Klett v. Security Acceptance Co.

SCHAUER, J.

Plaintiff appeals from a judgment, entered pursuant to a jury verdict for defendants, in this action for the recovery of usurious interest and penalties and for the conversion of certain furniture. We have concluded that no prejudicial error or miscarriage of justice is shown and that, in accord with the mandate of section 4½ of article VI of the state Constitution, the judgment should be affirmed. Because, however, there was error in instructing the jury, it is necessary to quote, or to epitomize in some detail, a substantial amount of the evidence to show that the error was not prejudicial.

Some of the testimony of plaintiff, such as that in reference to the circumstances of his meeting Mr. Parker and the events immediately preceding his dealings with defendants, scarcely seems material to either cause of action but since plaintiff evidently thought that these matters were important and the jury heard them from plaintiff’s lips, mention of them is made. The jury may have felt that the evidence threw some light on plaintiff’s circumstances, his business methods, and the nature of his dealings with defendants.

The Usury Cause of Action

Plaintiff, in November, 1945, was a furniture salesman employed by the Standard Furniture Company in Sacramento ; he decided that he wished to go into the furniture business on his own account. He had met a Mr. Parker, “the first time the day I came from Stockton to the Sacramento Alcoholics Anonymous Club, and we became friends through our work together, and in that philosophy we follow in Alcoholics Anonymous.” Mr. Parker “used to come to the store” where plaintiff was employed; further, according to plaintiff’s testimony, Mr. Parker said “he would like to go into the furniture business with me here. This conversation possibly went on for two or three months.” Plaintiff and Mr. Parker then, on November 13, 1945, orally agreed to form a partnership and on that date plaintiff left his employment with the Standard Furniture Company. Plaintiff testified, “I told Mr. Parker that I was unable to go into business as far as finances were concerned ... I said, ‘I will consider going in business with you if you will put up the money against my experience At that time he said he would arrange for twenty five hundred dollars, and not very long after he would have twenty five hundred dollars more. I said, 1 It would be useless to go in for less than five thousand dollars at this time. ’ ” On November 29, 1945, Mr. Parker “put up one thousand dollars” and on December 4, five hundred dollars. Parker advanced no more money. In the meantime, plaintiff testified, he expected a Dr. Leiser to purchase a storeroom and rent it to plaintiff; on the strength of his expectations of getting a location and the capital which Mr. Parker had promised, plaintiff made buying trips to San Francisco and Los Angeles and purchased several thousand dollars worth of furniture; he also purchased a used automobile.

Plaintiff testified, “there wasn’t any use in trying to establish a credit. ... I told the manufacturers we would pay for this merchandise when it was delivered, or before it was delivered ... I was to notify them for future delivery.” After the first $1,000 was advanced by Parker, plaintiff paid for some of the furniture he had ordered, paid $150 for a sales tax bond, and paid for the used automobile.

Plaintiff then discovered that Dr. Leiser had not purchased the building which he (plaintiff) had expected Dr. Leiser to purchase and lease to the new partnership, and, having no storeroom, plaintiff caused the furniture he had purchased to be placed in storage with Western Van & Storage Company. He then noticed (about December 2, 1945) that a building near the one which he had expected Dr. Leiser to purchase appeared to be empty; plaintiff contacted the owner, Avho at first was not interested in plaintiff as a tenant; however, although the OAA'ner would not enter into a lease he finally agreed to permit the new partnership to rent the building on a month to month basis on condition, suggested by plaintiff, that the latter “would give his son a position.” Upon this agreement plaintiff caused the stored furniture to be moved into the rented building on or about December 4 or 5. Mr. Parker put up the $500 above mentioned on December 4 and this sum went for “payment of rent and telephone deposits, gas and electricity deposits, and the general conduct of the business, and repairs. We had to put a floor in our store.”

Plaintiff repeatedly asked Mr. Parker for more money but Mr. Parker said it was not aA'ailable. On December 4, 1945, at plaintiff’s request, defendant Kenneth Forrest, vice-president of defendant finance company, met plaintiff at the latter’s home. Plaintiff, while an employe of Standard, had seen Mr. Forrest in the Standard store. Concerning their meeting on December 4, plaintiff testified, “I told him . . . that I was having difficulty and that difficulty was in getting enough capital to start this business. And I told him that Raymond Parker and I had agreed to go in business; and I told him it didn’t look like I was going to get very far on this new store without some financial assistance.

