American Mut. Bldg. & Sav. Ass'n v. Daugherty

• Decision Date: 19 December 1901
• Citation: American Mut. Bldg. & Sav. Ass'n v. Daugherty, 66 S.W. 131 (Tex. App. 1901)
• Parties: AMERICAN MUT. BLDG. & SAV. ASS'N v. DAUGHERTY et ux.<SMALL><SUP>1</SUP></SMALL>
• Court: Texas Court of Appeals

66 S.W. 131

AMERICAN MUT. BLDG. & SAV. ASS'N v. DAUGHERTY et ux.¹

Court of Civil Appeals of Texas.

December 19, 1901.

Error from district court, Harris county; John G. Tod, Judge.

Action by J. K. Daugherty against the American Mutual Building & Savings Association and another, in which defendant association filed a plea in reconvention, joining L. M. Daugherty, wife of the plaintiff, as a party defendant to the plea. Judgment for defendant on its plea in reconvention, but granting insufficient relief, and it brings error. Reversed, and judgment rendered in favor of plaintiff on his cross error.

Watkins & Jones, for plaintiff in error. C. L. Bradley, for defendants in error.

GARRETT, C. J.

J. K. Daugherty brought suit against the American Mutual Building & Savings Association and W. J. Alder to cancel certain liens against his homestead, which were created by himself and wife in order to borrow $600 from the association with which to build the dwelling house thereon. The petition set out the note executed for the money, and a deed of trust executed by the plaintiff and his wife upon the property to W. J. Alder, as trustee, to secure the note, and a contract for a mechanic's lien for said sum, which had been executed by the plaintiff and his wife with one A. W. Underwood, and for which the note had been executed, and which had been assigned to the association. It alleged usury in the transaction, and the payment thereon of certain sums of money in accordance with the terms of the contract, as principal and interest, amounting to more than the principal of the note, and asked that double the amount of all sums paid as interest be applied to the principal, and for the cancellation of the deed of trust and mechanic's lien, and for judgment over against the association for an excess to which he averred he was entitled. The defendant association, after answering generally, pleaded over in reconvention, and elected to recover upon the mechanic's lien which it averred had been assigned to it, and admitting the payment of $120 as interest, and that Daugherty owned 14 shares of stock of the association, of the value of $348.40, for which credit was conceded, prayed for judgment and foreclosure of lien for the balance. L. M. Daugherty, the wife of the plaintiff, was joined with her husband as defendant to the plea in reconvention. The cause was tried without a jury, and the court found that the transaction was usurious, and after crediting all payments upon the principal of the debt, but refusing credit for double the interest paid, rendered judgment in favor of the association upon its cross action against Daugherty for the sum of $124.74, as the balance of principal of the debt, including attorney's fees, with 6 per cent. interest on that amount from date of judgment, with decree of foreclosure against said Daugherty and his wife upon the lots described in the pleadings and the several instruments set out.

The American Mutual Building & Savings Association is a foreign corporation,—its domicile being in Chattanooga, Tenn.,—with a permit to do business in the state of Texas. W. J. Alder is the secretary of said association, and W. Walker its agent in Houston, Tex. A short time prior to June 23, 1896, Walker, the agent of the association, approached Daugherty, and offered, in behalf of the association, to lend him the money to build a home on the lots described in the petition, if he desired to do so. Plaintiff agreed to borrow $600 at 6 per cent. interest, with security on the lots, to be repaid in monthly installments, and made an application for the loan, dated June 23, 1896. Walker told him that in order to get the money he would have to enter into a contract for the building with a person who would transfer the contract to the association, and suggested A. W. Underwood as an acceptable contractor. On July 21, 1896, the plaintiff, joined by his wife, entered into a contract with Underwood for the erection of the house on lot 8, to be completed by August 15, 1896, for which he agreed to pay him the sum of $600, with interest at the rate of 10 per cent. per annum from the date of the completion of the improvements, with 10 per cent. attorney's fees in case of suit to enforce the payment, and a mechanic's and material man's lien was given upon the lot, in favor of Underwood, to secure the payment of the money. There were other stipulations in the contract, requiring Daugherty to keep the property insured for the benefit of Underwood, and to pay all taxes and other charges until the debt should be paid. The money for the payment of this contract was to be furnished by the association, and was to be repaid in monthly payments, with 6 per cent. interest. The house was built in accordance with the contract, and the contractor was paid by the association by three checks, dated October 27, 1896, in favor of A. W. Underwood, drawn on the Citizens' & Trust Company of Chattanooga, Tenn., and stamped "Paid" November 4th and November 5th. And on October 31, 1896, Underwood assigned the building contract to the association. Plaintiff testified that the agent, Walker, told him that the loan would draw interest at 6 per cent., payable in monthly installments of $3, and that the loan itself was payable in monthly installments of $8.40. The witness did not understand that he was a stockholder. He testified that he and his wife signed a number of papers, all at the direction of the agent, for the single purpose of securing a loan for $600, which he understood that he was to have the privilege of paying in monthly installments, as above stated. The application for the loan was made to the association. In it the plaintiff stated that, as a stockholder and member of the association, holding 12 shares of stock, he desired to obtain a loan of $600, payable only when the series of stock matured, and agreed to furnish security on lot 8 of the lots described; and he guarantied that he would build thereon certain improvements set forth, for which purpose the loan was applied for. For said loan he agreed to sell and assign his shares of stock, to become the absolute property of the association at maturity thereof, and which, when matured, should be in full satisfaction of said loan. He agreed to pay 6 per cent. interest on the sum borrowed, and monthly dues on the shares of stock sold to the association, as well as on two other shares, which were called "free shares," until they had matured in accordance with the bylaws, rules, and regulations of the association, and waived the right of withdrawal before maturity of his two free shares; and, in case of default in the payment of interest and dues, the free shares were also assigned, and the officers of the association were authorized to apply the amount due on them to the payment of interest on the money borrowed, and to the payment of dues and fines on the stock sold and assigned to the association. He also agreed to execute a deed of trust upon the property improved. The application was granted by the association, and on November 7, 1896, the note and deed of trust were executed. The deed of trust conveyed the property to the defendant W. J. Alder, as trustee, in trust for the security of the loan, but recited that the original promissory note and mechanic's lien on the property were continued in full force and effect, and the holder of the note set out in the deed of trust might, at his option, enforce either or both of them. The note executed by the plaintiff and his wife is as follows: "Note. Texas Form. $600.00. Houston, Texas. On maturity of the shares of stock herein mentioned, for value received, I, we, or either of us, promise to pay to the American Mutual Building and Savings Association, of Chattanooga, in the state of Tennessee, in U. S. gold coin of present standard, six hundred dollars, with interest at the rate of six per cent. per annum from date, payable monthly on the last Saturday of each and every month, commencing on the last Saturday...