Court Opinion

ID: 8888057
Source: CourtListenerOpinion
Date Created: 2022-11-26 22:26:58.032625+00
Date Added: 2024-06-11T17:07:02.398853
License: Public Domain

VAN PELT, Senior District Judge
(dissenting) :
I find it necessary to use again the opening words of my previous dissent to the effect that it is with reluctance that I conclude that I cannot concur in the well-written supplemental opinion of Judge Wilkey, concurred in by Chief Judge Bazelon, on the petition for rehearing.
Again a lengthy dissent is unnecessary. Detailed comment on the various briefs filed on the question of reconsideration or rehearing and en banc hearing and the various amicus curiae offerings is unnecessary. I do feel that my views as to Restatement (Second) could be helpful.
My continued dissent is not with intent to emphasize the “intolerable situation” which, according to a congressional report on the proposed amendments to the District of Columbia Consumer Protection Act of 1971, the previous decision is said to have created. The action I propose will, however, lessen the outside pressures, if any. Because I feel that the Manufacturers and Hartford claims are based upon Maryland contracts, and thus valid under Maryland law, I suggest that we withdraw all parts of the previous opinions discussing the interpretation and applicability of the Loan Shark Act and decide that issue only in event it is later presented and is necessary to be decided in an ap*202peal involving the Equitable note and deed of trust. I am not disagreeing with the return of the Equitable claim for the taking of further evidence.
In fairness, I should admit my agreement with the language of the House of Representatives’ report on the above described 1971 Act in which, after referring to Von Rosen v. Dean, 59 App.D.C. 359, 41 F.2d 982 (1930),1 it was stated: “In the intervening years since the 1920 [sic] case, court decisions have gradually altered the interpretation of the law . . . .” I was of opinion when my previous dissent was written that Von Rosen v. Dean, supra, was a correct interpretation of the Loan Shark Act and that Congress, when it passed the Loan Shark Act, did not have in mind transactions such as were involved in the Von Rosen case, or in these cases. At the time it seemed inappropriate for me as a visiting judge to suggest the overruling of Hartman v. Lubar, 77 U.S.App.D.C. 95, 133 F.2d 44 (1942) and subsequent eases which I regard as altering Von Rosen. I do feel that a convincing argument can be made that Hartman and these other cases were' wrongly decided. I think, however, that such an important issue should be the subject of an en banc hearing if later it is necessary to pass on the Loan Shark Act.
All three of us are in agreement as to Manufacturers’ claim. In the majority opinion it is stated:
“Here we have a real estate transaction, involving a note, a security instrument, and a sizeable sum of money, challenged as to its validity because of a moneylending regulatory statute in the District of Columbia, where some of the activities in connection with the loan unquestionably took place. At best, the Trustee can create a conflict between Maryland and District of Columbia law and a choice as to which might govern; where there is a choice of jurisdictions, the preferable course is to select the law of the jurisdiction which would sustain the transaction, and here this is Maryland. This rule contributes to the certainty of commercial transactions, one of the prime objects of all commercial law.” p. 171, footnote omitted.
I am in agreement with this statement. I quote it here to emphasize the language that the preferable course is to select the law of the jurisdiction which would sustain the transaction.
In the supplemental opinion, the majority rely upon the American Law Institute’s Restatement of the Law (Second) “Conflict of Laws” § 188, setting forth five factors to be weighed and balanced. They are:
1) The place of contracting.
All briefs seem in agreement that the note and deed of trust were executed in Maryland. The supplemental opinion states: “. . . however, ‘the settlement of the loan took place in Montgomery County, Maryland’ (FF 2).” It is clear to me that this factor weighs in favor of applying Maryland law.
2) The place of negotiation of the contract.
Here we have a loan negotiated by correspondence. One party was in Maryland; the other in the District of Columbia. The papers were signed in Maryland. Since the actual signing culminates the negotiations and anything in the writings to the contrary of the signed instruments would be ineffective, barring fraud, and in some instances clear mistake, I feel that it is just as fair to say that the contract was negotiated in Maryland as to say, as the majority indicate, that it was negotiated in the District of Columbia. If the preferable course is to select the law of the jurisdiction which would sustain the transaction, then this factor should be balanced in favor of Maryland.
3) The place of performance.
*203If by place of performance is meant the place where the periodic repayments of the loan are to be made, then it is the District of Columbia. If by place of performance is meant where the loan proceeds were paid then it is Maryland. Since the money was paid in Maryland, I conclude that the place of performance is Maryland.
4) The location of the subject matter of the contract.
The subject matter of the contract was the real estate. It was located in Maryland. I am in complete disagreement with the supplemental opinion taking the position that the location of the subject matter of the contract is both in the District of Columbia and in Maryland. To me the facts clearly support a finding that this factor supports a determination that Maryland law applies.
5) The domicile, residence, nationality, place of incorporation and place of business of the parties.
So far as the borrower is concerned, all of these factors are answered by saying Maryland. As to Walker & Dunlop the factors are to be answered District of Columbia except as to place of incorporation. One of the briefs would indicate that Walker & Dunlop were incorporated in Delaware. If this is correct, then there are four District of Columbia answers and six non-District of Columbia answers. Even if Walker & Dunlop are incorporated in the District of Columbia, this factor is evenly divided and if we apply “the preferable course” doctrine, which we all agree should be applied to Manufacturers, then as to this factor we should determine that it is a Maryland contract.
Thus, I feel that a proper weighing and balancing of the Section 188 contacts supports the conclusion of my original dissent that the Hartford claim is based upon a Maryland contract and that Maryland law should apply.
Section 188 is not the only section of “Conflict of Laws” Restatement (Second) to which our attention must be given. Section 6 of the Restatement (Second) gives the general “Choice-of-Law Principles” which are referred to in Section 188. Section 6 provides:
“(1) A court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law.2
“(2) When there is no such directive, the factors relevant to the choice of the applicable rule of law include
(a) the needs of the interstate and international systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of law,
(f) certainty, predictability and uniformity of result, and
(g) ease in the determination and application of the law to be applied.”
While under the majority’s rationale “the relevant policies of the forum” could call for application of the Loan Shark Act, although they do not compel it, “the relevant policies of other interested states” (in this case the State of Maryland), “the protection of justified expectations,” “the basic policies underlying the particular field of law,” “certainty, predictability and uniformity of result, and “ease in the determination and application of the law to be applied,” all call for application of Maryland law. It is clear to me, as I have above attempted to point out, that Maryland does have the more significant contacts under Section 188 and when Section 188 is read with Section 6 it is even clearer that Maryland law should be applied.
This is not the first time that a conflict of laws question has arisen. *204Throughout the history of such conflict questions, the law of the place where the property is situated has received great emphasis. It may be a fair statement to say that it has received the greatest emphasis of any factor. See, e. g., United States v. Crosby, 11 U.S. (7 Cranch) 115, 3 L.Ed. 287 (1812); Restatement of the Law, “Conflict of Laws” §§ 214-54 (1934).
In addition, the situs of real property is given overriding consideration by the Restatement (Second) in § 228 which applies to such questions as whether a mortgage creates an interest in land and the nature of the interest created. However, the rules for determining which law governs the validity of the underlying debt are those in Chapter 8 dealing with contracts.
In considering Restatement (Second), § 195 is not to be overlooked. It reads:
“The validity of a contract for the repayment of money lent and the rights created thereby are determined, in the absence of an effective choice of law by the parties, by the local law of the state where the contract requires that repayment be made, unless, with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the transaction and the parties, in which event the local law of the other state will be applied.”
In the Section comment, we read:
“c. When local law of place of repayment will not be applied. On occasion, a state which is not the place where the contract requires that the loan be repaid will nevertheless, with respect to the particular issue, be the state of most significant relationship to the transaction and the parties and hence the state of the applicable law. This may be so, for example, when the contract would be invalid under the local law of the state where repayment is to be made but valid under the local law of another state with a close relation to the transaction and the parties. In such a situation, the local law of the other state should be applied unless the value of protecting the expectations of the parties by upholding the contract is outweighed in the particular case by the interest of the state where the loan is to be repaid in having its invalidating rule applied. There will also be occasions when the local law of some state other than that where the loan is to be repaid should be applied in any event because of the intensity of the interest of that state in having its local law applied to determine the particular issue (see Illustration 1).” (Emphasis supplied.)
To me it is clear that Maryland not only has the “more significant relationship” to the transaction but it also seems under the majority’s view, as expressed in disposing of the Manufacturers’ claim, that if the contract would be invalid under District of Columbia law but valid under the Maryland law, Maryland law should be applied.
While the Loan Shark Act is not, as I suggested in my original dissent, a usury statute, the general reasoning of Restatement (Second) § 203 is not to be overlooked as we discuss the Restatement principles applicable to this case.
“The validity of a contract will be sustained against the charge of usury if it provides for a rate of interest that is permissible in a state to which the contract has a substantial relationship and is not greatly in excess of the rate permitted by the general usury law of the state of the otherwise applicable law under the rule of § 188.”
Change the words “charge of usury” to whatever words attorneys for the Trustee care to use in arguing for invalidity of the Hartford instruments, and this sentence becomes a concise, fair affirmance of the Hartford transaction.
We are all in agreement that the Equitable case should be remanded to the District Court, which in turn, under *205my understanding of the law applicable to bankruptcy reviews, would return the case to the Referee in Bankruptcy for the introduction of further evidence. The Referee may well find that there has been a novation or that Maryland law applies or that the Loan Shark Act, even as interpreted by the majority in the opinion which I suggest withdrawing, does not apply to the transaction. If Maryland law applies or there has been a novation, there will be no occasion for the Referee or reviewing courts to pass on the Loan Shark Act.
If it later becomes necessary, I suggest, in view of the recent action of the 92nd Congress in this field, that another panel or the court en banc might well take another look at the congressional intent of the original Act before it concludes as the majority here have, in effect, that Von Rosen v. Dean, supra, was incorrectly decided.
For these reasons I dissent from the majority’s original opinion and supplemental opinion. I propose the withdrawal of all comment in both opinions as to the applicability of the Loan Shark Act, the affirmance of the Manufacturers and Hartford cases on the basis of Maryland law, and the return of the Equitable claim to the District Court and through that court to the Referee in Bankruptcy for the taking of further evidence, after which the Referee can then enter an order which will become subject to the usual review procedures.
I have had an opportunity to read the opinion of Judge MacKinnon and I add my concurrence.
Before BAZELON, Chief Judge, and WRIGHT, McGOWAN, TAMM, LEV-ENTHAL, ROBINSON, MacKINNON, ROBB and WILKEY, Circuit Judges.
ORDER
PER CURIAM.
On consideration of the suggestions for rehearing en banc, and of the responsive pleadings filed with respect thereto, and there not being a majority of the judges in regular active service in favor of having these cases reheard en banc, it is
Ordered by the Court en banc that the aforesaid suggestions are hereby denied.
Circuit Judges TAMM, MacKINNON and ROBB would grant rehearing en banc.
