Dodson v. Citizens State Bank of Dalhart

• Decision Date: 02 January 1986
• Docket Number: No. 07-84-0253-CV,07-84-0253-CV
• Citation: 701 S.W.2d 89
• Parties: C.B. DODSON, Jr., Individually and as Independent Executor of the Estate of C.B. Dodson, Sr., Deceased, and C.B. Dodson, Inc., a Texas Corporation, Appellants v. CITIZENS STATE BANK OF DALHART, Appellee.
• Court: Texas Court of Appeals

Page 89

701 S.W.2d 89

C.B. DODSON, Jr., Individually and as Independent Executor of the Estate of C.B. Dodson, Sr., Deceased, and C.B. Dodson, Inc., a Texas Corporation, Appellants v. CITIZENS STATE BANK OF DALHART, Appellee.

No. 07-84-0253-CV.

Court of Appeals of Texas Amarillo.

Jan. 2, 1986.

Philip R. Russ, Amarillo, for appellants.

Culton, Morgan, Britain & White, Don L. Patterson, Frank A. Hunold, Jr. and William A. Hill, Amarillo, for appellee.

Before DODSON, COUNTISS and BOYD, JJ.

BOYD, Justice.

Appellants C.B. Dodson, Jr., individually and as Independent Executor of the Estate of C.B. Dodson, Sr., deceased, and C.B. Dodson, Inc. bring this appeal from a judgment in favor of appellee Citizens State Bank of Dalhart, a corporation. We affirm.

The instant suit was originally brought by appellee against C.B. Dodson, Jr. The suit was brought to collect on a note in the original principal sum of $291,860.89 with accrued pre and post maturity interest. In his answer, Dodson claimed that the note was usurious and also asserted various other affirmative defenses. In a separate instrument denominated as "Defendant's Third Amended Counterclaim," filed June 8, 1984, all appellants sought recovery against appellee because of an asserted breach of fiduciary relationship and other maleficent acts. Jury trial commenced on June 18, 1984 at which, by three witnesses, its senior vice-president and trust officer and its two attorneys, appellee presented its case in chief. Although appellants did cross-examine appellee's witnesses, they chose to present no evidence at trial. The court then instructed a jury verdict and, based upon that verdict, rendered the judgment of which appellants complain.

In attacking the judgment, appellants raise fourteen points of asserted error. In points one, two, three, five, and seven, they argue the trial court erred in: (1) instructing a verdict since the undisputed evidence proved that the note in question was usurious; (2) rendering judgment against appellant C.B. Dodson, Jr. for a sum of $398,804.47, which included post maturity interest, figured at a rate of 13.5% maturity when, as a matter of law, the maximum permissible post maturity rate was 6% per annum; (3) denying appellants' motions for instructed verdict and for judgment non obstante verdicto because appellee "charged," and, in some cases "received" post maturity interest at the rate of 13.5% per annum, a rate, appellants say, was in excess of two times the allowable rate; and (4) holding that appellant C.B. Dodson, Jr. was not, as a matter of law, entitled to judgment forfeiting the principal of the note and in failing to allow recovery by all appellants of "two (2) times all interest and other charges, plus three (3) times all usurious interest charges and the recovery of reasonable attorneys fees."

The thrust of appellants' argument under points one, two, three, five, and seven is that the 13.5% post maturity interest rate admittedly charged by appellee was usurious as a matter of law because it was in excess of two times the permissible rate. It is uncontroverted, and appellants do not question, that C.B. Dodson, Jr. executed the note and that appellee was the holder of the note when the principal and interest became due and owing on April 16, 1983 or that the note provided for interest from its date until maturity at the rate of 13.5%. The note further provided that "[a]ll past due principal and interest shall bear interest at the highest legal rate." It is also uncontroverted that appellee charged post maturity interest at the rate of 13.5% per annum.

Appellants argue that the quoted language was not sufficient to establish an agreed specified rate of post maturity interest. Therefore, they reason, Tex.Rev.Civ.Stat.Ann. art. 5069-1.03 (Vernon Pamp.Supp. 1971-1985) is applicable. That article provides:

When no specified rate of interest is agreed upon by the parties, interest at the rate of six percent per annum shall be allowed on all accounts and contracts ascertaining the sum payable, commencing on the thirtieth (30th) day from and after the time when the sum is due and payable.

Based on that premise, appellants say that the 13.5% post maturity interest admittedly charged by appellee was in excess of twice the allowable rate, thereby entitling them to their affirmative defenses and counterclaims of usury.

