Case Name: Cash Service Company v. George Ward, Banking Commissioner, et al.
Court: Supreme Court of Appeals of West Virginia
Jurisdiction: West Virginia
Decision Date: 1937-06-01
Citations: 118 W. Va. 703
Docket Number: No. 8501
Parties: Cash Service Company v. George Ward, Banking Commissioner, et al.
Judges: 
Reporter: West Virginia Supreme Court
Volume: 118
Pages: 703–713

Head Matter:
Cash Service Company v. George Ward, Banking Commissioner, et al.
(No. 8501)
Submitted April 28, 1937.
Decided June 1, 1937.
Strother & McDonald, for appellant.
Clarence W. Meadows, Attorney General, Ira J. Part-low, Assistant Attorney General, and Walter L. Brown, for appellees.

Opinion:
Hatcher, Judge:
This appeal involves application of Chapter 13, Acts Regular Session 1933, commonly known as the Small Loans Act.
Plaintiff, Cash Service Company, a corporation, engages in the special business of acquiring assignments of earned wages, not exceeding fifty dollars, upon the fol lowing plan: It gives the wage earner a check for ninety per cent of the assignment, with a merchandise coupon attached for ten per cent of the assignment. Plaintiff then recommends to the wage earner a list of merchants, each of whom has contracted with plaintiff to accept the coupon in exchange for merchandise at regular prices, provided the entire check is expended with the merchant. This recommendation constitutes plaintiff's consideration to the merchant, for honoring the coupon. If the wage earner follows the recommendation he obtains the full value of his wages in merchandise, but in nothing but merchandise; if he discards the recommendation and cashes his check in whole or part, he forfeits the merchandise coupon. In either event, plaintiff receives a profit of eleven and one-ninth per cent for the few days it is out the advance made the wage earner. Plaintiff has no state license. Plaintiff charges that defendant, George Ward, Banking Commissioner, and defendant, J. P. Clifford, Prosecuting Attorney of Harrison County, have instigated criminal prosecutions against it for doing a small loan business without a license and in violation of the Act, and seeks to have the prosecutions enjoined. From a final adverse ruling of the circuit court, plaintiff secured the appeal.
The Small Loans Act contains the following restrictions: "Section 1. No -* corporation shall engage in the business of making loans of money, credit in the amount or of the value of three hundred dollars or less, and charge, contract for or receive on any such loan a greater rate of interest, discount or consideration than six per cent per annum, except as authorized by this act and without first obtaining a license from the commissioner of banking Section 18. "No corporation, except as authorized by this act shall charge, contract for, or receive any interest, discount, or consideration greater than six per cent per annum upon the loan of money or upon the loan, use or sale of credit of the amount or value of three hundred dollars or less."
Plaintiff contends that these restrictions would im pair its contracts with merchants as well as its right of contracting with wage earners, and is therefore unconstitutional. The constitutional prohibition against impairing the obligation of contracts applies only to contracts lawfully made and not to usurious contracts which, by oppressing the necessitous, oppose public policy. "The contract clause of the Federal Constitution does not give validity to contracts that are properly prohibited by statute." Griffith v. Connecticut, 218 U. S. 563, 31 S. Ct. 132, 134, 54 L. Ed. 1151. From the time of Moses to the present, there has been almost continuous recognition among the more advanced nations of the power in government to prohibit usurious .charges on loans. Dunham v. Gould, 16 Johns. (N. Y.), 367, 376, et seq., 8 Am. Dec. 323. It is too late now to question the exercise of that power. State v. Sherman, 18 Wyo. 169, 105 P. 299, 301, 27 L. R. A. (N. S.) 898, Ann. Cas. 1912C, 819; State v. Griffith, 83 Conn. 1, 74 A. 1068-9; Otis v. Parker, 187 U. S. 606, 609, 23 S. Ct. 168, 47 L. Ed. 323. The West Virginia Small Loans Act follows, with minor changes, the Uniform Small-Loan Law drafted by the Russell Sage Foundation after thorough study and investigation of the small loan business. With slight variations that draft has been enacted in many states; and a number of other states have passed statutes based upon "the same theory as to supervision, rates, regulation and necessary powers" as the draft. Ryan, Usury, 222. So far as we are apprised, in every instance where such laws have had appellate review they have been upheld. See particularly, Sweat v. Commonwealth, 152 Va. 1041, 148 S. E. 774; Palmore v. Baltimore Rr. Co., 156 Md. 4, 142 A. 495; Alabama Brokerage Co. v. Boston, 18 Ala. App. 495, 93 So. 289; Mutual Loan Co. v. Martell, 200 Mass. 482, 86 N. E. 916, 43 L. R. A. (N. S.) 746, 128 Am. St. Rep. 446, 222 U. S. 225, 32 S. Ct. 74, 56 L. Ed. 175, Ann. Cas. 1913 B, 529; People v. Stokes, 281 Ill. 159, 118 N. E. 87; Warner v. People, 71 Colo. 559, 208 P. 459; Badger v. State, 154 Ga. 443, 114 S. E. 635; Levin v. Morris Plan Corporation, (N. J.) 174 A. 237, 12 N. J. Misc. 666; Dunn v. State, 122 Ohio St. 431, 172 N. E. 148; Commonwealth v. Puder, 261 Pa. 129, 104 A. 505.
