Delta Enterprises v. Gage, 17800

• Decision Date: 01 September 1977
• Docket Number: No. 17800,17800
• Parties: DELTA ENTERPRISES, a Joint Venture, Appellant, v. Coke L. GAGE, Appellee.
• Court: Texas Court of Appeals

Page 555

555 S.W.2d 555

DELTA ENTERPRISES, a Joint Venture, Appellant, v. Coke L. GAGE, Appellee.

No. 17800.

Court of Civil Appeals of Texas, Fort Worth.

Sept. 1, 1977.

Rehearing Denied Sept. 29, 1977.

Day & Day, and Marshall Day, Fort Worth, for appellant.

James S. Robertson, Jr., Dallas, for appellee.

OPINION

SPURLOCK, Justice.

This case involves a question of usury. Delta Enterprises, a Joint Venture, instituted this suit against Coke L. Gage to recover the statutory penalties under art. 5069-1.06, ¹ for Gage's alleged contracting, charging and receiving interest in excess of double the amount allowed by law. Delta sought judgment against Gage for (1) the amount of principal paid, (2) double the amount of interest paid, (3) cancellation of the balance of the indebtedness, (4) cancellation and release of the deed of trust liens, and (5) attorney's fees. In response to special issues, the jury determined that certain sums of money totaling $17,336.59 and $26,940.00 paid by Delta to Gage did not constitute "interest," and it also found that Delta did not tender to Gage the sum of $211,095.55 representing the balance due on two promissory notes. On these findings, the trial court rendered a take-nothing judgment against Delta from which Delta has perfected this appeal.

We affirm.

Delta is a joint venture engaged in the buying and selling of real estate. Gage is involved in the same business activity. On June 7, 1971, Delta and Gage entered into two written option contracts, whereby Gage granted Delta three-year options to purchase two tracts of land in Wise County, Texas. Delta paid $13,500 for the two options. It is the wording of these two options that has given rise to the instant lawsuit. The paragraphs in dispute in the two option contracts read as follows:

"2. The cash price to be paid by Purchaser for said real estate in the event this option is exercised is One Hundred Fifty Thousand Dollars ($150,000.00), of which the sum of Ten Thousand Dollars ($10,000.00) is to be paid in cash upon the exercise of this option, and the balance of One Hundred Forty Thousand Dollars ($140,000.00) is to be paid in accordance with Purchaser's one certain promissory note dated as of June 7, 1971, payable to the order of Seller at Decatur, Wise County, Texas, on or before ten (10) years after date, bearing interest from date at the rate of 7 per cent per annum, providing for the payment of.$1000.00 per year on principal plus interest commencing 1 year from closing date, with the entire balance of principal and interest due on or before 10 years from closing. Said note is to be secured by vendor's lien and additionally secured by deed of trust with the usual provisions as to acceleration of maturity in event of default." (Emphasis added.)

"2. The cash price to be paid by Purchaser for said real estate in the event this option is exercised is One Hundred Twenty Thousand Dollars ($120,000.00), of which the sum of Ten Thousand Dollars ($10,000.00) is to be paid in cash upon the exercise of the option, and the balance of One Hundred Ten Thousand Dollars ($110,000.00) is to be paid in accordance with Purchaser's one certain promissory note dated as of June 7, 1971, payable to the order of Seller at Decatur, Wise County, Texas, on or before ten (10) years after date, bearing interest from date at the rate of 7 per cent per annum, providing for the payment of.$1000.00 per year on principal plus accrued interest commencing 1 year from date of closing, with the entire balance of principal and interest due on or before 10 years from date. Said note is to be secured by vendor's lien and additionally secured by deed of trust with the usual provisions as to acceleration of maturity in event of default." (Emphasis added.)

In June of 1973, Delta decided to exercise its option to purchase one of the tracts of land covered by one of the options. By letter on June 27, 1973, Gage's attorney instructed the title insurance company (which prepared the closing statements) regarding the collection of "interest on the purchase price" from the June 7, 1971 date of the purchase of the option to June 30, 1973, the date set for closing the sale. In that letter, Gage's attorney wrote:

"I believe the option agreement is clear and it was Coke's intention that the interest on the purchase price was to commence as of the date of the option, being June 7, 1971. Accordingly, he will insist that upon closing you collect from Delta Enterprises interest at the rate of 7% per annum from June 7, 1971 to June 30, 1973, which sum will be in addition to the $10,000.00 in cash payment on principal provided in the option agreement."

The sale of the first tract of land was completed on June 30, 1973. On that date, Delta (1) paid $10,000.00 in cash, supposedly as a down payment on the purchase price, (2) paid $17,336.59 which the parties called "interest," and (3) gave Gage a promissory note in the amount of $110,000.00 dated January 1, 1973, bearing interest at seven per cent per annum payable in annual installments commencing June 7, 1974.

The sale of the other tract of land was closed on December 31, 1973. At that time, Delta (1) paid $10,000.00, supposedly as a down payment on the purchase price, (2) paid $26,940.00 which the parties called "interest," and gave Gage a promissory note in the amount of $140,000.00 dated December 31, 1973, bearing interest at seven per cent per annum payable in annual installments commencing December 31, 1974.

It is the sums of $17,336.59 and $26,940.00 that Delta paid to Gage at the time of exercising the respective options that form the basis of Delta's claim for the penalties provided by the usury statute.

What do these sums of money represent?

Delta contends that these sums of money it paid to Gage constitute "interest." As the original option contracts illustrate, these payments were denominated "interest" in the documents involved in the transactions.

Gage contends that the disputed sums did not constitute interest, regardless of how the relevant documents denominated the payments. At the trial, Gage called William A. Nobles to testify concerning the purpose of such payments. Nobles was Gage's attorney in the real estate transactions. On direct examination, Nobles testified that such payments, while denominated "interest," were in fact intended as payments of a variable component of the consideration for the options in question, or as part of an escalating purchase price at which the option could be exercised.

Delta asserts that the trial court erred in admitting into evidence in violation of the parol evidence rule the testimony of Nobles as to what the parties intended by the use of the word "interest" in the two options. The parol evidence rule is as follows: "As a general rule, in the absence of fraud, accident, or mistake, extrinsic evidence is inadmissible to vary, add to, or contradict the terms of a valid written...