Appellants' basic premise that the provision for post maturity interest "at the highest legal rate" is not a specification of a definite interest rate is erroneous. Parties may agree, as did appellee and C.B. Dodson, Jr., that past due principal and interest will bear interest at the highest legal rate. Bundrick v. First Nat. Bank of Jacksonville, 570 S.W.2d 12, 15 (Tex.Civ.App.--Tyler 1978, writ ref'd n.r.e.). See also Whitehead Utilities, Inc. v. Emery Financial Corp., 697 S.W.2d 460, 462 (Tex.App.--Beaumont 1985, no writ). Therefore, since the provision for post maturity interest does not expressly entitle appellee to charge interest at a rate greater than that allowed by law, the note is not usurious on its face. Smart v. Tower Land and Inv. Co., 597 S.W.2d 333, 341 (Tex.1980).

The uncontroverted evidence established that the highest legal rate for which the parties could have contracted, during the relevant period, ranged from 18% to 22.72%. Tex.Rev.Civ.Stat.Ann. art. 5069-1.04 (Vernon Pamp.Supp. 1971-1985); Hightower, The Current State of Usury Law in Texas, 14 St. Mary's L.J. 149 (1983). It naturally follows that the rate actually charged, i.e., 13.5%, was not usurious.

By points one, three, four, six, and seven, appellants contend that appellee violated the usury statutes by "folding or rolling the C.B. Dodson, Inc. corporate note of $35,000.00 into the Three Hundred Eleven Thousand Four Hundred Eighty-Seven Dollar and 30/100 ($311,487.30) C.B. Dodson, Jr., personal note." The record reveals that on April 12, 1982, C.B. Dodson, Jr. executed his personal note in the amount of $250,000 payable to appellee, which matured on October 9, 1982. On September 13, 1982, Mr. Dodson, on behalf of C.B. Dodson, Inc., executed a note in the amount of $35,000, which also matured on October 9, 1982.

On November 30, 1982, Mr. Dodson met with representatives of appellee. The only testimony about that meeting was that of Burton Doyle Hanbury, who is a senior vice-president and trust officer with appellee. In preparation for that meeting, appellee had drafted a promissory note in the principal sum of $311,487.30. Mr. Hanbury testified that that figure represented the renewal of the original of Mr. Dodson's personal note, the corporate note, and some $70,000 of additional funds. Dodson refused to execute the note.

When queried as to the reason for the presentation of the note, Hanbury replied that "[w]e were asking Mr. Dodson to do something with our bank about the past due notes and interest at our bank, plus he had some other problems that we knew about that we were trying to get him going again, and we gave him this opportunity for a six-month period of time, and he did not take that up." When further queried about the circumstances, his testimony was that "[w]e asked him to do something with our bank. This was a proposition that we offered to him if he wanted to do it, and that's all." Mr. Dodson refused to execute the note and told Hanbury that "[y]ou know what you have to do; go get after it."

Later that day, appellee offset Dodson's personal accounts, the C.B. Dodson, Sr. estate account, the corporation account, Dodson's special account, and his cattle account and applied them to payment of the $35,000 corporate note and his personal note. Mr. Dodson had signatory authority on each of these accounts. Appellee's representatives had not told Dodson they would take this action prior to doing so.

Later, on December 22, 1982, C.B. Dodson, Jr. executed a note in the amount of $286,042.09, maturing on January 21, 1983. This note was secured by a deed of trust on certain real property not material here. Hanbury testified that $250,000 of the note was in renewal and extension of Dodson's April 12, 1982 note. Of the remainder, $20,048.58 was advanced, deposited in Dodson's personal account, and used to pay the interest on the April 12 note. At Dodson's request, of the $15,993.51 remainder, $14,412.56 was deposited into an account entitled C.B. Dodson Estate, $934.23 was deposited into an account entitled C.B. Dodson Special, and the remainder $646.72, in two deposits, was deposited into an account entitled C.B. Dodson, Jr. Appellants, in their brief, argue that $8,453.84 of the amount borrowed by Dodson was used to replace funds taken by appellee in its offset of the corporate debt. Therefore, they argue, Dodson did not receive or have the use of this amount and it should be considered as an interest charge of 50.55%. However, since the record does not show this application by Dodson, it does not support this particular argument.

On February 15, 1983, the note upon which this suit is based was executed. It was in the principal sum of $291,860.89, was secured by a deed of trust, was due on April 16, 1983, and, to the extent of $286,042.09, was in renewal and extension of the December 22, 1982 note. The remainder, in the amount of $5,818.80, was advanced to C.B. Dodson, Jr. at his request.

Initially, appellants contend that "by folding or rolling the C.B. Dodson, Inc. corporate note of $35,000 into the $311,487.30 C.B. Dodson, Jr., personal note," appellee made a usurious charge of interest. In asserting that conclusion, appellants place heavy reliance upon the holding of the Court in Alamo Lumber Co. v. Gold, 661 S.W.2d 926 (Tex.1983). In Alamo, the Court held that a lender who, as a condition for making a loan, requires that a borrower assume a third party's debt, must include the amount of the third party's debt in the interest computation. While appellants assert the facts in Alamo and in this case are...