Court Opinion

ID: 9681110
Source: CourtListenerOpinion
Date Created: 2023-08-24 07:44:09.295023+00
Date Added: 2024-06-11T18:17:32.294620
License: Public Domain

CULVER, Justice,
dissenting.
Although the majority’s opinion does not foreclose altogether the right of a junior lienholder to assert standing to attack a senior lien as constitutionally usurious, it does preclude standing of a junior lienholder to assert statutory usury in order to void a senior lien. From this result, I must dissent.
Usury laws are designed mainly to compensate unsophisticated or disadvantaged borrowers and to punish and deter unscrupulous lenders who prey on such individuals. To achieve these ends, our usury statute provides for severe penalties that are assessed against culpable lenders.1 By amending the Act in 1979, the legislature made it clear that only the “obligor” could collect the penalties imposed by the statute. An obligor has been defined as a person who pays, is charged, or has contracted to pay interest at a rate in excess of that allowed by law. Concrete Construction Supply, Inc. v. M.F.C., Inc., 636 S.W.2d 475, 477 (Tex.App. — Dallas 1982, no writ). Focusing entirely on the “obligor” language, Benser argues that Allee lacks standing to seek the remedies provided by Article 5069-1.06 because she never paid, was charged, nor contracted to pay interest. Benser cites Houston Sash & Door Co. v. Heaner, 577 S.W.2d 217 (Tex.1979), wherein we held that a guarantor on an open account could not interpose the debt- or’s usury defense in order to escape liability under the guaranty agreement. Numerous cases decided both before and after Houston Sash have held that only immediate parties to a transaction may assert usury in the transaction to avoid liability or collect statutory penalties.2 Those cases are easily distinguished from the case at bar because Allee does not seek to avoid liability on a debt and is not asking for statutory penalties. She is asking simply that her lien be declared superior to the allegedly usurious Benser lien. Consequently, the Houston Sash decision and the other similar decisions should have no bearing on the issue before us and would not be affected by our holding that junior lienhold-ers have standing to challenge usurious senior liens.
I recognize that the usury statute is designed mainly to govern the rights of immediate parties to loan agreements. However, the lender and borrower are not nec*67essarily the only parties with recognizable interests in a loan transaction. When a borrower pledges collateral as security for a loan, the lender acquires the right to have satisfaction out of the collateral pledged to secure the payment of the debt. If the borrower subsequently pledges the same collateral as security for another loan from another lender, the second lender acquires the same right of satisfaction, except that his right is subordinate to that of the first lender. In this case, Benser is in the position of first lender, or senior lienholder, and Allee is in the position of second lender, or junior lienholder. When Morris defaulted on his obligations to Benser and Allee, Allee’s right of satisfaction was dependent upon the validity of Benser’s senior lien.
In recognition of the rights of junior lienholders under these circumstances, our courts have carved out an exception to the general rule that only immediate parties to a loan transaction may assert usury when questioning its validity. In Maloney v. Eaheart, 81 Tex. 281, 16 S.W. 1030 (1891), this court held that a junior lienholder has the right to protect his lien by paying off the amount that is just and legally due on the senior lien. Thus, the court held that “the right to remove the first lien by discharging so much of appellant’s [senior lienholder’s] lien as was lawful was acquired by the second mortgagee when his lien was acquired.” Id. at 1031. Further, it has been held that even when a junior lienholder takes a lien with notice of a senior lien, the junior lienholder may nevertheless assert usury in the senior lien. Johnson v. Lasker Real Estate Ass’n, 21 S.W. 961, 962 (Tex.Civ.App.1893, no writ); cf. Sugg v. Smith, 205 S.W. 363, 370 (Tex.Civ.App. — Austin 1918, writ ref’d) (junior lienholder who has not assumed payment of preexisting mortgage may show usury in preexisting debt if property is not of sufficient value to discharge both debts).
Compelling reasons existed for the creation of the “junior lienholder” exception. One commentator wrote:
Anyone in legal privity with the mortgagor, unless he has debarred himself of the right to dispute the mortgage, may set up this defense; otherwise the property would be practically inalienable in the hands of the mortgagor, unless he should be willing to affirm the usurious mortgage by selling the property subject to it. But the owner of the property has, of course, the right to sell the property as though such void mortgage did not exist; and the purchaser necessarily acquires all the rights of his vendor to question the validity of the usurious encumbrance.
2 L. Jones, Mortgages § 791 (8th Ed.1928).
Such reasoning is still persuasive. The Benser lien, if tainted by usury in the renewal and extension agreement, is void as a matter of law. Tex. Const. Art. XVI, § 11. Failure of the lien would have a direct impact on Allee’s right to satisfaction from the sale of the common property pledged as security in the two transactions. For the above reasons, I would hold that a junior lienholder has standing to assert usury in a priority dispute with a senior lien and that a suit for declaratory judgment is the proper vehicle for determining priority between the competing liens. Thus, I would sustain Allee’s first point of error.
In her second point of error, Allee contends that the court of appeals erred in failing to decide, as a matter of law, that the $30,000 paid by Morris to Benser as consideration under the renewal and extension agreement constituted interest. In response, Benser argues that the purpose behind the renewal and extension agreement was to allow Morris one last opportunity to salvage the collateral and work out his financial cash flow problems. Benser argues that the $30,000 charge was a separate, distinct, and bona fide consideration for purposes other than the simple lending of money.
The usury statute defines “interest” as “the compensation allowed by law for the use or forebearance or detention of money.” TEX.REV.CIV.STAT.ANN. art. 5069-1.01(a) (Vernon 1987). In determining whether a particular charge constitutes interest, courts look beyond the “labels” *68placed on the charges. Gonzalez County Savings & Loan Association v. Freeman, 534 S.W.2d 903 (Tex.1976). A charge which is in fact compensation for the use, forebearance or detention of money is interest, regardless of the label placed upon it by the lender. Art. 5069-1.01(a). Where a dispute in the evidence exists as to whether the charge is merely a device to conceal usury, a question of fact is raised for the jury. Greever v. Persky, 140 Tex. 64, 165 S.W.2d 709 (1942). I believe that such a fact question exists in this case. Benser filed his own sworn affidavit along with his response to Allee’s motion for summary judgment, wherein he stated that he “charged Thomas E. Morris various sums of money which represented compensation for services rendered as a guarantor, including time spent negotiating the guarantee agreement and the renewal and extension as well as consultation with the attorneys.” I believe this summary judgment evidence raises a fact question with respect to whether the $30,000 paid by Morris under the renewal and extension agreement constituted interest.
This cause should have been remanded to the trial court with instructions to proceed to trial.
KILGARLIN, J., joins in this dissenting opinion.

