                IN THE COURT OF APPEALS OF TENNESSEE

                               FILED
                             December 9, 1999

                             Cecil Crowson, Jr.
                            Appellate Court Clerk
                            AT KNOXVILLE




                                  E1998-00412-COA-R3-CV
WESTSIDE HEALTH AND RACQUET  ) C/A NO. 03A01-9810-CH-00332
CLUB, INC.,                  )
                             )
                                  Plaintiff-Appellee, )
                             )
                             )
                             )
                             )
                             )
v.                           ) APPEAL AS OF RIGHT FROM THE
                             ) HAMBLEN COUNTY CHANCERY COURT
                                                          )
                             )
                             )
                             )
JEFFERSON FINANCIAL SERVICES,     )
INC.,                        )
                             )
          Defendant-Appellant.) HONORABLE THOMAS R. FRIERSON,
                                II,
                             ) CHANCELLOR




For Appellant                         For Appellee

RICHARD N. SWANSON                    CLINTON R. ANDERSON
Morristown, Tennessee                 Morristown, Tennessee

THOMAS F. BLOOM
Nashville, Tennessee




                                                                Page 1
                        OPINION




REVERSED AND REMANDED


                                  Susano, J.




                                               Page 2
            Westside Health & Racquet Club, Inc. (“Westside”)

filed this action against Jefferson Financial Services, Inc. (“

Jefferson”).    Westside’s theory of its claim -- which theory

was adopted by the trial court -- is that Westside’s transfer

to Jefferson, over time, of some 495 installment sales

contracts was, in each case, part and parcel of a usurious

loan made by Jefferson to Westside, rather than a sale of the

contract.     The trial court awarded Westside damages of

$68,519.71 for usurious interest, which was enhanced by a

further award of pre-judgment interest pursuant to T.C.A. §

47-14-123 (1995) 1.   Jefferson appeals, raising several issues.

The issue that we will focus on can be stated thusly: Does the

Retail Installment Sales Act, T.C.A. § 47-11-101, et seq., (“

the Act”) operate to exempt the dealings between these parties

from Tennessee’s usury statutes?



                              I. Facts



            Westside operates health and fitness centers in

Hamblen County.     Individuals who wish to use Westside’s

facilities and equipment pay membership fees for such

privileges.     Members often pay these fees on a monthly basis

for a specified period of time pursuant to written contracts.



            Jefferson is a company organized under the Tennessee

Industrial Loan and Thrift Companies Act, T.C.A. § 45-5-101, et

seq., and is engaged, generally, in the business of making and



                                                                   Page 3
purchasing loans.



            On May 16, 1990, Westside and Jefferson entered into

an agreement 2 which allowed Westside to utilize its membership

contracts to generate cash.     This agreement is complex and

ambiguous.     While neither of the parties seems to have

completely understood its terms, the following is an accurate

recitation of how the parties performed under it.     When a

member signed a contract with Westside agreeing to pay

membership fees in installments over time, Westside would

deliver the contract to Jefferson.     If the member failed to

make the first scheduled payment, Jefferson would advance no

money, but instead would return the contract to Westside.        If

the member made the first payment, Jefferson would calculate

the “purchase price” of the contract by discounting the gross

amount due under the contract by a time price differential of

either 24 or 18 percent.     Jefferson would then keep for itself

10% of the “purchase price” as a “loan origination fee” and

place 40% of the “purchase price” in Westside’s reserve

account.     Jefferson would disburse the remaining 50% to

Westside.



            On September 28, 1992, the parties entered into a

new agreement that is substantially the same as the May 16,

1990, agreement except for the percentage to be held in

reserve and the percentage to be disbursed to Westside.        Under

the new agreement, Jefferson placed 30% in Westside’s reserve



                                                                       Page 4
account and disbursed 60% to Westside.   Jefferson’s 10% “loan

origination fee” remained the same.



         Under the agreements between Westside and Jefferson,

the latter collected the monies due under the health club

membership contracts.   Jefferson tracked each of the

membership contracts individually.    If a member performed his

or her contract fully, Jefferson released the amount held in

reserve on that particular contract to Westside.    On the other

hand, if a member failed to make all of the required

installment payments, Jefferson notified Westside, and

Westside had the option of paying the contract in full.     If

Westside did not pay the contract in full, Jefferson collected

what was due under the contract by utilizing the funds in

Westside’s reserve account.   If, at any time, the amount in

Westside’s reserve account was insufficient to fund Westside’s

obligations to Jefferson, Jefferson could resort to a $100,000

promissory note executed by Westside.    This promissory note

was secured by two deeds of trust, a continuing guaranty and a

UCC-1 Financing Statement covering all of Westside’s accounts

receivable, contract rights and payments, personalty and

equipment.   This “stand-by” line of credit was never utilized,

however, because the reserve account was always sufficient to

cover Jefferson’s obligations.



