Court Opinion

ID: 9689132
Source: CourtListenerOpinion
Date Created: 2023-08-24 18:20:59.933439+00
Date Added: 2024-06-11T18:18:45.177749
License: Public Domain

JONES, Justice
(concurring in the result) .
I would wholeheartedly join in the dissent of my brother, Mr. Justice Faulkner, if the constitutional issues discussed in his dissent were properly raised and presented for our review. We are limited by the stipulation of facts submitted to the lower court by the parties and the issues raised thereby. Therefore, I concur in the result of the majority opinion to the effect that § 340 allows 8% add on finance charges and the 9% per annum simple interest charged here does not exceed that rate. To be sure, the parties stipulated that the 9% reflected by the mortgage, plus all other charges incident to the loan, fall below the maximum allowable rate prescribed by § 317.
I am constrained to comment on two aspects of the Mini-Code, particularly as it relates to real estate mortgages. While compromise is the hallmark of the legislative process, indirection amounting to outright deception, which permeates this Act, can only serve to breed disrespect for the institutions of government.
First, § 340 “backs” into coverage of real estate mortgages for purposes of the increased finance charges by exempting those “covered” from all other provisions of the Act:
“None of the provisions of this chap-. ter, except provisions of subsection (a) of section 316 and section 317 of this title, shall apply to any loan, forbearance, or credit sale involving an interest in real property or the sale, lease or mortgage of an interest in real property, where the creditor is a lending institution which is an approved mortgagee under the provisions of the National Housing Act or is exempt from licensing under this chapter.”
The legislative history makes apparent the following sequence of events:
The Mini-Code, absent § 340, was initially defeated by the legislature and lay on the shelf for two years prior to its reintroduction in 1971. The bill was on the verge of suffering its second defeat when the proponents offered to amend the bill by adding § 340 under the pretense of assuring the opponents of the bill that the Act could not be used by real estate mortgagees to exceed 8% per annum interest. By use of the double negative — -“None of the provisions . . . except provisions . ” — this amendment not only provided the real estate mortgagees with their cake, but allowed them to eat it as well. They were given all of the advantages of the Act — increased maximum finance charges — and were saddled with none of its disadvantages — sanctions, penalties, etc.
Second, while this delusive method of inclusion is a serious and reprehensible flaw, it pales into relative insignificance when compared to the second evil that pervades the entire Act — that of fixing the allowable rate of finance charges at 8% add on. What a shame that the legislature’s forthrightness in combining all allowable charges (interest, points, service fees, etc.) into one single finance charge stopped short of a maximum annual percentage rate fixed for such charges. The 8% add on rate authorized by § 317 can only be denominated as misleading and deceptive in and of itself. Admittedly, this is no new *180innovation (6% add on already existed under prior statutes), but the mellowing process of antiquity could hardly add a whit of purity to so rotten a scheme.
Instead of fixing an annual percentage rate (which incidentally, § 317(b) appears initially to do — “$8 per $100 per year” — the only forthright method of dealing with usury, the Act then alludes to the illusory gimmickry of the commercial community and provided for 8% add on — “ . by computing the maximum rate authorized ... on the original principal amount of the loan . . . for the full term of the contract without regard to scheduled payments . . . ”
Given any typical factual situation involving monthly installments over a period of years, not even the experts can agree on the APR conversion rate. Indeed, it may run as high as 16% under this formula. The cost of borrowing money would equate the same figure whether the loan is repaid in monthly installments or if none of the principal or interest were due or paid until the last day of the mortgage period. Stated otherwise, under the latter hypothesis, the borrower receives no credit whatsoever, insofar as finance charges are concerned, for payments made during the term of the mortgage.
Proponents of “add on” argue that real estate mortgagees would not abuse the law by charging up to the maximum rate allowable, but would instead follow the traditional practice of charging a per annum percentage rate of 8i/> to 9]/2, which is well within the add on method of computation prescribed by the Act. This argument begs the question because, if this be true, there is no need for a usury law in the first instance.
The legislature, in establishing public policy with respect to usury, is proscribing illicit conduct in the field of commercial lending. It can ill afford to be guilty of conduct as reprehensible as that which it proscribes.
I realize that I have been severely critical of this Act, both from the standpoint of the method by which real estate mortgagees were included for purposes of the increased maximum rate of finance charges as well as the add on method of computing the maximum rate allowable. While not apologizing for either aspect of my criticism, let me hasten to say that it is entirely understandable that such things do occur. The myriad and complex items of legislation with which the members- of the legislature find themselves continually faced, coupled with the pressure brought to bear by special interest groups, can only cause one to marvel that such matters do not occur with even greater frequency. I conclude on the note that a more adequate professional staff to assist those dedicated to the improvement of our laws is at least a partial answer.