86 N.E.2d 444 | Ind. | 1949
This is an appeal from a declaratory judgment of the trial court which adjudicated that § 9 of the Indiana Retail Instalment Sales Act, as amended by Ch. 238 of the 1947 Acts (§ 58-909, Burns' 1943 Replacement [1947 Supp.]), "is unconstitutional and void in that it deprives plaintiff [appellee General Finance Corporation] of liberty and property without due process of law and unlawfully burdens interstate commerce." The evidence consisted of stipulations, documentary evidence, and the testimony of three witnesses, and there is no dispute as to the facts, but only as to the law as applied to the facts.
The complaint was for a declaratory judgment and injunction. The evidence reveals that the appellee is a corporation organized under the laws of the State of Michigan, with its principal office at Detroit, and it has been duly admitted, qualified and authorized to transact business as a foreign corporation in the State of Indiana. Since February 26, 1944, it has been licensed by the Department of Financial Institutions to purchase retail instalment contracts as defined in the Retail Instalment Sales Act (§ 58-901 et seq., Burns' 1943 Replacement; ch. 231, Acts of 1935), and on June 26, 1946, it was again licensed "to purchase retail instalment contracts from retail sellers and/or to loan money to retail sellers on the security of retail instalment contracts . . . from July 1, 1946, until such license and the authorization thereunder is surrendered, revoked or suspended. . . ." The corporation is licensed to and does business in approximately eighteen states and maintains offices in Chicago. Its net worth is $9,000,000 with a borrowing capacity of three times its net worth, or $27,000,000. Its annual gross business throughout the United States totals $400,000,000 of which the annual volume of business in Indiana is *379 $10,000,000. It maintains an Indiana office where it buys retail instalment sales contracts.
At the time the action was commenced it had an agreement with the Harris Trust and Savings Bank of Chicago, Illinois, and the Mercantile-Commerce Bank and Trust Company of St. Louis, Missouri, to sell and assign to them without recourse retail instalment sales contracts purchased in Indiana. The Indiana contracts were transmitted to the corporation's Chicago office for the assignment and delivery to the Harris Trust and Savings Bank, which also serviced the purchases made by the Mercantile-Commerce Bank and Trust Company of St. Louis. These two banks were the only institutions available to the corporation for sale without recourse of instalment sales contracts in the large volume required by it.
The corporation also had a standing arrangement with the First National Bank of Chicago, Illinois, to pledge large amounts of such contracts with it as trustee for approximately seventy-five banks located in approximately twenty states, only one of which is licensed under the Indiana Retail Instalment Sales Act, as security for separate loans made to the appellee by such banks.
It was stipulated that because of the large quantity of credit and working capital the corporation was required to employ in its business, its business in Indiana would be seriously impaired without being able to assign or pledge the contracts in which it dealt. None of the out of state banks has ever engaged in the business of purchasing retail contracts from retail sellers, or making loans to retail sellers in Indiana on the security of such contracts, and prior to the bringing of this action each of the three named banks advised the appellee it was unwilling to become a licensee under *380 the Indiana Act. However, under protest the Harris Trust and Savings Bank of Chicago and the Mercantile-Commerce Bank and Trust Company of St. Louis did obtain a license from the Department of Financial Institutions in order to protect the validity of the contracts pending the outcome of this litigation. The First National Bank of Chicago never obtained such a license.
At the time this action for declaratory judgment was commenced, Ch. 238 of the 1947 Acts, which amended § 9 of the Act, had not become effective, although it had been approved by the Governor March 12, 1947. It contained no emergency clause, and the exact time it would become effective was uncertain. It did become effective on August 20, 1947, the day the evidence was concluded upon the trial.
A declaratory judgment action will lie to determine the rights under a statute even though the act is not yet in effect. Anderson, Declaratory Judgments, p. 192, § 68; 16 Am. 1-3. Jur. 301, § 27. The amendment was certain to take effect, and when it did become effective it would substantially impair the valuable property rights of the appellee. We cannot presume that, in the absence of adjudication declaring its invalidity, the Department of Financial Institutions would not take steps to enforce its provisions. It was stipulated that there was "a good faith controversy" existing between the appellee and appellants as to the validity of § 9 of the Act as amended. The complaint alleged the appellants were contending that § 9 as amended was "in all respects valid" and will "render unlawful the sales and pledges of the contracts to persons, firms and corporations either within or without the state of Indiana not licensed under the act" and that "a good faith controversy exists between the plaintiff *381
and defendants as to the interpretation and validity" of said section. The finding of the trial court was that the facts alleged in the complaint were true. The appellee had a present substantial interest in the relief sought, and there was in existence a real and material controversy which should be decided in order to safeguard the appellee's rights. Zoercher v.Agler (1930),
"`When the law is settled it will be obeyed. It is therefore immaterial whether the proper proceeding is an application for a restraining order or a petition for a declaratory judgment. A final interpretation of the law in either form of proceeding would be binding upon these parties.'
