TEL SERVICE CO., Inc., a Florida Corporation; G.E. Grass and Richard A. Noll, Appellants, Cross-Appellees, v. GENERAL CAPITAL CORPORATION, a Florida Corporation, Appellee, Cross-Appellant. TEL SERVICE CO., Inc., a Florida Corporation; G.E. Grass and Richard A. Noll, Petitioners, Cross-Respondents, v. GENERAL CAPITAL CORPORATION, Respondent, Cross-Petitioner.
Nos. 37860, 37858.
Supreme Court of Florida.
October 29, 1969.
227 So.2d 667
William Reece Smith, Jr. of Carlton, Fields, Ward, Emmanuel, Smith & Cutler, Tampa, for appellee, cross-appellant, respondent-cross-petitioner.
ERVIN, Chief Justice.
We review the appeal of Appellants Tel Service Co., Inc., a Florida corporation; G.E. Grass and Richard A. Noll, and the cross-appeal of the Appellee General Capital Corporation, a Florida corporation, from the decision in this case of the District Court of Appeal, Second District, reported in 212 So.2d 369. The parties also filed petition and cross-petition respectively, for a writ of certiorari to review the decision.
As reflected in the reported decision and opinion of the District Court, the Appellant Tel Service Co., Inc., initially sought a recovery in the Circuit Court from Appellee General Capital Corporation because of the latter‘s alleged usury charges.
The Circuit Court, after hearings, entered a final decree in favor of Tel Service, holding certain transactions between the parties to be criminally usurious loans in violation of
The Circuit Court specifically found that General Capital required a partnership composed of G.E. Grass and Richard A. Noll to change their form of business from a partnership to a corporation (Tel Service) before General Capital would enter business relations with the firm. This finding of the Circuit Court was made in connection with its basic holding that the transactions between the parties were loans and not sales.
General Capital appealed this final decree to the District Court. While the appeal was pending, the Florida Legislature enacted Chapter 65-299, now appearing in the Florida Statutes as
While the cause was on remand in the Circuit Court, that court granted permission to Tel Service to amend its complaint to include G.E. Grass and Richard A. Noll as parties plaintiff and allege that said individuals as a condition to Tel Service obtaining the loans from General Capital were required to guarantee the payment thereof. It was alleged by Tel Service in its amendment that these individuals were the actual borrowers or real parties in interest, and not Tel Service, the corporation.
After hearings on the amended complaint and defenses, the Circuit Court entered its amended final decree reaffirming its findings that the transactions were loans and not sales, but adding that the transactions were actually loan transactions between General Capital and Grass and Noll, the corporation Tel Service being a mere conduit of corporate form furthering
General Capital appealed the final decree and judgment summarized just above to the District Court, which in its reported opinion and decision in 212 So.2d 369 reversed in part and affirmed in part as follows:
- It affirmed the finding in the final decree that the transactions were usurious loans and not sales.
- It held that the defenses of laches, unclean hands, or the statute of limitations did not bar a recovery by plaintiff Tel Service.
- It held that in relinquishing jurisdiction and remanding the cause to the Circuit Court to determine the applicability of Chapter 65-299 to the cause as it existed, did not convey authority on the Circuit Court to reshape the proceedings as was done below by substituting Grass and Noll as the real parties plaintiff and allowing amendment to the complaint for these individuals to seek recovery from General Capital because of the alleged usurious loans to them rather than to Tel Service.
- It held Chapter 65-299 (
F.S. § 687.11 , F.S.A.) to be constitutional and applicable to the instant litigation. - Since Chapter 65-299 provides a borrowing corporation is only entitled to recover interest and not principal on a usurious loan, the District Court reduced the Circuit Court‘s judgment from $710,911.08 to $125,912.65, and directed that final judgment for said sum be entered in favor of Tel Service, eliminating the individuals, Grass and Noll, as plaintiffs in the litigation.
Our jurisdiction of the appeal is invoked because the District Court upheld the validity of Chapter 65-299.
Our review covers the five points outlined above which summarize the holding of the District Court. In addition, our review includes a further point raised by General Capital, through its motions filed while this appeal was pending concerning the applicability of further intervening legislation, to wit, Chapter 69-135, Laws of Florida 1969.
