Court Opinion

ID: 9771159
Source: CourtListenerOpinion
Date Created: 2023-08-29 16:34:36.059712+00
Date Added: 2024-06-11T15:38:11.477160
License: Public Domain

LAGARDE, Justice,
concurring.
I join the majority in granting the Allee parties’ motion for rehearing and I withdraw my opinion of May 20, 1987. The following is now my opinion.
I agree only with the result reached by the majority. Generally, I would hold that, for the limited purpose of determining pri*571ority of competing liens on the same property, a junior lienholder has standing to assert that a senior lien is totally or partially void due to usury. However, the allegedly usurious contract here is the renewal and extension agreement, and Benser’s senior lien would not be tainted or invalidated by any usury in that separate agreement which was executed after the inception of Benser’s lien. Thus, here, the Allee parties have no standing to have determined the question of whether the renewal and extension agreement is usurious, because their rights would not be affected by any usury in that agreement. On this basis, I agree with the majority that the trial court’s judgment be reversed and the cause remanded to the trial court.
A. Article 5069-1.06 and Houston Sash & Door Co. v. Heaner
As a general rule, only those parties with a justiciable interest in the subject matter of a lawsuit have standing to sue. See Holland v. Taylor, 153 Tex. 433, 436, 270 S.W.2d 219, 221 (1954); City of Waco v. Akard, 252 S.W.2d 496, 499 (Tex.Civ.App.—Waco 1952, writ ref’d n.r.e.). Therefore, an understanding of the nature of the relief sought by the Allee parties is crucial to the resolution of the standing issue before us. The Allee parties sued under the Texas Declaratory Judgment Act. They sought- 1) a declaration that Benser’s lien is void because of usurious interest charged by Benser in connection with the renewal and extension agreement between Benser and Morris; 2) a declaration that Benser’s lien is secondary and inferior to the Allee parties’ lien; and 3) a declaration that the Allee parties’ lien be satisfied first out of any foreclosure proceeds from the sale of Morris’s property.
This is essentially a priority case. However, the majority characterizes this case as a “usury case” and holds that “a junior lienholder does not have standing to assert any usury claim that a third-party borrower might have against a senior lienholder.” Under the majority’s holding, a junior lien-holder would never be able to assert the voidness of a senior lienholder’s lien due to usury. This holding is in direct conflict with Johnson v. Lasker Real Estate Ass'n, 2 Tex.Civ.App. 494, 21 S.W. 961, 962 (1893, no writ), which held that a junior mortgagee may set up usury in a senior mortgage. The majority reasons that Johnson is no longer applicable because the current usury statute, article 5069-1.06, provides that usury penalties be forfeited “to the obli-gor,” whereas the usury statute in effect when Johnson was decided provided that a usurious contract is void without placing a limitation on who could recover usury penalties. The majority also relies on the emphasis placed on the “obligor” language in article 5069-1.06 by the Supreme Court of Texas in Houston Sash & Door Co. v. Heaner, 577 S.W.2d 217 (Tex.1979).
The majority’s reliance on the language in article 5069-1.06 is misplaced for two reasons. First, as the majority recognizes, a usurious contract is void as a matter of law even under the current statutory scheme. See Tri-County Farmer’s Co-op v. Bendele, 641 S.W.2d 208, 209 n. 2 (Tex.1982). Therefore, the fact that the usury statute in effect when Johnson was decided expressly provided that a usurious contract is void, while article 5069-1.06 contains no similar provision, is not a valid basis for distinguishing Johnson.
Second, and more importantly, article 5069-1.06 does not purport to be and is not an all-encompassing limitation on who may assert usury or when usury may be asserted. Rather, that statute is remedial in nature because it specifies who can collect usury penalties. Article 5069-1.06(1) provides that “[a]ny person who contracts for, charges or receives [usurious] interest ... shall forfeit to the obligor” the penalties prescribed by that statute. TEX.REV.CIV. STAT.ANN. art. 5069-1.06(1) (Vernon Supp.1987) (emphasis added). I will concede that the Allee parties are not “obli-gors,” and, therefore, they could not sue to recover the penalties prescribed by article 5069-1.06. However, that fact is irrelevant because the Allee parties are not seeking to recover usury penalties here. The Allee parties are asserting the voidness of Ben-ser’s lien, due to usury, in a suit for a *572determination and declaration of priority between competing liens on Morris’s land.
