Duvall v. Kansas City Life Ins. Co.

• Decision Date: 02 July 1936
• Docket Number: No. 1754.,1754.
• Citation: 96 S.W.2d 793
• Parties: DUVALL et ux. v. KANSAS CITY LIFE INS. CO. et al.
• Court: Texas Court of Appeals

Page 793

96 S.W.2d 793

DUVALL et ux. v. KANSAS CITY LIFE INS. CO. et al.

No. 1754.

Court of Civil Appeals of Texas. Waco.

July 2, 1936.

Rehearing Denied September 24, 1936.

Appeal from District Court, Bosque County; O. B. McPherson, Judge.

Suit by W. H. Duvall and wife against the Kansas City Life Insurance Company and another, wherein named defendant filed a cross-action. Judgment for named defendant, and plaintiffs appeal.

Reversed and remanded.

W. V. Dunnam, of Waco, for appellants.

Hamilton, Lipscomb & Wood, of Dallas, for appellees.

GALLAGHER, Chief Justice.

This suit was instituted by appellants, W. H. Duvall and wife, Lela May Duvall, against appellees, Kansas City Life Insurance Company and one E. E. Clark, Jr. Appellants alleged that appellee Kansas City Life Insurance Company was a corporation, incorporated under the laws of the state of Missouri, and that E. E. Clark, Jr., resided in Dallas county. Appellants further alleged that on the 8th day of December, 1922, Realty Trust Company was a domestic corporation with its offices, domicile, and place of business in Dallas, Dallas county, Tex.; that on said date they executed and delivered to said Realty Trust Company their certain promissory notes or bonds, payable to it at its office in Dallas, Tex., as follows: One bond in the sum of $500, due January 1, 1928, one bond in the sum of $500, due January 1, 1929; one bond in the sum of $500, due January 1, 1930; one bond in the sum of $500, due January 1, 1931; and one bond in the sum of $15,000, due January 1, 1933; that all the same amounted in the aggregate to $17,000. Appellants further alleged that they issued and delivered to said corporation thirty-six notes or coupons representing the annual interest on said several notes or bonds at the rate of 6 per cent. per annum, and that all said notes or bonds and interest notes or coupons obligated appellants to pay interest thereon after maturity at the rate of 10 per cent. per annum. Appellants further alleged that coincident with the execution of said notes and to secure the same, they executed and delivered to F. O. Ketcham, trustee for said Realty Trust Company, their certain deed of trust on a tract of land situated in Bosque county, Tex. The terms of said deed of trust, so far as relevant to the issues of law hereinafter discussed, will be recited in connection therewith. Appellants further alleged that coincident with the execution of said principal notes, interest coupons and deed of trust securing the same as aforesaid, and as additional consideration for the loan of $17,000 evidenced by said principal notes or bonds, they executed and delivered to said Realty Trust Company five additional notes in the aggregate sum of $1,630, two of which were for the sum of $340 each and due, respectively, January 1, 1924, and January 1, 1925, one of which was for the sum of $335 and due January 1, 1926; another for the sum of $315, due January 1, 1927; and the fifth or last for the sum of $300, due January 1, 1928. Each of said notes represented approximately 2 per cent. of the principal notes or bonds for the year immediately preceding its maturity, and provided for the payment of interest after maturity only at the rate of 10 per cent. per annum. All of said notes were paid by appellants. Appellants further alleged that coincident with the execution of said last-described series of notes, they executed and delivered to F. O. Ketcham, trustee for said Realty Trust Company, another or second deed of trust on said tract of land. The terms of said deed of trust, so far as relevant to the issues of law hereinafter discussed, will be recited in connection therewith. Appellants alleged in this connection that by the terms of said several instruments as aforesaid, said Realty Trust Company intended to exact and to require appellants to pay interest at a higher rate than 10 per cent. per annum on the amount of the loan evidenced thereby, and that said transaction was therefore usurious; that no interest could be lawfully collected thereon and that all sums paid as interest should be credited in discharge of the principal of said indebtedness. Appellants further alleged that appellee Kansas City Life Insurance Company then claimed to be the owner and holder of all the unpaid notes or bonds and certain unpaid coupons thereon; that it acquired the same with full knowledge that they were tainted with the vice of usury; and that the appellee, E. E. Clark, Jr., purporting to act as substitute trustee under said original deed of trust, had advertised the land described therein for sale and would, unless restrained, sell the same and apply the proceeds of such sale to the satisfaction of said unpaid notes and interest coupons according to the face and tenor thereof, notwithstanding appellants' right to have the aggregate amount thereof abated to the extent of all interest payments made by them. The court granted a temporary injunction restraining the sale of said land during the pendency of the suit.

