, 24 Am.St.Rep. 279; Benson v. Berry-Dampeer Company, 158 Miss. 237, 130 So. 157, 158; Commercial Credit Company, Inc. v. Shelton, 139 Miss. 132, 104 So. 75; Commercial Credit Company, Inc. v. Tarwater, 215 Ala. 123, 110 So. 39, 48 A.L.R. 1437, and other cases to be hereinafter cited; or whether the $151.20 referred to in the conditional sale contract as a 'time price differential (including finance, insurance, and recording charges, if any),' was in reality, and according to the intention of the parties under all the testimony, an amount added to the deferred balance as an interest charge (except as to the cost of the insurance policy, there being no claim that any recording charges were incurred), and would therefore not represent a part of a time or credit price.

The oral testimony disclosed that while only Mrs. Ainsworth signed the conditional sale contract and note, the purchase of the car was made for the benefit of her son, the appellee Willard Ainsworth, and that they both read and understood the terms of the contract as written before he asked his mother to sign the same, although he testified that the only price that had been mentioned at all to him by the seller was the sum of $700 instead of the $616 specified in the contract hereinbefore set forth. The appellee, Mrs. Ainsworth, testified that when she signed the contract she understood in what amount she was obligating herself to pay and that she did not pay any more thereon than she expected to pay. And Willard Ainsworth was asked: 'You knew you were to pay a credit price for it; that you were not able to pay cash for it, didn't you?' And he answered: 'Yes.' However, he further testified that there 'was only one price on the car $700, plus interest.' He was then asked 'Who told you that was interest", he answered 'It was interest.', Q. 'Who told you that Mr. Ainsworth?', and he answered 'It was carrying charges on the car.' This witness did not contend in his testimony that anyone ever told him that the amount to be paid as a time price differential was being charged as interest, and when he was asked 'What is the difference between carrying charges and interest?' he answered 'It all amounts to the same thing.' Nor did his mother Mrs. Ainsworth testify that the word 'interest' was mentioned during the negotiations.

As heretofore stated, the question then is whether the time price differential mentioned in the conditional sale contract to cover finance (or carrying) charge, insurance, etc., was a charge for interest and the cost of insurance instead of being a part of the time price specified in the contract and charged to cover the risk to be assumed by the finance company on account of the anticipated rapid depreciation in the value of the automobile by reason of its continued use the expense of investigating the credit risk assumed by the finance company and the possible expense to be incurred in the seizure and sale of the automobile to enforce the lien...