         The owner and president of Westside, Ken Taylor (“

Taylor”), testified that Westside entered into the agreements



                                                                   Page 5
with Jefferson because Westside had borrowed all it could from

banks, but still required additional funds for capital

improvements.   Taylor also testified that Robert Schwalb (“

Schwalb”), Jefferson’s president, described the agreement as

Jefferson loaning money to Westside and Westside’s members

making the payments.    In contrast, Schwalb testified that he

believed Jefferson owned the contracts.    He further testified

that Jefferson pledged them as collateral to obtain a loan of

its own.



                     II. Trial Court’s Judgment



           The trial court concluded that the transfer of

membership contracts from Westside to Jefferson “constituted

loan transactions” and were subject to applicable usury laws.

In a Memorandum Opinion filed September 4, 1996, the court

opined as follows:



Regarding all installment contracts assigned by [Westside] to
Jefferson on and subsequent to May 16, 1990, the Court
specifically finds that said assignments constituted loan
transactions....The assignments of these installment contracts
were so inextricably connected to the advance and disbursement
of funds pursuant to the $100,000.00 line of credit that they
became the very essence of the loan. Jefferson’s use of the
term “loan origination fee” retained for each contract
assigned further substantiates a finding that said
transactions constituted loans. The unrebutted testimony of
owner Ken Taylor that the purpose of the $100,000.00 line of
credit for the benefit of [Westside] was to obtain working
capital for improvements and general operations of the
business further corroborates the finding that said
transactions constituted loans. Accordingly, this Court
directs that all membership installment contracts assigned on
and subsequent to May 16, 1990, constituted loans for which



                                                                  Page 6
the Tennessee usury laws apply.




Following subsequent hearings, the court concluded that

Westside was entitled to a judgment in the amount of

$68,519.71, plus pre-judgment interest, based on Jefferson’s

charging of usurious interest.



                     III. Standard of Review



         In this non-jury case, our review is de novo upon

the record, with a presumption of correctness as to the trial

court’s factual determinations, unless the evidence

preponderates otherwise.   Rule 13(d), T.R.A.P.; Union Carbide

Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993); Wright v.

City of Knoxville, 898 S.W.2d 177, 181 (Tenn. 1995).   The

trial court’s conclusions of law, however, are accorded no

such presumption.   Campbell v. Florida Steel Corp., 919 S.W.2d

26, 35 (Tenn. 1996); Presley v. Bennett, 860 S.W.2d 857, 859

(Tenn. 1993).



                       IV. Applicable Law



         The first issue raised on appeal by Jefferson is

whether T.C.A. §§ 47-11-106 and -110 of the Retail Installment

Sales Act, T.C.A. § 47-11-101 et seq., operate to exempt the

transactions between Jefferson and Westside from the usury



                                                                  Page 7
laws.   This issue requires us to examine the Act according to

well-established rules of statutory construction.



          The primary goal of statutory construction is “to

ascertain and give effect to the intention and purpose of the

legislature.”   Carson Creek Vacation Resorts, Inc. v.

Department of Revenue, 865 S.W.2d 1, 2 (Tenn. 1993).     Courts

are to ascertain legislative intent “primarily from the

natural and ordinary meaning of the language used,” id., “read

in the context of the entire statute, without any forced or

subtle construction which would extend or limit its meaning.”

National Gas Distribs., Inc. v. State, 804 S.W.2d 66, 67

(Tenn. 1991).   Additionally, a court is restricted in its

analysis to the four corners of the statute unless the statute

contains an ambiguity.     Austin v. Memphis Pub. Co., 655 S.W.2d

146, 148 (Tenn. 1983).



          T.C.A. § 47-11-106 (1995) provides that



[a]ny retail seller may assign, pledge, hypothecate, or

otherwise transfer a retail installment contract or retail

charge agreement to any person, firm, or corporation on such

terms and conditions and for such price as may be mutually

agreed upon.



T.C.A. § 47-11-110 (1995) is of particular relevance to this

case.   It provides that



                                                                    Page 8
[a] “retail installment transaction,” as defined in §

47-11-102, or any other conditional sales contract or other

agreement covering the time sale of personal property or

services, and the assignment thereof, and the business of

selling such personal property and services on a time payment

basis, and the business of purchasing or acquiring such

transactions, contracts, or agreements, whether or not

regulated under this chapter, shall not be deemed to be loans

or forebearances of money or things of value or the making of

same, nor shall they be regulated by or subject to the

provisions of title 45, chapter 5, parts 1-4.



