State ex rel. Burgum v. Hooker

• Decision Date: 20 December 1957
• Docket Number: No. 7680,7680
• Citation: 87 N.W.2d 337
• Parties: The STATE of North Dakota ex rel. Leslie R. BURGUM, Attorney General, State of North Dakota, Plaintiff and Respondent, v. Dale L. HOOKER, doing business as Peerless Finance Company, and Florence J. Witcik, Defendants and Appellants.
• Court: North Dakota Supreme Court

Page 337

87 N.W.2d 337

The STATE of North Dakota ex rel. Leslie R. BURGUM, Attorney General, State of North Dakota, Plaintiff and Respondent, v. Dale L. HOOKER, doing business as Peerless Finance Company and Florence J. Witcik, Defendants and Appellants.

No. 7680.

Supreme Court of North Dakota.

Dec. 20, 1957.

Syllabus by the Court

1. The state has the power and the duty to prevent acts injurious to the public welfare where the remedy at law or by criminal prosecution would not be adequate and the remedy in equity by injunction would furnish more effective and complete relief.

2. A suit for an injunction is an equitable proceeding which is designed to protect people from acts causing irreparable injury to their property or to other civil rights.

3. A court of equity will not enjoin the commission of crime generally; but it has jurisdiction in a proper case, at the instance of the state, to restrain an existing or threatened public nuisance, though the offender is amenable to the criminal law of the state.

4. The exaction of usury ranging from 149 to 277 per cent per annum for small sums of money loaned to wage earners in necessitous circumstances for the collection of which threatening methods are used endangering the comfort, repose and security of the borrowers, who because of their necessitous condition, are reluctant to resort to any means of protection, and are thus forced to pay illegal, usurious, interest, is sufficient grounds for the state to invoke the jurisdiction of a court of equity to suppress such illegal practices.

5. A nuisance may be public even if it does not inflict injury to all of the public. It is sufficient if it injures any considerable number of people who may have to come in contact with it.

Francis Murphy, Donald H. Crothers, Fargo, for appellants.

Norman G. Tenneson, Special Asst. Atty. Gen., for respondent.

GRIMSON, Chief Justice.

This is an action by the State of North Dakota, on the relation of Leslie R. Burgum, Attorney General, to enjoin the defendants from conducting a usurious, small loan business in the City of Fargo. Upon a verified complaint and fifteen affidavits alleging that said business was conducted in gross violation of the usury statutes of the State of North Dakota, against the public policy of the State and to the injury of the unfortunate people forced by necessitous circumstances to make such loans, the court, on the 5th day of December, 1956, granted an ex parte order restraining the defendants from carrying on said business in a usurious manner and upon the allegation of the existence of an emergency, appointed a receiver who took possession of the office and business of the Peerless Finance Company. The court further ordered the defendants to show cause on the 21st day of December, 1956, at 10 o'clock A.M. why said injunction and receivership should not be continued until the trial and final determination of the case.

The defendants demurred to the complaint and made a motion to vacate the restraining order and the appointment of a receiver. The court then directed the plaintiffs to show cause on Dec. 21st 1956 why said motions should not be granted.

On the return date of said orders, both parties submitted all of the issues involved upon the affidavits and argument of counsel. On the 24th day of January 1957, the court overruled the demurrer and issued an order denying the motion to vacate the temporary injunction and the appointment of a receiver and further ordered the injunction continued until the final disposition of the action upon its merits, and enjoined the defendants from interfering with the receiver in his administration of the property. From that order this appeal is taken. Subsequently the defendants answered by a general denial.

