*1 FORD, INC. FALCONE PALMER 355, September Term, [No. 1965.] *3 24, 1966. May Decided Hornby, Hammond, Mar-
The cause was before argued McWilliams, bury, Barnbs JJ.
Joseph A. Mattingly appellant. *4 Miller, Canby Miller & M. with whom were Canby,
William brief, on appellee. Automobile Trade Association filed by
Brief Amicus Curiae White, Mindel Clarke and & Inc. Maryland, (Buckmaster, Bank- The brief); by Maryland Buckmaster on the Everett L. Howard, B. Or- Norwood Baetjer ers & Association (Venable, Maryland brief) by rick Marbury on Luke Bernstein, Merchants, Conaway, (Frank, Inc. of Retail Council A. Kauf- Kaufman, and Frank Rodowsky Lawrence F. & Gump brief.) man of the Court. opinion J., majority delivered
Hammond, at Dissenting p. opinion dissents. J., Horistey, infra. from the Falcone, truck a used tractor
The appellant, bought Inc., Falcone was Ford, 1960. August Palmer in appellee, on time so the sale was cash unwilling either unable or of three years over monthly period with deferred payments fully sales contract which a conditional which were secured by Retail Install- met and specifications the requirements and Code Law, (1957) codified both Code ment Sales final 128 to 153. The as Art. Vol.), (1965 Replacement §§ vehicle, of the cash down pay- after deduction truck, $6,742.31. for an was and the trade-in allowance old ment the seller (as premiums paid by To this was added insurance of Art. in the amount 83) 131 and 132 permitted by (6), §§ $6,991.06. financed” $248.75, “the making principal in an install- balance” that “the time provides (a) Sec. charge finance of a include a ment sale motor vehicle “may subject provisions insurance (cid:127)charges premiums, this section.” that: (b) specifies Sec. sale of a motor
“The on the charge imposed rates: following shall not exceed the vehicle per per Class 1. new motor Any $100 vehicle—$9 on the balance. year principal motor designated
Class 2. used vehicle Any model not more than two year the manufacturer in which the sale made— years prior year balance. on the per year per $12 $100 motor designated by Class 3. used vehicle Any more than two year manufacturer model years which the sale year per prior made—$15 balance.” on the year per bought The tractor truck which Falcone was Class a finance permitted which would have “$12 *5 balance”; per year however, the principal Palmer Ford charged per year—21% principal $6,991.06, stated to be a $1,468.22—be- finance charge cause this was the then current rate set by the various finan- cial institutions which bought its conditional sales contracts for large used trucks. The principal balance and the finance charge together amounted ato total “time $8,459.28, balance” of which was stated in the conditional sales contract executed seller * * * buyer be in payable “consecutive monthly installments as follows: 36 @ (which would total $8,459.28). $234.98” conditional sales contract was assigned by Palmer Ford to The Commerce Investment Company Falcone duly punc- tually made to it $234.98, thirty-six monthly payments then sued Palmer Ford for refund of the finance charges of $1,468.22, claiming that it had charged, and Invest- Commerce collected, ment had “more of a finance charge than is allowed law” and that he had “a under the right remedy provided in to a forfeit Section of all finance charges Article $1,468.22.” or paid (Sec. that: (d) provides “If seller or holder of the installment sales agreement for motor vehicle shall collect a finance charge on motor greater vehicle amount than the section, maximum specified this or a service charge, the seller shall forfeit to the all charges buyer paid payable agreement said unless the over- results from a bona fide error computation corrected within from sixty days the date of the installment agreement.”) The basis of claim an Falcone’s overcharge is that read, of Art. (b) correctly means that the maximum fi- “interest,” nance he considers charge—which and refers to as although statute does not—is to be figured on a declining balance so that as each monthly made, payment is in- credited, terest then due is deducted and and what remains of monthly applied installment is prin- and a new balance thus at. cipal arrived is, first, theory
Palmer Ford’s that the statute contemplates and authorizes installment which will payments aggregate and the “time balance owed fully pay buyer seller” *6 129 which is the (§ (10)) sum balance” (a) “principal (8)), 129 and (§ (b) charge the finance within the limits set dollars, balance, 132 by stated as a sum in (b) (the principal being in turn the sum of (a) by balance owed unpaid seller, buyer (b) to the cost of insurance by provided seller, and official fees be (c) to the seller to paid pub- lic for officials recording buyer’s ob- papers securing and, second, ligation) that the complementarily, “declining bal- has ance” no technique installment sales place regulated the Retail Installment Sales Law.
