State, on Inf. of Taylor v. Salary Purchasing Co.

• Citation: 218 S.W.2d 571,358 Mo. 1022
• Decision Date: 14 March 1949
• Docket Number: 40615
• Parties: State of Missouri on the Information of J. E. Taylor, Attorney General, Relator, v. Salary Purchasing Company, Incorporated, of Missouri, a Corporation, Respondent
• Court: Missouri Supreme Court

218 S.W.2d 571

358 Mo. 1022

State of Missouri on the Information of J. E. Taylor, Attorney General, Relator, v. Salary Purchasing Company, Incorporated, of Missouri, a Corporation, Respondent

No. 40615

Supreme Court of Missouri

March 14, 1949

Quo Warranto.

Respondent ousted and fined.

J. E Taylor, Attorney General, C. B. Burns, Jr., and Arthur M O'Keefe, Assistant Attorneys General, for relator.

(1) Sec. 3356, R.S. 1939, prohibits the taking of assignments of unearned wages. Sec. 3356, R.S. 1939; McCarter v Fireman's Ins. Co., 74 N.J.Eq. 372, 73 A. 80; State v. Weatherby, 344 Mo. 848, 129 S.W.2d 887; Witmer v. Nichols, 320 Mo. 665, 8 S.W.2d 63; 12 Am. Jur., p. 731. (2) In addition to forfeiture of charter a substantial fine should be assessed against respondent, and respondent should be ordered to return to the borrowers the illegal interest exacted. State on inf. of Taylor, Att. Gen. v. American Ins. Co., 200 S.W.2d 1.

John Hendren, Henry C. Hinkel, Harold D. Carey and Alex L. McAnally for respondent.

(1) An assignment of earned wages is a valid and enforceable transaction in the State of Missouri. Sec. 3356, R.S. 1939; Service Purchasing Co. v. Brennan, 226 Mo.App. 110; Hax v. Acme Cement Plaster Co., 82 Mo.App. 447. (2) An assignment of unearned wages is made a void and unenforceable transaction by Section 3356, R.S. 1939. Since it is a nullity, no penalty is provided for having entered into such a transaction. Sec. 3356, R.S. 1939; Vaughn v. Graham, 234 Mo. 781, 121 S.W.2d 222; The State v. Williamson, 118 Mo. 146; Cooley Credit Co. v. Townsend, 132 Mo.App. 390; Beal v. McVicker, 8 Mo.App. 202; Webster's Collegiate Dictionary, 5th Ed., 1947; Mobile County v. Williams, 180 Ala. 369, 61 So. 963; Kuhn v. Simmons, 126 Mo. 434; Cuneo v. Bornstein, 269 Mass. 232, 168 N.E. 810. (3) The law distinguishes loans and wage assignments. The procedure adopted by respondent was effective for the purpose of executing an enforceable assignment. Therefore, respondent was legitimately engaged in the business of purchasing salaries. Secs. 4813, 8166, R.S. 1939; Sherrill v. Brantley, 334 Mo. 497, 66 S.W.2d 529; Bell v. Mulholland, 90 Mo.App. 612; Service Purchasing Co. v. Brennan, 226 Mo.App. 110, 42 S.W.2d 39; McWhite v. State, 143 Tenn. 222, 226 S.W. 542; Cotton v. Cooper, 160 S.W. 597; State ex rel. v. Central Purchasing Co., 118 Neb. 383, 225 N.W. 46; State v. Mehaffey, 112 Ohio St. 130, 147 N.E. 506; Smith v. Sterritt, 24 Mo. 260. (4) Acceptance of partial assignments by respondent does not demonstrate that the transactions were mere subterfuges for making loans. Service Purchasing Co. v. Brennan, 226 Mo.App. 110, 42 S.W.2d 39; Stewart v. Kane, 111 S.W.2d 975. (5) Section 4813 of the R.S. Mo. 1939 is violative of Section 44, Article 3, of the Missouri Constitution. Sec. 44 of Art. 3, Mo. Constitution; Sec. 4813, R.S. 1939; Household Finance Corp. v. Harry Shaffner, 203 S.W.2d 734; Ex parte Berger, 193 Mo. 16, 90 S.W. 759; State v. Sherman, 18 Wyo. 169, 105 P. 299.

OPINION

Clark, J.

Quo Warranto filed in this court by the Attorney General, as relator, alleging that respondent has been and is violating its corporate charter and the state law by loaning money at usurious rates of interest, praying that respondent be fined, ousted from doing business in the State and required to return to its borrowers all sums illegally exacted from them. After we issued our writ and the parties filed their pleadings, we appointed an attorney, Honorable Francis Smith, as our specal commissioner to hear evidence and report as to the law and the facts. His report has been filed, sustaining the allegations of the information in all important particulars, and respondent has filed exceptions.

