Court Opinion

ID: 8171788
Source: CourtListenerOpinion
Date Created: 2022-09-09 21:20:03.677215+00
Date Added: 2024-06-11T16:39:46.743266
License: Public Domain

Dooley, J.,
dissenting. It is undisputed that on February 1, 1989, the date that defendant ceased paying on the loan made by plaintiff, defendant did not owe plaintiff any money. This is true because plaintiff failed to obtain a license as a lender and charged interest at the usurious rate of 20%. At the time the loan in this case was made, the remedy provision of the Licensed Lenders Law specifically stated that any loans made in violation of the statute “shall be void and the lender shall have no right to collect or receive any principal, interest, or charges whatsoever.” 8 V.S.A. § 2233 (amended 1988) (emphasis added). The language could not be clearer that this loan was void and uncollectible from the day it was made.
*512The majority now holds that on July 1, 1990, as a result of legislation that says nothing about the issue before us, the dead loan miraculously sprang back to life. Although the statute on which the majority relies can reduce penalties, I find it inconceivable that the Legislature intended that it could create new loan obligations, where none existed before, in essence inflicting a penalty on defendant. I dissent.
When the meaning of a statute is plain on its face, the statute must be enforced according to its terms. Vermont Dev. Credit Corp. v. Kitchell, 149 Vt. 421, 424, 544 A.2d 1165, 1166 (1988). The meaning of the preamended version of § 2283 could not be any clearer: any violation of the Licensed Lenders statute results in an immediate voiding of the underlying transaction. By the terms of the unamended statute, the consequence of failing to obtain a lender’s license is imposed at the very moment of the loan’s inception. Accordingly, 1 V.S.A. § 214(c) offers this loan agreement no salvation because it provides that reduced penalties will be applied retroactively “unless [the initial penalties are] imposed prior to the date of the amendment.” 1 V.S.A. § 214(c). Here, the “penalty” was imposed on October 19,1988, the day the parties entered into the loan agreement — almost two years before the effective date of the amendment. See Klipping v. McCauley, 354 P.2d 167, 169 (Colo. 1960) (statutory amendment reducing penalties “extends its bounty only to such loan transactions as were lawfully entered into prior to its effective date/’ and transaction at issue void under original act). We have not been reluctant to enforce the statute in just this manner. See Kitchell, 149 Vt. at 427, 544 A.2d at 1168 (voiding a $175,000 loan executed by nonprofit corporation for failing to procure license under Licensed Lenders statute). Indeed, a variety of jurisdictions provide that loans or contracts that directly contravene a licensing requirement are null, void, and unenforceable. See, e.g., Derico v. Duncan, 410 So. 2d 27, 31 (Ala. 1982); Currier v. Tuck, 287 A.2d 625, 627-28 (N.H. 1972); Gottesfeld v. Kaminski, 524 A.2d 872, 875 (N.J. Super. Ct. App. Div. 1987).
The Court is applying here an extreme example of retroactivity. Imagine how the Court’s application of § 214(c) would work in the criminal context. If the Legislature lowered the maximum penalty for armed robbery, we could agree that the effect of § 214(c) would be to apply the reduced.maximum to a defendant who committed the crime prior to the amendment but was sentenced after the Legislature’s action. The new penalty would apply to a preexisting crime but not to reduce an existing sentence.
*513The majority’s interpretation of § 214(c) would go much further. Prisoners who have already been sentenced for armed robbery would have their sentences reduced if they were at or near the old maximum. I suspect that the Legislature would be amazed that its action would have an effect on existing sentences, even though it had said nothing about them.
The Court appears to have two answers to the fact that it has recreated a debt obligation that no longer exists: (1) “void” means “voidable”; and (2) extreme retroactivity for usury penalty reductions is the norm. The former answer is at variance with the statutory wording. A void contract is one that does not exist at law; it is null from the beginning. Black’s Law Dictionary 1574 (6th ed. 1990). As the majority shows, this Court has occasionally decided that in the context involved, the term “void” actually means “voidable.” Thus, in describing the common law of illegal contracts in Irish v. Clayes, 10 Vt. 81, 85 (1838), the Court noted that contracts are often described as “void” when they are merely voidable. In Becker v. Becker, 138 Vt. 372, 380, 416 A.2d 156, 162 (1980), we construed the term “void” in the Fraudulent Conveyance Act as “voidable” because the fraudulent transaction is valid between the parties who enter it. The sole effect of the act is to make it invalid when challenged by a creditor who was defrauded by the transfer. See Jones v. Williams, 94 Vt. 175, 185, 109 A. 803, 807 (1920); Tudor v. Tudor, 80 Vt. 220, 223, 67 A. 539, 540 (1907).
