Watts v. Holley

• Court: Texas Civil Court of Appeals
• Writing for the Court: POWERS
• Citation: Watts v. Holley, 622 S.W.2d 583 (Tex. Ct. App. 1981)
• Decision Date: 22 July 1981
• Docket Number: No. 13353,13353
• Parties: Edwin A. WATTS, Appellant, v. Jerry D. HOLLEY, Appellee.

Page 583

622 S.W.2d 583

Edwin A. WATTS, Appellant, v. Jerry D. HOLLEY, Appellee.

No. 13353.

Court of Civil Appeals of Texas, Austin.

July 22, 1981.

Rehearing Denied Sept. 4, 1981.

Travis R. Phillips, Phillips & Neal, for appellant.

Vance Dunnam, Dunnam, Dunnam, Horner & Meyer, Waco, for appellee.

POWERS, Justice.

This appeal is taken from an order of the 261st Judicial District Court of Travis County which sustained the plea of privilege of Jerry D. Holley, appellee.

Appellant Edwin A. Watts sued Holley in Travis County alleging an action for breach of contract and statutory actions for usury, arising out of an ostensible sale and lease-back of improved real property and equipment, which Watts claimed was a loan transaction. Holley filed his plea of privilege to be sued in McLennan County, the county of his residence. Watts' controverting affidavit asserted that special venue existed in Travis County by reason of his statutory actions for usury under Tex.Rev.Civ.Stat.Ann. art. 5069-1.06, which allows such actions to be brought in the county where a usurious transaction is "entered into" or where usury is received or collected. Tex.Rev.Civ.Stat.Ann. art. 1995, subsection 30. Following a hearing without a jury, the trial court sustained Holley's plea of privilege and ordered the case transferred to McLennan County. Although findings of fact and conclusions of law were requested, none were filed.

We will reverse the judgment of the trial court and remand the cause to that court.

Findings of fact and conclusions of law may properly be requested and filed in a venue case, but they are not required to be. Tex.R.Civ.P. 296, 385.

Where the record contains no findings of fact or conclusions of law as in the present case, we ordinarily affirm the order of the trial court if it may be upheld on any legal theory supported in the evidence. Bishop v. Bishop, 359 S.W.2d 869 (Tex.1962). It is, in such cases, presumed that the trial court resolved every fact issue in favor of the appellee. Where the appellant contends there is "no evidence" to support the judgment and the implied findings of fact incident thereto, we are required to review the evidence in a light most favorable to the trial court's judgment, disregarding all contrary evidence. James v. Drye, 320 S.W.2d 319 (Tex.1959). Where the appellant contends that the evidence is "insufficient" to support the judgment, a different rule applies, however, and in determining that question we must consider and weigh all the evidence, including any evidence contrary to the trial court's judgment. Burnett v. Motyka, 610 S.W.2d 735 (Tex.1980). Watts, the appellant here, complains on appeal that the trial court erred in failing to find (1) that a usurious transaction was "entered into" in Travis County, and (2) that Holley received or collected usurious interest in that county. Coupled with appellant's argument in his brief, we interpret these points of error to be complaints of insufficient evidence. We will, therefore, examine appellant's points of error using a sufficiency of the evidence standard.

To maintain the special venue in Travis County, Watts was required to show by a preponderance of the evidence that he had a meritorious cause of action for usury under Article 5069-1.06, supra, and that the usurious transaction was "entered into" in Travis County or that Holley received or collected usury in that county. See Fitting Supply Co. v. Bell County Solar Control Corp., 605 S.W.2d 856 (Tex.1980). To show a meritorious cause of action for usury, Watts was required to establish these elements: (1) a loan of money; (2) an absolute obligation to repay; (3) the exaction of a greater compensation than allowed by law; and (4) the lender's intention to exact usury. Pansy Oil Co. v. Federal Oil Co., 91 S.W.2d 453 (Tex.Civ.App. Texarkana 1936, writ ref'd).