“I asked him if his company would be interested in any Avay in helping me finance this business. . . . We discussed furniture contracts, and the sale of furniture. And I told him that if he would help me at this time, in this way of financing or flooring,¹ that I AArould be able to give him a good deal of our sales contract business.² . . . And we dwelled a great deal on the plan we had been using [ ?] If he decided to do so, how Ave would sell our furniture contracts to him and his firm . . . And before he left my home he told me that he would go along with us after knowing the structure that we had at this time to the extent of five thousand dollars; and that I would have to floor, or finance with them only the major pieces of furniture. The smaller items he would not be interested in because it would be hard to keep track of. . . . He said ‘I will go along to five thousand dollars worth of flooring or financing.’ ”

Plaintiff and Kenneth Forrest arranged a meeting on December 5 with Kenneth’s father, president of defendant finance company, and plaintiff’s partner, Parker. At this meeting, plaintiff testified, the elder Mr. Forrest “told me that they would put 90 per cent into these purchases and that we would pay one per cent a month on the flooring, and that this merchandise would be paid off individually from these trust receipts³ that I signed later as we sold the merchandise and delivered it. . . . If the merchandise was on the floor for a period of thirty days we were to pay him one per cent a month for that privilege of having that, or whatever you want to call it, that flooring; but had the merchandise been sold before that time—for example, if merchandise would come in on the first of the month, and we sold it on the fifth of the month, we were also instructed that we were to pay one per cent at that time.”

It is apparent from plaintiff’s testimony as above quoted that he was asking for, and received, something more than a mere loan of money or credit for interest. He admitted that he had no credit and that it would be useless for him to try to establish credit. He was asking the defendants to finance his business; to do almost the very thing, short of becoming a partner, which Parker had agreed to do but had failed to do. He was asking defendants, in effect, to purchase for cash from manufacturers the major items of furniture which were to constitute his stock in trade; to pay 90 per cent of the cost thereof while plaintiff advanced only 10 per cent of such cost; to keep an inventory of each item of furniture so stocked; to permit plaintiff to have possession of such furniture, to display it on his salesroom floor and, ordinarily at least, not to expect to be repaid for his advances or his costs of doing business until and unless the furniture items were sold to retail purchasers; “we were to pay him [defendants] one per cent a month for that privilege of having that, or whatever you want to call it, that flooring.”

As indicated above it was agreed that defendant finance company would advance 90 per cent of the wholesale price of furniture selected by plaintiff for purchase, in a total amount not to exceed $5,000 (later increased to $7,500), that plaintiff would pay the remaining 10 per cent of the purchase price, and that title would be vested in defendants but possession for purposes of display on the salesroom floor would be in plaintiff. Pursuant to this arrangement plaintiff obtained from defendant finance company a series of loans. On the occasion of each loan plaintiff executed to the finance company a document entitled “trust receipt.”⁴ These documents evidence a security interest of the finance company in furniture which is described therein and which plaintiff, by virtue of the arrangement, put in his store, exhibited, and sold or attempted to sell to retail customers. The finance company made a monthly charge of one per cent of the face amount of each “trust receipt.” Also, during the period of the dealings between the parties, plaintiff, pursuant to the previously mentioned oral arrangement with Forrest, sold conditional sales contracts between plaintiff and his retail customers to the finance company, at discounts which amounted to about 17 per cent of the face value of the.contracts; the sales of these contracts were without recourse by the finance company against plaintiff.

Plaintiff has discussed at great length the elements of a trust receipt relationship before, and after enactment of the California version of the Uniform Trust Receipts Law (Civ. Code, §§ 3012-3016.16) and has argued at great length that the elements of the relationship described in that law were not present in the various “trust receipt” transactions here.⁵ Plaintiff’s arguments in this regard concern aspects of the trust receipt transactions which would be relevant only if rights of third parties (e.g., persons with prior liens on the furniture) were involved. Since it is undisputed that the transactions resulted in some sort of security interest in the finance company and since the name of the type of interest is immaterial, it is unnecessary to describe in detail the manner in which these various transactions were handled or to construe with particularity the Uniform Trust Eeceipts Law in its exact application to each transaction. For convenience of discussion the documents entitled “trust receipts” will be so referred to, but from this reference no implication that we are passing upon the law of trust receipts in relation to possible intervening rights of third persons is to be drawn. Our concern here is not whether the requirements of the Uniform Trust Eeceipts Law were met in all respects, but whether the jury’s verdict that usury was not committed and that defendants did not convert plaintiff's property can properly be sustained.

Plaintiff urges that as a matter of law the one per cent per month charges were interest at a rate in excess of that permitted by section 22 of article XX of the state Constitution.⁶ The controlling issue, however, as to this element of the case, .is whether the monthly charges were exclusively for the forbearance of money or were for other services either wholly or at least in such part as to leave the amount paid as interest, if any, within a legal rate. This presents a question of fact and the evidence on it is conflicting but the issue does not appear to be a close one. Plaintiff’s own testimony conflicts within itself; in significant parts, however, it corroborates the testimony of defendant Kenneth Forrest (the only defendant who testified).

