Lincoln Credit Co. v. Peach

• Decision Date: 06 July 1982
• Docket Number: No. 63018,63018
• Citation: 636 S.W.2d 31
• Parties: LINCOLN CREDIT CO., et al., Appellants, v. George PEACH, et al., Respondents.
• Court: Missouri Supreme Court

Page 31

636 S.W.2d 31

LINCOLN CREDIT CO., et al., Appellants, v. George PEACH, et al., Respondents.

No. 63018.

Supreme Court of Missouri, En Banc.

July 6, 1982.

Rehearing Denied Aug. 2, 1982.

Warren H. Kawin, L. W. Higley, St. Louis, for appellants.

John Ashcroft, Atty. Gen., S. Francis Baldwin, Asst. Atty. Gen., Jefferson City, George Peach, Circuit Atty., David Wells and John Finger, St. Louis, for respondents.

DONNELLY, Chief Justice.

In 1979, the Missouri General Assembly enacted § 408.096, RSMo Supp. 1979 (effective September 28, 1979). It provides as follows:

No person, firm or corporation shall receive or impose any fee or charge, other than one expressly provided for by statute, for arranging credit in the amount of one thousand dollars or less the proceeds of which are intended to be used by the borrower primarily for personal, family or household purposes. Any contract evidencing such excess fee or charge and any note evidencing credit so arranged is void. Any person, firm or corporation who receives or imposes a fee or charge prohibited by this section is guilty of a class B misdemeanor.

On September 7, 1979, appellants filed a suit for declaratory judgment in the Circuit Court of the City of St. Louis and sought to have § 408.096 declared void on the grounds that it violated the United States Constitution and the Missouri Constitution.

Appellants' petition stated that they were corporations duly organized under the laws of the State of Missouri for the purpose of arranging credit between a borrower and a third-party lender; that appellants receive a fee for such services; that the loan is usually evidenced by a promissory note between the borrower and the third-party lender; that the effect of § 408.096 was to make unlawful the previously lawful business conducted by appellants because they arrange only loans of $1,000 or less for personal, family or household purposes; that enforcement of § 408.096 would prohibit appellants from collecting the fee charged for arranging loans and would prohibit third-party lenders from collecting money loaned to the borrowers; and that the effect of the statute is to invalidate loans already contracted for and thus to subject appellants to suit by the third-party lenders who loaned money to appellants' clients. Appellants pleaded that § 408.096 violates provisions of the Missouri Constitution and of the United States Constitution. Appellants also requested that the court enjoin George Peach, Circuit Attorney for the City of St. Louis, and John Ashcroft, Attorney General of the State of Missouri, from prosecuting them under the statute.

On September 7, 1979, the circuit court issued a temporary restraining order against defendants Peach and Ashcroft. On September 25, 1979, October 11, 1979, and November 29, 1979, amended restraining orders were entered. On December 13, 1979, all parties consented to an order continuing the last amended restraining order until further court order.

On October 24, 1980, appellants filed a motion for summary judgment which requested the trial court to find that § 408.096 destroyed appellants' business and that it violated both the United States Constitution and the Missouri Constitution.

On March 16, 1981, the trial court entered a summary judgment denying appellants' constitutional attacks on § 408.096. The court held that the statute was not invalid or void, and declared that the temporary restraining order had expired. On March 26, 1981, appellants filed a motion to modify the summary judgment decree, declared their intent to appeal directly to this Court, and requested that the trial court stay that part of the decree which vacated the temporary restraining order pending this Court's disposition of the case. On April 21, 1981, the trial court entered an order which granted that request. Notice of appeal was then filed with this Court.

The basic test to determine whether a plaintiff has standing to bring suit for declaratory and injunctive relief is whether he has a legally protectible interest at stake. Schweig v. City of St. Louis, 569 S.W.2d 215 (Mo.App.1978). Missouri courts have held that whether a party can lawfully engage in its business under a particular statute presents a situation where that party has a legally protectible interest. State ex rel. Eagleton v. McQueen, 378 S.W.2d 449, 452 (Mo.banc 1964). Moreover, such a question constitutes a justiciable controversy under the declaratory judgment act even though no enforcement of that statute has yet been commenced against that party. Id., at 452. Therefore, there is a justiciable controversy here. This Court has jurisdiction because this case involves the validity of a statute of this state. Mo.Const.Art. V, § 3.

