I dissent.
The main issue presented in this case was whether the transaction between plaintiff and defendants was usurious. The transaction was in the form of trust receipts and the court erroneously instructed the jury, as is conceded by the majority opinion, that a trust receipt transaction can never be usurious and if it was found to be such an arrangement in this case, defendants must recover. Yet it is held that there was no prejudice—that the jury was not misled. I think it is clear that the majority opinion itself demonstrates that the jury was misled. The parties and the trial court were confused as to the law on the subject and hence the erroneous instructions were given. How then may it be said the jury was not confused?
Turning to the law involved, it appeared that the trust receipt instruments were between plaintiff-dealer, as trustee, and the company-financier, as entruster, and provided that the trustee “holds in trust” for the entruster, “as security for payment of the amount hereinafter set forth on the due date hereinafter specified,” the described furniture, “in which personal property a security interest remains in or is hereby transferred to Entruster as security for such payment. Trustee agrees to hold said personal property in trust as the property of Entruster for the purpose of sale or exchange and to deliver same to the Entruster upon demand. Entruster may *792at any time examine said personal property and the books and records of the Trustee with reference thereto and may at any time either before or after the due date repossess said personal property without notice or demand of any kind and for such purpose Bntruster or his representatives may without legal process enter any premises in which said personal property is located. Bntruster may insure said personal property against the hazards of fire and theft while held by the Trustee for not less than the amount secured hereby, and the Trustee agrees to pay the premiums and charges for such insurance to Bntruster upon demand and until so paid same shall likewise be secured hereby.
“. . . The Trustee may, however, sell said personal property for cash or on terms approved in advance by Entruster for not less than the amount due Bntruster hereunder, including insurance premiums and charges; provided, however, that upon such sale all moneys hereby secured shall become immediately due and payable and all of the proceeds and considerations received in such sale shall be forthwith delivered to Bntruster as security for payment of said moneys and until so delivered shall be held by the Trustee separate from the funds of the Trustee and as security for such payment.” The articles of furniture are described and an amount named “Amt. Secured” is set opposite each, together with the due date. On repossession of the property by the entruster it may sell it and apply the proceeds to the expenses of the sale and “to the satisfaction of the Trustee’s indebtedness hereby secured; and, fourth, to the payment of any other obligation owed by Trustee to Bntruster. The Trustee shall receive any surplus and shall pay into Bntruster upon demand any deficiency. . . .
“In the event of default by the Trustee in the payment of any moneys hereunder due on the due date hereof, Bntruster may declare all moneys secured immediately due and payable. In event of such default Bntruster may at his option and in lieu of sale as hereinabove provided declare a forfeiture of the Trustee’s interest in said personal property against cancellation of the then remaining indebtedness in accordance with the provisions of Section 3016.2 of the Civil Code of the State of California.”
It is quite clear that the transactions were standard trust receipt arrangements as they are established by the Uniform Trust Receipts Law. (Civ. Code, §§ 3012-3016.16.) That law defines an entruster as one who has directly or by agent *793taken a “security interest” in goods under a trust receipt transaction, but does not include a person who owns goods and sells them on conditional salé for profit. (Civ. Code, § 3013 [3].) A “security interest” is a property interest in goods limited “to securing performance of some obligation of the trustee.” (Id., § 3013[12].) A “trustee” is a person “having or taking” possession of goods under a trust receipt transaction. (Id., § 3013[14].) “New value,” includes new “advances or loans” made, but not extensions or renewals of existing obligations of the trustee. (Id., § 3013[7].) A trust receipt transaction is any transaction where the entruster and trustee are parties for one of the purposes mentioned in the section (that is, applicable here, where the possession of the goods by the trustee is for the purpose of selling them [Id., § 3014(1) (3) (a)]), whereby “(a) The entruster or any third person delivers to the trustee goods ... in which the entruster (i) prior to the transaction has, or for new value (ii) by the transaction acquires or (iii) as the result thereof is to acquire promptly, a security interest . . . provided, that the delivery under paragraph (a) . . . either (i) Be against the signing and delivery by the trustee of a writing designating the goods . . . concerned, and reciting that a security interest therein remains in or will remain in, or has passed to or will pass to, the entruster. . . .” (Id., § 3014[1] [a] [b] [i].) The security interest of the entruster may be