Associates Inv. Co. v. Sosa

MURRAY, Chief Justice

(dissenting).

I do not concur in the opinion of the majority. The promissory note in the sum of $1,737.60, payable to Dave’s Used Cars in twenty-four monthly installments of $72.40 each, signed by David Sosa, Jr., when construed in connection with the conditional sales contract attached to it, does not show on its face to be a usurious note. The note on its face was a promissory note in the usual form, and only provided for interest after maturity. The sales contract plainly provided that Sosa was purohasing from Dave’s Used Cars (a regular used car dealer) a Chevrolet Sedan, for the Time Selling Price of $2,712.60, of which the sum of $975.00 was paid in cash, and the promissory note given for the time balance due. The trial judge at the request of appellant filed additional and amended findings of fact, as follows:

“1. That the Chevrolet automobile which plaintiff agreed to purchase on March 11, 1948, was owned by Dave’s Used Cars.
“2. That -at no time during - the negotiations for the sale of the automobile in question did the purchaser (plaintiff) or the seller (Dave’s Used Cars) contemplate or discuss a sale of the automobile for all cash.”

These findings are to be regarded as ultimate and controlling findings, and if they are in conflict with other findings, previously made by the trial court, such prior findings are to be disregarded. Rule 289, Texas Rules of Civil Procedure; Waters v. Yockey, Tex.Civ.App., 193 S.W.2d 575; Anderson v. Geraghty, Tex.Civ.App., 212 S.W.2d 972. These amended findings are supported by the uncontradict-ed testimony and are sufficient to justify the conclusion that this transaction was a *708bona fide sale of an automobile by Dave’s Used Cars to David Sosa, Jr., for a Time Selling Price of $2,712.60. David Sosa 'himself testified that he never contemplated a purchase of this automobile for all cash, and that he only had the sum of $1,-000.00 to pay in cash, and that he knew the credit price would exceed the cash price. He further testified that before he gave the $100.00 check as earnest money to close the deal he knew that the car would cost him a thousand dollars in cash and the payment of twenty-four monthly installments in the sum of $72.40 each. It is clear that the loan company, appellant here, had no connection whatever with this transaction until after its final consummation. It merely purchased the note. Therefore, there was no loaning of money, no financing of a balance due, but, under the undisputed evidence, there was a sale of the Chevrolet automobile for a total Time Selling Price of $2,712.60. The only provisions in the conditional sales contract which in any way render this meaning doubtful and ambiguous are two isolated phrases in the tabulation inserted in the contract, to-wit:

“C Unpaid Cash Balance (Deferred Balance) $1300.00
“D Total finance charge and insurance premium for which credit is extended 437.60”

These two isolated phrases, not appearing in the contractual part of the instrument but merely in the tabulation inserted in the instrument, can not be used to destroy the plain and unequivocal contractual part of the instrument, wherein it is stated that the automobile is being sold for a Time Selling Price. Greer v. Franklin Life Ins. Co., Tex.Civ.App., 109 S.W.2d 305; Walker v. Temple Trust Co., 124 Tex. 575, 80 S.W.2d 935, affirming Tex.Civ.App., 60 S.W.2d 826.

A finance charge is not ordinarily to be regarded as interest. In Harper v. Futrell, 204 Ark. 822, 164 S.W.2d 995, 996, 143 A.L.R. 235, the Court said:

“In his motion for a new trial appellant assigned a number of errors. He contends that the court erred in refusing to give his requested instruction No. 4, which reads as follows: ‘You are instructed that if you find from a preponderance or greater weight of the testimony that the defendant, Ray Harper, did in fact execute and deliver to plaintiff the contract in evidence, and you further find that the said contract bears a greater rate of interest, or charge for credit, than ten pereentum per annum, the contract is void and your verdict should be for the defendant.’
“The court did not err in refusing to give this instruction. This court has held that finance charges in connection with the sale of property under a conditional sales contract are not paid for a loan of moneys but are a part of the purchase price which1' the purchaser agreed to pay, and that there' is no usury in a transaction of this kind. See Cheairs v. McDermott Motor Co., 175 Ark. 1126, 2 S.W.2d 1111.” See also, Annotations, 143 A.L.R. beginning p. 238.