Appellee filed a general denial and a cross-action in which it sought recovery on all unpaid principal notes or bonds and all unpaid interest coupons executed and delivered in connection therewith, together with 10 per cent. interest thereon from maturity, and a further 10 per cent. on the aggregate amount as attorney's fees.

The case was submitted on special issues, in response to which the jury found, in substance, that: (1) The Realty Trust Company made the loan contracts under consideration herein with the intention to charge and exact a rate of interest on the loan during some one year in excess of 10 per cent.; (2) the Realty Trust Company intended to fix a lien on the land described in said deeds of trust for, and require appellants to pay, such taxes as might thereafter be assessed against the notes by the city of Dallas, Dallas county, and the state of Texas, where said notes were payable; (3) appellee Kansas City Life Insurance Company took an assignment of the notes and deed of trust liens involved herein with knowledge of such intent with reference to the payment of taxes. Appellants filed a motion for judgment in their favor in accord with the findings so returned by the jury, which motion was overruled by the court. Appellee Kansas City Life Insurance Company filed a motion for judgment non obstante veredicto, which motion the court granted, and entered judgment that appellants take nothing by their suit, and that appellee Kansas City Life Insurance Company recover from appellant W. H. Duvall the aggregate amount of principal, interest, and attorney's fees found by the court to be due, together with interest on such amount from December 3, 1934, until paid at the rate of 6 per cent. per annum.

Opinion.

Appellants present various propositions in which they insist that the transaction under consideration in this case, as disclosed on the face of the several instruments evidencing the same, was, as a matter of legal construction, usurious; that such transaction, as disclosed on the face of such instruments, when considered in connection with the testimony introduced, was shown to be usurious and found to be so by the jury; that the court erred in refusing to render judgment in their favor on the findings returned by the jury, and that the court further erred in rendering judgment against them non obstante veredicto. Appellants base their contention that the transaction was usurious as a matter of the legal construction of the several instruments involved, on the terms thereof authorizing acceleration, and on the terms of that provision embraced in the first or principal deed of trust requiring them, in event of the imposition of any tax or assessment upon the principal notes or lien or interest of the holder of the secured indebtedness in the encumbered land, to pay the same, as will be hereinafter more fully recited. The acceleration clauses incorporated in the instruments evidencing this transaction are not materially different from the acceleration clauses considered and held not to disclose an intent to exact or receive usurious interest in various recent cases decided by our Supreme Court and by Courts of Civil Appeals, in which latter cases applications for writs of error have been refused or dismissed, and such contention is therefore overruled.

Appellants' contention that the transaction was rendered usurious by the terms of the tax provision hereinbefore referred to invokes more extended examination. A succinct recapitulation of the material facts is deemed proper. Appellants, who executed said several notes and deeds of trust, resided in Bosque county, and the land described in the respective deeds of trust was situated therein. The Realty Trust Company, the payee in all said notes and the beneficiary in said deeds of trust securing the same, was a domestic corporation, domiciled in the city of Dallas, Dallas county, Tex. F. O. Ketcham, the trustee named in said deed of trust, also resided in Dallas county. The transaction was consummated on December 8, 1922. The principal notes, or so-called "bonds," provided for the payment of interest thereon at the rate of 6 per cent. per annum, as evidenced by so-called interest notes or coupons. The additional interest notes, as before described, amounted to approximately 2 per cent. on the principal, but covered only one-half, or the first five years, of the period for which the loan was made. Specifically stated, the transaction required that appellants, during the first five years of the loan, pay interest annually at the rate of approximately 8 per cent. per annum and during the remaining five years of the period of the loan to pay interest at the rate of only 6 per cent. per annum. The original or principal deed of trust contained the following provision: "It is specially agreed, that if any tax or assessment shall be imposed within the State of Texas upon said Bond, or upon the interest of the...