Standard Sav. Ass'n v. Greater New Canaan Missionary Baptist Church, Inc.
| Decision Date | 01 February 1990 |
| Docket Number | No. A14-88-1013-CV,A14-88-1013-CV |
| Citation | 786 S.W.2d 774 |
| Parties | STANDARD SAVINGS ASSOCIATION, Appellant, v. GREATER NEW CANAAN MISSIONARY BAPTIST CHURCH, INC., Appellee. (14th Dist.) |
| Court | Texas Court of Appeals |
Madison R. Jones, Edward W. Engel, Houston, for appellant.
Jerome K. Wade, Houston, for appellee.
Before ROBERTSON, SEARS and DRAUGHN, JJ.
Appellee, Greater New Canaan Missionary Baptist Church, Inc., a religious corporation, brought this suit for usury in connection with a promissory note which on its face exceeds the ten percent (10%) annual interest ceiling provided in the Texas Constitution. Appellant, Standard Savings Association, contends the note is not usurious due to a statute, in effect at the time the note was executed, that allows an additional one and one-half percent (1 1/2%) per month interest for corporations. The trial court held the statute does not apply to religious corporations, and we agree. However, we do not affirm that part of the judgment awarding prejudgment interest, and we remand the cause for a resolution of fact questions that exist relating to the amount of damages.
To finance a new church building, Greater New Canaan executed a construction note in 1976 for the original sum of $76,934.21, payable to the order of James M. Thomas Construction Company, Inc. A year later, they assigned the note and lien to Standard and executed a new note, payable to Standard in one hundred eighty (180) equal monthly installments and bearing interest at the rate of eleven percent (11%) annually. Its principal sum of $90,750 represented a renewal and extension of the previous note plus an additional advance in the amount of $13,815.97.
Alleging that it never received full consideration for the 1977 note, Greater New Canaan brought suit for usury against Standard in June, 1986, and subsequently filed a motion for summary judgment, contending that the actual principal was $82,450, therefore the remainder was illegal interest. Of the remainder, $3,260 was represented as payment for a term life insurance policy, and $5,040.57 was to pay off a "share loan" to the contractor. The trial court granted the motion for summary judgment, calculating usury damages of $145,437 (three times each of the forty-seven monthly payments of $1,031.47 that exceeded the asserted "true" principal of $82,450) along with $265,437 in prejudgment interest at the rate of 10%.
Standard filed a motion for new trial alleging that due to counsels' mistake, the trial court improvidently entered the summary judgment on submission date without a hearing. Counsel for both parties had agreed informally that Standard would pass its motion to dismiss and Greater New Canaan would reciprocate by passing its motion for summary judgment. However, they failed to notify the court of their agreement. Standard's motion for new trial and amended motion for new trial and rehearing were overruled by operation of law, and Standard appealed to this Court.
First, we consider whether the trial court correctly applied the law as to usury. "[I]n the absence of legislation fixing maximum rates of interest all contracts for a greater rate of interest than ten per centum (10%) per annum shall be deemed usurious[.]" TEX. CONST. ART. XVI, § 11. At the time the parties executed the 1977 note, Article 1302-2.09 of the Miscellaneous Corporation Act provided:
Notwithstanding any other provision of law, corporations, domestic or foreign may agree to and stipulate for any rate of interest as such corporation may determine, not to exceed one and one-half percent (1 1/2%) per month, on any bond, note, debt, contract or other obligation of such corporation under which the original principal amount of Five Thousand Dollars ($5,000) or more, ... on any extension of renewal thereof, and in such instances, the claim or defense of usury by such corporation, its successors, guarantors, assigns or anyone on its behalf is prohibited; however, nothing contained herein shall prevent any charitable or religious corporation from asserting the claim or interposing the defense of usury in any action or proceeding. (emphasis added.) TEX.REV.CIV.STAT.ANN. art. 1302-2.09 (Vernon 1980).
We hold that the final clause preserves the 10% ceiling for charitable and religious organizations found in the Texas Constitution. We disagree with Standard's contention that the proviso somehow grants a charitable or religious organization the right to assert a claim of usury but raises the interest ceiling for all corporations. One, it would be superfluous to grant a usury right when the right already was established by the state constitution. Two, when the 1981 Legislature chose to include charitable and religious corporations in a statute that further carves out an exception to the interest ceiling in the state constitution, it specifically directed application of the statute to all corporations "domestic or foreign, including but not limited to any charitable or religious corporation[.] " " See 1981 TEX.GEN.LAWS, ch. 111, § 1, at 271. (emphasis added). Because no law existed at the time of the note's execution that would raise the interest ceiling above 10% for a religious corporation, the 1977 note at 11% is usurious on its face, thus we overrule point of error number one.
Next, Standard contends the trial court erred in awarding prejudgment interest in addition to usury penalties. We agree. The Texas Supreme Court has held that prejudgment interest is not recoverable. Steves Sash & Door Co. v. Ceco Corp., 751 S.W.2d 473, 476-77 (Tex.1988). Greater New Canaan attempts to distinguish this case by asserting that the usurious note here violates a provision of the state constitution rather than a statute; and therefore, the statutory damages for usury do not apply. However, the Legislature made no such distinction in enacting the statute that governs...
To continue reading
Request your trial