Oxford Consumer Discount Co. of North Philadelphia v. Stefanelli

• Decision Date: 17 March 1970
• Citation: 55 N.J. 489,262 A.2d 874
• Parties: OXFORD CONSUMER DISCOUNT COMPANY OF NORTH PHILADELPHIA, a corporation, Plaintiff-Appellant, v. Anthony E. STEFANELLI and Thereas A. Stefanelli, Defendants-Respondents, and Arthur J. Sills, Attorney General of New Jersey, Intervenor-Respondent, and First Mercantile Consumer Discount Company, Intervenor-Appellant, and Paul V. Durkin and Ellen Durkin, his wife, Intervenors-Respondents.
• Court: New Jersey Supreme Court

Page 489

55 N.J. 489

262 A.2d 874

OXFORD CONSUMER DISCOUNT COMPANY OF NORTH PHILADELPHIA, a corporation, Plaintiff-Appellant, v. Anthony E. STEFANELLI and Thereas A. Stefanelli Defendants-Respondents and Arthur J. Sills, Attorney General of New Jersey, Intervenor-Respondent and First Mercantile Consumer Discount Company, Intervenor-Appellant and Paul V. Durkin and Ellen Durkin, his wife, Intervenors-Respondents.

Supreme Court of New Jersey.

Argued Jan. 6, 1970.

Decided March 17, 1970.

Morris L. Weisberg, Philadelphia, Pa., for plaintiff-appellant (Glickman & Valentine, Newark, attorneys).

Arnold K. Mytelka, Newark, for intervenor-appellant (Roger S. Clapp, Newark, of counsel, Clapp & Eisenberg, Newark, attorneys).

Steven S. Radin, Newark, for Middle Atlantic Finance Ass'n, amicus curiae (Michael B. Tischman, and Alan J. Gutterman, Newark, on the brief, Cummis, Kent & Radin, Newark, attorneys).

Annamay T. Sheppard, Newark, for defendants-respondents.

Jack B. Kirsten, Newark, for intervenors-respondents Paul V. Durkin and Ellen Durkin, his wife, (Robert S. Solomon, Newark, on the brief, Kirsten & Solomon, Newark, attorneys).

Stephen G. Weiss, Asst. Atty. Gen., for intervenor-respondent Arthur J. Sills, Atty. Gen. (Fred R. Gruen, Deputy Atty. Gen., on the brief).

PER CURIAM.

Subject to a qualification to be stated, the judgment of the Appellate Division is affirmed substantially for the reasons expressed below in the exhaustive opinions of Judge Conford. Oxford Consumer Dis. Co. of No. Phila. v. Stefanelli, 102 N.J.Super. 549, 246 A.2d 460 (App.Div.1968), and 104 N.J.Super. 512, 250 A.2d 593 (App.Div.1969).

The first opinion of the Appellate Division was handed down on September 11, 1968. Prior to that date certain New Jersey borrowers other than the defendants Stefanellis had brought suit against First Mercantile Discount Company and another Pennsylvania loan company in the Superior Court, Chancery Division, seeking an injunction to prevent the enforcement of all secondary mortgage loans made by such corporations on the security of New Jersey realty. Basically the same issues were involved in that action (which the plaintiffs were allegedly prosecuting as a class action) as in the Oxford case. Subsequent to September 11, 1968 some of these parties applied to the Appellate Division for leave to intervene and for a rehearing in order to be heard on the issues decided in Oxford. The leave was granted and the common problems in the cases were reargued. One of the primary questions presented for further consideration was whether, if the Appellate Division adhered to the view expressed in the September 11, 1968 opinion respecting the applicability of the New Jersey Secondary Mortgage Loan Act, the judgment should be prospective or retrospective in scope. The position of the loan companies was that in no event should loan transactions made by Pennsylvania corporations licensed in Pennsylvania to make such loans and entered into before the effective date of that decision be adversely affected by it, where the loans were not only made in Pennsylvania but were repayable there and in all other respects were in conformity with Pennsylvania law. (See 104 N.J.Super. at 516, 250 A.2d 593).

Thereafter the Appellate Division affirmed its original holding and dealt comprehensively with the prospectivity--retroactivity issue. 104 N.J.Super. at 519--525, 250 A.2d 593. It held that sufficient equitable considerations were present to warrant denial of unrestricted retroactive operation of the September 11, 1968 decision. In specifying the restrictions it said:

1. 'We have concluded that we should not now go beyond adjudicating relief from retroactivity in respect of transactions where there was no intermediation of any kind by others, operating in this State, between Pennsylvania lender and New Jersey borrower.'