Plaintiff contends that it is not loaning money to the wage earner, but is purchasing outright the assignment of his wages, and cites the usual definition of assignment, etc. Unfortunately for this contention, a loan, for the purposes of the Act, is defined by the Act itself, section 16, as the payment of money or credit, in consideration of the assignment of wages.
Plaintiff further contends that in any event the loan contemplated by the Act is one wherein the lender makes his profit off the wage earner; and that the Act does not apply to its business because the check and merchandise coupon given the wage earner, together equal in value the wages assigned, and its profit is paid by the merchant. In considering this contention, we must bear in mind that the Act is remedial and "should be liberally construed so as to suppress the mischief and advance the remedy." Central Missouri Trust Co. v. Smith, 213 Mo. App. 106, 247 S. W. 241. Accord: Gibbs-Hargrave Shoe Co. v. Peek, 212 Ala. 633, 103 So. 672; Eaker v. Bryant, 24 Cal. App. 87, 140 P. 310; In re Pittock, case No. 11,189, 19 Fed. Cas., 745. The obvious legislative purpose in regulating the assignment of wages is to enable wage earners, without paying excessive interest, to obtain cash needed in advance of pay day. Hence, section 17 of the Act requires that the amount of the loan be "paid to the borrower simultaneously with its execution." Nominally, plaintiff pays the wage earner pro tanto a check. Yet, to obtain the value of his merchandise coupon and cause the merchant to pay therefor in accordance with plaintiff's plan, he must spend the entire check for merchandise. If he does so, the check and coupon become in effect merely an order for the merchandise, and under a remedial construction of the Act, do not constitute the simultaneous payment required of the lender. If to procure immediate money, the wage earner cashes his check, plaintiff profits directly off him, and not the merchant — an alternative also unlawful. Thus in practice the illegality of plaintiff's business is patent. Under the Act the identity of the one who pays usury to the lender is not material. Following the interdiction above copied from section 18, it prescribes: "The foregoing prohibition shall apply to any corporation which by any device, subterfuge or pretense whatever, shall receive greater interest, consideration or charges than is authorized by this act for any such loan ." Thus the one fact only required by the Act to corrupt a statutory loan is the receipt by the lender of excessive charges. Where this occurs, as was said by Lord Mansfield in 1774, "the wit of man cannot find a shift to take it out of the statute." Floyer v. Edwards, 1 Cowp. 112, 114-15. Accord: Brakeley v. Tuttle, 3 W. Va. 86, 101; Crim v. Post, 41 W. Va. 397, 23 S. E. 613; Bank v. Kirby, 100 Va. 498, 42 S. E. 303; Clarke v. Sheehan, 47 N. Y. 188, 195; Pope v. Marshall, 78 Ga. 635, 4 S. E. 116; Carozza v. Finance Co., 149 Md. 223, 131 A. 332, 43 A. L. R. 1, 11. Consequently, a usurious transaction is not validated through an arrangement, purposely planned as that of plaintiff, to have a third person pay the usury. Levy v. Gadsby, 3 Cranch (U. S.), 180, 2 L. Ed. 404; Hamilton v. Brennan, 90 Hun. 340, 35 N. Y. S. 805; Spalding v. Bank, 12 Ohio 544; Tucker v. Fouts, 73 Fla. 1215, 76 So. 130, L. R. A. 1917 F, 916; 66 C. J., subject Usury, section 165; Williston, Contracts, section 1693. "If the thing forbidden by law is done, the law is violated, and it is wholly unimportant by what particular method the violation is effected." Borcherling v. Trefz, 40 N. J. Eq. 503, 507, 2 A. 369, 372.
The decree is affirmed.
Affirmed.