Geisberg v. Mutual Building & Loan Ass'n.

• Decision Date: 18 December 1900
• Citation: Geisberg v. Mutual Building & Loan Ass'n., 60 S.W. 478 (Tex. App. 1900)
• Parties: GEISBERG et al. v. MUTUAL BUILDING & LOAN ASS'N.<SMALL><SUP>1</SUP></SMALL>
• Court: Texas Court of Appeals

Page 478

60 S.W. 478

GEISBERG et al. v. MUTUAL BUILDING & LOAN ASS'N.¹

Court of Civil Appeals of Texas.

December 18, 1900.

Appeal from district court, Harris county; John G. Tod, Judge.

Suit by the Mutual Building & Loan Association against John G. Geisberg and another. From a decree for plaintiff, defendants appeal. Affirmed.

Jacob C. Baldwin, for appellants. W. C. Oliver and W. N. Shaw, for appellee.

PLEASANTS, J.

Appellee brought this suit to recover upon two promissory notes executed by appellants and payable to appellee; one being for the purchase money of certain lots in the city of Houston conveyed to appellants by appellee, which note was secured by an express vendor's lien retained in said deed; the other note being for labor and material furnished in erecting a house on the lots so conveyed to them, and being secured by an express mechanic's and material man's lien. The appellee further sought to recover of appellants the sum of $122.55 paid out for appellants as taxes and costs, under an alleged contract, by the terms of which appellee was authorized to pay said taxes, and a lien given upon the property involved in this suit to secure the repayment to appellee of the amount so paid out by it. The petition contained all the necessary allegations to entitle appellee to recover upon said notes and contract and foreclose said lien, and further alleged that all interest due upon said notes up to the 1st day of November, 1894, had been paid by appellees, and that by crediting said notes with the value of certain shares of stock issued by appellee to appellants, and which was held by appellee as additional security for said notes, there remained due and unpaid on the first of said notes the sum of $904.20, with 10 per cent. interest thereon from the 1st of November, 1894, and on the second note the sum of $602.80, with interest as aforesaid, for which amounts, together with 10 per cent. attorney's fees, as provided in said notes, and the said sum of $122.55 before mentioned, the appellee prayed judgment. The defendants answered by a general demurrer, general denial, and special answer, by which they alleged that the mechanic's lien contract sued upon by the plaintiff was void, for the reason that at the time the same was executed the defendants were not the owners of the property, and that at the time of the execution of the second mortgage mentioned in plaintiff's petition the property was the defendants' homestead, and, the material and labor having been furnished prior to said date, it created no lien upon defendants' property; that the entire transaction was made with the defendants; and that they used the name of L. C. Salter, to whom said mechanic's lien was originally given, in order to avoid the constitutional provision prohibiting the defendants from mortgaging their homestead. The defendants further alleged that the entire contract sued upon was usurious, for the reasons: First. That said contract and notes upon their face provide for the payment of the highest rate of interest allowed by law, in advance, in equal monthly payments, and that the requiring of the payment of the interest monthly in advance, at the highest legal rate, made said contract usurious. Second. That the contract was usurious because it provided upon its face that all payments upon the shares of stock should go as payments to that extent upon the principal indebtedness, and that thereby the principal indebtedness was reduced monthly to the extent of the payments made upon said shares of stock, and notwithstanding this fact the contract provides for the payment of 10 per cent. per annum on the principal sum of $2,000, which was to continue during the period of said contract, which made the same usurious. Third. That the contract was usurious because it provided for the payment of 5 per cent. penalty upon each and every delinquency in the payment of said monthly assessments and installments, and that when said penalties were added to the legal rate of interest the contract became usurious. Fourth. That the contract was usurious because the defendants were required to pay interest on said $2,000 from the 1st day of April, 1893, when no part of the money was advanced to them by the plaintiff until on or about the 30th day of May, 1893, when the sum of $1,250 was paid; that the remaining sum of $750 was not paid to the defendants until on or about the 1st day of August, 1893; and that the plaintiff having required the defendants to pay interest on said sum from said date made the contract usurious. Fifth. That the contract was usurious because, in the mechanic's lien contract made by the defendants with L. C. Salter, it was expressly provided that they were to pay no interest upon said contract price until the building was completed, and that the building was not completed until on or about the 1st of August, 1893; that, notwithstanding this fact, the plaintiff forced the defendants to pay interest on said sum from the 1st day of April, 1893, at the highest legal rate known to the law; that by reason of all these facts the plaintiff was entitled to no interest upon said contract; and that all sums paid by the defendants to the plaintiff (the same being $440 on stock, $349.65 as interest, and $14.55 as penalties), should be applied to the extinguishment of the principal indebtedness. The plaintiff, by supplemental petition, alleged that the fines referred to by the defendants in their answer were exacted under a separate and independent contract, to which every stockholder in plaintiff's association is a party, and which is in the nature of a penalty for nonpayment of dues at the time required by the by-laws of said association. The plaintiff further set forth that, as to the attorney's fees on the note of $750, it did not seek a foreclosure upon the property for said attorney's fees, and did not seek a personal judgment against Mary A. Geisberg. The cause was tried by a jury in the court below, and resulted in a verdict and judgment in favor of appellee for the sum of $2,730.76, with 10 per cent. interest from December 1, 1894, and foreclosure of liens as prayed for by appellee. From this judgment appellants prosecute this appeal.

