Beneficial Finance Co. v. Administrator of Loan Laws

Hammond, C. J., delivered the opinion of the Court. The question presented is whether an unintentional clerical miscalculation of interest by a small loan licensee that caused a charge to a borrower greater than that permitted by the governing statute voided the loan completely under the provisions of Code (1968 Repl. Vol.), Art. 58A, § 16 (d). Judge Sodaro, sitting in the Baltimore City Court, in a thoughtful and sound opinion, held that it did, affirming the ruling of the Administrator of Loan Laws.

We agree with Judge Sodaro. The loan here involved was made in October 1968 in the sum of $418.09, to be repaid, principal and interest, by thirty monthly payments of $21.00 each. On November 29, 1968, the first monthly payment was made. The loan company credited $13.26 to interest and $7.74 to ⁴³² principal.

The computation was erroneous, made because an employee misread the interest tables and charged 35 days’ interest rather than 34. The interest actually due on November 29 was $12.88 leaving $8.12 to be credited to principal. Thus the borrower’s account on November 29 reflected an overcharge of interest of 38 cents. In July 1969 an examiner from the office of the Administrator of Loan Laws discovered the mistake in the course of a routine examination.

The company promptly credited to principal the 38 cents. This still left an error of 9 cents because the credit should have been made as of November 29, 1968, but was not. Later the company made an entire and proper recalculation. On October 21, 1969, the loan company was charged by the Administrator with violating §§ 16(c) and 16(d) of Art. 58A of the Code (the Maryland version of the Uniform Small Loan Law), which then read as follows: “(c) In addition to the interest and charges provided for by this article, no further or other charge, or amount whatsoever for any examination, service, brokerage, commission or other thing, or otherwise, shall be directly or indirectly charged, contracted for or received. “(d) If interest, or charges in excess of those permitted by this article shall be charged, contracted for, or received, the contract of loan shall be void and the licensee shall have no right to collect, retain or receive any principal, interest, charges or recompense whatsoever.” After a hearing the loan company was ordered by the Administrator to cease collecting, receiving or retaining any part of the principal or interest or charges on or in connection with the loan, and the proceedings in court followed.

The loan company urges that (a) an essential ingredient of usury is the intention to exact more than the law allows for the use of money and where, as here, the overcharge is made by unintentional mistake, there is absent ⁴³³ the necessary intent without which usury does not occur; (b) this rule was not changed by the adoption in Maryland of the Uniform Small Loan Law; and (c) the legislative history and the uniform administrative interpretation show that unintentional mistake does not void a loan made under Art. 58A of the Code. The loan company is right in saying that the general rule of long standing is that the finding of an intention to exact more than legal interest is an essential prerequisite to a finding of usury. Duncan v. Md. Savings Inst'n, 10 G.& J. 299, 312. It does not follow that the legislature in establishing rules to govern and control “[t]he ceaseless conflict between the rapacity of money lenders and the necessities of borrowers,” as the Court put it in Finance Company, Inc. v. Catterton, 161 Md. 650 , by enacting the Small Loan Law by Ch. 88 of the Laws of 1918, intended to carry over into the new statute the rule of intention applicable to traditional usury.

Chapter 88 recited in its preamble that the act was remedial, stating: “And Whereas, The conduct of [the small loan] business has long been a cause of general complaint, and of much hardship and injustice to borrowers, and there is no regulation or provisions of law which has proved effective for the protection of such borrowers and for the punishment of usurious money lenders Catterton went on to describe more fully why the act was passed, saying (p. 654 of 161 Md.) : “Since the borrowing of money by the relatively poor is so often under the drive of dire and Immediate necessity, it has been found that the complete prohibition of high rates of interest on small loans on doubtful security is impracticable and ineffective, and the whole trend of modern thought is that the reasonably adequate protection of the borrower In such cases can only be ⁴³⁴ afforded by regulation. Countless instances illustrate the oppression and the injustice wrought on small needy borrowers by the callous and cruel greed so often found in the class engaged in the business of lending money in small amounts to those who have little to offer as security except their future earnings, or used and worn articles of little value to any one other than the borrowers, by whom they are needed for the ordinary purposes of daily life. In the very nature of things, such borrowers are frequently illiterate, often inexperienced, and usually, as a result of ignorance, inexperience, poverty, or necessity, incapable of defending themselves against wrongful, oppressive, fraudulent, or extortionate exactions by the lender. It was to mitigate rather than eradicate the evils incident to the business, and to afford to the borrower the greatest practicable measure of protection that the act was passed.” We think the legislature recognized that the borrower would not be afforded the greatest practicable measure of protection unless the lender was deterred from overcharging him by sanctions that in efféct imposed an automatic heavy fine for violating the law and the protection it sought to give the borrower.

