A. B. Lewis Co. v. National Invest. Corp. of Houston, 6

Decision Date15 November 1967
Docket NumberNo. 6,6
Citation421 S.W.2d 723
PartiesA. B. LEWIS CO., Inc., Appellant, v. NATIONAL INVESTMENT CORPORATION OF HOUSTON, Appellee. . Houston (14th Dist.)
CourtTexas Court of Appeals

John Gano, Joseph D. Jamail, Houston, Donald W. Keck, Fritz & Vinson, Dallas, for appellant.

R. H. Singleton, Butler, Binion, Rice, Cook & Knapp, Houston, for appellee.

TUNKS, Chief Justice.

This is a usury case. A. B. Lewis Co., Inc., plaintiff in the trial court and appellant here, alleged that certain payments made by it to National Investment Corporation of Houston, appellee, during the period from April, 1958, until May, 1960, were payments of usurious interest under the terms of Article 5073, V.A.T.S. Plaintiff sought recovery of double the amount paid as alleged usurious interest.

A. B. Lewis Co., Inc., is a Texas corporation. Its president is A . B. Lewis. In April, 1958, it was engaged in the used car business in Houston, Texas. At such time it desired to expand its business and sought to get the capital for such expansion from the defendant, National Investment Corporation of Houston, also a Texas corporation .

After some preliminary negotiations, the plaintiff, acting through its president, A. B. Lewis, and the defendant, acting through its vice-president, H. C. Hendrix, entered into an oral agreement. The substance of that agreement is in dispute, and that dispute is the subject matter of this lawsuit. The plaintiff contends that it was an agreement to loan money at interest. The defendant contends that it was an agreement wherein it, the defendant, agreed to buy, at discount, the conditional sales contracts through which the plaintiff sold its automobiles.

According to the testimony of Hendrix, the vice-president of the appellee, the agreement was to the effect that appellee would buy the conditional sales contracts representing sales by appellant of its automobiles; that appellee would discount those contracts at 6% Per annum or 1/2 of 1% Per month; that appellee was to hold 25% Of the face value of each sales contract in reserve until the contract had been paid in full; that the reserve amounts so withheld were to be returned to appellant during the month following the final payment to appellee of the face amount of each sales contract; and that if the account was paid off in advance, appellant was to be given credit for the reserve so held on the account.

The testimony of A. B. Lewis, president of appellant, was not substantially different as to the mechanics arranged for in the basic agreement between the two parties. He, however, testified that the parties referred to the transaction as a loan to be secured by a pledge of the conditional sales contracts rather than a sale of the contracts.

Also in the agreement of April, 1958, it was agreed that when appellant tendered to appellee for acceptance one of its conditional sales contracts, it would be accompanied by a credit report on the customer of appellant, the obligor of the contract, and appellee reserved the right to reject such of those contracts as it did not wish to accept.

During the period of time in question, more than 500 individual transactions occurred in the carrying out of the terms of the basic agreement. In each individual transaction appellant would present to appellee a conditional sales contract upon a form selected by appellant and having in it the following language:

'Purchaser hereby agrees that the seller may sell or assign this contract, and all the seller's rights and interests shall pass to the purchaser of this contract.'

The back of the conditional sales contract form used by appellant in its business had a form for assignment without recourse and a form for assignment with recourse. Those printed assignment forms, however, were not actually used in the transactions. Instead, there was stamped onto the back of the conditional sales contract form an agreement used by the parties in effecting the transfer from appellant to appellee. That stamped assignment form read as follows:

'For value received, we hereby sell, assign, transfer and set over the foregoing obligation to National Investment Corporation of Houston, with full recourse on us.

A. B. LEWIS CO., INC.

By _ _'

In each of the transactions between the parties, that form, above quoted, was signed by the transferor and the conditional sales contract was actually delivered to appellee.

The following example will demonstrate the procedures followed by the parties in carrying out the terms of their basic contract. If a conditional sales contract transferred provided for a principal amount of $1,000.00 payable by the buyer of the automobile, within one year from its date, there would first be deducted the amount of $60.00 as representing the 'discount.' Next, there would be deducted the amount of $250.00 as representing the 'reserve.' The total deductions would, therefore, amount to $310.00, and the net amount received by the appellant would be $690.00.

In each transaction the appellant would deliver to appellee not only the conditional sales contract but also the title certificate for the automobile involved. That title certificate would reflect that the holder of the lien on the automobile given to secure the payment of the conditional sales contract was A. B. Lewis Co., Inc. Nothing was done by appellee to record the transfer to it of the conditional sales contract nor otherwise to record any lien which it might have against the automobile to secure the payment of the conditional sales contract.

These conditional sales contracts so transferred to appellee were payable in installments. Pursuant to the agreement between parties, the buyer of the automobile continued to make his installment payments to A. B. Lewis Co., Inc., rather than to appellee. While these conditional sales contracts had on them the above quoted recitation to the effect that they were assignable, they also had on them a provision to the following effect:

'Payment to any other than A. B. Lewis Company does not constitute payment hereunder.'