The simplest way is the best way to bring to judicial determination the challenged validity of governmental action allegedly violating individual rights; and experience has shown that the declaratory judgment serves that purpose admirably . . ." Borchard, Declaratory Judgments 967 (2d Ed.). *382
The fact that the appellee had a license under the Act does not estop it from attacking the constitutionality of the amendment. The enactment constituted an invasion of appellee's 4-6. liberty and property rights and there was in substance a threat of enforcement of the unconstitutional provisions.Euclid v. Ambler Realty Co. (1926),
An examination of all the provisions of the Retail Instalment Sales Act (Ch. 231 of the 1935 Acts, § 58-901 et seq., Burns' 1943 Replacement) reveals that, among other objects, it 7-9. seeks to prevent fraud and promote competition among licensees who might purchase such contracts from retail sellers. The prevention of fraud is a legitimate exercise of the police powers of the state. Dent v. State of W. Va. *383
(1889),
But it is not every exercise of police power by the state which is valid either under the Commerce Clause or the due process clause of the Federal Constitution or under §§ 1 and 23 of 10. Article 1 of the Constitution of Indiana, nor does the determination by the legislative department as to what is a proper exercise of police power prevent a review of the question by the courts. Baldwin v. Seelig (1935),
There is nothing immoral, noxious or unlawful per se in the execution of retail instalment sales contracts, nor in engaging in the business of selling goods by such method, nor in 11-14. selling, buying, or pledging such contracts. "Property is more than the mere thing which a person owns. It is elementary that it includes the right to acquire, use, and dispose of it. The Constitution protects these essential attributes of property. Holden v. Hardy,
Section 9 of the Act as amended by Chapter 238 of the 1947 Acts (§ 58-909, Burns' 1943 Replacement [1947 Supp.]), in part provides, "No retail instalment contract shall be sold, assigned or transferred to any person other than a licensee under this act or a retail seller who was a party to the retail instalment sale from which such retail instalment contract originated *385 and no suit shall be brought thereon by any assignee or purchaser in violation of this provision."
Section 11 of the Act (§ 58-911, Burns' 1943 Replacement), prohibits persons from purchasing retail instalment contracts from retail sellers, or, unless a bank or trust company, from making loans to a retail seller doing business in this state on the security of retail instalment contracts, unless the Department of Financial Institutions has licensed such business activities. Before the amendment of § 9, the appellee was free to sell or pledge such contracts in other states.1
The prohibitions in the present law prevent the appellee from assigning or pledging its own property in another state. The prohibition of a right to contract within another state 15-17 concerning the property of a person within the state, is a denial of due process of law. Allgeyer v.Louisiana (1897),
"In the privilege of pursuing an ordinary calling or trade and of acquiring, holding, and selling property must be embraced the right to make all proper contracts in relation thereto, and although it may be conceded that this right to contract in relation to persons or property or to do business within the *386
jurisdiction of the state may be regulated and sometimes prohibited when the contracts or business conflict with the policy of the state as contained in the statutes, yet the power does not and cannot extend to prohibiting the citizen from making contracts of the nature involved in this case outside of the limits and jurisdiction of the state, and which are also to be performed outside of such jurisdiction; nor can the state legally prohibit its citizens from doing such an act as writing this letter of notification, even though the property which is the subject of the insurance may at the time when such insurance attaches be within the limits of the state. The mere fact that a citizen may be within the limits of a particular state does not prevent his making a contract outside its limits while he himself remains within it, Milliken v. Pratt,
No state by legislation may project its powers and authority beyond its own borders. New York, L.E. W.R. Co. v.Commonwealth of Pennsylvania (1894),
In considering what is interstate commerce the courts are not bound by any frozen concept. As stated by Mr. Justice Holmes in Swift Co. v. United States (1905),
The general purposes of the Act in preventing fraud and monopolies must be accomplished by reasonable means, and the provisions of the Act, as far as intrastate commerce 22, 23. extended, for the regulation and examination of the original licensees who purchased instalment contracts from the retail sellers were valid. But it is quite different for the legislature to say that after a licensee has purchased a contract pursuant to his license, which gives the Department of Financial Institutions the right to inspect his required records, and obtain reports to insure compliance with the Act, that this licensee then is prohibited from selling or pledging his property to any person except another licensee. The facts in this case show that the market for assignment without recourse and pledges in large volume was restricted to out of state purchasers and pledgees, who asserted Indiana has no right to regulate their businesses. It seems to us that the purposes of the Act could be fully accomplished without any attempt to extend the police power of Indiana into other states. The inevitable result of amended § 9, if it should be held valid as to interstate commerce, would be to restrict the market for contract sales or credit to Indiana in direct violation of the Commerce Clause, which was intended by the Forefathers to prohibit such clogging of the stream of interstate commerce. Judgment affirmed.
NOTE. — Reported in