Court Opinion

ID: 9590299
Source: CourtListenerOpinion
Date Created: 2023-08-21 23:53:38.418068+00
Date Added: 2024-06-11T09:13:39.201834
License: Public Domain

CARTER, J.
I dissent.
I believe that that portion of the constitutional provision *589on usury (Cal. Const., art. XX, § 22, third para.) which excepts certain kinds of lenders, such as personal property brokers, is inoperative under the equal protection clause of the Fourteenth Amendment to the Constitution of the United States, at least until such time as the Legislature acts and makes a reasonable classification and fixes maximum rates for such excepted persons, and that such exception is severable from the balance of section 22, thus leaving in effect the first two paragraphs thereof which provide for a maximum rate of 10 per cent for all lenders.
Section 22 fixes a 10 per cent maximum rate of interest and then exempts from its operation certain named institutions, such as personal property brokers. It leaves to the Legislature the fixing of rates for the exemptees. The sum and substance of it is that until the Legislature acts, there is a maximum rate of interest fixed for individuals loaning money but none whatever for the named exemptees. They may charge any rate they please. The sole basis of that discrimination is the type or character of the lender, such as personal property brokers, where personal property is taken as security, and not even then, unless the person is engaged in the business of lending money and taking personal property as security. I am cognizant of the fact that the Legislature has acted with respect to personal property brokers but concededly only as to loans of $300 or less. There is no limit, as clearly appears from the majority opinion, on the rates they may charge for loans over $300. Therefore, it cannot be doubted that under the Constitution and the legislation thus far enacted, John Doe, who makes an occasional loan, not as a business, is limited to a 10 per cent rate of interest regardless of the amount of the loan, whereas the exemptees, for at least all loans over $300, can charge whatever rate they please. I am not unmindful that there may be appropriate reasons for permitting a higher rate to be charged on small loans because of the administrative expense, or on personal loans or those secured by personal property only, than on loans secured by real property because of the disparity in the quality of the security, or that those reasons might constitute a basis for higher rates for businesses which are strictly regulated as to the character of persons who may engage therein and otherwise, but that is not to say that there may be a maximum fixed for individual occasional lenders and none whatever on the favored few. The cases—Griffith v. Connecticut, 218 U.S. 563 [31 S. *590Ct. 132, 54 L.Bd. 1151], and Mutual Loan Co. v. Martell, 222 U.S. 225 [32 S.Ct. 74, 56 L.Ed. 175]—relied upon by the majority, are clearly distinguishable inasmuch as the exemption there was of banks, and the court proceeded upon the assumption that such institutions were not likely to be in such financial straits that they would be compelled to charge exorbitant rates of interest. I do not believe that such an assumption may be made as to personal property brokers. Indeed, the Legislature has so determined, for it restricts the rates of interest that they may charge on loans under $300. It is not to be supposed that the second they make a loan above that amount they become so virtuous and philanthropic that no curb at all on their interest charges is necessary.
I am of the opinion, therefore, that the above mentioned exemption of personal property brokers from the maximum rate of 10 per cent interest for loans of over $300 is inoperative until the Legislature has legislated in the field and made appropriate and constitutional classifications. The restrictions now imposed by the Legislature on loans of $300 and less may stand as there is a valid basis for such a classification. It must necessarily follow that the rate charged in the case at bar was in violation of the above mentioned provision and is therefore usurious.