Browner v. District of Columbia, 86-220.

• Citation: 549 A.2d 1107
• Decision Date: 08 November 1988
• Docket Number: No. 86-220.,No. 86-221.,86-220.,86-221.
• Parties: Ferris N. BROWNER, Appellant, v. DISTRICT OF COLUMBIA, Appellee. Rita A. WALKER, A/K/A Rita Browner, Appellant, v. DISTRICT OF COLUMBIA, Appellee.
• Court: Court of Appeals of Columbia District

549 A.2d 1107

Ferris N. BROWNER, Appellant, v. DISTRICT OF COLUMBIA, Appellee.

Rita A. WALKER, A/K/A Rita Browner, Appellant, v. DISTRICT OF COLUMBIA, Appellee.

No. 86-220.

No. 86-221.

District of Columbia Court of Appeals.

Argued July 12, 1988.

Decided November 8, 1988.

W. Edward Thompson, with whom J. Lincoln. Woodard was on the brief, for appellants.

Edward E. Schwab, Asst. Corp. Counsel, with whom Frederick D. Cooke, Jr., Corp. Counsel, Charles L. Reischel, Deputy Corp. Counsel, and Lutz Alexander Prager, Asst. Deputy Corp. Counsel, Washington, D.C., were on the brief, for appellee.

Before MACK and SCHWELB, Associate Judges, and PRYOR, Senior Judge.^*

SCHWELB, Associate Judge:

Where the real truth is a loan of money, the wit of man cannot find a shift to take it out of the statute.

Lord Mansfield in Floyer v. Edwards, 1 Cowp. 112, 114-115, 98 Eng.Rep. 995, 996 (1774).

I

Perhaps because so many of us have to live on credit and envy those who have the cash, it is fair to say that, rightly or wrongly, money lenders in general and usurers in particular have not been dealt with kindly in Holy Scripture, in literature, or in judicial rhetoric. The Bible warns us that "the borrower is servant to the lender,"¹ and instructs that

if you lend money to any of my people with you who is poor . . . you shall not exact interest from him.[²]

Shakespeare's character Polonius, speaking to his son Laertes about the ways of the world, provides unambiguous counsel on this subject:

Neither a borrower nor a lender be.[³] The Bard also introduces us to Shylock, perhaps the most famous (or infamous) money lender in all of fiction, who seeks to exact a pound of his anti-Semitic enemy's flesh as liquidated damages for failure to repay a loan.⁴

Not to be outdone, one court has described the practices which usury and loan sharking laws were designed to punish as "an actual, manifest, fearsomely violent evil," People v. Ayers, 109 Misc.2d 870, 875, 440 N.Y.S.2d 1019, 1023 (1981), and a second has commented that loan sharking is "one of the most heinous, virtually bloodsucking, criminal activities of all times." People v. Fernandez, 93 Misc.2d 127, 129, 402 N.Y.S.2d 940, 943 (1978).⁵ Those who lend money at high interest rates sometimes become rich, but human nature being what it is, they seldom win the plaudits of the crowd or the goodwill of their less affluent fellow citizens.

In the present case, the principal question is whether the appellants Rita A. Walker and Ferris Browner, who are wife and husband, and who denied being in the business of money lending at all, were actually engaged in the criminal enterprise of making loans in a disguised form at legally impermissible rates and without a license. The trial judge, Honorable Fred L. McIntyre, sitting without a jury, found the evidence sufficient to establish beyond a reasonable doubt that the transactions in the record, although otherwise denominated by the defendants, were in reality loans of the prohibited character. We agree and affirm both appellants' convictions.

Ms. Walker and Mr. Browner were convicted of three counts each⁶ of violating the Loan Sharking Act, D.C.Code § 26-701 (1981), which provides in pertinent part that

it shall be unlawful and illegal[⁷] to engage in the District of Columbia in the business of loaning money upon which a rate of interest greater than 6 per centurn per annum is charged on any security of any kind, direct or collateral, tangible or intangible, without procuring a license.[⁸]

The controversy in this case arose out of a number of transactions in 1981 and 1982 between the appellants and several homeowners who were in financial difficulty and were facing imminent foreclosure on their homes. The Corporation Counsel charged that these transactions were loans at an interest rate that exceeded 6 per cent. The appellants claimed that, rather than making loans, they were purchasing homes, leasing them back, and providing the former homeowners with an option to repurchase.

The Corporation Counsel offered evidence which established that the appellants were the principals in a Virginia corporation named RAW & Associates, Inc.⁹ They held themselves out as money lenders. They placed classified advertisements in the Washington Post in the newspaper's "MONEY TO LEND" columns. The advertisements read NEED MONEY?—Foreclosure help RAW 726-9303/387-4546.