Since a lender almost always, it must be imagined, would contend that an overcharge was inadvertent and therefore each individual overcharge would become a matter of controversy, the practicable answer of the lawmakers was to eliminate intention from the picture. We perceive no reason why the legislature could not do away with intention as a factor and make action determinative. We so ruled recently in. Canada’s Tavern, Inc. v. Town of Glen Echo, 260 Md. 206 , 271 A. 2d 664 (1970), holding that the general rule that abandonment of a nonconforming use in zoning cases depended Upon the concurrence of two factors, intention to abandon and some overt act or failure to act, had been modified by statute to eliminate intention as a factor and ⁴³⁵ make abandonment turn on cessation of use for a specified period.

We think the legislature left no doubt of its intention and purpose to make void every loan as to which there was an overcharge. The language of § 16(d) of Art. 58A of the Code is simple, direct, plain and unambiguous. It provides that if interest or charges greater than permitted by Art. 58A “shall be charged, contracted for, or received, the contract of loan shall be void and the licensee shall have no right to collect, retain or receive any principal, interest, charges or recompense whatsoever.” We said in Hunt v. Montgomery County, 248 Md. 403 , 414: “A statute is not made unclear or ambiguous because one side in a controversy, in order to obtain a desired result, gives its words a meaning they do not on their face appear to have. If the words of a statute, given their normal meaning, are plain and sensible the legislature will be presumed to have meant the meaning the words import.

The court will not substitute for literal intent a real intent unless the literal words of a statute say something the legislature could not possibly have meant. Amalgamated Ins. v. Helms, 239 Md. 529, 535 . Rules and methods of construction and interpretation, including legislative history and administrative practice, are resorted to for the purpose of resolving an ambiguity, not for the purpose of creating it.” Article 58A must be read as a whole in determining legislative intent. That the General Assembly made intention a factor when it desired to do so and that its purpose was not to make intention a factor in § 16(d) is shown by other sections of Art. 58A enacted in 1968 by Ch. 439 of the Laws of that year.

Section 16(e), the subsection that immediately follows § 16 (d), provides: “No licensee shall induce or knowingly permit any borrower to split up or divide any loan made ⁴³⁶ under this article for the purpose of obtaining a greater rate of interest or charges than would otherwise be permitted by this article. No licensee shall knowingly permit any husband' and wife during coverture, individually or together, or any endorser, guarantor or surety, to be indebted directly or contingently under more than one contract of loan at,the same time to such licensee.” (Emphasis added.) Section 23 provides: “Any licensee and any officer or employee of a licensee who shall knowingly violate the provisions of §§ 16, 17 or 19 of this article, and any person, copartnership, association or corporation, which shall knowingly violate the provisions of §§ 1, 21 or 22 (a) or this article, shall be guilty of a misdemeanor * * *.” (Emphasis added.) House Bill 13 of the 1968 Session of the General Assembly proposed to include in § 16 (d) of Art. 58A words that would delete overcharges resulting from clerical errors from the overcharges that would void a .loan. The legislature struck out this proposed amendment in the course of the passage of House Bill 13, which later became Ch. 439. 1 Not only did the legislators refuse to weaken the sanction of making void a loan as to which there was an overcharge, wilful or not, but also added § 16(e) and 23 above quoted to provide that specified violations of Art. 58A would subject the violator to criminal sanctions only if done “knowingly.” The legislative purpose not to include knowledge or intent as a prerequisite to the civil sanction for violation of § 16(d) but to include them as a prerequisite to a crimi ⁴³⁷ nal sanction comes through strongly from this concurrence of legislative actions and omissions and certainly from and after July 1, 1968 left no doubt as to the meaning of § 16(d). This is particularly true in the light of the case of Fisher v. Bethesda, 221 Md. 271 , decided in 1960, in which in dealing with similar provisions of the Industrial Finance Law (Art. 11 of the Code) (the Court pointed out the significance of the use of the word knowingly in one context and the failure to use it in