Temple Trust Co. v. Haney

• Citation: 103 S.W.2d 1035
• Decision Date: 18 March 1937
• Docket Number: No. 8399.,8399.
• Parties: TEMPLE TRUST CO. et al. v. HANEY et ux.
• Court: Court of Appeals of Texas

103 S.W.2d 1035

TEMPLE TRUST CO. et al. v. HANEY et ux.

No. 8399.

Court of Civil Appeals of Texas. Austin.

March 18, 1937.

Rehearing Denied April 14, 1937.

Appeal from District Court, Coleman County; O. L. Parish, Judge.

Action by W. E. Haney and wife against the Temple Trust Company and its receiver. From a judgment for plaintiffs in part, defendants appeal.

Judgment set aside in part, reformed by reducing the amount of recovery, and otherwise affirmed.

J. B. Daniel, of Temple, and Critz & Woodward, of Coleman, for appellants.

J. B. Dibrell, Jr., of Coleman, for appellees.

BAUGH, Justice.

This is a usury suit. Haney and wife sought to establish usury in three separate loans made to them by the Temple Trust Company. Trial was to the court without a jury, usury found as to two of said loans, but denied as to the other, and judgment rendered accordingly. The Temple Trust Company and its receiver have appealed; and the Haneys cross-assign error as to the loan on which recovery of usury was denied them.

All of the loans in question involve what may be designated as a bonus of 12 per cent. on the money borrowed. The ones in suit may be, as treated by the parties in their briefs, for convenience indicated by their numbers — 3345, 4176, and 4174. Loan No. 3345 was made on May 15, 1924, for $2,000 to erect a residence in the city of Coleman, for which Haney and wife executed notes designated as "bond," aggregating $2,240, as follows: Notes 1 to 3 for $100 each; notes 4 to 7, inclusive, for $200 each; and note No. 8 for $1,140. These notes bore 7 per cent. interest payable semiannually on June 1st and December 1st of each year; the principal maturing on June 1, 1925, 1926, 1927, 1928, 1929, 1930, 1931, and 1934, respectively; provided that past-due interest bear interest at 10 per cent. provided for accelerated maturity of all notes at the option of the holder thereof in case of default in payment of principal or interest according to their terms. They were secured by a deed of trust on the property involved, which provided, in case of default, that "The principal and interest then accrued on said bond, and all advances made to or on account of the grantors herein, for taxes, assessments, and charges of every kind, shall at once become due and payable, and the moneys due on said bond and for advances as aforesaid, may be collected by a sale under this mortgage, or by a suit in the Courts of Bell County, etc." Under the power of sale granted the deed of trust provided that the proceeds therefrom be applied, among other items, "Third, to the payment of said bond, together with all interest thereon."

Treating the $240 bonus as interest exacted, as the trial court found it to be, and assuming that this amount was carried into and included in the $1,140 note, which it manifestly was, and which ran for a period of ten years, had the loan been repaid in the sums provided and at the maturity dates of the respective notes, there would not have been exacted interest in excess of 10 per cent. per annum over the entire period covered on the sum of money actually loaned, that is, the $2,000, except for the year 1934. This can be demonstrated as follows: Ten per cent. interest on $2,000 would, at the end of the first year, have yielded $200. The amount due on the 7 per cent. rate on $2,240 and paid by appellees, was $156.80. At the end of the first year, under the maturity of note No. 1 the principal was reduced $100, and the principal remaining would yield at 10 per cent. the sum of $190 interest; whereas, the amount due under the contract, that is, 7 per cent. on $2,140, would be $149.80. Applying this process of calculation, reducing the actual principal from year to year by the amount of principal maturing according to the terms of the contract, the $2,000 actually loaned would have yielded at 10 per cent. per annum over the period covered by the contract a total interest charge of $1,400. (In making such computation we have disregarded the 15-day period between May 15, 1924, and June 1, 1924, as not changing the result, and for clarity and convenience have treated the contract as having been made on June 1, 1924. Whereas the total yield for the entire period of the contract, according to its terms, on $2,240 at 7 per cent. would be $1,148. If the $240 bonus, carried into the last note of the series, be added, the borrower would have actually paid in interest the total sum, had the contract been performed in full, of $1,388, or less than 10 per cent. per annum on the sum actually loaned for the entire period. Manifestly, therefore, under the contract as written, the borrower would not have paid in excess of 10 per cent. per annum on the amount actually loaned, during any year up to 1934, the date of the maturity of the last note into which was carried the $240 bonus. Had he paid the first seven notes at maturity he would have repaid only $1,100 of the principal, leaving $900 due in note No. 8. Ten per cent. on this during the last three years of the loan would have yielded $90 per annum, whereas up to the last year, 1934, he paid only $79.80, or 7 per cent. on $1,140, the face of the note. Had he paid this note at maturity, the $240 bonus (or interest) would have been included, plus the $79.80 interest coupon, or $319.80 interest for that year, on the remaining principal of $900 actually due, manifestly a usurious charge. This, however, he did not pay, and it cannot be said that he has actually paid interest in excess of 10 per cent. on the sum actually loaned during any year in which he had the use of it.

