31 A.2d 485 | N.J. | 1943
The determinative question is whether respondent, a small loan company licensed under R.S. 17:10-1, et *141 seq., was guilty of a violation of section 17:10-14 of the statute in these circumstances:
Appellant desired to purchase an automobile upon which there was a lien in the sum of $238. He applied to respondent for a loan in this sum to satisfy the lien. The application was granted with the understanding that appellant would give a mortgage upon the vehicle as security for the loan. The chattel was appraised at $255. Respondent also asked for a policy of insurance against loss or damage from fire, lightning, theft, robbery, and collision or upset, and appellant agreed to provide it at his own expense. The loan was so conditioned. Respondent's manager testified that appellant tendered the policy then covering the automobile, but he "told him it could not be transferred." He proceeded to state why the transfer could not be made, but the inquiry was foreclosed by an objection "to the reason" interposed by appellant's counsel, which was sustained. Appellant thereupon made written application for this insurance coverage to the Colonial Insurance Company, and a policy was issued. While the insurer was suggested by respondent, appellant was told he was at liberty to procure the insurance from "any other company that he might have in mind." The premium was $17. A loan was eventually made in the sum of $255, to cover also the cost of the insurance; and appellant endorsed respondent's check to him for $17 and returned it to respondent, who delivered it to the insurer in payment of the premium. The balance of the loan, $238, was used to liquidate the lien upon the automobile. While the policy was issued under a "master policy" granted by this insurer to respondent, "covering all policies issued between the borrower" and respondent (as to the nature and function of a master policy see R.S. 17:28-4 and 17:28-5), it is conceded that the premium charged appellant was in accordance with the standard, uniform rate, and that respondent did not share therein to any extent. This much was stipulated at the trial. Appellant's sole contention is that respondent "received the benefit of the protection of its lien interest at the expense of the borrower, which expense should have been borne by it as an item included in the all-inclusive charge of 2 1/2% per month permitted by the statute," *142 and so the insurance premium constituted an exaction by the lender in contravention of section 17:10-14, supra. It is said that not only was this in itself a "charge" in violation of that section, but that the interest exacted was greater than the rate permitted by the statute, since it was calculated upon $255, rather than upon $238; and that therefore the borrower has a right of action under the last-cited provision for the recovery of all moneys returned to the lender on account of the loan.
The District Court Judge awarded judgment to the lender; and the borrower maintains that it rests upon a misapprehension of the statutory concept and so should be reversed. The point is not well-taken.
Unlike the exaction in the case of Edelstein v. Hub LoanCo.,
The sole "benefit" to the lender is the safeguarding of the security. It is utterly unreasonable to presume that the legislature meant to authorize the taking of chattel security and yet place upon the lender the cost of indemnification against the loss of the subject-matter. This is a responsibility incident to ownership. Such insurance is deemed an integral part of the security itself. The exception from the outlawed category of charges and disbursements attending the "actual sale of the security in foreclosure proceedings" and the "entry of judgment" is significant of the legislative sense of the associated terms. Certainly, the assignment of a pre-existing policy, without reimbursement of the unearned premium, would not fall into the forbidden class. And, as regards the cancellation value, that would be just as much a payment of the insurance premium by the borrower as the payment in the case at bar.
As said in Edelstein v. Hub Loan Co., supra, the legislation embodied in section 17:10-1, et seq., is suigeneris; and its several provisions are to be considered and interpreted in the light of the essential object to be served. It regulates the small loan business in the public interest. The object was the eradication of the abuses and evil practices that had attended the conduct of this business, primarily the unconscionable and oppressive interest exactions. In construing a provision substantially similar, the New York Court of Appeals found the criterion to be "whether the lender has placed upon the borrower the burden of an additional charge in order to give the lender `compensation in excess of that contemplated by the statute.'" Martorano v. Capital Finance Corp.,
While the Small Loan Act is generally remedial in nature, the provisions enjoining the imposition of charges and expenses not specifically authorized are highly penal, and are therefore to be strictly construed. Not only does a violation entail the forfeiture of the moneys loaned, whether repaid or not, but the lender is also guilty of a misdemeanor. Section 17:10-21. A statute may be both penal and remedial; and its several provisions are to be treated in this regard according to their nature. Edelstein v. Hub Loan Co., supra.
The judgment is accordingly affirmed, with costs.
Mr. Justice Perskie dissents for the reasons stated by Judge Lewis, for the minority, in Martorano v. Capital FinanceCorp., supra. *145