Columbia Auto Loan, Inc. v. District of Columbia

• Decision Date: 26 February 1951
• Docket Number: No. 995.,995.
• Citation: 78 A.2d 857
• Parties: COLUMBIA AUTO LOAN, Inc. v. DISTRICT OF COLUMBIA.
• Court: D.C. Court of Appeals

Page 857

78 A.2d 857

COLUMBIA AUTO LOAN, Inc. v. DISTRICT OF COLUMBIA.

No. 995.

Municipal Court of Appeals for the District of Columbia.

Argued January 7, 1951.

Decided February 26, 1951.

Rehearing Denied March 14, 1951.

Samuel F. Beach, Washington, D. C., with whom Leslie C. Garnett and Bernard Margolius, Washington, D. C., were on the brief, for appellant.

Chester H. Gray, Principal Asst. Corp. Counsel, Washington, D. C., with whom Vernon E. West, Corp. Counsel, and Milton D. Korman and Clark F. King, Asst. Corporation Counsel, all of Washington, D. C., were on the brief, for appellee. Edward A. Beard, Washington, D. C., also entered an appearance for appellee.

Before CAYTON, Chief Judge, and HOOD and CLAGETT, Associate Judges.

CLAGETT, Associate Judge.

Columbia Auto Loan, Inc., trading as Columbia Credit Company, through its president, Samson Dewey Gottlieb, was convicted and fined under Code 1940, § 26-601, which makes it unlawful "to engage in the District of Columbia in the business of loaning money upon which a rate of interest greater than six per centum per annum is charged on any security of any kind, direct or collateral, tangible or intangible, without procuring license". It was stipulated that defendant was engaged in the business of lending money and also that it was not licensed under the so-called Small Loan Act, under which rates higher than 6% may be charged. Therefore the principal issue both in the trial court and here was whether defendant charged borrowers more than 6% interest.

Involved in the original information were three specific loans on used automobiles, but, for reasons not germane to this appeal, one of the cases was eliminated. Of the remaining cases one involved a loan to Peter Bunn of $150. This loan was made May 26, 1950. As evidence of this indebtedness Bunn was required to deliver to defendant his promissory note secured by a chattel deed of trust in the amount of $250, payable in 10 installments of $25 each. The other case involved an alleged loan to Joshua Reed made May 27, 1950, in the amount of $198.28.¹ As evidence of this indebtedness, Reed was required to deliver to defendant his promissory note secured by a chattel deed of trust in the amount of $300, payable in 10 installments of $30 each. The notes in both cases were written to include interest until paid, but the rate of such interest was left blank. The chattel deeds of trust securing the notes contained provisions that upon default of any installment (which included insurance charges) the entire amount of the notes (including the insurance premiums) would become due. Since such monthly payments, including the repayment of principal, obviously would equal more than 6% per annum on the amount loaned, the issue was narrowed to whether and to what extent such payments included legal, or indeed any, charges for insurance.

Defendant's ordinary method of doing business as described by its president Gottlieb was as follows: When a person applied to it for an automobile loan ($150 in the Bunn case) and the loan was to be repaid in 10 months, the company took the sum necessary to repay the principal and interest in 10 months ($150 principal plus $3.75 interest in the Bunn case)² and added thereto a sum representing "insurance" premiums for one year ($96.25 in the Bunn case), the total representing the face amount of the note and the chattel mortgage which the borrower was required to sign ($250 in the Bunn case). The total was divided by the number of months in which the loan was to be repaid (10 in the Bunn case), and thus the monthly payment ($25 in the Bunn case) was arrived at. The "insurance" was supposed to cover one year's premium on the actual cash value of the automobile, $25 deductible, including fire and theft, towing charges, and collision. In the Bunn case, for example, at the time of obtaining the loan of $150, he was required to sign, in addition to the note and chattel deed of trust, a "loan and insurance application" authorizing Columbia Auto Loan, Inc., to cover the automobile with such insurance "as it may deem necessary," and also authorizing the company "to make payment covering the premium on any such insurance to such insurance agency or company that you [the company] may choose or make payments thereon on a monthly basis."³

The so-called insurance in these cases was claimed by the company to have been based upon an agreement between one Patchen, said to have recently left the employ of defendant company, and the American Title and Insurance Company, making Patchen a "policy-writing" agent of the insurance company. Under this agreement the agent Patchen would have the right to countersign automobile policies sent in advance and to "adjust" losses arising under policies. This agreement is referred to more fully below.

Fundamental to consideration of the present case were certain significant dates and also provisions of our Code relating to insurance agents. In addition to being licensed as insurance agents generally, certain "policy-writing agents" are authorized to be specially licensed for that purpose by the Superintendent of Insurance under Code 1940, § 35-1336, which also provides that the Superintendent shall first find that the agent is "competent and trustworthy" and that not more than 25% of his commission income from business to which the license applies will result from policies, the premium on which are paid or are to be paid in the manner set forth in paragraph (f) of section 35-1340. This subsection prescribes that such a license of a policy-writing agent may be revoked by the Superintendent if he finds that the license "is being used primarily for the purpose of obtaining commissions on policies on which he, on his own account, pays or is to pay the premiums, or on which the premiums are paid or are to be paid by any person who receives or is to receive any benefit, direct or indirect, from the commissions obtained, or on which the premiums are paid or are to be paid by any partnership, association, or corporation of which he is a member."

It is noteworthy that Code 1940, § 35-1334, provides that no insurance contract of this nature shall be written unless it is countersigned by a person specially licensed for this purpose.

Previous to the dates mentioned in the present case, the Columbia Auto Loan, Inc., as agent had written automobile insurance through other companies. For example, Gottlieb, testifying regarding a previous arrangement his company had with another insurance company, said that the insurance company sent the defendant company, as agent, a bill for the premiums due every month, defendant company carried such accounts as bills payable, and then, exclusive of losses, "We got back 88% of what we paid in the previous month." Asked whether the securer of the loan got the benefit of such repayment of premiums, Gottlieb answered, "No". However, on the initiative of the Superintendent of Insurance, such policy-writing agency or agencies with defendant were cancelled and were not in effect on the date of the transactions here involved. In consequence...