Micrea, Inc. v. Eureka Life Ins. Co. of Amer.

• Decision Date: 30 January 1976
• Docket Number: No. 17686,17686
• Citation: 534 S.W.2d 348
• Parties: MICREA, INC., and Jack Adler, Appellants, v. EUREKA LIFE INSURANCE COMPANY OF AMERICA, Appellee.
• Court: Texas Court of Appeals

Page 348

534 S.W.2d 348

MICREA, INC., and Jack Adler, Appellants, v. EUREKA LIFE INSURANCE COMPANY OF AMERICA, Appellee.

No. 17686.

Court of Civil Appeals of Texas Fort Worth.

Jan. 30, 1976.

Rehearing Denied Feb. 27, 1976.

Jon Mercer, Houston, for appellants.

Fillmore, Lambert, Farabee, Purtle & Lee, and Glynn Purtle, Wichita Falls, for appellee.

OPINION

MASSEY, Chief Justice.

Eureka Life Insurance Company brought suit against Micrea, Incorporated, for deficiency indebtedness evidenced by note, after original indebtedness was credited with proceeds from sale of real estate under authority of a Deed of Trust. Said company likewise sued Jack Adler upon his contract of guaranty of the note obligation of Micrea. Micrea and Adler, by cross-action, sought to set aside and annul the sale by Trustee for a variety of reasons, and by additional cross-action Adler sued the company for damages on the theory that his contract provided for the payment of usurious interest.

Status of the case as so described resulted from consolidation of the suit by Eureka Life Insurance Company's suit in Wichita County, with the suit filed by Micrea and Adler in Brazoria County where there had been the sale by Trustee of the real estate securing the note.

Trial was before the court without a jury. Following hearing judgment was rendered for Eureka Life Insurance Company on the note, with denial of all the relief sought by Micrea, Inc. and Jack Adler who have brought an appeal.

Judgment affirmed as to Micrea, Incorporated; as to Jack Adler judgment is reformed by elimination of attorney's fee adjudged against him, and as reformed affirmed.

Not clear from the record is whether Micrea had existed as a corporation for some time, or whether it was formed for the purposes of the several transactions and occurrences which culminated in suit and judgment. In any event Micrea was a close corporation of which Jack Adler and his wife were the owners of the stock. There is not the contention that there exists any issue of whether such corporation was the Alter ego of Adler, its president.

Some 46 acres of land in Brazoria County was apparently optioned to be purchased by Micrea in the early part of 1973. In order to consummate purchase of the land Micrea required a loan of approximately $168,750.00. It found that Eureka Life Insurance Company of America was willing to loan the money on the following conditions: (a) the indebtedness by loan should be evidenced by note and the note must be absolutely guaranteed by Adler as an individual, (b) the security for the indebtedness should be by first lien on the land to be purchased, secured further by Deed of Trust, (c) that the note should be for a full three year period for $168,750.00 with said amount delivered over to Micrea at the 'closing' of the real estate purchase and financing transaction(s), (d) that Micrea should immediately and at time of 'closing' make redelivery to the company of the sum of $10,125.00 as 'commitment fee' due from Micrea to the company as part of the consideration for making the loan and (e) that Adler should guarantee payment of the loan as 'Guarantor.'

The $10,125.00 'commitment fee' was not referred to as any part of the interest on the principal amount of $168,750.00. It is clear that it was not intended to be applied as interest. The note contract provided that it should be due and payable on or before three (3) years from its date with interest at the rate of ten per cent (10%) per annum on the $168,750.00, payable semi-ammually as it accrued, beginning on or before November 1, 1973.

To all the foregoing Micrea agreed and executed instruments in accord, acting by and through Jack Adler, its President, on May 25, 1973. Upon receipt in hand of the $168,750.00, Micrea handed back to the agent of the company the agreed amount of $10,125.00. To the guaranty Adler agreed, as an individual, and at the same time he signed the $168,750.00 note as 'Guarantor', he signed a separate instrument guaranteeing that in the event of default by Micrea he would be bound to pay the balance of any indebtedness owing to the company.

Developments anticipated by all parties failed to occur. Micrea made the interest payment due November 1, 1973 but nothing thereafter. By provisions of the note there was default by Micrea entitling the company to make its election to declare the whole to the indebtedness evidenced thereby as due and payable, and accelerating the obligation of Micrea so that there would be a maturity thereof (because of the default) much earlier than the date of the expiration of the three-year term originally anticipated. It is agreed that the company did exactly this, plus exercising its right to proceed to cause the property to be sold under the provisions of the Deed of Trust. Following procedures necessarily antecedent to sale of this security by Trustee there was what Micrea and Adler contend was a mere purported, and in any event voidable sale to an agent for the company itself for the sum of $46,000.00.

