296 N.W. 911 | Minn. | 1941
Lead Opinion
The decisive question, as plaintiff sees it, is whether the transaction was "a conventional sale of an automobile by a dealer to defendant under a conditional sale contract, and abona fide sale of the contract by the dealer to plaintiff, or whether, * * * plaintiff made a usurious loan to defendant to enable him to pay * * * the balance due on the car."
The court found the transaction to be a usurious loan. That finding is challenged because, so it is claimed, defendant has failed to meet "the burden of proving usury." *281
On August 5, 1937, defendant purchased from a dealer an automobile the cash price of which was $2,645. His Packard car was taken in trade as a "down payment" for $1,445, leaving an unpaid balance of $1,200. Defendant was without sufficient funds to finance the deal, and the question of how he could do so became the subject of some discussion between the dealer and defendant. Plaintiff's name was suggested as the medium through which the cash could be had. Defendant testified:
"Well, the balance due of $1,200 — I was to buy my license extra — and that was to be financed with the Midland Finance Company. In other words, it was $100 a month that I was to pay, or $101 — I think it was $100, and then there was a little balance over the 12th month that was supposed to be paid at that time to make it equal."
He signed a form of contract "in blank. * * * It was not filled in." On the same day the instrument, a conditional sale contract, was completed, apparently by the dealer. As written, it provided for the payment of $1,412, payable in 12 installments, $301 due September 15, 1937, and 11 installments of $101 each due on the 15th of each month thereafter, with interest after the maturity of each installment at eight per cent per annum. By its terms the dealer "purported to be vendor," defendant the vendee. It was made "concurrently with the loan transaction." In plaintiff's brief it is said: "Defendant's testimony is to the effect that he never agreed to pay more than $1,200," he "didn't buy anything for $2,857," that being the time payment sale price contained in the instrument as written.
In its memorandum the court said that it had "not the slightest hesitation in finding that the transaction as engineered by the plaintiff was usurious, and was so intended to be"; that it was "compiled, made and printed" by the plaintiff, who "placed" these printed contract forms "in the hands of its agents, the car salesmen, for use when the willing victim appeared. The testimony shows that before the contract between" the dealer "and the defendant *282 was completed" the dealer "was in communication by telephone" with plaintiff in regard to the terms of the contract, which was assigned on that very day to plaintiff; that all the dealer "had coming" upon acceptance of defendant's trade-in car was $1,200, which is the amount plaintiff actually paid to the dealer by its check in that sum. In addition, plaintiff on the same day also issued to the dealer "a deferred certificate" in the amount of $39, stating that there had been "deposited with this company" (plaintiff) that sum, "payable to the depositor [dealer] on or before after 1st payment upon return of this certificate, properly endorsed, with interest at 6 per cent per annum. Payable on condition that when [?] all notes given by * * * purchaser [describing the car involved] are paid in full, together with all interest thereon."
Defendant's exhibit 2 is typed upon an "invoice" bearing the dealer's name and address. This was deemed by the court to be of evidentiary value since it shows what the dealer "had coming after it took in exchange the defendant's" Packard car. It reads:
"Salesman M.B. Cutter Jr. Date August 5th, 1937. Sold to H.W. Lorentz 709 Mtk. Mills Rd., Hopkins, Minnesota
Description Unit Price -------------------------------------------------------------- Cord Beverly sedan 812 model 1937 Serial No. 2263S Motor No. FB2189 2645.00 Packard 120 Club sedan 1445.00 Midland Fin. check 1200.00 -------- 2645.00 -------- Paymts. to be made to the Midland Finance Co. as foll: 1 @ 301.00 due Sept. 15th, 1937, and 11 @ 101.00 ea."
That part of our statute applicable to this controversy reads (2 Mason Minn. St. 1927, § 7038): *283
"All bonds, bills, notes, mortgages, and all other contracts and securities whatsoever, * * * whereby there shall bereserved, secured, or taken any greater sum or value for theloan or forbearance of any money, goods, or things in actionthan hereinbefore prescribed, shall be void except as to bona fide purchasers of negotiable paper, in good faith, for a valuable consideration and before maturity, as hereinafter provided." (Italics supplied.)
The exception quoted is not material here since a conditional sale contract is clearly not "negotiable paper."
1. The statutory language is plain and unambiguous. And our cases, while not in complete harmony as to results reached, do establish that the question of usury is, generally speaking, one of fact. As such, each case depends upon its own particular facts and circumstances. Stein v. Swensen,
2. The test to determine whether there is usury in a given case is whether the contract, if performed, will result in producing to the lender interest at a greater rate than that permitted by law, and whether that result was intended by the lender. Smith v. Parsons,
3. In the Buelow case we reiterated the long established rule that (
"Courts look to the substance and effect of transactions. There is no shift or device on the part of the lender to evade the law under or behind which the law [court] will not look to ascertain the real nature and object of the transaction."
