In re Washer

An application for the writ of habeas corpus.

At the time of the filing of the petition in this proceeding petitioner was under imprisonment pursuant to conviction upon a charge of having violated the provisions of a statute of the state known as the Usury Act. The com

Petitioner contends for his release from durance on the ground that the Usury Act is unconstitutional. The statute which was enacted by the people under the initiative provisions of the constitution, is to be found in Stats. 1919, page lxxxiii. It also appears in Deering, General Laws, as Act No. 3757. For convenience in discussing the various constitutional questions argued in the briefs, the entire enactment, with the exception of a few lines which clearly are not involved in the points presented, is below set forth. For further convenience in dealing with the questions presented to us the quotation from the statute is divided into two parts. The first of these reads:

“Sec. 1. The rate of interest upon the loan or forbearance of any money, goods or things in action or on accounts after demand or judgments rendered in any court of this state, shall be seven dollars upon the one hundred dollars for one year and at that rate for a greater or less sum or for a longer or a shorter time; but it shall be competent for parties to contract for the payment and receipt of a rate of interest not exceeding twelve dollars on the one hundred dollars for one year and not exceeding that rate for a greater or less sum or for a longer or shorter time, in which case such rate exceeding seven dollars on one hundred dollars shall be clearly expressed in writing.

“Sec. 2. No person, company, association or corporation shall directly or indirectly take or receive in money, goods or things in action, or in any other manner whatsoever, any greater sum or any greater value for the loan or forbearance of money, goods or things in action than at the

“Sec. 3. Every person, company, association or corporation, who for any loan or forbearance of money, goods or things in action shall have paid or delivered any greater sum or value than is allowed to be received under the preceding sections, one and two, may either in person or his or its personal representative, recover in an action at law against the person, company, association or corporation who shall have taken or received the same, or his or its personal representative, treble the amount of the money so paid or value delivered in violation of said sections, providing such action shall be brought within one year after such payment or delivery.”

The second portion of the statute follows immediately the first part as above set forth and will be referred to hereafter in this opinion as the latter part of section 3. It reads:

“And any person, company, association or corporation, who shall ask, demand, receive, take, accept or charge more than twelve per centum per annum upon the sum of money actually loaned for the forbearance, use or loan thereof, when the repayment of the money loaned shall be secured by a mortgage, trust deed, bill of sale, assignment, pledge, receipt or other evidence of debt, except corporation bonds, and municipal and other public bonds, upon property, real or' personal, or by assignment of wages, or ask, demand, receive, take, accept or charge more than an amount equal to five per cent so actually loaned and secured in all sums of one thousand dollars or less, and three per cent on all sums over one thousand dollars in full for all examina

The points urged by petitioner for his release from custody depend for their solution almost wholly, if not altogether, upon the language of the latter part of section 3, and in presenting them petitioner relies upon the following guaranties contained in the organic law of state and nation, respectively:

“All laws of a general nature shall have a uniform operation” (Const. Cal., art. I, sec. 11).

“No special privileges or immunities shall ever be granted which may not be altered, revoked, or repealed by the legislature, nor shall any citizen-, or class of citizens, be granted privileges or immunities which, upon the same terms, shall not be granted to all citizens” (Const. Cal., art. I, sec. 21).

No state shall “deny to any person within its jurisdiction the equal protection of the laws” (Const. -U. S., 14th Arndt.).

These various constitutional provisions, generally speaking and having in mind the situation exhibited in the present controversy, look to the accomplishment of one object, the protection of the individual against unjust discrimina

[1] It now becomes necessary to state the terms of the exception with exactness. This may be done by a quotation from the statute, omitting alternating words and all expressions which are immaterial to a construction of the clause in which the exception is contained, and which may tend to make construction difficult. Thus shortened the clause reads: “And any person who shall ask more than twelve per centum upon the money actually loaned for the use thereof, when repayment shall be secured by a mortgage, trust deed, bill of sale, assignment, pledge, receipt or other evidence of debt, except corporation bonds, and municipal and other public bonds, upon property, real or personal, shall be guilty,” etc. A mere reading of this language demonstrates that its meaning is far from clear. The clause “or other evidence of debt” would' seem to furnish the principal guide to a construction of the entire passage, but the import of that guiding expression is determinable only after a consideration of the language which accompanies it. The meaning of the words “or other evidence of debt” is obscured by the fact that they are preceded by the language “when repayment shall be secured by a mortgage, trust deed, bill of sale, assignment, pledge, [or] receipt.” Not only under the language of

