Webster v. Sterling Finance Co.

• Decision Date: 10 June 1946
• Docket Number: No. 39667.,39667.
• Citation: 195 S.W.2d 509
• Parties: J.D. WEBSTER v. STERLING FINANCE COMPANY, Appellant.
• Court: Missouri Supreme Court

195 S.W.2d 509 J.D. WEBSTER
v.
STERLING FINANCE COMPANY, Appellant. No. 39667. Supreme Court of Missouri. Division One, June 10, 1946. Rehearing Denied, July 8, 1946.

[195 S.W.2d 510]

Appeal from Circuit Court of City of St. Louis. — Hon. F.E. Williams, Judge.

REVERSED AND REMANDED (with directions).

Joseph Boxerman and Roberts P. Elam for appellant.

(1) The sale of the specified and designated installments of such notes, even though at a discount greater than the maximum legal rate of interest, and even though payment thereof was guaranteed by the seller, was not a loan, and was not usurious nor the subject of usury. General Motors Acceptance Corp. v. Weinrich, 218 Mo. App. 68, 262 S.W. 425; Nichols v. Fearson, 7 Pet. 103 (32 U.S. 103), 8 L. Ed. 623; State ex rel. Atty. Gen. v. Boatmen's Savs. Institution, 48 Mo. 189; Coleman v. Cole, 158 Mo. 253, 59 S.W. 106; Priest v. Garnett, 191 S.W. 1048; American Loan Plan v. Frazell, 135 Neb. 718, 283 N.W. 836; Grand Island Finance Co. v. Fowler, 124 Neb. 514, 274 N.W. 429; Commercial Credit Co. v. Tarwater, 215 Ala. 123, 110 So. 39; In re Bibbey, 9 F. (2d) 944; Manufacturer's Finance Trust v. Stone, 251 Ill. App. 414; 27 R.C.L., sec. 16, p. 215; 66 C.J., sec. 83, p. 186; Baker v. Butcher, 106 Cal. App. 358, 389 Pac. 236; O.A. Graybeal Co. v. Cook, 111 Cal. App. 518, 295 Pac. 1088; Seltzer v. Sokoloff, 302 Pa. 449, 153 Atl. 724; Acme Finance Co. v. Zapffe, 161 Wash. 312, 296 Pac. 1050; Metropolitan Loan & Trust Co. v. Schafer, 44 App. D.C. 356; Mutual Canning Co. v. DeGuenther, 23 Ga. App. 746, 99 S.E. 319; Coast Finance Co. v. Ira T. Powers Furn. Co., 105 Ore. 339, 209 Pac. 614; Valley Mortgage Co. v. Patterson, 30 Ala. App. 492, 8 So. (2d) 213; Limpert v. Walker, 65 P. (2d) 955; Berry v. Bank for Savings & Trusts, 14 So. (2d) 129; Standard Motors Finance Co. v. Mitchell Auto Co., 173 Ark. 875, 293 S.W. 1026; Campbell v. Morgan, 111 Ga. 200, 36 S.W. 621. (2) If the transactions between Octozone and Sterling constituted a sale and pledge, as pointed out under Point (1), supra, the pledge to Sterling was sufficient and valid for the purposes for which it was made. Smith v. Holdoway Const. Co., 344 Mo. 862, 129 S.W. (2d) 894; Russell v. Empire Storage Co., 332 Mo. 707, 59 S.W. (2d) 1061; 49 C.J., p. 937, sec. 78; Jones on Collateral Securities (3rd Ed.), sec. 358. (3) The mesne assignments from Octozone to plaintiff were specifically subject to the prior rights of Sterling, and plaintiff could have no greater rights, and no different standing, than Octozone had subsequent to its pledge of these remaining installments to Sterling. Stewart v. Kane, 111 S.W. (2d) 971; Straus v. Tribout, 342 Mo. 511, 116 S.W. (2d) 106; In re International Raw Material Corp., 22 F. (2d) 920; Liebers v. Plainfield, etc., Bldg. Co., 108 N.J. Eq. 391, 155 Atl. 270; Miller v. Reid, 243 Mich. 694, 220 N.W. 283; Tuxedo Enterprise v. Detroit Trust Co., 272 Mich. 160, 261 N.W. 283; New York Title & Mort. Co. v. Mapletree Estates, 247 N.Y.S. 449; Alston v. American Mortgage Co., 116 Ohio St. 643, 157 N.E. 374; Dorothy v. Commonwealth Commercial Co., 278 Ill. 629, 116 N.E. 143. (4) If, on the other hand, the transactions between Octozone and Sterling constituted mere loans, there was nevertheless coupled with it a pledge of the later due installments of the notes involved as security for the purposes designated in the instruments evidencing those transactions, and the pledge was nevertheless a valid and binding one, irrespective of what rate of interest might have been charged upon such loans. This, because Octozone, being a corporation, was deprived of the benefits of the usury laws, including Sec. 3231, R.S. 1939, by the proviso to Sec. 3230, R.S. 1939. In re Champion Shoe Machinery Co., 17 F. Supp. 985; Brierley v. Commercial Credit Co., 43 F. (2d) 734; Buchholz v. Granite Savings Bank & Trust Co., 261 Fed. 75; Hubbard v. Tod, 171 U.S. 474, 19 S. Ct. 14, 43 L. Ed. 246; Curtis v. Leavitt, 15 N.Y. 9; Carozza v. Federal Finance & Credit Co., 149 Md. 223, 131 Atl. 332, 43 A.L.R. 1; Jenkins v. Moyse, 254 N.Y. 319, 172 N.E. 521, 74 A.L.R. 205; Silverman & Kantrowich, Inc., v. Liebers, 224 N.Y.S. 332; Alston v. American Mortgage Co., 116 Ohio St. 