Court Opinion

ID: 3846894
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:21:40.324401+00
Date Added: 2024-06-11T14:12:55.158980
License: Public Domain

As I view it, the basic proposition upon which the structure of the court's opinion is erected in this case is erroneous, — namely, that "even if confiscation had been shown, it would have made no difference, because the Commonwealth under its police power can prohibit the pawnbroking business entirely." This court had occasion, in an opinion filed as recently as May 13, 1940, in Commonwealth v. Zasloff, 338 Pa. 457, to discuss the power of the legislature wholly to prohibit an industry. It was there pointed out that the decisions allowing such suppression were all cases of businesses which were regarded by the community as "inherently and generally vicious," and that it was an unconstitutional deprivation of property for the legislature absolutely to prohibit a business which in itself was neither immoral nor otherwise inimical to the public welfare and where the abuses to which it might give rise were reasonably capable of correction by regulation. There were cited cases of the United States Supreme Court so holding, —Adams v. Tanner, 244 U.S. 590; Weaver v. Palmer Bros. Co.,270 U.S. 402; Tyson  Brother v. Banton, 273 U.S. 418, 442,443; Fairmont Creamery Co. v. Minnesota, 274 U.S. 1. In the Fairmont Creamery Co. case the court asked itself the question, "May the State, in order to prevent some strong buyers of cream from doing things which may tend to monopoly, inhibit plaintiff in error from carrying on its business in the usual way heretofore regarded as both moral and beneficial to the public and *Page 464 
not shown now to be accompanied by evil results as ordinary incidents?" And the court answered this question by saying, "Former decisions here require a negative answer." In the Zasloff case itself we held that a statute was unconstitutional which forbade sales of merchandise at less than cost, on the ground that such sales were an evil only so far as abuses occurred in connection with them, and therefore, while the legislature might seek to rectify such abuses, it could not prohibit all sales below cost.
Is the pawnbroking business so inherently vicious that the State would be constitutionally justified in preventing its citizens from engaging in it? Possibly the best answer to be found to this question is contained in the opinion of the court in Asakura v. Seattle, 265 U.S. 332, 343, where, although the court did not decide the question whether pawnbroking could be prohibited, it had this to say of the business: "While the amounts of the loans made in that business [pawnbroking] are relatively small and the character of property pledged as security is different, the transactions are similar to loans made by banks on collateral security. The business of lending money on portable securities has been carried on for centuries. . . . In this country, the practice of pledging personal property for loans dates back to early colonial times, and pawnshops have been regulated by state laws for more than a century. We have found no state legislation abolishing or forbidding the business. . . . While regulation has been found necessary in the public interest, the business is not on that account to be excluded from the trade and commerce referred to in the treaty. Many worthy occupations and lines of legitimate business are regulated by state and federal laws for the protection of the public against fraudulent and dishonest practices. There is nothing in the character of the business of pawnbroker which requires it to be excluded from the field covered by the above quoted *Page 465 
provision, and it must be held that such business is 'trade' within the meaning of the treaty."
