311 Mass. 183 | Mass. | 1942
This is a bill in equity in which the plaintiff seeks to have a negotiable promissory note and a conditional sale agreement attached thereto declared void because of alleged violation of the provisions of G. L. (Ter. Ed.) c. 140, relating to small loans. The judge made a report of material facts found by him, and entered a decree declaring the instruments in question void and directing the defendant to deliver them to the plaintiff. The defendant’s appeal from this decree brings the case before us.
Since the evidence is reported in full questions of fact as well as of law are brought before this court, whose duty it is to examine the evidence and to decide the case upon its judgment as to the facts, giving due weight to the findings of the trial judge, which will not be reversed unless plainly wrong. Kevorkian v. Moors, 299 Mass. 163, 166. Culhane v. Foley, 305 Mass. 542, 543. The recital of the judge in
Material facts disclosed by the evidence, including those recited in the judge’s report of material facts, may be summarized as follows: The defendant is engaged in the business of “financing and loaning moneys.” It is not licensed to conduct the business of making small loans. It had engaged in other transactions similar to the one involved in the present case, where as here the amount paid by it for notes and accompanying conditional sales agreements was less in each case than $300.
For some time prior to July 29, 1940, the plaintiff was negotiating with the Zanditon Auto Sales, Inc., hereinafter referred to as the dealer, relative to the purchase of a secondhand automobile at a price of $345. He was unable to pay this sum in cash. As a result of a conversation with the dealer, he went to the office of the defendant two or three days before July 29 and talked with its president and treasurer, one Epstein. The plaintiff told Epstein that he was supposed to meet Zanditon, the president of the dealer, there and said: “I am the fellow who was buying a car from Zanditon and Zanditon wanted you to purchase the paper and you refused to.” Epstein replied: “That is right, the down payment [$55] is not sufficient for us to purchase the paper.” Zanditon came in and after some conversation Epstein said: “If the down payment was larger I would purchase the paper for $225.” Zanditon
We first consider whether the transaction was void under the governing statutes in effect at the time of its consummation. We are of opinion that the proper conclusions from the facts hereinbefore recited are that the defendant bought the note and agreement in question for less than $300; that it had entered into other transactions of a similar character; that it thus engaged in the business of making small loans; that the amount exacted in the present case for interest and other expenses exceeded in the aggregate more than twelve per cent per annum, and that the defendant was not licensed to engage in the business of making small loans as required by G. L. (Ter. Ed.) c. 140, § 96, as amended by St. 1934, c. 179, § 2. It follows as matter of law that the note is void under the provisions of § 103. Modern Finance Co. v. Holz, 307 Mass. 281, and cases cited. The word “void” as employed in § 103 is used in its strict technical sense. Cuneo v. Bornstein, 269 Mass. 232, 236-237. The present case is not distinguishable from the Modern Finance Co. case except that in the latter case the action was that of the indorsee-lender against the dealerindorser, and that there the automobile had been repossessed by the plaintiff and sold under the conditional sale agreement and the only question involved was the validity of the note. We think that the facts that in the present case the suit is that of the maker against the defendant which bought the note, and that the automobile has not been repossessed by the defendant, do not take the case out of the principles laid down in the Modern Finance Co. case, at least so far as the note is concerned, and that under those principles the note is void under the statutes in effect at the time of its execution and purchase by the defendant.
We consider the further question whether in the circumstances of the case hereinbefore set forth, the conditional sale agreement is also void, as decreed by the judge. If the requisite facts are shown, illegality, such as usury, is sufficient ground to justify application of the equitable remedy
In Burnes v. New Mineral Fertilizer Co. 218 Mass. 300, the defendant contended that, where a negotiable security is deposited as collateral security for a loan made in violation of the small loans act, not only is the deposit of the security void, but the security itself by force of that act becomes a nullity so that if it is afterwards separated from the void loan and bought in good faith by an innocent purchaser for value no recovery can be had upon it. The court, however, sustained the security right of the plaintiff who had acquired it from a party who bought it in good faith and without notice. See Drury v. Morse, 3 Allen, 445, 448, 450; Richardson v. Brackett, 101 Mass. 497, 503, 504; Webb v. Johnston, 246 Mass. 229, 234; Pietrzykowski v. Davis, 250 Mass. 372, 375.