They also distributed a circular entitled "YOUR FINANCIAL RESOURCE: RAW ASSOCIATES" which told prospective clients, among other things, that "Where banks stop, we start," "SERVICES PRO-VIDED: Financing money to lend," and other phrases to the effect that loans were available. The phrase "where banks stop, we start" was also used in an unsolicited letter to persons whose homes were being advertised for foreclosure.¹⁰

The trial judge found that the various homeowners who testified for the government contacted the defendants in response to these advertisements, seeking loans to save their homes, which were threatened with foreclosure. Instead of receiving loans, however, they were presented with and signed papers ostensibly conveying their property to Ms. Walker with a lease back and an option to repurchase within a year.

Although the transactions were denominated sales, the homeowners testified that they never intended to sell their property. Moreover, there was evidence that the appellants described the transactions to their clients as loans, and sometimes assured those clients who raised questions about what they were signing that the characterization of a transaction as a sale in the documents was solely a technicality, effected for the purpose of accommodating an accountant. In any event, most of the homeowners were understandably upset about their financial difficulties and the prospect of losing their homes, and even those with some years of college were less than diligent in reading what they were signing or otherwise protecting their own interests.

While the "sales" saved the homes from immediate foreclosure, they left the homeowners in an extremely precarious position. The homeowners were required to pay a monthly "rent" which was generally at least twice their former mortgage payment. In addition, in order to redeem their property after one year, they had to repay the money RAW had expended to make current the mortgage arrearages and other debts, as well as all costs incurred by RAW in conveying the property to Ms. Walker. If the homeowners were unable to make all of these payments, they lost the homes which they had asked appellants to help them save, equity and all.

The specific transactions as to which the government adduced testimony were all of the general character detailed above, although there were differences between the various (but all markedly one-sided) "bargains" struck.¹¹ Judge McIntyre's description of the experience of one family that dealt with the defendants is illustrative of what occurred:

On or about November 15, 1982, Mrs. Julia Carroll visited the offices of RAW Associates to obtain a loan in order to assist her son whose house was subject to immediate foreclosure. The defendant Ferris Browner negotiated with Mrs. Carroll. Pursuant to the discussions, RAW made available funds in the amount of $4,591.18 to close out the pending foreclosure of the son's house. As part of the financing plan, Mrs. Carroll deeded her house over to the defendant Rita Walker under a one-year lease provision with an option to repurchase at the end of one year.

During the one-year leasing period, Mrs. Carroll was required to pay monthly rental payments of $375.00 to RAW (in lieu of the $118.00 per month mortgage payments); and upon exercising the repurchase option, Mrs. Carroll would be obligated to pay the $4,591.18 arrearage payment, included therein being the cost of title examination, fire insurance, and the appraisal of the property.

At the time Mrs. Carroll entered into the alleged sale of her property to Rita Walker it had a value of $38,185 and was entirely free of debt except for the balance of the first mortgage in the amount of $1,600.00.

Thus, Mrs. Carroll conveyed property worth $38,185.00 for $6,988.18 (which included the arrearages, a $1,600.00 payment on her mortgage, fire insurance and various other amounts). The paltry sum expended by the appellants on Mrs. Carroll's behalf was even lower than the ostensible contract sale price of $8,100.00.

After hearing this evidence, as well as a prosecution expert's testimony that the effective interest rates charged by RAW ranged from 50% to 200%, the trial court found each appellant guilty of three counts of violating § 26-701. The appellants received suspended jail sentences and were placed on probation and ordered to make restitution, pay fines, and perform community service. These appeals followed.

III

Before reaching the principal question in the case—whether the Loan Sharking Act reaches appellants' conduct—we address two procedural issues. The first, which was properly preserved for presentation on this appeal, is whether the defendants were improperly denied a jury trial. The second, first expressly raised as an independent basis for reversal during oral argument, is whether Judge McIntyre should have recused himself.

A. Jury Trial.

The maximum penalty for a violation of the Loan Sharking Act is imprisonment for thirty days, or a $200.00 fine, or both. As previously noted, appellants were also charged with violating 16 DCMR § 201.1, but this regulation prohibits like conduct and carries the same maximum penalty. There is no constitutional or statutory right to a jury trial for such an offense.

The Sixth Amendment to our Constitution provides that in all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial by an impartial jury. Art. III, § 2, cl. 3 similarly states that "the trial of all crimes . . . shall be by Jury." The right of trial by jury, however, does not extend...