Case Name: ASSOCIATES INV. CO. v. SOSA
Court: Texas Courts of Civil Appeals
Jurisdiction: Texas
Decision Date: 1951-06-06
Citations: 241 S.W.2d 703
Docket Number: No. 12263
Parties: ASSOCIATES INV. CO. v. SOSA.
Judges: 
Reporter: South Western Reporter Second Series
Volume: 241
Pages: 703–712

Head Matter:
ASSOCIATES INV. CO. v. SOSA.
No. 12263.
Court of Civil Appeals of Texas. San Antonio.
June 6, 1951.
Rehearing Denied July 11, 1951.
Davis, Clemens, Knight & Weiss, Theo F. Weiss, and George H. Spencer, all of San Antonio, for appellant.
John R. Locke, Jr., San Antonio, for appellee.

Opinion:
NORVELL, Justice.
This is a usury case. David Sosa, Jr., recovered a .judgment of $585.96 from Associates Investment Company as and for the statutory penalty of double the amount of usurious interest paid by him to the company. Article 5073, Vernon's Ann.Civ. Stats.
The trial judge, in response to a request therefor, made findings of fact and conclusions of law. The following statements set forth in lettered paragraphs are taken from said findings and direct quotations therefrom are indicated:
(a) On March 13, 1948, Sosa purchased an automobile from Dave Hernandez and Henry Rosales, operating under the name and style of "Dave's Used Cars." Sosa made a down payment of $975.00 in cash and paid $25.00 for the tax and title charges on the car. This left a balance of $1,300.00 owing on the purchase price of the automobile, which was to be financed. The agreement was evidenced by a written instrument designated as a "Texas Conditional Sales Contract" which provided that Sosa agreed to purchase the motor vehicle "for a Total Time Selling Price equal to the sum of Items (A and D) in the following tabulation:
"(A) Total Bona Fide Cash Price ot Motor Vehicle 2250.00 plus 25.00 T & T ?2275.00
Down Í Trade-in $-- Payment |0&8⅛ $ 975.00
(B) Total Down Payment $ 975.00
(C) Unpaid Cash Balance (Deferred Balance) $1300.00
(D) Total finance charge and insurance premium for which credit is extended $ 437.60
Type of Insurance $50.00 DD and Comp.— 24 months
(No insurance included unless described above)
The Time Balance (sum of C and D) $1737.60"
(b) Sosa further agreed and executed a promissory note binding him to pay the amount of the "Time Balance" of $1737.60 at the office of the Associates Investment Company at San Antonio, Texas, in twenty-four monthly installments of $72.40 each, beginning on April 15, 1948.
(c) "Only one price was ever made to plaintiff by Dave's Used Cars and that price was, as stated in the conditional sales contract, a 'Total Bona Fide Cash Price of Motor Vehicle $2,250.00 plus $25.00 T & T.' "
(d) The premium on the insurance policy provided for in the Conditional Sales Contract amounted to the sum of $135.00, and "the balance remaining of said $437.60, which is referred to in said conditional sales contract as 'Total Finance Charge and Insurance Premium for which Credit is Extended' after the payment of insurance premium, is the sum of $302.60, which sum was a charge made for the use, forbearance or detention of the sum of $1,300.00, which said sum was the unpaid balance of the purchase price of said automobile for a period of twenty-four months." Certain small refunds were made to Sosa, leaving a balance of $292.48 as the amount of usurious interest paid by Sosa to Associates Investment Company.
(e) Representatives of Associates Investment Company did not participate in the sale of the automobile to Sosa and had no actual knowledge thereof until the company purchased the conditional sales contract and note the week following the sale. The purchase of the contract and note was the first connection the company had with the transaction.
(f) "It was the practice of Dave's Used Cars to sell notes and contracts received by it in connection with the sale of automobiles on forms furnished by defendant (Associates Investment Company), not only to defendant but to several other finance companies; some of these notes and contracts were not sold by Dave's Used Cars at all but were retained by such dealer."
The record further shows, conclusively and without dispute, that the form of sales contract and the note attached thereto were prepared by Associates Investment Company and that the name of the company was printed upon the assignment and transfer forms. The insurance policy covering the automobile was introduced in evidence. It bears date of March 12, 1948, and shows a premium charge of $135.00, the amount found by the trial court. Printed on the face of the policy appears the following, "Named Insured: Associ ates Investment Company and its Subsidiaries." The company admitted that it paid the premium of $135.00 to the insurance company. It is therefore undisputed that at the time the company acquired the contract and note on March 15, 1948, it knew that the sum of $302.60 ($437.60 less $135.00) was a "finance charge."
