Court Opinion

ID: 9626026
Source: CourtListenerOpinion
Date Created: 2023-08-22 07:59:36.086102+00
Date Added: 2024-06-11T18:06:19.754503
License: Public Domain

Ott, C. J.
(dissenting)—Did Maurice A. Hoard and Clara Hoard, his wife, enter into a usurious loan agreement with Hans M. Busk? The trial court, after weighing the evidence, answered the query in the negative. The majority, after weighing or totally disregarding the evidence, answer the query in the affirmative. I believe the judgment of the trial court should be affirmed for the following reasons:
The usury statutes provide that, if a rate of interest in excess of 12 per cent is contracted for or received or reserved, the contract shall not be void, but the parties thereto will be subject to certain statutory penalties. RCW 19.52-.030 provides in part:
“ . . . and the acts and dealings of an agent in loaning money shall bind the principal, and in all cases where there is ittegal interest contracted for by the transaction of any agent the principal shall be held thereby to the same extent as though he had acted in person. Arid where the *137same person acts as agent of the borrower and lender, he shall be deemed the agent of the lender for the purposes of this act.” (Italics mine.)
The evidence established that Stevens-Norton, Inc., was not acting for Hans M. Busk in any capacity on April 14, 1960. On that date, Maurice A. Hoard and Clara Hoard, his wife, entered into a brokerage contract with Stevens-Norton Inc., which provided, inter alia:
“You are authorize [sic] to procure for me a loan of $7,500.00 payable at $200.00 or more a month including interest at 10% per annum. . . .
“I agree to pay you $20% plus 50.00 App. Fee pd—commission and furnish title insurance showing the mortgage to be first lien, free of all taxes and assessments, upon the property, and pay $costs for examination thereof. . . .
“In the event that this application for a loan is accepted, and I refuse to sign Note and Mortgage, or desire to cancel this application for loan, then I promise to pay you the commission herein agreed, as liquidated damages, also costs for recording to perfect title.”
Hans M. Busk, a carpenter by trade, had never before made a loan to anyone. There is not a scintilla of evidence that Stevens-Norton, Inc., was acting as an agent “in loaning money” for Busk at the time the agreement was entered into between the Hoards and Stevens-Norton, Inc. Yet, it is the payment by the Hoards of the brokerage fee to Stevens-Norton, Inc., in compliance with the April 14th agreement, which the majority hold makes the note and mortgage between the Hoards and Busk a usurious contract. To arrive at this conclusion, the majority hold, in effect, (a) that the payment of the brokerage fee was in fact payment of interest, and (b) that Stevens-Norton, Inc., in obtaining this brokerage contract, was acting as agent for Busk, and that the agent’s knowledge of the usury (the brokerage fee) was knowledge to Busk.
As to (a), both the Hoards and officers of Stevens-Norton, Inc., testified that the brokerage fee was paid by the Hoards to Stevens-Norton, Inc., for services rendered. The written contract quoted above is in conformity with the *138intention and agreement of the parties. In this brokerage contract, the use of money was not involved; hence, no interest was to be paid by the Hoards to Stevens-Norton, Inc., or vice versa. In Colagrossi v. Hendrickson, 50 Wn. (2d) 266, 271, 310 P. (2d) 1072 (1957), we said: “. . . it was the province of the jury to weigh the facts and decide whether the promissory note was tainted with usury.” Here, the trial court, as the trier of the facts, found that the transactions in question did not constitute usury.
As to (b), that knowledge of the agent for certain purposes imputes knowledge to the principal is a well-established rule of law. The rule, however, does not apply where, as here, there is no evidence that on April 14, 1960, Stevens-Norton, Inc., was acting in any capacity for Busk. In this regard, the trial court’s finding was as follows:
“That the aforesaid Stevens Norton, Inc., was not acting as the agent of the plaintiff at any time prior, during, or subsequent to the transaction between the plaintiff and the defendants Hoard as hereinbefore set forth.”