In the instant case the defendant through its president and treasurer had notice of all the facts, and must be deemed to have had notice that the terms upon which it advanced
It appears from the cases to which we have referred that the decisive question is whether the holder of the security interest had notice or knowledge of the illegality of the debt secured at the time he acquired that interest, or whether he had notice or acquired knowledge subsequently thereto. See Baker v. Collins, 9 Allen, 253, 254. It is true that the statutes (§§ 96-114) do not specifically provide that a conditional sale agreement given to secure the payment of a void note shall likewise be void. But in the circumstances of the present case where the transaction was tainted with illegality in its inception to the knowledge of the defendant, the security holder, at the time of its acquisition, relief may be given not only by declaring the note to be void, but also by declaring the contract of conditional sale, the security given to secure the payment of the note, void as well. In Thomas v. Burnce, 223 Mass. 311, 312, a case involving the small loans act, the court said, "Independently of the statute ‘courts of equity will grant relief against usurious contracts no matter what may be their form and will permit no shift or device of the creditor to shield him in taking more than legal interest on a loan.’ Horner v. Nitsch, 103 Md. 498.” In the circumstances of the present case, to hold the transaction in question void as to the note, but valid as to the conditional sale agreement, would be to defeat the public policy of the Commonwealth declared in the governing statutes in force when the transaction was entered into. Harrison v. Hannel, 5 Taunt. 780. See Cuneo v. Bornstein, 269 Mass. 232, 237. Tested by those statutes the conditional sale agreement was then void.
The question remaining to be considered is whether St. 1941, c. 158, if applied to the case at bar would have the effect of depriving the plaintiff of property without due process of law in violation of the provisions of arts. 1, 10 and 12 of the Declaration of Rights of the Constitution of
It would serve no useful purpose to review the many decisions of this court in which the constitutionality of retroactive legislation has been discussed. There is a collection of such cases in Hanscom v. Malden & Melrose Gas Light Co. 220 Mass. 1, and the subject is dealt with in the recent cases of Mulligan v. Hilton, 305 Mass. 5, and Segal v. Switzer, 305 Mass. 27. An examination of the decisions of this court dealing with the subject demonstrates that while it is settled that retroactive legislation that relates to matters of procedure or remedy is not violative of any constitutional provisions, nevertheless it is firmly established as a settled principle that “A statute cannot constitutionally impose an obligation with respect to a transaction that at the time it took place gave rise to no obligation.” Mulligan v. Hilton, 305 Mass. 5, 10, and cases cited.
The provisions of G. L. (Ter. Ed.) c. 140, § 96, as amended, and in force when the transaction in question took place, were not intended to prescribe a form or mode of procedure or remedy, but rather were intended to and did create “a
In the present case the statutes in force when the transaction took place made the note not voidable, but void in the strict technical sense. Cuneo v. Bornstein, 269 Mass. 232, 236. Modern Finance Co. v. Holz, 307 Mass. 281, 285. It was a nullity, without any force and effect. It was not binding upon the plaintiff. Hence no obligation of the plaintiff arose upon it. For reasons already given the conditional sale agreement was likewise void. It follows that to hold that the retroactive provisions of St. 1941, c. 158, are applicable to the transaction in question would be in effect to appropriate property of the plaintiff without due process of law in violation of arts. 1, 10 and 12 of the Declaration of Rights of the Constitution of this Commonwealth. There is nothing in Hanscom v. Malden & Melrose Gas Light Co. 220 Mass. 1, considered as a whole, to support the contention of the defendant to the contrary. Nor is there anything in Brown v. Boston & Maine Railroad, 233 Mass. 502, essential to the result there reached, that is in conflict with what we have said here.
Decree affirmed with costs.