derived from the trustee or from any other person. (Id., § 3014[1].) Under the initial oral agreement here, the method by which the transactions were handled, we have at least a situation where the purpose of the arrangement was to enable plaintiff-trustee to have possession of the goods for retail sale; defendant company-entruster acquired its security interest from the plaintiff-trustee; the goods were delivered to the trustee by a third person, the factory-seller and the entruster “by the transaction is to acquire promptly” a security interest. The trust receipts declaring the security interest in the entruster were executed immediately after the trustee obtained possession of the goods from the seller in conformity with the prior oral understanding. The entruster gave new value, that is, the payment of 90 per cent of the cost of the goods. We do not read the uniform law as requiring that title pass to the entruster from the seller-factory, that is, that a tripartite arrangement is required between the seller, retail dealer and financier. As long as it is a part of the same transaction, and the steps are in close proximity, we have a trust receipt. *794Here the advancements were made to enable the dealer-trustee to buy from the seller and the advances were to be secured by trust receipts. All according to an oral understanding, and promptly upon delivery of the goods by the seller to the trustee, the advancements were made, the seller was paid, and a trust receipt executed which vested a security interest in the entruster. It is true that a trust receipt under the uniform law is not a negotiable promissory note, for it is not an unconditional promise to pay a sum certain. It is a method of “securing a debt and not creating a debt.” Nor is it a chattel mortgage or conditional sale. (Commercial Discount Co. v. Los Angeles County, 16 Cal.2d 158 [105 P.2d 115] ; Chichester v. Commercial Credit Co., 37 Cal.App.2d 439 [99 P.2d 1083].) Nevertheless, the transaction is a security transaction. As said in Commercial Discount Co. v. Los Angeles County, supra, 16 Cal.2d 158, 161, after stating that a trust receipt is a method of securing a “debt” not creating a “debt”: “There is nothing in the law which would prevent the execution of a promissory note or notes representing the amounts secured by the trust receipts. It does not appear that the plaintiff took notes from the automobile dealers for that purpose and the ease is presented on the theory that the obligations to repay the money loaned rested in parol.” In Chichester v. Commercial Credit Co., supra, 37 Cal.App.2d 439, the order for ears was placed by the retail dealer with the factory-seller and the financier paid the seller for them and they were shipped, the bills of lading going to the financier who turned them over to the dealer on his signing a trust receipt and he then got possession of them. While that was a tripartite transaction, the court said (p. 443) : “Prior to the adoption of the Uniform Trust Receipts Law, the only instance where the security title of a trust receipt holder was permitted to prevail against the claims of creditors of the trustee or against his trustee in bankruptcy, was where the title of the entruster or trust receipt holder was derived from someone other than the trustee. (Arena v. Bank of Italy, 194 Cal. 195 [228 P. 441] ; In re James, Inc., supra [30 F.2d 555] ; In re Fountain, 282 F. 816 [25 A.L.R. 319].) Where the title of the entruster was derived from the trustee and not from some third person, the transaction was treated as being similar to a chattel mortgage and was held to be void as against creditors of the trustee in the absence of recordation . (Arena v. Bank of Italy, supra.)
“If in the instant case defendant held the title to the automobiles at all times, as was found by the court, deriving *795such title directly from the Chrysler Corporation, its security interest would be protected under the former law as well as under section 3016.4 of the Civil Code. The evidence discloses with respect to the Chrysler automobiles that although they were shipped by the Chrysler Corporation directly to Reagan, accompanied by invoices made out to Reagan, the bills of lading were made out to, and were sent directly to defendant. The evidence is conflicting as to whether sight drafts were attached to all of such bills of lading, but it appears without controversy that in every instance, whether by paying such drafts, or by other arrangements, defendant paid the full purchase price for such automobiles directly to the Chrysler Corporation. Moreover, defendant paid all of the freight charges. The bills of lading were not delivered to Reagan until after the trust receipts had been signed. Concerning the Plymouth automobiles which were delivered from the Los Angeles office of the Chrysler Corporation, defendant after securing trust receipts from Reagan, ordered the ears to be delivered to Reagan’s place of business and paid the purchase price directly to the corporation. There is no evidence whatever tending to prove that Reagan at any time prior to signing the trust receipts, had either title to or possession of any of the automobiles in question. Although the trial court found that defendant was at all times the owner of the automobiles in question, it was of no consequence whether defendant’s title originated with the Chrysler Corporation or with Reagan.
