Dryden v. City Nat. Bank of Laredo

• Citation: 666 S.W.2d 213
• Decision Date: 04 January 1984
• Docket Number: No. 04-82-00299-CV,04-82-00299-CV
• Parties: Edward Joseph DRYDEN, Jr., Appellant, v. CITY NATIONAL BANK OF LAREDO, Appellee.
• Court: Court of Appeals of Texas

Page 213

666 S.W.2d 213

Edward Joseph DRYDEN, Jr., Appellant, v. CITY NATIONAL BANK OF LAREDO, Appellee.

No. 04-82-00299-CV.

Court of Appeals of Texas,

San Antonio.

Jan. 4, 1984.

Rehearing Denied Feb. 3, 1984.

Emilio Davila, Jr., Laredo, for appellant.

Paul D. Gallego, Mann, Freed, Trevino & Hale, Laredo, for appellee.

Before ESQUIVEL, REEVES and TIJERINA, JJ.

OPINION

TIJERINA, Justice.

This law suit was brought by the City National Bank of Laredo to collect on two installment notes and one promissory note. Judgment was rendered in favor of appellee-bank based on an instructed verdict as to the promissory note and on the jury's answers to special issues on the two installment notes.

Appellees filed suit for payment of three notes, foreclosure on the property held as security, and attorney's fees. Appellant contended at trial, as on this appeal, that the notes sued upon were usurious. Appellant's claim is twofold: (1) that the promissory note was usurious because of a charge for a credit life insurance policy; and (2) that the two installment notes were usurious because appellee, by way of a written demand for full payment, including unearned interest, charged more interest than authorized by law. The trial court rendered an instructed verdict on the promissory note and submitted special issues to the jury on the two installment notes.

Appellee executed the following notes: (1) an installment note on July 5, 1978, for the purchase of a 1974 Jaguar in the total amount of $12,047.40 (hereinafter referred to as the car note); (2) an installment note on November 1, 1978, for the purchase of a 1978 Shasta Mini Motor Home in the total amount of $18,759.84 (hereinafter referred to as the motor home note); and (3) a promissory note on July 10, 1979, for the extension of the two prior notes in the total amount of $1,257.62 (hereinafter referred to as the promissory note). Appellant was in default on all three notes, to which the appellee orally demanded full payment in December, 1979, and in a written demand letter on January 15, 1980, accelerated all three notes and demanded full payment, without credit for previous payments, including a demand for unearned interest. Appellee then filed suit on April 21, 1980. It was stipulated at trial that appellant executed all three notes and was in default on each note. On the promissory note, the trial court entered an instructed verdict denying appellant's claim of usury. The issue of usury on the two installment notes, the car note and the motor home note, was submitted to the jury on special issues. Based upon the jury's findings, favorable to appellee, the trial court rendered judgment for appellee. This appeal only concerns the issue of whether appellee contracted for, charged, or received more interest than allowed by law. TEX.REV.CIV.STAT.ANN. art. 5069-1.06 (Vernon 1971).

In its first point of error, appellant contends that the trial court erroneously entered an instructed verdict for appellee on the promissory note, arguing that the evidence raised several material fact issues as to whether appellee charged more interest than that authorized by law.

The rule is well settled that it is error to instruct a verdict when the evidence raises any material fact issue. In passing upon the question of the authority of the trial court to instruct a verdict, the evidence must be considered in the light most favorable to the party against whom the verdict is instructed. An instructed verdict is warranted only when the evidence shows that no other verdict can be rendered and the winning party is entitled to judgment as a matter of law. When there is any conflicting evidence, either direct or circumstantial, in the record of a probative nature, a determination of the issue is for the jury. Texas Employers' Insurance Association v. Page, 553 S.W.2d 98, 102 (Tex.1977); Spicer v. Great Service, Inc., 580 S.W.2d 14, 15 (Tex.Civ.App.--San Antonio 1979, no writ). To make this determination, the trial court, without passing upon the credibility of the witnesses, must accept as true all evidence which, when liberally construed in favor of the adverse party to the motion for instructed verdict, tends to support the adverse party's contention. The trial court must also indulge every reasonable inference deductible from the evidence in the adverse party's favor and disregard all contradictory evidence favorable to the movant. If this evidence amounts to more than a scintilla, a fact issue is raised. Spicer v. Great Service, Inc., 580 S.W.2d at 15-16; 3 R. McDONALD, TEXAS CIVIL PRACTICE IN DISTRICT AND COUNTY COURTS § 11.28.2 (rev. 1983).

