Appeal from order of Court of Common Pleas of Blair County, June T., 1959, No. 129, in case of Equipment Finance, Inc. v. Chester E. Grannas et al.
T. Dean Lower, for appellants.
Martin Goodman, with him Alexander A. Notopoulos, and Goodman & Notopoulos, for appellee.
Ervin, P. J., Wright, Watkins, Montgomery, Jacobs, and Hoffman, JJ. (Flood, J., absent). Opinion by Jacobs, J.
[ 207 Pa. Super. Page 364]
The narrow point of law presented in this appeal is whether or not the Usury Statute applies to a sale of heavy machinery on credit when a finance company, in good faith and for value, purchases from the seller of the machinery the security agreement and accompanying note given by the buyer to the seller.
Equipment Finance, Inc., hereinafter called "Finance Co.", sued Chester E. Grannas and Paul A. Grannas, trading as Grannas Brothers, a partnership, hereinafter "Buyer", to recover three monthly payments allegedly due on the purchase of certain rock crushing equipment from Aggregates Equipment, Inc., hereinafter "Seller". In October, 1963, a jury returned a verdict of $8,062.31 for the Finance Co., which included the three monthly payments of $2,133.02 monthly, plus interest from 1959. Buyer appeals from the judgment entered on the verdict.
The main issue at trial was whether the transaction was a loan from Finance Co. to Buyer so arranged as
[ 207 Pa. Super. Page 365]
to constitute a subterfuge to avoid the law against usury, as alleged by appellants, or a sale on credit with an assigned installment sales agreement. This was resolved against appellants. Since the parties have stipulated for this court that the transaction was a sale on credit and that Finance Co. purchased the security agreement and accompanying note from Seller in good faith and for value, we need not go into the involved factual details.
For purposes of this appeal it is sufficient to point out that Buyer and Seller executed a security agreement dated July 9, 1956, covering the rock crushing equipment which Seller sold to Buyer. The security agreement clearly delineated each component of the selling price. It showed an unpaid cash price of $65,075.28, which included an insurance charge of $2,099.28 and a $5.00 filing fee. It showed a time balance of $76,788.72, arrived at by adding a "credit service charge" of $11,713.44 to the unpaid cash price. It set forth the terms under which the time balance was to be paid, viz., 36 monthly installments of $2,133.02 each, beginning August 9, 1956. Seller assigned this security agreement and Buyer's accompanying note to Finance Co. in return for the unpaid cash price less insurance and filing charges. Buyer made each month's payment to Finance Co. for 33 months but refused to pay the final three installments, tendering instead a check for $396.92, which it alleged was the entire balance due at the time the 34th payment was demanded in May, 1959. It contended that the credit service charge of $11,713.44 was usurious and that all it was obliged to pay was 6% interest per annum on the declining balance of the unpaid cash price, leaving $396.92 due.
Appellants would have us hold that certain sections of Article 9 of the Uniform Commercial Code, Act of April 6, 1953, P. L. 3, § 9-101 et seq., as amended, 12A P.S. § ...