Foundation Finance Co., Inc. v. Robbins

• Court: Louisiana Supreme Court
• Writing for the Court: O'NIELL, Chief Justice.
• Citation: Foundation Finance Co., Inc. v. Robbins, 179 La. 259, 153 So. 833 (La. 1934)
• Decision Date: 26 February 1934
• Docket Number: 32647
• Parties: FOUNDATION FINANCE CO., Inc., v. ROBBINS et al

153 So. 833

179 La. 259

FOUNDATION FINANCE CO., Inc., v. ROBBINS et al

No. 32647

Supreme Court of Louisiana

February 26, 1934

Remanded, with directions.

Guy J D'Antonio, of New Orleans (Weiss, Yarrut & Stich and Gill & Simon, all of New Orleans, of counsel), for applicant.

Benjamin Y. Wolf, of New Orleans, for respondent Harry Rosenberg.

Fred G Benton, of Baton Rouge, for amicus curiae in support of application for certiorari or writ of review.

Sanders Baldwin, Haspel & Molony, Robert Weinstein, Prowell, McBride & Ray, Friedrichs, Connolly & Simoneaux, Frymire & Ramos, and Frank B. Twomey, all of New Orleans, amici curiae.

O'NIELL Chief Justice. LAND, J., and BRUNOT, J., dissents. ST. PAUL, J., absent.

OPINION

O'NIELL, Chief Justice.

This is a suit on a promissory note for $ 300, alleged to have been given for a loan made by the plaintiff under the provisions of the Small Loan Law, Act No. 7 of the Extra Session of 1928. The only question is whether the stipulation in the note that the maker shall pay an attorney's fee of 25 per cent., in addition to the maximum rate of 3 1/2 per cent. interest per month, in the event of its being necessary for the holder of the note to employ an attorney to collect it after maturity, renders the whole obligation void and unenforceable, according to the thirteenth section of the statute. The district judge held that the stipulation for the payment of the attorney's fee, being in addition to a stipulation for the payment of the maximum rate of interest allowed by the statute, annulled the obligation; and the judge therefore dismissed the suit on an exception of no cause or right of action. The judgment was affirmed by the Court of Appeal. The case is here on a writ of review, issued at the instance of the plaintiff, Foundation Finance Company, Inc.

The thirteenth section of the statute provides that a person, partnership, or corporation, licensed to make loans under the provisions of the act, may make loans not exceeding $ 300 at a rate of interest not exceeding 3 1/2 per cent. per month; and the section provides:

"In addition to the interest herein provided for, no further charge or amount whatsoever for any discount, examination, service, brokerage, commission or other thing or otherwise shall be directly or indirectly charged, contracted for or received, except the lawful fees, if any, actually and necessarily paid out by the licensee to any public officer for the filing or recording or releasing in any public office any instrument securing the loan, which fees may be collected when the loan is made or at any time thereafter. Interest, discount or charges in excess of those permitted by this Act shall not be charged, contracted for or received, and if any such shall be charged, contracted for or received, the contract of loan shall be void and the licensee shall have no right to collect or receive any principal, interest or charges whatsoever."

In the case of Automobile Security Corporation v. Randazza, 17 La.App. 489, 135 So. 45, 674, the Court of Appeal for the parish of Orleans decided that a stipulation for the payment of an attorney's fee, in a note bearing the maximum rate of interest allowed by the statute, was not forbidden by the statute; and, on the 6th of October, 1931, this court affirmed the ruling by refusing to grant a writ of review, on the ground that the judgment was correct.

In the case of Heymann v. Mathes, 18 La.App. 403, 137 So. 871, the Court of Appeal for the parish of Orleans again decided that a stipulation for the payment of the attorney's fee, in a note bearing the maximum rate of interest allowed by the statute, was not forbidden by the statute; and, on the 1st of February, 1931, this court affirmed the ruling by refusing to grant a writ of review, on the ground that the judgment was correct.