2. 'We are clear, first, that Pennsylvania lenders obtaining New Jersey loan business on a regular continuing basis by or through agents, brokers, or representatives operating in this State, whether or not technically independent contractors, could not reasonably have been advised in advance that choice of law and interstate commerce factors would immunize the loans from the effect of the New Jersey act. As to such loans, therefore, the decision of September 11, 1968 will remain fully retroactive. As to any other type of case involving some degree of causal intermediation between the lender and the borrower by operatives functioning in this State, the court should appraise the particular facts of the individual case for determination as to whether considerations of fairness and justice call for relief from retroactivity of the September 11, 1968 decision in such instance, according to the criteria discussed above.'

3. 'It is next necessary to decide whether there should be any curtailment of the lender's claim to interest and other charges where it ultimately qualifies otherwise for relief from retroactivity. As heretofore noted, plaintiff and intervenors contend that fairness would be served by requiring the borrowers to pay the interest rates and other charges (if specifically agreed to in the loan contract) allowed for such transactions by either the New Jersey or Pennsylvania statute whichever is the lower. We think some further curtailment of recoverable interest is appropriate in order to give a degree of substantial effect to the circumstance that, in finality, the lenders have violated New Jersey law as substantively determined by our prior decision. Therefore recovery will be limited to 6% Per annum simple interest computed on principal balances outstanding on funds actually advanced.' (Numbering of paragraphs ours.) 104 N.J.Super. at 524--525, 250 A.2d at 599--600.

We take paragraph 3 to mean that in All cases of loans made by plaintiffs as well as intervenor and Amici loan companies to New Jersey borrowers and secured by secondary mortgages on New Jersey realty as defined in N.J.S.A. 17:11A--1, subd. a, which are not within the bar of paragraph 2 above, the lender may recover the sum of the loan as actually advanced but only with 6% Simple interest on principal balances outstanding. In our view the equities referred to in the second Appellate Division opinion on the subject of retroactivity of the September 11, 1968 decision require a less drastic limitation.

Assuming the loan transactions of Anthony E. and Theresa A. Stefanelli, defendants in the principal case, and Paul V. Durkin and Ellen Durkin, Lindley Henry, Jr. and Irene Henry, Paul Kuzmick and Jane Kuzmick, plaintiffs in the injunction action referred to above, had been instituted and in existence prior to September 11, 1968 and are not within paragraphs 1 or 2 quoted above, these parties are entitled to retroactive benefit of the decision of that date to this extent: They shall be liable for the agreed installment payments of the principal of the actual loan to them but without interest. Additionally, if their loan transactions resulted from intermediation within the contemplation of paragraphs 1 or 2, the September 11, 1968 decision shall be fully retroactive, and they shall have no liability on their loans.

If these are other persons not named above who were, prior to September 11, actually in litigation challenging the validity of the type of loans that are involved in this case, they too are entitled to the benefit of the rules of retroactivity just described. Further, the September 11, 1968 decision is fully applicable retroactively to bar all recovery on New Jersey secondary mortgage loans made prior to that date and which were induced by the lender through intermediation of the nature described by paragraphs 1 and 2 above. All other New Jersey secondary mortgage loans of the type involved in this case made before September 11, 1968 which are not within paragraphs 1 and 2 above, and were not in litigation prior to that date remain unaffected by the judgment in this case.

The record shows that the trial court entered summary judgment against Mr. and Mrs. Stefanelli on their note to Oxford. Thus they had no opportunity to develop the facts respecting the intermediation by an alleged agent of Oxford which induced them to enter into the loan transaction. Under the circumstances, and even though their liability on the note is limited to installment payment without interest on the sum actually advanced to them by plaintiff, they are entitled to an opportunity to submit the facts to the trial court relating to intermediation. If such facts are undisputed and bring their case within paragraphs 1 and 2 above, they are entitled to a judgment exonerating them from liability on their note. If the evidence raises a factual dispute on the subject, the issue must be resolved by a jury or the court if the case is tried without a jury.

The judgment of the Appellate Division is affirmed as modified, and the cause is remanded to the trial court for proceedings consistent herewith.

For affirmance: Justices JACOBS, FRANCIS, PROCTOR and SCHETTINO--4.

For reversal: Chief Justice WEINTRAUB and Justices HALL and HANEMAN--3.

WEINTRAUB, C.J. (dissenting).

This case has an emotional overlay for it involves the distasteful business of lending money at predatory rates to people who are poor or soon will be. I would add, irrelevantly to be sure, a regret that government does not provide loans at tolerable interest charges for those of our citizens who need them most. Instead, the impecunious are made a separate class, alone required to underwrite the high credit risk attributed to some of their number. But this having been said, the fact remains that this unpleasantness has legislative approval here and elsewhere, and the case must be decided in that light and not some personal one. Indeed, there is little to choose between the New Jersey and Pennsylvania statutes here involved. Labels aside, the sundry charges under the statutes permit about...