Levinson v. Boas

Plaintiff is the receiver of the insolvent copartnership of Schumacher & Co. While the firm of Schumacher & Co. was transacting its business as diamond and jewelry merchant one of the members of the firm, on behalf of the firm, at various times borrowed money from the defendant, pledging with him, as security for the loans, diamonds, and other jewels and articles of jewelry. After his. appointment the receiver made demand upon defendant for a restoration and return of the pledges upon the ground that defendant was, and was acting as, a pawnbroker, and that because of his violations of the laws of the state and of the municipality of San Francisco in the conduct of his business as pawnbroker, the contracts were void. He therefore insisted that the pledges should be returned, and that defendant should be relegated to the position of a general creditor. Upon the refusal of defendant to accede to this demand, the receiver, with permission, brought Suit. The suit was submitted for decision upon an agreed statement of facts, judgment passed for defendant, and the receiver appeals.

There being no controversy over the facts, the questions to be resolved are two. First, under the facts, was defendant a pawnbroker 1 Second, if a pawnbroker, did his unquestioned failure to comply with the statutes of the state and the ordi

The word “pawnbroker” has been variously defined as “Any person whose business or occupation it is to take or receive, by way of pledge, pawn, or exchange, any goods, wares, or merchandise, or any kind of personal property whatever, as security for the payment of money loaned thereon.” (Anderson’s Law Dictionary, p. 759.) “One who makes a business of loaning money for interest, and receives personal property in security for the payment of the same.” (English Law Dictionary, p. 607.) Or, again: “A pawn is a pledge to a pawnbroker, or person who keeps a shop for the purchase or sale of goods, and takes goods by way of security for money advanced thereon.” (2 Raplaje & Lawrence’s Dictionary, p. 940.) Our Penal Code (see. 338) declares that “Every person who carries on the business of pawnbroker, by receiving goods in pledge for loans at any rate of interest above the rate of ten per cent per annum, except by authority of a license, is guilty of a misdemeanor.” Under our law, therefore, one is a pawnbroker who carries on the business of receiving goods in pledge for loans, exacting an interest for those loans. If the rate of interest which he exacts exceeds ten per cent per annum, he is guilty of a misdemeanor if he conducts his business without first procuring a license so to do. Analyzing these definitions for the better understanding of the facts of this ease which are to follow, it becomes apparent that, to constitute a person a pawnbroker, two requisites must be established. First, the person must receive goods in pledge for loans at a rate of interest, and, second, this must be his business, or a well-defined part of his business. A single transaction, or an occasional loan, would not establish that a person “carried on the business of pawnbroker.” The stipulated facts as to defendant Boas may be summarized as follows : For more than thirty years last past he has maintained an office in the city and county of San Francisco for the transaction of business as a money-lender, and during all of said time was generally known to the public to be engaged in the business of lending money at his said office, upon mortgages on real estate, upon mortgages upon personal property, and upon assignments of life-insurance policies, and upon assignments of public warrants, and upon unsecured

Under this state of the law and of the facts, was defendant a pawnbroker? Unhesitatingly it is answered that he was. He loaned money upon personal property pledged or pawned with him. He loaned this money upon the security of the pledge and pawn. He charged and collected upon these loans a high rate of interest, exceeding ten per cent per annum. He did all of these things continuously, and as a part of his regular business, at a fixed place of business, and the doing of these things—the carrying on of this business—was publicly known. That he limited his operations to certain classes of goods—namely, jewels and jewelry—does not militate against this conclusion. No one would hesitate to say that one who, as a regular business, received in pledge or pawn second-hand clothing, loaning money upon it at usurious rates of interest, was a pawnbroker. Yet the kinds of jewels, and, still more, the kinds of manufactured products known as jewelry, are vastly greater than the kinds of second-hand garments. So that the mere limiting of a. dealer’s sphere of operations to one or another of a particular class of goods is not at all the test of the character of his business.