Plaintiff in his testimony variously described the charges as “for the privilege of having that . . . flooring” and as “interest.” Forrest testified that in their preliminary negotiations “I mentioned the fact to Mr. Klett that I would charge him 1 per cent a month charges on flooring of merchandise.” Forrest further 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. Tes, 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 notice, 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.” Plaintiff himself testified, it will be remembered, that “we were to pay him [Forrest] one per cent a month for that privilege of having that . . . flooring.” Further tending to support the implied finding of the jury that the one per cent charge was intended by the parties not as interest but as compensation for the arrangement under which plaintiff, without substantial capital or credit, was enabled to start and carry on a business and to that end was allowed to select for purchase, purchase, and display the furniture in his store, are plaintiff’s references in his testimony to his “ten per cent equity” in the furniture as to which the finance company was advancing 90 per cent of the wholesale price.⁷

Plaintiff further urges that as a matter of law the sales of his conditional sales contracts to the finance company at discounts of about 17 per cent were made under a scheme which secured to the finance company a collateral advantage and which was made for the sole purpose of evading the usury laws by giving the finance company a usurious profit on the loans. Such a scheme is usurious. (Terry Trading Corp. v. Barsky (1930), 210 Cal. 428, 432 [292 P. 474].) But there is ample evidence to support the implied finding of the jury that the discount sales of the conditional sales contracts were bona fide sales of property, were without recourse as against plaintiff or his partner, and were transactions made at plaintiff’s request, and not part of a usurious scheme. (Cf. Milana v. Credit Discounting Co. (1945), 27 Cal.2d 335, 340 [163 P.2d 869, 165 A.L.R. 621].)

In connection with his argument that he was forced to sell his conditional sales contracts unprofitably plaintiff (citing 65 C.J., p. 101, § 177, and 22 C.J., p. 104, § 46) says that there is a presumption that the market value of those contracts was their face value. Since it is a matter of common knowledge that many retailers customarily discount such contracts and many finance companies purchase them, we cannot agree that there is any such presumption.

Plaintiff asserts that even if the evidence does not show as a matter of law that the discounting of the contracts was a device to evade the usury laws, certain rulings of the trial court prevented him from properly presenting the question to the jury as one of fact. He complains of the trial court’s refusal to give the following formula instruction (requested by plaintiff): “if you find that the relationship existing between plaintiff and defendants herein was that of borrower and lender, insofar as the transactions occurring between the plaintiff and defendants evidenced by trust receipts are concerned, and you find that said transactions were in fact loans of money,⁸ and yon further find that as a condition of making such loans the defendants required the plaintiff to sell to said defendants at less than their reasonable, fair market value time contracts covering the sale of furniture by plaintiff to plaintiff’s customers, then you must find that for the purposes of this action the amount under the reasonable, fair market value that each time contract was discounted is to be considered interest.” The instruction was properly refused, for “the mere fact that ... [a borrower] may have been required to enter into an unprofitable contract as a condition to a loan of money would not itself make the loan usurious.” (Terry Trading Corp. v. Barsky (1930), supra, 210 Cal. 428, 432.) Furthermore, as will appear more in detail from instructions hereinafter quoted, the jury were properly instructed that “all the circumstances [and dealings of the parties] must be inquired into to determine whether . . . there was a usurious charge of interest.”

Plaintiff further complains that he was not allowed to prove the fair market value of the conditional sales contracts because, when he asked Forrest, on cross-examination and with no offer of proof or statement of purpose, whether the 17 per cent discount was “about the prevailing rate of discount,” defendants’ objection to the question was sustained. If we assume that the question was designed to elicit evidence of the fair market value of conditional sales contracts, and that it was proper on cross-examination of defendant Forrest after plaintiff had rested his case on direct examination, the sustaining of the objection thereto nevertheless could not have prejudiced plaintiff because, as previously stated, the jury impliedly found upon ample evidence and sufficient instructions that defendants did not require the sale of the contracts as a condition of making the loans. In this connection the jury were told, among other things, that “where different transactions have been entered into and these different transactions are relied upon in making a charge of usury all the circumstances must be inquired into to determine whether or not such collateral agreement or separate agreement was intended to be and was a part of another agreement, and considering the two together there was a usurious charge of interest.” (See also further instructions quoted infra, pp. 786-787.)

