Bradley v. Houston State Bank
| Decision Date | 11 July 1979 |
| Docket Number | No. B2075,B2075 |
| Citation | 588 S.W.2d 618 |
| Parties | R. B. BRADLEY et al., Appellants, v. HOUSTON STATE BANK, Appellee. (14th Dist.) |
| Court | Texas Court of Appeals |
Gary D. Mathews, Larry R. Jones, Law Offices of W. Harold Sellers, Houston, for appellants.
William E. Wylie, James Elder, III, Charles B. Wolfe, Brown & Wylie, Houston, for appellee.
Before CURTISS BROWN, C. J., and COULSON and MILLER, JJ.
This is an appeal by R. B. Bradley, Stephen D. Spencer, T. S. Terry (appellants), and Spencer, Terry/Padgett & Associates, Inc. (corporate appellant), from a directed verdict in favor of appellee Houston State Bank (the Bank) in a suit based upon appellants' claims of usury, fraud, and breach of contract. We affirm the judgment of the trial court.
Appellants Bradley, Spencer and Terry approached appellee Houston State Bank in May or June of 1974 for the purpose of obtaining a loan in order to move their indebtedness in the amount of $60,000.00 from Spring Branch State Bank. Houston State Bank made a loan in that amount to appellant Spencer, Terry/Padgett & Associates, Inc., a corporation, at an interest rate of 12% Per year. Appellant Terry executed the promissory note on behalf of the corporation, as its president, and the three individual appellants, Terry, Spencer and Bradley, signed as individual guarantors of the corporation's note. Under the agreement between the Bank and appellants this ninety-day note was reduced by ten percent of the original principal amount at the end of ninety days and a renewal note was executed for the remaining amount due on the principal plus interest. The $60,000.00 amount was eventually reduced to $36,000.00 and a renewal note for that amount was executed in June of 1975. This note was due to be paid in September of 1975 but at that time appellants were unable to make the necessary $6,000.00 payment on the principal. The Bank agreed to accept a payment of interest only and a new note bearing the principal amount of $36,000.00 was executed in October. No payment was made on this note when it was due in December of 1975 and the Bank made demand for payment of the total amount of the note.
When payment was not forthcoming the Bank filed suit against appellants to collect the $36,000.00 plus interest and attorney's fees. Appellants filed an answer to this lawsuit and a counterclaim against the Bank claiming usury as a defense. Appellants and the Bank entered into negotiations which culminated in an agreement executed in June of 1976. Under the terms of this document the Bank agreed to advance the sum of $40,475.00 to the individual appellants, Terry, Bradley and Spencer, to fully satisfy the $36,000.00 note, with interest, of Spencer, Terry/Padgett & Associates, Inc. Terry, Bradley and Spencer in return executed a promissory note in favor of the Bank in the total amount of $40,475.00 (the $40,000.00 note). This note bore interest at the annual rate of 81/2% And was secured, under a security agreement, by a promissory note in the principal sum of $45,000.00 executed by two doctors and payable to a limited partnership owned by the individual appellants (the doctors' note or the collateral note). The Bank further agreed to dismiss its lawsuit against appellants on their $36,000.00 note.
The first payment on the $40,000.00 note was due on August 1, 1976 but was not made by appellants. Thereupon the Bank made demand upon appellants for the entire balance due on that note. Appellants did not pay the note and the Bank posted notice of its intent to sell the collateral note. At this point appellants arranged with River Oaks Bank and Trust Company (River Oaks Bank) to obtain appellants' notes from Houston State Bank to prevent the sale of the collateral note. The Bank required payment for the total due on appellants' $40,000.00 note, for the total due on appellant Terry's individual note in the principal sum of $3,600.00 and payment of $4,130.35 for attorney's fees.
The Bank having dismissed its suit against appellants on the original promissory note, trial was subsequently had upon appellants' second amended original counterclaim based upon fraud, usury, and breach of contract. At the close of appellants' evidence the Bank made a motion for a directed verdict which was granted by the trial court. Judgment was entered that appellants take nothing against the Bank. Appellants appeal from that judgment.
Appellants' first two points of error contend that the trial court erred in excluding evidence of fraudulent misrepresentations made to them by the Bank which are alleged to have induced appellants to execute the agreement settling their counterclaim on the original note and releasing all their claims of usury based on that note, as well as inducing them to execute the new note. Appellants further contend that such fraudulent misrepresentations caused them to sell certain real property at a price well below its actual value and to suffer damages thereby. The evidence which appellants claim would prove fraud consisted of testimony by appellant Terry as to what he was told by the Bank concerning payment of the new note. In substance he testified that the Bank, in settlement of the Bank's claim against appellants, informed them that it would accept a note from the two doctors as collateral, that the Bank would use the funds from payment of that note to reduce the indebtedness of appellants on their new note, and that the due date upon appellants' note would be the same as the due date on the doctor's note to appellants so that they would coincide. Terry further stated that, relying upon such representations by the Bank, appellants sold their interest in ranch property to the doctors at a price below its market value in order to obtain such a note from the doctors to be given as collateral to the Bank.
This testimony was excluded from evidence on objection that it violated the parol evidence rule. Appellants contend that the evidence was admissible under the Texas rule that parol evidence is admissible, although it may contradict the terms of a written agreement, to prove that the agreement was induced by fraud. Dallas Farm Machinery v. Reaves, 158 Tex. 1, 307 S.W.2d 233 (1957); Instant Credit Service, Inc. v. McClanahan, 497 S.W.2d 954 (Tex.Civ.App. Austin 1973, writ dism'd).
The Supreme Court of Texas has recently held that "the mere representation by a payee to the maker (of a promissory note) that the maker will not be liable on the note does not constitute fraud in the inducement so as to be an exception to the parol evidence rule" without a showing of some additional type of trickery, artifice, or device employed by the payee. Town North National Bank v. Broaddus, 569 S.W.2d 489, 492 (Tex.Sup.1978). In the case before us appellants' own evidence discloses that the Bank did not make representations that appellants would not be liable on the note. Statements that payments on the collateral note would be applied to appellants' note, even indulging every inference to be drawn therefrom in favor of appellants, does not amount to a representation that appellants would not be liable for payment of their note in the event that no payments were made on the collateral note. The evidence was properly excluded under the parol evidence rule.
Appellants argue that the Bank made fraudulent representations as to the time of payment of the two notes because, although the payment dates on both notes were the same, the collateral note contained a provision for a ten-day grace period within which payment could be made by the doctors without the note being in default whereas appellants' note to the Bank contained no such provision. We observe that the collateral note was prepared by appellants and that appellants were represented by counsel at all times material to the formation of the notes and agreements with the Bank and no reference was made to the addition of such provision. We find no misrepresentation in the provisions for time of payment of the note.
Appellants' next points of error deal with the exclusion of evidence that the Bank required, as a condition to making the $40,000.00 loan at an interest rate of 81/2%, that a $20,000.00 "compensating balance" be maintained on deposit with the Bank. Appellants argue that this evidence was admissible under the Texas rule that parol evidence is admissible for the purpose of showing usury. We find however that, under the facts of this case, the requirement that a compensating balance be maintained with...
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