Court Opinion

ID: 9858041
Source: CourtListenerOpinion
Date Created: 2023-09-24 16:12:51.354316+00
Date Added: 2024-06-11T10:01:29.642387
License: Public Domain

ON MOTION FOR REHEARING
Appellee’s motion for rehearing argues that our decision will cause havoc among commercial lenders in Texas because they cannot be assured that an individually guaranteed corporate loan within corporate interest rate limits will not be attacked by its guarantor for usurious interest.
Article 1302-2.09, which denies the claim or defense of usury to a corporate guarantor, clearly applies to individually guaranteed corporate loans in most instances. Texas case law, however, mandates that a transaction’s substance determines whether it is usurious. Texas also condemns disguised usurious transactions. Commercial Securities Co. v. Rea, 130 Tex. 11, 105 S.W.2d 872, 875 (1937); Western Guaranty Loan Co. v. Dean, 309 S.W.2d 857, 863 (Tex.Civ.App.—Dallas 1957, writ ref’d n.r.e.). These authorities lead us to conclude that using a corporation to exact the higher corporate interest rate is impermissible where no corporate business purpose is present for the loan. See generally T. Perick, J. Fields and S. Hunt, A Topic of Interest: An Analysis of the Status of the Usury Law in Texas, 19 S.Tex.L.J. 525, 533 (1978) and Comment, Using a “Dummy” Corporate Borrower Creates Usury and Tax Difficulties, 28 S.W.L.J. 437, 443 (1974). The record here shows no corporate business purpose for the loan to J.L.S., Inc. and that it was in substance a loan to Shook. We believe, therefore, Shook is entitled to a judgment against Republic for usury. Appellee’s motion for rehearing is overruled.
Appellant has moved for rehearing in part requesting that we order forfeiture of the interest accrued on the notes since November 6, 1978, the date of the last renewal note. It appears that all interest accrued after that date was calculated at higher than allowable rates of interest. Therefore, it must be forfeited. Republic is entitled to recover $155,434.69, which represents the principal on all three notes reduced by Shook’s recovery for usurious interest paid and offset of usurious interest contained in the notes but not paid. Appellant’s motion for rehearing in part is granted and our judgment is so modified.