In Thorndike v. Hesperian Orchards, Inc., 54 Wn. (2d) 570, 575, 343 P. (2d) 183 (1959), we said:
“ . . . If we were of the opinion that the trial court should have resolved the factual dispute the other way, the constitution does not authorize this court to substitute its findings for that of the trial court. . . . ”
Again, in Malstrom v. Kalland, 62 Wn. (2d) 732, 735, 384 P. (2d) 613 (1963), this court said:
“We do not conceive that the presence or absence of conflicting testimony minimizes or enlarges the scope of appellate review. If there is competent evidence in the record (whether it be conflicting or undisputed), to support the findings of fact of the trial court, we cannot disturb them (see Thorndike v. Hesperian Orchards, Inc., supra) except as provided by RCW 4.44.060, . . . ”
Usury is an affirmative defense. The burden of proof rests upon the one who asserts the transaction to be usurious. McCall v. Smith, 184 Wash. 615, 622, 52 P. (2d) 338 (1935), and cases cited. The appellants did not meet this burden.
*139The majority hold that the agency between Stevens-Norton, Inc., the Hoards, and Busk is established by virtue of RCW 19.52.030, which provides in part:
"... And where the same person acts as agent of the borrower and lender, he shall be deemed the agent of the lender for the purposes of this act.” (Italics mine.)
Before the statute becomes applicable, dual agency must be established by the common-law principles of agency. There is no statutory presumption that a dual agency exists; nor does the statute prescribe a magic formula for determining whether a dual agency has been established. In the instant case, agency between the borrower and the broker was admitted. Such admission alone does not invoke the statute which, by its terms, requires proof of a dual agency. Can we say, as a matter of law, that, by the application of the common-law principles, the broker was also the agent of the lender in procuring the loan?
In Moore v. Blackburn, 67 Wash. 117, 119, 120 Pac. 875 (1912), we said:
“ . . . Agency is a fact to be determined by the peculiar circumstances of each case; so that there are many cases holding that the broker who acts as intermediary between the parties is, under some conditions, the agent of one party, and under other conditions, the agent of the other party. It seems to us, however, that the problem must be solved by determining under whose direction the broker was acting. ...”
In Clemson v. Best, 174 Wash. 601, 604, 25.P. (2d) 1032 (1933), we said:
“Nor do we think that the lender makes the broker his agent by the mere fact that he turns the money over to the broker to be transmitted to the borrower, and accepts a note and mortgage in which he is designated as payee and mortgagee. These are facts and circumstances which should be taken into consideration in determining whose agent the broker is, but in neither case are they conclusive.”
In McCall v. Smith, supra, we said, p. 622:
“ . . . Whether a broker is to be regarded as acting for the borrower, for the lender, or for both, depends on *140all the facts and circumstances of the particular case, and no one fact, seized from its setting, can be said to be conclusive or controlling under any and all circumstances.”
The relationship created when Busk entered the offices of Stevens-Norton, Inc., after reading its advertisement in the newspaper, is tantamount to that between a merchant who advertises his wares for sale, and the customer who selects and purchases one of the products offered. In such merchant-customer transactions, the merchant is in no legal sense the buyer’s agent in contracting for the procurement of the products being offered for sale. It is obvious that the customer’s reliance upon the merchant’s glowing representations as to the soundness of the investment falls far short of proving agency, as a matter of law, by the application of common-law principles.
In the instant case, Stevens-Norton, Inc., had contracted to procure the loans before the customer Busk selected and purchased one of those offered. The fact that, after the loan had been procured, the broker agreed to furnish collection and related services for the lender does not establish an agency, as a matter of law, for the purpose of “loaning money.” The 10 per cent note and mortgage from the Hoards to Busk, for which Busk paid in full to the Hoards’ agent, was admittedly not a usurious loan on its face. There was no “illegal interest contracted for” between the Hoards and Busk. Busk knew nothing of the brokerage agreement between the Hoards and Stevens-Norton, Inc. The evidence is conclusive that Busk sought and intended to purchase a 10 per cent loan. One of the elements of usury on the part of the lender is an unlawful intent to do that which is forbidden by law. Colagrossi v. Hendrickson, 50 Wn. (2d) 266, 270, 310 P. (2d) 1072 (1957), and case cited; Washington Fire Ins. Co. v. Maple Valley Lbr. Co., 77 Wash. 686, 692, 138 Pac. 553 (1914).
Usury statutes are quasi-penal in nature. Contracts are not declared usurious in the absence of a manifest showing of intent on the part of the parties to engage in a usurious transaction. Tacoma Hotel Inc., v. Morrison & Co., 193 Wash. 134, 141, 74 P. (2d) 1003 (1938). A contract will not be *141struck down as usurious, if it can be sustained upon any legal hypothesis. Simpson v. C. P. Cox Corp., 167 Wash. 34, 37, 8 P. (2d) 424 (1932).