Appellant argues that a material issue of fact was raised during the trial as to whether $435.87 retained by appellee constituted an interest charge or constituted a retroactive charge for credit life insurance on the eight month old motor home loan. Appellant's contention is that if it is the former then appellee charged usurious interest on the $1,257.62 promissory note; if it is the latter, then the note is usurious for lack of a rebate on the credit life insurance charge.

Appellee argues that the record is void of any evidence of a probative nature that the $435.87 was anything else but proceeds borrowed to pay credit life insurance on the motor home note. Appellee relies on Mitchell v. Schimming & Eddins, 52 S.W.2d 1080 (Tex.Civ.App.--Waco 1932, no writ), for the proposition that a court may rule on the issue of usury as a matter of law when the evidence is insufficient to raise an issue of usury. Mitchell is distinguishable from the case at bar. In Mitchell, the defendant's plea of usury was based on the specific allegation that by the terms of the deed she was required to pay interest on the property one year before she purchased it; the evidence showed, without dispute, however, that no interest was ever claimed, demanded or received, and that there was an inadvertant mistake in the year stated in the deed. Appellee also argues that execution of a subsequent note will never constitute payment of usurious interest being that the second note is distinct and separate from the original note, citing Ware v. Paxton, 266 S.W.2d 218 (Tex.Civ.App.--Eastland 1954, writ ref'd n.r.e.). The Ware case is not on point with the instant case. At issue in Ware was whether payment of usurious interest was made. The court stated that "[t]he payment contemplated by the statute is an actual payment and not a further promise to pay." Id. at 226. TEX.REV.CIV.STAT.ANN. art. 5073 (1925), the statute in effect at the time the Ware case was decided, has been superceded by TEX.REV.CIV.STAT.ANN. art. 5069-1.06 (Vernon 1971). Article 5069-1.06, supra, does not require "actual payment"; the Ware case is not controlling. Appellee also argues that a transaction which occurs after execution of a note does not constitute usury on the note, citing Southwestern Investment Co. v. Hockley County Seed & Delinting, Inc., 511 S.W.2d 724 (Tex.Civ.App.--Amarillo) writ ref'd n.r.e. per curiam, 516 S.W.2d 136 (Tex.1974). ¹ The Southwestern Investment Co. case is factually different from the instant case; in that case there was no new indebtedness created, in the instant case the third note was executed to gain extension of the prior two notes.

This Court has held that if the original transaction is tainted with usury, that vice will follow the debt in whatever form it might assume. Burton v. Stayner, 182 S.W. 394, 395 (Tex.Civ.App.--San Antonio 1916, writ ref'd); see Skeen v. Slavik, 555 S.W.2d 516, 521 (Tex.Civ.App.--Dallas 1977, writ ref'd n.r.e.). It is well settled that courts will look beyond the form of the transaction to its substance in determining the existence or non-existence of usury. Gonzales County Savings & Loan Association v. Freeman, 534 S.W.2d 903, 906 (Tex.1976). Where there is a dispute in the evidence as to whether the charge is merely a device to conceal usury, a question of fact is raised for the jury. Id. at 906. Further, when there is some evidence regarding a fact issue, it is the peculiar province of the jury to find the facts of the case because the jury, not the court, is the fact finding body. Benoit v. Wilson, 150 Tex. 273, 239 S.W.2d 792, 796-97 (1951); Spicer v. Great Service, Inc., 580 S.W.2d at 16.

In deciding this case, it is necessary to summarize the evidence in the light most favorable to appellants. The promissory note was executed for a total amount of $1,257.62. The proceeds of the promissory note were used in the following manner: (1) $821.75 was used to gain extension of two prior installment loans, the car note and the motor home note; and (2) $435.87 was used to purchase credit life insurance on the motor-home note. Appellant testified that he did not agree to purchase credit life insurance for the motor home loan. Appellant further testified that the appellee did not inform him until trial that the $435.87 was retained to purchase credit life insurance on the motor home loan. The record reflects that the promissory note was executed on July 10, 1979; that appellant filled out the credit life insurance application on that date; that the credit life insurance was on the motor home loan; that appellant was charged on July 10, 1979, for credit life insurance dated back to the date of indebtedness on the motor home loan on November 1, 1978. Appellee's witness, Mr. Solis, testified that appellee's ledger sheet reflected no rebate of any portion of the $435.87 credit life charge and that the rebate was not calculated until the day of trial.

It is well settled that usury, where not apparent from the face of the instrument, is a question of fact for the jury. See Greever v. Persky, 140 Tex. 64, 165 S.W.2d 709, 712 (Tex.1942). Whether a fee charge is interest or a service charge is also a question of fact for the jury. Eckols v. Sabine Bank, 613 S.W.2d 762, 763 (Tex.Civ.App.--Beaumont 1981, writ ref'd n.r.e.) (and citations therein)....