MacKINNON, Circuit Judge:
Concisely stated, the panel opinion holds that it was the intent of Congress in the Loan Shark Act to prohibit all lenders (except banks, etc.) from making non-usurious loans over $200 unless the lender was licensed under a law that prohibits licensees from making any loan over $200. Such opinion thus produces the absurd result of penalizing a lender for making certain loans without a license which loans would still be prohibited even if the lender were licensed.1
In my opinion the ease should have been heard by the court sitting en banc because the validity of subject transactions “involves a question of exceptional importance” and, since the panel decision failed to ascertain the true legislative intent, rehearing en banc is necessary in order to secure uniformity of our decisions. Fed.R.App.P. 35(a).
My major objections to the panel opinion are twofold. First, it applies the Loan Shark Law to non-usurious lenders, contrary to the basic intent of the statute, and, secondly, it imposes a penalty, complete confiscation of the loan, that is not authorized by the statute. At the outset it must be recognized that all these loans were made at rates of interest, 6*4 and 6%% per annum, which were legal under the 8% usury rate fixed by statute in the District of Columbia.
The cardinal error of the panel opinion is that it fails to recognize that Congress in the Loan Shark Act was only *206regulating usurious lenders. Its failure in this respect is caused by a disjunctive and overly literal reading of the words “six per cent” in § 601. It reads these words without comprehending the basic intent of Congress in 1913. All the panel opinion sees is the three letters “s-i-x”. Actually, what Congress was referring to was the then existing general usury rate which at that time was 6% per annum. Thus when Congress required the licensing of persons who charged interest in excess of 6% per annum what they were really requiring in 1913 was the licensing of usurious lenders; and when Congress changed the usury rate to 8% per annum in 1920 it is to be considered as impliedly amending the 6% rate in the Loan Shark Act to conform to the 8% change in the usury rate. Millard v. Harris, 132 U.S. App.D.C. 146, 153, 406 F.2d 964, 971 (1968)2; Boys Markets, Inc. v. Retail Clerk’s Union, 398 U.S. 235, 250, 90 S.Ct. 1583, 26 L.Ed.2d 199 (1970); American Tobacco Co. v. Werckmeister, 207 U.S. 284, 28 S.Ct. 72, 52 L.Ed. 208 (1907); Holy Trinity Church v. United States, 143 U.S. 457, 461, 12 S.Ct. 511, 36 L.Ed. 226 (1892). There was never any intent to require legitimate lenders to be licensed^ — only usurious lenders. The three principal cases upon which the panel opinion relies all involved usurious loans.3 The licensing requirements of the Loan Shark Act when it was enacted did not require the licensing of one legitimate lender. No legitimate lender charged usury. And yet, without any change in the Loan Shark Act, the panel opinion now construes these same provisions to require the licensing of all legitimate lenders except banks, etc.
The panel opinion also fails to recognize that Congress in 1913, when it provided that the Loan Shark Act would not apply to banks, etc., was not exempting banks from the requirements of the law but was excluding banks from the right to be licensed under the act to make small loans at rates up to 1% per month.
The opinion also fails to recognize the common sense of the situation. Thus, when Congress in 1920 raised the usury rate from 6;% to 8% and provided that such action shoüld not “repeal or affect” the Loan Shark Act, the real intent of Congress was to assure that its fixing of the usury rate at 8%, which was below the maximum authorized for small loan companies, would not, by virtue of being a later enactment, be held to repeal the right conferred by the Loan Shark Act on small loan companies to charge up to 1% a month on loans up to $200 and not to thereby backhandledly convert the licensing provisions of the Loan Shark Act so as to require the licensing of all otherwise legitimate lenders, except banks. An analysis of all the applicable statutes and the legislative history makes it clear that Congress never had any such intent. That is in effect what Congress said in 1960 in the Committee Report which stated that the Loan Sharfc Act “obviously” did not apply to loans made by Small Business Investment Companies but that it was enacting the *207amendment adding SBIC's to the list of exempted institutions to make sure that a literal interpretation was not applied to such companies. Why our court in 1971 would ignore this statement by Congress that it “obviously” did not intend the interpretation of the law that the opinion now asserts, is hard to understand.
Congress again said essentially the same thing on December 17, 1971 when it passed a curative act validating practically all large loans made in the District of Columbia since the Loan Shark Act was enacted in 1913. This massive curative act stated in effect that no provision of the Loan Shark Act shall apply to any loan (those in litigation excepted) made at a rate of interest which did not exceed the maximum lawful rate of interest which would be applicable to such loan but for the provisions of the Loan Shark Act. When that statute is read and understood that is precisely what Congress said in 1913 in the Loan Shark Act and the provision to that effect (§ 601) has never been amended.
I also concur in the dissenting opinion of Judge Van Pelt, and particularly as to the status of those loans made by real estate brokers. (See his discussion of the claim by Hartford Life Insurance Company.) The real estate broker argument is controlled by the language of the 1902 statute which recognizes that real estate brokers make loans for their own account. It is evident from the statute that when Congress inserted the words “for others” as a qualification to the last clause that it thereby indicated that the initial requirement “as agent for others” would not apply beyond the first clause, i. e., those who sold or offered for sale. In any event this is the normal effect of a qualifying phrase which the court’s opinion recognizes when it states that the words “as agent for others” is dreadfully misplaced. It is dreadfully misplaced if one seeks to have it amend subsequent clauses but not if it is applied to the next precedent clause which is the normal intent and meaning. The general rule is that relative and qualifying words, phrases and clauses are to be applied to the words or phrase immediately preceding and not to others more remote. United States ex rel. Santarelli v. Hughes, 116 F.2d 613, 616 (3d Cir. 1940); Mandel Bros., Inc. v. Federal Trade Commission, 254 F.2d 18, 22 (7th Cir. 1958); T. I. McCormack Trucking Co. v. United States, 251 F.Supp. 526, 532-533 (D.N.J.1966); 82 C.J.S. Statutes § 334, p. 670.
For the foregoing reasons I vote to hear the case en banc. Judges TAMM and ROBB also concur in this opinion.

