Ware v. Paxton

• Decision Date: 26 February 1954
• Docket Number: No. 3017,3017
• Citation: 266 S.W.2d 218
• Parties: WARE v. PAXTON et ux.
• Court: Texas Court of Appeals

Page 218

266 S.W.2d 218

WARE v. PAXTON et ux.

No. 3017.

Court of Civil Appeals of Texas, Eastland.

Feb. 26, 1954.

Appellees' Motion for Rehearing and to Certify, Denied Feb. 26, 1954.

Ed C. Stearns, Dallas, for appellant.

Fritz, Goldberg & Alexander, Dallas, for appellees.

COLLINGS, Justice.

This suit was brought by V. L. Ware against J. S. Paxton and wife to recover $3,135.82 alleged to be the balance due on a promissory note dated December 29, 1950, plus interest at 10% per annum and $400 attorney's fee and to foreclose a chattel mortgage lien on certain household goods and furniture. The Paxtons alleged in an answer filed March 31, 1951 that in a long series of transactions involving numerous notes they had paid $4,250 usurious interest to Ware. They sought to recover double the amount of such claimed excess payments which more than offset the amount of the note sued upon. Plaintiff Ware answered the cross-action by denying the allegations upon which the Paxtons based their claims for recovery of usurious interest charges. In defense of the Paxton's claim for all payments alleged to have been made before March 30, 1949, Ware pleaded the provisions of Article 5073, Texas Revised Civil Statutes, which provides that all actions for collection of penalty for usury must be brought within two years from the time said payments have been collected. Upon a jury verdict on special issues, the District Court rendered judgment for the Paxtons in the sum of.$181.84, plus costs and interest. V. L. Ware has brought this appeal.

The pleadings and evidence are voluminous and the numerous transactions which form the basis of the claims of the parties hereto are difficult to understand with certainty and exactness. It is undisputed that appellees have made no payments on the note of December 29, 1950 for the sum of $3,048 upon which this suit is brought. The defense urged by the Paxtons is numerous usurious charges alleged to have been made by Ware on transactions extending back to August 19, 1946. It is alleged that such charges together with the statutory penalty thereon should be offset against the principal of the note sued on. The alleged usurious charges, together with the transactions to which they were connected are, as we understand from the evidence, briefly as follows:

The first transaction between the parties was a note dated August 19, 1946 in the sum of $312 upon which 'brokerage' charges were made in the sum of $62. This note, including the charges thereon, was paid in full more than two years before this suit was brought.

On June 7, 1947, Ware made a loan to Paxton evidenced by a note for the sum of $616.76 which included a charge of $100 for a 'waiver contract.' The $100 charge, as explained by Ware, consisted of $11.20 as 'service charge, transfer, etc.,' $25.80 as interest and $63 for his waiver of the right to collect the loan in the event of Paxton's death, illness, accident or unemployment.

On October 9, 1947, a third note in the sum of $302.04, payable in three monthly installments, was executed which included charges for a total amount of $52.04, of which it was claimed that $5.04 was for interest, $7 for 'transfers, titles, telephone, etc.,' and $40 for premium on a life, health and accident policy of insurance.

On May 19, 1948, another loan in the sum of $2,156, payable in equal monthly installments for one year which included a service charge of $3.75, an interest charge of $102.50, and $309.25 to Zenith Insurance Co. for a credit, life, health and accident insurance policy, or a total of $415.50. Such note also included an item of $475 as the balance due on former loans, including claimed usurious charges in the amount of $152.04.

The total of all above claimed usurious charges was $629.54, all of which were made in connection with notes executed more than two years before the filing of appellee Paxton's cross-action for usury on March 31, 1951 and as previously noted, $62 of such amount was actually paid more than two years before suit was filed.

On April 29, 1949, Paxton secured another loan from Ware evidence by a note payable in ten monthly installments, and in the sum of $660 which included a charge of $110 as consideration for Ware waiving his right to demand payment of the note in case of appellee's death, accident or sickness. Thereafter, an additional advance in the sum of $66 was made on this note. All of this note and the additional $66 was paid, except a balance of $136 which was carried forward in another note, as hereinafter set out.

On July 30, 1949, another note in the sum of $132, payable in one month, was executed which included a charge of $32 for the expense of the contract and the cancellation of the debt in the event of Paxton's death, sickness or disability. This note was paid except a balance of $32 which was likewise carried over and included in a subsequent note.

