Huddleston v. Bossier Bank and Trust Co.

• Decision Date: 10 September 1985
• Docket Number: No. 85-C-0578,85-C-0578
• Citation: 475 So.2d 1082
• Parties: Albert J. HUDDLESTON, Robert D. Martinez and His Wife, Mardel W. Martinez, Mardel W. Martinez, Jacques E. Lauer, and His Wife, Alva N. Lauer, Margaret Louise Huddleston, Kevin Doyle Huddleston, Lindsay Madeline Huddleston and Alicia St. John Huddleston v. BOSSIER BANK AND TRUST COMPANY. 475 So.2d 1082
• Court: Louisiana Supreme Court

Page 1082

475 So.2d 1082

Albert J. HUDDLESTON, Robert D. Martinez and His Wife Mardel W. Martinez, Mardel W. Martinez, Jacques E. Lauer and His Wife, Alva N. Lauer, Margaret Louise Huddleston Kevin Doyle Huddleston, Lindsay Madeline Huddleston and Alicia St. John Huddleston v. BOSSIER BANK AND TRUST COMPANY.

No. 85-C-0578.

475 So.2d 1082

Supreme Court of Louisiana.

Sept. 10, 1985.

Peter J. Butler, Aubrey B. Hirsch, Jr., M. Shawn McMurray, Butler, Heebe & Hirsch, New Orleans, for plaintiff-applicant.

Robert Mathis, New Orleans, for defendant-respondent.

BLANCHE, Justice ^*.

Plaintiffs filed this suit alleging that the interest on a promissory note issued by Bossier Bank and Trust Company was usurious. The promissory note was held not to be usurious by the trial court. However, the trial court did award plaintiffs $9,250.00 in attorney's fees. The Court of Appeal, 463 So.2d 1336, also found that the promissory note was not usurious but disallowed the award of the attorney's fees to plaintiffs. We granted writs, 467 So.2d 528, to consider whether the promissory note provided for usurious interest.

Albert J. Huddleston was a one-third owner in an apartment complex known as the "Malibu Apartments." After a disagreement with his co-owners, Huddleston filed to partition the apartment complex by licitation. After two unsuccessful sales, a third auction was advertised for October 25, 1978. Prior to this sale, on October 3, 1978, defendants agreed to make a discounted loan to plaintiffs so that they could purchase the apartments. Huddleston executed a collateral mortgage which was pledged to secure a hand note in the amount of $894,083.03 payable to Bossier Bank and Trust Company with interest at 10% from maturity and due in 90 days. The proceeds of the loan were as follows:

                Cash Proceeds           $825,000.00
                Life Insurance Premium    19,014.00
                Precomputed Interest      21,748.61
                Loan Fee (Points)         28,320.42
                                        -----------
                Total                   $894,083.03
                

When the note became due on January 1, 1979, Huddleston was unable to pay the entire balance. After negotiations, Bossier agreed to renew the note for an additional 90 days on the condition Huddleston would pay $39,195.30. Bossier further required that as to the renewal note Huddleston was also to pay a renewal fee plus precomputed interest as a condition of the loan. The proceeds of the second note were distributed as follows:

                Balance due on October 3
                  1978 note:               $894,083.03
                Less Payment                 39,195.40
                                           -----------
                Balance to Renew           $854,887.73
                Fees to Renew                17,446.69
                Precomputed Interest         33,166.63
                                           -----------
                Amount of New Note         $905,501.05
                

When the second note matured on April 3, 1979, Huddleston executed a third note extending the due date for an additional 91 days. This final note matured on July 2, 1979 and remained unpaid until November 12, 1979, at which time Huddleston tendered payment of $877,173.39. Bossier rejected this amount asserting that the correct payout amount was $911,417.03. After negotiations between the respective parties' attorneys, Bossier accepted the amount tendered by Huddleston. However, as a result of this disagreement, Huddleston incurred attorney's fees of $9,250.00.

On December 19, 1979, plaintiffs filed this suit alleging that the October 3, 1978 promissory note for $894,083.03 was usurious, and that since the note was usurious, all charges in connection with the use of the money should be returned. Huddleston also alleged tortious conduct in regard to Bossier refusing to accept the amount tendered on the note which matured July 2, 1979. He sought to recover all charges incurred for the use of the money loaned by Bossier as well as $9,250.00 in attorney's fees. Huddleston later withdrew his demand for the return of the fees incurred on the final note but maintained his demand for attorney's fees.

At the time the October 3, 1978 note was executed, the interest rate on a discounted loan could exceed 8% annually provided that the note did not bear more than 8% interest after maturity. La.C.C. art. 2924. The note issued by Bossier provided for 10% interest from maturity. Therefore, as the lower courts correctly found, the October 3, 1978 note as written violated Article 2924.

Plaintiffs contend that since the note is usurious on its face all interest paid on the note should be forfeited. Defendant, however, argues that the 10% figure was placed in the note by clerical error. They further contend that the interest paid should not be forfeited simply because the note was usurious on its face where the interest actually collected was not usurious. Plaintiffs rely on Grunewald v. Bartholomew, 269 So.2d 274 (La.App. 4th Cir.1972) for their contention that usury is determinable solely from the face of the instrument. In Grunewald, a loan of $5000 was made to defendant after he signed a discounted note payable on demand, with a face amount of $5,750.00 bearing 8% interest from maturity until paid. However, unlike the note issued by Bossier, the note in Grunewald, was a demand note payable from the date of its issuance. The court further found that the rule which permitted capitalized interest plus legal interest from maturity contemplated an interval of time between the date of execution and the date when the interest from maturity became applicable. Since a demand note matures the day it is issued, the Court found that the note actually provided for interest from the date of its issuance rather than from maturity and that the interest paid on the note exceeded the maximum amount allowed by law. Moreover, the parties in Grunewald, did not contend that the note contained an error as to the interest rate charged or as to the amount of interest actually paid. Therefore, under the particular facts of Grunewald, usury could have been determined from the face of the instrument. Likewise, in Paulat v. Pirello, 353 So.2d 1307 (La.1977) the lender actually accepted usurious interest where the note itself was not usurious on its face. This Court stated that Grunewald, "under its facts is a correct statement of the law" but that it did not "purport to legitimize, as non-usurious, payments exacted after execution of a note not usurious on its face, when such subsequent payments in fact...