(Emphasis added).



                           V. Analysis



         Jefferson’s first argument on appeal is that T.C.A.

§§ 47-11-106 and –110 exempt the transactions between

Jefferson and Westside from Tennessee’s usury laws regardless

of whether the transactions are characterized as loans or

sales.



         The trial court relied, at least in part, on the

case of Lake Hiwassee Development Co. v. Pioneer Bank, 535

S.W.2d 323 (Tenn. 1976).   Hiwassee involves facts similar to




                                                                Page 9
those in the instant case.     In Hiwassee, a real estate

developer transferred to a bank promissory notes that the

seller had acquired in connection with its sale of subdivision

lots.     Id. at 324-25.   The Supreme Court concluded in Hiwassee

that the transfers constituted sales of the promissory notes.



            Many of the particulars of the agreement between the

seller and the transferee in Hiwassee are substantially

similar to the terms of the agreements in the case now before

us.     There is, however, a significant difference.     In Hiwassee,

the subject matter of the underlying transactions was the sale

of an interest in real property.      Id. at 324.     While Hiwassee

generally applies in cases of this sort, it has no application

here because, as we shall see, the subject matter of the

agreement between Westside and its members is personalty and

thus “goods” within the meaning of the Act.         Therefore, the

Act, not Hiwassee, controls our resolution of the issues in

this case.



            Westside’s first response to Jefferson’s argument

that the Act exempts the transactions between Westside and

Jefferson from the usury laws is that this argument was not

properly raised at trial and cannot be raised for the first

time on appeal.     However, we find and hold that the question

of whether the Act operates to exempt the transactions between

the parties from the usury laws was raised and considered

below.     In its Memorandum Opinion filed on September 11, 1997,



                                                                        Page 10
the trial court made the following statement:



Though [Jefferson] continues to assert that the entire
transaction was one of purchase rather than a loan, thereby
statutorily protected by the “Retail Installment Sales Act”
through T.C.A. 47-11-106, the Court reaffirms its earlier
findings and conclusion that the assignment of approximately
495 installment contracts constituted the crux of a
comprehensive loan rather than a purchase so as to bring the
transaction within the operation of the Tennessee usury
statutes.


This statement clearly indicates that the Act was raised and

considered by the trial court.     Thus we find that Westside’s

assertion -- that the issue of the Act’s applicability is not

properly before us -- is without merit.



         Westside’s next argument is that the transactions

between Jefferson and Westside are not covered by the Act

because Westside is not a “retail seller” and the contracts

between Westside and its members are not “retail installment

transactions.”   We disagree.    We find and hold that Westside

is a “retail seller” within the meaning of the Act.     The Act

defines a “retail seller” as one



regularly engaged in, and whose business consists to a
substantial extent of, selling goods to a retail buyer;



T.C.A. § 47-11-102(8) (1995).     “Goods” in turn are defined as



all personalty, including certificates issued by a retail
seller exchangeable for personalty or services, but not
including other choses in action, personalty sold for



                                                                   Page 11
commercial or industrial use, money, motor vehicles, or mobile
homes.




T.C.A. § 47-11-102(2) (1995).   Black’s Law Dictionary defines “

personalty” or “personal property” as



everything that is the subject of ownership, not coming under
denomination of real estate. A right or interest in things
personal, or right or interest less than a freehold in realty,
or any right or interest which one has in things movable.



Black’s Law Dictionary 1217 (6th ed. 1990).



         Westside sells to its members the right to use its

facilities and equipment; thus, the members acquire “personalty

”, i.e., a right or interest in something



              that is the subject of ownership, not
         coming under denomination of real estate.
         A right or interest in things personal, or
         right or interest less than a freehold in
         realty, or any right or interest which one
         has in things movable.



Black’s Law Dictionary 1217 (6th ed. 1990).   This right, being

personalty, comes within the broad definition of “goods” as

defined in the Act.   Therefore, we find and hold that Westside

is a “retail seller” under the Act because it is regularly

engaged in, and its business consists to a substantial extent

of, selling goods to its members.




                                                                   Page 12
         Additionally, we find and hold that the membership

contracts involved in this case are covered by the Act.   The

Act defines a “retail installment transaction” as



a contract to sell or furnish or the sale of or the furnishing
of goods or services by a retail seller to a retail buyer
pursuant to a retail installment contract or a retail charge
agreement.



T.C.A. § 47-11-102(7) (1995).   A “retail installment contract”

is



an instrument or instruments evidencing one (1) or more retail
installment transactions entered into in this state pursuant
to which a buyer promises to pay in installments for goods or
services....



