Liberty Finance Co., Inc. v. Catterton
| Citation | 158 A. 16,161 Md. 650 |
| Decision Date | 14 January 1932 |
| Docket Number | 84. |
| Parties | LIBERTY FINANCE CO., INC., v. CATTERTON ET AL. [a1] |
| Court | Maryland Court of Appeals |
Appeal from Circuit Court No. 2 of Baltimore City; Samuel K. Dennis Judge.
Suit by Benjamin Catterton and another against the Liberty Finance Company, Inc. From decree for plaintiffs, defendant appeals.
Reversed and remanded for further proceedings.
Argued before BOND, C.J., and URNER, ADKINS, OFFUTT, PARKE, and SLOAN, JJ.
Samuel J. Aaron, of Baltimore (Howard L. Aaron, of Baltimore, on the brief), for appellant.
George E. Robinson and Joseph Loeffler, both of Baltimore, for appellees.
On February 5, 1929, Benjamin Catterton and Annie L. Catterton his wife, the appellees, executed to the Liberty Finance Company Inc., the appellant, a corporation engaged in the "petty loan" business in the city of Baltimore, a mortgage on certain personal chattels, and a leasehold property known as 818 McKean avenue in that city, to secure a loan of $300, with interest thereon at the rate of 3 1/2 per cent. per month, payable in thirty monthly installments of $10 plus accrued interest.
After having paid $80 on account of the principal debt, and $68.68 on account of interest, Mr. and Mrs. Catterton, on October 10, 1929, applied for an additional loan of $80 and, to secure that loan and the unpaid balance of the original loan executed another mortgage to the appellant identical with the first except as to the date. Having paid on account of the principal debt secured by that mortgage $80, and on account of interest $79.17, on June 25, 1930, they applied for a further loan of $80, and to secure that loan and the balance due on the second mortgage they executed a third mortgage which, except as to its date, was a duplicate of the first, and they paid on account of the principal of that mortgage $25, and on account of interest $98.92. The first mortgage was duly recorded, but the second and third mortgages were not, and although the second mortgage was in substitution of the first and the third in substitution of the second, neither the first nor the second mortgage was released or surrendered. As a result of those transactions, the appellant had loaned to the appellees $480, on which they had paid on account of the principal $185, and on account of interest $246.77, and it held three mortgages executed by them aggregating $900 to secure a loan which at no time exceeded $300.
On May 13, 1931, plaintiffs, through their counsel, Mr. George E. Robinson, wrote the appellant asking to be informed of the balance due on the mortgage debt and interest, and were told that $275 was due on account of principal and $8.66 on account of interest. The appellees thereupon, on May 29, 1931, filed the bill of complaint in this case on the theory that, since by each of the three mortgages a chattel real was pledged together with chattels personal for the repayment of the loan, no interest in excess of 6 per cent. could be legally charged or collected, because, they said, the Small Loan Act did not permit any person holding a license under its provisions to charge or to collect interest at a rate higher than that on a loan secured by real estate or chattels real, independently, or combined with chattels personal. Accordingly, they prayed (1) for an accounting; (2) that all payments made by them in excess of 6 per cent. be credited on account of the principal debt and interest accrued at 6 per cent.; (3) that the appellant be compelled to accept such balance as might be found to be due after that credit had been made; (4) that it be required to account to the plaintiffs for all usurious and excessive interest collected from them; and (5) that the mortgages be declared void under "the Uniform Small Loan Law of Maryland."
A demurrer to the bill (as amended) was overruled, and the appellant filed an answer, supported by affidavit, in which it expressly disclaimed any intention of enforcing the lien against the leasehold property, and admitted that the first and second mortgages had been paid. The case was heard on bill, answer, and testimony, and at the conclusion of the hearing the chancellor decreed that the defendant was entitled to collect from the plaintiffs "no more than six per cent. interest per annum on the three mortgages mentioned in the Bill of Complaint in this case, by reason of the fact that said mortgages are mixed mortgages, including real estate as well as chattels," and accordingly directed that the plaintiffs should be credited with interest payments in excess of that rate, and that, upon payment into court of the balance due on the principal and accrued interest thereon at 6 per cent. after that credit, the three mortgages should be released. The appeal is from that decree.
The particular question submitted by the appeal is whether the Uniform Small Loan Law, Code, art. 58A, applies to loans secured by the pledge of real property, either independently or in combination with chattels. In addition to that question, the appellant in this court raised the question of the constitutionality of the act. But since that question was not passed upon by the trial court, and since in that court appellees not only failed to make that objection, but actually relied on the act in support of their contentions, it will not be considered by this court, Summerson v. Schilling, 94 Md. 589, 51 A. 610, except in so far as reference to it may be incidental to the main question.
The preamble to chapter 88 of the Acts of 1918 sums up in a few words the experience of men in dealing with the practices of persons who lend money in relatively small amounts on doubtful security to those to whom poverty and necessity have left no other resource. It declares that:
"Whereas, There is and has long been conducted in this State an extensive business, in the making of small loans of three hundred dollars ($300) and less, to persons in need of funds to meet immediate necessities;
And Whereas, The conduct of such business has long been a cause of general complaint, and of much hardship and injustice to borrowers, and there is no regulation or provisions of law which has proved effective for the protection of such borrowers and for the punishment of usurious money lenders;
And Whereas, It is recognized that the business of lending small sums of money upon security that is not acceptable to ordinary financial institutions does and will exist and there is a real need for the enactment of a law that will enable its continuance under proper supervision;
And Whereas, It appears that in the conduct of such business greater risk is incurred than is ordinarily incident to lending money...
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