Bernhardt v. Atlantic Finance Corp.

• Citation: 40 N.E.2d 713,311 Mass. 183
• Parties: LEONARD BERNHARDT v. ATLANTIC FINANCE CORPORATION.
• Decision Date: 25 March 1942
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

311 Mass. 183

40 N.E.2d 713

LEONARD BERNHARDT v. ATLANTIC FINANCE CORPORATION.

Supreme Judicial Court of Massachusetts, Suffolk.

March 25, 1942

January 26, 1942.

Present: FIELD, C.

J., DONAHUE, QUA DOLAN, & RONAN, JJ.

Small Loans. Usury. Bills and Notes, Validity, Cancellation. Contract, Validity Cancellation. Sale, Conditional. Equity Jurisdiction Cancellation, Usurious note, Plaintiff's clean hands. Public Policy. Constitutional Law, Due process of law. Statute, Retroactive. Equity Pleading and Practice, Appeal. Words, "Void."

Upon appeal from a final decree in a suit in equity, with a report of the evidence and a report by the judge of all the material findings on which the decree was based, such findings are not to be disturbed unless plainly wrong, but this court should make such further material findings as it deems to be justified by the evidence and give due weight to them as well as to the judge's findings in disposing of the case.

A note for $283.20 payable in twelve monthly instalments, given in 1940 by the purchaser of an automobile to the seller as "evidence" of a balance of $225 due on the purchase price plus a "finance charge" of $58.20, and a contract of conditional sale under which the purchaser agreed to make such payments and the seller retained title until they all were made, were void, under the amended Sections 96-114 of G. L. (Ter. Ed.) c. 140, in the hands of a finance company which engaged in the business of making small loans without having a license therefor under said statute and which for $225 received from the seller a transfer of the note and the contract, where it appeared that the company participated in the entire transaction with full knowledge of all the pertinent facts.

Public policy did not regard the maker of a note and of a conditional sale contract, which were acquired by a finance company in violation of the small loans act and were void in its hands, to be in pari delicto with the company; he was entitled to maintain a suit in equity against it for their cancellation.

St. 1941, c.

158, if applied to bar the maker's right to have cancelled a note and conditional sale contract given in 1940 and void under the small loans act, would be unconstitutional as depriving him of property without due process of law.

BILL IN EQUITY, filed in the Superior Court on February 13, 1941. The case was heard by Morton, J., and in this court was submitted on briefs.

The conditional sale agreement, described in the opinion, set forth an account stating the "selling price" of the automobile as $345, adding thereto $58.20 as a "finance charge," making a "total time price" of $403.20; crediting against that amount a "cash down payment" of $120; and stating a net balance "in 12 monthly payments of $23.60 each, $283.20." This was followed by the statement: "Evidenced by purchaser's promissory note of this date bearing interest as therein stated. (Not as payment but as evidence of the amounts to become due hereunder.)" The interest so stated in the note was "at the rate of three per cent per month" "after maturity." A "condition," which was made a part of the agreement, was that, in "the event of buyer's failure to pay any of his indebtedness hereunder when due . . . seller and/or assigns may declare the entire amount then unpaid due and payable forthwith, and may . . . take possession" of the automobile.

The case was submitted on briefs. S. T. Lakson, for the defendant.

M. M. Goldman & H.

Robinson, were permitted to file a brief as amici curiae.

M. Brown, was permitted to file a brief as amicus curiae. No argument nor brief for the plaintiff.

DOLAN, J. 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 his report of material facts that the facts therein set forth are all the material facts upon which his order for decree was based does not affect this rule. It is still for us to decide the case upon our judgment as to the facts, giving due weight not only to those actually found by the judge but also to all other facts disclosed by the evidence, which we find ourselves. Atlantic National Bank of Boston v. Hupp Motor Car Corp. 298 Mass. 200, 202. The present case is not one where a report such as that under discussion is made by the judge but the evidence is not reported, and where accordingly there is no room for implication of further findings and the decree must stand or fall upon the facts found in the report. See Sidlow v. Gosselin, 310 Mass. 395 , and cases cited.

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 then asked Bernhardt if he could raise the money and the latter said that he thought it could be arranged. Epstein then said that if a down payment was made by the plaintiff of $120 he would purchase the paper. On or about July 29, 1940, the plaintiff purchased the vehicle from the dealer for $345, making a down payment of $120 partly in cash, and partly by note payable to the dealer, leaving a balance due of $225. In payment of this balance the plaintiff executed a note payable to bearer for $283.20. This note was attached to a conditional sale agreement, which was also entered into on the same date between the dealer and the plaintiff, which set forth a "Total Cash Selling Price" of $345 and a finance charge of $58.20. The note was expressed to be payable in twelve monthly instalments of $23.60 each. On the same day the dealer indorsed the note in blank and executed an assignment of the contract and delivered the instruments to the defendant. The form of assignment was printed on the back of the agreement to which the note was attached. The form upon which these instruments were executed had been furnished by the defendant to the dealer. The defendant bought the "paper," that is, the note and agreement, for $225, which it paid to the dealer by check dated July 29, 1940. The discount of $58.20, which is to be treated as interest (Cuneo v. Bornstein, 269 Mass. 232 , 236. Noteman v. Welch, 26 Fed. Sup. 437, 440) exceeded by far the twelve per cent permitted to be charged by persons who engage in the business of making loans of $300 or less without having obtained a license to carry on such business from the commissioner of banks as provided in G. L. (Ter. Ed.) c. 140, Section 96, as amended by St. 1934, c. 179, Section 2, so far as here pertinent. See also Section 90 as amended by Section 1 of said c. 179. The plaintiff made four of the monthly payments provided for in the note and agreement. Two of these payments were tendered later than the due dates and in connection with these payments the defendant required the plaintiff to pay two "reinstatement charges" of $1.50 each. In his report of material facts the judge ruled in effect that the transaction was void and that it was not exempt under St. 1941, c. 158, from the provisions of G.

L. (Ter. Ed.) c. 140, Sections 96-114, in the amended form in which they appeared when the transaction involved was entered into.

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...