Coppedge v. Colonial Sav. & Loan Ass'n
| Decision Date | 03 December 1986 |
| Docket Number | No. 05-86-00039-CV,05-86-00039-CV |
| Citation | 721 S.W.2d 933 |
| Parties | Mark T. and Wendy COPPEDGE, Appellants, v. COLONIAL SAVINGS & LOAN ASSOCIATION, Appellee. |
| Court | Texas Court of Appeals |
Joseph G. Chumlea, Dallas, for appellants.
C. Victor Anderson, Jr., Carvan E. Adkins, Tim G. Sralla, Fort Worth, for appellee.
Before AKIN, DEVANY and HOWELL, JJ.
Mark and Wendy Coppedge appeal from a summary judgment granted against them on their claim against Colonial Savings & Loan Association to recover for usurious interest charged and received by Colonial. The Coppedges contend that the trial court erred in granting Colonial's motion for summary judgment and in overruling theirs because Colonial charged and received usurious interest from the Coppedges. Consequently, they argue that they are entitled to statutory penalties and attorney fees, as well as common-law damages, as a matter of law. We agree with the Coppedges that they were entitled to summary judgment on their claims for statutory usury penalties and remand the cause for determination of proper attorney's fees to be awarded them. We do not agree, however, that they are also entitled to common-law recovery for usury in addition to the statutory penalties. Consequently, we affirm the trial court's judgment as to their common-law cause of action.
The Coppedges borrowed money from Colonial in 1977 to purchase a home. The promissory note, secured by a deed of trust on the home, provided for interest at the rate of 9.375% per annum, payable in 359 monthly payments. The parties have stipulated to the following figures:
Total interest under note over 359-month term ..... $173,497.97
Maximum legal amount that could have been
contracted for, charged or received under
note for 359-month term (at 10%) ................. 187,857.70
Actual period Coppedges had use of the funds ....... 67 months
Total amount of interest received by Colonial
(excluding the $9,100.00 payment here in
controversy) ..................................... $45,592.77
Maximum legal amount of interest that could have
been received by Colonial over the 67 months ...... 48,749.00
During 1983, the Coppedges contracted to sell their house to a third party. The transaction called for the prepayment of the Coppedges' note payable to Colonial. The closing occurred on September 30, 1983. Colonial notified the title company handling the transaction to withhold from the sale proceeds the sum of $9,100 over and above the principal balance plus accrued interest. It appears that Colonial premised its claim to the $9,100 upon a contention that the Coppedges had violated the due-on-sale provision in the deed of trust that secured the note. When the Coppedges protested the withholding, the title company escrowed the $9,100.
On November 10, 1983, an attorney representing Colonial sent a letter to the Coppedges containing the following language:
You should consider this letter to be a demand letter for back interest in the amount of $9,100.00 plus attorneys' fees and court costs, if any. Please be advised that this demand letter is made in order to fulfill the statutory requirements for filing of a lawsuit if this matter is not resolved to our satisfaction.
At Colonial's request, the escrow agent delivered the $9,100 to Colonial. On November 18, 1983, the Coppedges' attorney wrote to Colonial's attorney demanding that Colonial cease charging the $9,100 additional interest and threatening to file suit if Colonial persisted. Eight months later, in July 1984, Colonial returned the $9,100 plus interest to the Coppedges. The Coppedges cashed the check and then filed this lawsuit.
The note in this case was, under the facts stipulated by the parties, not usurious. The Coppedges contend, however, that Colonial "charged and received" usurious interest when it demanded the additional sum of $9,100 as interest in September and November of 1983 and caused that amount to be delivered to Colonial from the escrow account at the title company. If the $9,100 was interest, and no exception contained in the usury statute applies, then Colonial received $5,943.77 in usurious interest (total amount of interest received for 67 months--$54,692.77--less maximum legal amount stipulated to by the parties--$48,749.00), and is subject to the penalties for usury permitted by law.
