Danziger v. San Jacinto Sav. Ass'n, 01-84-0701-CV
| Decision Date | 16 January 1986 |
| Docket Number | No. 01-84-0701-CV,01-84-0701-CV |
| Citation | 708 S.W.2d 1 |
| Parties | Joseph B. DANZIGER, et. ux., Appellants, v. SAN JACINTO SAVINGS ASSOCIATION, Appellee. (1st Dist.) |
| Court | Texas Court of Appeals |
Michael C. O'Connor, O'Connor, Wisner & Craig, Houston, for appellants.
Gregory N. Jones, Hill, Parker, Franklin, Cardwell & Jones, Houston, for appellee.
Before JACK SMITH, DUGGAN and HOYT, JJ.
This is a usury suit filed by the appellants claiming violations of the Texas Consumer Credit Code and the Federal Truth-In-Lending Act. The trial court held that the appellee had not contracted for, charged, or received usurious interest and had not violated the Federal Truth-In-Lending Act. A take-nothing judgment was entered.
The appellants made arrangements with the appellee to enter into a contract for a home improvement loan. On August 5 1980, the promissory note and other papers attendant to the loan were executed. All of the instruments were dated August 5 except the promissory note which was dated July 30.
The contract provided for a 180 month home improvement loan in the principal sum of $39,350. The 8 percent add-on interest computed to 12.34 annual interest or the sum of $47,217.40. The promissory note provided that it could be prepaid at any time and a rebate of any unearned finance charges would be made under the Rule of 78's. At the time the contract was executed, the appellee's loan officer informed the appellants that the loan proceeds would be escrowed.
The first advance to the contractor was made on August 5, 1980, and the last advance was made on June 25, 1981.
On approximately May 18, 1982, the appellants requested a written payoff quote on the loan. The appellee showed the amount at $38,941.55; however, the appellants did not attempt to pay off the note.
In their second point of error, the appellants contend that there is no evidence or insufficient evidence to support the trial court's finding that the loan proceeds were placed in an escrow account for the appellants' use and benefit. Alternatively, they contend that the trial court erred in holding as a matter of law that any such account was bona fide since the appellee had sole control over the loan proceeds until they were actually advanced to the appellants or their contractor.
The only evidence in the record regarding the existence of an escrow account came from Mr. Danziger, who testified that the appellee's loan officer had told him that the money would be placed in escrow. He further testified that on the day he signed the note, he knew that the proceeds would be transferred into an account that was to be used for the appellants' home improvements.
To prevail in the instant case, it was incumbent upon the appellants to prove that there was (1) a loan of money, (2) an absolute obligation that the principal be repaid, and (3) an exaction of a greater compensation than allowed by law for the use of the money by the borrower. Holley v. Watts, 629 S.W.2d 694, 696 (Tex.1982). In the instant case, the appellants are alleging that there was not an escrow account. Accordingly, it was their burden to disprove the existence of such an account. Since the only evidence in the record is the testimony of the appellant, which tended to show that there was an account, the appellants have failed to meet their burden. If a party has the means and opportunity to disprove testimony, and fails to do so, then that party may be bound by the testimony. Walker v. Ross, 548 S.W.2d 447, 453 (Tex.Civ.App.--Fort Worth), writ ref'd n.r.e. per curiam, 554 S.W.2d 189 (Tex.1977).
The appellants alternatively argue that the appellee was not entitled to accrue interest because the appellee had control over the money. The record does not support this allegation. After the loan proceeds were escrowed, periodic disbursements were made, rather than a lump sum payment to the contractor, to insure that the contractor's work was satisfactory. The appellee would not approve an advance until there had been an inspection of the premises to verify that the contractor's work was satisfactory and had been performed as stated by the contractor. The appellants agreed to this procedure. The contractor testified that the appellants were happy with this arrangement, notwithstanding their testimony to the contrary.
The appellants reliance on First State Bank v. Miller, 563 S.W.2d 572 (Tex.1978) is misplaced. In Miller, the bank made a loan, placed the loan proceeds in the borrower's account, and then froze $14,000.00 of the loan proceeds to insure repayment of interest on the loan. The bank then continued to lend the frozen $14,000.00 to other bank customers. The Texas Supreme Court held that since the money was "frozen" in the borrower's account, it should be deducted in determining the amount of the principal. Id. at 573-77. The Miller decision was based upon the fact that the bank had exercised control over and had use of the frozen funds; not the fact that they were placed in escrow. Id. at 573. In the instant case, there is evidence that the appellants, because of the terms of the construction contract, had the use of the borrowed money, and there is no evidence that the appellee used the money on loans to other bank customers.