The Court of Appeal, in the Randazza Case, analyzed the statute accurately and thoroughly, and rendered a very logical and convincing opinion that a stipulation, in a promissory note bearing the maximum rate of interest, for the payment of an attorney's fee if an attorney should have to be employed to collect the note after maturity, was not a charge for the use of the money. In so deciding, the Court of Appeal cited several cases decided by this court -- particularly Race & Foster v. Bruen, 11 La.Ann. 34, in 1856, and Bacas v. Klein, 14 La.Ann. 407, in 1859 -- maintaining that a stipulation for the payment of an attorney's fee, in a promissory note, was not to be considered as a disguised form or method of charging usurious interest. That rule is now almost universally recognized. See note to Ann. Cas. 1917D, 366, viz.:

"The rule obtaining in the majority of jurisdictions is that a stipulation in a promissory note for the payment of attorney's fees or other costs of collection is valid. Such a stipulation is in those jurisdictions regarded as a reasonable provision for indemnity to the creditor against the expenses incident to a default on the part of the debtor."

In the Randazza Case the Court of Appeal observed also that the provision in the thirteenth section of the Small Loan Law, that the charging of, or contracting for, or receiving of, any interest or discount or other charge, in excess of the charges permitted by the statute, should annul the obligation and work a forfeiture of all that was loaned, was a penal clause, and therefore had to be construed literally and strictly, and not liberally against the lender. We may add that it seems quite certain that the Legislature did not intend, by the language of the thirteenth section of the statute, to forbid a licensee under the statute to protect himself by a stipulation for indemnity against the loss of any part of his loan or of the interest on it by providing that, if any such expense should be incurred by the necessity of employing an attorney to collect the note after maturity, the party whose fault or default caused the expense should bear it. The members of the Legislature knew that an attorney's fee for collecting a small loan, of $ 300 or less, would amount to a considerable proportion or percentage of the amount involved; and they knew that it would be impracticable to carry on the small loan business, which is done generally on shaky securities, if the lender had to bear the cost of collecting such loans. It is true that the Legislature used very comprehensive language in saying: "In addition to the interest herein provided for, no further charge or amount whatsoever for any discount, examination, service, brokerage, commission or other thing or otherwise shall be directly or indirectly charged, contracted for or received, except the lawful fees, if any, actually and necessarily paid out by the licensee to any public officer for the filing or recording or releasing in any public office any instrument securing the loan." But the very fact that the Legislature was so profuse and redundant in its use of words and synonyms, in the determination to forbid the charging of excessive interest under another name, shows that, if the Legislature had intended that the charging of attorneys' fees should be deemed a disguised form of charging excessive interest, the Legislature would have said so in terms and not by inference. The one fact that everybody has common knowledge of, these days, is that it is customary to have a stipulation for the payment of attorneys' fees in promissory notes. In fact, it is a safe estimate that 99 out of every 100 promissory notes given for a loan contain the stipulation for the payment of an attorney's fee if it becomes necessary to employ an attorney to collect the note after maturity. Hence, when we apply the cardinal rule of interpretation of laws, by trying to ascertain the intention of the Legislature that enacted the law, we do not believe that the Legislature intended -- without saying -- that these small loan notes should be like the one in a hundred, instead of being like the ninety-nine out of a hundred, in that respect.

It is pointed out by the defendant in this case that the Legislature made only one exception, in forbidding a licensee under the statute to charge anything more than the maximum rate of interest allowed, viz.: "Except the lawful fees if any, actually and necessarily paid out by the licensee to any public officer for the filing or recording or releasing in any public office any instrument securing the loan, which fees may be collected when the loan is made or at any time thereafter." But it mustbe borne in mind that the fees paid out for filing or recording or releasing an instrument securing a loan are not contingent fees, like attorneys' fees, contingent upon a failure of the borrower to perform his part of the obligation. The...