Southwest Inv. Co. v. Hockley County Seed & Delinting, Inc.

• Decision Date: 03 June 1974
• Docket Number: No. 8442,8442
• Citation: 511 S.W.2d 724
• Parties: SOUTHWESTERN INVESTMENT COMPANY, Appellant, v. HOCKLEY COUNTY SEED & DELINTING, INC., et al., Appellees.
• Court: Texas Court of Appeals

Page 724

511 S.W.2d 724

SOUTHWESTERN INVESTMENT COMPANY, Appellant, v. HOCKLEY COUNTY SEED & DELINTING, INC., et al., Appellees.

No. 8442.

Court of Civil Appeals of Texas Amarillo.

June 3, 1974.

Rehearing Denied July 8, 1974.

Clayton & Clayton, Cleo G. Clayton, Jr., and Wesley G. Clayton, Amarillo, for appellant.

Walters & Associates, Reid A. Rector, Lubbock, for appellees.

ELLIS, Chief Justice.

In this appeal of a usury case arising out of a note executed on November 1, 1965, by Hockley County Seed & Delinting, Inc., et al., appellees, to Southwestern Investment Company, appellant, the appellantlender challenges the judgment of the trial court awarding to appellees a recovery of double the amount of usurious interest found by the court to have been paid and received on such note, together with attorney's fees, pursuant to the provisions of Vernon's Ann.Civ.St. art. 5073.

Southwestern Investment Company instituted suit on July 18, 1968, against the appellees for unpaid principal and interest due on the note. The defendants in such suit, appellees herein, alleged defensively that the note sued upon was usurious and by counterclaim sought to recover certain statutory penalties.

The case was originally tried on May 28, 1970, and a judgment was entered by the 108th District Court of Potter County Texas, in favor of plaintiff Southwestern Investment Company, to the effect that Article 1302--2.09, Vernon's Ann.Civ.St., enacted in 1967, allowing interest in certain instances up to 18 per cent per annum, was controlling in determining the respective rights of the parties and that thereunder the transaction in question was not usurious.

The defendants, Hockley County Seed & Delinting, Inc., et al., appealed from such judgment. The cause was reversed and remanded by the appellate court on the grounds that Article 1302--2.09 should not be applied retroactively, and that the disposition of this case should be governed by the law as it existed in 1965 when the note was executed.

In reversing the judgment of the trial court, this court, in an opinion dated December 27, 1971, reported in 476 S.W.2d 38, writ ref'd n.r.e., stated:

'In view of our holding above, we reverse the judgment of the trial court; and for the reason that under the present state of the record we find insufficient evidence to enable us to determine all aspects of the judgment which should be rendered, we remand this cause for further proceedings to determine the rights of the parties in accordance with the provisions of Articles 5069, 5071 and 5073, as amended in 1963. Rule 434, Texas Rules of Civil Procedure.'

Article 5069 declared that interest at a greater rate than 10 per cent per annum was usurious. Under Article 5071, a contract providing for interest greater than the established maximum legal rate of 10 per cent per annum was void as to the amount of interest only. The pertinent provisions of Article 5073, as amended in 1963, are:

'Within four (4) years after the time that a greater rate of interest than . . . ten per centum (10%) per annum, shall have been received or collected upon any contract, the person paying the same or his legal representative may by an action of debt recover double the amount of such interest from the person, firm, or corporation receiving the same and reasonable attorney's fees to be set by the court.'

On May 9, 1973, further proceedings were had in the 108th District Court of Potter County to determine the rights of the parties in accordance with the provisions of Articles 5069, 5071 and 5073. Following a discussion between the court and counsel for the respective parties concerning the scope and extent of the remand, the court permitted and recognized the appellant's filing of additional pleadings, including Plaintiff's Third Amended Original Petition, containing a plea of unilateral mistake or error on plaintiff's part in the calculation of interest on the note resulting in a calculated interest rate of 10.7983% Per annum rather than 10% Per annum, as intended, and also pleaded for the relief of reformation whereby the note would conform to the true intent and purposes of the parties. It is further noted that in the Plaintiff's Third Amended Original Petition, filed March 6, 1973, appellant alleged that, although the installment payment due on the note as of January 21, 1968, was extended or postponed until April 21, 1968, by written agreement of the parties, the defendants subsequently defaulted and that, at the time of such default, there was due on such note the sum of $28,566.99, exclusive of interest.