The decisions on violations of licensed lending laws have been directly contrary to the Court’s holding here. The rule and rationale was explained by the Supreme Judicial Court of Massachusetts: *514Cuneo v. Bornstein, 168 N.E. 810, 811 (Mass. 1929).1 Other courts have found the loan to be void and have gone beyond the remedies that would be allowed if the loan were only voidable. For example, consistent with the view that the loan was void ab initio, the decisions allow the debtor to recover any payments made on the loan. See Credit Finance Service, Inc. v. Able, 127 A.2d 396, 400 (D.C. Ct. App. 1956)(Maryland law); Hardman v. New Fin. Co., 259 S.W.2d 431, 432 (Ky. Ct. App. 1953); Robb v. Central Credit Corp., 100 N.W.2d 57, 64 (Neb. 1959); Smashed Ice v. Lee, 200 N.W.2d 236, 238 (S.D. 1972).
*513The purpose of the Small Loan Act was to prohibit the unlicensed business of making small loans and to prevent an excessive rate of interest on such loans. The statute was passed as a protection to the borrower; it was intended to make the statute effective and to prevent its evasion by indorsing notes given for such loans to third parties. It •would afford little protection to the borrower if the notes given contrary to the statute would be valid in the hands of a holder in due course. In our opinion the word “void” was used in its technical sense; the notes were void at their inception and of no validity in the hands of [the holder].
*514There is no reason in law and policy to hold that the meaning of “void” in § 2233 is other than that which is plain. The ruling of the majority recreates a loan that was a nullity, as if it never existed, at the time of the Court’s action.
The Court’s holding that § 2233 makes the loan voidable, not void, creates additional difficulties with the majority decision. It is clear that the purpose of small loan laws, like Vermont’s Licensed Lenders Law, was rooted in strong public policy concerns, namely, to protect the public from loan-sharking.2 See generally National Consumer Law Center, Usury and Consumer Credit Regulation § 2.2.3.1, at 21 (1987); see also 8 V.S.A. § 1 (purpose of statute is “to protect the public against unfair and unconscionable lending . . . policies”). The original statutes created a licensed class of small lenders who, in exchange for state regulation of their business, were permitted to charge interest rates higher than most usury ceilings, but were nevertheless vastly lower than rates charged by loan sharks. Usury and Consumer Credit Regulation, supra, at 22. The statutes employed a variety of safeguards that protected debtors from “the greed and the rapacity of unscrupulous persons who might exploit [the debtor’s] necessities and misfortunes to his loss and their profit.” Valley Acceptance Corp. v. Glasby, 337 S.E.2d 291, 295 (Va. 1985). This case involves a lender who charged usurious rates of interest, exactly the concern that gives rise to the debtor protections in the statute.
*515Given this history and legislative purpose, the consequences provided for violation of the act cannot be characterized solely, or even primarily, as punitive measures; they are also remedial. See Usury and Consumer Credit Regulation, supra, § 9.2.1., at 215; see also Glasby, 337 S.E.2d at 295 (small loans act is remedial in nature and must be liberally construed to advance remedy for which it was promulgated). Indeed, we recognized the remedial nature of forfeitures in Chittenden Trust Co. v. Andre Noel Sports, 159 Vt. 387, 621 A.2d 215 (1992). In that case, a secured party asked this Court to abandon its earlier holding that failure to abide by the procedural requirements for disposition of the collateral on the debtor’s default prevents the secured party from recovering a deficiency judgment. We noted that some courts have rejected this “absolute bar” rule because they view it as “punitive in nature, involving] a forfeiture, and creating] a penalty.” Id. at 394, 621 A.2d at 219. We rejected this reasoning, however, and retained the absolute-bar rule because it “does not punish, but rather precludes the secured party from invoking the operation of remedial statutory provisions.” Id. at 395, 621 A.2d at 220 (emphasis added).