Palmer Ford offered Judge testimony permitted Shure receive, the jury to over Falcone’s objection, that it was the in Maryland custom and treat nationally to the “principal bal- ance” as the sum of the of the cash unpaid price, insurance, fees, cost and official and the custom Mary- to compute land the finance charge by multiplying number over which the years repaying installments are to stretch where, here, agreed rate so that the time was three and years the rate the finance cus- per year tomarily would be of the principal balance. 21% Falcone,
At the close of the offered on testimony behalf of refused, Palmer Ford for a moved directed verdict which was and then renewed its motion after all the in. testimony was denied, motion too was This as was Falcone’s motion in his directed verdict made at favor the close of Palmer Ford’s case.
Judge submitted the interpretation Shure of the retail in- stallment sales statutes to and jury furnished them with 129, photostatic copies 132 and 152 (the definition sec- §§ of Art. 83 for use in their tion) deliberations. The returned jury Palmer Ford verdict and Judge Shure overruled Fal- motion for judgment cone’s N.O.V. and entered judgment for Ford. Palmer agree Judge erred parties Shure in submitting
meaning jury statutes and Falcone contends that it was and erroneous improper permit evidence of custom or It construction. is established practical beyond doubt interpretation the construction and statutes for the court 494 Eisenberg, 237 Md. Aravanis v.
and not the
to decide.
jury
220;
214,
259;
Munday,
v.
212 Md.
Bethlehem
Co.
Steel
Inc.,
1;
Asher, Jr.,
Sons,
Vogel
Md.
v.
P.
&
196
F.
Emery
Marriott,
413;
Sehlhorst,
Falcone’s specified construes the rates in tends that unless the court § of interest which are subject mean rates 132 of Art. 83 to is, unless the phrase declining technique—that “$12 balance” be on the used year princpial per per § $100 year on the unpaid per per prin- read as meaning “$12 $100 of the which added then balance”—-Ch.80 cipal Laws 83 of Art. the Code the sub- 119A—now 132—to § § fix “the maximum rates title “Retail Installment Sales” in retail instalment sales of charged be motor ve- may which * * * hicles, providing penalties overcharges” and also be a because there would variance be unconstitutional would He body Act. reaches this con- the title between must the word “rates” the title on the that premise clusion “rates of interest.” only meaning meaning have the from meanings rate has numerous and varied apart The word interest, rates, as for hotel example, of a measure that stories, rates of a and as a measure of as publisher of so a ton or a More at the rate much yard. pertinently the word rates in the title of Ch. 80 of the Laws conclusively, to refer to the of 1954 would seem schedule Class obviously 1, Class 2 and Class forth in 3 motor vehicles set (b). § classes, b Preceding subsection commences specifications “The on charge imposed with these words: the sale of shall not rates.” following motor vehicle exceed the (Empha- sis There is no supplied.) substance Falcone’s contention as the title of Ch. 80 of invalidity of 1954. Laws
Falcone the second of his supports thrust basic argument— that the “principal balance” 132 of phrase Art. 83 should sum, be read to mean declining principal the then unpaid principal balance—by saying rule (1) general is as as much of each necessary periodic partial on payment an account of indebtedness is first to be applied the in- terest then due indebtedness the balance then is to- indebtedness; be to reduce the applied principal amount of the if the (2) declining balance requirement not into read could, Retail Installment Sales statutes seller under the law, maximum finance allowed by make “nearly double the return on its money with compared interest charging [presumably at maximum of per per- year on the balance or unpaid almost 24 percent,” mitted] immoral,” says Falcone “is “in because Maryland, general interest rate is 6 percent. Article Section the Mary- Code, land 1957.”1 acknowledges legislative many exceptions- 1. Falcone there are *8 to the basic allowed rate of interest such as the allowed' 6% 36% Law, (1964 the Replacement Uniform Small Vol.), Code Loan 16; 58A, per (J4%) per month,” § Art. the “or one-half cent 6% plus charges advance, “service in for services rendered or to be ** * rendered, expenses twenty- and ($4.00) four of dollars or one (1/25) original principal fifth of the amount of the loan or advance, greater, any whichever is on or loan advance not in original principal excess in of amount five hundred dollars- ($500.00); twenty ($20.00) dollars (1/50) or one-fiftieth of the-
original loan or advance whichever original greater, is amount of which is in excess- ($500.00),” five specified hundred dollars delinquent and the charges, up on $1,500 loans over Maryland and to under are, first, an actual that answers to contentions The Falcone’s sale, is than the cash greater at both a price installment the cash rate interest legal and in excess of price is a loan because it not usury laws is not to subject price, and, second, that the Legislature clearly but a sale money Retail rule by passing to established recognition this gave Law, safeguards. with specified appropriate Installment Sales 453, 792, where Rep. B. 108 Eng. Beete C. Bidgood, In v. & pounds, was sixteen thousand estate, an of which value in payable hundred twenty eight pounds for thousand was sold hundred eight thousand added four stated installments (the if had it been transaction usurious have made the pounds would case that arose “out a held in 1827 money), loan of it was estate, loan and not for the of a of an contract for the sale * * * in that there was no illegality.” money. [And] in Hogg the same view 1861 adopted Court Supreme 38, 115, L. that noting Ruffner, Black) 66 U. (1S. Ed. taking a and the to there must either be loan usury constitute interest or the more than taking legal usurious interest due, holding: forbearance of a debt sum of and money or A sell B a “But it is manifest that if to to propose cash, $10,000 $20,000 or for tract of land for pay- instalments, if B able ten annual prefers time, sum contract cannot be gain larger called usurious. A in hand to may vendor prefer $100 double the sum in expectancy, may purchaser credit; greater longer with the prefer one will who not between that dif- distinguish things fer, truth, with that B hun- say, apparent may pays cent, forbearance, dred per assert may usurious; such contract is but truth there whatever be in the the conclusion may premises, manifestly (Code (1957), 163-205, par 11, Industrial Finance Law Art. §§ ticularly 196); per month one cent interest allowed § (1957), credit their loans members unions on Art. Code Development 153; Corpora and the extra allowed Credit § 4% says (1965 Supp.), tions under Art. extra Code but these legislative general than allowances do no more establish a intent pattern rate of interest maximum 12%.