On January 9, 1950, another note was executed for the total sum of $3,744 which included an item of $144 as interest. The note also included a balance of $646 on prior indebtedness. As we understand, this balance on prior indebtedness included a balance of $478 from the $2,156 note dated May 19, 1948, a balance of $136 from the note for $660 plus the $66 advance dated April 29, 1949, and a $32 balance remaining due on the $132 note dated July 30, 1949.

On the date of the execution of the $3,744 note, Paxton made another note to Ware in the sum of $576, bearing interest from date at the rate of $10%, and payable in one year. It was given for brokerage under an agreement between the parties for various services in connection therewith; for guaranteeing the payment of the $3,744 note to the Mercantile National Bank.

On June 19, 1950, appellee borrowed $675 to which a charge of $67.50 was added for interest and 'waiver of rights.' This note, in the total sum of $742.50 was made payable on August 3, 1950.

On October 30, 1950, Paxton borrowed $62, to which was added $6.90 for service charges.

The total of the above charges claimed to have been made within a period of two years prior to the filing of appellee's cross-action for usury on March 31, 1951 was $936.40.

On December 29, 1950, another note was executed in the sum of $3,048. This is the note upon which suit was instituted in this case. This note included a balance of $1,164 on the $3,744 note and another balance on prior indebtedness of $1,282.50. As we understand the record, such $1,282.50 balance included a $461 balance on the $576 note dated January 9, 1950, the total amount of the $62.10 note, plus the $6.90 charge thereon or a total of $69, and included the balance of the note dated June 19, 1950 in the sum of $675 plus the $67.50 charge thereon or a total of $742.50, and also included a balance of $10 remaining unpaid on advances made in connection with the $576 note over and above payments made thereon. In addition to the balances brought forward as above set out, the note in question included $74, the price of an air conditioner purchased by Paxton and interest charges on said note.

It was found by the jury in answer to special issues that Ware required Paxton to enter into the waiver contracts as above indicated, and to accept the insurance coverage and other claimed service charges in order for the loans to be made and for the purpose of obtaining compensation by Ware for the use of his money in excess of 10% per annum. The jury found that Ware performed no services for Paxton in connection with these transactions. The jury further found that Paxton had made a payment of $200 for which he had not been given credit.

The judgment in favor of appellee Paxton in the sum of.$181.84 does not indicate the manner in which the amount of recovery was ascertained. Appellant, in his brief, undertakes to explain the manner in which the amount of the judgment was determined and appellee does not question the explanation. We, therefore, incorporate the substance of appellant's explanation of the judgment as follows:

By offsetting the $1,690.96 against the $1,872.80, leaves the sum of.$181.84, the amount of the judgment rendered by the trial court in favor of Appellee.

It is apparent that the trial court found all of the charges and interest made in said transactions to be usurious. Appellant attacks such findings. It is contended by appellant in his 10th and 12th, and in other points, that the court erred in holding charges for credit, life, health and accident insurance to be improper and in effect usurious interest and, therefore, subject to double penalty. The charges made for such insurance have already been enumerated in connection with loans made by Ware to the Paxtons. As urged by appellant, a lender may, without violating the usury law, make an extra charge for any distinctly separate and additional consideration other than the simple lending of money. Greever v. Persky, 140 Tex. 64, 165 S.W.2d 709.

In the absence of statutory prohibition, a charge for credit insurance which is not excessive, and where there is no compulsion in the selection of the insurance company by which the lender will receive additional commissions or compensation, is not considered as a usurious exaction of interest. The jury found, however, that Ware made the charges for such insurance for the purpose of obtaining compensation for the use of his money in excess of 10% per annum. It is held that if there is an intent to charge usury the courts will look through the form to the substance of the transaction and hold the contract usurious no matter how the transaction may be veiled or disguished. Mitchell v. Napier, 22 Tex. 120; Wellfare v. Realty Trust Co., Tex.Civ.App., 85 S.W.2d 1067; National Bond & Mortgage Corporation v. Mahanay, 124 Tex. 544, 80 S.W.2d 947; Temple Trust Co. v. Sewell, 133 Tex. 417, 126 S.W.2d 943.

There is evidence that Ware required Paxton to take such credit insurance as a prerequisite to the loans made in connection therewith...