As hereinabove mentioned, the court apparently accepted the view of the law suggested in plaintiff’s opening statement and offer of proof as quoted in footnote 8, supra, page 781, and gave instructions which erroneously assume that a “trust receipt” transaction and a usurious loan are mutually exclusive concepts.⁹ In fairness to plaintiff it is pointed out that while he made the opening statement, offer of proof, and request for instruction as shown in footnote 8 and its context, he did not request the instructions quoted in footnote 9; these latter instructions appear to have been formulated and given by the court of its own motion. Trust receipts are “a method of securing a debt and not of creating a debt” (Commercial Discount Co. v. Los Angeles County (1940), 16 Cal.2d 158, 161 [105 P.2d 115]) ; there can be no such thing as a security interest which secures no obligation. If Oil City Motor Co. v. C.I.T. Corp. (1935), 76 F.2d 589 [104 A.L.R. 240], purports to stand for the proposition that trust receipt transactions cannot be loans within the usury laws, then we cannot agree with it. As we understand the Oil City case, however, it is based upon the rule, not applicable here, that (p. 591 of 76 F.2d) ‘‘A return demanded and received for a bona fide loan or extension of credit as distinguished from a loan of money does not taint the transaction with usury regardless of the amount ... if the transaction is in good faith and not a mere . . . device to conceal usury.”

We pass over the question as to whether plaintiff should be foreclosed, because, it may be argued, he induced the erroneous view, from raising the contention that the giving of the instructions quoted in footnote 9 was error, and we consider the contention on its merits. We recognize that such instructions are clearly erroneous to the extent that they imply that trust receipt transactions and loans are, respectively, inherently and necessarily exclusive each of the other, and to the extent that they advised the jury that “If the transactions . . . were trust receipt transactions and not loans, then the question of interest is not involved”; nevertheless, if all the instructions are read together, in the light of the evidence, it appears that the error could not reasonably, and plaintiff upon whom as appellant the burden rests has not shown that it did, result in a miscarriage of justice. It is obvious that in fact and in law loans were made, else there would have been no obligations for the trust receipts to secure, and it is equally obvious that documents in the form of trust receipts were used to evidence a security interest which, if the transactions were bona fide, was created.

The error in the instructions quoted at length in footnote 9 lies in the statement that “If the transactions . . . were trust receipt transactions and not loans, then the question of interest is not involved, and under such circumstances there can be no claim of usurious or unlawful interest”; in the statement that “In determining whether the transactions were loans or whether they were under trust receipts, you must,” etc.; and in the statement that “It is necessary for you to determine whether the transactions were loans or were trust receipt transactions.” But in the lengthy substance of the instructions in question, after the opening paragraphs, the court implicitly predicates applicability of such instructions upon the condition “If you find as follows:” and then details facts which must be found if the subject instructions are to be given effect. Such facts all go to the question of good faith and substantiality in the use of the trust receipts, not to conceal a device for securing usurious interest, but to evidence a security interest in, and exclusively in, a bona fide flooring transaction in which legitimate charges other than for interest could be made. To this effect such instructions particularly specified as conditions (which must have been found to exist before the instructions would have been applicable) that it was agreed “that the defendants were to finance the plaintiff in his business” (not merely to loan money for interest to a going concern with established business and credit); that the furniture was actually bought from “several manufacturers in Los Angeles, who understood plaintiff was to be financed”; that the furniture so purchased was placed in plaintiff’s store; that plaintiff “did at once take the invoices over to the defendants . . . and that the parties did then and there sign a document . . . designated trust receipt ; . . . that defendants did immediately give to the plaintiff a check to cover the amount thereof; that it was understood and agreed by the parties that they were, and it was the intent of each, that a trust receipt transaction was contemplated ; and if you further find that the goods were placed in plaintiff’s store, and that both parties so acted that thereby the goods were ‘floored,’ and that both recognized that plaintiff was .trustee . . . and did not have title thereto to dispose of the same, except under the terms of the trust receipt and that defendants as entrusters had a security interest, and each party understood and agreed that the interest of the plaintiff was that of a trustee, as referred to ... in the trust agreement; . . . that there was no understanding or agreement express or implied, other than the above, if you so find the facts to be, then I instruct you that it would be your duty to find that the transactions as between the parties were trust receipt transactions and not loans.” (Italics added.) Obviously it was error to give an instruction, standing alone, that if the transactions were trust receipt transactions they were not loans, but it is also obvious that applicability of that instruction was conditioned on the jury’s finding that the trust receipt transactions were bona fide and to secure flooring of the furniture and not to conceal or secure any hidden agreement for the mere payment of interest.

Furthermore, the erroneous statements are to be considered in the light of other instructions given, hereinafter quoted. The jury were told that they must consider the instructions as a whole. So considered, the instructions make it clear that the ultimate issue actually to be decided was not whether the transactions were trust receipts or loans; that it was whether the loans, or the transactions by whatever name they might be called, were or were not usurious. The jury were told what a loan is¹⁰ and under the undisputed evidence, as already indicated, it would seem that they must have found that there were loans here. Trust receipts were partially explained to them, by quotations from the Uniform Trust Receipts Law, in such a manner that, in the light of the evidence, it would seem that they must have found, as likewise already indicated, that there were trust receipts here. Moreover, the jury were told to look to all the circumstances in determining whether there was a usurious charge of interest.