In accordance with the uniform practice, the customer, that is the person who had bought the automobile and executed the conditional sales contract, was not told that the contract had been assigned to appellee.

As to the 'reserve' withheld by appellee, it was not paid back to appellant nor credited to appellant until the entire principal amount of the contract had been paid. That is to say, in the above hypothetical transaction where the face amount of the conditional sales contract was $1,000.00, the $250.00 was not paid back to appellant nor credited to appellant when there had been payments of $750.00 on the account. Seven hundred fifty and 00/100 Dollars would represent the amount of the net cash received by appellant together with the $60.00 'discount' charge. Nevertheless, on that hypothetical transaction, appellant would have to see that appellee was paid the entire $1,000.00 before the appellant would be entitled to have paid back to it, or credited to it, the $250.00 withheld as a 'reserve.'

Appellant does not contend that a bona fide purchase of a written obligation at a discount is illegal, even if the discount is more than 10% Per annum. Appellant alleges, however, that appellee did not intend to actually purchase the obligations evidenced by the sales contract and that the use of the form of purchase at discount was, in fact, a subterfuge to conceal the collection of usurious interest.

Appellee, on the other hand, does not deny that if these transactions were loans secured by a pledge of the conditional sales contracts so that the amounts of money paid to appellee by appellant were interest rather than discounts, then the payments would exceed the lawful interest rate of 10% And constitute usury.

At the conclusion of the testimony, appellant moved for an instructed verdict, which motion was overruled by the trial court. The trial court submitted to the jury special issue No. 1 in the following language:

'Do you find from a preponderance of the evidence that the transactions between the plaintiff, A. B. Lewis Co., Inc., and the defendant, National Investment Corporation of Houston, which are listed on plaintiff's Exhibit 'A', were loans of money by the defendant to the plaintiff?'

The jury answered that special issue No. 1: 'We do not.' The trial court entered judgment on the verdict that plaintiff take nothing from the defendant. Plaintiff's motion for judgment n.o.v. and motion for new trial were overruled and appeal to this court was perfected.

The appellant here contends that the evidence shows as a matter of law that the transactions between it and appellee were loan transactions, that the payments made by it (the 'discounts' withheld by appellee) were payments of usurious interest so that the trial court should have granted its motion for instructed verdict or its motion for judgment notwithstanding the verdict and we should here reverse the judgment of the trial court and render judgment for appellant in the amount of the payments so made.

Alternatively, the appellant contends that the jury's finding to the effect that the transactions were not loans is so against the weight of the evidence that the judgment of the trial court, based on such finding, should be reversed and remanded.

The crux of the cause of action alleged by plaintiff is set forth in the following quotation from plaintiff's trial petition:

'Plaintiff further alleges, in connection with the foregoing allegations concerning a contractual agreement whereby defendant advanced monies to plaintiff in connection with the various contract of conditional sale setforth in Exhibit 'A', that the use by defendant of such terminology as 'discount' and the rubber stamp 'assignment' offered and furnished by defendant constituted a Sham and subterfuge for the purpose of undertaking to conceal the true intent of defendant to charge and...

To continue reading

Request your trial
9 cases
  • El Paso Refining v. Scurlock Permian Corp.
    • United States
    • Texas Court of Appeals
    • April 18, 2002
    ...759, 762 (Tex.Civ.App.-Houston [14th Dist.] 1979, writ ref'd n.r.e.) (quoting A.B. Lewis v. National Invest. Corp. of Houston, 421 S.W.2d 723 (Tex. Civ.App.-Houston [14th Dist.] 1967, writ ref'd n.r.e.)). Nevertheless, we hold the better view is to apply the preponderance of the evidence st......
  • Western Auto Supply Co. v. Vick
    • United States
    • North Carolina Supreme Court
    • May 5, 1981
    ...e. g., Lake Hiwassee Development Co., Inc. v. Pioneer Bank, 535 S.W.2d 323 (Tenn.1976); A. B. Lewis Co. v. National Investment Corporation of Houston, 421 S.W.2d 723 (Tex.Civ.App.1967), it has been the established law of North Carolina for over 120 years that if the purchaser of a note requ......
  • El Paso Refining v Scurlock Permian Corp.
    • United States
    • Texas Court of Appeals
    • January 31, 2002
    ...759, 762 (Tex. Civ. App.--Houston [14th Dist.] 1979, writ ref'd n.r.e.) (quoting A.B. Lewis v. National Invest. Corp. of Houston, 421 S.W.2d 723 (Tex. Civ. App.--Houston [14th Dist.] 1967, writ ref'd n.r.e.)). Putting aside the fact that EPRI has never alleged that SP's alleged risk premium......
  • Terry v. Teachworth
    • United States
    • Texas Court of Appeals
    • June 19, 1968
    ...442; 3 Baylor L.Rev. 75; Moser v. John F. Buckner & Sons, 292 S.W.2d 668 (Tex.Civ.App.), writ ref., n.r.e.; A. B. Lewis Co. v. National Invest. Corp. of Houston, 421 S.W.2d 723, 729 (Tex.Civ.App.), writ ref., n.r.e. Further a charge or a deduction in the making of a loan to pay to so-called......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT