State v. Sherman

• Decision Date: 09 December 1909
• Docket Number: 608
• Parties: STATE v. SHERMAN
• Court: Wyoming Supreme Court

105 P. 299

18 Wyo. 169

STATE v. SHERMAN

No. 608

Supreme Court of Wyoming

December 9, 1909

ON RESERVED QUESTIONS from the District Court, Laramie County HON. RODERICK N. MATSON, Judge.

An information was filed in the District Court against Ethelyn Margaret Sherman, charging that on March 29, 1909, she did wilfully and unlawfully arrange for the receipt of interest at a rate greater than 25 per cent. per annum upon a loan of $ 25. Upon the hearing of a demurrer to the information, the cause was ordered sent to the Supreme Court for its decision upon certain reserved questions, involving the constitutionality of the statute under which the information was filed. The questions are stated in the opinion.

C. L Rigdon, for the State.

The statute in question was enacted in the exercise of the police power of the State, and the Legislature could, under its police power, pass such laws as were necessary to regulate a business which it believed inimical to the public interest. (State v. Wickenhoefer, 64 A. 273.)

The statute is not class legislation, and does not create an arbitrary classification of loans. The purpose of the law is to regulate a business and not to create a class. It subjects all persons in a particular business to its terms (Jackson v. Shawl, 29 Cal. 267; Youngblood v Trust & Sav. Co., 95 Ala. 251; Carruthers v. Andrews, 42 Tenn. 378; State v. Wickenhoefer, 64 A. 273; Barbier v. Connolly, 113 U.S. 27; Ry. Co. v. Mackey, 127 U.S. 205; Otis v. Parker, 187 U.S. 606; Ry. Co. v. May, 194 U.S. 267.)

T. Blake Kennedy, for defendant. (Edmund J. Churchhill, of counsel.)

It is contended that the act claimed to have been violated by the defendant is unconstitutional in that it violates the fourteenth amendment to the Constitution, as being "class legislation;" in that it violates Section 27 of Article III of the State Constitution, forbidding local or special laws regulating the rate of interest on money; and in that it violates Section 34 of Article I, requiring all laws of a general nature to have a uniform operation. It is class legislation, for the reason that it attempts to place restrictions and to impose penalties on persons loaning money in the amount of $ 200 or less, and makes no provisions for persons loaning sums above $ 200. The classification is unreasonable and wholly artificial. While reasonable classification is permitted, it must not be arbitrary or capricious. (Atkinson v. Woodmansee, (Kan.) 74 P. 641; Connolly v. Sewer Pipe Co., 184 U.S. 563; In re. Grico, 169 U.S. 284; People v. Foundry Co., 66 N.E. 349; Slocum v. Bear River &c., (Cal.) 55 P. 402; Peonage Cases, 123 F. 671; State v. Walsh, (Mo.) 37 S.W. 112; State v. Thomas, 39 S.W. 481; White v. Holman, (Ore.) 74 P. 933; People v. Windhols, 86 N.Y.S. 1015; Davidson v. Jennings, 27 Colo. 187; In re. Abel, (Ida.) 77 P. 621; In re. Jarvis, (Kan.) 71 P. 576; People v. Zimmerman, 92 N.Y.S. 497; State v. Dodge, (Vt.) 56 A. 983.) It will be observed from the authorities that classifications which have no reasonable basis, which do not create a cleavage, so to speak, upon lines which are natural and not artificial, constitute class legislation and are void.

A usury statute substantially like the one under consideration has been held void in California. (Ex parte Sohncke, 82 P. 956.) A similar provision in an Illinois statute was held void. (Massie v. Cessna, 82 N.E. 152; see also Owen v. State, (Tex.) 112 S.W. 1075.) The statute artificially and without any good reason creates a class of money lenders, viz: those loaning sums under $ 200. This fatal defect in the law is so inseparably a part of the statute that it cannot be eliminated therefrom, and therefore the entire act must fail.

The statute destroys uniformity of interest rates, and is therefore void as special legislation. (People v. Haselwood, 116 Ill. 319; Wheeler v. City, 77 Pa. St. 338; State v. Tolle, 71 Mo. 650; Club &c. v. State, 42 So. 1040; Friend v. Levy, (Ohio) 80 N.E. 1036; State v. Schraps, 106 N.W. 106.) It legislates as to a class of interest conditions, without providing uniformly as to all classes. (Counsel also cited in support of their contention, generally, the case of In re. Application of Jefferson Credit Co., for a license under the Pennsylvania Act of May 11, 1909, decided by the Court of Quarter Sessions for the County of Philadelphia in July, 1909.)

