
    Wessell v. Timberlake.
    
      Constitutional law — Police power — Regulation of chattel and salary loans — Section 6346-1 et seq., General Code (106 O. L., 281) —License by superintendent of banks.
    
    
      1. Chattel loans on mortgage security or otherwise, the rate of interest on such loans, and the ways and means of assigning wages, are proper subjects for the exercise of the police power by the general assembly of the state.
    2. Section 6346-1 et seq., General Code (106 O. L., 281), is a constitutional exercise of police power by the general assembly of Ohio. The provision in Section 6346-2 of said act, in so far as it relates to the revocation of a license issued pursuant to the act, is reserved for future consideration in cases in which such question may properly be raised.
    (No. 15297
    Decided November 21, 1916.)
    Error to the Court of Appeals of Hamilton county.
    On September 17, 1915, plaintiff in error, Herman Wessell, was arrested by a constable, Charles L. Timberlake, charged with violation of Section 6346-1, General Code (106 O. L., 281), in that said Wessell “did on or about the 17th day of September,- 1915, in the county of Hamilton and state of Ohio, unlawfully” etc., engage and continue in the business of making loans on plain notes at a charge or rate of interest in excess of eight per cent, per annum, without a license.
    On the same date Wessell was brought before the common pleas court of Hamilton county on a writ of habeas corpus, and the sole ground upon which it was sought to have him released was the alleged unconstitutionality of the law under which he was arrested.
    On April 28, 1916, the common pleas court, by its judgment entry, declared this law valid, and on May 3, 1916, the judgment of the common pleas court was duly affirmed by the court of appeals. Proper exceptions were taken by plaintiff in error to the judgments rendered.
    The only questions to be discussed are those which pertain to the validity of the provisions of the act known as the “Loan Law,” which act is as follows:
    “Sec. 6346-1. It shall be unlawful for any person, firm, partnership, association or corporation, to engage, or continue, in the business of making loans, on plain, endorsed, or guaranteed notes, or due bills, or otherwise, or upon the mortgage or pledge of chattels or personal property of any kind, or of purchasing or making loans on salaries or wage earnings, or of furnishing guarantee or security in connection with any loan or purchase, as aforesaid, at a charge or rate of interest in excess of eight per centum per annum, including all charges, without first having obtained a license so to do from the superintendent of banks and otherwise complying with the provisions of this act.
    