“Plaintiff places great reliance upon the case of Arena v. Bank of Italy, supra, in support of his contention that a trust receipt which does not comply with the provisions of section 3440 of the Civil Code is void as against creditors of the trustee. That decision, however, is clearly distinguishable upon its facts from the instant case. It must be borne in mind that the Arena case was decided long prior to the enactment of the Uniform Trust Receipts Law. In the Arena case, one Dellaira having both the title and possession of certain goods, assigned and delivered possession of such goods to the Bank of Italy as security for an indebtedness; thereafter the bank restored the possession of such goods to Dellaira and, at the same time took the trust receipts in question from Dellaira. Obviously, whatever title or interest the bank acquired could only have been derived from Dellaira, the trustee under the trust receipts. . The court properly held that under the law which existed at that time, i.e., prior to the enactment of the Uniform Trust Receipts Law, the trans*796action was to be treated as being in the nature of a chattel mortgage and consequently void as against the trustee’s (debtor’s) creditors unless properly recorded.
“From the foregoing discussion it appears that under the former law the source of the entruster’s title was the controlling factor in determining whether or not a given trust receipt transaction was valid. However, under the existing law, by which the instant case is to be governed, the entruster’s security interest will be protected whether his title is derived from the trustee or from a third party. From an examination of section 3014 of the Civil Code, which defines trust receipt transactions, it is apparent that the legislature intended to include within the general provisions of the law all trust receipt transactions without regard to the source of the entruster’s title. That section provides, among other things: ‘The security interest of the entruster may he derived from the trustee or from any other person, and hy pledge or hy transfer of title or otherwise.’
“The only case which has come to our attention, involving an interpretation of the California Uniform Trust Receipts Law, is In re Boswell, 20 F.Supp. 748, affirmed in 96 F.2d 239. The facts of that ease were similar to those of the Arena ease in that the entruster derived its title from the trustee who had both possession and title to the merchandise covered by the trust receipt. Thereafter the trustee became bankrupt and action was brought by the entruster to reclaim the merchandise from the trustee in bankruptcy. It was held that under the sections of the ‘Civil Code comprising the Uniform Trust Receipts Law, such a transaction was valid and enforceable and that the entruster was entitled to reclaim the merchandise in question from the trustee in bankruptcy.” In re Boswell, 20 F.Supp. 748, affirmed 96 F.2d 239, approved in the Chichester case, involved a situation where the retail dealer bought the merchandise on open account from the seller-factory and title passed to him and the bank-financier advanced $800 to pay for it and took notes representing the amount and a trust receipt as security. In In re Chappell, 77 F.Supp. 573, 575, it is said: “In order to constitute a trust receipt transaction under the Oregon Uniform Trust Receipts Law the entruster bank must acquire its security interest prior to or at the same time as delivery is made to the dealer, or delivery must be made under some arrangement whereby the security interest is to be acquired ‘promptly.’ Section 75-102, O.C.L.A. In other words, the delivery of the *797goods to the dealer must stem from an arrangement between the bank and the dealer for the acquisition of the goods by means of advances from the bank.” (See, also, Automobile Banking Corp. v. Weicht, 160 Pa. Super. 422 [51 A.2d 409] ; Peoples Finance & Thrift Co. v. Bowman, 58 Cal.App.2d 729 [137 P.2d 729]; Universal Credit Co. v. Citizens State Bank of Petersburg, 224 Ind. 1 [64 N.E.2d 28, 168 A.L.R. 352] ; 57 Yale L.J., 761; 5 Fordham L.Rev., 17, 240; 16 Wash. L.Rev. 1, 10; 41 Colo.L.Rev., 1134; 3 Univ. of Chicago L.Rev., 26.) ■ Plaintiff seeks to distinguish the Chichester ease on the ground that there was at the time that case arose a subdivision (c) to subdivision (1) of section 3014, which read: “. . . or (c) the entruster gives new value in reliance upon the transfer by the trustee to such entruster of a security interest in goods or documents in possession of the trustee and the possession of which is retained by the trustee ...” which subdivision was later eliminated by amendment (Stats. 1939, p. 2826), and a special provision was added for the protection of motor vehicle and aircraft dealers, reading: “A trust receipt transaction is also one in which, pursuant to a trust receipt, a motor vehicle dealer or aircraft dealer as trustee obtains new value from an entruster upon the transfer to the latter of a security interest in new or used motor vehicles or aircraft, whether or not such vehicles or aircraft are owned or possessed by the trustee prior or subsequent to the execution of the trust receipt document, and whether or not such vehicles or aircraft are thereafter retained in the trustee’s possession.