497 character- erroneous. a contract has none of the Such for- istics of it is not for the loan of usury; money, bearance of a debt.” Reynolds, v.
Our took same view. Williams predecessors 10 there must be Md. held that for there to be usury at loan of note and that the sale of valid money promissory sale there was an actual discount was not usurious because Poe, and not a view. loan. v. 142 Md. took same Bailey dis Almost all this rule. recognize states and apply See Legislative cussion in Treatment “Usurious” Judicial of Sales, Usury-Appli Credit 71 Harv. Rev. 1143 (1958), L. Sales, Mich. to Installment 62 cability Usury L. State Laws of Corbin, 1500. Rev. 1268 and see 6A Contracts (1964); Some are: typical recent cases which are illustrative Lin relatively Co., Service, coln Loan Inc. (Mun. Inc. v. Motor Credit Ct. 230; Capitol Finance C.), D. 83 A. 2d v. Loan & App. Luchesi Rose, 725; Mytelka & I.), Co. 113 A. 2d v. (R. Steffenauer 88; Inc. Bank 210 A. 2d Carolina Industrial (N. Super.), J. 692; Merrimon Mass. Corp. 132 2d (N. C.), S. Uni-Serv E. of v. Commissioner Banks 2d 906. 207 N. (Mass.), E. As retail throughout installment grew sales number courts at such trans- country, took looks increasingly sharper actions to make sure that there was a sale in substance masked a loan actually rather than a sale form only debt, of money or legislatures forbearance of a and more state which, enacted statutes al- governing retail installment sales though that such sales not loans recognizing subject were laws, the usury limited the amount which the time price could exceed other desirable safe- imposed guards for the protection buyers. 71 Harv. Rev. See L.
and 62 Mich. Rev. referred both to above. L. Maryland enacted its Retail Installment Act Sales Ch. 851 year of the and added provisions Laws vehicles, noted, as to motor as we have heretofore Ch. 80 1954. herein provided “except Laws Ch. specifically in this section provided [132], provisions ‘Retail Installment shall remain unaffected.” Sales Law’
A review the various pertinent provisions Mary-
land Retail Installment Law discloses that it con- clearly Sales and authorizes what occurred in the case at bar. templates just 128 of Art. requires every 83 installment agreement Sec. sales to be evidenced aby by executed both and con- writing parties agreements” “all of the of the taining 129 parties. speci- Sec. out, agreement fies what such an shall and includ- contain spell of ing goods; the the for de- (1) price (2) charges installation, stated, or other if livery, repair separately services ; there is such sum of items and charge; (3) (2) (1) (4) the amount of payment; the down balance of (5) unpaid the cash to is price payable buyer seller “which item by (1) be, item as less (3), may the case item the cost to (4)”; (6) him; of insurance for which credit is buyer (7) extended fees, the amount of official for which the buyer charged, recording agreement; the written (8) “the balance ; of owed” which is the sum items and “the (5), (6) (7) (9) dollars; charge” stated as a sum in the “time bal- (10) seller, ance” owed which is sum of by buyer items and and the of (8) number installment re- (9), payments it, and the amount and time of each quired pay payment. of 152 contains definitions terms used. Sec. (j) Subsection defines “cash to mean the minimum for which the price” price may article be for cash from purchased the seller by buyer. balance” is defined in subsection to be “Principal “the (1) amount to as item be entered to subsection (8) pursuant (a) of “Finance “the charge” (subsection (m)) 129.” amount § sold, of the cash price goods agreed excess upon by paid seller and the to be buyer, buyer for the privilege under the installment purchasing goods agreement.” sale “Time balance” subsection (Emphasis supplied.) says (n) “means the be entered as item amount to to sub- (10) pursuant section of 129.” (a) § 128, 129, and 152 132 read together