It is not necessary for us here to decide whether each and every one of the words which immediately precede the expression “evidences of debt” are truly descriptive of and were intended to designate actual evidences of debt. It is enough to say that some of them plainly cannot belong to that classification, for such a conclusion -answers the purpose of our discussion. It is now manifest that the expression which, after the word “except,” follows the phrase, “evidence of debt,” that is to say, the expression “corporation bonds, and municipal and other public bonds,” need not be construed as referring to evidences of debt, as that expression is understood in the strict nomenclature of the law. To put it differently, as the expression “other evidence of debt” follows words which do not refer to strict evidences of debt, the words which follow that expression, “corporation bonds and municipal and other public bonds,” are not necessarily to be construed as referring to strict evidences of debt. To state the situation differently, again: If we attempt to follow the rule ejusdem generis, and under that rule essay to consider “corporation bonds and municipal and other public bonds” in such a manner as to place them in the same genus with the terms which precede the word “except,” we need not consider such bonds as strict evidences of debt for the very good reason that most of the instruments named just before the term “except” are not themselves evidences of debt, although they are inferentially so named by the three words which immediately follow the term “except.” The names of the instruments or securities which precede that word in strictness do not establish such a genus. Therefore, the words which follow it need not belong to that genus. We should make it plain here that in what we say we have in mind a rule of construction, based upon an admeasurement of context, and do not deal with the matter of the usual and ordinary import of the terms “corporation bonds,” “municipal bonds,” or “public bonds.” That ordinary meaning is, of course, well understood. Such bonds, beyond a doubt, are in strictness evidences of debt. We only say that if there is room to con

It will be observed that a discussion of the clause of the Usury Act now under consideration, especially in connection with the argument thus advanced, involves us in a maze of words. If we have made ourselves clear, notwithstanding this great difficulty, we may now say that up to the point at which we have arrived—and we pause to remark that we must yet go further—the result of our discussion supports the argument of petitioner as to the import of the exception embodied in the Usury Act and now under consideration, and in saying this we have in mind a certain specific point made by petitioner within the general proposition already stated and which is embraced in the two questions which we have above propounded as to the meaning of the exception. This specific point must now be stated. Petitioner contends that the words which precede the term “except” in the statute do not designate evidences of debt, but that they, under the terms of the clause in which the exception is contained and under the law, are descriptive of various kinds of security for the payment of debt. Upon this premise he then asserts that the expression, “corporation bonds, and municipal and other public bonds,” which follows the word “except,” must be construed in such manner as to make them refer to security for the payment of debt, also. The next step in his argument is that the expression can be so construed if it is held to relate to the repayment of loans to individuals who may privately own such bonds and who may deposit them as collateral with the persons who may make such loans to them and as security for repayment. As an accompaniment to this assertion petitioner says that corporate, municipal, and other public bonds, being evidences of debt of the entities which issue them, cannot be considered as security for the repayment of the debts of those entities, incurred on the faith of advances made to them by investors in bonds, and that trust deeds issued by such entities in connection with bond issues are the security for repayment in such instances and not the bonds themselves. It will now be perceived how the argument of petitioner is supported, as far as we have proceeded, by the conclusion which we have above ex

We have already concluded that the rule ejnsdem generis does not compel us to consider the expression “corporation bonds and municipal and other public bonds” as intended by the people, in the enactment of the Usury Act, to refer to those instruments as evidences of debt. These questions are now to be determined: Are we bound to consider the expression as referring, strictly, to security for the payment of debt? Are we bound to adopt completely the contention of petitioner ? To put the problem conversely: May we give to the expression the meaning which it ordinarily imports and hold that the exception in the statute refers to loans made to corporations, municipalities, and other public entities upon the faith of bonds issued by them? We shall discuss the problem before us—and it is to be conceded that it is an extremely difficult one—in the terms of the question last put, for we shall be able to answer it in the affirmative.

In the first place, as we have so often remarked, the bonds referred to in the exception are actually evidences of debt. They are, in effect, the promissory notes of the entities which issue them. Not only so, but they are called evidences of debt by the presence of that very expression immediately preceding the word “except” in the statute, although the expression is largely if not altogether a misnomer as applied to the names of instruments which precede the word “except.” These considerations are -far from controlling, but they are worthy of mention in assembling the arguments in opposition to the contention of petitioner. There are other considerations which are vastly more potent against him. It will be noted, for instance, that the statute undoubtedly intends, in that part of it immediately preceding the word “except,” to refer to loans the repayment of which are to be “secured” by instruments executed by the borrower. To be more specific, it is evidently intended by the statute that the denouncement of a charge of more than twelve per centum interest on loans the repayment of which is secured by “a mortgage, trust deed, bill of sale, assignment, . . . [or] receipt” contemplates loans in connection with which the instruments mentioned, or any of them, are executed by

[2] As a basis for further argument in refutation of the contention of petitioner as to the import of the exception embodied in the statute, we turn now to a consideration of his claim that the exception puts him under the ban of an unjust and, therefore, unconstitutional discrimination. Undoubtedly this contention were well-founded if the exception were conceded to mean what petitioner insists that it means. We have already seen that if the exception were so construed it would operate upon those who are situated similarly with petitioner. Upon such a construction, then, it would -result that the classification attempted to be made by the exception would not be based upon a natural or just scheme of classification, and that the statute, or some parts of it, at least, would be unconstitutional and therefore void. A directly opposite result flows from the view that the exception in the statute was intended to apply to loans to those corporate entities which borrow money upon bond issues. They are, from the very nature of the transactions incident to the issue • and sale of their bonds, in a class entirely different from that occu

