Court Opinion

ID: 9834449
Source: CourtListenerOpinion
Date Created: 2023-09-01 23:36:15.218457+00
Date Added: 2024-06-11T07:44:15.616166
License: Public Domain

On Motion for Rehearing.
Appellants’ attorneys say in their motion for rehearing that, if they understand our opinion, then under our holding “any amount, say 50 per cent., or even more, might be deducted at any stage of the loan and be lawful, provided it taken together with the rest of the interest contracted or paid, did not exceed the legal rate when calculated for the full term of the principal loan. If that be the law, there could never be a usurious loan where the rate was less than 10 per cent., because it matters not what form you put the interest in, it would always figure straight interest at that rate for the full term.” h’e did not intend to announces rule that would lead to such a conclusion, and that is not our understanding of what we said. We were of the opinion that in long-term loans, where interest in excess of the amount that would be due at the time of payment, calculated at the highest allowable legal rate to such time, is paid, such excess should be applied to the reduction of the principal and interest computations made on such basis for the purpose of settling the question of usury. We did not go to the trouble in the opinion of stating a computation applicable to the case at bar, because appellants’ attorneys conceded in their briefs and in oral argument that, if the loan ran through the 10-year period, there would be no usury in it. The appellants in their motion withdraw this admission and submit figures which they contend show that the contract is in any event usurious. This necessitates a computation now.
In making this calculation we compute the interest at 10 per cent., the highest legal rate allowable, and run it through the loan period, crediting excess payment of interest to principal, which we think is the correct method of determining the question of usury. During the first year of the loan period plaintiffs had the use of $4,200; interest at 10 per cent, on this sum would amount to $420. Under the contract they would have paid at the end of the first year the sum of $504. Under our theory, and that is the general rule for the application of payments in such cases (Tooke v Bonds, 29 Tex. 420; Clark v. Brown, 48 Tex. 212; notes, 13 Ann. Cas. 711; 15 R. C. D. p. 31), $420 of this amount should be applied to the payment of the accrued interest, and $84 on the principal. For the second year we start with a new principal amount, to wit, $4,116, and follow this process through the first 5-year period, at the end of which the principal will have been reduced to $3,687.17. Thereafter the annual payments of $252 would not pay the interest at 10 per cent. We pretermit a determination as to whether this deficiency should, during the latter period of the loan, be charged back to principal, since it does not become necessary to determine whether that would be allowable under the facts of this case. But we compute the interest for the remaining 5 years at 10 per cent, on $3,687.17, the amount being $1,843.55. At the end of the 10 years the makers, in order to have paid off the note under this method of calculation, would have paid the following amounts; $2,520 paid during the first 5 years; $3,687.17 balance due on principal and $1,843.55 interest for the last 5 years of the loan, a total of $8,050.72. If the contract be carried out according to its terms, the maker of the note would pay $4,200 and $3,-780, a total of $7,980. So that, if our calculation and the theory on which it is based are correct, the contract is not usurious.
The appellants argue that the ease of Parks v. Lubbock, 92 Tex. 635, 51 S. W. 322, is contrary to Dugan v. Lewis, 79 Tex. 246, 14 S. W. 1024, 12 L. R. A. 93, 23 Am. St. Rep. 332, referred to in our opinion, and to our own holding. We did not overlook this case, though it is not mentioned in the former opinion, in our consideration of this matter. In our opinion it is distinguishable from Dugan v. Lewis and our own holding. In Parks v. Lubbock there was an express agreement to pay interest on the principal, and matured interest, at the rate of 12 per cent, after' maturity; and the court held this agreement made the note usurious. It was thus an express agreement to pay more than the legal rate of interest for the detention of the money. That is not the case here, but an agreement which provides, in certain contingencies, for a forfeiture of the right of the borrower to retain the principal sum to the maturity date of the note. There is no express provision for the forfeiture of unearned interest in that event, and, on the other hand, no express agreement for its refunding as a condition to the exercise of the right to accelerate the maturity of the principal. There is thus no express agreement to pay a sum in excess of the legal interest for the use or detention of the money. If there is anything in the contract that produces such result it is incident to the exercise of the right to declare the note due prior to the contract date of maturity, and, under the authoriy of Dugan v. Lewis, and the other authorities which we cited, a court of equity might prevent the holder of the note from exercising this right, except upon accounting for the unearned interest that had been paid, so that the provision for the acceleration of maturity of the note “does not make the contract usurious.”
Overruled.