On appeal from judgment of the District Court of the First Judicial District of the County of Hudson.
For the appellant, Henry Pass (William Boorstein, of counsel).
For the respondent, Lindabury, Depue & Faulks (Burtis S. Horner, of counsel).
Before Justices Bodine, Heher and Perskie.
The opinion of the court was delivered by
HEHER, J. The determinative question is whether respondent, a small loan company licensed under R.S. 17:10-1, et
seq., was guilty of a violation of section 17:10-14 of the statute in these circumstances:
Appellant desired to purchase an automobile upon which there was a lien in the sum of $238. He applied to respondent for a loan in this sum to satisfy the lien. The application was granted with the understanding that appellant would give a mortgage upon the vehicle as security for the loan. The chattel was appraised at $255. Respondent also asked for a policy of insurance against loss or damage from fire, lightning, theft, robbery, and collision or upset, and appellant agreed to provide it at his own expense. The loan was so conditioned. Respondent's manager testified that appellant tendered the policy then covering the automobile, but he "told him it could not be transferred." He proceeded to state why the transfer could not be made, but the inquiry was foreclosed by an objection "to the reason" interposed by appellant's counsel, which was sustained. Appellant thereupon made written application for this insurance coverage to the Colonial Insurance Company, and a policy was issued. While the insurer was suggested by respondent, appellant was told he was at liberty to procure the insurance from "any other company that he might have in mind." The premium was $17. A loan was eventually made in the sum of $255, to cover also the cost of the insurance; and appellant endorsed respondent's check to him for $17 and returned it to respondent, who delivered it to the insurer in payment of the premium. The balance of the loan, $238, was used to liquidate the lien upon the automobile. While the policy was issued under a "master policy" granted by this insurer to respondent, "covering all policies issued between the borrower" and respondent (as to the nature and function of a master policy see R.S. 17:28-4 and 17:28-5), it is conceded that the premium charged appellant was in accordance with the standard, uniform rate, and that respondent did not share therein to any extent. This much was stipulated at the trial. Appellant's sole contention is that respondent "received the benefit of the protection of its lien interest at the expense of the borrower, which expense should have been borne by it as an item included in the all-inclusive charge of 2 1/2% per month permitted by the statute,"
and so the insurance premium constituted an exaction by the lender in contravention of section 17:10-14, supra. It is said that not only was this in itself a "charge" in violation of that section, but that the interest exacted was greater than the rate permitted by the statute, since it was calculated upon $255, rather than upon $238; and that therefore the borrower has a right of action under the last-cited provision for the recovery of all moneys returned to the lender on account of the loan.
The District Court Judge awarded judgment to the lender; and the borrower maintains that it rests upon a misapprehension of the statutory concept and so should be reversed. The point is not well-taken.
Unlike the exaction in the case of Edelstein v. Hub Loan Co., 129 N.J.L. 497, the insurance premium thus paid by the borrower is not an expense incident to the conduct of the lender's business, and is therefore not within the interdicted class. The insurance in question was essential to the maintenance of the integrity of the mortgage security. True, this served the interests of the lender, but not more so than the taking of other measures necessary to render the chattel an adequate and satisfactory security -- e.g., the provision of a missing essential part, the making of repairs, or the liquidation of a lienable claim for repairs already made. Such are plainly not within the enumerated proscribed items. The statute directs that no "charge or amount for any examination, service, brokerage, commission, expense fee, or bonus or other thing or otherwise shall be directly or indirectly charged, contracted for, or received," in addition to the permissible exaction for interest, "except on actual sale of the security in foreclosure proceedings or upon the entry of judgment;" and it is provided, by way of sanction, that the contract of loan shall be void, and the full amount of the loan forfeited by the lender, "if any interest, ...