Following are the instructions to this effect which were given at plaintiff’s request: “A contract or agreement involving a loan of money may be verbal or in writing, and the promise or obligation to repay or return the money may be secured or unsecured. The form of instrument by which a borrower hypothecates or puts up property to secure the repayment of the money borrowed does not in and of itself change what is in fact a loan of money into something else. Such instrument may be in form a mortgage contract, a pledge contract, a trust receipt contract [italics added] or any one of a number of other writings made to secure the obligation, and you are instructed that if from all the circumstances surrounding the transactions occurring between plaintiff and defendants you find that the transactions were in fact loans of money, then any such instrument or instruments purporting to transfer an interest in property solely for the purpose of securing repayment of the money borrowed does not change what in fact was a loan of money into some other form of obligation. In other words, once a loan of money is made, any instrument executed or given to secure repayment of that loan of money does not change or destroy the fact that a loan of money was made in the original instance.”

“The intent with which the usury is committed is immaterial, for the voluntary taking of more than the legal rate of interest constitutes usury. Therefore the only intent necessary on the part of the lender is the intent to take more interest than the law permits. Usurious intent is implied if excessive interest is intentionally taken, and it is of no consequence that there was no specific intent knowingly to violate the usury law.

“However where different transactions have been entered into and these different transactions are relied upon in making a charge of usury all the circumstances must be inquired into to determine whether or not such collateral agreement, or separate agreement was intended to be and was a part of another agreement, and considering the two together there was a usurious charge of interest. . . . Under such circumstances the question is whether there was an intent to evade the law with regard to usury, and all the circumstances may be considered in the determination of such question. The burden rests upon the one charging usury to establish such charge. ’ ’

In the light of these instructions it would be attributing to the jury folly, or disregard of the charge to consider the instructions as a whole, to assume that they thought that the lengthy trial was had in order to determine whether the relationship of plaintiff and the finance company was that of borrower and lender or that of trustee and entruster (when it was undisputablv both), rather than to determine whether the loans secured by the trust receipts were usurious. It is clear—or at the very least plaintiff has failed to sustain the burden of showing convincing evidence to the contrary— that the jury rejected plaintiff’s contention that the finance company charged usurious interest because it is apparent from plaintiff’s testimony as a whole that he first conceived the notion that the transactions were illegal when he decided upon this action as a method of recouping his failing fortunes¹¹ after he defaulted on a payment due to the finance company.

Plaintiff also complains of the giving of the following instruction: “A lender is not prohibited from charging an extra and reasonable amount for incidental services, expenses or risk additional to the lawful interest, other than for the loan of money. He may make a reasonable charge for investigating, arranging, negotiating, brokering, making, servicing, collecting and enforcing his obligation.

“Such items, however, must be confined to specific service or expense incidental to the loan incurred in such a way as to preclude it being a device through which additional interest or profit on the loan may be exacted.”

This instruction, given at defendants’ request, is a correct statement of the law (In re Fuller (1940), 15 Cal.2d 425, 433, 434 [102 P.2d 321]; see Haines v. Commercial Mortgage Co. (1927), 200 Cal. 609, 616 [254 P. 956, 255 P. 805, 53 A.L.R. 725], pointing out that a general charge for “expenses” or “services” not attributable to any particular expense or service may well be but a device to evade the usury law). Plaintiff asserts that the instruction conflicts with the provision of section 22 of article XX of the California Constitution that “No person ... or corporation shall by charging any fee, bonus, commission, discount or other compensation receive from a borrower more than ten per cent per annum upon any loan or forbearance of any money ...” Legitimate charges for specific items of actual service and expense are not, as plaintiff seems to believe, compensation for the loan of money; i. e., such charges are not interest; and the statement in Carter v. Seaboard Finance Co. (1949), 33 Cal.2d 564, 579 [203 P.2d 758], that the quoted constitutional provision was intended “to prevent lenders from circumventing the limits on interest ... by forbidding any charges whereby the borrower is required to pay more than the 10 per cent,” does not mean that charges which are not interest become interest by reason of the constitutional amendment.

There was received in evidence, over plaintiff’s objection, the statement of trust receipt financing which, under section 3016.9 of the Civil Code, may be filed by an entruster with the Secretary of State. The statement was merely some evidence that the finance company intended to lend money to plaintiff on the security of trust receipts. Its admission could not have prejudiced plaintiff. He, himself, proved the fact.