The effect of the trial court‘s allowance of the amendment substituting Grass and Noll as real parties plaintiff and the reasons assigned therefor can only be construed as a holding by the Circuit Court that under the circumstances the corporate veil of Tel Service should be pierced and the individuals treated as alter egos of the corporation. The most compelling evidentiary finding by the Circuit Court asserted to support this position is that General Capital, as lender, had required Tel Service to change its form of business organization from a partnership to a corporation so that a higher rate of interest could be charged (15 per cent to corporations compared to 10 per cent to individuals). Such factual consideration, measured against the evidentiary requirements necessary to justify disregarding a corporate entity, is not sufficient for such result under the circumstances here presented. The law dispositive of this question was settled in Holland v. Gross (Fla. 1956), 89 So.2d 255, where this Court, quoting from American Jurisprudence, stated:
“`* * * While the corporate entity may generally be disregarded where it is used as a cloak or cover for fraud or illegality, the corporate entity of a corporation organized merely for the purpose of executing a mortgage on terms usurious in the case of an individual may not be disregarded in order to let in the
defense of usury, available to an individual, but not to the corporation * * *.’ (55 Am.Jur., Sec. 105, p. 396.”
In reaching the conclusion that the present case is governed by the principle enunciated in Holland v. Gross, supra, we did not overlook cases cited by Appellants where corporate entities were disregarded because of findings by trial courts that loans were in fact made to individuals and that the corporations formed were devices to evade the usury laws. See Gilbert v. Doris R. Corporation (Fla.App. 1959), 111 So.2d 682; Atlas Subsidiaries of Florida, Inc. v. O. & O. Inc. (Fla.App. 1964), 166 So.2d 458. We believe the principles adhered to in the cases just cited are entirely consistent with the rule announced in Holland v. Gross, the distinguishing feature being only in the application of the principles to the facts presented in each case.
The testimony offered by Grass to the effect General Capital insisted on the formation of a corporation to be the borrower in order that a higher rate of interest could be charged when the loans were made is not sufficient to establish the loans were actually made to Grass and Noll. Such testimony, without more, is insufficient to form the basis for disregarding the corporation entity. We conclude, therefore, that on the record before us the trial court erroneously found that the loan transactions were made to the individuals, Grass and Noll, rather than to the Appellant corporation, Tel Service.
The evidentiary situation in the instant case is sufficiently parallel to the controlling facts in Monmouth Capital Corporation v. Holmdel Village Shops, Inc. (1966), 92 N.J. Super. 480, 224 A.2d 35, to warrant application herein of the view adopted in that case. In that case it was said:
“Borrower corporation, which was organized because of lender‘s legitimate policy of dealing only with corporations, and which had bank account, adopted corporate resolutions in connection with other borrowers, paid real estate taxes, entered into leases with tenants, and acted as valid legal entity, was neither shell nor cloak and was barred by statute from asserting defense of usury in lender‘s mortgage foreclosure action where chief stockholder had capable legal advice before forming corporation and was a knowledgeable businessman, notwithstanding that lender‘s only reason for dealing with corporations applicable was to be able to charge amount in excess of six percent per annum fixed by statute. * * *” (At 35-36.)
For the reasons stated here, as well as those outlined by the District Court, we see no basis for disturbing the holding of the District Court on this point.
