"N. K. Smith and Mid-Tex Oil Mills, as plaintiffs, filed this suit on the 5th of January, 1915, against J. D. Sugg, as defendant, and, among other things, alleged, in substance, that about May, 1904, the Belton Oil Company, a private corporation operating an oil mill at Belton, Tex., passed a resolution authorizing its president, N. K. Smith, to execute a contract with defendant whereby defendant was to make a loan of $20,000 for the benefit of the Belton Oil Company, and to become the holder of certain of its mortgage bonds as security, and by which defendant was to be given the option to furnish necessary funds for the operation of the business of Belton Oil Company during the seasons of 1904 and 1905, and so long thereafter as said Sugg might be a holder of said mortgage bonds or any part thereof, and whereby it should be agreed that, in addition to the usual rate of interest, the said Sugg should receive 10 per cent. of the net profits of said mill for such seasons as he might furnish such funds; that shortly thereafter the Belton Oil Company, acting through its president, N. K. Smith, entered into a contract in writing, whereby, in consideration of said loan of $20,000, which loan was evidenced by a note signed by N. K. Smith and C. B. Smith, and secured by collateral mortgage bonds of the Belton Oil Company, said Belton Oil Company agreed and obligated itself to give said J. D. Sugg option to finance its business for the crushing seasons of 1904 and 1905, and during the continuance of said indebtedness, and that it would pay him 10 per cent. of the net profits of said mill earned in the respective seasons that he should finance the same in addition to the regular rate of interest to be paid on all funds used in such financing; that on the same date, about the 28th day of May, 1904, in pursuance of this arrangement, the $20,000 note was executed, bearing interest at the rate of 8 per cent. per annum from date; that said note was executed by N. K. Smith and C. B. Smith, with the collaterals of the oil mill attached, and with the understanding that said loan was being made for the benefit of said Belton Oil Company, N. K. Smith being at that time and at all times thereafter the president of said company and the owner of a majority of the capital stock of same; that shortly thereafter the said Sugg did begin to finance said Belton Oil Company for the seasons of 1904 and 1905, and continued to do so until the final dissolution of said Belton Oil Company in the year 1911; that at the time of the adoption of said resolution and at the time of the execution of said note J. D. Sugg had agreed to loan the $20,000 and to finance said mill for the seasons of 1904 and 1905, providing the Belton Oil Company would agree to pay him 10 per cent. of the net profits and earnings of said mill in addition to the regular rate of interest to be paid him, and that it was in pursuance of such agreement that the Belton Oil Company entered into said contract and obligation in writing, agreeing to pay 10 per cent. of the earnings of said mill in addition to the usual rate of interest; that during the seasons of 1904 and 1905 various promissory notes for moneys loaned by J. D. Sugg were executed by Belton Oil Company and N. K. Smith; that all of said notes were usurious, and that all loans as represented by them were made by J. D. Sugg in pursuance of the 10 per cent. profit agreement in addition to the regular rate of interest: that the profits in contemplation of the parties at the time were to be large, and that same, when added to the rate of interest provided for in said notes, would represent an amount largely in excess of 10 per cent. interest per annum; that by reason of the foregoing all interest provided for in said notes was forfeited, and that all payments should be applied to the principal amount due on same, and that it should be determined that said notes bear no interest from the date of their execution. The payments made on said notes were fully set out. That the total amount of the credits aggregate $83,248.13, of which the sum of $3,342.20 was applied as credits upon said note for $20,000, the remainder of which amount, to wit, $79,905.92, should be applied as a credit on the principal amounts due upon the remaining notes, the total amount of which aggregated for the seasons of 1904 and 1905 and 1905 and 1906 the sum of $95,000, leaving a balance due on said notes of $15,094.08.