The Conversion Cause of Action

On December 16, 1946, after defendants had been financing plaintiff under the “trust receipt” arrangement for about a year, plaintiff issued to defendants his check for the amount due under one of the “trust receipts” which covered furniture which had been sold by plaintiff to a retail customer. . The check was not honored because there were insufficient funds in plaintiff’s bank account. Also at this time plaintiff, in violation of the terms of “trust receipts,” had not turned over to defendants the proceeds of sales of certain other furniture which was covered by such “trust receipts.” The due dates on the other “trust receipts” covering the furniture in plaintiff’s store had passed. After the cheek was dishonored defendant Forrest made several oral demands that plaintiff make good the check, and that he pay the entire amount due to the finance company (about $7,030) or surrender possession of the entrusted furniture. Plaintiff stated that he had no money with which to pay the finance company. On December 27, 1946, Forrest, as he had told plaintiff he would do, came to plaintiff’s store and took all the furniture which was covered by “trust receipts”; Forrest also took other furniture, not covered by “trust receipts,” of a value equal to that of the furniture which plaintiff -had improperly sold without delivering the proceeds.

The complaint on which the case was tried alleges that defendants on December 27,1946, converted, took, and carried away the furniture; that plaintiff thereafter demanded and defendants refused return of such furniture; and, upon information and belief, that defendants subsequently sold the furniture.

The jury, adequately instructed,¹² impliedly found upon sufficient evidence¹³ that plaintiff consented to the taking of the furniture on December 27. Since plaintiff consented to the taking of the furniture, that taking was not a conversion, and the following contentions of plaintiff (together with related contentions concerning the instructions) ' are without merit: that Forrest improperly took some furniture which plaintiff had already sold to retail purchasers; that plaintiff was not in default (because of a waiver of default) and therefore defendants could not sell the furniture without notice to plaintiff; that because defendants were not licensed under the Personal Property Brokers Act (Stats. 1909, p. 969, as amended; 2 Deering’s Gen. Laws, Act 5825 (2d)¹⁴) the loans were void (§ 21) and therefore the sale of the furniture in which the finance company had only a purported security interest amounted to a conversion.

Furthermore, the Personal Property Brokers Act had no application. The act did not apply to “bona fide conditional contracts of sale involving the disposition of personal property, when such forms of sales agreements are not used for the purpose of evading this act” (§ 4, par. (c)), and “As used in this act the term ‘conditional contracts of sale’ shall include flooring contracts” (§ 3). 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; hence they are included within the definition (§ 3 of the act) of conditional contracts of sale. (See plaintiff’s instruction quoted supra, footnote 1; Commercial Credit Co. v. Barney M. Co. (1938), 10 Cal.2d 718, 720 [76 P.2d 1181].)

Plaintiff complains that an objection to the following question addressed to him was sustained: “Now, assuming he [Forrest] did not have a right to remove that furniture, would you have consented to his taking any of the furniture ? ’ ’ Framed as it was, the question required plaintiff to speculate on what his action would have been. If plaintiff wished to adduce testimony as to his state of mind he could have testified to it directly rather than speculatively.

Certain evidence offered by plaintiff to prove the extent of his damages was rejected. Since the jury found against plaintiff on the issue of-liability and did not reach the issue of damages, plaintiff cannot now complain of the rejection of the evidence as to extent of damages.

Finally, plaintiff asserts that the jury were out too short a time to have properly deliberated. They retired at 11:10 a.m. and returned 25 minutes later with a signed separate verdict on each of the two counts. The jury were polled and, with the exception of one juror as to count 2, the verdicts for defendants were unanimous. We cannot conclude from this circumstance, either standing alone or in the light of the entire record, that there is reasonable ground for concluding that there has been a miscarriage of justice; accordingly the verdicts must be upheld. (Cal. Const., art. VI, § 4½.)

For the reasons above stated the judgment is affirmed.

Gibson, C. J., Shenk, J., Traynor, J., and Spence, J., concurred.

Edmonds, J., concurred in the judgment.

1 Tlie term “flooring,” as it is used in this case, was explained to the jury in the following instruction (given at plaintiff’s request): “Merchandise is ‘floored’ when it is financed under a trust receipt or similar title retention document, whereby a retail dealer obtains possession of the same from a distributor for exhibition and sale through payment to distributor by a bank or other financing agency.”

2 The “sales contract business” referred to by plaintiff is the sale at a discount of conditional sales contracts between plaintiff and his retail customers.

3 The form of the “trust receipts” is hereinafter quoted in footnote 4.

4 Sueh documents read in material part as follows: “Trust Beceipt . . . [Plaintiff] as Trustee holds in trust for Security Acceptance Co., Entruster, as security for payment of the amount hereinafter set forth on the due date hereinafter specified, and all other obligations of Trustee to Entruster whether heretofore or hereafter incurred, the following personal property: [description] ... 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 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 Entruster or his representatives may without legal process enter any premises in which said personal property is located. . . .