In our opinion, Associates Investment Company was chargeable with notice of the usurious nature of the contract by the contents of the agreement itself, together with its knowledge of the amount of the insurance premium. The majority of the trial judge's findings relate to matters readily disclosed upon the face of the sales contract. This agreement provides for a so-called "Total Time Selling Price," followed by a statement of several specific items which make up this "Time Selling Price." In construing the contract, the specific itemized elements will control the general terms. Reynolds v. McMan Oil & Gas Co., Tex.Com.App., 11 S.W.2d 778, holdings approved by the Supreme Court; 12 Am.Jur. 779, Contracts, § 244; 10 Tex.Jur. 307, Contract, § 175. The contract states that the "cash price" of the vehicle plus tax and title, amounted to $2,275.00 of which $975.00 was paid in cash. It then states that the "Deferred Balance" is $1300.00. "Deferred Balance" in plain English can not and does not mean a sale for cash on the spot. It means exactly what it says, that the money is not now paid, but that payment is deferred. It can not be cash and at the same time deferred. Obviously, the contract says that there is $1300.00 due on the car which is deferred and unpaid but is to be paid in time; a sum that did not have to be paid in cash at the closing of the trade, but at some time in the future. The schedule shows the price of the automobile to be $975.00 cash, plus $1300.00 deferred, or $2,275.00 including $25.00 for tax and title (Items B plus C equals A).
The contract states that the "Total Time Selling Price" is equal to the sum of Items A and D. Upon examination of these items, it is readily seen that Sosa was paying for things other than the motor vehicle alone, for included in said items there appear insurance charges and finance charges. Hence, to say that the "Time Selling Price" of $1737.60 is the credit price for the vehicle is obviously incorrect and proved false by the itemization used to arrive at the total. Insurance premiums paid to a third party constitute no part of a sales price. When we examine the contract to find the price of the vehicle, it is inescapable that such price was $975.00 cash down payment and the sum of $1300.00 deferred balance, a total of $2275.00, including tax and title charge. When the tax and title charge of $25.00 is eliminated a balance of $2,250.00 is left, and this is the price of the vehicle, according to the contract.
The face of the contract also disclosed the significant fact that the charge made for "tax and title" was $25.00. The Act providing for a motor vehicle retail sales tax article 7047k, Vernon's Ann.Civ.Stats., prescribes a rate of one per cent of the total consideration "paid or to be paid for said motor vehicle and all accessories attached thereto at the time of the sale, whether such consideration be in the nature of cash, credit, or exchange of other property, or a combination of these." Appellant says that the credit price was $2712.60 (Item A, $2275.00, plus Item D, $437.60). One per cent of this amount is $27.13, yet the sum of $25.00 set aside and allocated for tax- and title purposes, according to the contract, will not pay the sales' tax when computed on a $2712.60 basis, let alone the title expense and licensing costs for the period extending from March 13th to April 1, 1948. Article 6675a-3 Vernon's Ann.Civ.Stats. This circumstance rather conclusively shows that the parties did not contract that the price of the automobile was $2712.60.
Although admittedly, where it is reasonably possible, we should construe a contract so as to render it legal rather than illegal, we do not believe that in order to escape the taint of usury this rule should be extended so as to wholly disregard clauses placed in the contract by the parties themselves and convict one of them of a violation of penal law in underpaying a tax levied upon the sales price of the motor vehicle.