In Blindman v. Industrial L. T. Corp.
"A nugatory oral promise to pay excessive interest, if performed, and excessive interest actually received thereunder by the lender, would result in usury, not because of the invalid promise, but because the lender had actually taken and received the excessive interest. But, where no such excessive interest is taken or received, the mere executory promise, otherwise unenforceable and no part of the written contract, is of no effect."
This result was reached upon the theory that oral testimony was inadmissible to vary the terms of a written contract. Mr. Justice Loring dissented, but the only question upon which disagreement was based was limited to the claimed right of the borrower to show by oral testimony what he asserted the true arrangement to be.
In Bangs v. Midland Loan Finance Co.
4. In Bearl v. Edison Finance Corp.
"There the claimed usurious agreement was made prior to the execution of the note, and the note when signed did not embody that agreement but was legal on its face. In the case at bar, the *286 instrument being signed in blank, the holder had no authority to insert any other terms than those orally agreed upon."
Dunn v. Midland Loan Finance Corp.
Of course, no one will question the holding there to the effect that one may ask a higher price for his property on a time payment plan than when the deal is for cash. The important distinction between that case and this is that there the time payment contract was a valid one, while here it was but a subterfuge for the exaction of usury.
5. Another case relied upon by plaintiff is Minneapolis Discount Co. v. Croff,
"The point contended for by the defendants is that the purchase price inserted in the written instrument was greater than the sum agreed upon and that the excess amount represented a usurious charge for interest, thereby making the contract illegal and unenforceable."
Affirmance was placed upon the ground that defendants "do not contend that a contract embodying the true agreement would be usurious," therefore there could be no contract so to do. Undoubtedly what the writer of that opinion had in mind was what *287
Mr. Justice Mitchell said in Egbert v. Peters,
"It [usury] is an illegal contract for a loan or forbearance of money, goods, or things in action, by which illegal interest is reserved, or agreed to be reserved or taken. Of course, there can be no usury without a contract."
6. All elements constituting usury are present here. The only contract upon which plaintiff relies for its recovery against defendant is the conditional sale contract. As written and sought to be enforced, it involves a "loan" of money or "forbearance" of a debt; the principal sum is payable absolutely and without any contingency; there is the exaction of a greater amount of interest or profit than is allowed by the law; and obviously there was an intention to evade the law since a person "is presumed to have intended the necessary consequences of his acts." Hagan v. Barnes,
7. As we have here a usurious contract, void under the statute, it follows that the one guilty of usurious exaction must bear the legal consequences flowing from such violation. As such he must lose not only the interest on the money risked, but also the principal, including as well all security given to secure performance. Jordan v. Humphrey,
8. Whether plaintiff's situation is that of an assignee or an original party is unimportant since the involved contract is not within the statutory exception relating to "negotiable paper." Scott v. Austin,
As to the legal principles involved, there is nothing distinguishing this case from that of Bearl v. Edison Finance Corp.
We have reviewed in this opinion only a limited number of our cases bearing upon this subject. For a more complete history and general background of this important and often abused statute, we refer to the following: "What is Usury in Minnesota," 21 Minn. L.Rev. 585; "Assignment of Conditional Sale Contract Contemporaneous with Usurious Loan," 22Id. 447. The dissenting opinion of Mr. Justice Loring in Blindman v. Industrial L. T. Corp.
While there are other assignments of error, examination of them does not disclose that reversal is required in either case. The decisive question has been determined adversely to plaintiff's contentions. That should end the controversy.
Both judgments are affirmed.
MR. JUSTICE STONE took no part in the consideration or decision of this case.
Addendum
Plaintiff asks that our original opinion "should be so modified as to preserve plaintiff's right to proceed against Madsen, the car dealer" and assignor of the conditional sale contract upon which the present suit was brought.
The petition is denied since Madsen was not a party to the cause and as such not "directly interested in the subject-matter" of the action. He had no right to control the proceedings or to examine and cross-examine witnesses, nor could he have appealed from the order or judgment finally entered. Clearly, then, no rights or remedies as between plaintiff and Madsen were in any way involved or determined in the present cause. Counsel should know that this is so since no one but the parties to the cause, or their privies, could be bound by the result here reached. Madsen has not intervened or applied for leave to become a party, hence *289
he is a "stranger" to this cause. 5 Dunnell, Minn. Dig. (2 ed.) §§ 7314, 7314a, and cases cited under notes; State v. Tri-State T. T. Co.
Other matters concerning which complaint is again made were considered and determined in our former opinion, to which we adhere.
Petition denied.