It has been aptly said that the pawnbroker is the "poor man's banker." The differences between the business of a pawnbroker and that of a financier who makes loans to people of larger means are that, the loans in the one case being smaller and the expense of making them proportionately greater, the pawnbroker is compelled to resort to charges for storage, insurance, investigation and other services in connection with the loans, and also that the security, instead of being stocks and bonds, usually consists of tangible property. Poor people would have no way of borrowing money at all if it were forbidden them to obtain loans on the collateral of their ordinary personal and household possessions, and how could a state constitutionally abolish a business which consists of nothing more than the making of such loans? It is true that, as distinguished from the general banking industry carried on with more prosperous clients, certain abuses may tend to bring disrepute upon the pawnbroking business, — for example, as stated in the majority opinion, the exaction of exorbitant charges and the temptation to thieves to pawn, and pawnbrokers to receive, stolen property. These evils, however, are amenable to corrective regulation; the permissible fees may be reduced by legislative enactment and the receiving of stolen goods — at best a minor feature when compared with the overwhelming majority of legitimate transactions in the business — can be, and is, checked by government surveillance. It seems to me that it would be a distinct deprivation of a right of property and of contract, and therefore a violation of the Constitution of the Commonwealth as well as of the Fourteenth Amendment of the Federal Constitution, for the State to prohibit entirely the carrying on of a business which, in itself, is not only innocuous but in almost every age and clime has apparently proved to be essential to the economic life of those financially less fortunate. *Page 466 
While, therefore, in my opinion, the business of pawnbroking is one that cannot be constitutionally prohibited by the State, it can, of course, as plaintiffs themselves admit, be regulated
in the exercise of the police power. But the regulatory power of the State is confined, in the case of all industries affected with a public interest, to acts of reasonable regulation, and, in the case of rate-fixing legislation, that means that the maximum charges prescribed must permit those engaged in the business to receive a reasonable interest return on their capital investment. To deny such opportunity is in effect to deprive the owner of his property in the capital itself, because it is the chief beneficial attribute of capital that it may be profitably invested. Certainly, if rates legislatively fixed for public utilities must allow such a reasonable return, the same requirement, a fortiori, must exist in the case of the more private business of lending money.
During the course of an extended hearing plaintiffs produced a mass of testimony intended to demonstrate that the fees fixed by the act here in question for the storage, insurance, investigation and other services incident to the pawnbroking business did not allow of a reasonable return on the capital investment of their enterprises. The issue thus raised was, to my mind, the essential one in the case, but the court below, instead of making findings of fact which would have made it possible to ascertain therefrom whether the scale of fees established by the act was confiscatory, held in effect that this was immaterial because, whether confiscatory or not, plaintiffs had no standing to complain. In my opinion the record should be remitted to the court below in order that this fundamental question may become capable of determination in the light of adequate factual findings necessary to its decision but now wholly lacking.
There are other rulings involved in the majority opinion which I believe to be not only erroneous but, if followed generally hereafter, likely to destroy the important *Page 467 
safeguard of our governmental system that the legislature cannot delegate its functions and confer arbitrary authority upon officials or administrative tribunals. The act provides that in certain cases the Secretary of Banking shall, within prescribed limitations, fix the fees that the pawnbrokers are to be allowed to charge for storage, insurance, investigation and other services, and that he may thereafter increase or decrease such fees. No standard or purpose to be attained is prescribed to guide the Secretary in doing this, but the matter is left to his uncontrolled discretion. The majority opinion holds that this is unobjectionable. That such a provision is a violation of our State Constitution follows necessarily from the principle so clearly and vigorously proclaimed inHolgate Brothers Co. v. Bashore, 331 Pa. 255, where the court said (p. 260): "The legislature may, however, leave to administrative officers, boards and commissions, the duty to determine whether the facts exist to which the law is itself restricted. In all such occasions, nevertheless, the legislative body must surround such authority with definite standards, policies and limitations to which such administrative officers, boards or commissions, must strictly adhere and by which they are strictly governed." And the court further stated (p. 261), in regard to the power of the legislature to confer upon another agency the right to find facts upon which the law is to operate, that such facts generally are those "not involving a personal decision as towhether the facts should be considered within the generalpolicy of the law in question."