The trial court observed that the brokerage agreement between the Hoards and Stevens-Norton, Inc., appeared to be fraudulent. However, its validity was not challenged in the trial court and, for the purposes of this appeal, it is a lawful contract. Brokerage agreements for listings and commissions for loans have long been approved. Calvin Philips & Co. v. Langlow, 55 Wash. 385, 104 Pac. 610 (1909). The brokerage contract between the Hoards and Stevens-Norton, Inc., was not usurious or tainted with usury, because it was not "... the exaction of something in excess of what is allowed by law for the use of the money . . . ” (Italics mine.) Hafer v. Spaeth, 22 Wn. (2d) 378, 383, 156 P. (2d) 408 (1945). The brokerage contract was an agreement to pay a specified sum for the performance of a service, not for the use of money.
In 55 Am. Jur., Usury § 71, p. 373, the rule is stated as follows:
“A lender cannot be charged with usury on account of any commission or bonus paid by the borrower to his own agent or to an independent broker for services in negotiating or procuring a loan, even in jurisdictions expressly forbidding additional charges. And although the agent may act for the lender in other matters, or in some respect in connection with the loan in question, if it is clear that in procuring the loan he was acting as the agent of the borrower, a commission paid him for his services in the latter capacity will not constitute usury. . . . ” (Italics mine.)
Accord, 52 A.L.R. (2d) 710.
The majority predicate the finding of agency, as a matter of law, upon five items of service which the broker offered to perform for Busk. Stevens-Norton, Inc., was directly interested in earning its $1,500 brokerage commission from the Hoards. The trial court, in holding that no agency existed, could well have found as a fact that Stevens-Norton, Inc., voluntarily and gratuitously, offered to perform these services for Busk solely as an inducement to the buyer or *142investor to purchase a “product” which the broker had for sale.
Applying the rule that a contract will not be struck down as being usurious, if it can be sustained upon any legal hypothesis, it is more consistent to hold that Stevens-Norton, Inc., performed these services gratuitously or was compensated therefor by the brokerage commission, than it is to hold that Busk was receiving a financial benefit from the services; hence, had knowingly and intentionally executed a usurious contract.
The legislature has not seen fit to exercise its police power to license or regulate these brokerage activities. The enactment of proper legislation in this field is solely a function of the legislature. It is not the province of the courts to interpret and apply the general usury statutes so as to police this field of business activity.
Finally, it seems to me unconscionable that the conduct of a borrower who, by subterfuge and deceit, has been unjustly enriched at the expense of an innocent lender should receive the sanction of this or any appellate court. Here, a borrower knowingly and intentionally entered into a written agreement to pay a broker an exorbitant fee for enticing a lender to loan his money to the borrower upon receipt of a legal 10 per cent note and mortgage. The brokerage agreement was intentionally and surreptitiously withheld from the knowledge of the lender until after default. When he sought to foreclose his mortgage, he was confronted with an affirmative defense of usury, predicated upon the brokerage fee as a cost for the use of money, and a contention that the broker was the agent of the lender in the procurement of this allegedly usurious loan. The trial court found that the evidence did not establish either agency or usury. The majority reverse the trial court, and hold that agency was established as a matter of law. Agency alone does not render a loan usurious. The majority rule is stated in 52 A.L.R. (2d) 737 as follows:
“Although there is some disagreement, it is generally held that a loan is not rendered usurious by the lender’s agent charging the borrower a commission or bonus in *143excess of the maximum legal rate of interest for procuring the loan, where such charge is made for the agent’s own benefit and is without the lender’s knowledge or consent, either express or implied, and is not ratified or shared in' by the lender.” (Italics mine.)
If we assume that Stevens-Norton, Inc., was Busk’s agent, the penalties for usury do not apply to Busk where, as here, (1) the charge was made for the sole benefit of Stevens-Norton, Inc., (2) the deduction of its commission from the loan was made by the broker without the knowledge or consent of Busk, and (3) Busk neither ratified nor shared in the broker’s commission.
For the reasons stated, the judgment of the trial court should be affirmed.
Hunter, J., concurs with Ott, C. J.
Hill and Donworth, JJ., concur in the result of the dissent.
January 4, 1965. Petition for rehearing denied.