Wirtz v. Valco, Inc., Civ. A. No. 67-B-31.

• Citation: 280 F. Supp. 449
• Decision Date: 23 February 1968
• Docket Number: Civ. A. No. 67-B-31.
• Parties: W. Willard WIRTZ, Secretary of Labor, United States Department of Labor, v. VALCO, INC., a Corporation, d/b/a Rio Loan Company.
• Court: United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas

280 F. Supp. 449

W. Willard WIRTZ, Secretary of Labor, United States Department of Labor, v. VALCO, INC., a Corporation, d/b/a Rio Loan Company.

Civ. A. No. 67-B-31.

United States District Court S. D. Texas, Brownsville Division.

February 23, 1968.

Charles Donahue, Sol., U. S. Dept. of Labor, Washington, D. C., and M. J. Parmenter, Regional Atty., and James F. Gruben, Trial Atty., U. S. Dept. of Labor, Dallas, Tex., for plaintiff.

Fred Galindo, Brownsville, Tex., for defendant.

MEMORANDUM OPINION

GARZA, District Judge.

This case was brought by the Secretary of Labor, United States Department of Labor, asking the Court to enjoin the Defendant from violating the minimum wage, overtime and record keeping requirements of the Fair Labor Standards Act of 1938, 29 U.S.C. § 201 et seq.; and to enjoin the Defendant from withholding any minimum wages or overtime compensation found by the Court to be due under the Act.

The case was tried before the Court on January 23, 1968, and oral testimony was taken, exhibits received, and the pretrial stipulations of the parties introduced. The parties were allowed to file briefs, and those are now before the Court.

Jurisdiction of the Court over the subject-matter and the parties is not in dispute.

The Defendant, Valco, Inc. No. 2, d/b/a Rio Loan Company, is a corporation incorporated under the laws of the State of Texas. It has a permit from the State of Texas to make loans in an amount not to exceed $100.00. It is a rather small operation and has regularly in its employ a manager not subject to the Fair Labor Standards Act under any circumstances, a secretary and two collectors.

The Defendant only makes loans to customers residing in the Brownsville, Texas, area. However, it was sometimes discovered that the customer actually resided in Mexico or in some State outside of Texas. This resulted either from the customer having moved after the loan was made, or from having misrepresented his correct address or residence. At the time of trial, the number of such accounts was 22 out of 717 outstanding accounts, but there was evidence that at some time previous there had been up to about forty of such accounts. The Defendant Loan Company only maintains its Brownsville office, and did not refer these accounts to anyone else. It attempted to make collection from a customer that lived outside of Brownsville through the mailing of letters. The manager always prepared these in longhand, but the secretary in the office typed them and mailed them.

The secretary performed the usual secretarial duties, including the handling of mail, answering the telephone, and preparing certain reports. The secretary at times answered long-distance calls, but the calls were always handled by the manager.

The collectors pick up cards in the office that show the name and last known address of persons who have accounts with the Defendant. They make collections on these accounts, make arrangements for payment, and attempt to locate the persons who have moved from their last known address. The money collected is turned over to the office, together with whatever information that has been obtained about the customer that may be useful to the Defendant. It is the collectors who discover that some of the customers are not actually residing in the Brownsville area. The collectors make their reports to the office, either by personal contact or by telephone.

At first blush it would seem that the Defendant is only a small loan company doing no interstate business and, therefore, not engaged in commerce or in producing goods for commerce. However, the Defendant operates with funds made available to it by Southern Funds, Inc., of Nashville, Tennessee. The Defendant has a permanent financing arrangement by contract with Southern Funds, Inc.

The contract (called a Revolving Loan Agreement) was introduced into evidence. The Defendant accepts promissory notes from its customers, endorses them to Southern Funds, Inc., at Nashville, Tennessee. Full payment of the note, when it is made, is reflected in one or more of the reports prepared by the Defendant and sent to Southern Funds, Inc. Southern Funds then returns the note by mail to the Defendant's office, where it is conveyed to the original maker, usually by mail. These notes serve as collateral on a continuing basis for the money owed by the Defendant to Southern Funds, Inc.

The Original obligation to Southern Funds, Inc., was incurred on May 11, 1964, in the amount of $28,000.00. As of March 31, 1966, the Defendant owed Southern Funds about $38,000.00. Defendant has continued to owe Southern Funds a substantial amount of money throughout the period in question, and there is no question but that the money made available for loans by the Defendant has come from Southern Funds. A further obligation in the amount of $11,700.00 was also incurred by the Defendant to Southern Funds on June 30, 1966, which is evidenced by a promissory note of the Defendant and secured by notes receivable from the Defendant's customers in the approximate amount of $56,000.00.

Under the Revolving Loan Agreement in question, the Defendant regularly prepares eight separate reports which are sent directly to Southern Funds, Inc. These reports contain in detail the financial transactions of the Defendant and the Defendant's customers. Five of these reports were prepared and sent to Southern Funds three times a week; one every ten days; and two of these reports were sent once a month. The manager, Joe Cortez, testified that he prepared these reports, but the fact remains that they were typed by the secretary, and much of the information in the reports came from the work done by the collectors. There was testimony that the preparation of most, if not all, of the reports in question was required under the laws of Texas, but the fact remains that the reports were also prepared for transmission to Southern Funds, Inc., in Tennessee.

The Defendant urges that the Plaintiff has failed to meet its burden of proof that the Defendant's employees were engaged in commerce or in the production of goods for commerce within the meaning of the Act.

However, there is no question but that Defendant's employees were engaged in commerce. The Fair Labor Standards Act defines commerce to mean trade, commerce, transportation, transmission or communication among the several States, or between any State and any place outside thereof. 29 U.S.C. § 203(b).

The Act has been construed liberally to apply to the farthest reaches consistent with congressional direction. Overstreet v. North Shore Corporation, 318 U.S. 125, 63 S.Ct. 494, 87 L.Ed. 656; Mitchell v. C. W. Vollmer & Co., Inc., 349 U.S. 427, 75 S.Ct. 860, 99 L.Ed. 1196; Alstate Construction Co. v. Durkin, 345 U.S. 13, 73 S.Ct. 565, 97 L.Ed. 745.

The Defendant further urges on the Court that those transactions with Southern Funds should not subject it to the Act, for to do so would be to penalize it for having to borrow money from outside of Texas; and says that the cases of Mitchell v. Kentucky Finance Co., Inc., 150 F.Supp. 368, 254 F.2d 8, 359 U.S. 290, 79 S.Ct. 756, 3 L.Ed.2d 815 and Aetna Finance Co. v. Mitchell, 247 F.2d 190 (CA 1, 1957), which are urged on the Court by the Plaintiff, are not controlling.

In these two cases local branch offices were engaged in the loan business, but both were controlled by parent companies outside the State. They were naturally larger...