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District Court of Appeal, First District, Division 1, California.


Cr. 2163.

Decided: June 25, 1941

John B. Ehlen, of San Francisco, and Melvin V. Wood, of Oakland, for appellants. Earl Warren, Atty. Gen., and David K. Lener, Deputy Atty. Gen., for respondent.

Appellants were convicted by the court sitting without a jury on two counts of an indictment charging conspiracy to violate the provisions of the California Small Loan Act. Deering's General Laws, 1939 Supp., p. 1509; Stats. 1939, Ch. 1045, p. 2886. The first count charged that defendants conspired “* * * to charge, contract for and receive, by device, subterfuge and pretense, greater interest, consideration and charges than are authorized by the provisions of the said California Small Loan Act for the loan, use and forbearance of money, goods and things in action, and for the loan, use and sale of credit and to require borrowers * * * in connection with and incidental to the making of loans, to contract for, purchase and agree to purchase other things and merchandise in connection with such loans and to enter into collateral sales agreements and contracts, in connection with such loans.” Eleven overt acts are alleged in the count. The second count charged that during a specified period of time defendants conspired “to engage in the business of making and negotiating * * * loans of money, credit, goods, and things in action in the amount and of the value of less than $300.00 without first obtaining from the Commissioner of Corporations of the State of California a license authorizing them so to do.” The superior court, holding that the conspiracy charged in each count came within the purview of section 182 of the Penal Code, specifically subd. 1 and the second penal paragraph thereof, followed the provisions of that subdivision and paragraph in entertaining jurisdiction and passing judgment. We quote the section in full since its construction and application to this case present the main question on the appeal: “If two or more persons conspire: 1. To commit any crime; 2. Falsely and maliciously to indict another for any crime, or to procure another to be charged or arrested for any crime; 3. Falsely to move or maintain any suit, action or proceeding; 4. To cheat and defraud any person of any property, by any means which are in themselves criminal, or to obtain money or property by false pretenses or by false promises with fraudulent intent not to perform such promises; 5. To commit any act injurious to the public health, to public morals, or to pervert or obstruct justice, or the due administration of the laws. They are punishable as follows: When they conspire to commit any felony, or to commit any act injurious to the public health, or to public morals, or tending to pervert or obstruct justice, or the due administration of the laws, they shall be punishable in the same manner and to the same extent as in this code provided for the punishment of the commission of the said felony or act, respectively. When they conspire to do any of the other acts described in this section they shall be punishable by imprisonment in the county jail or state penitentiary not exceeding two years, or by a fine not exceeding five thousand dollars, or both, and cases of such conspiracy may be prosecuted and tried in the superior court of any county in which any overt act tending to effect such conspiracy shall be done.”

Appellants' operations which led to their arrest and prosecution were as follows: For some years prior to the effective date of the Small Loan Act (September 19, 1939), Vanderpool had been engaged in the business of making unsecured loans. At times appellant Clancy was in his employ. Two months after the said act became effective Vanderpool, having obtained from the board of equalization a seller's permit under which he was authorized to sell tangible personal property; and from the city of Oakland, a merchandise agent's license, opened offices in the city of Oakland under the name of Bell Sales Company. These offices consisted of two adjoining rooms with an interconnecting door. There was a partition of wood and frosted glass between the rooms, but the interconnecting door was usually kept open. On the entrance door to one of the rooms were painted the words “H. F. Vanderpool, Public Accountant, Agent for Financial Service Company”; on the other, the words “Bell Sales Company”. While operating the Bell Sales Company, Vanderpool became an agent for the sale of automobile signals. Appellants Clancy and Rouse, the latter having been previously employed in a similar business, subsequently entered the employ of Vanderpool, and thereafter most of the sales hereinafter mentioned were made by them. The stock of the business consisted of some twenty–six pieces of jewelry which Vanderpool purchased at the time of opening the offices at a cost of less than $90. When an individual applied for a loan, he was directed to the room where the jewelry was displayed and told that he might purchase a piece on credit which would be repurchased for cash immediately in the next room at the amount he wished to borrow. A sales tag, simply containing the description “merchandise”, was made out for the purchase and was usually signed by the customer. In the next room,––occasionally in the same room,––the article was turned back and the desired small loan made. The amount named on the sales tag represented the sum of the loan, the state sales tax (notwithstanding there was no actual or intended sale), and interest on the loan calculated to the time the purported price of the article became payable, the rate of interest being higher than permitted by the Act and in some instances exceeding 30 per cent a month. The stock of jewelry was neither augmented by purchases nor diminished by sales. It figured in more than six hundred so–called sales without ever leaving the premises. The stock was never on display except in connection with contemplated loans; and at times the loan was consummated without the use of the jewelry. The sales operations were obviously merely used as a subterfuge to make the loan. One of appellants testified: “Q. Do you remember any cases in which you allowed the customer to make a selection of the merchandise that he wanted? A. No, I can't say I did; sometimes I laid two or three articles out there if they wanted to look at them, if some customer came in and wanted to look at the jewelry, I laid three or four articles out there.”