      “Sec. 6346-2. Any person, firm, partnership, corporation or association desiring to obtain a license, shall apply therefor, under oath, on forms prescribed by the superintendent of banks; and by paying annually to the superintendent of banks, a license fee in the sum of one hundred dollars, shall be entitled to obtain a license, which license fee shall include the entire cost of inspection, or inspections, for a period of one year. The said license shall be issued by the superintendent of banks, and shall expire the first day of March, next following the date of its issuance, except that the fee of one hundred dollars herein provided shall be apportioned for that part of the year 1915 remaining after the date when this act shall become law, but thereafter no abatement of said charge shall be made if licenses are issued for less than one year, and no other or further license fee shall be required from any such licensee, by the state or any municipality nor shall any fees or charges be collected under section 736 of the General Code. Every such license and bond hereinafter provided for shall be renewed annually on the first day of March in each year. No license shall be granted to any person, firm, partnership, corporation or association unless, and until, such applicant shall, in writing, and in due form, to be first approved by and filed with the superintendent of banks, appoint an agent, a resident of the state of Ohio, and county where his office is to be located, upon whom all judicial and other process, or legal notice, directed to such applicant may be served; and in case of the death, removal from the state, or any legal disability or disqualification of any such agent, service of such process or notice may be made upon the superintendent of banks. The said superintendent of banks may revoke any license, if the licensee, his officers, agents, or employes shall violate any of the provisions of this act. Whenever, for any cause, such license is revoked, said superintendent of banks shall not issue another to said licensee until the expiration of at least one year from the date of revocation of such license. Every such applicant shall execute and file a bond to the state of Ohio in the penal sum of two thousand dollars with the superintendent of banks, to be approved by him, for the faithful observance of all provisions of this act. Any person claiming to be injured by a violation of this act by a licensee may maintain an action on said bond. ,
    “Sec. 6346-3. Application for a license shall state fully the name or names, and address, of the person or corporation, and of every member of the firm, partnership, or association authorized to do business thereunder, and the location of the office or place of business in which the business is conducted; and in the case of a corporation, shall also state the date and place of its incorporation, the name and address of its manager for the period for which the license is issued, and the names and addresses of its directors for the period for which the license is issued, and the name and address of the agent as provided in section 6346-2 of this act. Such license shall be kept posted in a conspicuous place in the office where the business is transacted. No person, firm, partnership, corporation or association so licensed, shall transact or solicit business under any other name. Not more than one office or place of business shall be maintained under the same license. But in case of removal, the superintendent of banks, may, on application, endorse thereon a transfer to the new place of business, with the date of transfer, and from the time of such endorsement, the new place so designated shall be deemed the place designated in the license.
    “Sec. 6346-4. The superintendent of banks shall, either personally, or by such person or persons as he may appoint for the purpose, at least once a year, and oftener, if he deems it advisable, investigate the business and affairs of every such licensee, and for that purpose shall have free access to the vaults, books and papers thereof, and other sources of information with regard to the business of such licensee and whether it has been transacted in accordance with this act. Said superintendent of banks, and every examiner appointed by him, shall have authority to examine, under oath or affirmation, any person whose testimony may relate to the business of any such licenseé or alleged violator herein.
    “Sec. 6346-5. No such licensee or licensees shall make a loan or purchase or furnish guaranty, or security, as hereinbefore provided at a greater total charge, including interest, than three per cent, per month; except that on loans that'do not exceed fifty dollars in amount, in whatever manner made payable, an inspection fee of not to exceed one dollar may be collected at the time the loan is made, when such loan is made for a period of not less than four months; and such inspection fee shall not be imposed upon the same borrower for any new or additional loan made within four months after such charge has been imposed. Said three per cent, per month shall not-be paid in advance and shall be computed on Unpaid monthly balances, without compounding interest or charges. No bonus, fees, expenses, or demands of any nature whatsoever, other than said inspection fee and said total charge of three per cent, per month (which shall include interest) as hereinbefore provided, shall be made, paid, or received, directly or indirectly, for such loans, purchases or furnishing guaranty or security, wage assignments or advancements except court costs upon the actual foreclosure of the security or upon the entry of judgment. Nothing in this act shall apply to pawn brokers who obtain a municipal license as provided in sections 6337 to 6346, inclusive, of the General Code or to national banks or to state banks or any person, partnership, association or corporation whose business now comes under the supervision of the superintendent of banks. No charge or fee shall be made unless the loan is actually made. A copy of this section shall be furnished each borrower at the time the loan is made.
    “Sec. 6346-6. Every person, firm, partnership, corporation or association licensed as herein provided, shall give to the assignor, borrower, or pledger, a statement upon which shall be written in ink, typewritten or printed, the name of the licensee making such loan or purchase, name of the assignor, borrower or pledger, the amount of the loan, the rate or amount of interest charged, the date when the loan is made, and the date when payable; and shall also give the assignor, borrower, or pledger, a receipt for each payment of principal or interest.
    “Sec. 6346-7. No assignment of any salary, wages or earnings, or any part thereof given to secure a loan shall be valid unless the same shall be in writing, signed in person by the person making the same; and if such person is married and living with husband or wife, signed also by the husband or wife of such person, as the case may be. Nor shall any such assignment be valid unless the same shall be in writing and made to secure a debt contracted simultaneously with the execution of such assignment, with all blank spaces therein filled in with ink or typewriting, together with the date, names of the assignor and assignee, the amount for which such assignment is made, together with the rate of interest charged.
    “The term assignment as used in this section shall include every instrument purporting to transfer an interest in or any authority to collect the wages, salary or earnings of such person. Any assignment of wages, salary or earnings, made in accordance with the provisions of this section shall bind the wages, salary or earnings earned or to be earned by the assignor until the loan secured by such assignment and interest thereon is fully paid, but no assignment or conveyance of wages, salary or earnings to be earned in the future given to secure a loan shall be binding for a sum in excess of fifty per cent, of the amount due or to become due the person making such assignment.
    