These two isolated phrases at most merely cast a doubt or raise an ambiguity as .to the true meaning of the contract. The construction which the majority opinion gives to these two isolated and ambiguous phrases is a meaning which destroys and sets aside the plain contractual provisions of the instrument. The rule is well established that if an instrument is subject to two constructions, one of which would render it usurious and the other of which would render it non usurious, the courts will give effect to that interpretation which renders the instrument non usurious and therefore legal. North Texas B. & L. Ass’n v. Moore, Tex.Civ.App., 82 S.W.2d 397; Matthews v. Tibbitt, Tex.Civ.App., 120 S.W.2d 503; Goode v. Davis, Tex.Civ.App., 135 S.W.2d 285; 42 Tex.Jur. Sec. 11, p. 889, and authorities there cited.

I am well aware of the fact that where a transaction is usurious in its nature that the courts will look to the intention of the parties and to the transaction itself and will disregard the form or the language used by the parties in their attempt to disguise a usurious transaction, and for this purpose they will hear parol evidence to determine the true intention of the parties and the nature of the transaction, regardless of the language used. 42 Tex.Jur. 885, §§ 8 and 9, and authorities there cited.

*709However, we are ¡here discussing’ whether or not this instrument on its face was shown to be a usurious transaction and, under the rule of construction above set out, it is quite plain that this instrument does not disclose that the transaction was tainted with usury. On the contrary, it shows just the opposite. There was a bona fide sale for an agreed credit price. Beete v. Bridgood (English Case) 7 B. & C. 453, 14 E.C.L. 206, 108 Reprint 792; Shirkey v. Hunt, 18 Tex. 883; Commercial Credit Co. v. Tarwater, 215 Ala. 123, 110 So. 39, 48 A.L.R. 1437; Rattan v. Commercial Credit Co., Tex.Civ.App., 131 S.W.2d 399; Standard Supply & Hardware Co. v. Christian-Carpenter Drilling Co., Tex.Civ.App., 183 S.W.2d 657.

There is another rule of construction of contracts which might be well invoked, that is a contract should be construed from its four corners and, if possible, in such a way as to give meaning to each and every part of the contract. This can readily be done by giving meaning to the contract wherein it plainly says it is a sale of an automobile for a Time Selling Price, and regarding the tabulation set out in the contract as nothing more than a calculation or work sheet by which the appellant arrived at the Time Selling Price. The construction giving this conditional sales contract by the majority gives meaning only to the two isolated phrases and no meaning whatever to the main provisions in the instrument. It presumes an unlawful intention of the parties rather than a lawful intention. Robertson v. Connecticut Gen. Life Ins. Co., 134 Tex. 588, 137 S.W.2d 760, answers to certified questions conformed to Tex.Civ.App., 140 S.W.2d 936; Foley v. Farm & Home Savings & Loan Ass’n, Tex.Civ.App., 81 S.W.2d 231.

If we disregard the language of the instrument and turn to the evidence itself to determine the true intentions of the parties and the nature of the transaction, we find from the undisputed evidence that this was a transaction whereby a used car dealer sold to a purchaser a Chevrolet automobile for a cash payment of $1,000.00 and a deferred balance of $1712.60, to be paid in monthly installments of $72.40 each, and that such transaction was fully understood by the parties prior to the closing of the sale. So, whether you take the contract and construe it from its four corners or whether you look through the forms of the contract and the language used, to the substance of the transaction, you come to the same conclusion, to-wit, that this was a sale of an automobile for a Time Selling Price fully understood and agreed to 'by the parties before the deal was ever closed. This conclusion is supported by the amended finding of the trial judge and the evidence introduced.