Appellants contend (1) that the conspiracy charged is a misdemeanor conspiracy over which the superior court has no jurisdiction because (a) it falls within the purview of subd. 5 of said section 182 and (b) the Small Loan Act itself, expressly and by implication, makes a violation of its provisions a misdemeanor; (2) that the evidence is insufficient to establish the conspiracy, sought to be proved under the first count of the indictment, to make loans for $300 or less, and to charge rates of interest in excess of the maximum allowed by the Small Loan Act; and (3) that the evidence is insufficient to prove a conspiracy, under the second count of the indictment, to engage in the making of such loans without first obtaining a license therefor, since there was no proof that defendants Clancy and Rouse were even aware of the fact that Vanderpool had neglected to obtain the required license from the Commissioner of Corporations.

Specifically, appellants contend that violations of the Small Loan Act are offenses against public morals; that they tend to pervert and obstruct justice and the due administration of the laws within the meaning of the first penal paragraph of said section, with the result that since the act provides that any person who violates it is guilty of a misdemeanor, conspiracy to violate it is likewise a misdemeanor. Respondent challenges the contention that conspiracies to violate the act are referable to subd. 5 thereof, maintaining that subd. 1 is the one applicable; and further contends that in any event it is only where the offense charged is a felony, or act referable to subd. 5, and made punishable by some provision of the Penal Code, that the punishment prescribed for the felony or act is, by the first penal clause of section 182, made applicable to such felony or act.

The first penal paragraph provides: “When they conspire to commit any felony * * * they shall be punishable * * * as in this code provided for the punishment of the commission of the said felony * * *”. By virtue of the designation and inclusion of the phrase “in this code”, it should be concluded that only where the felony is made punishable by the Penal Code does the first penal paragraph apply. Doble v. Superior Court, 197 Cal. 556, 241 P. 852; People v. Campbell, 1 Cal.App.2d 109, 36 P.2d 198. If this conclusion is correct under the opinion in the Doble case, it applies equally to “any act” which is injurious to public health, morals or tends to pervert or obstruct justice or the due administration of laws, so that if “the act” denounced by the section of the Penal Code is made a misdeameanor “in this code”; it is by said first penal paragraph made punishable as a misdemeanor. Otherwise the second paragraph prescribing the punishment controls the question of jurisdiction.

