Coast Finance Corp. v. Powers Furniture Co.

BEAN, J. The court found as a conclusion of law that the agreement between the plaintiff and defendant provides in effect for a sale and assignment of a [343] portion of the conditional sales contract. Defendant assigns snch finding as error, and contends that the transaction was in the nature of a loan and the rate of interest provided for usurious. By Section 7988, Or. L., the rate of interest in this state is fixed at 6 per cent per annum, provided, that on contracts interest up to the rate of 10 per cent per annum may he charged by express agreement, and no more. Section 7989, Or. L., provides as follows: “No person shall, directly or indirectly, receive in money, goods, or things in action, or in any other manner, any greater sum or value for the loan or use of money, or upon contract founded upon any bargain, sale, or loan of wares, merchandise, goods, chattels, lands, and tenements, than in this chapter prescribed. ’ ’ Section 7990, Or. L., provides that when suit is brought on a contract where a rate of interest has been contracted for iq excess of that authorized, the same shall be deemed usurious and shall work a forfeiture of the entire debt so contracted to the school fund of the county where the suit is brought. The plaintiff contends that the assignment of the conditional sales contract in consideration of the sum of $100, by defendant to plaintiff constituted a sale of an interest in such contract, and is not affected by the usury statutes. The establishment of the defense of usury requires clear and cogent proof thereof. Vague inferences or mere probabilities or conjectures are not sufficient: Poppleton v. Nelson, 12 Or. 349 (7 Pac. 492); Barger v. Taylor, 30 Or. 228, 236 (42 Pac. 615, 47 Pac. 618); Nunn v. Bird, 36 Or. 515, 521 (59 Pac. 808). [344] In Balfour v. Davis, 14 Or. 47 (12 Pac. 89), it was held that, to constitute usury, there must be first a loan, express or implied; second, an understanding between the parties that the money shall be returned; third, that a greater rate of interest than is allowed by law should be paid or agreed to be paid; and fourth, a corrupt intent to take more than the legal rate for the sum loaned. This ruling was approved in Beach v. Guaranty Sav. Assn., 44 Or. 530, 533 (76 Pac. 16, 1 Ann. Cas. 418). It is a general rule that after a negotiable instrument has once been validly negotiated by transfer for a valuable consideration it becomes an article of commerce- and can be bought and sold as freely as any other property, the rate of discount being governed by the market value of such instrument, and upon principle and authority the owner of such property has a perfect right to name the price for which he is willing, to sell and to refuse to accede to any other. The sale and assignment of such choses in action are not within the letter or spirit of the usury law i 39 Cyc. 931; 27 R. C. L., p. 214, § 15. "When the holder of an instrument, such as the conditional sales contract held by defendant, transfers the instrument at a discount and is required to indorse or otherwise guarantee it so that the vender becomes liable contingently to pay the purchaser at a future day a sum greater than that received with legal interest, the authorities present different views. The great weight of authority is that such a transaction should be regarded as a valid sale of a chattel with a warranty of soundness, and the purchaser is allowed to enforce the obligation to its full extent against his own indorser and all prior parties: 39 Cyc. 933. [345] It appears that plaintiff was in the business of discounting contracts and commercial paper. From the facts stated in defendant’s answer quoted above, and the stipulation as to the position of the plaintiff and defendant, the court was warranted in finding that the assignment of the conditional sales contract in consideration of the sum of $100 was a bona fide sale of an interest in the contract. Any contrary holding would clog the wheels of commerce. As far as the record shows, the transaction did not constitute a loan; there was no understanding between the parties that defendant should return the money to plaintiff, except in the contingency that the original promisor, Kappes, should make default in payment; and it was a pure bargain and sale of an interest in the contract, and no rate of interest was agreed upon. As far as shown the sale was made in entire good faith, and there was no corrupt intent to exact a usurious rate of interest: 27 R. C. L., p. 213, § 14. As we view it, the sale and assignment of the contract in question stands upon the same footing as the transfer of a promissory note. In 27 R. C. L., page 215, Section 16, we read: “Unless the discounting of promissory notes is by statute declared to be usurious if at a greater rate of interest than permitted by law there is little or no doubt that they, like other property, may be bought and sold on such terms as may be agreed on, and, however small the price paid, the transfer is not usurious if in good faith, and not a mere attempt to disguise a borrowing and lending of money. This is so though the seller indorses the note, if the transaction is bona fide and not intended as a cover for a usurious loan.” [346] The facts stipulated do not tend to support defendant’s claim. The judgment of the lower court is affirmed. Affirmed. Mr. Chief Justice Burnett took no part in the consideration of this case.