      “In order to obtain a priority of any such assignment over any other assignment, the holder thereof, shall deposit a true copy with the recorder of the county where the person making such assignment, if a resident of the state, resides, or if not a resident of the state, then with the recorder of the county where such assignment is made, together with a sworn statement by the holder, his agent, or attorney, of the amount due, and the rate of interest charged. All such assignments shall be filed and preserved by the recorder as provided in section 8562 of the General Code. When so deposited, any such assignment shall have priority over any other assignment subsequently deposited as herein provided.
    “Every such assignment so filed shall be void as against other assignments to creditors of the person making it after the expiration of one year from the filing thereof, unless within thirty days next preceding the expiration of said period of one year a true copy thereof, together with a sworn statement by the holder thereof, his agent or attorney, of the amount then due and rate of interest charged is refiled with the county recorder as herein provided.
    “A sworn copy of such assignment so filed together with a statement of the amount due filed with any employer of the assignor shall bind not exceeding fifty per cent, of any salary, wages or earnings due or to become due such assignor from the time the same is filed with such employer until any such loan and interest is fully paid and discharged.
    
      “Sec. 6346-8. Any person, firm, partnership, corporation or association, and any agent, officer or employee thereof, violating any provision of this act, shall for the first offense be fined not less than fifty dollars nor more than two hundred dollars and for a second offense not less than two hundred nor more than five hundred dollars, and imprisoned for not more than six months. The superintendent of banks upon such second conviction shall revoke any license theretofore issued to such person, firm, partnership, corporation or association. Any instruments taken in connection with the transaction upon which the conviction is made, shall be illegal, void and of no effect, and it shall then be the duty of the superintendent of banks to so notify the borrower in writing. Any charge of interest paid in excess of that provided herein may be recovered by the payor in an action at law.
    “Sec. 6349-9. The superintendent of banks shall enforce the provisions of this act, make all reasonable effort to discover alleged violators, notify the proper prosecuting officer whenever he has reasonable grounds to believe that a violation has occurred, act as complainant in the prosecution thereof, aid such officers to the best of his ability in such prosecution, and make a separate report to the governor at the end of each fiscal year. The superintendent of banks shall employ the assistant or assistants necessary, in his judgment, to make the investigation and inspection provided for in this act.
    
      “Sec. 6346-10. Any licensee, or licensees, who holds a license under the provisions of sections 6346-1, 6346-2, 6346-3, 6346-4, 6346-5, 6346-6 and 6346-7, of the General Code, inclusive, which has not yet expired, and who shall present his license for cancellation to the superintendent of banks herein, shall receive therefor a credit in the amount of ten dollars, and the superintendent of banks shall credit the same upon the license herein.
    “Section 2. Should any section or provision of this act be decided by the courts to be unconstitutional or invalid, the same shall not affect the validity of the act as a whole or any part thereof, other than the part so decided to be unconstitutional.
    “Section 3. That original sections 6346-1, 6346-2, 6346-3, 6346-4, 6346-5, 6346-6 and 6346-7 of the General Code, inclusive, and all other acts or parts of acts inconsistent with this act be, and the same are hereby repealed:”
    
      Messrs. Miller & Foster, for plaintiff in error.
    
      Mr. Edward C. Turner, attorney general; Mr. Hanby R. Jones; Mr. George B. Okey; Mr. Hugh Huntington; Mr. E. G. Lloyd; Mr. John J. Chester and Mr. Albert M. Calland, for defendant in error.
   Wanamaker, J.

It is claimed that the foregoing statute, known as the “Loan Law,” violates the following provisions of the Constitution of Ohio:

Section 1, Article I. “All men * * * have certain inalienable rights, among which are those of enjoying and defending life and liberty, acquiring, possessing, and protecting property.”
Section 16, Article I. “All courts shall be open and every person, for an injury done him in his land, goods, person, or reputation, shall have remedy by due course of law.”

