Court Opinion

ID: 9777130
Source: CourtListenerOpinion
Date Created: 2023-08-29 19:59:53.186453+00
Date Added: 2024-06-11T07:32:49.255143
License: Public Domain

CADENA, Justice,
dissenting.
I do not agree with the conclusion that the trial court correctly denied defendants’ prayer for recovery of the statutory penalties for usury.
The record conclusively, I think, discloses that the amount sued for included unearned interest. The face amount of the note, $625.00, included precomputed interest at the maximum legal rate on a loan of $482.14 repayable in 25 monthly installments. On October 12,1973, after the total payments made by defendants, less default charges, had been applied to the reduction of the principal, the unpaid balance was $503.05. Clearly, this unpaid balance included interest computed on the assumption that the note would be paid in 25 months. There is no other possible arithmetical process which will yield the figure, $503.05.
Plaintiff’s supervisor of accounts testified that on October 12, 1973, the amount owed by defendants, taking into consideration delinquency charges and rebate of unearned interest, was $503.05. Simple arithmetic discloses the complete falsity of this statement. The maximum amount of delinquency charges for which defendants could be liable at that time was $7.50. They had paid $4.30 of such amount. Therefore, the total unpaid delinquency charges amounted *179to $3.20. The total amount for which defendants were then liable would be $506.25. But this figure includes 19 months’ unearned interest. Even if the unearned interest is computed according to the “Rule of 78ths,”1 a method which is more favorable to the lender than is the actuarial method of computing unearned interest, the amount of interest to be refunded would be in excess of $80.00. The “net payoff” as of October 12, then, would not exceed $426.25.
Nor does $503.05 correctly represent the net “payoff” figure as of October 22, 1974, the date on which plaintiff filed this suit, if delinquency charges and unearned interest are taken into consideration. The truth is reflected in that portion of the testimony of plaintiff’s supervisor of accounts in which he admitted that the amount which plaintiff was seeking to recover includes unearned interest. Under the circumstances of this case, the amount sued for included usurious interest.
Under the holding in Moore v. Sabine National Bank, 527 S.W.2d 209 (Tex.Civ.App.—Austin 1975, no writ), plaintiff, by filing suit to recover an amount which included usurious interest, “charged” excessive interest and became subject to the statutory penalty.
The making of this illegal charge is sought to be justified by explaining that if, to the unpaid balance of $503.05, plaintiff had added the total delinquency charges for which defendants were liable, less the interest to be rebated, the amount due would be in excess of $503.05. Therefore, plaintiff decided to forego assertion of its undoubted right to demand payment of default charges and chose, instead, to demand payment of excessive interest.
It is difficult to categorize this asserted defense. Article 5069-8.01 relieves a lender who charges excessive interest from liability for the statutory penalty if the charge resulted from “accidental and bona fide error.” Although neither the statute nor the decisions furnish definitive guidelines for the application of this defense, it is clear that plaintiff’s explanation cannot be upheld as an assertion of accidental and bona fide error.
The cases suggest that the defense applies only to computational or clerical errors, and then only to errors which result in the charging of interest which is but slightly above the permitted rate. Guetersloh v. C.I.T. Corp., 451 S.W.2d 759, 761 (Tex.Civ.App.—Amarillo 1970, writ ref’d n. r. e.); Western Bank & Trust Co. v. Ogden, 42 Tex.Civ.App. 465, 93 S.W. 1102, 1104 (Dallas 1906, no writ). See generally, Annot., 11 A.L.R.3d 1498, 1516-18 (1967).
The cases also reflect a refusal to consider the subjective motive or intent of the lender as a material factor in determining whether or not a transaction involves usury. Johns v. Jaeb, 518 S.W.2d 857, 860 (Tex.Civ.App.—Dallas 1974, no writ); Southwestern Investment Co. v. Hockley County Seed & Delinting, Inc., 511 S.W.2d 724, 732 (Tex.Civ.App.—Amarillo), writ ref’d n. r. e. per curiam, 516 S.W.2d 136 (Tex.1974). If the lender intentionally does the act which leads to a violation of the statute, liability attaches. Townsend v. Adler, 510 S.W.2d 175, 176 (Tex.Civ.App.—Houston [14th Dist.] 1974, no writ).
Plaintiff’s decision to insist on payment of usurious interest was deliberately made. Assuming that plaintiff acted under the belief that by foregoing his right to demand payment of default charges he acquired the *180right to demand excessive interest, its mistake was one of law and cannot constitute a defense.
I know of no authority supporting the theory that refraining from engaging in lawful conduct somehow engenders a right to act illegally.

. The description of the method of computing unearned interest embodied in Art. 5069-3.-15(6) is, in substance, a verbal expression, in somewhat terrifying form, of the Rule of 78ths which, in effect, says that in the case of a loan payable in 12 equal monthly installments, i2M of the total finance charge shall be allocated to the first payment; UM to the second payment and so on until '/m of the charge is allocated to the 12th payment. Since the denominator will be “78” only in the case of a loan payable in 12 monthly installments, the label, “Rule of 78ths” is, to some extent, a misnomer. The following formula has been devised for computing, in one operation, the amount of rebate due under the Rule: R = F X P (P + 1)/N(N + 1), where “R” represents the amount of the rebate, “F” stands for the amount of the finance charge, “P” stands for the number of installments prepaid, and “N” represents the total number of installments.