The majority’s conclusion that the loan is voidable, not void, may be an answer to defendant’s vested rights claim, but it makes the creditor’s remedy indistinguishable from that in Andre Noel Sports. The creditor is left in the position at the commencement of the litigation, unable to collect more, but able to keep whatever proceeds were received before the litigation. This result is remedial, and 1 V.S.A. § 214(c), which applies only to penalties and punishments, cannot act retroactively to take away defendant’s remedy. Instead, retroactivity is governed by 1 V.S.A. § 214(b)(4), which prohibits retroactive application that would “[ajffect any suit, remedy or proceeding to enforce . . . any right ... or liability . . . accrued under the amended or repealed provision.” (Emphasis added.) Cf. Stewart v. Darrow, 141 Vt. 248, 252, 448 A.2d 788, 790 (1982) (interest in freedom from previously barred claim cannot be eliminated by retroactive application of statute of limitations).
The Court’s second answer is that reductions in usury penalties are applied retroactively. This proposition may be true as a general rule, but none of the majority’s cases are on point to the circumstances here. In none of the cases did the applicable statute make the loan void ab initio because of the violation of the usury law. See Minn. Stat. Ann. § 334.011 subd. 2 (if loan usurious, interest on debt “forfeited”); Miss. Code Ann. § 75-17-1(9) cited in Allied Chemical Corp. v. *516MacKay, 695 F.2d 854, 856 (5th Cir. 1983) (same); California Constitution art. XV § 1(2) (no person shall recover more than interest authorized by law); Mich. Comp. Laws Ann. § 438.32 (lender who violates provisions of statute “barred” from recovery of interest). Although these statutes provide specific “penalties” for violations, retroactive application of amendments or revocations is possible because the language employed in these statutes, unlike 8 V.S.A. § 2233, did not make the violations nullities from the beginning. See Black’s Law Dictionary 650 (6th ed. 1990) (defining “forfeiture” as a divestiture of specific property without compensation; defining verb “to bar” as “impediment, obstacle or preventative barrier”).
Since § 214(c) cannot apply in this case, I would follow the well-settled principle of statutory construction that absent the most clear and unequivocal language, a statute affecting legally existing rights should not be construed to operate retroactively. Curran v. Marcille, 152 Vt. 247, 250, 565 A.2d 1362, 1364 (1989). We have held on several occasions that unless a statute’s language is so clear as to permit no other construction, the presumption is that the Legislature intended the statute to act prospectively only. See, e.g., Northwood AMC Corp. v. American Motors Corp., 139 Vt. 145, 148, 423 A.2d 846, 849 (1980); see also Hockley County Seed & Delinting, Inc. v. Southwestern Investment Co., 476 S.W.2d 38, 40 (Tex. Ct. Civ. App. 1971) (in absence of express statutory language, amendment of usury statute decreasing penalties applied prospectively); Davis v. General Motors Acceptance Corp., 127 N.W.2d 907, 911 (Neb. 1964) (statute amending forfeiture provisions specifically provided for retroactive application).
Here, the amended version of § 2233 is silent as to whether the amendment is to have retroactive application. We must presume, therefore, that the Legislature intended the amendment to operate prospectively. Northwood, 139 Vt. at 149, 423 A.2d at 849. Moreover, the language of § 2233 infers a prospective application by using words like “shall have” and the “making of which.” See id. (no indication of intent to apply statute retroactively where amendment used prospective language like “shall mean” and “shall be compensated”). Accordingly, no intent to apply § 2233 retroactively can be discerned.
The effect of the majority’s decision is to create a new loan obligation and to require defendant to pay it. Nothing in the relevant statutes suggests that the Legislature intended this extreme result.
I dissent.

 As in this case, Cuneo involved the failure to obtain a license. Cuneo was reaffirmed and distinguished in Begelfer v. Najarian, 409 N.E.2d 167, 174-75 (Mass. 1980), where the court considered the usury provisions of the Small Loans Act which stated that the loan “may be declared void.” Because the provision authorized the court to find the loan was void, but did not command it, the provision made the loan voidable in the discretion of the court.

 Prior to April 30,1980, § 2201 of the Licensed Lenders Act applied only to loans of $1500 or less, and the entire chapter was entitled “Small Loans.”