Carey v. Discount Corp.

I respectfully dissent.

The court is here called upon to decide the somewhat technical question of whether the remedy afforded a borrower in an action by a lender upon a contract, tainted with usury, under section 7053, R.L.H. 1935, is exclusive and abrogates the borrower's common-law right to bring an action of assumpsit to recover usury or whether the statutory remedy is cumulative only and enlarges the protection given to a borrower at common law.

If section 7053 is to be interpreted as exclusive, an exacting lender can force the borrower as his contractual victim into the payment of the usurious contract with threats to confiscate the borrower's security and by pressing legal action if the borrower is ignorant of the law. Under such a construction, once the satisfaction of the contract and the extraction of the usury become fait accompli, the matter is ended. Accomplishment and the consummation of the usurer's greed purges him of liability for his unlawful acts. Indeed the exaction of security for a usurious loan with power to sell without resort to legal proceedings guarantees in advance the successful perpetration of usury. The statute under this construction becomes a farce, easily evaded by the clever usurer, who is in effect rewarded for successfully extracting his pound of flesh and penalizes only the clumsy, less expert, and inexperienced usurer. If, on the other hand, the statutory remedy should be regarded as cumulative, the temptation to exact interest in excess of the lawful maximum rate vanishes.

Thus, although the immediate question of whether the statutory remedy should be construed as exclusive or cumulative may be technical, a question of public policy is clearly involved which should transcend technicality.

I am sure my learned associates would not disagree with me that the public interest demands the upholding of ethical standards in business and the tightening of prohibitions against sharpsters. While this policy standing alone is persuasive, it is not the basis of my dissent.

A number of States have usury laws similar to ours. Among such States there is a definite cleavage of authority, many holding that the borrower's statutory remedy is cumulative and some that it is exclusive. (27 R.C.L. 272.) Faced with such a division of authority upon a question that is novel in this jurisdiction, the intention of our legislature in enacting section 7053 is of primary concern.

In the House Journal (1931) of the Sixteenth Legislature of Hawaii, at page 388, it appears from the report of the committee on judiciary, to which the bill was referred after its introduction in the house of representatives, that our section 7053 was designedly patterned after and copied from a usury statute of the State of Washington. It is, therefore, logical to suppose that our legislature in enacting section 7053 intended thereby to produce and perpetuate the result already achieved by the Washington statute. It is a familiar rule of construction, often invoked by the courts, that the adoption of a statute from another jurisdiction carries with it the interpretation placed on that statute at the time of its adoption by the courts of the jurisdiction from which it was borrowed. (Carter v. Gear, 16 Haw. 242, aff'd 197 U.S. 348, 49 L.ed. 787; Middleditch v. Kalanianaole, 18 Haw. 272; Territory v.Ota, ante, p. 80. A comparison of section 7053 with section 6255, Rem. Bal. Code (Wash.) (L. '99, § 7, p. 129. Cf. L. '95, § 5, p. 350) (Remington's Comp. Stats. [Wash. 1922] § 7304), from which section 7053 was copied, reveals that our section preserves every feature of the original Washington statute which is in any way material to the principle of construction here involved.

In Lee v. Hillman, 74 Wash. 408, 133 P. 583, 35 Ann. Cas. 1915A 759, L.R.A. 1918B 581, the Washington statute, section 6255, supra, was construed in 1913 and the exact question now before this court was then determined. The Washington court held that the section provided merely a cumulative remedy and did not extinguish the common law remedy of assumpsit, saying: "The argument of counsel upon both sides of the cause proceeds upon the assumption that the only question here involved is: Does the law recognize the right of one who has paid usurious interest to maintain a civil action, as plaintiff, to recover any portion of the amount so paid, or does it withhold from him all remedy except that which our statute gives by way of defense in an action brought to recover the principal upon which he has paid such usurious interest? * * *

"The decisions of the courts are, at least seemingly, in serious conflict as to the right of one who has paid usurious interest to recover the same by civil action as plaintiff, especially under usury statutes which prescribe a remedy by way of defense to an action prosecuted against the debtor to enforce collection of the principal. * * * In the text of 22 Encyc. of Pl. Pr. at page 482, it is said: `By the weight of authority the common-law remedy of assumpsit to recover back payments of usury is not abrogated by statutes providing other remedies for the recovery of such payments or for the recovery of penalties and forfeitures; but in some of the states there are decisions to the contrary.'

"* * * We are unable to see that a debtor having money or property thus unlawfully taken from him is in any different situation, so far as his right to have the same restored is concerned, than as if it were taken from him in some other unlawful manner. Nor can we see that his right to restoration is any different because the taking is made unlawful by statute instead of by the common law. * * * We are of the opinion that, at least in so far as money or property is exacted in payment of interest above the highest rate permitted by our usury statute, the same may be recovered by the payer thereof in a civil action prosecuted by him as plaintiff."