It is further claimed that this act violates the provisions of Section 1 of the 14th Amendment to the Federal Constitution, which reads in part:

“No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

Plaintiff in error in his brief gives the following bill of particulars as a basis for the claim of unconstitutionality:

(a) “It gives authority to the superintendent of banks to revoke a license if the licensee violates ‘any of the provisions of this act.’ ”
(b) “The superintendent of banks is made the sole and final judge as to whether or not any violation has taken place. There is no provision for an appeal to the courts or otherwise.”
(c) “There is nothing to prevent the bank superintendent from holding an unfair and ex parte hearing, and in fact, he would not have to hold any hearing at all, but could arbitrarily revoke the license.”
(d) That the exemptions and classifications provided for in such statute are arbitrary and unreasonable, and therefore deny due process of law and the equal protection of the laws.

The chief case relied upon by plaintiff in error to sustain his contentions is Geiger-Jones Co. v. Turner, Atty. Genl., as found in a lengthy opinion of the United States district court, reported in the Ohio Law Reporter under date of April 17, 1916.

It must be conceded that if that judgment and opinion correctly interpreted the various constitutional provisions involved, and correctly applied them to the statute in question, that judgment and the reasons therefor would apply in the case at bar and demand a reversal of the judgments below; for, in the main, the alleged grievances in the so-called “Blue Sky Law” are substantially the same as the alleged grievances in the “Loan Law.”

Since the submission of this case to this court, and prior to the preparation of this opinion, the United States supreme court has reviewed the decision in the Geiger-Jones case and, with but one judge dissenting, has reversed said judgment. The reversal is clear and comprehensive on practically all the various grounds set forth in the opinion of the United States district court.

The opinion of the supreme court of the United States is very illuminating upon many of the questions involved in this case.

If the loan-act statute be a constitutional exercise of governmental power, it is conceded that it is so by virtue of what is known as the police power of the state.

Definitions of police power, giving with precision its latitude and longitude with exactness, have not been attempted by any courts. It is wise that it is so, because this, like many of the subject-matters of the law, is constantly in the process of evolution and development, and must be adapted to the social, industrial and commercial conditions of the times.

The police power in effect sums up the whole power of government. All other powers are only incidental and ancillary to the execution of the police power. It is that full, final power that is involved in the administration of law as a means to the administration of practical justice.

Mr. Justice Day in a well-considered opinion has discussed the police power at some length. His views are helpful in this case.

In Sligh v. Kirkwood, 237 U. S., 52, at page 58, he discusses the nature and scope of this power in the following language:

“The limitations upon the police power are hard to define, and its far-reaching scope has been recognized in many decisions of this court. At an early day it was held to embrace every law or statute which concerns the whole or any part of the people, whether it related to their rights or duties, whether it respected them as men or citizens of the state, whether in their public or private relations, whether it related to the rights of persons or property of the public or any individual within the state. New York v. Miln, 11 Pet. 102, 139. The police power, in its broadest sense, includes all legislation and almost every function of civil government. Barbier v. Connolly, 113 U. S. 27. It is not subject to definite limitations, but is coextensive with the necessities' of the case and the safeguards of public interest. Camfield v. United States, 167 U. S. 518, 524. It embraces regulations designed to promote public convenience or the general prosperity or welfare, as well as those specifically intended to promote the public safety or the public health. Chicago &c. Railway v. Drainage Commissioners, 200 U. S. 561, 592. In one of the latest utterances of this court upon the subject, it was said: ‘Whether it is a valid exercise of the police power is a question in the case, and that power we have defined, as far as it is capable of being defined by general words, a number of times. It is not susceptible of circumstantial precision. It extends, we have said, not only to regulations which promote the public health, morals, and safety, but to those which promote the public convenience or the general' prosperity. * * * And further, “It is the most essential of powers, at times the most insistent, and always one of the least limitable of the powers of government.” ’ Eubank v. Richmond, 226 U. S. 137, 142.”

The title of the original loan act is as follows:

“To regulate and license the loaning of money upon chattels or personal property of any kind and of purchasing or making loans upon salaries or wage earnings.” (102 O. L., 469.)

In the main, so far as it applies to the case before us, it is an act to prevent usury.

. The right to regulate the rate of interest by law is as old as government itself.