The record is long. Many witnesses were heard and many exhibits introduced, but, as the testimony mainly follows the same pattern, the essential facts may be compressed into a comparatively small volume.

Respondent was organized as a Missouri corporation and opened an office in Jefferson City in August, 1946. Its charter powers are stated as "to buy, acquire, discount, hold, own, collect, and receive payment of any choses in action, salary or wage accounts, due or to become due to the seller or assignor, whether earned or unearned, and any and all other claims, demands, obligations, rights of action, judgment and choses in action whether evidenced by writing or not."

Respondent's customers were persons of low income, unable to procure credit from banks and other conservative money lenders. They were attracted to respondent's office by alluring advertisements and solicitation through the mail, promising easy money, without security and upon the applicant's signature alone. The usual procedure was as follows: An applicant would go to the office of respondent and ask "to make a loan" or "borrow money." Sometimes, but not always, the person in charge of the office would tell the applicant that the company did not loan money, but would purchase a part of his salary. After a card was filled with certain information about the applicant, he was told that repayment must be made at his next payday. He then signed a contract purporting to be an assignment of earned wages to the amount advanced to him by respondent. The advancements generally ranged from five dollars to fifty dollars. At the next payday the applicant would collect his wages from his employer, go to respondent's office and pay the amount advanced plus the discount charged. In many instances the applicant would execute a new assignment for the same amount and pay the discount charge only. In such instances the new assignment could only be for future unearned wages to secure a prior indebtedness.

Although the assignment authorized respondent to notify and collect from the applicant's employer, this was never attempted. If the advancement was to be repaid within a week, the discount was usually five or ten per cent; if the debt continued unpaid, as was nearly always true, the discounts collected at succeeding paydays in a year's time would amount to many times the original debt. In one instance an applicant was charged one dollar for the use of ten dollars for one day.

After the information was filed in this case one J.A. Gordon, of Nashville, Tennessee, and a Mr. Diamond, of Dallas, Texas, came to respondent's office and employed Mr. Bothwell, one of respondent's agents, to take promissory notes from applicants who were unable to pay their debts to the company. These notes bear interest at eight per cent per annum and are payable to Gordon. Bothwell continues to work both for respondent and Gordon. When payments are made on the notes the money is deposited in the bank account of respondent and when the account exceeds $ 500.00 the excess is sent to Gordon at Nashville by check or money order. Cancelled checks and receipts for money orders are sent to the President of the Salarly Purchasing Company, Nashville, Tennessee.

The records in the office of the Missouri Secretary of State disclose that J.A. Gordon, giving his address as Birmingham, Alabama, on May 18, 1948, filed under the Fictitious Name Statute that he is operating under the name of Salary Purchasing Company at respondent's address in Jefferson City.

From the foregoing statement it is clear beyond dispute that, if respondent is engaged in lending money, it is doing so in violation of its charter powers and at usurious rates in violation of our statutes. [All references to statutes, unless otherwise specified, will be to sections of Revised Statutes of Missouri, 1939, and Mo. R.S.A.]

Sections 3226-7 fix annual interest rates for the loan of money at six per cent, if no rate is specified, and not to exceed eight per cent if specified in the contract.

Section 4813 provides: "Every person or persons, company, corporation or firm, and every agent of every person, persons, company, corporation or firm, who shall take or receive, or agree to take or receive, directly or indirectly, by means of commissions or brokerage charges or otherwise, for the forbearance or use of money or other commodities, any interest at a greater rate than 2 per cent per month, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by a fine of not less than one hundred dollars nor more than five hundred dollars, and by imprisonment in the county jail for a period of not less than thirty days nor more than ninety days. Nothing herein contained shall be construed as authorizing a higher rate of interest than is now provided by law."

Respondent denies that it is engaged in lending money; claims that it only buys wages or salaries and that the same is legal both at common law and under Section 3356, which provides: ". . . and all assignments of wages, salaries and earnings, not earned at the time the assignment is made, shall be null and void." [The constitutionality of this statute was sustained in Heller v. Lutz, 254 Mo. 704, 164 S.W. 123.]

Respondent argues that, as Section 3356 prohibits the assignment of unearned wages only, the assignment of earned wages is valid. We are forced to concede that bona fide assignments of earned wages were valid at common law and that we now have no valid statute prohibiting such assignments.

Then respondent, while conceding that a part of its business consisted in taking assignments for unearned wages, argues that the only effect of Section 3356 is to make such assignments void and unenforceable and does not transform the transactions into loans. We fail to see any logic in that argument. Respondent was presumed to know and the evidence shows that it actually did know that such assignments were void; that they transferred no right or title in the unearned wages which they purported to assign....