Deming Inv. Co. v. Clark, 1591.

• Decision Date: 07 November 1935
• Docket Number: No. 1591.,1591.
• Parties: DEMING INV. CO. et al. v. CLARK et ux.
• Court: Texas Court of Appeals

89 S.W.2d 853

DEMING INV. CO. et al. v. CLARK et ux.

No. 1591.

Court of Civil Appeals of Texas. Waco.

November 7, 1935.

On Rehearing December 5, 1935.

Appeal from District Court, Hopkins County; Charles D. Berry, Judge.

Suit by George H. Clark and wife against the Deming Investment Company and the Rutland Savings Bank, wherein the Rutland Savings Bank filed cross-action. From the judgment, the defendants appeal.

Judgment reformed and, as so reformed, affirmed.

Read, Lowrance & Bates, of Dallas, and J. K. Brim, of Sulphur Springs, for appellants.

Roach & Roach, of Commerce, and Neyland & Neyland and H. L. Carpenter, all of Greenville, for appellees.

ALEXANDER, Justice.

This action involves a complaint of usury. On May 2, 1921, George H. Clark and wife executed and delivered to Deming Investment Company one principal note in the sum of $2,500, due in ten years, bearing interest at the rate of 6 per cent. per annum, payable annually as it accrued in accordance with interest coupons attached, which note was secured by a deed of trust on certain land in Hopkins county. As a part of the same transaction, Clark and wife executed and delivered to Deming Investment Company ten additional notes, the first one for $88.85, due April 1, 1922, and the remaining nine notes for $100 each, payable one each year on April 1, 1923, to 1931, inclusive These notes were secured by second deed of trust on the same land. The first lien note provided for acceleration of the maturity thereof at the election of the holder in the event of failure to pay the annual interest as it accrued, and, further, that the makers had the privilege of paying $100 or any multiple thereof, or the whole amount of said note at the maturity date of any interest coupon on and after April 1, 1926. The first deed of trust provided, in part, as follows: "If default be made in the payment of said note or any installment of interest thereon * * the whole sum of money herein secured and all interest thereon to the date of payment thereof to be computed at ten per cent per annum from the date of exercise of option herein, may at the option of the holder of the note hereby secured and without notice be declared due and payable at once. * * *"

The second deed of trust contained the following clauses:

"This deed of trust, however, and all indebtedness secured by the same, is subordinate to the lien of the first deed of trust of even date herewith; executed by the first party to Robert O. Deming, trustee, in favor of The Deming Investment Company, and it is understood that The Deming Investment Company, while advancing the money to the first party on said loan, is acting merely as the agent of the first party for the negotiation of the same in the market, and the notes secured by this deed of trust (except as may be hereinafter stated) represent the earned commission which the party of the first part agrees to pay to the third party for the negotiation of said loan, regardless of any payment on the first lien note prior to its maturity. * * *

"* * * if default be made in the payment of any of said notes * * * the whole sum of money herein secured may, at the option of the holder of the notes and without notice, be declared due and payable at once, and this mortgage may thereupon be foreclosed immediately for the whole sum of said money, interest and costs, anything in this mortgage or said notes contained to the contrary notwithstanding. * * *

"And is further agreed that if sale is made by trustee under the power in said first deed of trust, out of such money as remains in said trustee's hands after the payment of expenses of sale and the debt and other items mentioned in said first deed of trust, there shall be paid to the owner of the notes secured by this second deed of trust the amount due and unpaid thereon (or such amount as remains in said trustee's hands if not sufficient to pay all due), and this clause shall be construed as an assignment of such amount and as an order on said trustee to pay the same to the owner hereof."

The note secured by the second deed of trust did not contain any provision for accelerated maturity, but did contain the following clause: "This note is secured by Second Deed of Trust, of even date herewith, on real estate situate in Hopkins County, Texas, and is given as earned commission agreed to be paid for the negotiation of a loan of even date herewith, described in and secured by a First Deed of Trust, executed by the makers hereof to Robt. O. Deming, Trustee."

The first lien note was assigned to Rutland Savings Bank and the second lien notes retained by Deming Investment Company. During the life of the loan Clark paid to Rutland Savings Bank as interest the sum of $1,518.03, and paid to Deming Investment Company on the second lien notes the sum of $888.85.

In January, 1933, Clark and wife brought this suit against Deming Investment Company, Rutland Savings Bank, and others to enjoin a sale of the land by the trustee under the first deed of trust and to have the contracts declared usurious and to have applied as a credit on the principal of the $2,500 note the full amount theretofore paid by plaintiff on all of said notes. The Deming Investment Company and Rutland Savings Bank filed general answers and, in addition, the bank sued to recover on the $2,500 note and to foreclose its lien on the land. The trial court in a trial without a jury declared the contracts to be usurious, allowed the plaintiffs credit for the sum of $2,406.88 on the $2,500 note, and awarded said bank a judgment on its cross-action for the sum of $93.12 as principal and $9.31 attorney's fees, with a foreclosure of its lien on the land. Both the Deming Investment Company and Rutland Savings Bank appealed.

The plaintiffs alleged, and the evidence supports an implied finding in favor of the judgment, that the Deming Investment Company was lending its own money, and was not entitled to collect a commission therefor, and that the attempt to charge a commission for making said loan was but a device for the collection of additional interest. Under these circumstances, the notes secured by the second deed of trust, which purport to have been given as a commission...