POTTER, CHIEF JUSTICE. BEARD, J., and SCOTT, J., concur.

OPINION

POTTER, CHIEF JUSTICE.

This case is here from the District Court of Laramie County upon the following reserved constitutional questions:

First. Is Chapter 135 of Session Laws of 1909, being "An act to prevent extortion in relation to small loans, making such extortion a misdemeanor, and providing penalties therefor, and for other purposes," unconstitutional as being contrary to Article 14 of the Amendments to the Constitution of the United States, in that it denies to certain citizens the equal protection of the law?

Second. Is said Chapter 135 of the Session Laws of 1909 contrary and repugnant to Section 6, Article I, of the Constitution of the State of Wyoming, in that it attempts to deprive certain persons of liberty without due process of law?

Third. Is said Chapter 135 of the Session Laws of 1909, contrary and repugnant to Section 34 of Article I, of the Constitution of the State of Wyoming, in that it denies the uniform operation of the laws of a general nature?

Fourth. Is said Chapter 135 of the Session Laws of 1909 contrary to Section 27 of Article 3 of the Constitution of the State of Wyoming, in that it is a special law attempting to regulate the rate of interest on money in special cases?

The statute referred to was approved February 27, 1909, and by its terms was to take effect and be in force from and after its passage. The title of the act is stated in the first question. Its material provisions are as follows:

"Section 1. It shall be unlawful for any person, corporation, association, or co-partnership, his or its agent or employee, by any method or device whatsoever, to receive, or arrange for the receipt of, interest, increase or profit at a greater rate than 25 per centum per annum upon any loan made by any such person, corporation, association, or co-partnership of any sum less than two hundred dollars. The said sum of 25 per centum per annum interest, increase and profit shall cover all commissions, fees, charges, interest and increase of every character whatsoever."

"Sec. 2. Every person, corporation, association, or copartnership, and every employee or agent of any such person, corporation, association or co-partnership who shall violate any of the provisions of this act shall be guilty of a misdemeanor, and upon conviction thereof, be punished by a fine for each offense, in any sum not less than twenty-five dollars, nor more than two hundred dollars, or by imprisonment in the county jail, for not less than thirty days, nor more than six months, or by both such fine and imprisonment."

The questions reserved for decision arose upon a demurrer to an information filed under said statute charging that the defendant on March 29, 1909, did wilfully and unlawfully arrange for the receipt of interest at a rate greater than 25 per cent. per annum upon a loan of twenty-five dollars to a person named in the information.

The demurrer challenges the validity of the statute on the ground of its alleged repugnancy to each of the constitutional provisions referred to in the reserved questions, and it is here contended that the act violates said provisions and is therefore void for the reason that it unreasonably and arbitrarily creates a separate class of money lenders, and imposes upon those whose transactions bring them within that class a restriction and penalty from which other money lenders are exempt, and for the further reason that it is a special law regulating the rate of interest on money.

A prior statute, in force when the act in question was passed, provides that any rate of interest which may be agreed upon, not exceeding twelve per cent. per annum, shall be valid upon any loan or forbearance of money; and that if any greater rate of interest than that allowed shall be contracted for or received, or reserved, the contract shall not therefore be void; but if in any action on such contract, proof be made that illegal interest has been directly or indirectly contracted for, taken or reserved, the plaintiff shall only recover the principal, without interest, and the defendant shall recover costs; and if any interest shall have been paid thereon, judgment shall be for the principal, deducting interest paid. (Rev. Stat. 1899, Sections 2447, 2451.)

It is argued on behalf of the defendant that the act of 1909 does not have the effect of increasing the rate of interest which may legally be received or contracted for upon any loan, but that its only effect is to constitute the act of receiving or arranging for the receipt of a greater rate than 25 per cent. per annum upon the loan of a sum less than $ 200 a misdemeanor, while the former statute continues in full force exacting the penalty of the loss of interest and costs in case of every usurious loan, whenever in an action thereon proof is made that illegal interest has been taken or contracted for. It will be assumed for the purposes of the case that this is a correct construction of the statute.

The act here involved was enacted as a police regulation, as are all statutes for the prevention of usury. The police power of the State is most essential and very comprehensive. Under that power regulations are prescribed for the protection of the public health, public safety, and public morals, or, as more generally stated, the public welfare; and it is held to embrace...