Watts v. Mann

• Decision Date: 18 April 1945
• Docket Number: No. 9492.,9492.
• Citation: 187 S.W.2d 917
• Parties: WATTS et al. v. MANN et al.
• Court: Texas Court of Appeals

187 S.W.2d 917

WATTS et al. v. MANN et al.

No. 9492.

Court of Civil Appeals of Texas. Austin.

April 18, 1945.

Rehearing Denied May 9, 1945.

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Appeal from District Court, Travis County; J. D. Moore, Judge.

Suit by Walter Watts and others against Gerald C. Mann, Grover Sellers, Attorney General, and others for a declaratory judgment holding the Loan Act invalid and an injunction against enforcement thereof, in which the Attorney General, on the State's behalf, filed a cross-petition to enjoin violations of the act by plaintiffs. Judgment for defendants, and plaintiffs appeal.

Affirmed.

Donald S. Thomas, Edward Clark, and Everett L. Looney, all of Austin, for appellants.

Grover Sellers, Atty. Gen., and R. Dean Moorhead, Ocie Speer, and Frederick B. Isely, Asst. Attys. Gen., for appellees.

McCLENDON, Chief Justice.

Appeal by Walter Watts and 29 others (plaintiffs below) from a judgment: (1) declaring "valid and constitutional" Chapter 144, Acts 48th Legislature, 1943, Regular Session, Vernon's Ann.Civ.St. art. 4646b (popularly known as the Loan Shark Act); and (2) denying the equitable relief (injunction against enforcing the Act) sought by plaintiffs against defendants (the State of Texas, the Attorney General, and various district and county attorneys); and (3) perpetually enjoining and restraining each of the plaintiffs and their respective officers, agents, servants and employees "from demanding or receiving interest at a rate in excess of ten per centum (10%) per annum on or in connection with any loan made by" plaintiffs, "or any of them, or by their respective officers, agents, servants or employees within the State of Texas, or from using any means to attempt to collect usurious interest from the borrowers of such loans, and from hereafter charging any borrower usurious interest, or contracting for any usurious interest, on any loans made by such persons within this State."

The suit was originally brought by Watts, the other plaintiffs intervening and adopting his allegations, against the Attorney General and district and county attorneys seeking (1) a judgment under the Uniform Declaratory Judgment Act, Chap. 164, p. 265, Gen. Laws Reg. Ses. 48th Leg.—1943, Vernon's Ann.Civ.St. art. 2524—1, declaring the Loan Act invalid upon grounds stated below; and (2) injunction against its enforcement. The Attorney General filed answers on behalf of himself (in his official capacity) and the State, and on behalf of the State filed a petition in cross-action, in which he alleged violation of the Act by each plaintiff, and sought the injunctive relief afforded by the Act against each of them. Plaintiffs filed an answer to this cross-action in which Watts admitted and the other plaintiffs denied violation of the Act. The case was tried to a jury upon special issues (except as to Watts against whom a verdict was directed), and upon their answers (and Watts' admission) judgment was rendered as above stated. Plaintiffs have appealed, urging invalidity of the Act and various trial errors noted below.

The body of the Act (omitting Secs. 4 and 5, severability as to invalidity and emergency clauses) reads:

"Section 1. The State of Texas through its Attorney General, or any District or County Attorney, may institute a suit in the District Court to enjoin any person, firm, or corporation or any officer, agent, servant or employee of such person, firm, or corporation who is engaged in the business of habitually loaning money for the use and detention of which usurious interest has been charged against or contracted to be paid by the borrower, from demanding, receiving or by the use of any means attempting to collect from the borrower usurious interest on account of any loan, or from thereafter charging any borrower usurious interest, or contracting for any usurious interest. All persons, firms, or corporations, and their agents, officers, servants and employees similarly engaged in making loans of money as herein defined, who reside in the same county, may be joined in a single suit and no plea of misjoinder of parties defendant shall ever be available to any defendant in such suit.

"Sec. 2. By the term `habitually' as used in this Act, is meant the making of as many as three (3) loans on which or in connection with which usurious interest is charged or contracted for within a period of six (6) months next preceding the filing of any such suit.

"By the term `usurious interest' as used in this Act, is meant interest at a rate in excess of ten (10%) per centum per annum.

