Washington State

Office of the Attorney General

Attorney General

Bob Ferguson

AGLO 1974 No. 16 -
Attorney General Slade Gorton


Where a retail installment contract is entered into in the state of Washington between a seller having his principal place of business in this state and a buyer residing in the state of Idaho, with the merchandise being purchased to be delivered by the seller to the buyer in Idaho, the maximum service charge fixed by RCW 63.14.130 applies.

                                                                  - - - - - - - - - - - - -

                                                                 February 1, 1974

Honorable Herbert F. Donohue
State Senator, Ninth District
Route 2, Box 13
Dayton, Washington 99328                                                                                                               Cite as:  AGLO 1974 No. 16

Dear Sir:

            By letter previously acknowledged, you have requested an opinion of this office upon the applicability of RCW 63.14.130, concerning maximum service charges on retail installment transactions, to a retail installment transaction having incidents in both Washington and Idaho.  We paraphrase your question as follows:

            Where a retail installment contract is entered into in the state of Washington between a seller having his principal place of business in this state and a buyer residing in the state of Idaho, with the merchandise being purchased to be delivered by the seller to the buyer in Idaho, does the maximum service charge fixed by RCW 63.14.130 apply, or may the seller, instead, impose the higher service charge which is permitted with respect to retail installment sales under the laws of Idaho?

            In our opinion, the answer to your question is that RCW 63.14.130 does apply to this transaction and, therefore, the seller may not impose the higher service charge permitted under Idaho law.


            Preliminarily, we believe it necessary to express a policy limitation upon the scope of this opinion.  In view of the multi-state aspects of the factual situation giving rise to your question, it is possible for the matter to be litigated either before the courts of Washington or those of Idaho.  And, consequently, it is also possible that different answers could result depending upon which forum is selected to hear the case.  In this opinion, however, we can only properly advise you of the law, as we view it, of our own state ‑ leaving it to the appropriate Idaho authorities to opine, separately, as to the result under Idaho law which they believe would be reached if the case were tried in that state instead.

             [[Orig. Op. Page 2]]

            In 1968, through their adoption of Initiative No. 245, the voters of the state of Washington placed the following ceiling on the service charge which may be imposed in a retail installment transaction:

            ". . .

            "(1) The service charge, in a retail installment contract, shall not exceed the highest of the following:

            "(a) One percent per month on the outstanding unpaid balances; or

            "(b) Ten dollars."1/

             If the seller in a situation such as you have outlined were to impose a service charge in excess of this rate allowed by Washington law, but not exceeding that allowed under Idaho law, its enforceability would turn upon whether the transaction was governed by Washington or Idaho law.  Since this issue has not yet been specifically resolved by a Washington court, however, we must predicate an opinion as to its resolution by the courts of our state on basic conflict of law principles.

            Absent constitutional restrictions, a court will follow the statutory directives of its own state in choosing which law to follow in a case such as this.  See, Oxford Consumer Dis. Co. of No. Phila. v. Stefanelli, 102 N.J. Super. 549, 246 A.2d 460 (Super Ct., App. Div. 1968), supplemented on rehearing, 104 N.J.Super. 512, 250 A.2d 593 (1969), (supplemented on separate issue), aff'd as modified, 55 N.J. 489, 262 A.2d 874 (1970) (modified on separate issue; 4-3 decision on applicability of cited rule), appeal dismissed, 400 U.S. 923 (1970)revising 400 U.S. 808 (1970) (first dismissal order revised to specify dismissal for want of a final judgment); Restatement of Contracts 2d, § 6(1); R. Leflar, American Conflicts of Law, § 89 (rev. ed. 1968).  Thus it is to be anticipated that if confronted with the question you have posed, a Washington court would look, in this case, to the choice of law directive which appears as a part of the statutory definition  [[Orig. Op. Page 3]] of "retail installment contract" in RCW 63.14.010(6), as follows:

            "'Retail installment contract' or 'contract' means a contract, . . . entered into or performed in this state for a retail installment transaction . . ."