It is advisable at this point to consider whether the substantive offense, the commission of which forms the object of the conspiracy, is in fact an act against public morals, etc. Appellants cite Lesser v. Collins, 1 Cal.App.2d 161, 36 P.2d 411 and People v. Van, 30 Cal.App.2d 663, 87 P.2d 57. In the Lesser case, the registrar of voters of the City and County of San Francisco appealed from an order for a peremptory writ of mandate directing that Lesser be permitted to qualify as a voter. It appeared that Lesser had been convicted of conspiracy to violate section 176 of the Penal Code. The offense (omission of duty by a public officer) was specifically denounced by the Penal Code as a misdemeanor, and no other punishment than that specified in the Penal Code provided. It involved the perversion of justice referred to in subdivision 5 and the first penal clause of section 182. The Van case involved a conspiracy to maintain a lottery which is specifically denounced and the punishment therefor prescribed by Penal Code section 320.

The perpetration of any offense denounced by the Penal Code or otherwise is perhaps in a broad sense a perversion or obstruction of justice and interferes with the due administration of laws. The same thing may be said of acts against public morals, and perhaps in a more limited sense acts injurious to public health. We need not be concerned in the present case with the niceties of distinction between various offenses relating to public morals, etc., as the legislature wisely or unwisely has laid down the rule that unless the offense forming the object of the conspiracy is punishable under the provisions of the Penal Code, the jurisdiction is controlled by the second penal paragraph of section 182, and the courts are bound by this rule.

The consideration so far naturally leads to the question: Where is the punishment for a violation of the provisions of the Small Loan Act prescribed? Section 435 of the Penal Code reads: “Every person who commences or carries on any business, trade, profession, or calling, for the transaction or carrying on of which a license is required by any law of this state, without taking out or procuring the license prescribed by such law, is guilty of a misdemeanor.” No specific punishment is prescribed by the section so it is necessary that it be read in conjunction with section 19 of the same code, which provides: “Except in cases where a different punishment is prescribed by any law of this state, every offense declared to be a misdemeanor is punishable by imprisonment in the county jail not exceeding six months, or by fine not exceeding five hundred dollars, or by both.” An examination of the Small Loan Act discloses that a “different punishment is prescribed”. Section 4 of the California Small Loan Act provides: “No person shall engage in the business of making or negotiating, for himself, or another, loans of money, credit, goods, or things in action, in the amount or of the value of three hundred dollars or less, without first obtaining a license from the Commissioner of Corporations.” Deering's General Laws, 1939 Supp., pp. 1510, 1511. Section 20, page 1517 provides: “Any person and the several members, officers, directors, agents, and employees thereof, who shall violate or participate in the violation of any of the provisions of this act, or any of the rules, orders and regulations of the commissioner, shall be guilty of a misdeameanor. Any contract of loan in the making or collection of which any violation of this act shall have been committed, shall be void as to interest and charges, and neither the lender nor the broker shall have any right to collect or receive any interest or charges whatsoever.” Stats.1939, ch. 1045, pp. 2886, 2887, 2896. Evidently the legislature intended that a violator of the provisions of the Small Loan Act should not only be subject to imprisonment and a fine but that any violator (person, officer or employee) should be prohibited from receiving any emoluments whatsoever from the transaction. To that extent it is inconsistent with section 435 of the Penal Code.

When an inconsistency exists between a statute dealing generally and one dealing specifically with a phase of the same subject matter, the special statute is controlling. Kahrs v. County of Los Angeles, 28 Cal.App.2d 46, 82 P.2d 29. In Pierce v. Riley, 21 Cal.App.2d 513, 519, 70 P.2d 206, 209, the court said: “It is not conclusive of this problem, but it is recognized as a rule of construction in determining which act is controlling under such circumstances, that the statute last approved, particularly if it be a special act applicable to a particular subject, will be controlling over one which was previously approved, on the theory that it is the latest utterance of the Legislature.” See, also, Coca Cola Bottling Co. v. Feliciano, 32 Cal.App.2d 351, 89 P.2d 686. In Ex parte Sohncke, 148 Cal. 262, 82 P. 956, 2 L.R.A., N.S., 813, 113 Am.St.Rep. 236, 7 Ann.Cas. 475, the court had before it two legislative enactments dealing with the licensing, the right to make loans on personal property, the amount of interest to be charged and providing a penalty for the violation thereof. Both enactments were declared unconstitutional, but the court held that the act later in time of adoption would otherwise have prevailed. Assuming the inconsistent provisions of code section 435 and section 20 of the Small Loan Act to be valid, the later enacted provision prevails.

