Coronet Credit Corp. v. West Thrift Co.
| Decision Date | 07 September 1966 |
| Citation | 53 Cal.Rptr. 433,244 Cal.App.2d 631 |
| Court | California Court of Appeals Court of Appeals |
| Parties | CORONET CREDIT CORPORATION, Plaintiff, Cross-Complainant, Cross-Defendant and Appellant, v. WEST THRIFT COMPANY, Defendant, Cross-Defendant and Respondent, Harry Gross and Leonard Gross, Defendants and Respondents, Northern California Finance Company, Defendant, Cross-Complainant, Cross- Defendant and Respondent, Leslie B. Cohn and Ethel L. Cohn, Cross-Defendants, Cross-Complainants and Appellants. Civ. 22508. |
Yale H. Smulyan, Field, DeGoff & Rieman, San Francisco, for Coronet Credit Corporation, Leslie B. Cohn and Ethel L. Cohn.
Gross, Gross, Rose & Schwartz, Oakland, for defendants.
This is an appeal by Coronet Credit Corporation and Leslie and Ethel Cohn from the judgment entered against them and in favor of West Thrift Company, Northern California Finance Company, Harry Gross, and Leonard Gross, which judgment adjudged (1) that Coronet was entitled to no relief against West Thrift, Northern California Finance, Harry Gross, and Leonard Gross on its complaint which sought (a) declaratory relief to the effect that Coronet had fully discharged its obligations under its contract with West Thrift involving the purchase by Coronet of certain of West Thrift's accounts, (b) return of all interest and consideration paid by Coronet to West Thrift over and above the $16,500 principal of an allegedly usurious loan, plus treble damages for the interest and consideration paid to West Thrift within one year preceding the commencement of the action, and (c) damages for West Thrift's alleged breach of a contract to lend Coronet $40,000; and (2) that Northern California Finance have judgment in the amount of $23,141.78 plus interest and $2,500 attorneys' fees against Coronet and Leslie and Ethel Cohn on its cross-complaint which cross-complaint sought recovery of the sum of $24,500 together with attorneys' fees in the amount of $3,000 against Coronet and Leslie and Ethel Cohn upon a written guaranty allegedly executed by them 1 in favor of West Thrift and allegedly assigned by West Thrift to Northern California Finance. 2
Although we will discuss appellants' contentions in detail below, at this point we state their contentions generally as follows: (1) The findings which the trial court made concerning the obligations of Coronet and West Thrift under the April 24, 1962 agreement relating to the sale of accounts are erroneous and incomplete in several respects, and particularly in regard to Coronet's right to reassign certain accounts to West Thrift for credit; and (2) the $16,500 loan which West Thrift made to Coronet violated the provisions of the Financial Code relating to the maximum allowable charges which an industrial loan company may assess in making a loan and the trial court failed to make findings necessary to support its determination that the loan did not violate these provisions of the Financial Code.
Leslie and Ethel Cohn were the sole stockholders of Coronet, a corporation whose business involved the purchasing of accounts receivable, and Harry Gross was president and a director of West Thrift, an industrial loan company. On April 24, 1962, following negotiations between Leslie Cohn and Harry Gross, Coronet and West Thrift entered into a written agreement involving the sale by West Thrift to Coronet of certain of West Thrift's accounts. This agreement, which was entitled 'Sale of Accounts Receivable,' described the items which were the subject of the sale as follows: '(A)ll of the conditional sales contracts, personal loan accounts and chattel mortgages, hereinafter referred to as 'Accounts,' and commonly designated as the 'Profit & Loss Accounts of Northern California Thrift' listed on bottom of March 31, 1962 financial statement Balance of charge-of (sic) accounts (1639) $414,660.94. * * *' The agreement further provided that Coronet was to pay West Thrift 7 1/2 percent of the balances owing on the transferred accounts, or $30,000 for $400,000 of accounts. Additional terms and conditions of the agreement consisted of the following: (1) The agreement provided that the accounts were sold to Coronet on "Non-Recourse" 'excepting that, if for any reason, West Thrift is unable to convey clear and good title, right and interest in the entirety for any account or accounts, then such account or accounts shall be reassigned by Cononet to West Thrift, and West Thrift will reimburse or credit Coronet at the same rate as set forth in this document,' that is, at the rate of 7 1/2 percent of the face value of the reassigned accounts; (2) the agreement provided that if any of the accounts sold by West Thrift had been previously assigned to any collection agency or attorney who might be holding such accounts under a claim of right, title or interest, West Thrift would endeavor to secure reassignment of such accounts, and that in the event such reassignment was not made within 30 days from the date of sale, West Thrift would reimburse or credit Coronet for such accounts at the rate of 7 1/2 percent of their face value; (3) finally the agreement provided that West Thrift would furnish Coronet with all information it possessed concerning the accounts included in the sale, such information to include but not to be limited to 'ledger cards, applications, work cards, contracts, promissory notes, documentation, and evidence of chattel, correspondence and any other pertinent records or material.'