"That about July 2, 1906, in consideration of the usurious agreement then in existence between the parties, and in consideration of an extension and renewal agreement for the balance due on said notes, plaintiff Smith, acting for himself and for the benefit of the Belton Oil Company, being at that time also president and owner of a majority of the capital stock in Bartlett Oil Mill, a private corporation engaged in conducting an oil mill at Bartlett, Tex., transferred and sold to J. D. Sugg capital stock of said Bartlett Oil Mill of the par value of $2,500; that J. D. Sugg purchased this stock of N. K. Smith, and in consideration therefor agreed to credit the indebtedness claimed to be owing by the Belton Oil Company; that said Sugg bought this stock and agreed to pay therefor par value for same, and that plaintiffs are entitled to have said $2,500 applied as a credit on the principal amount due on said notes, leaving a balance of $12,594.08; that on or about the last-mentioned date, July 2, 1906, a renewal note was executed by the Belton Oil Company and N. K. Smith in consideration of an extension in time of payment of the balance due on all said notes, except the $20,000 note, which renewal note was executed, not for the amount actually due, to wit, $12,594.08, but for the principal sum of $22,000, and secured by attached mortgage bonds of the Bartlett Oil Mill, and that said note was executed by the Belton Oil Company, Bartlett Oil Company, and N. K. Smith; that this note was usurious, and was executed in pursuance of a contract, both verbal and in writing, to pay, in addition to the rate of interest provided for in said note, same being 8 per cent., an amount equal to 10 per cent. of all profits to be made by the Belton Oil Company and the Bartlett Oil Mill in their respective businesses; that said note was also usurious, and that the principal sum of $22,000, which included the usurious charges, payments, and exactions which had theretofore been agreed upon and paid by the Belton Oil Company and N. K. Smith, and because of the fact that much less than $22,000 was actually due and payable to J. D. Sugg; all other notes executed for loans made by J. D. Sugg to the Belton Oil Company, to the Bartlett Oil Mill, and to Granger Oil Mill were fully set out and described, said Granger Oil Mill being a private corporation doing an oil mill business at Granger, Tex., all of said notes being alleged to be usurious; that it was within the contemplation of the parties at the time said notes were given, and at the time the contracts and agreements as to the extra interest and bonuses were made, that the value of 10 per cent. of the profits of said oil mills, all of which was agreed upon, would be greatly in excess of the lawful rate of interest, and that the profits, added to 8 per cent. provided for in said notes, would be greatly in excess of 10 per cent. per annum of said notes; that all of the notes were signed by N. K. Smith and imdorsed by him before they were delivered to J. D. Sugg, was primarily liable and an original obligor on same.
"The respective payments made on all of the foregoing notes were fully set out, showing that a balance was due J. D. Sugg of $140,620.18 on July 1, 1908; that prior to that time, about March 30, 1908, N. K. Smith, acting for said corporations and for himself as the owner of a majority of the capital stock in each of them, and for himself individually, as the maker and
indorser on said notes, did sell and transfer to J. D. Sugg capital stock in said Granger Oil Mill for $5,000; that on July 1, 1908, he likewise sold and transferred to him capital stock in the Bartlett Oil Mill for $2,500, and that about said date he also transferred and sold to him capital stock of said Belton Oil Company of the par value of $2,500; that J. D. Sugg, in the purchase of said stock, agreed to pay therefor an amount equal to the par value of said stock, and to apply the purchase price thereof as credits on the indebtedness claimed to be due him by said corporations, and by N. K. Smith, leaving a balance of $130,620.18 as due on July 1, 1908, at which time a renewal and extension agreement was entered into, and that new notes were given, not for the amount actually due as aforesaid, but new notes were executed by the Belton Oil Company, the Bartlett Oil Mill, and the Granger Oil Mill, payable to J. D. Sugg, for the respective amounts of $100,000 and $75,000; that each of these notes was a usurious contract, and included usurious interest, charges, exactions, and profits heretofore mentioned, and which had been paid to J. D. Sugg, and included in the amount claimed by him to be due as represented by these notes in renewal; that said notes were also usurious contracts in writing for the reason that at...