Whether a particular transaction is a sale or a loan depends upon the intention of the parties as manifested by their agreement or the surrounding circumstances. Wells v. Hilburn, 98 S.W.2d 177 (Tex.Com.App.1936, opinion adopted). The instruments which would objectively reflect the parties' agreement in this case, while consistent with an outright sale of the property, and a lease-back to Watts, are alleged by Watts to be colorable only and contrary to the real agreement of the parties for a loan secured by the property and repayable in the form of the rents required of Watts under his lease contracts with Holley. The parties disagree, of course, about their contractual intentions, the validity of the instruments, and the nature of the transaction. We are left, then, with drawing their true agreement from the totality of the circumstances. Such circumstances include: the preliminary negotiations; whether the seller urgently needed money before entering the transaction; whether the buyer was normally in the business of lending money; the reasonableness of the amount charged as rent in the lease of the property back to the seller; and the price paid for the property. See Comment, Real Estate Sale-Leaseback Agreements Under Texas Usury Law: Circumvention or Sale?, 7 St. Mary's L.J. 821 (1976). The ultimate and essential point to be determined is whether the parties intended a mortgage or an absolute conveyance of the property. Perry v. Long, 222 S.W.2d 460 (Tex.Civ.App. Dallas 1949, writ ref'd).

The evidence introduced at the plea of privilege hearing consisted primarily of Watts' own testimony and documents offered by him, including the deed in issue. Holley chose to offer no evidence and relied upon the issue of whether Watts' evidence was legally sufficient. The evidence showed that in the spring of 1977, Watts and his partner ¹ needed money to complete a remodeling of the second floor of their building to accommodate a physical fitness enterprise they intended to operate therein, and to purchase the physical fitness equipment that they had ordered but not received. They discussed their financial need with Holley in Travis County and he agreed to lend them $50,000.00 for the remodeling and $53,200.00, the purchase price of the equipment, at a rate of interest between twenty and thirty percent. ² There was no evidence that the parties agreed at this time about the terms of repayment or the exact rate of interest. Watts obtained at this time, however, and gave to Holley, a mortgagee's information letter issued by Texas Title Guaranty Company through Austin Title Company. In substance, the company agreed to issue an insurance policy guaranteeing that the lien of a deed of trust, to be executed by the partners for the benefit of Holley in the amount of $50,000.00, would be superior to any other lien on the building save for several listed encumbrances. The policy itself was never issued nor does it appear that any such deed of trust had been executed at this time.

Watts testified further that after the oral agreement was made for a loan, the partners traveled to Waco, in McLennan County, to meet with Holley's attorney and accountant. A curious episode then occurred in the office of Holley's attorney, who had prepared documents to evidence each of three possible transactions to evidence and effectuate the agreement made earlier. These documents consisted of:

(1) An earnest money contract reciting the partners' agreement to sell their building to Holley for a sale price equal to $373,852.00, payable entirely by Holley's assuming an existing indebtedness secured by a lien on the property, associated with a promissory note in the original amount of $378,000.00; and a deed of general warranty in regular form evidencing the partners' conveyance of the property to Holley for a recited consideration of ten dollars and Holley's agreement to assume such debt.

(2) A builder's or mechanic's lien contract and associated promissory note, setting forth Holley's agreement, as contractor, to construct improvements on the second floor of the building for $50,000.00; and a promissory note in that amount to be executed by the partners, secured by a lien on the building granted in the contract, and payable ninety days from its date (April 20, 1977).

(3) A promissory note and deed of trust reflecting a $50,000.00 loan from Holley to the partners at ten percent per annum, secured by the lien of the deed of trust and payable on or before ninety days from its date (April 20, 1977).

Watts testified that Holley's attorney told them that all three sets needed to be signed before an initial payment of $10,000.00 would be "disbursed," that the attorney and accountant needed to keep Holley out of usury problems, and that they would determine or choose at a later time which set of documents they would use. The partners agreed to this arrangement, executed all the documents on April 20, 1977, and received $10,000.00 in the form of a bank check drawn by Holley on the account of ...