Cuneo v. Bornstein

• Decision Date: 03 December 1929
• Parties: CUNEO et al. v. BORNSTEIN et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

269 Mass. 232

168 N.E. 810

CUNEO et al.

v.BORNSTEIN et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Dec. 3, 1929.

Appeal from Superior Court, Suffolk County; Lummus, Judge.

Action by John A. Cuneo and another against Harry L. Bornstein and others. From a final decree for plaintiffs, defendant Morris Glickman appeals. Affirmed.Wm. Shaw McCallum, of Boston, for appellant.

D. Burstein, of Boston, for appellees.

CARROLL, J.

This is an appeal by the defendant Glickman from a final decree ordering the cancellation of certain notes, executed by the plaintiffs, for money loaned in violation of the Small Loan Act, G. L. c. 140, § 96, and declaring that the notes were wholly void.

It was found by the master that Glickman was a holder in due course; that he purchased the notes in question for $700, which was a fair price, and that he was ignorant of ‘the circumstances under which the Realty Investment Company purchased the notes or the price which it paid for them.’

G. L. c. 140, § 96, prohibits one from engaging in the business of making loans for $300 or less, if the amount to be paid on any such loan for interest and expenses is in excess of twelve per cent. per annum without first obtaining a license. By section 103 any loan upon which a greater rate of interest is charged than is allowed by sections 96-111, inclusive, may be declared void in equity upon petition by the person to whom the loan is made. By section 106 the unlawful interest may be recovered; and section 110 enacts that any loan made or note purchased or indorsement or guarantee furnished by an unlicensed person in violation of the statute shall be void.

The Realty Investment Company during the year 1928 was engaged in the business of making and buying loans of $300 or less, charging interest exceeding twelve per cent. per annum, without a license. The defendant Bornstein was the president and treasurer of the company. In 1928 the plaintiff Wall made on four occasions promissory notes for the accommodation of the plaintiff Cuneo. These notes were purchased from Cuneo by the Realty Investment Company, and were sold by Bornstein and the company to Glickman, who was not in the business of making small loans. The defendant Glickman contends, although the statute declares notes given in violation of the statute shall be void, that the word ‘void’ should not be construed in its technical sense, and should be construed to mean voidable; that the notes in suit are not void in the hands of a holder in due course. He cites a number of cases in support of this contention.

In Kelly-Buckley Co. v. Cohen, 195 Mass. 585, 81 N. E. 297, it was held that the word ‘void’ as used in the sale in bulk statute then under consideration should be construed as meaning voidable. It was recognized that the word ‘void’ is used in many statutes in its technical sense and in many it is used in the sense of voidable, depending in part on the subject matter of the statute and the abuse which the statute seeks to correct.

The purpose of the Small Loan Act (G. L. c. 140, §§ 96-114) was to prohibit the unlicensed business of making small loans and to prevent an excessive rate of interest on such loans. The statute was passed as a protection to the borrower; it was intended to make the statute effective and to prevent its evasion by indorsing notes given for such loans to third parties. It would afford little protection to a borrower if the notes given contrary to the statute would be valid in the hands of a holder in due course. In our opinion the word ‘void’ was used in its technical sense; the notes were void at their inception and of no validity in the hands of Glickman. This...