The contract here involved can not he construed as a "credit price contract," without disregarding substance and giving force to such anamolous and contradictory concepts as a "Cash Price" which includes a "Deferred Balance" and a "Time Selling Price" which includes items having nothing to do with the sales price of the motor vehicle involved. The distinction between the present case and Rattan v. Commercial Credit Co., Dallas Court of Civil Appeals, 131 S.W.2d 399 (and other cases similar thereto) is pointed out in G. F. C. Corporation v. Williams, Tex.Civ.App., 231 S.W.2d 565, 567, opinion by Chief Justice Bond, who also wrote the opinion in the Rattan case. From the report of the case cited it appears that Williams, the buyer of the automobile, executed a note for the sum of $970.95, payable to C. L. Luck Motor Company or order in 15 monthly installments of $65.33, which amount included the $760.00 that the Finance Corporation had agreed to finance, $46.88 premium for a $75-Deductible Collision Fire and Theft Insurance Policy on the car, and $173.07 "finance charges,"
The Court said: "The principal contentions of appellant, in effect, are that the $173.07 paid by Williams and received by it, represents the difference between a cash Selling price and a time selling price, and that same was not paid as interest on the aforesaid balance of $760 as to come under legal contemplation of usury; and, if the finance charge was compensation for the use or forbearance or detention of money (Art. 5069, V.A.C.S.), knowledge of such fact was not brought to the attention of the Corporation authorities. True, if the finance charge of $173.07 added in the note could be said to be compensation, an addition to the price charged for the automobile sold to Williams on extended credit basis over the current cash price,, and such was known to Williams, such charge would be a legitimate commercial transaction. In such a situation no finance loan of money would be involved; the purchaser buys for a credit price known to him to be higher than the cash price, and signs a note for the' unpaid balance. 'A seller may demand one price for cash and another and greater price upon credit, and it would not be usury.' Rattan v. Comercial Credit Co., Tex.Civ.App., 131 S. W.2d 399, 400, writ refused. The purchaser takes his choice. But if the selling price merely designates the means of computing the amount the seller was to receive and the buyer to pay, and, as a part óf such transaction, an arrangement is made for financing a deferred balance in addition thereto which is in excess of 1€%, same is usury, irrespective of whether the transaction was made at cash price or credit price. The amount that is exacted of the purchaser is the price paid for the automobile." (Italics ours.)
The Court then cites with approval the decision of the Austin Court in Associates Inv. Co. v. Ligon, Tex.Civ.App., 209 S.W.2d 218, and the opinion of the Ft. Worth Court in Associates Investment Co. v. Thomas, Tex.Civ.App., 210 S.W.2d 413.
It seems to us that the question of the legality of the particular contract here involved has been set at rest by at least four decisions involving the, same contract and the same appellant as are now 'before us. We are in agreement with the clear and forceful statement of Mr. Justice Hughes in the Ligón case, supra, relating to matters disclosed upon the fact of the written contract wherein he said:
"We cannot agree with appellant (Associates Inv. Co,) that the finance charge is a part of the credit price. It would be most unusual for a cash sale contract to specify the credit price or for a credit sale contract to specify the cash price. The contract would be for one price or the other, unless the buyer is given an option which usually is in the form of a discount, if paid within a certain time. The contract here specified but one sale price and whether it be a cash or credit price is not material. The amount of the down payment is plainly stated and so is the amount of the unpaid purchase price. That the $197.50 was not a part of the purchase price is obvious unless we ignore the contract which states that this amount was for the 'total finance charge and insurance premium for which credit is extended.' Omitting insurance, this language is a fair definition of 'interest.' " Associates Inv. Co. v. Ligón, 209 S.W.2d 218, 219. (Italics supplied.)
The above statement relates to the contract involved and is a sound and accurate expression of the principle of law that controls this case.
In response to suggested fact distinctions between the present case and the Ligori case, it might' be pointed out that the rule above stated has been consistently applied by the Austin Court under varying fact circumstances. The Ligon case is cited and followed in Associates Investment Co. v. Baker, Tex.Civ.App., 221 S.W.2d 363. In Associates Investment Co. v. Hill, Tex.Civ.App., 221 S.W.2d 365, 366, the Court points out that the issue of actual notice to the company other than that imputed by the terms of the contract was not raised in the case, but concludes, nevertheless, that the contract was usurious.
The Court said: "The evidence shows only one price ($869.13) was asked for the automobile sold to appellee. After the deductions of payments made by appellee, there was left the sum of $530 of the purchase price of said automobile unpaid and for' which appellee obligated himself to pay $687.45. Of this sum $119.95 was 'finance charges.' "
In the present case, it appears that by reading the contract, note and insurance policy, which were prepared upon forms promulgated by Associates Investment Company, anyone acting for the company would necessarily know that a $302.60 charge had 'been made for the use of $1300.00 dischargeable in twenty-four monthly payments. This charge was "interest" as that term is defined by Article 5069, Vernon's Stats., i. e., compensation "for the use or forbearance or detention of money". The compensation or charge specified in the contract was obviously in excess of that permitted by Article 5071 Vernon's Stats., and is therefore usurious. We see no occasion for drawing distinctions as to the sources whereby a transferee of an agreement gains knowledge of the usurious nature of a contract. If it is shown that a transferee may by reading the contract in the light of knowledge possessed by him (such as to amount of insurance premium in this case) and thus ascertain its usurious nature, he is charged with notice of usury. It is not necessary to show this notice "over again" by evidence outside the written contract. Gifford v. State, Tex.Civ.App., 229 S.W.2d 949.
The judgment is affirmed.