General Capital Corp. v. Tel Service Co.

• Decision Date: 12 June 1968
• Docket Number: 7477,67--106,Nos. 4990,s. 4990
• Citation: 212 So.2d 369
• Parties: v. TEL SERVICE CO., Inc., a Florida corporation, Appellee. GENERAL CAPITAL CORPORATION, a Florida corporation, Appellant, v. TEL SERVICE CO., Inc., a Florida corporation, G. E. Grass and Richard A. Noll, Appellees.
• Court: Florida District Court of Appeals

Page 369

212 So.2d 369 v TEL SERVICE CO., Inc., a Florida corporation, Appellee GENERAL CAPITAL CORPORATION, a Florida corporation, Appellant, v. TEL SERVICE CO., Inc., a Florida corporation, G. E. Grass and Richard A. Noll, Appellees.

Nos. 4990, 7477, 67--106

District Court of Appeal of Florida, Second District.

June 12, 1968.

Rehearing Denied Aug. 6, 1968.

William Reece Smith, Jr., of Carlton, Fields, Ward, Emmanuel, Smith & Cutler, Tampa, for appellant.

William B. Holland, Winter Haven, E. A. Bosarge, Bartow, and Henry M. Sinclair and Norman A. Sand of Sinclair, Barfield & Louis, Miami, for appellees.

PIERCE, Acting Chief Judge.

General Capital Corporation, a Florida corporation, appellant, but referred to herein as GC, brings to this Court three appeals, all growing out of the same Circuit Court action. No. 4990 is an appeal from a Final Decree rendered in favor of appellee, Tel Service Co., Inc., a Florida corporation, plaintiff below, referred to herein as TS, in a suit brought against GC in the Polk County Circuit Court. No. 7477 is an appeal from an Amended Final Decree entered after a temporary remand by this Court in the light of intervening legislation. No. 67--106 is an appeal from a Final Judgment awarding money damages pursuant to an accounting ordered in the final decree. In the last two appeals G. E. Grass and Richard A. Noll were added by the lower Court as new plaintiffs. The two decrees and one judgment were all in favor of plaintiff(s) involved and against GC.

This overall case has been in Court for over six years. The record here is voluminous, comprising twenty-two volumes of testimony and proceedings. There are over two thousand pages of original typewritten matter, also ninety-six separate exhibits, most of which are multi-pages, some being over a hundred pages each. In addition to such record, there have been filed here lengthy briefs and manifold motions, suggestions, objections, etc., of the parties. The complexities of the case prompted us to allot a full day for oral argument. Hinging upon the outcome is upwards of a million dollars or more in cash.

But in spite of the ramifications of the case and the obvious importance of the outcome, the issues now before this Court are clearly defined. They are (1) whether the evidence before the Chancellor was sufficient to sustain his original Final Decree; (2) whether Ch. 65--299, enacted by the 1965 legislature, was applicable to this case; (3) the propriety of the Chancellor allowing two individual persons to be added as parties plaintiff while appeal from the Final Decree was pending here; and (4) the computations followed by the Chancellor in arriving at the amount of the final judgment.

On and prior to August 13, 1959, GC was in the commercial finance and discount business. TS was in the business of manufacturing covers for telephone directories and selling advertising space thereon either for cash or upon a deferred time basis evidenced by the usual commercial paper executed by the purchaser.

On the date aforesaid, the parties entered into a written contract which provided substantially: that GC would 'buy' such commercial paper for the face amount thereof, less a 'discount' of 11%; that a 'reserve' of 25% Would also be deducted, to be repaid when the particular paper was 'paid in full'; that TS would repurchase any defaulted paper, paying GC the full amount due thereon, plus any expense of collection; that GC would 'have recourse to the said reserved fund' it TS defaulted in the contract; and that TS would not 'accept collection' of the paper after sale to GC.

Thereafter, from time to time, the agreement was mutually changed in writing so as to finally fix the 'discount' to be 17 1/2% And the 'reserve' to be 20%. Simultaneously with execution of the contract there was signed a 'guaranty' by the three sole stockholders of TS and also two real estate mortgages by the President of TS; all as 'security' to GC for the 'performance' of TS under the contract.

From the date of the contract the parties did a heavy volume of business, but around the first of April, 1962, they had irreconcilable differences, resulting in the filing in the Polk County Circuit Court on April 10, 1962, by TS of a complaint against GC, in which it was alleged in substance: that notwithstanding the terms of the contract, the relationship of the parties had actually been that of lender and borrower; that the contract of August 13, 1959 was 'a scheme and device' contrived to cover up the real nature of the enterprise, which was that of lending money; that during the time they were doing business, GC had 'loaned' to TS approximately $570,000 and there had been deducted therefrom more than $125,000, which latter amount was more than 25% Per annum ¹ upon the main consideration; that therefore, under F.S. § 687.07 F.S.A., ² the whole commercial venture was infected with criminal usury and GC had thereby forfeited to TS, not only the face value of the paper, but the amounts deducted as well.