Similarly, the majority’s reliance on Houston Sash is misplaced. In that case, Houston Sash sued Bedford Corporation for a debt owed by Bedford under its open account with Houston Sash. Houston Sash also sued Heaner, an officer of Bedford, who had guaranteed Bedford’s open account debt in a separate written guaranty agreement with Houston Sash. Heaner was only an obligor under his written guaranty agreement with Houston Sash. He was not a co-obligor under Bedford’s open account. Therefore, the court held that Heaner’s estate could not interpose Bed-ford’s usury defense to avoid liability under the guaranty agreement — i.e., Heaner’s estate could not assert usury in the open account, to which Heaner was not an obli-gor, as a defense to Heaner’s own obligation to pay the debt incurred by Bedford on the open account. See Houston Sash, 577 S.W.2d at 222.
In Houston Sash, the Supreme Court of Texas does use the “obligor” language from article 5069-1.06 to limit who may assert usury. However, the limitation enunciated in that case applies only where a party is attempting to use the usury in one transaction to which he is not an obli-gor as a defense to his own obligation to pay money under a separate non-usurious contract. Thus, the Texas Supreme Court uses the word “defense” to mean raising usury as a means of avoiding liability for a debt or obligation owed by the party raising usury. In Micrea, Inc. v. Eureka Life Ins. Co. of Amer., 534 S.W.2d 348 (Tex.Civ.App.—Fort Worth 1976, writ ref’d n.r.e.), the case cited by the Supreme Court in Houston Sash and by the majority here for the proposition that the usury defense is restricted to the immediate parties to the usurious transaction, the court also used the word “defense” in reference to an attempt to avoid liability. See Micrea, Inc., 534 S.W.2d at 354 (“[o]ne who has not himself paid usurious interest and whose individual contract with a lender, in relation to a loan made to another, does not provide for usurious interest may not avoid liability on the ground that usurious interest was paid by the principal debtor, the defense of usury or right of action growing out of the contract providing therefor or actual collection of usurious interest being purely personal to the borrower for whose protection the statutes were enacted”) (emphasis added). While it is true that we are bound by the pronouncements of the Texas Supreme Court, we are not bound to extend the holdings of that court. Here, the majority has extended the Houston Sash holding to a situation that was not expressly or implicitly addressed in that opinion. Under the majority's holding, Houston Sash stands for the proposition that a party who is not an obligor to a transaction cannot assert usury in that transaction for any purpose. I cannot agree.
Once again, I will concede that the Allee parties, like any junior lienholders, are not obligors under a senior mortgage. However, under the reasoning in Houston Sash, the Allee parties’ non-obligor status is irrelevant because they are not seeking to avoid liability for a debt owed by them. Rather, they are seeking a declaration of priority between competing liens on the same piece of property.
B. General Rule: A junior lienholder does have standing to assert usury against a senior lienholder
After a close examination of the language in article 5069-1.06 and the Houston Sash opinion, it is clear that neither of those two authorities controls the standing issue before us. Those two authorities establish two propositions: 1) a non-obligor may not sue to recover usury penalties; and 2) a person may not assert usury in a transaction under which he is not an obli-gor as a defense to avoid his personal liability for a debt. Neither of those propositions controls when a junior lienholder sues under the Texas Declaratory Judgment Act for a determination of priority, as the Allee parties did here. Instead, the provisions of that statute, which are now found in the Texas Civil Practice and Remedies Code, govern whether the junior lien-holder has standing. Section 37.004(a) of *573the Texas Civil Practice and Remedies Code provides:
Subject Matter of Relief
(a) A person interested under a deed, will, written contract, or other writings constituting a contract or whose rights, status, or other legal relations are affected by a statute, municipal ordinance, contract, or franchise may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract, or franchise and obtain a declaration of rights, status, or other legal relations thereunder.
TEX.CIV.PRAC. & REM.CODE ANN. § 37.004(a) (Vernon 1986) (emphasis added). I would hold that as a general rule, under section 37.004(a), a junior lienholder has standing to assert that a senior mortgage is usurious because the junior lienholder’s rights are affected by the validity of a senior mortgage.
In Texas, prior to foreclosure, a mortgagee has only a lien on the mortgaged land to secure payment of a debt owed by the mortgagor. See Karcher v. Bousquet, 672 S.W.2d 289, 292 (Tex.App.—Tyler 1984, writ ref'd n.r.e.); see also Taylor v. Brennan, 621 S.W.2d 592, 593 (Tex.1981) (Texas follows lien theory of mortgages). A lien is the right to have satisfaction out of the property that is mortgaged to secure the payment of a debt. See Texas Bank & Trust Co. of Dallas v. Custom Leasing, Inc., 402 S.W.2d 926, 930 (Tex.Civ.App.—Amarillo 1966, no writ). The right of satisfaction is the first right of a junior lienholder that is affected by the validity of a senior mortgage.