“. . . The Trustee may . . . sell said personal property for cash or on terms approved in advance by Entruster for not less than the amount due Entruster hereunder . . .; 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 Entruster 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.

“In event of the repossession of the said personal property the Entruster may on or after default give notice to the Trustee of intention to sell and may at any time not less than five (5) days after the giving of such notice sell said personal property at public or private sale, with or without notice and without any further notice or demand to the Trustee and without having said personal property at the place of sale, and may at any public sale itself become a purchaser. The proceeds of any such sale shall be applied, first, to payment of the expenses thereof; second, to payment of the expense of retaking, keeping and storing said personal property . . .; third, to the satisfaction of the Trustee’s indebtedness hereby secured; and, fourth, to the payment of any other obligation owed by Trustee to Entruster. The Trustee shall receive any surplus and shall pay unto Entruster upon demand any deficiency.

"Notice of intention to sell shall be deemed sufficiently given when in writing and either personally served on the Trustee or when deposited in the United States mail postage prepaid addressed to the Trustee’s last known business address.

"In the event of default by the Trustee in the payment of any moneys hereunder due on the due date hereof, Entruster may declare all moneys secured Immediately due and payable. In event of such default Entruster 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.

"No waiver of any existing default shall be deemed to waive any subsequent default and all rights hereunder are cumulative and not alternative.”

5 Erorn his opening statement on throughout the trial, except perhaps in connection with his motion for a directed verdict, plaintiff argued that the transactions evidenced by the trust receipt documents were "not trust receipts transactions” but were "mere loans.” The error of this position, which was adopted by the trial court, is discussed later.

6 Cal. Const., art. XX, § 22: “ The rate of interest upon the loan or forbearance of any money . . . shall be seven per cent per annum but it shall be competent for the parties to any loan ... to contract in writing for a rate of interest not exceeding ten per cent per annum.”

7 We also note that plaintiff’s original complaint does not seek recovery of usurious interest and penalties, but only seeks damages for conversion. This might be considered as tending to show that his claim that the charges were usurious interest was but an afterthought, prompted by litigation.

8 Here again, plaintiff suggests the erroneous view that trust receipt transactions and loans are mutually exclusive of each other.

In Ms opening statement plaintiff’s counsel said, “Now, Mr. Bdett . . . maintains throughout and has alleged in Ms complaint, that the transaction as carried on between himself and the defendant here was nothing more nor less than a loan of money. That is going to be one of the principal things that you folks are going to have to be looking for as the evidence develops . . . Now . . . the defendant . . . will claim that the transaction . . . between my client and themselves did not result in a loan of money, but that it was something else.

“We will show that . . . Mr. Klett signed certain instruments . . . entitled ‘Trust Receipts’ and they were furnished by the defendant . . . We will also show . . . and prove, that these transactions were nothing more nor less than a loan of money, and that the defendant, for that loan of money, charged a rate of interest Which we will prove to you is in excess of the amount that was permitted . . . under the laws of this state . . . Now, it is going to be up to you ... to determine what the transaction was. ’ ’

Again, in introducing in evidence the documents denominated “trust receipts” plaintiff’s counsel insisted on the view that bona fide trust receipt transactions and loans of money were mutually exclusive of each other. The record shows; “Mr. Dunning [plaintiff’s counsel]: I am introducing the instruments but, I want it understood that I am not introducing the instruments for the purpose of showing that they are trust receipts. The Court: You are introducing them but you claim they are not trust receipts? A. I claim they are not trust receipts, yes. The Court: All right, you can put them in for that limited purpose. Mr. Dunning: In other words, I want it understood I am putting them in for the limited purpose and not for the purpose of establishing that they are trust receipts but for the purpose of showing the amount owing, if any, on December 27, 1946, from the plaintiff to the defendants and for the purpose of showing that the defendants had a security interest in the merchandise which is listed on these instruments entitled ‘Trust Receipts.’ Mb. Bedeau [defendants’ counsel]: Aren’t they going in for all purposes regardless of whether you call them chattel mortgages or trust receipts? The Court: No, he isn’t introducing them—I don’t understand myself about the security interest—but he wants to limit it for the two purposes and I guess that is all right.”

The above quoted statements of position by counsel for plaintiff are referred to infra, p. 782, in connection with an instruction given by the court which erroneously adopts the position taken by plaintiff.

9 Such instructions read as follows: “If the transactions between the parties were trust receipt transactions and not loans, then the question of interest is not involved, and under such circumstances there can be no claim, of usurious or unlawful interest.”