“The taking of interest for the loan of money, or at least taking excessive interest, has been regarded with abhorrence from the earliest times. We are told that such usury was prohibited by the early laws of the Chinese and the Hindus, and by the Koran.” 39 Cyc., 889.

Moses announces it as follows:

“If thou lend money to any of my people that is poor by thee, thou shalt not be to him as an usurer, neither shalt thou lay upon him usury.” Exodus XXII, 25.

Originally the word “usury” applied to all rates of interest. Later it was applied only to illegal or excessive rates of interest.

' It is significant that Abraham Lincoln in 1832, when he was but twenty-three years of age, in a campaign for the general assembly of Illinois, declared in an open circular to the people of his county that usury was then an obnoxioüs practice in the state of Illinois and that he stood for a law against it.'

Legislation against usury has been recognized by all the leading nations of the world from time almost immemorial. Excessive or usurious rates of interest assessed or charged against the poor and needy, against those whose small incomes are too often wiped away by illness, enforced idleness or financial reverses, have been vigilantly denounced by the laws of all lands.

It would seem now too late to challenge the constitutionality of shch legislation upon the ground that it is a denial of the right of property or liberty of contract.

The right of property, or liberty of contract with reference to property, is by our own constitution made “subservient to the public welfare.” Where, therefore, a statute seeks to accomplish such purpose as prevention of usury, such statute is clearly within the police power of the state of Ohio under the provisions of both the state and federal constitutions, unless some part of the machinery for its administration may violate some provision of state or federal constitution.

It is, however, suggested, from the title of the act, that the statute and the various sections thereof do not constitute a regulation of interest rates, but really undertake to regulate business, indeed to prohibit the same, and as such are a denial of the right of property — the taking of property without due process of law.

While the right of a state to regulate business, trade or occupation is of much later recognition and development than the right to regulate the rate of interest, it nevertheless is equally well settled to-day, that, in the interest of the public welfare, business, trades and occupations may be so regulated as to prevent extortion, fraud, restraint, monopolistic control of products or prices, and so on.

Whether or not the business of chattel loans is fairly within the police power of the state is no longer an open question in Ohio. This court in Sanning v. City of Cincinnati, 81 Ohio St., 142, in the first paragraph of the syllabus in that case, has stated the generally accepted doctrine:

“The state may, in the exercise of the police power, license and regulate chattel mortgage and salary loan brokers; and it may delegate authority to do so to municipal corporations.”

So it matters not whether the purpose of the statute be the regulation of a business or the denouncement of usury; in either event the paramount purpose of the statute is within the legal exercise of the police power of the state.

We come now to consider the second question as to whether or not the plans and provisions of the statute for the promotion of such purposes are a legal exercise of such police power.

The legal machinery provided by the statute for the enforcement of its provisions obviously must be operated by some officer or board. The statute designates the superintendent of banks as such officer. He grants the license provided for by the act, and agreeable to the act may revoke a license. He is merely the executive of the state for the enforcement of the statute, and the presumption surely is that he would exercise his discretion fairly and justly and in accordance with the purpose, terms and spirit of the act.

No serious claim is made that the provisions of the statute relating to the granting of licenses are in any wise unconstitutional, particularly because of any broad discretion or arbitrary power lodged in such superintendent of banks touching the issuing of licenses. The statute in this respect practically deprives him of the exercise of any discretion and recognizes him only as a ministerial officer.

Section 6346-2 provides for the application for such license, the payment of the fee of $100 therefor, and the term of such license. No complaint is made that the license fee is unreasonable, or that any of the provisions expressed in the statute for the issuing of the license are arbitrary or unreasonable.

But it is claimed that the classifications and exemptions made by the statute, as to those required and not required to obtain licenses, render the statute null and void; because, it is claimed, such do not give the petitioner the “equal protection of the laws.”

Naturally questions of this character are more frequently before the United States supreme court, under the due-process and equal-protection-of-the-laws clauses of the 14th Amendment, than in any other court of last resort. That court has passed upon these questions very frequently and - very recently in a number of celebrated and well-considered cases. One of the most recent cases is that of Rast v. Van Deman & Lewis Co., 240 U. S., 342, known as the Trading Stamp case.

