Watson v. State Commissioner of Banking

• Decision Date: 27 October 1966
• Citation: 223 A.2d 834
• Parties: Rupert WATSON d/b/a Maine-Wide Adjusters v. STATE of Maine COMMISSIONER OF BANKING.
• Court: Maine Supreme Court

Page 834

223 A.2d 834

Rupert WATSON d/b/a Maine-Wide Adjusters v. STATE of Maine COMMISSIONER OF BANKING.

Supreme Judicial Court of Maine.

Oct. 27, 1966.

Malcolm S. Stevenson, Bangor, David R. Downing, Bucksport, for plaintiff.

Jerome S. Matus, Asst. Atty. Gen., Augusta, for defendant.

Before WILLIAMSON, C. J., and WEBBER, TAPLEY, MARDEN, RUDMAN, and DUFRESNE, JJ.

MARDEN, Justice.

On report.

The factual background is as follows: During the period September, 1948 to January, 1960, plaintiff owned and operated a collection agency. In January, 1960, he was found guilty of embezzlement and executed a sentence in the Maine State Prison from which he was released in February of 1963. Upon his release, he renewed the operation of his collection agency. The 102nd Legislature (1965) passed 'An Act regulating collection agencies' (Chapter 430 P.L.1965), effective January 1, 1966, which is now 32 M.R.S.A §§ 571-583 inclusive. By the terms of this Act a collection agency as therein defined (§ 571), and including a proprietorship so operating, with exclusions (§ 572), is required to procure an annual license (§ 573), supply upon request financial statements, file surety company bond and generally is subject to supervision of the State Bank Commissioner. By Section 575 no license is to be granted an applicant who has been convicted in the State or Federal Courts of listed crimes, including embezzlement.

In compliance with this Act, the plaintiff applied for a license, supported by the required financial statement and cash deposit as a bond, which application was denied on the basis of plaintiff's reference conviction.

Plaintiff then petitioned for injunctive relief against the enforcement of the statute, and for a declaratory judgment on the validity of the legislation. The case was reported.

The complaint, with amendments, attacks the constitutionality of the statute as being not a proper exercise of the police power of the State, but if it is, that it is discriminatory, that it constitutes an impairment of the obligation of contracts, that it violates constitutional due process, and that it is an ex post facto law.

Upon report the issues are expressed as four,-that the defendant's refusal to grant plaintiff a license was (1) the application of an ex post facto law, (2) the application of a law retrospectively which impaired the obligation of contracts, (3) deprivation of property without due process of law, and (4) the application of law that is discriminatory, arbitrary and denies plaintiff equal protection of the laws. Our consideration is confined to these issues.

Plaintiff, in his composite attack, challenges the law as exceeding the State's police power. The general power of the State to preserve and promote public welfare, even at the expense of private rights, but within constitutional limitations, and by means reasonably tending to correct some evil or promote some public interest, is basic. State v. Old Tavern Farms, Inc. 133 Me. 468, 470, 471, 180 A. 473, 101 A.L.R. 810. See also Dexter v. Blackden, 93 Me. 473, 484-485, 45 A. 525, citing Cooley on Constitutional Limitations. It is a matter of common knowledge that creditors solicit the aid of collection agencies only after they have exhausted the collection resources within their own organizations and not infrequently only after the claims are written off their books. By virtue of the fact that the creditor has largely given up the claims as realizable assets, their supervision of and interest in the agencies' activities is not lively. This may, and not infrequently does, open the way for the agency to indulge in collection practices and accounting procedures which in the public interest and welfare, including both the credit and debit communities, establish need for, and propriety of, regulation. The legislature was competent to declare the activity as one affecting the public welfare.

'The wisdom, necessity or expediency of a legislative enactment is not subject to judicial review.' Treffry v. Taylor (Wash.1966) 408 P.2d 269, (14) 273 (Regulation of Contractors)

See also Reynolds v. Louisiana Board of Alcoholic Beverage Control (1966) 248 La. 639, 181 So.2d 377, (4) 380 (Regulation of liquor distributors); Ferguson v. Skrupa (Kan.1963) 372 U.S. 726, 83 S.Ct. 1028, (2-5) 1031, 10 L.Ed.2d 93 (debt adjusters); State ex rel. Clark v. Brown (1965) 1 Ohio St.2d 121, 205 N.E.2d 377, (3) 380 (budget counseling service); and in principle, Baxter v. Waterville Sewerage District, 146 Me. 211, 214, 79 A.2d 585.

The extent to which regulation in the public interest has been held constitutional is indicated by the substantial list of enterprises so regulated, shown in 16A C.J.S. Constitutional Law § 659 b., to which list others periodically have been added. ¹

'The regulation and licensing of commercial and collection agencies has been upheld, for the most part, against various constitutional objections. Although no extensive line of cases has been developed, it seems clear that as a general matter the singling out of commercial or credit agencies as objects for the exercise of the police power represents a reasonable classification.' Annot. 54 A.L.R.2d 881 § 2, 883.

