I find myself in difficulties trying to reconcile the conclusion arrived at by the majority with well-established principles of the law, and I am disturbed by the practical effect of that conclusion. The vice in the reasoning of the majority lies in treating the usurious contract as wholly void as to both parties, whereas our holdings and the obvious purpose of the statute is to make it void as to the usurer only and to impose the penalties upon him alone. Section 334.01 (§ 7036) prohibits the taking or receiving of usurious interest, not the paying of it. The legislature did not need to prohibit the borrower from forcing usurious interest upon the lender. Section 334.02 (§ 7037) permits the person who has paid usurious interest to recover it, not the principal, one-half going to the common schools. True, § 334.03 declares the usurious contract void except in the hands of a bona fide purchaser, but permits the maker who has paid such bona fide purchaser to recover from the usurer what he may have paid in principal or interest to the bona fide purchaser. There seems to be no provision for recovery of the principal unless it has been paid to a bona fide purchaser. These statutes are aimed at the usurer, not at his victim. As said by this court, speaking through Mr. Justice Mitchell, in Lukens v. Hazlett, 37 Minn. 441,443, 444, 35 N.W. 265, 267:
"* * * These laws are enacted to protect the weak and necessitous from oppression. The borrower is not particepscriminis with the lender, whatever his knowledge or intention may be. The lender alone is the violator of the law, and against him alone are its penalties enacted."
This interpretation of the statute has stood for over 56 years.
In Midland Loan Finance Co. v. Lorentz, 209 Minn. 278, 287,296 N.W. 911, 915, this court, speaking through Mr. Justice Julius J. Olson, said: *Page 583
"As we have here a usurious contract, void under the statute, it follows that the one guilty of usurious exaction must bear the legal consequence flowing from such violation. As such he must lose not only the interest on the money risked, but also the principal, including as well all security given to secure performance."
A conditional sales contract, of course, reserves the title in the seller. Sometimes it is referred to as the "legal title," at others as the "absolute title"; but that title is held only as security for the payment of the balance of the purchase price and does not survive payment of the total purchase price. In this state, such a sale does not normally effect a bailment. The equitable title or interest acquired by the buyer is assignable. It is a right to have the legal title transferred to him upon payment of the balance due the seller. Karalis v. Agnew, 111 Minn. 522, 525, 127 N.W. 440, 441. The contract, when accompanied by the transfer of possession to the buyer, gives the buyer a right of possession of which he cannot be deprived except in case of default. When there is no longer an obligation on the part of the buyer to pay, the legal title no longer survives in the seller.
Here we are dealing with a contract determined to be usurious and conceded by the majority to be so. As said in the majority opinion, the usury law is a harsh one. It was intended by the legislature to stop usury, and it is for that body to determine the policy of the state toward usury. It is not for us to legislate or to repeal legislation. If a usurious contract is wholly void as to both parties, as determined here by the majority, and if the seller or lender may then recover what he parted with, the purpose of the usury law is circumvented. If such a contract is void as to both parties, why cannot the lender recover the money that he has lent under the void arrangement in an action for money had and received? Yet the law heretofore has not tolerated the recovery by the usurer of either interest or principal.
If the contract now before us had not been usurious and there had been no default on the part of the purchaser, the seller could not maintain replevin for the automobile. If the usurious contract *Page 584 was not void as to the purchaser, it served to pass the possession of the property to him. In this replevin action, where plaintiff is seeking possession of the car, he could introduce in evidence the usurious contract to show his right to possession, since as to him it is not void. Defendants, on the other hand, would not be in a position to claim possession for default, the only ground on which they might be entitled to it, because as to them the contract is void and plaintiff owes them nothing. There is no default. How, then, can the seller maintain replevin or how can he lawfully exercise a right of repossession? Had not defendants here recaptured the automobile by direct action and were they in court as plaintiffs in a replevin action, how would they prove a right to possession, except as in Halos v. Nachbar, 196 Minn. 387, 265 N.W. 26,infra, by endeavoring to show a breach of the void contract? Holding, as the majority does, that the contract is wholly void as to the buyer as well as to the seller permits the usurious seller to recapture the property at any time, and we thereby encourage the making of usurious contracts by the sellers, because they will run no risk whatever of losing the property, but may recapture it at any time. In many instances the purchaser will pay the usurious interest as well as the purchase price. By the majority decision, that is what the purchaser must do hereafter to protect his investment if he has paid anything on the contract, if, indeed, that will be any protection.
It strikes me that when the statute in regard to usury says that such contracts shall be void it merely means, as this court said in Lukens v. Hazlett, 37 Minn. 441, 35 N.W. 265,supra, that they shall be void as to the lender or, in this case, as to the seller; that the contract which we have under consideration here serves to pass possession to the purchaser; and that that possession may not be disturbed.
In Halos v. Nachbar, 196 Minn. 387, 265 N.W. 26, this court had before it a transaction similar to the one at bar. There the defendant Nachbar made a usurious loan to the plaintiff, covering it by a conditional sales contract in which the Torrance Motor *Page 585 Company appeared as the seller. It then assigned the contract to Nachbar. By that arrangement, Nachbar placed himself in the same position as defendants here. Upon default, Nachbar got possession of the automobile which was the subject of the contract. Halos sought recovery by replevin, and this court held that, since the only claim that Nachbar could assert, either of title or right of possession, came through the contract executed to evidence the transaction, and that contract was tainted with usury, Halos could recover possession of the automobile. That there was a loan instead of a usurious agreement to pay interest on the purchase price does not change the application of the law where, as here, usury vitiates the contract as to the usurer. The contract here under consideration fixed the price and then provided interest on that price at a usurious rate. It differs entirely from a case where there is a cash price and a higher price on time.
In the case at bar, the only right to possession which defendants had was under the usurious contract, void as to them but not as to plaintiff.
I am not persuaded to follow the majority opinion in the case of Morgan M. F. Co. v. Oliver, 101 Utah 492, 503,124 P.2d 778, 783, for the reason that the Utah statute, as interpreted by the Utah court, provides in substance:
"* * * that it will place the parties as they were before the contract — in so far as property given as security for the repayment of the 'loan of forbearance' is concerned."
Nor is the case of Dunlop v. Mercer (8 Cir.) 156 F. 545, controlling. There the federal court held that the federal courts were not foreclosed from entertaining suits by unqualified foreign corporations in controversies of which the statute and acts of congress give the federal courts jurisdiction. Also, in that case, the so-called conditional sales contract was but a bailment of goods for sale by the bailee, and consequently the rule which we are considering here does not apply. At any rate, the court there held that the Minnesota statute in regard to foreign corporations did not make the contract under consideration void. *Page 586
My impression is that the trial court was correct in its first holding and that the judgment should be reversed.