The complaint thereupon prayed that the moneys paid by GC to TS be decreed to be a usurious loan in violation of said § 687.07, that the Court order an 'accounting of the transactions between the parties' to determine the amount of money owed by GC to TS 'for principal and interest', that a money decree be entered therefor in favor of TS 'as a forfeiture of the same' pursuant to the statute, and that GC be required to transfer back to TS all current commercial paper then held and the written guaranties of the stockholders aforesaid and also to cancel the mortgages.

GC filed answer on April 18, 1962, denying that the transactions constituted loans or that the relationship between them was that of borrower and lender, and asserting that all their commercial dealings had been sales of commercial paper with discounts, etc., as provided in the contract, except one transaction on May 12, 1961, whereby TS did borrow from GC $12,500 secured by a recorded chattel mortgage, upon which there was a current balance of $8,508.29, but which matter was separate from the commercial dealings under the contract. The answer further denied that the contract of August 13, 1959 was any 'alleged scheme' to circumvent the usury laws but that all transactions thereunder were what the contract stated.

By counterclaim GC alleged that TS had made collections upon numerous previously assigned items without accounting therefor to GC, and that TS should be enjoined from making such further collections; and that the chattel mortgage of May 12, 1961 was in default and should be foreclosed. Relief was prayed accordingly.

On November 5, 1962, GC submitted four additional affirmative defenses: (1) unclean hands, (2) estoppel, (3) laches, and (4) statute of limitations.

After taking much testimony the trial Judge entered Final Decree, finding in substance: that the contract of August 13, 1959 and the subsequent dealings pursuant thereto constituted a continuous loan of money from GC to TS rather than the purchase of commercial paper; that the monies realized by GC upon the paper exceeded what it paid TS therefor by more than 25% And therefore constituted 'criminally usurious interest'; and that none of the affirmative defenses of GC were supported 'by the necessary preponderance.'

The decree in its decretal portion (1) declared the entire transaction to be void and ordered the same cancelled; (2) adjudged that TS should recover from GC all monies received plus the 'interest charged thereon'; (3) cancelled all assignments of commercial paper theretofore delivered to GC and ordered return to TS of all unpaid notes and paper; (4) ordered all 'reserve' funds held by CC paid to TS; (5) directed accounting to be had before a Special Master to determine the amount of TS's 'recovery', GC to be given offsets on the chattel mortgage and the monies collected by TS on paper previously assigned; and (5) cancelled the real estate mortgages given by TS's stockholders. On March 25, 1964, GC appealed the Final Decree to this Court, as case No. 4990.

After briefs had been filed on the appeal, the 1965 legislature enacted Ch. 65--299, effective June 23, 1965. GC filed motion here asking that said Ch. 65--299 be applied to this case, and TS countered with suggestion that the 1965 Act was unconstitutional. On February 16, 1966, this Court entered an order which after briefly stating the foregoing history of the litigation, temporarily relinquished jurisdiction back to the trial Court 'in view of the 1965 Act.'

Upon such temporary remand, the trial Court, on June 27, 1966, without taking evidence and over objection of GC, 'found' that the transactions between the two corporations were 'in fact' loans of money from GC to G. E. Grass and Richard A. Noll (principal stockholders of TS) as individuals rather than to the corporation, 'ordered * * *on its own motion' Grass and Noll added as parties plaintiff to the suit, and held that their joinder made the 1965 Act 'inapplicable'.

At this stage of the case numerous pleadings were filed, hearings had, and orders entered, which will be reviewed later. Suffice here to state that on August 26, 1966 the Chancellor entered an Amended Final Decree and a separate order, the intent of which was to carry forward the decretal portions of the Final Decree but to substitute Grass and Noll as beneficiary plaintiffs instead of T.S. On December 9, 1966, GC appealed the Amended Final Decree to this Court as case No. 7477.

While the foregoing two appeals were pending, proceedings continued in the Circuit Court on the 'accounting' ordered in the Final Decree. A Special Master was appointed, who ultimately made findings which the Court approved, resulting in entry of a Final Judgment for $710,911.08 against GC and in favor of TS and the individuals Grass and Noll.

From such Final Judgment, GC on March 13, 1967 filed appeal to this Court. This appeal, numbered here as case No. 67--106,...