See also Hankins v. Spaulding (1957) 78 Idaho 533, 307 P.2d 222, and Meyers v. Matthews (1955) 270 Wis. 453, 71 N.W.2d 368, 54 A.L.R.2d 868.

Placing the collection business under the supervision of a state commission through a Credit and Collection Board (§ 583), requiring evidence from the agency bearing upon its 'reputation, integrity, competence and net worth' (§ 573, 4), requiring the agency to supply surety bond 'to safeguard the interests of the public' (§ 574), establishing qualifications for those proposing to engage in the business (§ 575), prohibiting practices which the legislature considered inimical to commercial and professional ethics (listed in § 576), requiring access to the agency's business records (§ 580), and providing means for the orderly liquidation of an agency in default of its claimants (§ 581), are eminently appropriate and reasonable means toward public assurance that persons handling other's claims are trustworthy, that collection procedures will be kept within commercially and legally acceptable bounds, and that claims by forwarders and creditors will be protected.

Plaintiff aims his criticism grounded upon constitutional prohibitions, ² at Sections 571, 572, and 575 only. These prohibitions will be considered seriatim.

Ex post facto issue

This statute is not an ex post facto law constitutionally prohibited. Such '(a) law is ex post facto (after the deed or fact,) when (1) it makes a criminal offense of what was innocent when done; or (2) it aggravates a crime, making it greater than it was when committed; or (3) it inflicts a punishment more severe than was prescribed at the time the crime was perpetrated; or (4) it alters the rules of evidence to the injury of the accused; or (5) it, in effect if not in purpose, deprives him of some protection to which he has become entitled. The expression relates solely to crimes and their punishment, and has no application to civil matters.' In re John M. Stanley, 133 Me. 91, 93, 174 A. 93, affirmed in Stanley v. Public Utilities Commission, 295 U.S. 76, 55 S.Ct. 628, 79 L.Ed. 1311. See also Hawker v. People of State of New York (1898) 170 U.S. 189, 196, 18 S.Ct. 573, 42 L.Ed. 1002; Meffert v. State Board of Medical Registration and Examination (1903) 66 Kan. 710, 72 P. 247, 251, 1 L.R.A.,N.S., 811 (bottom column 1); Page v. Watson (1938) 140 Fla. 536, 192 So. 205, (4) 210, 126 A.L.R. 249; McDonough v. Goodcell (1939) 13 Cal.2d 741, 91 P.2d 1035, (19, 20) 1041, 123 A.L.R. 1205; Frazier v. Goddard (D.C.Okl.1945) 63 F.Supp. 696, (4) 698; Konigsberg v. State Bar of California (1961) 366 U.S. 36, 81 S.Ct. 997, (9, 10) 1005, 6 L.Ed.2d 105; and Smith v. The State of California (9 CCA, 1964) 336 F.2d 530, (6) 534.

The rationale is expressed in Hawker, supra, a leading case, 170 U.S. at page 200, 18 S.Ct. on page 577, where the majority of the court said:

'The thought which runs through these cases and others of similar import which might be cited is that such legislation is not to be regarded as a mere imposition of additional penalty, but as prescribing the qualifications for the duties to be discharged and the position to be filled, and naming what is deemed to be, and what is in fact, appropriate evidence of such qualifications.'

Impairment of Contract Issue

This issue is raised only by the implication that on January 1, 1966 plaintiff had contractual relations with clients which the requirement of license, denied him, impaired. The record does not establish that such contracts in fact existed, but, if so, the law is not unconstitutionally defective in this respect. See In re Guilford Water Company (1919) 118 Me. 367, 372, 108 A. 446, where appears '(t)he rule is general that every contract touching matters within the police power must be held to have been entered into with the distinct understanding that the continuing supremacy of the state, if exerted for the common good and welfare, can modify the contract when and as the benefit of that interest properly may require.' Also Baxter v. Waterville Sewerage District, 146 Me. 211, 218, 79 A.2d 585. This rule is reiterated and applied in American Budget Corp. v. Furman, 67 N.J.Super. 134, 170 A.2d 63, (9) 69, affirmed by the court of last resort (1961) 36 N.J. 129, 175 A.2d 622, against an attack on a statute in substance outlawing the business of debt adjusting.

The plaintiff, never having been licensed, can base no challenge of the statute upon the false premise that the relationship between the State and him, as a licentiate, is contractual, which contract the statute impairs. 33 Am.Jur., Licenses § 21, and see Hughes v. State Board of Medical Examiners (1926) 162 Ga. 246, 134 S.E. 42, (4) 47.

'Due Process, 'Equal Protection' and 'Unjust Discrimination' Issues

There...