. Von Rosen held in substance that the Loan Shark Act was not intended to and did not apply to a $177,500 loan secured by a first deed of trust upon real estate.

. We have no such directive here.

. D.C.Code, § 26-605 provides: “. . . No such loan greater than two hundred dollars shall be made to any one person : . . . ” (37 Stat. 659).

. Cf. Cross v. Harris, 135 U.S.App.D.C. 259, 418 F.2d 1095 (1969); Justin v. Jacobs, 145 U.S.App.D.C. 355, 449 F.2d 1017 (1971) (MacKinnon concurring).

. Hartman v. Lumbar, 77 U.S.App.D.C. 95, 133 F.2d 44 (1942), cert. denied, 319 U.S. 767, rehearing denied, 320 U.S. 808, 64 S.Ct. 30, 88 L.Ed. 488 (1943); Royall v. Yudelevit, 106 U.S.App.D.C. 1, 268 F.2d 577 (1959); Indian Lake Estates, Inc. v. Ten Individual Defendants, 121 U.S.App.D.C. 305, 350 F.2d 435 (1965). These loans were all made at rates of interest in excess of the 8% per annum maximum rate fixed by the usury laws.
Hartman v. Lubar: $900 loan taking $1,000 note from borrower. This was probably considered a $1,000 loan at 10% discounted, though in terms of simple interest it is slightly in excess of 11% annual rate.
Royall v. Yudelevit: Lender paid $8,500 for a 90-day note of $10,000. This is some incredible rate — it’s 15% on a discount basis, nearly 18% on its face, and between 53-54% on an annual basis.
Indian Lake Estates v. Ten Individual Defendants: Terms not given, but suit initially under the usury statute and so it can be assumed tlat rate vas usw'.qus under that law.