Household Finance Corp. v. State

Hamley, J.

(dissenting)—I agree with the views expressed by the majority on the constitutional question. In my opinion, however, the findings entered by the supervisor in denying these applications demonstrate that he did not apply the legislative standards provided for his guidance.

With respect to the Vancouver application, the supervisor’s findings indicate the present number of loaning agencies in that city, including three licensed loan offices; express *465 the view that these loaning agencies have sufficient funds and adequate facilities to serve the present requirements of small loan borrowers; call attention to a population setback and decline in bank deposits; refer to competition from Portland, Oregon; and point out that the aggregate volume of loans is relatively small. Apparently on the basis of these detailed findings, there is' then a primary finding that:

“The granting of the license applied for is not necessary to permit adequate service to borrowers and might create a competitive situation among licensees that would encourage the adoption of unwholesome business practices that might be detrimental to the best interests and welfare of borrowers.” (Emphasis supplied.)

The conclusion is then stated that the granting of the additional license applied for at this time would not promote the convenience and advantage of the community.

It will be observed that all of these findings bear upon the ability of present loaning agencies to handle the business and the likelihood that there is not enough business to support another such agency. It is plain from the findings that the granting of the application would be detrimental to existing loaning agencies. But there is no finding that this would result in excessive solicitation, overlending, or other objectionable practices which the act was designed to prevent. There is not even a clear-cut finding of the ultimate fact that granting the application would be detrimental to the borrowing community.

It is true that the supervisor found that the granting of the license “might” create a competitive situation among licensees that would encourage the adoption of “unwholesome” business practices, and that the competitive situation which “might” thus develop “might” be detrimental to the best interests and welfare of borrowers. This pyramiding of possibilities to arrive at a result deemed undesirable does not appeal to me as a finding either for or against convenience and advantage of the borrowing community.

The record indicates that there was considerable evidence introduced at the trial tending to show that appellant, if granted a license, would offer loans at interest rates below *466 those now available, and that the competition which it would afford would be of advantage to borrowers. These factors were apparently not taken into consideration in the supervisor’s findings and conclusion. There is a great deal of evidence tending to show that, measured by population or retail sales, Vancouver is greatly “underlicensed” when compared to the national average. The supervisor’s findings indicate that this factor was not considered.

About the same situation exists with respect to the Seattle application, except that appellant now operates a licensed loan office about one block from the location applied for. The primary finding, quoted below, substitutes the word “may” for “might” and adds a consideration, shown in italics, which appears wholly foreign to the question of the convenience and advantage of the borrowing public:

“The granting of the license applied for is not necessary to permit adequate service to borrowers and will unnecessarily create a competitive situation among existing licensees in applying for additional licenses in Seattle, and may tend to encourage the adoption of unwholesome business practices by licensees that may be detrimental to the best interests and the welfare of borrowers.”

The legislature has not attempted to define the phrase “public convenience and advantage.” The reason is obvious, since it would be impossible to construct a definition which would comprehend every variety and set of circumstances surrounding each particular case. It is impracticable, for the same reason, for the courts to state a precise and helpful definition. Bank of Italy v. Johnson, 200 Cal. 1 , 251 Pac. 784 .

It seems clear, however, that the term “advantage” is broader than the term “necessity,” and implies improvement or betterment to a community, rather than imperative need. Even the term “need,” when used in statutes of this general character, is not to be understood as “absolute need” or “economic need,” but rather as “substantial or obvious need,” justifying the issuance of a license or charter. Moran v. Nelson, 322 Mich. 230 , 33 N. W. (2d) 772 . Some further indication of the scope of the term “public convenience and advantage,” as used in the small loan act, is to be gained from

*467 our decision in Kelleher v. Minshull, 11 Wn. (2d) 380, 119 P. (2d) 302 , where we said:

“Thus, the legislature sought not only to guarantee that the small loan business would be conducted by men of the ability, character, and financial standing necessary for the protection of those who may be compelled by reason of some serious emergency to borrow small sums of money, but also to make sure that the needs of the community in that respect were not outrun by the number of such establishments, at the risk of defeating the beneficent purposes of the act. The legislative desideratum was not the mere restriction in number of licensees, but rather the accomplishment of the well known objectives for which the act was passed.” (p. 397)

The supervisor is not required to make a conclusive finding as to the actual and inescapable effect which the granting of a license will have upon the convenience and advantage of the community. He is, however, required to find what the reasonably probable effect of the granting of such license will be upon such convenience and advantage. This determination is to be made not only in the light of the relative advantages and disadvantages of having another competitor in the field, and of the factors favorable and unfavorable to the particular applicant, but also in recognition of the administrative powers vested in the supervisor whereby the business methods and practices of licensees may be controlled and regulated.

It should be noted, in this connection, that all operating licensees are subject to constant regulation and surveillance by the supervisor with respect to advertising, rates charged, representations made to borrowers, type of contract and security, methods of collection, and other aspects of their business. This control over licensees is made effective through departmental rules and regulations, submission of annual reports, examination of books and records, and the power to suspend and revoke licenses. Thus it is a mistake to consider that the evils of unrestrained competition can be curbed solely through the denial of license applications.

I am of the view that, in giving almost exclusive consideration to the factor of the ability of existing loaning agen *468 cies to handle the business, and in failing to give any consideration to other factors bearing upon convenience and advantage, including those noted above, the supervisor did not apply the guiding standards as prescribed by statute. Under this view the indicated procedure would be to reverse the judgments with directions to the superior court to remand the cases to the supervisor so that he can perform his statutory duties as explained in the opinion. Had the defect which I find in the supervisor’s action been due to arbitrary or capricious conduct, it would not be necessary to remand the case to the supervisor, as the superior court could decree the issuance of the licenses.

Hill, J., concurs with Hamlet, J.