Appellants first contend that the trial court erred in failing to declare § 408.096 unconstitutional, as applied to contracts made prior to its effective date, because the statute voids those contracts, criminally punishes appellants for receipt of payments under those contracts, and prohibits future receipt of payments due under them.

As a general rule, statutes operate prospectively. St. Louis County v. University City, 491 S.W.2d 497, 499 (Mo.banc 1973). This rule controls unless the legislative intent that they be given retroactive operation clearly appears from the express language of the act or by necessary or unavoidable implication. Id. However, although a statute can operate retroactively, proscriptions exist against retrospective laws, ex post facto laws, and laws that impair contract obligations. Mo.Const.Art. I, § 13; Planned Industrial Expansion Authority of the City of St. Louis v. Southwestern Bell Telephone Company, 612 S.W.2d 772, 775 (Mo.banc 1981). A retrospective law, as that term is used in the Missouri Constitution, is one which impairs existing vested civil rights. Clark v. Kansas City, St. Louis & Chicago Railroad, 219 Mo. 524, 532, 118 S.W. 40, 43 (1909). More specifically, Mo.Const.Art. I, § 13 prohibits subsequent legislation from invalidating contracts lawful at the date of their making. See Home Telephone Company v. Sarcoxie Light & Telephone Company, 236 Mo. 114, 132, 139 S.W. 108, 112 (banc 1911). Of course, this constitutional provision has no application in a situation where the law is enacted before the contract is entered into. See State v. Laurisden, 312 S.W.2d 140, 143 (Mo.1958).

An ex post facto law is one which denounces as criminal acts which were non-criminal when committed or which changes penalties for criminal violations after such violations are committed. State ex rel. Jones v. Nolte, 350 Mo. 271, 284, 165 S.W.2d 632, 638 (banc 1942).

In our view, § 408.096 should not and cannot be applied retroactively to invalidate the loan contracts which appellants entered into prior to its effective date. First, there is no express language indicating that it should apply retroactively. Second, application of the law to invalidate the contracts made before its effective date would contravene the constitutional proscription in Mo.Const.Art. I, § 13 against retrospective laws and laws which impair contract obligations. Furthermore, such operation would constitute an ex post facto law because it would make receipt of payments under the contracts criminal whereas when the contracts were made such receipt was not criminal.

A basic maxim of statutory construction requires that a court faced with a constitutional challenge to a statute must, if possible, construe it in favor of constitutionality. Cascio v. Beam, 594 S.W.2d 942, 946 (Mo.banc 1980). Therefore, § 408.096 must be construed to operate prospectively only. So construed, § 408.096 is not unconstitutional for the reasons first urged by appellants.

Appellants next assert that the trial court erred in not finding that § 408.096 deprives them of equal protection of the law as guaranteed by U.S.Const., Amend. 14, § 1, and Mo.Const.Art. I, § 2, and deprives them of property without due process of law as guaranteed by U.S.Const., Amend. 14, § 1, and Mo.Const.Art. I, § 10.

The substantial state interest asserted by the Attorney General to justify the enactment of § 408.096 is as follows:

"Section 409.096 (sic) must be upheld as the Missouri legislature could have reasonably found that businesses and others engaged in the business of arranging credit frequently extort large sums from the poor and uneducated in need of small, personal loans, i.e., those least able to protect themselves from usury, outrageous fees, adhesion contracts and unconscionable bargains. Further, the legislature could have found that such businesses 'string the poor along' from payday to payday, charging outrageous sums under the guise of fees and commissions so that the borrower is forced to borrow again and again in the hope of paying off the loan, thus creating a system of perpetual indebtness (sic) and servitude. Further, the legislature could have found that the industry has for years been notoriously abusive of those in need of quick cash for personal purposes and that strong measures were needed."

In our view, "(a) rational legislature could have based its decision on such considerations." Ross v. Kansas City General Hospital and Medical Center, 608 S.W.2d 397, 399 (Mo.banc 1980). "It is enough that there is an evil at hand for correction, and that it might be thought that ... (this) particular legislative measure was a rational way to correct it.... The prohibition of the Equal Protection Clause goes no further than the invidious discrimination. We cannot say that that point has been reached here." Williamson v. Lee Optical Co., 348 U.S. 483, 488, 489, 75 S.Ct. 461, 464, 465, 99 L.Ed. 563 (1955). We cannot invalidate the underinclusive § 408.096 as unconstitutionally arbitrary.

Appellants' next claim is that the phrase "arranging credit" in § 408.096 is an unconstitutionally vague and uncertain limitation on appellants' businesses, resulting in a deprivation of property...