Mr. Justice McKenna in his opinion in that case lays down the correct doctrine that has been generally followed by the United States supreme court, and most of the state courts. The lower courts in the trading stamp cases had held that the use of coupons, or trading stamps, was only a mode of legitimate advertising, and that no distinction could be made as between business men who used such trading stamps and the business men who did not use such trading stamps.

. Mr. Justice McKenna upon that point, at page 357, uses this language:

“The difference between a business where coupons are used, even regarding their use as a means of advertising, and a business where they are not used, is pronounced. Complainants are at pains to display it. The legislation which regards the difference is not arbitrary within the rulings of the cases. It is established that a distinction in legislation is not arbitrary, if any state of facts reasonably can be conceived that would sustain it, and the existence of that state of facts at the time the law was enacted must be assumed, Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61, 78. It makes no difference that the facts may be disputed or their, effect opposed by argument and opinion of serious strength. It is not within the competency of the courts to arbitrate in such contrariety. Chi., Burl. & Q. R. R. Co. v. McGuire, 219 U. S. 549; German Alliance Ins. Co. v. Kansas, 233 U. S. 389, 413, 414; Price v. Illinois, 238 U. S. 446, 452.
“It is the duty and function of the legislature to discern and correct evils, and by evils we do not mean some definite injury but obstacles to a greater public welfare. Eubank v. Richmond, 226 U. S. 137, 142; Sligh v. Kirkwood, 237 U. S. 52, 59. And, we repeat, ‘it may make discriminations if founded on distinctions that we cannot pronounce unreasonable and purely arbitrary.’ Quong Wing v. Kirkendall, 223 U. S. 59, 62, and the cases cited above.”

This same doctrine as to classifications and exemptions is reviewed and reaffirmed by Justice McKenna in the Geiger-Jones case, supra, where he quotes from the briefs of counsel for the Geiger-Jones Company, specifying a large number of discriminations urged against the statute wherein the statute undertakes to classify those who are within the statute and those who are exempt from the statute. Upon this question Justice McKenna says:

“We cannot give separate attention to the asserted discriminations. It is enough to say that they are within the power of classification which a State has. A State ‘may direct its law against what it deems an evil as it actually exists without covering the whole field of possible abuses, and it may do so none the less that the forbidden act does not differ in kind from those that are allowed. * * * If a class is deemed to present a conspicuous example of what the legislature seeks to prevent, the Fourteenth Amendment allows it to be dealt with although otherwise and merely logically not distinguishable from others not embraced in the law.’ Central Lumber Co. v. South Dakota, 226 U. S. 157, 160. The cases were cited from which those propositions were deduced. To the same effect is Armour & Company v. North Dakota, 240 U. S. 510, 517.”

This same doctrine is decisive of the case at bar upon the matter of classifications and exemptions in the Loan Law act.

The chief objection to the act, and the most serious one, is that touching the revocation of the license. Section 6346-2 provides:

“The said superintendent of banks may revoke any license, if the licensee, his officers, agents, or employes shall violate any of the provisions of this act.”

No provision is expressly made for any hearing before the superintendent of banks, or for any notice to the licensee as to such hearing, nor is any provision made for attendance of witnesses. Neither is there any provision made for any appeal or review of the action of the superintendent of banks touching any revocation of a license. Manifestly, if any licensee were found guilty of violating any of the provisions of this act in a proper proceeding before a court of competent jurisdiction, such adjudicated violation would doubtless warrant the revocation of a license. But whether or not, independent of any such adjudication, the superintendent of banks is constitutionally authorized to revoke such license upon his own discretion, it is unnecessary here to determine. That question cannot be raised in this case.

Plaintiff in error has refused to apply for a license. He has ignored the act as a whole and refuses to recognize its force and effect as a whole. The question of the constitutional revocation of a license cannot be raised until a license' has been first granted under the provisions of this act. Upon presentation of such case it will then be proper for this court to consider and determine that question.

In so far as the act in question is involved in this case the same is held to be a valid act within the police power of the state and not prohibited by any provision of the Constitution of the United States.

Judgment affirmed.

Nichols, C. J., Johnson, Donahue, Newman, Jones and Matthias, JJ., concur.  