We first must determine whether the $9,100 was in fact interest. Interest is the compensation allowed by law for the use, forbearance, or detention of money. Tex.Rev.Civ.Stat.Ann. art. 5069-1.01(a) (Vernon 1971). Through its attorney, Colonial demanded $9,100 as "back interest" due as a result of the Coppedges' alleged breach of the due-on-sale clause in the deed of trust that secured their loan from Colonial. Although the label "back interest" is not controlling, see Gonzales County Savings & Loan Association v. Freeman, 534 S.W.2d 903, 906 (Tex.1976), the factual basis for Colonial's claim to the $9,100 indicates that Colonial sought that sum as additional compensation for the Coppedges' use of its money. Moreover, the fact that the Coppedges repaid the loan before Colonial demanded and received the $9,100 does not change the nature of that sum as compensation demanded in connection with the original real estate loan. The fact that a loan has been repaid does not ipso facto preclude a lender from asserting a charge for delinquent, or "back," interest under that loan. We also reject Colonial's argument that the $9,100 charge was not interest to the extent that Colonial used a portion of it to pay its attorney's fees. Had Colonial's demand letter identified a part of the $9,100 as being for attorney's fees, a fact issue might have been raised. However, the letter unambiguously identified the entire sum as "back interest" and stated that an additional sum would be sought for "attorneys' fees and court costs, if any." Colonial's actual use of the $9,100 is irrelevant, and its belated attempt to show that part of the amount demanded was to pay attorney fees does not bring it within the "services rendered in connection with the loan" exception to the usury statutes. See Nevels v. Harris, 129 Tex. 190, 102 S.W.2d 1046, 1048 (1937). Thus, we hold that the $9,100 that Colonial demanded and received from the Coppedges constituted interest within the statutory definition. Further, according to the parties' fact stipulations, the $9,100 interest was usurious in the amount of $5,943.77.
Our next question is whether the actions of Colonial and its attorney violated the statutory proscription against charging or receiving usurious interest. Under article 5069-1.06, the term "charges" means the unilateral act of placing on an account an amount due as interest. See Windhorst v. Adcock Pipe and Supply, 547 S.W.2d 260, 261 (Tex.1977). The unilateral act can be a debiting of an amount due or an act by the lender constituting a demand for payment, e.g., the inclusion of usurious interest in a statement of indebtedness submitted to the debtor. Concrete Construction Supply, Inc. v. M.F.C., Inc., 636 S.W.2d 475, 477 n. 1 (Tex.App.--Dallas 1982, no writ). Thus, the demand letter sent by Colonial's attorney constituted a "charge" of interest by Colonial. See Mecey v. Seggern, 596 S.W.2d 924, 927 (Tex.Civ.App.--Austin 1980, writ ref'd n.r.e.). Further, Colonial "received" usurious interest when it collected the $9,100 from the parties' escrow agent. Accordingly, we conclude that Colonial violated article 5069-1.06 by both charging and receiving usurious interest from the Coppedges.
Nevertheless, Colonial seeks protection from the statutory penalties under the first sentence of article 5069-1.07(a), which codifies the spreading doctrine set forth in Nevels v. Harris, 129 Tex. 190, 102 S.W.2d 1046 (1937). See Tanner Development Co. v. Ferguson, 561 S.W.2d 777, 786 (Tex.1977); see also Conte v. Greater Houston Bank, 641 S.W.2d 411, 415 (Tex.App.--Houston [14th Dist.] 1982, writ ref'd n.r.e.). Article 5069-1.07(a) provides as follows:
(a) On any loan or agreement to loan secured or to be secured, in whole or in part, by a lien, mortgage, security interest, or other interest in or with respect to any interest in real property, determination of the rate of interest for the purpose of determining whether the loan is usurious under all applicable Texas laws shall be made by amortizing, prorating, allocating, and spreading, in equal parts during the period of the full stated term of the loan, all interest at any time contracted for, charged, or received from the borrower in connection with the loan. However, in the event the loan is paid in full by the borrower prior to the end of the full stated term of the loan and the interest received for the actual period of the existence of the loan exceeds the maximum lawful rate, the lender contracting for, charging, or receiving all such interest shall refund to the borrower the amount of the excess or shall credit the amount of the excess against amounts owing under the loan and shall not be subject to any of the penalties provided by law for contracting for, charging, or receiving interest in excess of the maximum lawful rate.
Tex.Rev.Civ.Stat.Ann. art. 5069-1.07(a) (Vernon Supp.1986) (emphasis added). By enacting article 5069-1.07(a), the legislature adopted the spreading doctrine with respect to loans secured by a lien on any interest in real property. Thus, it applies in this action. The doctrine spreads "all interest at any time contracted for, charged, or received" in connection with the loan over the contractual term of the loan for the purpose of determining whether it is usurious. Tex.Rev.Civ.Stat.Ann. art. 509-1.07(a) (Vernon Supp.1986).
The stated term of Colonial's loan to the Coppedges was 359 months. When the total amount of interest contracted for, charged, or received by Colonial, including the $9,100 in dispute, is spread over the 359-month period, the transaction is...
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