"Sec. 2a. Nothing in this Act shall in any way modify, alter or change any valid provision of Article 8 of Chapter 5 of House Bill No. 79, Acts of the Regular Session, 48th Legislature, nor shall anything in this Act prevent charging of any actual and necessary expense, now or hereafter permitted and authorized by law, and such shall not be considered interest.

"In the trial of any application for injunction under this Act there shall exist a prima facie presumption that the actual and necessary expenses of making any such loan was One ($1.00) Dollar for each Fifty ($50.00) Dollars, or fractional part thereof loaned; but this prima facie presumption shall extend only to the first note or debt owing at the same time by an individual to any person, firm, corporation, partnership or association, and shall not apply to any renewal or extension thereof unless the original note or debt and all extensions thereof were for a period of not less than sixty (60) days.

"Sec. 3. In any such suit venue shall lie in the county of the residence of a defendant, or in a county where such business of loaning money is being conducted by such defendant."

The Act is attacked as invalid upon the following (substantially stated) grounds:

1. Under Texas Constitution Art. 16, Sec. 11, Vernon's Ann.St., the Legislature is authorized:

(a) To prevent usury only by providing "pains and penalties," which does not embrace injunction. And

(b) To provide "pains and penalties" to prevent all contracts for usury; not merely those named in the Act.

2. The Act denies plaintiffs "equal rights" and grants "privileges" to others in violation of Art. 1, Sec. 3, Texas Constitution, and deprives plaintiffs of property and privileges without due process of law, in violation of Art. 1, Sec. 19, Texas Constitution and of the 14th Amendment to the Federal Constitution, in that it authorizes an injunction:

(a) Against a money lender and not against any other class of usurers.

(b) Against one who makes as many as three usurious loans, and not against one making a less number.

3. It is violative of Art. 5, Sec. 8, Texas Constitution, in that it confers jurisdiction on the district court to grant injunctions at the instance of the State to protect purely private rights.

4. It is in conflict with the Federal Emergency Price Control Act of 1942, 50 U.S.C.A.Appendix, § 901 et seq.

5. It is in conflict with the Sherman (Federal) Anti-Trust Act, 15 U.S.C.A. § 1-7, 15 note.

In addition to briefs of the parties we have been furnished copies of a very able treatise entitled "Usury Control by Injunction," compiled by the Junior Bar Section of our State Bar, which contains a collation and analysis of cases upon points involving validity of the Loan Act. This treatise has been very helpful, as well as have been the briefs.

Considering the first ground of invalidity: the applicable portion of Const., Art. 16, Sec. 11, with supplied emphasis upon the pertinent wording, reads: "All contracts for a greater rate of interest than ten per centum per annum, shall be deemed usurious, and the first Legislature after this amendment is adopted, shall provide appropriate pains and penalties to prevent the same."

The particular ground urged assumes that the direction or mandate to the legislature to provide suitable "pains and penalties" to prevent "the same" (that is all usurious contracts) is a grant of power and as such constitutes in effect a limitation upon the powers of the legislature as to: (a) preventives (pains and penalties only) and (b) the application thereof (to all— not merely some—usurious contracts). At the time this amendment was adopted (1891), as well as at the time the section was originally adopted (1876), the words "pains and penalties" (so the argument runs) had a fixed and definite meaning which did not include injunction. Further, it seems to be appellees' contention that by "appropriate pains and penalties," was meant (applying the doctrine of ejusdem generis) those of the same general character as had up to that time been employed against violation of usury laws. In this connection appellants' brief contains an historical résumé of the usury laws in England, the American Colonies, and the Republic and State of Texas up to the time of the adoption of the amendment; giving the various penalties that such laws had from time to time inflicted upon usurers. As a study of a very important subject the brief upon this point shows a rather extended investigation and is both interesting and enlightening. But we do not regard the matter as having material bearing upon the case at bar, and for that reason a simple statement of appellants' contention thereon is all that is necessary here. We may concede for our present purposes that "pains and penalties" does not embrace "injunction" within the meaning of the amendment or otherwise.

If we were dealing with a constitutional grant of power the argument might be apropos. But such clearly is not the case. From the inception of our American form of constitutional government it has been persistently held (as aptly expressed in a recent standard text) that: "A doctrine firmly settled in the law is that a state constitution is in no manner a grant of power. It operates solely as a limitation of power. All power which is not limited by the Constitution inheres in the...