Financial Aid Corp. v. Wallace

• Decision Date: 14 November 1939
• Docket Number: 27205.
• Citation: 23 N.E.2d 472,216 Ind. 114
• Parties: FINANCIAL AID CORPORATION v. WALLACE et al.
• Court: Indiana Supreme Court

23 N.E.2d 472

216 Ind. 114

FINANCIAL AID CORPORATION v. WALLACE et al.

No. 27205.

Supreme Court of Indiana

November 14, 1939

Appeal from Superior Court, Marion County; Herbert E. Wilson judge.

Asa J. Smith, of Indianapolis, for appellant.

Thompson & Rabb and C. Severin Buschmann, all of Indianapolis Omer S. Jackson, Atty. Gen., and Thomas Longfellow, Deputy Atty. Gen., for appellees.

TREMAIN Judge.

This action was filed in the court below by the appellant, an Indiana corporation, against the appellees, the Department of Financial Institutions and all state officials connected therewith.

The complaint alleges that Chapter 154 of the Acts of the General Assembly of 1933, p. 806, amending Chapter 125 of the Acts of 1917, p. 401, Secs. 18-3001 to 18-3005, Burns' Ind.St.1933, Sec. 10465 to Sec. 10469 Baldwin's 1934 violates certain sections of the state and Federal Constitutions, and prays for a judgment Act the Uniform Declaratory Judgment Act declaring said Chapter 154 unconstitutional and void.

The appellant was organized for the purpose of engaging in the small loan business and sought to avoid the provisions of the 1933 act reducing interest rates and placing the small loan business under the control of the Department of Financial Institutions. The appellees answered the complaint by a general denial. On the issue joined and upon written request the court found the facts specially and stated its conclusions of law thereon in favor of appellees. Judgment was rendered accordingly, to which appellant excepted and prayed an appeal.

The 1933 act amends the 1917 act by placing the regulation of the small loan business under the control and supervision of the Department of Financial Institutions instead of the Auditor of State. License fee and bond are required as in the old act. The new act provides that license may issue 'if the department shall find that the financial standing and character of the applicant, and of the members thereof if the applicant be a copartnership, and of the officers and directors thereof if the applicant be a corporation, are such that the business will be operated honestly and fairly, within the purposes of this act * * *.' It provides that the department may not issue a license to one who does not meet the requirements as to financial standing and character. It provides that: 'The department shall give every applicant a reasonable opportunity to be heard and shall approve, or deny, by written order, every application for license hereunder within thirty (30) days from the hearing thereof.'

Section 1 further provides that: 'The department is hereby authorized and empowered to make by its order such general rules and regulations and specific rulings and findings not inconsistent with the provisions of this act as may be necessary for the proper conduct of such business and the enforcement of this act.'

In the event the department should decide to revoke the license ten days' notice must be given to the licensee who shall be given an opportunity to be heard. Authority is given to the department to investigate the loans and business, and to examine the books, accounts, records, and files of each licensee, who is required to keep books, accounts, and records of all business transactions to enable the department to make such examination. Reports are required to be filed with the department at stated times.

The act authorizes the department to make full and complete investigation of the conditions relating to the small loan business and

'(a) To classify such small loans by general order according to such system of differentiation as may reasonably distinguish such classes of loans for the purposes of regulation under the provisions of this act; and

'(b) To determine and fix by general order such maximum rate of interest or charges upon each such class of small loans as will make available adequate credit facilities to individuals, without the security generally required by commercial banks, by inducing efficiently operated commercial capital to enter such business in sufficient amounts to provide such adequate credit facilities; the department may from time to time upon the basis of changed conditions or facts redetermine and refix any maximum rate of interest or charge previously fixed by it * * *.'

It is provided that such changed rates shall not affect pre-existing loan contracts lawfully made. The act provides that until the department shall fix a different rate of interest the maximum rate of interest shall be 3 1/2 per cent. per month on unpaid principal balance of a loan not exceeding $150, and 2 1/2 per cent. per month on any remainder of the unpaid principal of a loan in excess of $150, and not exceeding $300. It provides and specifies the details as to notice, time, duties, privileges, and requirements of the license and the department.

Of the many objections to the act of 1933 the appellant most seriously objects to the provisions authorizing the Department of Financial Institutions to issue general orders and to make regulations relating to the small loan business. The objections go to the question relating to the discretionary features of the act granted to the department.

The trial court concluded that the appellant was not entitled to a declaration that the amendatory act of 1933 is invalid. Appellant asserts that the act violates Sec. 1, Article 3, of the Constitution of Indiana. This section provides: 'The powers of the Government are divided into three separate departments; the Legislative, the Executive including the Administrative, and the Judicial * * *.'

The appellant contends that the act confers upon executive officials both legislative and judicial authority--judicial in that the department may hold hearings and upon investigation issue orders regulating the loan business, and legislative in that the department may promulgate rules and regulations which have the force and effect of law. Authorities are cited holding that unwarranted delegation of power and authority will not be tolerated for the reason that such delegation violates this constitutional provision. That proposition is conceded by all concerned, but the answer to the proposition is that when the Legislature defines its policy and prescribes a standard as it has in the act in question, it may leave to executive boards and officers the determination of facts in order to apply the law, and in connection therewith the right of such administrative boards to make reasonable rules and regulations has been recognized by innumerable decisions of this court. Wallace v. Feehan, 1934, 206 Ind. 522, 532, 190 N.E. 438; Dunn, Auditor et al. v. City of Indianapolis, 1935, 208 Ind. 630, 638, 196 N.E. 528, 698, 5 N.E.2d 629; Blue v. Beach, 1900, 155 Ind. 121, 133, 56 N.E. 89, 50 L.R.A. 64, 80 Am.St.Rep. 195; New York Central Railroad Co. v. Public Service Commission, 1937, 212 Ind. 329, 7 N.E.2d 957; Carroll Perfumers, Inc., v. State, 1937, 212 Ind. 455, 7 N.E.2d 970; Stith Petroleum Co. v. Dept. of Audit and Control, 1937, 211 Ind. 400, 5 N.E.2d 517.

As pointed out in Blue v. Beach, supra, the Legislature cannot delegate the power to make a law, but it can make a law to delegate a power to determine facts upon which the law makes its own action depend. It has long been recognized in this state that certain industries are subject to a reasonable control by the state; that such control is necessary to the protection of inhabitants and to regulate the activities and conduct of other inhabitants. One of the more recent decisions of this court upon that subject is Albert v. Milk Control Board of Indiana, 1936, 210 Ind. 283, 290, 200 N.E. 688.

The 1933 act in fixing the rate of interest to be charged on small loans declares the policy of the state to be that the rate of interest must be such as will induce legitimate capital to enter that field and make loans upon security not recognized by banking institutions, and to enable persons in need of funds to borrow the money from the small loan company to meet their obligations, and in cases where the money could not be had from other financial institutions. Cotton v. Commonwealth Loan Co., 1934, 206 Ind. 626, 634, 190 N.E. 853.

Because the act confers upon the Department of Financial Institutions the authority to hold hearings, make investigations, promulgate rules and regulations, none of which were specified in the 1917 act, the appellant asserts the 1933 act to be invalid and void for the reason that the act does not furnish a guidepost for the control of the department's actions in exercising the power granted. It appears that the act has prescribed standards sufficiently definite, and has carefully defined the activities of the Department of Financial Institutions. Since the law prescribes the policies, fixes a rate of interest to be charged until otherwise fixed by the department after a full and careful investigation, and delegates to the department the authority to find the facts applicable to each case before granting a license, and...