643, 157 N.E. 374; Ex parte Washer, 200 Cal. 598, 254 Pac. 951; Wm. S. & John H. Thomas v. Union Trust Co., 251 Mich. 279, 231 N.W. 69; Smoot v. Peoples Perpetual Loan & Bldg. Assn., 95 Va. 686, 29 S.E. 746, 41 L.R.A. 589; State v. Hurlburt, 92 Conn. 232, 72 Atl. 1079; Matlock Properties v. Citizens & Southern Natl. Bank, 120 Fla. 77, 162 So. 148; Miller v. Reid, 243 Mich. 694, 220 N.W. 748; Liebers v. Plainfield Spanish Homes Bldg. Co., 108 N.J. Eq. 391, 155 Atl. 270. (5) The title to the Act of 1935 (Laws 1935, p. 267), showing it to be an act to repeal Sec. 2843, Art. I, Chap. 14, R.S. 1929, relating to interest, and to enact a new section in lieu thereof relating to the same subject, was obviously a sufficient title to that act. Young v. Greene County, 342 Mo. 1105, 119 S.W. (2d) 369. (6) Under the circumstances, the title to the original Act of 1891 is to be looked to in considering whether there was any violation of said Sec. 28 of Art. IV of our Constitution. State ex rel. Mueller Baking Co. v. Calvird, 338 Mo. 601, 92 S.W. (2d) 184. (7) And the title to the Act of 1891, showing that the act relating to usurious interest, would have been a sufficient title even if the act had then contained the proviso added in 1935. To constitute a compliance with Sec. 28 of Art. IV of the Constitution, it is not necessary that a bill relating to a particular subject set out provisos and exceptions appearing in the body of the bill. 25 R.C.L., p. 857, sec. 102; State ex rel. Department of Penal Institutions v. Becker, 329 Mo. 1041, 47 S.W. (2d) 781; Pottorff v. El Paso-Hudspeth Counties Road District, 62 F. (2d) 498; State v. Schlitz Brewing Co., 104 Tenn. 715, 59 S.W. 1033, 78 Am. St. Rep. 941. (8) Said proviso, depriving corporations of the right to set up usury, is not in any sense a special or local law, but a general law applying to all alike of a given class, namely, all corporations. A statute is not special or "class legislation" if it applies to all alike of a given class, provided the classification is not arbitrary or without a reasonable basis. Corporations constitute a distinct class for many species of legislation. Indeed, the Legislature is not prohibited from passing laws relating alone to corporations of a particular kind or class if there is a reasonable basis for the classification. Cheek v. Prudential Ins. Co. of America, 192 S.W. 387; Prudential Ins. Co. v. Cheek, 259 U.S. 530, 42 S. Ct. 516, 66 L. Ed. 1044; Mallinckrodt Chemical Works v. State of Missouri ex rel. Jones, 238 U.S. 41, 35 S. Ct. 671, 59 L. Ed. 1192; Thompson v. St. L.-S.F. Ry. Co., 334 Mo. 958, 69 S.W. (2d) 936; Massey-Harris Harvester Co. v. Federal Reserve Bank, 340 Mo. 1133, 104 S.W. (2d) 385, 111 A.L.R. 133; Miners Bank v. Clark, 252 Mo. 20, 30, 158 S.W. 597; White v. Missouri, K. & T. Ry. Co., 230 Mo. 287, 130 S.W. 325. (9) And to distinguish between corporations and natural persons as distinct classes with respect to the application of the usury laws, denying, the former the benefit of such laws, is by no means an unreasonable or arbitrary classification, but a valid distinction resting upon principles of sound public policy. Laws prohibiting corporations from setting up usury have been consistently upheld as against all attacks upon their alleged unconstitutionality. Brierley v. Commercial Credit Co., 43 F. (2d) 724; Carozza v. Federal Finance & Credit Co., 149 Md. 223, 131 Atl. 332, 43 A.L.R. 1; Thomas v. Union Trust Co., 251 Mich. 279, 231 N.W. 619; Griffith v. Connecticut, 218 U.S. 563, 31 S. Ct. 132, 54 L. Ed. 1151; State v. Hurlburt, 92 Conn. 232, 72 Atl. 1079; Smoot v. People's Loan & Building Assn., 95 Va. 686, 29 S.E. 746, 41 L.R.A. 589.

Franklin E. Reagan, Adolph K. Schwartz and Sievers & Reagan for respondent.

(1) The court properly found that the dealings between appellant and Octozone were loans and not bona fide sales of commercial paper. Courts are not bound by words or language used to cover up usurious transactions. Kreinbohm v. Yancey, 55 S.W. 260; Securities Inv. Co. v. Rottweiler, 7 S.W. (2d) 484; Brierley v. Commercial Credit Co., 43 F. (2d) 724. (2) Cancelled revenue stamps, necessary to show a bona fide sale, were not placed on the so-called transfer of notes. 26 U.S.C.A. 1801. (3) The transfer of various notes to appellant was by an instrument prepared by appellant and provided that the transfer of such notes was "with recourse" against Octozone in the event of a...