Court: Court of Appeals of Washington; August 6, 1986; Washington; State Appellate Court
The appellant sought to challenge the penalties imposed by the state's usury statute, which the trial court applied following a summary judgment. The facts reveal that the appellant loaned $50,000 to the respondents for commercial purposes, evidenced by a note due 180 days from February 6, 1981, with interest rates of 2.25% per month, increasing to 2.50% after 90 days. Respondents made interest payments until January 1983 but failed to pay the principal by the due date. Subsequently, the respondents filed for declaratory relief, claiming the note was usurious and violated the Consumer Protection Act, leading to a trial court judgment in their favor for $33,704.75.
The court referenced Aetna Fin. Co. v. Darwin, which outlines the elements of usury and the lender’s burden to prove entitlement to an exemption for business loans. It clarified that a loan is considered usurious if it exceeds the statutory interest rate and that the principal amount, not interest, defines the loan transaction. Consequently, the note's terms indicated a usurious loan. The court also addressed whether the appellant's forbearance in calling the note constituted a new transaction under RCW 19.52.080. Ultimately, it concluded that the forbearance did not cleanse the original usurious transaction, affirming the loan was usurious and subject to statutory penalties. According to RCW 19.52.030, the creditor is entitled only to the principal minus the interest accrued or, if interest has been paid, to the principal minus twice the interest paid plus any unpaid interest.
The debtor is entitled to recover costs and reasonable attorney's fees, as well as any excess payments made under a usurious agreement beyond what the creditor is entitled to receive. The trial court determined that the creditor's entitlement was a negative amount, leading the appellant to argue that the respondents received approximately $9,000 more than they should have. The court agrees with the appellant, emphasizing that a negative entitlement is nonsensical since one cannot possess or own a negative amount. Thus, the penalties should reduce the creditor's entitlement to zero, resulting in a corrected judgment of $24,750 instead of $33,704.75.
On remand, the judgment will be amended accordingly. The appellant also claimed that respondents failed to file within the 6-month limit set by RCW 19.52.032. However, the statute allows for the final payment date to change, and the appellant's acceptance of interest until January 1983 contradicts his argument about the timing of the respondents' action. Citing case law, the court pointed out that a cause of action for nonpayment does not accrue until the extension period expires, and the statute of limitations begins after the interest period concludes.
The appellant's argument of laches was found to lack factual support, as the respondents acted promptly after the appellant called the note in January 1983. The court noted that there were no genuine issues of material fact to dispute, justifying the summary judgment. The case is remanded solely for recalculating the usury penalty, while the trial court's other rulings are affirmed.
Creditor 1, Crouch, is entitled to a principal amount of $50,000, reduced by twice the interest paid, totaling $49,500, and further deducted by $6,750 in accrued and unpaid interest from six interest-only payments of $1,125. The total amount entitled to the creditor is calculated at $49,500 - $6,750 = $42,750. Debtor Gemperles is entitled to costs and reasonable attorney's fees, as determined by the court, plus any excess payments made under the contract beyond the creditor’s entitled amount, totaling $24,750. The final judgment in favor of the debtor amounts to $56,250, which includes $6,250 in total due.
The document outlines the necessary elements for establishing a loan or forbearance, including the understanding of repayment, the imposition of interest above legal limits, and the intention to engage in the transaction. It references the amendment of RCW 19.52.080, which exempts future commercial transactions from usury laws. The '2-hypotheses rule' in contract construction favors lawful interpretations unless it undermines usury laws by prioritizing form over substance. Furthermore, RCW 19.52.032 permits actions for declaratory judgment regarding the usurious nature of a loan or forbearance contract, with a six-month limitation period following the final payment due date or full payment of principal.