[7] The next point made by petitioner relates also to the latter part of section 3 of the Usury Law. Following the scheme adopted in discussing the question of which we have just made disposition, we shall quote from the section those parts which are involved in the point now to be examined, omitting unnecessary, words and passages which might serve to impede construction. Thus shortened the latter part of the section reads: “Any person who shall ask more than an amount equal to five per cent [on money] so actually loaned and secured in all sums of one thousand dollars or less, and three per cent on all sums over one thousand dollars in full for all examinations, views, fees, appraisals, commissions or renewals made within one year from date of loan and charges of any kind or description whatsoever in the procuring, making and transacting of the business connected with such loans shall be guilty,” etc. The expression, “so actually loaned and secured,” as it shows in this excerpt, evidently connects with the clause “the sum of money actually loaned” as that clause appears in the latter

The expression “so loaned and secured,” in the excerpt now before us, would also seem to connect with the clause above it in the latter part of section 3, which reads, “when the repayment of the money loaned shall be secured by a mortgage,” etc., and which clause has been the subject of such extended discussion above.

Petitioner contends that the portion of tlie statute which is now to be examined unjustly discriminates against him, but, as in the case of the point which we have above determined, a preliminary inquiry into the meaning of the statute must be made before we may embark upon a discussion of the speeilic question which is raised. In his construction of the feature of the enactment which is now of interest petitioner imposes a heavy burden on the tie that binds the expressions “the sum of money actually loaned,” “when the repayment of the money loaned,” and “so loaned and secured.” From the relation between these clauses petitioner deduces a variety of consequences to flow from the operation of the Usury Act. He says that only two purposes could have been intended by the statute in those parts of it which are fastened together by the three clauses which we have quoted. Under the first of these purposes, as seen by him, he asserts, because of the presence of the prohibition against more than 12 per cent interest on loans in that part of section 3 which we have quoted in discussing the point already determined, and through the connection caused by the interdependence of the three clauses mentioned—he asserts, we repeat—that the portion of the statute now under scrutiny allows an adding together of charges against a borrower, thus, to quote from his brief: “A lender may exact 17 per cent on loans of $1000 or less, but only 16 per cent [15 per cent (?)] on loans of $2000.” Under the first purpose seen by petitioner, also, because of the presence of the.provision, “shall be secured by mortgage,” etc., in the statute, and because of the connection between the three

Petitioner’s conjectured “second purpose” of this part of the statute is in our view the real one which the people had in mind in enacting the measure. Petitioner thus states the “second purpose” which he sees: “The other purpose that may have been intended to be accomplished is to make an exaction of more than 5 per cent on $1000 and of 3 per cent above $1000 for examinations, views, fees,' appraisals and other charges, bad irrespective of the interest, charged. ” In discussing the constitutional question presented by petitioner we shall assume, for we now decide, that this latter quotation from his brief states the real and only “purpose” of the portion of the statute now under examination. The “first purpose” which petitioner» sees in that part of the enactment is a mere figment of the imagination.

Is petitioner unconstitutionally discriminated against by the provision which we have just interpreted? We cannot see how such a result is possible. It must be remembered here that the claim of unjust discrimination now made is not presented and cannot be presented upon the theory which was behind the point of which we have already disposed. There petitioner advanced the arguable contention that an

Petitioner, however, cites other “examples” of the operation of the particular part of the statute now under examination, each of which, he says, demonstrates the unconstitutionality of the measure. It is enough to say that in our opinion they neither demonstrate nor permit such an outcome. The entire subject covered by petitioner’s assault upon that part of the statute now under scrutiny has been discussed and no necessity exists for a particular examination of the other “examples” stated by him. The claim of uneonstitutionality on the ground now urged is without merit.

[9] Petitioner also insists that he is unlawfully imprisoned for the reason that another portion of the latter part of section 3 is unconstitutional when read in connection with the remainder of the Usury Act. The portion referred to may be shortened, under the plan above adopted as to other parts of the enactment, to read thus: “Any person who shall ask any fee, bonus or commission for procuring [a] loan of money for a shorter period than six months when said loan is not secured by a mortgage or pledge upon real estate shall be guilty,” etc. Under rules of law which are stated above the objection thus made is not open to petitioner. In the pangs which he suffers pursuant to Ms conviction upon a charge of exacting an excessive rate of in

It is insisted by petitioner that the Usury Act is unconstitutional because it provides that no more than 12 per cent interest shall be charged for a loan of “goods.” It is said that this particular provision operates to deprive a lender of his property without due process of law. Without pausing to explore the substance of the contention it is enough to say that petitioner is in no position to make it. Such a question will properly arise when it shall be presented by some person charged with the particular offense denounced by the provision referred to.

While we have not mentioned specifically all points made by petitioner, we have answered the substance of every contention that is presented.

Writ discharged and petitioner remanded to custody.

Finlayson, P. J., and Craig, J., concurred.