Dallas Trust & Savings Bank v. Brashear

• Citation: 39 S.W.2d 148
• Decision Date: 17 February 1926
• Docket Number: No. 6936.,Motions No. 6173.,Motions No. 6174.,6936.
• Parties: DALLAS TRUST & SAVINGS BANK et al. v. BRASHEAR.<SMALL><SUP>*</SUP></SMALL>
• Court: Court of Appeals of Texas

39 S.W.2d 148

DALLAS TRUST & SAVINGS BANK et al. v. BRASHEAR.^*

No. 6936.

Motions No. 6173.

Motions No. 6174.

Court of Civil Appeals of Texas. Austin.

February 17, 1926.

Rehearing Denied June 10, 1931.

Appeal from District Court, Milam County; John Watson, Judge.

Action by J. C. Brashear against the Dallas Trust & Savings Bank and others. Judgments for plaintiff, and defendants appeal.

Affirmed in part, and in part reversed and rendered.

Cockrell, McBride, O'Donnell & Hamilton, of Dallas, for appellants.

W. A. Morrison, of Cameron, for appellee.

BLAIR, J.

Appellee sued appellants to recover double the amount of alleged usury claimed to have been paid them upon a written loan agreement between him and the appellant, Dallas Trust & Savings Bank, dated May 17, 1921, alleged to be usurious in its incipiency. He also sought to cancel all future interest accruing on the loan contract, as well as to cancel the deed of trust lien on the land, in so far as it secured future interest, and to enjoin record holders of all the principal loan notes from declaring their option under the loan agreement to mature them for failure to pay annual installments of future interest.

The pleadings admittedly present the true facts relating to the loan agreement. It was for $3,000, on what was termed a ten-year loan contract, bearing 9 per cent. interest per annum from date, but appellant Dallas Trust & Savings Bank prepared and required appellee to execute four notes, Nos. 1 to 4, both inclusive, the first three for $200 each, and due May 1, 1923, 1924, and 1925, respectively, and the fourth for the sum of $2,400 due May 1, 1931, which notes represented the principal loan. These notes provided for interest at the rate of 7 per cent. per annum from date, payable at Dallas, Tex., on the 1st day of May for each of the ten years, and provided for 10 per cent. interest on principal and interest after maturity. They were secured by a deed of trust representing the first lien upon 79 3/8 acres of land owned by appellee in Milam county. For the remaining 2 per cent. interest due under the loan agreement appellant bank prepared and required appellee to execute on the same date of the principal notes, May 17, 1921, five notes designated on their face as "interest notes," Nos. 1 to 5, both inclusive, due May 1, 1922, 1923, 1924, 1925, and 1926, respectively, the first three being for the sum of $102.67 each, and the last two for the sum of $102.66 each, and providing for 10 per cent. interest after maturity. These notes were secured by a second deed of trust lien upon the same land securing the principal loan, and provided for acceleration of maturity for all the notes in case of default in payment of any one of them. The nine notes and the two deeds of trust securing them represented one complete transaction with reference to the $3,000 loan. Three payments were made by appellee on the loan contract in the following manner:

On September 9, 1922, to Dallas Trust & Savings Bank, the sum of $314.10, representing interest on the $3,000 principal loan for first year loan contract.

On January 23, 1924, the appellant United States Bond & Mortgage Company to whom appellant Dallas Trust & Savings Bank had sold and transferred the four remaining interest notes, sued appellee in the district court of Dallas county, Tex., on those notes, having declared them due under the acceleration of maturity provision of the deed of trust securing them, and obtained a default judgment for the sum of $467.07, of which amount $434.29 represented interest as evidenced by the four notes. On May 2, 1924, appellee was compelled to pay this judgment to avoid a sheriff's sale of the land securing the notes.

About May 1, 1924, he paid appellant Connecticut General Life Insurance Company, to whom appellant Dallas Trust & Savings Bank had sold and transferred all the principal loan notes, the total sum of $847, representing principal loan notes Nos. 1 and 2, each for $200, and $447 as interest due for second and third years of contract on $3,000 principal loan notes.

Appellee alleged that these payments constituted payment of usury as a matter of fact, since he paid $1,234.28 for use of the $3,000 less than three years, whereas $900 or less was the total that could have been legally demanded.

Appellants addressed a general demurrer to all appellee's pleadings, which was overruled, and a plea in abatement to the effect that the judgment pleaded by appellee as a partial basis of his usury claim was res adjudicata of all matters and things sought to be recovered by him in this suit.

The case was tried to the court without the intervention of a jury, and separate judgments were rendered for appellee against each of the appellants as follows: Against Dallas Trust & Savings Bank for $627.80, which is a few cents less than double the amount of $314.10 that it collected as interest for the first year of the loan contract. Against United States Bond & Mortgage Company for $864.58, which is double the sum of $434.29 collected as interest on its judgment and foreclosure proceedings against appellee. Against Connecticut General Life Insurance Company for $894, which is double the $447 paid as interest to it on May 1, 1924.

The appeal presents generally but two questions, which are as follows: (1) Is the loan contract an usurious one on its face or in its inception? (2) Is the judgment pleaded by appellee as a partial basis of his claim for usury res adjudicata of all matters and things sought to be recovered by him in this suit?

The first question must be answered in the affirmative. The contract is usurious on its face or in its incipiency because it exacts of the borrower more than 10 per cent. per annum for each of the first five years of the loan, and, of course, exacts a total payment of interest in excess of 10 per cent. per annum for the first five years of the loan contract. An analysis of the loan contract and the various payments exacted by it of the borrower condemns it in its incipiency as an usurious one. It is true as contended by appellants that for the remaining five years of the loan contract there will be collected only seven per cent. interest per annum on $2,400, or $168 annually, a total of $840, which if added to the $1,479.33 interest collected for the first five years would make a total sum of $2,319.33, or about 9 per cent. for the entire period of the loan contract. But the vice in the contract as written is the fact that it exacts more than 10 per cent. per annum for each of the first five years of the loan.

Article 16, § 11, of the state Constitution, and articles 4979 and 4980, R. S., enacted pursuant to the constitutional provision, declare all contracts whatsoever which may in any way, directly or indirectly, stipulate for a greater rate of interest than 10 per cent. per annum to be void to the amount or value of the interest.

The Supreme Court held in Galveston & H. Investment Co. v. Grymes, 94 Tex. 609, 63 S. W. 860, 64 S. W. 778, that, to determine the question of usury in a contract, it must be tried by the statutory limitation of 10 per cent. per annum for the use, forbearance, or detention of the money for one year.

Appellants rely principally upon the case of Shropshire v. Commerce Farm Credit Co. (Tex. Civ. App.) 266 S. W. 615, to support their contention that the loan contract was not usurious when made, insisting that their loan contract is practically identical with the one in the Shropshire Case, and that the opinion in that case is sound and logical and supported by the great weight of authority. But in view of the fact that the Commission of Appeals, on February 10, 1926, 280 S. W. 181 (opinion not yet [officially] published) reversed and rendered the Shropshire Case, holding the loan contract there presented usurious in its incipiency, we feel that further discussion is unnecessary in support of our conclusion that the contract here involved was usurious in its incipiency. Appellants' mode and manner of enforcing the loan leaves no doubt but that they received the various payments as interest. Besides, the contract speaks for itself with respect to whether the payments were intended as interest, and, since they are wholly responsible...