Equally, and perhaps even more, violative of constitutional principles, is the provision that the Secretary of Banking is given by the act the power to reject any application for a pawnbroker's license, even though satisfied that the financial responsibility, experience, character, and general fitness of the applicant is beyond question, if he is not "satisfied that allowing such applicant to engage in business will promote theconvenience and *Page 468 advantage of the community in which the business of the applicant is to be conducted." It is suggested in the concurring opinion of Mr. Justice LINN that this provision will be properly before the court only when an applicant has been refused a license under it. But it is discussed and approved in the majority opinion and I consider it so indefensible as to warrant a present expression of views in regard to it. The majority opinion says of this provision that "It is not difficult to find precedents to support the vesting of administrative bodies with a discretion so limited." On the contrary, the precedents in the Supreme Court of the United States and in the various state jurisdictions would seem to be all but unanimous in indicating, by the principles they enunciate, that such a provision would be held invalid. Here, again, there is no standard prescribed for the exercise of the Secretary's discretion; it becomes necessarily a matter of his personal opinion as to whether the engaging in the business of pawnbroking by an applicant who is admittedly honest and in every way qualified will promote "the convenience and advantage" of the community. No criterion is suggested in regard to the granting or refusal of a license, as, for example, some limitation in the number to be granted in a given neighborhood. In the case of the liquor licensing Act of May 13, 1887, P. L. 108, the court of quarter sessions was directed to refuse a license whenever, in its opinion, it was "not necessary for the accommodation of the public," — thus establishing the test of adequacy of supply for the needs of a locality. But here the "advantage" of the "community" constitutes the basis of no rule whatever other than that of the general public good, which, of course, is a question for the determination of the legislature and not of an agent authorized by it. I cannot imagine a discretion more unlimited than that thus given to the Secretary of Banking. As was admirably stated by Judge RHODES in Kellerman v. City ofPhiladelphia, 139 Pa. Super. 569, 575, 13 A.2d 84, 86: *Page 469 
"In every case to which we have referred, the actual enforcement of the law was controlled by a standard created by the avowed policy, purpose, or terms of the legislation itself, or adopted by the legislature from fields of exact science, but in any case in some degree extraneous to and independent of the mind and judgment of the enforcing officer. . . . But any legislative enactment which vests in a person or body of persons free of any standard independent of his or their own mind and judgment the power of supplying, or giving force to, or suspending its terms falls beyond the limits of judicial approval evidenced in the foregoing authorities, and is unconstitutional as a delegation of the power reposed exclusively in the legislature." No provision could be more baneful than one which permits a government official to say that one person may, and another may not, enter upon a legitimate business, without establishing any method by which a court would be able to determine whether such discretionary power has been properly exercised. The act does not even provide for hearing the applicant, or for an appeal to a court, the lack of which was held fatal to the constitutionality of a statute, where a similar discretionary power was sought to be given, in Southern Railway Co. v. Virginia, 290 U.S. 190. True, it is said in the majority opinion that a right of appeal is implied, but the cases cited in support of that proposition apply only to appeals on constitutional grounds, and in the recent decision of this court in Commonwealth ex rel. Margiottiv. Cunningham, 337 Pa. 289, 300, one of the grounds upon which a statute was held invalid was that it contained no express provision for appeal to a court from the decision of a public official. In any event, what could such an appeal here amount to? All that the Secretary of Banking need say would be that he was not "satisfied" that allowing the applicant to engage in the pawnbroking business would "promote the convenience and advantage of the community," and under the protection of that vague formula he could arbitrarily *Page 470 
grant or reject applications in violation of the proud ideal of our American system — equal justice to all under the law.
Because of the reasons stated, I would declare unconstitutional that clause of section 8 of the act which permits the Secretary of Banking to reject an applicant for a license if he is not satisfied that to grant it would promote the convenience and advantage of the community in which the business of the applicant was to be conducted; also that part of section 12 A of the act which gives to the Secretary the power to fix initially, and thereafter to increase or decrease, fees for storage, insurance, investigation, and other services in certain cases within the limitations therein prescribed. I would also reverse the decree of the court below and remit the record for findings of fact to be made as to the effect of the prescribed fees upon the possibility of those in the business receiving, under such a scale of charges, a reasonable return of interest on their capital investment, in order that it may be determined whether or not the fees fixed by the act are confiscatory and therefore violative of the State and Federal Constitutions.
Mr. Justice PATTERSON concurs in that part of this dissenting opinion which expresses the view that the State would have no right to suppress the pawnbroking business entirely, and consequently no right to impose a confiscatory schedule of charges, but only the right to regulate it.