This suit is on all fours with the case of Rattan v. Commercial Credit Co., Tex.Civ.App., 131 S.W.2d 399, in which the Supreme Court refused a writ of error. It cannot be distinguished in any way. The majority opinion cites G. F. C. Corp. v. Williams, Tex.Civ.App., 231 S.W.2d 565, 566, opinion by Chief Justice Bond, who also wrote the opinion in the Rattan case. However the Williams case is easily distinguished from the Rattan case, in that in the Williams case a finance company entered the picture before the deal was closed and agreed to finance or loan the money sufficient to take care of deferred payments, while in the case at bar, as in the Rattan case, there was no loan company in the picture at all. Some of the expressions contained in these two cases readily distinguish them. In the Rattan case we find the following statement:

“No money changed hands in the transaction in the form of a loan, nor was any charge made for the use, detention or forbearance of any money. The transaction was simply a sale for credit at a higher price than for cash, calculated on a known basis for the seller to realize the cash price of the automobile by subsequent sale of the note and mortgage through commercial channels.”

In the Williams case we find the following notation:

“During the negotiation and before the transaction was closed, Mr. Luck of Luck Motor Company, who was negotiating the transaction with Williams, called the defendant G. F. C. Corporation by telephone in regard to financing the unpaid balance *710of the consideration. Luck gave the party to whom he was talking full credit information with respect to Mr. Williams, the kind and character of the car involved, and the agreed consideration therefor. After making the investigation, Mr. Luck was advised that the corporation would finance the unpaid 'balance of the consideration; * * *.” [231 S.W.2d 566.]

The opinion further shows that G. F. C. Corporation paid the money to Luck Motor Company before the car was delivered to Williams. Under such facts, the purohase pi'ice of the automobile was loaned by the corporation to Williams before he closed the deal for the automobile, and therefore charges by the corporation for the use of this money at more than 10% per annum would clearly be usurious, and it was so held by the court. In the case at bar no loan company agreed to finance the transaction and the first connection the finance company had with the deal was when it purchased the note from Dave’s Used Cars during the week subsequent to the week in which the sales contract was executed.

Aside from all that I have heretofore said, it will be borne in mind that this is not a suit between the original parties to the sales contract, but is a suit between the maker of the note against a holder in due course for the penalty provided for under the provision of Article 5073, Vernon’s Ann.Civ.Stats. Under the provisions of the Negotiable Instruments Act, Article 5935, § 59, Vernon’s Ann.Civ.Stats., every holder is deemed prima facie to be a holder in due course, and the burden is on the maker to show the contrary. Under Section 52 of said article a holder in due course is a holder who takes the instrument under the following conditions: “1. That it is complete and regular upon its face;

“2. That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact;

“3. That he took it in good faith and for value;

“4. That at the time it was negotiated 'to him he had no notice of any infirmity in *he instrument or defect in the title of the person negotiating it.”

Under Section 56 of the same article it is provided: “To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith.”

Under Section 57 of the same article, “A holder in due course holds the instrument free from any defect of title of prior parties, and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon.”

The only exception to this rule made by the Negotiable Instrument Act of this State is that of forgery. Section 23 of Art. 5932, Vernon’s Ann.Civ.Stats. However, the courts of this State have held that if an instrument is tainted with usury that the defense of usury is available against the holder in due course. 42 Tex.Jur. 1000, § 99, and authorities there cited.

I have been unable to find a case holding that the penalty provided for by Article 5073, Vernon’s Ann.Civ.Stats., can be collected from a holder in due course who has not knowingly collected usurious interest. The provisions of Article 5073 above are penal in their nature and are therefore to be strictly construed and they are only to be applied to a person who has knowingly collected the usurious interest. The leading case in Texas upon this point is that of Fires v. Kinney-Shotts Investment Co., 59 S.W.2d 827. Speaking for the Commission of. Appeals, Judge Leddy said:

“Plaintiff in error insists in this court that under the doctrine announced in Gilder v. Hearne, 79 Tex. 120, 14 S.W. 1031, he is entitled to recover the statutory penalty from defendant in error, even though it had no notice or knowledge at the time it collected the interest that there was any taint of usury in the note.
“The provision of the statute which authorizes a recovery of double the amount of usurious interest against the person who receives or collects the same is a penalty. It is an exaction imposed by statute as a *711punishment for an unlawful act. One who seeks a recovery under this statute has the 'burden of proving the existence of facts entitling him to the penalty therein provided.
“It was essential, in order for plaintiff in error to recover the statutory penalty for usury against the assignee of the note, that he allege and prove knowledge or notice upon its part that the interest received and collected was usurious. McDaniel v. Orr (Tex.Com.App.), 30 S.W.2d 489.
“Plaintiff in error misconceives the holdings of the Supreme Court in Gilder v. Hearne, supra, and the line of decisions following said case. None of these cases were actions to recover the statutory penalty for the collection of usurious interest. They were suits either to -cancel usurious interest or defenses made against the collection of such interest. When a person seeks to recover on a contract which is usurious, so far as the interest is concerned, he is seeking to enforce a contract which the Constitution declares to be utterly void. Under such circumstances, it is immaterial whether he is a bona fide holder in due course without notice of the fact that the note provides for usurious interest.
“An action under the statute for the penalty provided rests upon an entirely different basis from one Wherein a defense is urged against the enforcement of a usurious contract or wherein it is sought to cancel the interest imposed by such a contract. The former is -an action under a statute (Rev.St.1925, art. 5073) -designed to inflict punishment upon one who has collected and received payment of usurious interest. The statute does not contemplate that a person should be punished for receiving usurious interest when 'he is innocent of any intent to do so.
“Plaintiff in error vigorously insists that the -burden of proof rested upon defendant in error to establish that it had no notice of the vice of usury in the note either at the time it purchased the same or when it received payment of the interest thereon.
“In order to recover the statutory penalty, it devolved upon plaintiff in error to establish that defendant in error collected and received interest in excess of the amount authorized by law, and that in receiving and accepting said sum it intended to take and exact usurious interest. McDaniel v. Orr, supra.
“Plaintiff in this case did not sue to recover as for debt the usurious interest paid. His cause of action is simply one to recover the statutory penalty. The right sought to be enforced rests alone upon the statute.. Since he wholly failed to establish that defendant in error had any intent to receive or collect usurious interest, he was properly denied a recovery of the penalty provided by law.”

The facts in the instant case and the holding of the trial judge clearly show that appellant was -a holder in due course of the note in this case. It had no connection with the transaction until after the deal was closed. It paid v-alue for the note before maturity and there is nothing to show, nor is there a finding by the trial court, that appellant had knowledge of any defense to the note -at the time it purchased same. Under the facts appellant was presumed to be a holder in due course, and if appellee’s contention was to the contrary it was his duty to offer evidence and to secure a finding of the trial judge that at the time appellant purchased the note it had knowledge of its usurious nature, or that it had such knowledge as to render its acquisition of the note an act done in bad faith.

The mere fact that there may have been facts or circumstances which if investigated would have led to the discovery of a usurious taint the same would not be sufficient. The evidence would -have to go further and show bad faith on the part of appellant in purchasing the note.

All of the cases relied upon by appellant can easily be distinguished from the case at bar by the fact that in each of those cases it was either a suit by the original parties to the transaction or it was a suit against a loan company that appeared in the transaction before the deal was closed, offering to finance the unpaid balance. The only case that can not be thus distinguished from the case at bar is that of Associate’s *712Investment Co. v. Hill, Tex.Civ.App., 221 S.W.2d 365. The opinion in the Hill case does not state the facts of the case, nor the reasons for the holding, and therefore it has no value as a precedent. However, if the court intended in the Hill case to hold that the penalty provided for in Article 5073, supra, could be collected 'from a holder in due course who has innocently collected usurious interest, then it is out of line with all of the other decisions and should not be followed in this State, For the reasons above stated, I respectfully enter my dissent in this case.