Carder v. Knippa Mercantile Co.

• Decision Date: 19 October 1927
• Docket Number: (No. 7823.)
• Citation: 1 S.W.2d 462
• Parties: CARDER v. KNIPPA MERCANTILE CO.
• Court: Texas Court of Appeals

1 S.W.2d 462

CARDER v. KNIPPA MERCANTILE CO.

(No. 7823.)

Court of Civil Appeals of Texas. San Antonio.

October 19, 1927.

Rehearing Denied January 4, 1928.

Appeal from Uvalde County Court; Green B. Fenley, Judge.

Action by J. I. Carder against the Knippa Mercantile Company. Judgment for defendant, and plaintiff appeals. Affirmed.

Atlas Jones, of Uvalde, for appellant.

Ditzler H. Jones, of Uvalde, for appellee.

SMITH, J.

This action was brought by appellant, J. I. Carder, to recover of appellee certain items of alleged usurious interest, as well as for damages alleged to have been sustained by appellant when appellee refused to honor certain drafts drawn against it by appellant. The trial court directed a verdict against appellant upon the issue of usury, and the jury found against him upon the issue of damages.

It appears that appellee operates a general merchandise and supply store in the town of Knippa, that appellant has been a credit customer of the store for several years, and that appellee, from year to year, advanced provisions, supplies, and money on open account to appellant in his somewhat extensive farming operations. From time to time as the open account accumulated it would be covered by appellant's notes, secured by mortgages upon his personal property and crops. For the crop season of 1925-1926 appellant gave appellee his note for amounts then due and executed a chattel mortgage to secure the existing debt and advances to be made by appellee to him during the ensuing season. Subsequently, and during that crop season, appellee raised the question of whether it could continue to extend credit to appellant during the remainder of the year, and as a result of the discussion of the matter appellant agreed to and did in pursuance of that agreement prepare and plant 100 acres of oats for appellee without charging the latter for such service. At the end of the year appellant fully paid off the notes and open account due appellee, who canceled the notes and released the mortgages it held against appellant. Subsequently this suit was brought.

It appears from the record that in computing the amounts of appellant's open accounts appellee included interest upon said accounts at the rate of 10 per centum per annum from the dates of the accrual of the various items, and these interest items were added to the principal and included in the notes, which were made to bear 10 per cent. interest from date. By this system appellant was obligated to and did in fact pay 10 per cent. interest on his purchases from the respective dates thereof. Appellant was not aware of this system, and at the times he executed and paid the notes he had no actual knowledge of the fact that he was obligating himself to pay these interest items, or that he was in fact paying them. When he subsequently discovered the fact, he brought this suit upon the contention that, in charging and collecting from him 10 per cent. interest upon the open account, appellee had violated the provisions of the usury statute, entitling him to recover the statutory penalty for such infraction.

The constitutional inhibition against usury condemns "all contracts for a greater rate of interest than ten per centum per annum" as usurious, "but when no rate of interest is agreed upon, the rate shall not exceed six per centum per annum." Article 16, § 11. This provision is self-executing to the extent only of rendering usurious contracts illegal, and to the Legislature was delegated the power and duty of fixing penalties for violations of the constitutional provision. Hemphill v. Watson, 60 Tex. 679; Quinlan's Estate v. Smye, 21 Tex. Civ. App. 156, 50 S. W. 1068. But, in any event the constitutional provision was not contravened in this case, in so far as it is claimed that interest was charged upon an open account, for it is conceded that that charge did not exceed 10 per centum of the principal debt. So, appellant is relegated to the penalties fixed by the Legislature in response to the constitutional mandate.

The Legislature defined "interest" as "the compensation allowed by law or fixed by the parties to a contract for the use or forbearance or detention of money." "Legal interest" is defined as "that interest which is...