We next consider the question concerning the validity of Chapter 65-299, Laws of Florida 1965 (
Appellants assert in their brief and have raised in argument before this Court that Chapter 65-299, Laws of Florida 1965, is unconstitutional and void as being violative of Article III, Section 16, Florida Constitution, F.S.A. We have carefully studied the various contentions of Appellants regarding failure of the 1965 act to measure up to the requirements of Section 16, Article III, Florida Constitution, and find them to be without merit. See Deltona Corporation v. Florida Public Service Commission (Fla. 1969), 220 So.2d 905; Auto Owners Ins. Co. v. Hillsborough County Aviation Authority (Fla. 1965), 153 So.2d 722; City of St. Petersburg v. English, 54 Fla. 585, 45 So. 483; State ex rel. X-Cel Stores v. Lee (1936), 122 Fla. 685, 166 So. 568;
We have little difficulty affirming the District Court‘s conclusion sustaining the applicability of Chapter 65-299 to this cause, which act requires the forfeiture of usurious interest charged a corporation. As noted by the District Court, authority is legion to the effect that an action predicated on remedies provided by the usury statutes creates no vested substantive right but only an enforceable penalty. Accordingly, such penalty or forfeiture possesses no immunity against statutory repeal or modification and the enactment of legislation to this effect abates such penalty or forfeiture pro tanto even during the pendency of an appeal from a final judgment predicated on such statutory penalties or forfeiture. Pensacola & A.R. Co. v. State (1903), 45 Fla. 86, 33 So. 985; Matlack Properties, Inc. v. Cit. & Sou. Nat. Bank, 120 Fla. 77, 162 So. 148; Coe v. Muller (1917), 74 Fla. 399, 77 So. 88; 23 Am.Jur. 634; 50 Am.Jur. 537; 91 C.J.S. Usury § 100, p. 684; 16 C.J.S. Constitutional Law § 256, p. 1248; 82 C.J.S. Statutes § 441, p. 1019, et seq.
Having concluded the 1965 act properly was held to be applicable to the present controversy, the question is then presented as to the precise effect of the 1965 act on remedies provided by
As correctly concluded by the District Court,
In order to place in proper perspective the impact of Chapter 65-299, now
Thus, prior to the enactment of the 1965 act, it is apparent that the provisions of Chapter 687 embraced different penalties and forfeitures applicable to lenders making corporate or individual loans, the application of which penalty or forfeiture being determined by the rate of usurious interest charged. Against this framework then, we now inspect the 1965 act.
The applicable portions of Chapter 65-299, now
“(1) No individual secondarily liable as endorser, guarantor, surety, or otherwise on any corporate obligation shall be required, in any proceeding for collection of interest in the courts of this state, to pay any interest in excess of ten per cent per annum, and any interest claimed therein against such individual in excess of ten per cent per annum shall be forfeited; and no corporation, in any such proceeding in the courts of this state where the interest is proven to exceed fifteen per cent per annum, shall be required to pay any interest, and in such event all interest shall be forfeited.
“(2) All laws or parts of laws in conflict herewith and all other statutory penalties for usury applicable to loans to corporations are hereby repealed.”
Emphasis supplied.)
It is readily apparent that the emphasized portion of paragraph (1) can only be construed as affecting the repeal, as to usurious loans to corporations, of all conflicting penalty and forfeiture provisions embraced in
In its brief General Capital argues that a proper interpretation of Chapter 65-299 (
We reject the contentions above asserted, as did the District Court. We think it is important to observe that the designated critical phrase, “in any proceeding for collection of interest in the courts of this state,” first appears in the act in reference to the type of relief afforded individuals “secondarily liable” on corporate obligations. In this context we deem the designated phrase merely to be descriptive of circumstances under which a secondary obligor would have any need in the normal course of events to be accorded relief from usurious interest rates. That is, a secondary obligor would have a “real party interest” in being relieved from usurious rates usually in situations where such rates are sought to be enforced against him because of a default by the primary obligor. A secondary obligor who has not been subjected to liability for usurious interest has no need for a forfeiture recovery. But let us suppose a situation where the primary corporate obligor defaults, and the secondary individual obligor, unaware of the usurious nature of the interest charged his corporate obligor, proceeds to pay the usurious interest when demanded but finds later on that he paid usurious interest in excess of 10 per cent per annum. Can it
The foregoing considered, we can hardly attach to the term, “such proceeding,” as this term is used relative to the forfeiture remedies afforded corporate borrowers in the latter portions of Chapter 65-299, any greater significance than we ascribe to the related term as used in the preceding portion of the same act. Furthermore,
As to the last point raised by motions of General Capital, we find that Chapter 69-135, Laws of Florida 1969, became effective October 1, 1969, during the time the cause was pending on appeal here.
It is urged Section 2 of this act, which is set out in detail in the margin,2 unconditionally repealed
We find no merit in other contentions of the parties in the respective appeals.
The judgment and decision of the District Court so far as consistent with the views announced herein are affirmed.
DREW, ADKINS and BOYD, JJ., concur.
THORNAL and CARLTON, JJ., agree to conclusion and judgment.