Nor was his business any less that of a pawnbroker because at the same time and at the same place he conducted another business, or branches of his business, which were not of this character. A question identical in principle arose in City of Los Angeles v. Loan etc. Co., 109 Cal. 396 , [ 42 Pac. 149 ], where the defendant incorporated to do a trust and safe-deposit business and general banking business, had a savings department in which term savings deposits were received, and insisted that it was not taxable as a savings and loan corporation upon its term deposits. The trial court held that the deposits in question should not be assessed or treated as the property of the bank, but should be taxed with the safe deposits as ordinary commercial deposits. But this court held that the fact that the loan company was engaged in a general banking business, and a safe deposit business, in addition to

Nor was respondent the less a pawnbroker because he required the pledgor or pawnor to execute a promissory note or chattel mortgage in connection with the transaction. First, because it is admitted that reliance was placed upon the pledge, and, second, because the transactions, no matter what force the respondent may have thought attached to his notes and chattel mortgages, were, under our law, pledges, and nothing else. “Every contract by which the possession of personal property is transferred, as security only, is to be deemed a pledge.” (Civ. Code, sec. 2987.) “Every transfer of an interest in property . . . made only as security for the performance of another act, is to be deemed a mortgage, except when, in the case of personal property, it is accompanied by actual change of possession, in which case it is to be deemed a pledge.” (Civ. Code, sec. 2924.) The very fact that the respondent took possession of the property as a pledge, and relied upon his possession as a pledge, negatives the conception of a chattel mortgage. This precise question arose in Minnesota, and the same contention was made. It was disposed of by the supreme court of that state as follows: “We are also of the opinion that the evidence justified the trial court in finding that the defendant was conducting the business of pawnbroker. The evidence' does not consist wholly, as counsel claims, of the two loans. There was evidence of admission of defendant, or her admitted general agent, that those loans were but samples of the kind of business which she was conducting, and that she was in the habit of lending money on watches, stocks, time-checks, or any other kind of security, but that she thought she was not required to

It being thus established that defendant was a pawnbroker, and it being admitted that in the conduct of his business he neither procured the license required by law, nor observed the regulations prescribed by the statutes of the state and by municipal ordinance for the conduct of the business of pawnbroker, there is presented the second question: What legal consequences followed this dereliction in the matter of these contracts of pledge? And first, as having to do with the question, it is to be noted that the business of a pawnbroker is one which has always been regarded as subject to police regulation for the benefit of the public, and to prevent frauds upon it. Thus, touching a pawnbroker act, the court of common pleas of England said: “It is quite evident that the statute was passed not only for the purpose of protecting the numerous parties who borrow money on small pledges, but also the public, against frauds committed on third persons, the real owners of goods, by pledging their property without their consent.” (Ferguson v. Norman, 5 Bing. N. C. 76.) “The business [pawnbroker], therefore, comes expressly within the control of the police power of the state, and is properly subject to reasonable rules and regulations.” (Grand Rapids v. Braudy, 105 Mich. 670 , [ 55 Am. St. Rep. 472 , 64 N. W. 29 ].) And says the supreme court of Missouri: “The city may not only regulate, but suppress, pawnbrokers, or refuse to license such occupation altogether. No person has the right to follow such occupation within the limits of said city without first obtaining a license from its authorities for that purpose, which may be granted or withheld at pleasure. The business is a privilege, not a right, and he who avails himself of it and derives its benefits must bear its burdens and conform to the laws in force regulating the occupation.” (St. Joseph v. Levin, 128 Mo. 588 , [ 49 Am. St. Rep. 577 , 31 S. W. 101 ]. See, also, Ex parte Lichtenstein, 67 Cal. 359 , [ 56 Am. Rep. 713 , 7 Pac. 728 ].)

As has been pointed out, sections 338 and 339 of our Penal Code make every person carrying on the business of a pawnbroker, except by the authority of a license, guilty of misdemeanor; also every person carrying on such business, if he fails at the time of the transaction to enter in a register kept by him for that purpose, in the English language, the date, duration, amount, and rate of interest of every loan made by him, an accurate description of the property pledged, and the name and residence of the pledgor, and to deliver to the pledgor a written copy of such entry, and to keep an account in writing of all sales made by him. It has also been shown that these provisions are, one and all, enacted under the police power for the regulation of the business and the protection of the needy and improvident and of the general public against oppression and fraud. It has further been shown that where a statute, designed for the protection of the public, prescribes a penalty, that penalty is the equivalent of an express prohibition, and that a contract in violation of its provisions is void. “Whenever the illegality appears, whether the evidence comes from one side or the other, the disclosure is fatal to the case.” (Coppell v. Hall, 74 U. S. 542 ; Berka v. Woodward, 125 Cal. 119 , [ 73 Am. St. Rep. 31 , 57 Pac. 777 ].) Where the contract is void, the right of the pledgee

For the foregoing reasons the judgment is reversed, with instructions to the court to enter judgment'for plaintiff as prayed for.

McFarland, J., and Lorigan, J., concurred.