In order to secure a release of all liens on the properties securing the note to enable the consummation of the sale of such properties, the appellees paid to appellant the total sum of $31,168.36, pursuant to the terms of the agreement between the parties, dated February 8, 1969, after the filing of suit, whereunder such total sum so paid was subject to subsequent application with respect to the note and without prejudice to the respective rights of the parties to this suit. In the appellant's Third Amended Original Petition, it was alleged that out of the total amount so paid, the sum of $28,566.99 was owing on the principal of such note, and that the balance of the total payment was due to appellant for accrued and earned interest. Additionally, appellant alleged its entitlement to recover attorney's fees in the sum of $4,675.25, representing an amount equal to 15% Of the total sum of the outstanding interest and principal due under the terms of the note at the time such payment was made.

On March 9, 1969, appellant, as cross defendant, filed its answer to the Cross-Action of Cross-Plaintiffs. In this connection, it is here noted that in the First Amended Counter Claim of Hockley County Seed & Delinting, Inc., et al., filed on May 25, 1970, prior to the first trial, the appellees herein alleged, among other matters, the following:

'Cross Plaintiffs are entitled to collect of and from the Cross Defendant not less than the total sum of $20,401.22, or alternatively, a sum of money representing twice the amount of interest paid within two years from date of institution of Cross Plaintiffs' cross action herein (on or about August 19, 1968). This cross action has been instituted for the purpose of recovering statutory penalty under Article 5073, V.A.C.S., as the same existed on or about November 1, 1965.'

On March 22, 1973, the appellees filed Defendants' Third Amended Original Answer containing, among other pleas, various special exceptions to the plaintiff's pleadings. Also, on May 9, 1973, the appellees filed a separate Motion to Strike Pleadings, (Plaintiff's Third Amended Original Petition and the above mentioned Cross-Defendant's Answer to the Cross-Action of Cross-Plaintiffs, filed March 9, 1969) and to Restrict Proceedings. Also, on May 9, 1973, appellees filed a Motion In Limine wherein they requested the court to instruct appellant's counsel not to attempt to introduce evidence regarding the alleged unilateral mistake or relating to the appellant's subjective intent not to charge usurious interest on the grounds that a mistake by one of the parties to the contract is not sufficient to afford the relief of reformation of a contract.

The court overruled the appellees' exceptions to appellant's Third Amended Original Petition, the Motion to Strike as well as the Motion In Limine. The appellees were permitted to file a trial amendment to the effect that the appellant's plea in its Third Amended Original Petition for reformation of the note and documents executed in 1965 was barred by the two and four year statutes of limitations.

It was announced by the court and agreed by counsel for the parties that the entire record and everything that was offered in the first trial is 'before the court in this Hearing without repeating it.' Thus, in this non-jury hearing the court had before it all of the record, including the pleadings, evidence and stipulations of the first trial, together with the additional pleadings permitted to be filed by the respective parties and all evidence heard in the second proceeding pursuant to such pleadings.

We consider that the procedure followed by the trial court in connection with the remand of this cause was proper in all essential respects. The record of the first trial, together with the 'further proceedings' had in this hearing, including the additional pleadings and evidence insofar as pertinent to the basic issue of usury within the contemplation of Articles 5069, 5071 and 5073, were sufficient to enable the court to make a determination of the rights of the litigants in accordance with the legally recognized guidelines established by such statutes.

After the completion of the hearing conducted in the manner above stated, the court entered its judgment and recited therein, inter alia, certain findings, which are as follows:

'(A) That PLAINTIFF/CROSS-DEFENDANT, SOUTHWESTERN INVESTMENT COMPANY, as stipulated by the parties hereto, is entitled to recover, as attorneys fees, 15% Of the principal that was due and owing on the promissory note in question as of July 18, 1968, the date SIC filed its original petition. The Court further finds that on such date, the sum of $28,566.99 (sic) was due and owing as principal. The Court further finds that 15% Of $28,566.99 is.$4,285.05;

'(B) That on November 1, 1965, DEFENDANT/CROSS -PLAINTIFFS executed a promissory note payable to PLAINTIFF/CROSS-DEFENDANT in the original principal sum of $14,000.00;

'(C) That on the actual cash advancement of $41,000.00, pursuant to the terms and conditions of the promissory note in question, DEFENDANTS/CROSS -PLAINTIFFS were required to repay to PLAINTIFF/CROSS-DEFENDANT and did repay the sum of $51,583.15, which sum included the original principal advancement of $41,000.00 plus interest in the sum of $10,583.15;

'(D) That pursuant to the terms and conditions of the promissory note...