Walker v. Temple Trust Co., s. 1526-1794-6588.

• Decision Date: 27 March 1935
• Docket Number: Nos. 1526-1794-6588.,s. 1526-1794-6588.
• Citation: 80 S.W.2d 935
• Parties: WALKER et al. v. TEMPLE TRUST CO.
• Court: Texas Supreme Court

80 S.W.2d 935

WALKER et al. v. TEMPLE TRUST CO.

Nos. 1526-1794-6588.

Commission of Appeals of Texas, Sections A and B.

March 27, 1935.

Error to Court of Civil Appeals of Third Supreme Judicial District.

Action by the Temple Trust Company against M. L. Walker and others. To review a judgment of the Court of Civil Appeals which affirmed a judgment for plaintiff [60 S. W.(2d) 826], defendants bring error.

Affirmed.

Dibrell & Starnes and J. B. Dibrell, Jr., all of Coleman, for plaintiffs in error.

Critz & Woodward, of Coleman, Jno. B. Daniel, of Temple, and Chas, L. Black, of Austin, for defendant in error.

Seay, Malone & Lipscomb, of Dallas, amicus curiæ.

GERMAN, Commissioner.

The only question in this case is one of usury. The principal debt was $2,000, represented by six notes, to which were attached interest coupons representing interest at 7 per cent. per annum. The notes matured annually. These notes were secured by a first deed of trust lien.

There was another note for $258, payable in semiannual installments, which note on its face contained the following language: "This note is given for a part of the interest on a loan made to the undersigned by Temple Trust Company of Two Thousand & 00/100 Dollars due April 1, 1929, 30, 31, 32, 33, 34 and 1938, and in case the maker hereof exercises the option of paying said loan or any part thereof before maturity as provided in the bonds evidencing said loan, then this note shall be proportionately reduced."

This note was secured by a second deed of trust, and the contention that the loan was usurious arises by reason of the following stipulation in said second deed of trust: "But if default should be made in the payment of any of the installments on the note above described for $258.00 or of the notes or bonds secured by the first mortgage aforesaid, or if default should be made in the compliance with any of the terms or conditions of said first mortgage, which are hereby adopted and made a part of this instrument, then the whole sum of money hereby secured being the unpaid balance of said note for $258.00 shall become due and payable at the election of the holder thereof."

It is claimed that this stipulation alone conferred on the lender authority to mature the interest represented by the $258 note before it matured, and put it in his power to exact interest in excess of the amount allowed by law. It is evident that if this provision, when construed in the light of all other provisions of the contract, was intended by the parties to actually furnish means by which, if enforced, the lender would be enabled to realize a sum as interest in excess of the amount allowed by law, the contract was usurious.

The trial court held that the contract was not usurious, and that holding was affirmed by the Court of Civil Appeals; Chief Justice McClendon dissenting. 60 S.W.(2d) 826.

A like or similar question is involved in many other cases, and because of the great importance of the question involved it becomes necessary to restate some general principles.

The determination of whether or not usury exists in a contract is a matter involving first and pre-eminently the principle which is the polestar of construction, to wit: The ascertainment of the dominant purpose and intention of the parties embodied in the contract, interpreted as a whole, in the light of the attending circumstances and the governing rules of law which presumptively they intended to observe and obey in making the contract.

It is fundamental that to constitute usury there must exist an intention to exact more for the use, forbearance, or detention of money than the maximum allowed by law. Of course where the contract "upon its very face imports usury, as by an express reservation of more than legal interest, there is no room for presumption, for the intent is apparent." When, however, as here, the presence of usury is sought to be established by an isolated provision of an extensive contract, the true meaning of such provision must be arrived at by interpreting the language of the specific stipulation in harmony with and as a part of the dominant intent evidenced by the contract in all its parts and as a whole. It is erroneous to say that any contingency, even though within the literal words of the contract, by which the lender may get more than the lawful rate of interest, makes the contract usurious, when such contingency is evidenced only by some isolated provision of a general contract, without inquiring further to determine the real meaning of such isolated stipulation in the light of the true intention of the parties. To give arbitrary force to some separate stipulation in the contract, without further inquiry, is to depart from the master principle of construction—the ascertainment of the real intention of the parties.

While of course courts have no right to depart from the terms in which the contract is expressed to make legal what the parties have made unlawful, nevertheless when the contract by its terms, construed as a whole, is doubtful, or even susceptible of more than one reasonable construction, the court will adopt the construction which comports with legality. It is presumed that in contracting parties intend to observe and obey the law. For this reason the court will not hold a contract to be in violation of the usury laws unless, upon a fair and reasonable interpretation of all its terms, it is manifest that the intention was to exact more interest than allowed by law. "In short, the general rule of interpretation and construction of such contracts may be said to be that the contract is not usurious when it may be explained on any other reasonable hypothesis." 66 C. J. p. 173.

As related to the foregoing principle of construction, we may say that as unearned interest is no part of an indebtedness at the time of prematurity under an option by the lender, it is therefore...