In addition to the terms contained in this agreement West Thrift, by letter dated April 25, 1962, agreed that in the event that the face value of the accounts sold to Coronet totalled less than $400,000, Coronet would receive a credit at the rate of 7 1/2 percent of the difference between $400,000 and the actual face value of the accounts sold.
To discharge its obligation under this sale agreement, Coronet, on April 24, 1962, executed a promissory note in the amount of $30,000 payable to West Thrift. The note provided for monthly payments in the amount of $500 and further provided that upon Coronet's default in the payment of any installment for a period of 30 days, the balance due on the note would become due and payable at the option of the holder.
The record discloses that prior to the execution of the subject contract the accounts which were to be the subject of the sale were inspected by Leslie Cohn and several of Coronet's employees; that at the time the contract was executed, West Thrift furnished Coronet with a list of the accounts which were included in the sale transaction; that this list contained notations as to whether or not each account was documented; and that at the time of the sale Cohn, who was an experienced man in the credit collection business, knew that the accounts Coronet was buying had been extensively 'worked' by West Thrift and its predecessor, knew that the accounts had been charged-off as of no value to West Thrift, and knew that they were 'a mass of old and stale accounts' or 'garbage.'
Between May 23, 1962 and May 20, 1963 Coronet made payments totalling $6,000 to West Thrift upon the $30,000 note. In addition, when it was discovered that the face value of the accounts transferred to Coronet totalled only $390,743.15, it was agreed between Coronet and West Thrift that Coronet was entitled to a credit of $694.26 upon the note, this amount being equal to 7 1/2 percent of the difference between $400,000 and $390,743.15. This credit due to Coronet was verified by West Thrift in a letter dated April 26, 1962. In this letter West Thrift also made reference to the fact that it would furnish Coronet with the documentation as to the transferred accounts. On this point the letter read as follows: 'In accordance with our agreement with Coronet, as set forth on April 24, 1962, it will be our responsibility to furnish this documentation.'
In addition to the credit which West Thrift agreed to allow Coronet for the deficit in accounts transferred to the latter, Coronet, from time to time after September 12, 1962, attempted to reassign various accounts to West Thrift and to obtain credit therefor. Although several reasons were given by Coronet as justification for reassigning these accounts, the principal reason was that the accounts lacked documentation, that is, the promissory note, chattel mortgage or conditional sales contract applicable to the particular account had not been transferred to Coronet. Much evidence was adduced below on the issue of whether West Thrift agreed to accept these reassignments and to credit Coronet therefor. This evidence consisted of the following: (1) Accompanying the reassigned accounts were letters listing the accounts being reassigned and the reason for the reassignments; at the bottom of several of these letters appeared the notation 'Received by: Walter Vandertoorn'; Cohn testified that he was never told by anyone on behalf of West Thrift that the accounts which Coronet reassigned would not be accepted and credited to Coronet's account; however, Vandertoorn, who was the temporary manager of West Thrift's San Francisco office and in charge of collection and bookkeeping, testified that he told Cohn that he did not have authority to accept these reassignments and that Cohn would have to discuss the reassignments with Harry Gross; Gross testified that he informed Cohn of Vandertoorn's limited authority; in addition, Gross testified that on one occasion Vandertoorn spoke to him concerning Coronet's request to...
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