Family Finance Corp. v. Gaffney

• Decision Date: 02 March 1953
• Docket Number: No. A--67,A--67
• Citation: 95 A.2d 407,11 N.J. 565
• Parties: FAMILY FINANCE CORP. v. GAFFNEY.
• Court: New Jersey Supreme Court

Page 565

11 N.J. 565

95 A.2d 407

FAMILY FINANCE CORP. v. GAFFNEY.

No. A--67.

Supreme Court of New Jersey.

Argued Feb. 9, 1953.

Decided March 2, 1953.

William L. Dill, Jr., Newark, for appellant (Stryker, Tams & Horner, Newark, attorneys; David D. Furman, Newark, on the brief).

Oliver T. Somerville Rutherford, for respondent (Theodore D. Parsons, Atty. Gen., attorney).

John W. Griggs, Hackensack, for objector, North Jersey Finance Co., Inc. (Morrison, Lloyd & Griggs, Hackensack, attorneys).

Briefs amici curiae were filed for Auto Loan Co., Workers Finance Co. and others (Max Mehler, Newark, attorney); and Household Finance Corporation (Starr, Summerill & Davis, Camden, attorneys; Charles S. Kelly and John D. Hastings, Chicago, Ill., of the Illinois Bar, on the brief).

The opinion of the court was delivered by

WILLIAM J. BRENNAN, Jr., J.

No person may conduct a small loan business at any location without first obtaining a license from the Commissioner of Banking and Insurance, R.S. 17:10--2, N.J.S.A. The Commissioner 'shall issue' the license if he finds that the financial responsibility, experience, character and general fitness of the applicant, and of the officers and directors thereof, if a corporation, are such as to command the confidence of the community and to warrant belief that the business will be operated honestly, fairly and efficiently, that the applicant's net worth is at least $25,000 and that the applicant has liquid assets of at least that amount available for the purpose of making small loans at the specified location, and 'that allowing the applicant to engage in business will promote the convenience and advantage of the community in which the business of the applicant is to be conducted. R.S. 17:10--5(b), N.J.S.A.

Family Finance Corporation filed an application on December 16, 1949 for a license for a location at 66 Hudson Street, Hoboken. At that time there were two small loan licensees doing business in that city. The applicant was found to be qualified as to financial responsibility and character, but the license was denied on the ground that the issuance of another license in Hoboken would not promote the convenience and advantage of the community.

The decision was reversed in the absence of findings of basic facts supporting this determination. Family Finance Corp. v. Gough, 10 N.J.Super. 13, 76 A.2d 82 (App.Div.1950). It was held, however, that the convenience and advantage clause provided a legally sufficient standard for the guidance of the Commissioner and empowered him to limit the number of licenses in a community 'by declining to issue an additional license therein (to an applicant otherwise qualified) in the absence of a showing that the granting of the additional license will promote the convenience and advantage of the community within the contemplation of R.S. 17:10--5, N.J.S.A.', 10 N.J.Super. at page 21, 76 A.2d at page 86.

The application has been reheard and has again been denied on the ground that the issuance of an additional license in Hoboken will not promote the convenience and advantage of the community. We certified of our own motion this appeal of the company to the Appellate Division from this second determination of denial.

The respondent Commissioner based his decision on ten findings of fact from the testimony and exhibits in evidence, which we summarize as follows: (1) that the population of Hoboken increased hardly at all from 1940 to 1950 compared with a substantial increase in the State; (2) that retail sales in Hoboken show a smaller percentage of increase from 1939 to 1948 than the percentages for Hudson County and the State; (3) that Hoboken's retail sales have only a slightly higher average per personal loan office now licensed in Hoboken than the State average; (4) that Hoboken's per capita retail sales figure is lower than the State per capita although a little higher than the county per capita; (5) that Hoboken is not a trade center (although it is an active business center), and its merchants must depend primarily upon the patronage of Hoboken residents; (6) that there is already a licensed small loan lender next door to 66 Hudson Street; (7) that there are two banks, two state credit unions and seven federal credit unions all engaged in making personal loans in Hoboken; (8) that the business of the small loan licensee most recently licensed (in 1947) has had no substantial growth since 1948; (9) that there is competition now between the two present Hoboken licensees, 13 others in Jersey City, and three in Union City; (10) that the present licensees have sufficient working capital and credit to meet the demands for service in Hoboken. He therefore concluded that 'allowing the applicant to engage in business would not promote the convenience and advantage of the community in which the business is proposed to be conducted.'

Appellant contends on this appeal that the convenience and advantage clause cannot constitutionally be construed and applied to authorize denial of a license to an applicant, as here, found by the Commissioner to be financially and otherwise qualified, save as it appears that the applicant plans to operate the small loan business at the specified location merely 'as an adjunct to another business' or when 'the foreseeable borrowing needs of the community are negligible,' that is, when the applicant will not be able to do a loan business of at least $25,000. Particularly, it is argued, is there an unlawful invasion of constitutionally protected rights of private property in a denial based upon the capacity of the present licensees to handle foreseeable additional loan demands. This, appellant says, constitutes an unlawful suppression of competition, H. P. Hood & Sons v. DuMond, 336 U.S. 525, 538, 69 S.Ct. 657, 93 L.Ed. 865, 874 (1949); Federal Communications Commission v. Sanders Bros. Radio Station, 309 U.S. 470, 60 S.Ct. 693, 84 L.Ed. 869 (1940), and an arbitrary and capricious action going beyond the demands of the public interest which alone will justify the exercise of the regulatory power, Sheffield Farms Co., Inc., v. Seaman, 114 N.J.L. 455, 177 A. 372 (Sup.Ct.1935); Regal Oil Co. v. State, 123 N.J.L. 456, 10 A.2d 495 (Sup.Ct.1939); N.J. Good Humor, Inc., v. Bradley Beach, 124 N.J.L. 162, 11 A.2d 113 (E. & A.1940); cf. Reingold v. Harper, 6 N.J. 182, 78 A.2d 54 (1951); Lane Distributors v. Tilton, 7 N.J. 349, 81 A.2d 786 (1951); that a denial on such grounds bears no rational relation to the protection of the public health, morals, general safety or welfare and abridges the fundamental common right to engage in a lawful pursuit protected by Article I of the New Jersey Constitution and the Fourteenth Amendment of the Federal Constitution.

It is said in the brief: 'Protection of the public against the operation of small loan businesses by persons of unfit character and without adequate financial resources is a legitimate exercise of the legislative power. Once these qualifications have been met, any further limitation imposed by the convenience and advantage clause must be of narrow scope or fail * * *.' It is insisted that the underlying 'public welfare considerations', which the company concedes may support a limitation upon the number of banks in a community, R.S. 17:9A--11, N.J.S.A. ('There is a clear and pressing public interest in safeguarding against bank failures, which are disastrous to a community, destroying savings and other bank credits'), have no counterparts in small loan business. 'The customers of the community do not suffer economic injury from the failure of a small loan business. There is no overriding public advantage in the survival of such small loan business. Normal economic factors should be allowed full play, in accordance with the constitutional principles of non-interference by the legislature with private business, except by regulation which is reasonably requisite to the public health, safety or welfare.'

It is urged that appellant's proofs that a number of Hoboken residents now maintain loans with appellant at its Jersey City and Union City offices and largely would transfer their accounts to a Hoboken office operated by it, and the evidence showing that Hoboken is one of the business centers in the State for commuter transit traffic demonsrate that it would serve the convenience and advantage of Hoboken to grant the license sought, and that it is constitutionally indefensible to construe the convenience and advantage clause to authorize the Commissioner to deny the license in the circumstances.

We see no merit in the argument. The Legislature has seen fit to establish the policy that the general welfare is best subserved by restricting the number of small loan establishments in a given community. Appellant has abandoned on this appeal the contention made on the earlier appeal that this policy is Per se constitutional insupportable. Appellant's present position is that the restrictive policy is valid only if applied within the very narrow limits suggested by appellant. However, we are satisfied that the construction given the policy by the Commissioner not only is within the purview of the power delegated by the Legislature but that so, construed, this legislative determination is not so clearly unreasonable as to warrant this court in striking down the controlled clause, which is the practical result of the construction contended for by appellant. Cf. Abelson's, Inc., v. N.J. State Board of Optometrists, 5 N.J. 412, 421, 75 A.2d 867, 22 A.L.R.2d 929 (1950); Reingold v. Harper, supra. Although other criteria may also be within the purview of the clause, dependent upon their relation to the objectives of the Small Loan Act in light of its history and purpose, it is difficult to see how better the Commissioner can execute the legislative policy than by looking to the needs of the community in determining whether the grant of a license will promote its convenience and...