Appellants contend that if the conspiracy is not made punishable by the Penal Code it is not punishable at all. In Doble v. Superior Court, supra, 197 Cal. page 567, 241 P. page 856, the court said: “Nor do we find any merit in the contention that by section 183 there are no conspiracies punishable criminally other than those ‘enumerated’ in the preceding section (182), for the words ‘any crime,’ appearing in subdivision 1 of section 182, having been shown to include felonies and misdemeanors punishable under the law of the state, a conspiracy to violate the Corporate Securities Act, being a crime, would be ‘enumerated’ within the meaning of the terms of section 183.” The violation of the Small Loan Act “being a crime”, should come within the purview of subdivision 1 of section 182. It is possible that an alleged conspiracy may be designated under two or more of the subdivisions of section 182. It is possible that a conspiracy might exist falsely to maintain a suit, action or proceeding (subd. 3), to cheat and defraud by means which are in themselves criminal (subd. 4), which technically would be an act tending to pervert justice (subd. 5).

The failure to obtain a license as in the present case does not involve the perversion or obstruction of justice. One may conduct a business, such as is referred to in the second count of the indictment, without a license, and thereby, without being aware that a license is required, violate the law. One might, without wrongful intent, charge greater interest for a loan than is permitted by the Small Loan Act, and still be amenable to the provisions thereof. Subdivision 5 of section 182 in so far as it relates to the perversion or obstruction of justice is aimed at conspiracies to commit acts designed and intended to obstruct its administration, but not to acts or conduct which, while repugnant to justice, are not so designed or intended.

The Small Loan Act is independent legislation enacted without reference to the Penal Code, to control lenders and brokers engaged in the business of making loans within specified amounts, and while a penalty is prescribed for the violation of its provisions, the purpose of the act is to regulate rather than prohibit legitimate business.

The act itself makes no mention of a conspiracy to violate it, but such a conspiracy falls clearly within the language of the section of the Penal Code which we have discussed and which provides that a conspiracy to commit any crime other than a felony or the specific offenses enumerated in its fifth subdivision shall be punishable by imprisonment in the county jail or state penitentiary not exceeding two years, and permits the trial thereof to be had in the superior court of the county in which any overt act tending to accomplish it shall have been committed.

Appellants contend that the evidence as a matter of law is insufficient to sustain the judgments on each count, and on the second count an additional question is raised, namely, that appellants Rouse and Clancy did not know that it was necessary for Vanderpool to possess a license to operate. Appellant Rouse had previously worked for another concern in the same general line of business and knew that a license was necessary. Appellant Clancy testified that he knew the new law limited the rate on unsecured loans, but did not know whether Vanderpool had applied for a license. Certain evidence was introduced tending to impeach the witness in this respect. However, the essential elements in a conspiracy charge need not be proved by direct evidence but may be deduced from the evidentiary circumstances presented. People v. Ratliff, 131 Cal.App. 763, 22 P.2d 245; People v. Sisson, 31 Cal.App.2d 92, 87 P.2d 420. The mere recital of the facts in this case amply controverts the claim of insufficiency of the evidence to sustain the judgment on the second count and demonstrates that the two defendants who were formerly connected with other loan companies, but here claim lack of knowledge of the issuance or non–issuance of a license, must have been aware from the very manner in which the business was carried on, that it was operated without a license.

Under the facts as disclosed by the record, the essential elements necessary to each count in the indictment to establish the conspiracy charged were proved to a moral certainty and beyond a reasonable doubt against each defendant.

The judgments and orders are, and each of them is, affirmed.

WARD, Justice.

We concur: PETERS, P. J.; KNIGHT, J.

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