A determination of priority between competing liens is essentially a ranking of the liens in the order that they are entitled to be satisfied out of any foreclosure sale proceeds. Under basic mortgage principles, a valid and specific debt is necessary to support a lien. See Calvert v. Hull, 475 S.W.2d 907, 911 (Tex.1972); Tyler Bank & Trust Co. v. Shaw, 293 S.W.2d 797, 800 (Tex.Civ.App.—Texarkana 1956, writ refd n.r.e.). With this in mind, it should be remembered that a usurious contract is void as a matter of law. See Tri-County Farmer’s Co-op v. Bendele, 641 S.W.2d 208, 209 n. 2 (Tex.1982); see also Christian v. Manning, 59 S.W.2d 234, 236 (Tex.Civ.App.—Fort Worth 1933) (deed of trust given solely for usurious interest is null and void), modified, 124 Tex. 517, 81 S.W.2d 54 (1935). Thus, if the contract creating the indebtedness underlying a senior lien is void because of usury, the lien must fall with it. Cf. Lawson v. Giggs, 591 S.W.2d 292, 294 (Tex.Civ.App.—Houston [14th Dist.] 1979, writ ref d n.r.e.) (a mortgage is an incident of the debt and as long as the debt exists the security follows the debt). Of course, under article 5069-1.06, the contract creating the indebtedness that is secured by a lien may be either totally or partially void depending upon the amount of usurious interest charged. See TEX. REV.CIV.STAT.ANN. art. 5069-1.06(1) (Vernon Supp.1987) (person charging usurious interest in excess of double the amount allowed by law forfeits all principal and interest); id. (2) (person charging usurious interest less than double the legal limit forfeits three times the amount of usurious interest charged). A senior mortgagee loses his right to share in any foreclosure proceeds to the extent that his lien on the property is void. Therefore, it is clear that a junior mortgagee has a justiciable interest in determining the extent of the validity of a senior lien because that determination controls when and if his lien may be satisfied out of any foreclosure proceeds.
A second right of a junior lienholder that is affected by the validity of a senior mortgage is the junior lienholder’s right to remove the lien of a prior usurious mortgage by discharging the amount of the debt secured by the prior lien to the extent that the debt is valid and lawful (the right of discharge). See Maloney v. Earheart, 81 Tex. 281, 284, 16 S.W. 1030, 1031 (1891). The greater the amount of the debt, secured by a senior lien, that is invalid under article 5069-1.06, the less that a junior lienholder has to pay in order to discharge that lien.
For the reasons set forth above, I would hold that a person holding a junior lien on a *574particular property is a person whose rights, status, and legal relations are affected by and dependent upon the validity of a senior mortgage on the same property. In short, a junior lienholder has a justicia-ble interest and may assert usury in a priority dispute with a senior lienholder, because the junior lienholder has a lien on the same property that is the security for the senior lien, and because the junior lien-holder’s rights with respect to that property are affected by any usury existing in the senior mortgage. Thus, under section 37.-004(a) of the Texas Civil Practice and Remedies Code, a junior lienholder may have determined the question of whether a senior mortgage is usurious, and may obtain a declaration of priority between the competing liens. See TEX.CIY.PRAC. & REM. CODE ANN. § 37.004(a) (Vernon 1986) (“a person ... whose rights ... are affected by a ... contract ... may have determined any question of ... validity arising under the instrument ... and obtain a declaration of rights, status, or other legal relations thereunder”).
C. Application of the general rule to the Allee parties
As can be seen from the foregoing analysis, the determination of whether a junior lienholder has standing to assert usury under section 37.004(a) is a three-step process. First, the junior lienholder’s rights are identified. Second, the written contract that the junior lienholder is challenging as usurious is identified. Finally, a determination is made as to whether the junior lienholder’s rights would be affected by the validity of the allegedly usurious contract.
The Allee parties do not contend that the original note and deed of trust between Benser and Morris are usurious. The allegedly usurious contract here is the separate renewal and extension agreement between Morris and Benser. Even if that separate renewal agreement is usurious, the original indebtedness and Benser’s senior lien securing that indebtedness would still be valid and enforceable. See Cain v. Bonner, 108 Tex. 399, 401, 194 S.W. 1098, 1098 (1917); Southwest Realty Co. v. Barron, 113 S.W.2d 991, 994-95 (Tex.Civ.App.—Galveston 1938, no writ). Therefore, the Allee parties’ rights of satisfaction and discharge would not be affected by any usury in the separate renewal agreement. Thus, I would hold that the Allee parties do not have standing to assert that the renewal agreement is usurious. Consequently, I would join the majority in reversing the judgment of the trial court and in remanding the cause to that court for further proceedings.