Rice v. Franklin Loan & Finance Co. , 82 Colo. 163 ( 1927 )

THE plaintiffs in error brought this action under the declaratory judgment act, S.L. 1923, c. 98, to declare void a note and chattel mortgage which they gave the Franklin Loan Company, defendant in error. The ground of the action was that the note was usurious under C.L. c. LXIII, entitled Money Lenders. They were nonsuited and bring error.

One reason for the decision was variance between the plaintiff's allegations and their proof. We do not think it sound. The complaint alleged that plaintiffs "made, executed and delivered to said company their promissory note and chattel mortgage * * *." The proof was that when plaintiffs went to the defendant company to borrow money, they, at the request of the company, made the note payable to one McIntire who immediately endorsed it to the company who then and there delivered the cash proceeds by check payable to said McIntire which was then and there endorsed by him and delivered to the plaintiffs by the company, and all this was done to "get around the law." The fact that the transaction was a subterfuge and that the loan was in truth made by the company to plaintiffs and the note and mortgage made by them to the company is the only legitimate inference from the evidence. The plaintiffs had, therefore, proved what they alleged and there was no variance. See C.L. § 3797, quoted below. But, even if that were not so, the evidence was admitted without objection on the score of variance, and the point was therefore waived, as we have many times held. Tew v. Powar,37 Colo. 292, 295, 297, 86 P. 342.

But defendants argue that none but persons "engaged in the business of making loans * * * to the value of $300 or less * * *" are subject to the said Money Lenders' Act, and that they are not shown to have been engaged in such business, and so are not subject to the act; we think, however, that the statute embraces more than persons "engaged in the business." While the first section, C.L. § 3781, and other sections refer only to persons in the business, § 3797 goes further and forbids usury by any person. It is as follows:

"No person, co-partnership, or corporation, except as authorized by this act, shall, directly or indirectly, charge, contract for, or receive any interest, or consideration greater than twelve per centum per annum upon the loan, use, or forbearance of money, goods or things in action, or upon the loan, use, or sale of credit, of the amount or value of three hundred dollars ($300) or less;Provided, That banks, under national supervision; and banks, building and loan associations and trust companies under state supervision, shall not be prohibited hereby from discounting negotiable paper when such discount or purchase is made in the ordinary course of business and not through or from the borrower or maker, either directly or indirectly, of such negotiable paper. The foregoing prohibition shall apply to any person who, as security for any such loan, use, or forbearance of money, goods or things in action or for any such loan, use or sale of credit, makes a pretended purchase of property from any person and permits owner or pledgor to retain the possession thereof, or who, by any device or pretense of charging for his services, or otherwise, seeks to obtain a greater compensation than is authorized by this act. No loan for which a greater rate of interest or charge than is allowed by this act has been contracted for or received wherever made, shall be enforced in this state, and any person in any wise participating therein in this state shall be subject to the provisions of this act."

The section, it is seen, expressly includes "any person who * * * by any device or pretense * * * seeks to obtain a greater compensation than is authorized by this act" and the enforcement of any loan for which more than twelve per cent has been contracted for is forbidden. The question, then, whether defendants were "engaged in the business" of making such loans is without consequence. If the allegation that they were so engaged had been left out, the complaint would still have stated a cause of action, and, since the evidence shows the loan to have been at a rate greatly in excess of twelve per cent, it follows that the case so stated was proved.

The judgment is reversed and new trial granted.

MR. CHIEF JUSTICE BURKE, MR. JUSTICE SHEAFOR and MR. JUSTICE WHITFORD concur.

On Rehearing.