Case Name: Sparkman & McLean Co., Respondent, v. Govan Investment Trust, Appellant
Court: Washington Supreme Court
Jurisdiction: Washington
Decision Date: 1970-12-24
Citations: 78 Wash. 2d 584
Docket Number: No. 40051
Parties: Sparkman & McLean Co., Respondent, v. Govan Investment Trust, Appellant.
Judges: 
Reporter: Washington Reports
Volume: 78
Pages: 584–601

Head Matter:
[No. 40051.
En Banc.
December 24, 1970.]
Sparkman & McLean Co., Respondent, v. Govan Investment Trust, Appellant.
Dawson & Borst, by Edward A. Dawson and Howe, Davis, Riese & Jones, by Daniel B. Ritter, for appellant.
E. R. Cluck and Orvin H. Messegee, for respondent.
Monheimer, Schermer, Van Fredenberg & Smith, by J. Dimmitt Smith, amicus curiae.
Reported in 478 P.2d 232.

Opinion:
Hunter, C. J.
The plaintiff (respondent) Sparkman & McLean Co., upon motion to this court seeks to dismiss an appeal taken by the defendant (appellant) Govan Investment Trust, from a decree foreclosing a $400,000 real estate mortgage held by the plaintiff to secure the defendant's loan. The trial court held the transaction nonusurious and granted summary judgment to the plaintiff. The defendant's motion for summary judgment was denied.
The defendant in this case, pleading the defense of usury, seeks affirmative relief against the plaintiff. The plaintiff contends the case is now moot by reason of the enactment of chapter 97 by the state legislature during its 1970 extraordinary session. Chapter 23, Laws of 1967, Ex. Ses., was amended by the addition of chapter 142, Laws of 1969, Ex. Ses. This addition is codified as RCW 19.52.080. The legislature further amended this statute by enacting chapter 97, section 2, Laws of 1970, Ex. Ses. The statute now reads:
Corporations, Massachusetts trusts, associations, limited partnerships, and persons engaged in the business of lending money or the development or improvement of real estate in the state of Washington may not plead the defense of usury nor maintain any action thereon: Provided, however, That this section shall apply only to a transaction which involves an amount in excess of one hundred thousand dollars. [1970 1st ex.s. c 97 § 2; 1969 ex.s. c 142 § 1.]
This statute became effective May 14,1970.
There is no dispute as to whether the defendant came within the definition of the statute. The question posed is whether the defendant is now pleading the defense of usury or maintaining an action thereon.
The record shows that both parties moved for a summary judgment; the plaintiff for the foreclosure of his mortgage, the defendant upon his affirmative defense in seeking to impose upon the plaintiff the penalties provided in our usury statute. The plaintiff having prevailed, this appeal followed.
The defendant contends under this posture of the case he is not presently pleading the defense of usury or maintaining an action thereon; that this occurred at the trial of the case prior to the enactment of the statute.
The rule is clear in this state that one who is prosecuting an appeal is maintaining an action. In Foley v. Pierce County School Dist. 10, 102 Wash. 50, 172 P. 819 (1918), we said: "To prosecute an appeal is to maintain an action." This holding was reaffirmed in Bush v. Quinault School Dist. 97, 1 Wn.2d 28, 32, 95 P.2d 33 (1939). Conversely, a person who is defending a judgment from which an appeal has been taken is not maintaining an action. In Bruenn v. North Yakima School Dist. 7, 101 Wash. 374, 380, 381, 172 P. 569 (1918), we stated:
But it is argued that, since the action was pending on appeal subsequent to the time when the statute took effect, the word "maintained" is applicable. This contention does not seem to us sound. When a person obtains a final judgment in the superior court, he has nothing further to do. He has obtained his judgment and is out of court. True, when the appeal is taken, notice must be given him, but this notice is not process and he is not required to appear in the appellate court. If he does not, no default can be taken against him. . . . If to defend 'an action in the superior court, where, if no appearance has been made, a default may be taken, is not maintaining an action within the meaning of the statute, it would seem reasonably to follow that respondent, in this court, by appearing and resisting assignments of error, is not maintaining an action.
Here the defendant did not prevail in the lower court in the prosecution of its affirmative defense of usury, and is now maintaining an action by the prosecution of its appeal.
The defendant argues, however, that its rights were vested prior to the enactment of the repealing statute, supra, which the statute cannot abrogate. To the contrary, the rights of the defendant were not vested.
In Hansen v. West Coast Wholesale Drug Co., 47 Wn.2d 825, 827, 289 P.2d 718 (1955), where the right to prosecute an action in tort, by virtue of a statute, had been repealed pending an appeal, we said: "This being an action sounding in tort, appellant had no vested right until a final judgment in her favor had been entered." In Hafer v. Spaeth, 22 Wn.2d 378, 382, 156 P.2d 408 (1945), we said: "Usury is of purely statutory creation, and in the absence of statutory restriction parties may ordinarily contract for any interest they see fit." A vested right does not arise merely by a statutory creation. In Hansen v. West Coast Wholesale Drug Co., supra, quoting from Robinson v. McHugh, 158 Wash. 157, 164, 291 P. 330 (1930), we stated: "Where a tort action can be brought only by virtue of a statute, there can be no vested right therein, and the legislature may take away the right at any time.' "
The Supreme Court of Nebraska in White Motor Co. v. Reynolds, 179 Neb. 91, 94, 136 N.W.2d 437 (1965), has correctly stated the law in regard to vested rights under a usury statute, as follows: "There is no vested right in a usury law and it may be repealed or changed so as to affect causes of action or defenses in pending suits."
