Manning v. Christian

• Decision Date: 27 March 1935
• Docket Number: No. 1525-1793-6511.,1525-1793-6511.
• Citation: 81 S.W.2d 54
• Parties: MANNING et al. v. CHRISTIAN et ux.
• Court: Texas Supreme Court

81 S.W.2d 54

MANNING et al. v. CHRISTIAN et ux.

No. 1525-1793-6511.

Commission of Appeals of Texas, Sections A and B.

March 27, 1935.

Error to Court of Civil Appeals of Second Supreme Judicial District.

Suit by J. S. Manning against J. D. Christian, the Federal Life Insurance Company, which filed a cross-action, and another. To review a judgment of Court of Civil Appeals [59 S.W.(2d) 234], reversing the judgment of the district court and remanding the cause, J. S. Manning and the Federal Life Insurance Company bring error.

Judgment of Court of Civil Appeals affirmed in part and reversed in part.

Homer L. Baughman, of Fort Worth, and Goggans & Ritchie and Robert Allen Ritchie, all of Dallas, for plaintiffs in error.

H. D. Payne, of Floydada, for defendants in error.

GERMAN, Commissioner.

This is a case of usury. A full statement of the nature and result of the suit and of the controlling facts is found in the opinion of the Court of Civil Appeals reported in 59 S.W.(2d) 234, 236. We shall therefore mention only such matters as are essential to a disposition of the decisive questions in the case.

The principal note was for $15,000 dated September 20, 1922, and due January 31, 1933. It bore interest at the rate of 7 per cent. per annum; the interest being evidenced by eleven coupons, which were to bear interest after maturity at 10 per cent. This note was secured by a first deed of trust.

Seven additional notes were executed contemporaneously with the principal note and coupons. It is agreed that these notes were for 2 per cent. additional interest on the principal indebtedness. These notes were to bear interest after maturity at 10 per cent. per annum. There is no contention that the coupons and additional interest notes, if the loan and accrued interest had been paid as contracted, were usurious. The charge of usury is based upon the accelerative provision contained in the additional interest notes. In each of these notes there is the following provision: "Failure to pay this note when due or any of the notes of this series, or any installments of interest thereon, or failure to pay the interest on said first lien note above described, or to perform any of the covenants or stipulations in said first mortgage, or the deed of trust securing the payment of this series of notes, shall, at the option of the holder hereof, immediately mature all of said notes and the same shall become due and payable at once, without notice." (Italics ours.)

It is true that the second deed of trust securing these seven notes provided that the holder might at his option "declare the whole of the indebtedness hereby secured due and payable," and, if this provision stood alone, we would have no hesitancy in holding that the contract was not usurious. But the vice in this contract does not arise by reason of the acceleration clause in the deed of trust, but is found in the second lien notes themselves. Again, while the second deed of trust refers to these notes as a part of the agreed interest on the principal indebtedness, the notes themselves do not on their face show that they were for additional interest. This, to our minds, tends to show that the lender, for the purpose of being able to mature all of these notes in case of default in one, designedly failed to disclose on their face that they were interest notes. This, together with the precise and positive wording of the notes themselves that the holder might mature all of said notes, discloses an intention to mature them and make them payable in full, even though they represented only unearned interest. Tested by the most favorable rule which we can reasonably conceive, we are unable to see how these notes can be differentiated from the second lien notes in the case of Shropshire v. Commerce Farm Credit Co., 120 Tex. 400, 30 S.W.(2d) 282, 39 S.W. (2d) 11, 84 A. L. R. 1269.

It follows, therefore, that the Court of Civil Appeals correctly held that this contract was usurious and that all provisions with reference to interest were void.

Since the granting of the application in this case, the case of Dallas Trust & Savings Bank v. Brashear (Tex. Com. App.) 65 S. W.(2d) 288, has settled the question that Federal Life Insurance Company as holder of the first lien note was not an innocent purchaser without notice of the usurious character of the second lien notes.

We do not wish to be understood, however, as approving the language of the Court of Civil Appeals that, if "it lies in the power of the creditor under any supposable contingency to exact usurious interest, the loan will be condemned as usurious."

The deed of trust securing the $15,000 note contained a recital that said note was executed in renewal and extension of various vendor's lien notes. This recital, standing alone, would constitute a renewal and extension of such notes. Eight of the vendor's lien notes for $1,931.25 each were dated January 1, 1920, and they matured annually; the last note maturing January 1, 1928. There were also eight other vendor's lien notes for $387.50 each of the same...