The record in this case shows that the appellants applied to appellee for a loan of $2,000, of which $1,250 was to be used in the purchase of certain lots in the city of Houston, and the remainder in building a house upon said lots. This application was granted and the money set aside for the use of appellants on the 15th day of April, 1893. Appellants negotiated the purchase of the lots, and at their request appellee bought same, paying therefor the sum of $1,250, and on the 15th day of May, 1893, conveyed said lots, by quitclaim deed, to appellants, which deed reserved a vendor's lien upon said lots to secure the payment of the following note executed on said date by appellants in favor of appellee: "$1,250.00. Houston, Texas, May 15, 1893. On or before ten years after date, we promise to pay to the order of the Mutual Building and Loan Association, at its office in Houston, Texas, $1,250.00, for value received, with interest thereon at the rate of 10 per cent. per annum, interest payable in equal monthly installments of $10.41 2/3 each in advance on the third Saturday of each and every month after date until paid, and with an attorney's fee of 10 per cent., should judicial proceedings be used in collecting. Should default be made in the payment of the interest, or any part thereof, for two months, the entire debt may, at the option of the holder thereof, become due and payable. John G. Geisberg. Mary A. Geisberg." In addition to the vendor's lien reserved to secure the payment of said note, appellants transferred and assigned to appellee, as security for said note, seven shares of stock in said Mutual Building & Loan Association, appellee herein; said transfer being in writing, and containing the following provisions, viz.: "For value received, I hereby assign and transfer to the Mutual Building and Loan Association of Houston, Texas, seven shares of stock owned by me in said association, and for which I have received a pass book, No. ____, as collateral security for the repayment of a loan of $1,250.00 made the 15th day of May, 1893, to me by said association, on said stock No. ____, and evidenced by our contract of this date on file with said association. Should I fail for two months to pay the amount required by the said contract to be paid monthly on said loan, then the entire loan shall become due; and I hereby authorize said association to withdraw the amount paid in on the above-pledged stock, without notice to me, and apply the same to the payment of said loan. It is understood and agreed that, the payment upon the above shares of stock being taken as payment to that extent upon the loan, when said loan is finally repaid, that said shares are not to revert to myself, but are to be canceled on the books of said association. Witness my hand this 15th day of May, 1893. John A. Geisberg. Mary A. Geisberg." The deed above referred to provides that in case of default in the payment of any two monthly installments of interest on said note, or in case of default in the payment of any two monthly installments on said shares of stock, the whole of said indebtedness shall become due. Appellants also executed a deed of trust on said lots to secure the payment of said indebtedness which deed of trust contained, among other things, the following provision: "Whereas, we have agreed and do hereby agree, in accordance with the provisions of the by-laws of said association, to keep the improvements on said premises insured for the benefit of said association, the taxes, both general and special, assessed against the same, paid, and to keep the assessments paid on the seven shares of stock in said association this day pledged by us, the said John G. Geisberg and wife, Mary A. Geisberg, to said...