“In determining whether the transactions were loans or whether they were under trust receipts, you must determine what the transactions were by a consideration of all the evidence, and not merely from what the parties or documents appear to be or the parties represent themselves to be.

“It is necessary for you to determine whether the transactions were loans or were trust receipt transactions:

“If you find as follows: The parties, prior to their later transactions, understood and agreed that the defendants were to finance the plaintiff in his business . . ., that . . . said agreement was to be carried out; that in carrying out the same the plaintiff made contact with several manufacturers in Los Angeles, who understood plaintiff was to be financed and that later the parties signed the agreements herein admitted in evidence and captioned ‘trust receipts’; that in carrying out their understanding the plaintiff did in all eases but three or four, (in which three or four cases the money was sent by plaintiff [should read “defendants”] to the manufacturers) proceed to Los Angeles with his truck, or some truck under his control; that he did then order and secure delivery of various articles, from said manufacturers load the same on the trucks; and at the same time secure the invoices to the goods; that the trucks did deliver to his store at Sacramento; that he did at once take the invoices over to the defendants, and did present the same to defendants, and that the parties did then and there sign a document such as admitted in evidence and designated trust receipt; that in that document there was a description and price of articles listed therein; that defendants did immediately give to the plaintiff a check to cover the amount thereof; that it was understood and agreed by the parties that they were, and it was the intent of each, that a trust receipt transaction was contemplated; and if you further find that the goods were placed in plaintiff’s store, and that both parties so acted that thereby the goods were ‘ floored, ’ and that both recognized that plaintiff was trustee as elsewhere described herein and did not have title thereto to dispose of the same, except under the terms of the trust receipt and that defendants as entrusters had a security interest, and each party understood and agreed that the interest of the plaintiff was that of a trustee, as referred to elsewhere herein, and in the trust agreement; that when plaintiff delivered the invoices to defendants and received a check in payment thereof both he, as trustee and defendants as entrusters intended that a security interest should thereby pass to entrusters and the cheek so given or money represented thereby was to be applied in payment to the manufacturers as per said bill of goods, and both parties then and there signed the various documents labeled trust receipts; that there was no understanding or agreement express or implied, other than the above, if you so find the facts to be, then I instruct you that it would be your duty to find that the transactions as between the parties were trust receipt transactions and not loans.”

10 The following instruction was given: “A loan of money is the delivery of a sum of money to another under a contract to return at some future time an equivalent amount with or without an additional sum agreed upon for its use.” This definition is materially similar to the definition in the Civil Code (§ 1912).

11 A statement covering plaintiff’s business during the period from July 7, 1946, to December 27, 1946 (on the latter date, as hereinafter described, defendants took possession of the furniture because of plaintiff’s default in payments), shows “liabilities owing’’ in the amount of $21,829.67; under assets, “cash on hand in bank was a minus $39.85," and “Mr. Klett’s capital was á deficit, $2,712.26."

12 The jury were told that "in a legal sense the word 'consent’ means capable, deliberate, free and voluntary assent or agreement to, or concurrence in, some act or purpose, implying physical and mutual power and free action which is unclouded by threats, or duress. It presupposes that the person to be affected has knowledge of his rights. If, therefore, consent is given or obtained by means of unwarranted threats, or is given by a person without full knowledge of his rights, such a consent has no force or effect whatsoever, and the legal effect of consent given under such circumstances is the same as though no consent were given”; that "he who consents to an act is not wronged by it”; and that "If you believe that when the defendants called upon plaintiff to surrender the merchandise which was then in plaintiff’s possession, the plaintiff did not dispute defendants’ right to the goods, or set up a claim to them against the defendants, but freely consented thereto, then the defendants committed no conversion.”

13 After Forrest had demanded that plaintiff pay the amount due the finance company or surrender the furniture, and plaintiff had told Forrest that he could not pay, Forrest told plaintiff that on the morning of the 27th he (Forrest) would come to plaintiff's store to take the furniture. On that morning plaintiff went to the store with Forrest. Plaintiff told an employe that Forrest "has come for the furniture and is going to take it out of the store and we are going to turn it over to him,' ’ and directed the employe to turn over to Forrest certain furniture not covered by "trust receipts” in place of furniture which plaintiff had improperly sold without delivering the proceeds of the sales to defendants. At the time Forrest was taking the furniture plaintiff asked Forrest to hold it for him because plaintiff believed he might be able to raise some money; Forrest replied that he would hold it for five days; and plaintiff stated that that was satisfactory. Thereafter plaintiff did not communicate with defendants concerning the furniture. Defendants held it for more than five days and then, without notice to plaintiff, sold it for about $6,500 and applied this sum to the cancellation of plaintiff’s debt; about $530 remained owing from plaintiff to the finance company.

14 Provisions based upon this act are now found in the Financial Code, § 22000 et seq.