Finally, the appellants contend that the appellee's argument, that interest should not accrue on the loan proceeds because they were placed in an escrow account, completely contradicts the appellee's complicated procedure to rebate interest accrued on loan proceeds that were not advanced. This conclusory statement by the appellants has not been developed. Since no specific facts have been recited or cases cited to support the contention, we consider this argument waived. Tex.R.Civ.P. 414.
The appellants' second point of error is overruled.
In their first and third points of error, the appellants contend that the appellee had contracted for and charged usurious interest as a matter of law. They also contend that there is no evidence or insufficient evidence to support the trial court's finding of fact and conclusion of law that the appellee had not contracted for and charged interest in excess of 8% add-on per annum.
The parties agree that the loan in the instant case was made under the authority of the Texas Consumer Credit Code. Tex.Rev.Civ.Stat.Ann. art. 5069-5.01 (Vernon 1971). They also agree that since there was already a purchase money mortgage on the appellants' home at the time the loan was made, the instant loan was a "secondary mortgage loan" as defined in Art. 5069-5.01. They further agree that Art. 5069-5.02 permits an add-on interest charge on a secondary mortgage loan in the amount of $8.00 per $100.00 per annum for the full term of the loan. Tex.Rev.Civ.Stat.Ann. art. 5069-5.02(2) (Vernon 1971). The parties initially disagreed on the construction to be placed on Art. 5069-5.02(2). That section of the article states as follows:
(2) [i]nterest authorized in Section (1) of this Article shall be computed on the cash advance at the time the loan is made for the full term of the loan contract notwithstanding the requirement of the loan contract for payment in substantially equal regular monthly installments and shall be computed on the basis of a full month for any fractional period in excess of fifteen days. Interest authorized by Section (1) of this Article shall be added to the cash advance and said sum shall be the amount of the loan.
The appellants construe Article 5069-5.02(2) to authorize only a single advance loan with interest to be calculated only as specified in sec. (1) of Article 5069-5.02. They characterize the loan in the instant case as a multiple advance loan and allege that it is in clear violation of Chapter 5. On the other hand, although the appellee does not dispute that this section authorizes only single advancement loans, it does take issue with the appellant in characterizing the loan as a multiple advance loan.
Interest authorized under section 1 of the article is computed on the cash advance at the time the loan is made for the full term of the loan contract. The term "cash advance" is defined in the Code as the amount of cash or its equivalent that the borrower actually receives, including that which is paid out at his direction or request, on his behalf, or for his benefit. Tex.Rev.Civ.Stat.Ann. art. 5069-2.01(g) (Vernon 1971).
The evidence adduced at trial shows that the appellants were interested in making improvements to their home. On July 18, 1980, the appellants entered into a contract with Thomas M. Lammers to make such improvements for a total price of $39,350.00. The agreement stated:
Thereafter, the appellants contacted the appellee and made arrangements for the loan that is the basis of this lawsuit. Although the promissory note signed by the appellants is dated July 30, 1980, the parties all agree that the loan was consummated on August 5, 1980. The explanation for the note being dated July 30, 1980, is that such is the date the documents were prepared or it is the date that the person who prepared the documents was told that they were to be executed. According to the mechanic's and materialman's lien executed by the appellants and Mr. Lammers, the appellee, at the special instance and request of the appellants, was to pay the loan proceeds to the contractor in accordance with the plans and specifications agreed upon between the parties in the contract dated July 15, 1980.
We conclude that when the loan proceeds were placed in the escrow account, with the appellants acknowledging the receipt of the funds and giving instructions as to the manner in which they were to be paid out, that this constituted a "cash advance" as defined in Article 5069-2.01(g). We further conclude that the loan...
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Danziger v. San Jacinto Sav. Ass'n
...the Federal Truth-In-Lending Act or Regulation Z, and rendered judgment that the Danzigers take nothing. The court of appeals affirmed. 708 S.W.2d 1. We reverse and render in part and remand in The Danzigers entered into a contract with San Jacinto for a home improvement loan in the princip......