T.C.A. § 47-11-102(6) (1995).   The membership contracts at

issue in this case constitute the sale of goods and services

by Westside to its members pursuant to a written agreement

whereby the members promise to pay in installments for the

right to use Westside’s facilities, equipment, and services.

Thus, the membership contracts are “retail installment

contract[s]” and constitute “retail installment transaction[s].

”



         Westside also argues that a health club membership

contract cannot be a retail installment contract because the

requirements for the former are set forth in T.C.A. §

47-18-305 (Supp. 1999), while the provisions applicable to “



                                                                  Page 13
retail installment contract[s]” are set forth in T.C.A. §

47-11-101, et seq.   We find this argument to be without merit.

There is nothing in the two statutory schemes that precludes a

health club membership contract from also being characterized

as a retail installment contract under the Act. 3   A health

club agreement, pursuant to which a member agrees to pay his

or her fees in installments, are subject to the provisions of

both schemes.



         Westside next argues that even if the Act applies to

the membership contracts between Westside and its members, the

Act does not apply to an agreement between Westside and

Jefferson.   More specifically, Westside argues that T.C.A. §

47-11-110 applies to a retail installment transaction and to

the actual assignment of that transaction but does not apply

to a separate but related loan where the retail installment

transactions are transferred by the retail seller to a

transferee as collateral for the separate but related loan

transaction between the retail seller and the transferee.

Such a construction of the statute flies in the face of the

plain meaning of its language.    The statute clearly

contemplates the subsequent assignment of an existing contract

to a third party and exempts that assignment from the

operation of the usury laws.     Accordingly, we find that the

Act applies to the entire agreement between Westside and

Jefferson, without a distinction between the transfer of the

contracts and the transfer of the funds. 4



                                                                  Page 14
         Having decided that the Act applies, we must now

determine its effect.   We find and hold that it creates a

broadly-defined safe harbor exempting from the usury laws the

assignment of any agreement covering “the time sale of

personal property or services,” including retail installment

sales contracts.   T.C.A. § 47-11-110 (1995).



         Westside’s final response to Jefferson’s first

argument is that even if the Act applies to the transactions

between Westside and Jefferson, the agreements between these

parties are in violation of the Act’s own “usury” provision.

Specifically, Westside refers to T.C.A. § 47-11-103(d) (1995)

which provides as follows:



Notwithstanding the provisions of any other law, the seller or
other holder under a retail installment contract may charge,
receive, and collect a time price differential which shall not
exceed eleven dollars and seventy-five cents ($11.75) per one
hundred dollars ($100) per year on the principal balance of
each transaction.



T.C.A. § 47-11-103(f)(2) (1995) provides that



“[h]older” in this section means the retail seller unless the
seller has assigned the contract, in which case “holder” means
the assignee of such contract....



         The “time price differential” provisions of T.C.A. §

47-11-103(d) apply to dealings between the retail seller or “




                                                                 Page 15
holder” on the one hand and the retail buyer on the other; but

this provision does not purport to regulate a subsequent

assignment of the contract by the retail seller to a

transferee, except to provide that the transferee, i.e., the “

holder”, as well as the retail seller is limited to a certain

time price differential as against the retail buyer.      Only

T.C.A. §§ 47-11-106 and –110 expressly address the rights

between the retail seller and a third party transferee.

T.C.A. § 47-11-106 provides that a retail seller may transfer

a contract to a third party “for such price as may be mutually

agreed upon.”   T.C.A. § 47-11-110 provides that where the

third party is engaged in the business of purchasing or

acquiring such contracts, the acquisition, i.e., the

transaction between the retail seller and the transferee, will

not be deemed a loan and will not be subject to the usury

laws.   Therefore, we hold that as between Westside and

Jefferson, the time price differential limitation in T.C.A. §

47-11-103(d) is not relevant.



                        VI.   Other Issues



          Jefferson raises issues pertaining to the trial court

’s computation of damages for Jefferson’s alleged charging of

usurious interest.   These issues are rendered moot by our

holding that the subject transactions are exempt from the

usury laws.




                                                                  Page 16
                           VII. Conclusion



          The judgment of the trial court is reversed.    This

case is remanded for such further proceedings, if any, as may

be required, consistent with this opinion and for collection

of costs assessed below, all pursuant to applicable law.

Costs on appeal are taxed to the appellee, Westside Health and

Racquet Club, Inc.




                                    __________________________
                                    Charles D. Susano, Jr., J.



CONCUR:



________________________
Houston M. Goddard, P.J.



________________________
D. Michael Swiney, J.




                                                                 Page 17
