Opinion ID: 1180775
Heading Depth: 2
Heading Rank: 2

Heading: Conditional Sale Contract

Text: When the contract was executed, there was no Washington statute specifically regulating finance charges for conditional sales. [2] Under Washington law, twelve per cent is the maximum legal rate of interest, and no person shall directly or indirectly take or receive in money, goods or thing in action, or in any other way, any greater interest, sum or value for the loan or forbearance of any money, goods or thing in action than twelve per cent per annum. [3] The finance charge on the balance to be financed of the conditional sale contract was at least 14.68% on the declining balance. [4] Thus, if the contract was subject to the usury law of Washington, respondent violated that law by charging appellant Smith an usurious rate for the use of respondent's money. In the Washington case of Hafer v. Spaeth, [5] a merchant sold a piano on an installment (conditional) sale contract. The balance of the agreed purchase price  $175.00 less $30.00 down payment  was to be paid in monthly installments of $5.00 `with $3.50 handling charge per month or a fraction thereof.' The trial court found the conditional sale contract was a loan and the handling charge was interest, and determined the transaction was usurious. The Washington Supreme Court reversed saying: The contract simply provided the terms upon which the vendor was willing to sell, and upon which the purchaser expressed his willingness to buy, the piano. In other words, the transaction was one which contemplated the sale of a chattel upon specified terms, and not one which exacted a consideration for the extension of payment of an existing or prospective, indebtedness. [6]       it is not the office of a conditional bill of sale to secure a loan of money, but, rather, only to permit an owner of personal property to make a bona fide sale on credit, reserving title in himself for security until the purchase price is fully paid. [7] , [8] As far as we can determine, Hafer v. Spaeth is the most recent pronouncement of the Supreme Court of Washington on the question here presented. Neither Baske v. Russell [9] nor Busk v. Hoard, [10] each containing broad ranging statements on the question of usury indicates how the Washington Supreme Court might view the facts of the present action. However, it should be noted that in Hafer v. Spaeth, unlike the present action, the original seller never assigned the sale contract for financing purposes (there was an assignment for collection prior to litigation). In Idaho [11] and the large majority of other jurisdictions, [12] bona fide conditional sale contracts are not subject to usury laws. After careful consideration of appellants' arguments urging us to abandon this rule or to find the present action an exception, we have discovered no compelling reason why the general rule should not control here. Appellant says the seller, Dart, quoted him only one price  the cash price. Appellant calls our attention to use of the word interest in testimony by an agent of respondent Sherwood & Roberts. Appellant contends: As the contract clearly shows, the price of the tractor was $2,350.00, so that after adjustments for down payment and insurance all that remained was principal of a debt in the amount of $2,047.51. Thus, appellant claims, the whole finance charge was merely interest for a loan of the principal debt sum. The record does not disclose if the seller, Dart, made bona fide oral offers to appellant of different prices for cash and for credit before they agreed to enter the conditional sale contract. However, the contract itself states a cash price, details adjustments and charges, and presents a time purchase price. Appellant does not contend that these sums and computations had not been entered in the contract before he signed it. The contract clearly indicated a different price for cash and for credit, and appellant knowingly chose the credit price. Appellant urges that Dart's (seller's) use of respondent's conditional sale contract form indicates that the assignment to respondent was a loan rather than a true assignment of a sale contract. [13] But the mere supplying of forms does not compel such an inference. [14] Determination of whether a transaction such as that here involved is a bona fide credit sale and assignment, or rather is a loan, is primarily a question of fact. [15] The record adequately supports the district court's findings that the conditional sale contract and subsequent assignment was non-usurious under Washington law.