“All of the provisions of this chapter which are applicable to the trust receipt transactions enumerated in Section 3014 are applicable to the trust receipt transaction specified in this section.” (Civ. Code, § 3014.5.) But the Chichester case was not based on said subdivision (c) as seen from the quotation therefrom, supra. The transaction here concerned, falls within subdivision (a) of subdivision (1) and the next to last paragraph in subdivision (1). The special provision for motor vehicles and aircraft deals with cases where the dealer has possession of the goods prior to and wholly independent of the trust receipt. There is no relation between his possession and the trust receipt. Here the whole thing was a part of a continuous transaction.
As plaintiff’s first cause of action is for allegedly usurious interest, defendants urge that there could be no such interest for the reason that “trust receipts” are not subject to the usury law (Cal. Const., art. XX, § 22; Stats. 1919, p. lxxxiii), *798as they are not a loan or forbearance of money. We find nothing in the trust receipts law that exempts such transactions from the usury law. As above seen they are a sui generis type of security transaction, somewhat like a chattel mortgage, pledge or conditional sales contract, but different from any of them. The fact remains that the transaction is a method by which the performance of some financial obligation is secured, the same as is true of other security arrangements such as chattel mortgages. Being only the security instrument, like a chattel mortgage, accurately speaking, it is not the loaning instrument—or one containing the promise to pay or do some other act. Such features are usually found in promissory notes or collateral promises to perform. In trust receipts the main purpose is to assure the entruster that he will be repaid the money advancements he has made to enable the trustee-dealer to obtain possession of and sell merchandise. He may be in the position of a lender to the dealer-borrower. The obligation or promise for which the trust receipt is given, must be examined to determine whether there has been a loan or forbearance and whether the interest is too high. In Oil City Motor Co. v. C. I. T. Corp., 76 F.2d 589 [104 A.L.R. 240], the finance company paid the price of the cars to the seller and they were then shipped to the dealer and the latter gave a trust receipt to the company, thus enabling the dealer to obtain the ears with the instruments of title. If that case purports to stand for the proposition that such transactions may never be loans within the usury laws, we cannot agree with it. It is based upon the proposition that a sale or loan of credit is not a loan of money and therefore not within the usury law, a principle which is subject to the qualification that such a device may not be used as a cloak for usury. It has been said: “It is well settled that the usury law is inapplicable to a transaction amounting merely to a loan or sale of credit, and a loan of money, to facilitate which a loan of credit is made, is not rendered usurious by the payment of, or agreement to pay, a sum exacted for the loan of the credit. However, it is difficult to lay down any general rule as to what amounts to a sale of credit as distinguished from a loan. Although the transaction must not be a mere cover for usury, and in the decision of this question the intent of the parties is important, generally speaking, consideration must be given to the particular facts in order to determine whether one of the parties to the transaction is to advance money, or whether the advance is *799to be made in the first instance by a third party. If, for instance, the transaction is one not contemplating the immediate advance of money by a party thereto, but merely a means of enabling one of the parties to procure funds from a third party, it is properly deemed a sale of credit, as regards the usury statutes, although eventually the party permitting the use of his credit has to advance the money before he is placed in funds or property by the one receiving the credit.” (55 Am.Jur., Usury, § 25.) The most common and clear instance of its application is where a person guarantees payment by the maker of a promissory note. (See 104 A.L.R. 245.) Where, however, as a part of the transaction, the lender in fact advances the money to purchase the merchandise for the dealer, with an express or implied promise to repay the money, together with what qualifies as interest under the usury law, there may be a loan of money. (See Osborne v. Fuller, 92 S.C. 338 [75 S.E. 557, 42 L.R.A.N.S. 1058]; Wood v. Angeles Mesa Land Co., 120 Cal.App. 313 [7 P.2d 748].) An issue to be determined, therefore, is whether the basic transaction constituted a loan or forbearance within the meaning of the usury law.
The majority opinion says that the case is not a close one; that the instructions permitted the jury to find the transactions were trust receipts and yet loans, for it could find that the trust receipts were bona fide and to secure flooring of the furniture and not an agreement for interest, that is, in effect, that if they were flooring contracts, there was no usury. Not only is that not true but the majority concedes it is not, later in the opinion, where it is said: “The security transactions here, although not conditional sales contracts in the usual sense of the term, are ‘flooring contracts’ within the meaning of the act and within the definition of ‘flooring contracts’ accepted by plaintiff.” But, obviously, flooring contracts are the same as trust receipts. The ultimate holding is therefore that flooring contracts—trust receipts—are not subject to the usury laws.