Under these facts and circumstances, the question of usury vel non in the contract is referable to the accelerated maturity provisions under the rule laid down 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. Since the Shropshire Case was decided, numerous cases involving usury have been before the courts. The most common instances involve first and second deeds of trust, the second deed of trust usually given to secure payment of a separate and independent series of notes given for future or unearned interest, with varying provisions as to abatement of unearned interest where maturity of the principal is accelerated upon default. The rule adopted in such cases appears to be that where enforced collection of such unearned interest notes is authorized in ambiguous or uncertain provisions under one construction of the contract; but negatived under other provisions, the court will construe such contracts in favor of their legality. But where the lender in unambiguous language discloses a clear intention, in case of default, to collect unearned interest, or interest in excess of 10 per cent. per annum in any event, and without abatement of any such excess, the contract is as a matter of law usurious. Shropshire Case, supra; Commerce Trust Co. v. Best, 124 Tex. 583, 80 S.W.(2d) 942. A very able and extensive discussion of these two lines of cases is found in an opinion by judge Leslie in Wellfare v. Realty Trust Co. (Tex.Civ. App.) 85 S.W.(2d) 1067 (writ ref.), to which we refer without further discussion here.

In the instant case the $240 excess interest was not provided for in separate or subordinate interest notes, but was manifestly added to the face of the last note as principal and treated as such. This was done apparently to conceal its excessiveness. The only interest provided for in the contract was the 7 per cent. rate, evidenced by interest coupons attached, and predicated on a principal charge of $240 in excess of the sum loaned. The intention was clear and unambiguous that the holder was to collect this $240 as principal, in any event, whether the notes ran to full maturity under their terms, or the maturity in full of their face value, including the extra $240, should be accelerated and declared due upon default.

The only provision in the contract which appellant urges as negativing any intention on its part to collect more than 10 per cent. is a provision in the deed of trust which imposed the duty on the borrower to pay, in addition to taxes, insurance, etc., on the properties mortgaged, also all taxes on the "bond" held and owned by the appellant, but subject only to the following limitation: "* * * provided that if any tax assessed within the State of Texas against the bond or debt secured hereby, or the interest in said premises of the said Temple Trust Company, or its successors and assigns together with the interest paid or agreed to be paid on such bond or debt, shall exceed ten per centum per annum, then the grantors shall not pay such excess unless it shall have been first decided by the courts of last resort in this State, that the payment of such excess would not render this contract usurious, in which event grantors herein do covenant to pay the same on demand."

Manifestly this proviso was not in any sense a limitation as to the face of the "bond" itself, nor as to the 7 per cent. rate of interest as applied thereto. It in no sense can be construed as reducing or abating any sum or sums expressly provided to be paid in the "bond" (notes), but obviously was intended to mean that if the borrowers had to pay as taxes on the notes held by the lender an amount which, added to the 7 per cent. interest coupons, would aggregate a sum in excess of 10 per cent. on the $2,240 fixed as the principal of the notes or "bond," then the borrower would not be compelled to pay the excess, if the courts of last resort decided such payment would be usurious. Otherwise they should pay that also. Clearly such proviso had no relation to the $240 excess written into the face of the bond as principal. Nor did the Supreme Court so hold in Walker v. Temple Trust Co., 124 Tex. 575, 80 S.W. (2d) 935. This is the same construction placed upon this provision of the deed of trust, identical with the one here involved, in Temple Trust Co. v....