            By this provision the legislature has directed that the various provisions of the retail installment sales act, including the service charge limitation now found in RCW 63.14.130, supra, shall apply to every retail installment contractentered into or performed in this state.  Since a contract such as that described in your question would not only have been entered into but would also have been partially performed in Washington, a Washington court could therefore be expected to apply that limitation to the contract, from which it would follow that a seller contracting for the payment of a service charge in excess of that allowed by RCW 63.14.130 would be subject to the various sanctions provided by the retail installment sales act such as those contained in RCW 63.14.152, 63.14.170, 63.14.180 and 63.14.190.

            Although the application of the Washington limitation in a case such as this would raise several constitutional issues, these would not, in our opinion, provide any basis for an effective challenge to the conclusion stated above.  For example, if the contract in question expressly provided for service charges in accordance with Idaho law, it might be argued that application of Washington, rather than Idaho law on maximum service charges would violate the full faith and credit clause of the federal Constitution (United States Const., Article IV, § 1) or the due process clauses of both the state and federal Constitutions (Wash. Const., Article I, § 3; U.S. Const., Amendment XIV, § 1).  However since Washington would be the place of negotiation of this contract, the place of its making, the place of the buyer's performance (presumably) and the place where the seller is doing business, this argument would be without merit under the federal Constitution.  Clay v. Sun Insurance Office, Ltd., 377 U.S. 179, 12 L.Ed. 2d 229, 84 S.Ct. 1197 (1964);Oxford Consumer Dis. Co. of No. Phila. v. Stefanelli,supra.  Moreover, such federal cases as these under the due process clause of the Fourteenth Amendment are to be given great weight in construing the similar clause of the Washington Constitution2/ and, hence, any alleged violation of this provision of the state constitution would also be readily answerable.

             [[Orig. Op. Page 4]]

            A second constitutional argument to be anticipated would be that an application of the Washington statute would result in a burden on interstate commerce in violation of Article I, § 8, of the United States Constitution.  However, in view of this state's interest in protecting installment buyers from excessive service charges and the lack of discrimination against out-of-state interests, the commerce clause would present no barrier to application of RCW 63.14.130 to this transaction.  See,Huron Portland Cement Co. v. Detroit, 362 U.S. 440, 4 L.Ed. 2d 852, 80 S.Ct. 813 (1960), and Dean Milk Co. v. Madison, 340 U.S. 349, 95 L.Ed. 329, 71 S.Ct. 295 (1951),People v. Fairfax Family Fund, Inc., 235 Cal.App. 2d 881, 47 Cal.Rptr. 812 (Dist.Ct.App. 1964), appeal dismissed 382 U.S. 1 (1965) (dismissed for want of substantial federal question).

            Finally, it might be argued that this application of RCW 63.14.130 would impair the contractual obligation of the buyer to the seller in violation of Article I, § 10 of the United States Constitution.  It is well established, however, that notwithstanding this constitutional provision, the states retain the authority to safeguard vital public interests; and further, that reasonable legislation directed toward this end will be sustained even if existing contracts are thereby modified or abrogated.  Veix v. Sixth Ward Bldg. & Loan Asso., 310 U.S. 32, 84 L.Ed. 1061, 60 S.Ct. 792 (1940);Home Bldg. & Loan Asso. v. Blaisdell, 290 U.S. 398, 78 L.Ed. 413, 54 S.Ct. 231 (1934).

            On the basis of the foregoing analysis, therefore, it is our opinion a Washington court would hold the maximum service charge provided by RCW 63.14.130 to be applicable to the transaction described in your question, and that such application is constitutional.

            We trust the foregoing will be of assistance to you.

Very truly yours,

Attorney General

Assistant Attorney General

                                                         ***   FOOTNOTES   ***

1/Section 3, chapter 2, Laws of 1969 (Initiative No. 245), amending RCW 63.14.130 which is a part of this state's preexisting "Retail Installment Sales Act" ‑ chapter 236, Laws of 1963.

2/See, Petstel, Inc. v. County of King, 77 Wn.2d 144, 459 P.2d 937 (1969).