As I have pointed out, the case was a close one. Indeed the evidence is overwhelming that the transactions were loans for which interest was charged which exceeded the legal limit. There is evidence from which it may be inferred that the transaction was a loan of money rather than a loan or sale of credit, or any other transaction, such as the actual advance of the money to either plaintiff or the manufacturer, carrying with it an implied promise to repay together with *8001 per cent per month. The trust receipt refers to an “indebtedness” for which it stands as security; that a “security interest” is transferred to the entruster-defendant, thus negating a sale of the property. In some of defendants’ accounts the 1 per cent item has the letters “Int.” after them, indicating interest. Defendants are in the lending and financing business, not the retail furniture business. Defendants’ explanation of the arrangement with plaintiff is weak and conclusionary, barely sufficient to create a conflict in the evidence. Kenneth Forrest, one of the officials, testified that it was for trust receipts and plaintiff Klett “asked me or rather told me he had been in the furniture business for approximately thirty years; that he understood it very thoroughly; he was forming a partnership with a Mr. Raymond Parker and Mr. Parker was going to put up $7500.00 and he was going to put up his ability and they were going to start a furniture store on the Davis Highway and Mr. Parker at that time had not put up all his money and he had only put up, if I remember correctly, around $2000.00 or $2500.00 and that he would like to find some way to have furniture placed in his store and asked me if I would be able to do his financing for him and I told him it was impossible for me to finance any furniture because it did not have a serial number on it, that if he would like to floor his merchandise such as appliances that I would be glad to do it for him and he told me that I had known him for considerable time and he would be glad to place a serial number on each individual piece of furniture and under those circumstances would I floor merchandise for him and I told him, after some conversation back and forth regarding his experience, I told him I would do it and I told him when I would be able to do it under trust receipts, that I would send the checks direct to the factory on each particular deal and that he would put up 10 per cent and I would charge him 1 per cent a month and at that time he stated he had some furniture in Sacramento already, I asked him, is it paid for and he said it was and I told him that we would purchase the furniture in Sacramento on trust receipts and pay him 90 per cent of that and charge him 1 per cent of that also . . . and, about that time, he asked me if I would also handle his contracts and.I told him . that I would be glad to purchase his contracts but that I would have to buy them non-recourse as we didn’t have a loan license and it would be necessary that we buy the contracts non-recourse and that our charge for purchasing them was approximately 17 per cent and he said that was perfectly *801satisfactory, that he would be glad to do business with us on that basis . . . Mr. Klett asked me if I would be able to finance about $5,000 and I told him that we would, in fact, we stipulated at that time we wouldn’t go over $5,000.” In regard to the 1 per cent per month charge, Forrest testified: “Q'. What was that 1 per cent for, Mr. Forrest? A. The charge of enabling him to have our furniture in his store and other consideration. Q. Would that be for, let us say, writing up the trust receipt and handling the invoice and such as that? A. Yes, sir, that would include writing up the trust receipt, the bookkeeper’s time, making up a ledger card and putting it in the books and making up the addressograph plate to enable us to send the notices, and the notices themselves and the mail. . . . Q. And for the use of that money you made a charge of 1 per cent, is that correct ? A. For the privilege of his having my furniture in his store I charged him 1 per cent a month. Q. For the privilege of his having your furniture in his store you charged him 1 per cent a month. A. That is right. Q. And is that 1 per cent—considerable of that 1 per cent, as you have testified, went into certain expenses ? A. That is right. Q. Do you know how much of the 1 per cent went into actual expenses ? A. Roughly, I would say about % of 1 per cent. Q. That is about half of it? A. The other half, I would say, was profit.” In other words the deal was to be by trust receipts and was to enable plaintiff to have furniture in his store—to finance him—to loan him money.
It will be noted that frequent references are made to trust receipts. Both parties agreed that instruments called trust receipts were used. A notice that they were engaged in trust receipt transactions was filed with the Secretary of State as required by law. (Civ. Code, § 3016.9.) The trust receipts, labelled by that name, were introduced into evidence. With everything pointing to a trust receipt arrangement and nothing to the contrary, the jury was told that if it was a trust receipt deal there was no usury—defendant could not recover. I fail to see how the jury could escape being misled to the prejudice of plaintiff. The parties and the evidence told them the arrangement was a trust receipt one and then as a clincher the court commanded them to hold for defendants if trust receipts were used. This court said in Sebrell v. Los Angeles Ry. Corp., 31 Cal.2d 813, 817 [192 P.2d 898] : “Instructions that are contradictory in essential elements may *802warrant the reversal of a judgment on the ground that it cannot be ascertained which instruction was followed by the jury.”
I would therefore reverse the judgment.
Appellant’s petition for a rehearing was denied May 15, 1952. Carter, J., was of the opinion that the petition should be granted.