We are satisfied the defendant comes within the ambit of the statute, supra. The case is therefore moot unless it be determined that the statute is unconstitutional, which question we will now consider.
It is contended that the classification set forth in RCW 19.52.080 offends the equal privileges and immunities provisions of article 1, section 12 of the state constitution and the equal protection clause of the fourteenth amendment to the Constitution of the United States.
With the enactment of this statute, the legislature has established two categories that are not to be governed by the usury statute. The statute exempts those parties in the business of "lending money" or in the business of "development or improvement of real estate" in this state where the transactions involved are in excess of one hundred thousand dollars. The designated class includes corporations, Massachusetts trusts, associations, limited partnerships, and persons.
It is the well-established rule of law in this state that a statutory classification having some reasonable basis does not offend the equal protection clause or the privileges and immunities clause. O'Connell v. Conte, 76 Wn.2d 280, 283, 456 P.2d 317 (1969); Boeing Co. v. State, 74 Wn.2d 82, 86, 442 P.2d 970 (1968); State v. Persinger, 62 Wn.2d 362, 382 P.2d 497 (1963). In order to successfully attack a particular classification, it must be shown that such classification is manifestly arbitrary, unreasonable, inequitable, and unjust. Treffry v. Taylor, 67 Wn.2d 487, 408 P.2d 269 (1965); Kelleher v. Minshull, 11 Wn.2d 380, 119 P.2d 302 (1941).
Accordingly, the question is not whether the statute is discriminatory in nature, nor is it of paramount concern if the classification results in some inequality. The crucial determination is whether there are reasonable and justifiable grounds giving rise to the classification. State v. Persin-ger, supra; State v. Kitsap County Bank, 10 Wn.2d 520, 117 P.2d 228 (1941). Finally, in making this determination, it is recognized that the legislature has a wide range of discretion in defining the classifications and that such enactments are presumptively valid. O'Connell v. Conte, supra.
In discussing what constitutes a reasonable basis for the classifications and exemptions, the purpose behind the distinction must be examined. Generally, most states have enacted usury statutes to protect the needy borrower from the unconscionable moneylender. Our state is no exception. It is the declared public policy of this state to protect citizens from the oppressive exactions of interest. Laws of 1967, Ex. Ses., ch. 23, § 2, p. 1509. In Baske v. Russell, 67 Wn.2d 268, 273, 407 P.2d 434 (1965), this court had occasion to generally discuss the purpose of our usury statute:
The defendant in this case was in need of money. He was never told what interest he was to pay; he thought he was to pay the legal rate. . . . Finding himself in an economic squeeze, he did what man has done throughout history — accepted the oppressive terms of usurious interest. This is an evil that the usury statute attempts to prevent. It is designed to protect those who by adversity and necessity of economic life are driven to borrow money at any cost. The protection granted is based on the fact that many borrowers are powerless to resist the avarice of the money lenders.
With this purpose in mind, the legislature undoubtedly felt that certain parties need not be afforded the protection of our usury statute. Nor should they be restricted by the provisions of this statute. It is reasonable to assume that those parties engaged in the business' of lending money should be sufficiently accustomed to financial operations as not to require the protection of the statute. It is equally reasonable to assume that those engaged in the development and improvement of real estate, expecting high risks and high returns, should be familiar with financial operations and money's worth. Defining the class to include transactions in excess of one hundred thousand dollars is a further reasonable distinction between the "small time" borrower or lender and the "big time" operator.
In Griffith v. Connecticut, 218 U.S. 563, 570, 54 L. Ed. 1151, 31 S. Ct. 132 (1910), the United States Supreme Court considered the reasonableness of a Connecticut usury statute that limited interest on loans to 15 per cent and specifically exempted national and state banks, trust companies, and bona fide mortgages on real and personal property. While holding this was a reasonable classification, the court said:
Such institutions, managed by those accustomed to financial operations and familiar with the worth of money in the market from day to day, might well be deemed to require no statutory protection against being forced by their financial necessities to pay excessive interest for moneys borrowed.
Applying the aforementioned rules, we find that the challenged classification is not arbitrary and rests upon a reasonable basis.
It is further argued, however, that the legislation is discriminatory because it omits general partnerships and trusts (other than Massachusetts trusts), and therefore does not apply alike to all persons within the designated class. This argument is without merit. General partnerships and trusts (other than Massachusetts trusts) are not legal entities. The word "persons" added to the statute by the 1970 amendment, together with the word "corporations" brings members of a general partnership or a trustee into the classification.
We held that chapter 97, section 2, Laws of 1970, Ex. Ses., is not in violation of the equal privileges and immunities provisions of article 1, section 12 of the state constitution or the equal protection clause of the fourteenth amendment to the Constitution of the United States.
Other contentions that RCW 19.52.080 is not constitutional are without merit. Having held that the statute is constitutionally valid, and having heretofore determined that the defendant comes within the ambit of the statute, the case is moot. Plaintiff's motion to dismiss defendant's appeal is therefore granted.
Finley, Rosellini, Hamilton, Neill, Stafford, and Sharp, JJ., and Ryan, J. Pro Tern., concur.
Individuals were not included in the first enactment, the term "persons" being added as a category by amendment. The effective dates of the act and amendment leapfrogged the dates of the trial and argument, according to the following chronology:
Trial .August 16, 1967
Appeal argued on merits...........................March 19, 1969
Effective date of laws, 1969 session .August 11, 1969
Motion to dismiss appeal on mootness .November 7, 1969
Effective date of amendment adding persons to exempt category.......................May 14, 1970
Reargument on appeal and motion.................October 6, 1970