Thomas v. Hunt Mfg. Corp.

• Decision Date: 27 April 1954
• Citation: 269 P.2d 12,42 Cal.2d 734
• Court: California Supreme Court
• Parties: THOMAS v. HUNT MFG. CORP. et al. L. A. 23066.

Page 12

269 P.2d 12

42 Cal.2d 734

THOMAS v. HUNT MFG. CORP. et al.

L. A. 23066.

Supreme Court of California, in Bank.

April 27, 1954.

Donald C. McGovern, Todd W. Johnson, Edward D. Robertson, gilbert E. Harris, and Thomas C. Cannan, Los Angeles, for appellant.

Desser, Rau, Christensen & Hoffman and Robert Haves, Beverly Hills, for respondents.

SCHAUER, Justice.

Plaintiff brought suit to recover an alleged unpaid balance ($3,894.51 principal plus interest and attorneys' fees) on a promissory note (original principal $15,000) and a written contract for the payment of money, and to foreclose a mortgage and a chattel mortgage securing the obligations, all documents, together with a $5,000 note hereinafter mentioned, forming parts of the same transaction. Defendants, who had paid approximately four-fifths of the principal sums, together with accruing interest, by way of answer and counterclaim allege in detail the terms of the notes and the contract, set out the amounts paid by them and the dates of the several payments, and aver that of the amounts they had paid, the sum of $1,119.48 was usurious interest. ¹ The trial court found in favor of defendants and entered judgment crediting them with $3,358.44 (treble the amount of the usurious payments) on the balance unpaid on the principal of the obligations sued on.

Plaintiff appeals from the judgment and from the order denying his motion for a new trial. An order denying a motion for a new trial is a non-appealable order and will be dismissed. (Code Civ.Proc., § 963; Clemons v. City of Los Angeles (1950), 36 Cal.2d 95, 98, 222 P.2d 439.) The controlling question requiring determination is the sufficiency of the evidence to support the trial court's finding and conclusion that the contract called for the payment of usury. The evidence hereinafter epitomized amply supports the essential finding and, hence, requires affirmance of the judgment.

It is, of course, to be understood that in stating the evidence we are bound to consider that the trial court resolved all substantial conflicts and drew all reasonable inferences in favor of the defendants. (Pewitt v. Riley (1945), 27 Cal.2d 310, 313, 163 P.2d 873.) The defendant Hunt Manufacturing Corporation, wholly owned by defendant Willis E. Hunt, had a substantial business in Costa Mesa, California, where it was engaged in building plastic boats. More cash working capital was needed and in about February or March of 1950 defendant Hunt began negotiating with the plaintiff, hoping to interest him in the business to the end of augmenting the cash available. It was first proposed that plaintiff should contribute $20,000 and receive 50% of the stock of defendant corporation. Early in May plaintiff inspected the plant and the corporate books and records; he then told Hunt that the deal did not look good but after further talks Thomas offered to pay $15,000 for 55% of the corporate stock and to loan the corporation $5,000. To carry out that plan the corporation, on May 24, 1950, executed its note in favor of Thomas for $5,000 and on May 30, 1950, another note in his favor for $15,000 and, on the same date, a contract providing that upon approval by the Commissioner of Corporations the corporation would issue to Thomas enough of its stock to give him 55% of all outstanding stock in return for cancellation of the $15,000 note. Presumably the entire $20,000 was advanced by Thomas. The contract further provided that 'Hunt and Thomas shall receive such salaries as the Board of Directors may from time to time determine.' It is important to note that the board never approved a salary for Thomas.

In the middle of June, 1950, Hunt left on a trip to Texas to deliver some unfinished hulls and to set up a distributorship for business in Texas, Louisiana and Oklahoma. While on this trip he received a telephone call from plaintiff to the effect that the latter wanted to get out of the deal and that defendant Hunt should return immediately. Soon after this conversation, plaintiff told Mr. Hawley, the plant manager, that he had discovered some irregularities, that he didn't believe that there was a wilful intent to defraud, but that he would deny his lack of belief in that respect if ever asked. When defendant Hunt arrived back in California plaintiff told him substantially the same story he had already told Hawley. Once again he said in substance that he would deny his lack of belief that there was wilful intent to defraud if he was ever asked. At this time it appeared that the business, financially, was in a precarious condition. During Hunt's absence plaintiff had taken $4,305.49 of the corporation funds out of the corporation's bank account and placed it in his own name, assertedly as trustee for the corporation, leaving the corporation with a balance in its own account of less than $200; he had stopped all production; and he lhad reduced the production staff of 15 or 18 men to a skeleton crew of four or five men.

At this time, and under the related conditions, plaintiff demanded that all the money he had loaned or otherwise advanced to the corporation be returned immediately. Defendant Hunt pleaded for time and thereupon plaintiff had the agreement, which forms the basis for the finding of usury, drawn up. The agreement was executed on June 30, 1950. It provides that plaintiff shall keep the $4,305.49 which he had taken from the corporate bank account; that $10,000 was to be repaid to him over the next ten weeks at the rate of $1,000 a week; and that beginning September 15, 1950, payments of $200 a month, plus 6% interest on any unpaid balance, be made until the $20,000 which plaintiff had lent defendant corporation was repaid. Following this, in paragraph four of the agreement is the provision which the court found to be by way of subterfuge, and to be usurious. It provides 'That Hunt and the corporation do hereby jointly and severally promise to pay Thomas (plaintiff) beginning September 15, 1950, $100 per month as a fee for Business Management Engineering services which have been rendered to the corporation, and this $100 per month payment is to continue until Thomas has received his $20,000 principal plus interest provided for in paragraph 3, above. However, this Engineering service payment will not enter into the computations...