. Tex.Rev.Civ.Stat.Ann. art. 5069-1.06(l)-(2) (Vernon 1987) provides:
(1) Any person who contracts for, charges or receives interest which is greater than the amount authorized by this Subtitle, shall forfeit to the obligor three times the amount of usurious interest contracted for, charged or received, such usurious interest being the amount [of] the total interest contracted for, charged, or received exceeds the amount of interest allowed by law, and reasonable attorney fees fixed by the court except that in no event shall the amount forfeited be less than Two Thousand Dollars or Twenty percent of the principal, whichever is the smaller sum; provided, that there shall be no penalty for any usurious interest which results from accidental and bona fide error.
(2) Any person who contracts for, charges or receives interest which is in excess of double the amount of interest allowed by this Subtitle shall forfeit as an additional penalty, all principal as well as interest and all other charges and shall pay reasonable attorney fees set by the court; provided further that any such person violating the provisions of this section shall be guilty of a misdemeanor and upon conviction thereof shall be punished by fine of not more than One Thousand Dollars. Each contract or transaction in violation of this section shall constitute a separate offense punishable hereunder.

. Childs v. Taylor Cotton Oil Co., 612 S.W.2d 245 (Tex.Civ.App. — Tyler 1981, writ refd n.r.e.) (estate of debtor may not collect statutory penalties); Micrea, Inc. v. Eureka Life Ins. Co. of America, 534 S.W.2d 348 (Tex.Civ.App. — Fort Worth 1976, writ ref’d n.r.e.) (Guarantor cannot collect statutory penalties); Liberty Mutual Ins. Co. v. E.B. Hopkins, 422 S.W.2d 203 (Tex.Civ. App. — Beaumont 1967, writ refd n.r.e.) (only the party paying interest may recover statutory penalties); Patterson v. Neel, 610 S.W.2d 154 (Tex.Civ.App. — Houston [1st Dist.] 1980, no writ) (binding obligation must exist between plaintiff and defendant before plaintiff can collect statutory penalties); Hartnett v. Adams & Holmes Mortgage Co., 539 S.W.2d 181 (Tex.Civ. App. — Texarkana 1976, no writ) (“obligor" is one who agrees to pay interest); Guardian Consumer Finance Corp. v. C.H. Langdeau, 329 S.W.2d 926 (Tex.Civ.App. — Austin 1959, no writ) (receiver cannot collect statutory penalties).