Sections de- completely flate signed Falcone’s arguments. parties writing re- quired by in full and form. In it Falcone proper agreed § the tractor truck and to title remain buy have with Palmer Ford it until was for. Falcone further as paid agreed, that he contemplates and owed a provides, $6,991.06 also as to the and agreed character of (and made together up prin- the various items which permitted finance charge (which by and he owed a cipal balance) that * * * in excess of the cash definition was “the amount paid agreed and the be buyer, the seller upon by in- goods for the buyer purchasing privilege $1,468.22. stallment sale agreement” (emphasis supplied)) (9), in items agreed, (8) the statute Having provides $6,991.06 and a finance charge he owed a cash balance of $1,468.22, item in so agreed many Falcone next (10) words, of items as the statutes that he owed the sum provide, (8) as a “time balance” that he would (9) $8,459.28, time balance of items (8) the sum (9) law thirty-six equal installments each. The speci- $234.98 fies in agree 128 and that the must (a) (10) buyer §§ *11 more, the pay time balance—no no less—the most pertinent language of item when it being (a), says that (10) § that the agreement installment sale shall set out the buyer’s agreement as to amount of time balance and “the num- ber of installment amount and time payments of payment] [with to it time required It precise [the balance].” of the time balance the act is to be contemplates paid it is that precise agree amount that the must buyer pay.
Confirmation of legislative principal intent—that balance- ais constant and not a declining amount—is furnished by § 138 of Art. 83 which all or gives buyer right prepay of “the time balance” in part unpaid full before maturity, that the seller must refund him “a provides portion the finance which is to be at least as a charge” great proportion of the “total finance charge” as the proportion total of the periodic payments scheduled after the time of prepay- or, ment bear to the total time balance original alternatively, the amount of the total finance charge figured month per number of agreement months scheduled multiplied by the number of months which the “by payment the time balance has The been refund anticipated buyer.” set tip- 138 is not based on or related to the balance principal (or § balance,” balance) but on the time unpaid principal “unpaid and the refund is a contemplated no part goes the reduction of the balance principal any- at re- Legislature hint that the
time. All this not no only gives balance but garded declining principal that there would be definitely suggests contrary. has, in another Legislature
It is to be noted also that situation, recognition language shown by appropriate an unpaid balance and a constant principal difference between Installment balance). Land (a declining is an act Act, seq., et Art. Contracts Code (1957), § requirements its similar Retail Installment to the Sales very and manner in a certain order out items setting specified balance.” final figure “principal and its definition of the interest but un- 21 sets a maximum rate of 112 of Sec. Art. “the that the interest on Art. 83 provides like (b) annum, imme- not exceed unpaid balance” shall 6% an of the installment pay- thereafter directs diately application retail installment sale argues pay- ments in the Falcone way balance. declining ments should be to create applied found one pertinent been referred to and have but We have In- Retail Maryland case decided under a law similar decided The Minnesota Court Supreme stallment Sales Law. Inc., Olds, 2d Asperen 93 N. W. Darling Van of the Minnesota “time their Act did not require computation com- charge”) “finance to be Maryland differential” (the balance. declining on a puted for Palmer was entered judgment correctly We find Ford.
Judgment with costs. affimed, *12 Horney, following dissenting filed the J., opinion. to the man-
I in all agree majority respects except with “finance on the amount charge” “principal ner in which the a finance Instead of the seller making financed” was calculated. oí for three on whole charge years 21% $1468.22, fi- $6991.06, I think the charge financed of or figured nance should have been at the rate of charge (the $7 on agreed law) instead permitted by $6991.06 $12 year one on for one and on for year, $4660.70 $2330.36 for this reason: the word as used in “per” one year Since of Article 83 132(b) ($9, on “per per year $15 each,” “for principal balance”) literally means I it believe was the intention of the legislature that the authorized rate on each class of financed motor vehicle was to be an- figured nually on the “principal balance” due as of the beginning of each the contract was to year continue. Calculated in this man- ner, the finance charge on the principal amount financed of would been have on ($489.37 $6991.06 $978.75 $6991.06 the first year, for the second year $326.25 $4660.70 $163.- 13 on which, for the third year), when added $2330.36 principal amount financed would have amounted to $7969.81 as the “total time balance” payable thirty-six equal monthly installments of each. $221.39
I would reverse.
PRICE PERKINS Appeals (Two in One Record) 371, September Term, [No. 1965.] 24, 1966. Decided May