With the ascertainment of the amount of credits to be made on the indebtedness of Micrea pursuant to the sale by Trustee, and by reason of Adler's guaranty of the remainder of the indebtedness, the company proceeded to institute action to make the deficiency, plus the ten per cent (10%) attorney's fee provided by the note contract. As indicated heretofore the judgment secured against Micrea is in all respects affirmed. However, since there was a distinction to be made in the burden of proof on the company's action against Adler, the allowance of identical amount as attorney's fee in the judgment against him was in excess of the amount shown by proof, and to the extent of such excess is reduced.

Necessarily must our affirmance depend upon our refusal to disturb the action and sale pursuant to the Deed of Trust of Micrea. The points of error bearing thereon by the cross-action of both Micrea and Adler are all overruled. In part in consideration thereof, and in part independently, the points contending error in the denial of Adler's individual claim for usury damages are denied.

Under the complaints made by the points of error we find nothing constituting reversible error by the foreclosure under the Deed of Trust, nor by the judgment for deficiency of the obligation by note plus attorney's fee for services of the company's attorney in the prosecution of its suit. We will discuss questions posed relative thereto at a later stage.

Initially we will discuss the suit by cross-action of Adler, the individual, for wrongful and usurious contract by his guaranty of the Micrea note obligation in the amount of 168,750.00.

Of course Adler's obligation to the company by guaranty 'matured' so that liability attached upon failure of Micrea to meet its note obligation. In the instant case the exact date Adler's obligation 'matured' is immaterial to determination of questions, and may for convenience be taken as September 30, 1974 when the company filed its suit against Adler and Micrea for deficiency of the obligation by note, plus attorney's fee.

To be noted in the description of the facts at the beginning of the opinion is that Micrea, in obtaining the $168,750.00 from the company, agreed to, and did, deliver back to the company the sum of $10,125.00 as payment by it to the company as what is termed 'points' or 'commitment fee' due the company for making the loan. The $168,750.00 of the note provided on its face that it was to be repaid plus 10% Accrued interest within three years. Micrea did receive the full amount, though simultaneously (or immediately) redelivering it over to the company. We may observe that the $10,125.00 was interest which should have been credited as such upon the interest calculated as owing on the note at time of the judgment . Morris v. Miglicco, 468 S.W.2d 517 (Houston, 14th Dist., Tex.Civ.App., 1971, writ ref., n.r.e.). In any event it was paid by Micrea, a corporation. That Micrea might be deemed to have been obliged to pay (as result of the payment of the $10,125.00) approximately 12% Interest rather than the 10% Provided on the face of the note was, as to it, immaterial. This is so because Micrea was at liberty to pay, or contract with the company to pay, up to 18% Interest for the use of a lender's money. V.A.T.S. Title 32, 'Corporations', Art. 1302--2.09. 'Authority of certain corporations to borrow money.'

By V.A.T.S. Title 79, 'Interest', Art. 5069--1.02, 'Maximum rates of interest', ten per cent (10%) per annum is the maximum rate of interest where not otherwise authorized by Texas statute. If the company's loan had been to Adler rather than to Micrea such would have been the maximum permitted to be contracted or collected without the taint of usury.

By Art. 5069--1.06, 'Penalties', under the same Title, there is provision that 'Any person who contracts for, charges or receives interest which is greater than the amount authorized . . . shall forfeit to the obligor twice the amount of interest contracted for, charged or received, and reasonable attorney fees fixed by the court provided that there shall be no penalty for a violation which results from an accidental and bona fide error'.

It is by this statutory provision that Adler contends upon his individual cross-action for double the amount of the interest provided in the note as a penalty. In making the contention Adler seeks to have the $10,125.00 paid by Micrea as 'points' or 'commitment fee' treated as part of the interest contracted. In other words Adler desires a construction of the entire transaction as one where by a contract between himself and the company there had been contract for him to pay interest greater than the amount authorized by law.

Understandable is that at no stage of the proceeding did either Micrea or Adler seek to have the $10,125.00 (delivered back to the company) treated as 'interest paid' on the $168,750.00 note figure and credited upon the...