The complaint upon which these proceedings are based alleges that the attorney general is bringing this action on behalf of the State of North Dakota; that the defendants are doing business as Peerless Finance Company; that the defendants openly, publicly, and intentionally maintain a common nuisance in the City of Fargo by operating a small loan business charging usurious interest; that their patrons are wage earners without money or credit, forced by necessitous circumstances to borrow small sums of money ranging from $5 to $100 for terms usually from one to six months on payments made weekly; that upon default, the notes are repeatedly renewed into new loans under such conditions that the original amount borrowed draws from 149 to 277 per cent per annum interest; that the defendants threaten the borrowers by letters, telephone and personal conversation when the notes are not paid or renewed and in that way disturb the peace of mind of the numerous needy wage earners who deal with them, endangering their comfort, repose and security; that the great majority of the said borrowers are financially unable to protect their rights; that many of them are without knowledge of their rights and are easy victims of the lenders; that they are afraid of being sued, afraid of losing their positions if their employers are garnisheed; that they live in constant worry on account of the illegal activities of the defendants which reduces their money for necessary living supplies and which sometimes interferes with their ability to work so that they lose their jobs and become a burden on State Welfare at the cost of the public; that the defendants have hundreds of customers and have carried on this kind of business for five years; that they have many usurious loans outstanding; that said business practice is contrary to and in violation of public policy which includes the protection of all members of society from illegal practices upon them; that the business and professional men of the community suffer losses on account of such practice; that all these circumstances call upon the state itself to institute this litigation for the welfare of the people and the prevention of the dire results caused by this open, unlawful and usurious nuisance. The relator claims that an emergency exists; that unless a receiver is appointed there is imminent danger of defendants disposing of their property and causing irreparable loss and damage. Relator asks that a receiver be appointed to administer the property under the direction of the court during the progress of this lawsuit.

The complaint is supported by fifteen affidavits of individuals who have done business with the defendants, setting forth the unfortunate circumstances on account of which they have had to do business with them, the treatment they have received and the illegal interest they have been forced to pay. Further affidavits were filed before the hearing. Each of the original affidavits has been analyzed by a certified accountant and according to the statements made in the affidavits the affiants had been paying interest at the rate of from 149 9/10ths per cent to 277 3/10ths per cent per annum. The report of the receiver is to the effect that the books and records of the company show 406 borrowers owing a balance of $17,566.43 on December 5, 1956, in small amounts paying such usurious interest.

The defendants on their demurrer argue that the state has no authority to bring an action on the matter alleged in the complaint, claiming that the state has no financial interest therein and that the public is not affected thereby. The demurrer admits all the well-pleaded allegations of the complaint which have been heretofore set forth. Those allegations are sufficient to show an injury to the general public welfare. It has been repeatedly held that the state has the right, independent of any statutory provision, to institute a suit in any of its courts when it is required for the general welfare of its people. 'It possesses this right both in its sovereign capacity and by virtue of its corporate rights.' 49 Am.Jur., States, Territories, and Dependencies, Section 80, pp. 292, 293. In re Debs, 158 U.S. 564, 15 S.Ct. 900, 39 L.Ed. 1092, an injunction against a railroad strike was involved. It was claimed the United States proprietorship of the mails was a financial interest which gave it the right to enjoin the strick. At 158 U.S. 584, 15 S.Ct. 906, 39 L.Ed. 1102, the court said:

'We do not care to place our decision upon this ground alone. Every government, entrusted by the very terms of its being with powers and duties to be exercised and discharged for the general welfare, has a right to apply to its own courts for any proper assistance in the exercise of the one and the discharge of the other, and it is no sufficient answer to its appeal to one of those courts that it has no percuniary interest in the matter. The obligations which it is under to promote the interest of all and to prevent the wrongdoing of one, resulting in injury to the general welfare, is often of itself sufficient to give it a standing in court.'

In Stead v. Fortner, 255 Ill. 468, 478, 99 N.E. 680, 683, it is said:

'The public authorities have a right to institute the suit where the general public welfare demands it and damages to the public are not susceptible of computation. The maintenance of the public health, morals, safety, and welfare is on a plane above mere pecuniary damage, although not susceptible of measurment in money, and to say that a court of equity may not enjoin a public nuisance because property rights are not involved would be to say that the state is unable to enforce the law or protect its citizens from public wrongs.' See also State ex rel. Hopkins v. Howat, 109 Kan. 376, 388, 198 P. 686, 692, 25 A.L.R. 1210, 1225; State v. F. W. Fitch, 236 Iowa 208, 17 N.W.2d 380; State v. Chicago & N. W. Railway Co., 147 Neb. 970, 25 N.W.2d 824.

The relator further claims that the situation shown in the complaint and affidavits is such that not only is the state entitled to resort to equity under its general power to prevent injury to the public welfare but also under the statutory...