Opinion ID: 1838702
Heading Depth: 1
Heading Rank: 1

Heading: The applicability of sec. 138.05 (1), Stats.

Text: Sec. 138.05 (1), Stats., provides, in pertinent part, that no person shall: ... directly or indirectly, contract for, take or receive in money, goods or things in action, or in any other way, any greater sum or any greater value, for the loan or forbearance of money, goods or things in action, than: (a) At the rate of $12 upon $100 for one year computed upon the declining principal balance of the loan or forbearance; ... In Zang v. Schumann, [1] this court recognized the basic elements which are essential to constitute a usurious transaction: ... The law on this point is well summarized in 55 Am. Jur., Usury, p. 331, sec. 12, as follows: `The definition of usury imports the existence of certain essential elements generally enumerated as (1) a loan or forbearance, either express or implied, of money, or of something circulating as such; (2) an understanding between the parties that the principal shall be repayable absolutely; (3) the exaction of a greater profit than is allowed by law; and (4) an intention to violate the law. The presence of these elements infallibly indicates usury irrespective of the form in which the parties put the transaction; on the other hand, the absence of any one of them conclusively refutes the claim of usurious practice. In order that a transaction be considered usurious, these elements must exist at the inception of the contract, since a contract which in its inception is unaffected by usury can never be invalidated by any subsequent usurious transaction. It is the agreement to exact and pay usurious interest, and not the performance of the agreement, which renders it usurious. The test to be applied in any given case is whether the contract, if performed according to its terms, would result in producing to the lender a rate of interest greater than is allowed by law, and whether such result was intended.' (Emphasis supplied.) There is no question here as to requirements (2) and (3). The principal, the cash price of goods received, is repayable absolutely, and a rate of one and one-half percent equals 18 percent yearly, a rate which is plainly higher than that allowed under sec. 138.05 (1) (a), Stats. It is on requirements (1), an express or implied loan or forbearance of money, and (4), intent, that the parties are in conflict. The major dispute is over whether the Penney Charge Account Agreement (hereinafter referred to as the Agreement) is in fact a forbearance as the term is used in sec. 138.05 (1), Stats. Both parties seem to agree it is not an actual loan, and the trial court specifically found There is no loan as such.