Such is the judicial construction of the original statute by the leading Washington case, which had remained as the unimpeached law in the State of Washington for some eighteen years prior to the time that this statute which had been thus construed, was copied and adopted by our legislature in 1931. It had also been cited with approval and confirmed by the supreme court of the State of Washington before the enactment of section 7053 (Holland Co. v. Aitken, 98 Wash. 107 [1917], 167 P. 109; Hopgood v. Miller, 107 Wash. 449 [1919], 181 P. 919), and is still the law of that State (Trautman v. Spokane Security FinanceCorp., 163 Wash. 585 [1931], 1 P. [2d] 867; Edwards v. SuretyFinance Co., 176 Wash. 534 [1934], 30 P. [2d] 225).

In addition, Lee v. Hillman, supra, considered the line of authorities to the contrary of which Blain v. Willson,32 Neb. 302, 49 N.W. 224, is the leading case and which authorities are relied upon by the majority and expressly dismissed them in the following language: "This view of the right to recover is opposed by other decisions, of which probably that of Blain v.Willson, 32 Neb. 302, 49 N.W. 224, may be regarded as the leading case. We are of the opinion, however, that the better rule is that adhered to by the authorities we have noticed."

Nor, as pointed out above, are the Washington decisions the only authorities which support this interpretation of the borrower's statutory remedy. A comprehensive survey of the authorities reveals that others concur. (Baum v. Thoms,150 Ind. 378, 50 N.E. 357, 65 Am. St. Rep. 368; Wheaton v.Hibbard, 20 Johns. [N.Y.] 290, 11 Am. Dec. 284; Bexar Buildingand Loan Ass'n v. Robinson, 78 Tex. 163, 14 S.W. 227, 22 Am. St. Rep. 36, 9 L.R.A. 292; Westman v. Dye, 214 Cal. 28, 4 P. [2d] 134; Munford v. McVeigh, 92 Va. 446, 23 S.E. 857;Douglas v. Klopper, 107 Cal. App. 765, 288 P. 36; Wood vs. Lake, 13 Wis. 94, 106; Willie vs. Green, 2 N.H. 333;Fay v. Lovejoy, 20 Wis. 424; The First National Bank v.Plankinton, 27 Wis. 177, 9 Am. Rep. 453; Scott vs. Leary,34 Md. 389; Philanthropic Building Association v. McKnight,35 Pa. 470; Thomas v. Shoemaker, 6 W. S. [Pa.] 179; Damico v. Mayer, 158 A. 847; Jones v. Dickerman, 114 Cal. App. 357,300 P. 135; Sawyer v. Hass, 79 Ind. App. 192, 137 N.E. 622; Davis v. Garr, 55 Am. Dec. n. 399, 400; 2 Encyc. Plead. Prac. 1020, note on usury; 66 C.J. § 264, p. 284, and notes 12 and 15 for other authorities.)

The underlying rule of construction was well-expressed in 1778 in an English case, Browning v. Morris, Cowp. 790, 792, 98 Eng. Reprint 1364, and in 3 Parsons Contr. 128, where it is said: "The distinction has been taken between statutes enacted on general grounds of policy and public expediency in which each party violating the law is in pari delicto and entitled to no assistance from a court of justice, and those laws enacted to protect weak or necessitous men from being overreached, defrauded, or oppressed, in which event the injured party may have relief extended to him, and the whole purport and reason, both of the law of usury and of the great mass of decisions under it, indicate that the lender on usury is regarded as the oppressor and the criminal, and the borrower as the oppressed and injured."

Thus, not only does strong public policy dictate that the appellant be allowed to bring his action to recover usury exacted from him but the weight of authority favors it as well as being indicated by legislative intent. All of which, taken together, should be controlling upon this court as an interpretive rather than as a lawmaking body.

Lord Mansfield in two short sentences gave the proper approach to the question of allowing a borrower to bring an action to recover usury in Smith v. Bromley, as quoted in Jones v.Barkley, 2 Dougl. (K.B.) 685, 99 Eng. Reprint 434, 444 (1781), as follows: "Upon the whole, I am persuaded it is necessary for the better support and maintenance of the law, to allow this action; for no man will venture to take, if he knows he is liable to refund. When there is no temptation to the contrary, men will always act right."

These words are just as wise and perhaps just as cynical today in the twentieth century as they were when they were written in the eighteenth. To my mind, the majority opinion is overtechnical and not only does violence to the sound public policy as enunciated above, but also, in attempting to ascertain the intention of the legislature, disregards well-established rules long followed by this court in the construction of statutes.

The exceptions should have been sustained.