Court Opinion

ID: 9661160
Source: CourtListenerOpinion
Date Created: 2023-08-23 22:31:10.246783+00
Date Added: 2024-06-11T18:14:25.934801
License: Public Domain

ON MOTION FOR REHEARING
In a motion for rehearing Respondent Ferguson insists that we should have treated the principal of the vendor’s lien note ($226,388.77) as though it had been a loan of money from which the lender had deducted the prepaid interest ($21,506.93), thus resulting in a true principal of $204,881.84 and a total yield of more than ten percent interest per annum during the five year term of the note. Ferguson contends that our failure to so reduce the principal and hold the contract usurious will serve as a precedent for the same result where loans of money are involved.
Since this case involves no loan of money, and our opinion distinguishes the nature of the principal debt from a loan of money, we doubt the necessity of disclaiming it as a precedent for testing money loans from which interest or other front-end payments have been deducted by the lender or returned to the lender. To make this abundantly clear, however, we reiterate that in cash loan transactions from which the lender deducts interest, fees, commissions or other front-end charges, the amount of dollars actually received or retained by the borrower is held to be the “true” principal. In such cases the amount of the stated principal is reduced accordingly in testing for usury. See Nevels v. Harris, 129 Tex. 190, 102 S.W.2d 1046 (1937), and our statement of this rule in our opinion of October 19, 1977.
As stated in our opinion, the transaction in the present case was not a loan of money from which any fee, commission or interest was withheld from the payor. Rather, it was a sale of real estate in which Ferguson received a deed to ten acres of land. The $226,388.77 vendor’s lien note was given by Ferguson as partial payment for ten acres of land deeded to him by Tanner. None of the consideration for Ferguson’s note was reserved by Tanner or returned by Ferguson to Tanner. Ferguson had the full use and benefit of the ten acres purchased by the note. Furthermore, the note provided that Ferguson would not be personally liable to pay any sum of money thereon and that the payee would look solely to the liens on the ten acres for satisfaction of the note in the event of default. Clearly, this trans*788action is distinguishable from a loan of money, and there was no reason to judicially reduce the principal of the note so long as Ferguson had use of the land and forbearance on the stated principal during the entire term of the note.

Alternative Points on Interest “Charged”

In his motion for rehearing, Ferguson for the first time calls our attention to his alternative points in the Court of Civil Appeals on interest “charged,” which were not disposed of by that Court. While cross-points in this Court would have been the better procedure, it is properly urged that we may now consider and rule on these points rather than remand the case to the Court of Civil Appeals. Taggart v. Taggart, 552 S.W.2d 422 (Tex.1977); McKelvy v. Barber, 381 S.W.2d 59 (Tex.1964); Hatch-ell and Calvert, Some Problems of Supreme Court Review, 6 St. Mary’s L.J. 303, 318-322 (1974).
The alternative points assert that, even if the loan contract is not usurious, Tanner by its actions “charged” Ferguson usury during the events surrounding the attempted acceleration and foreclosure of the note. The alleged “charging” of the full face amount of the note without crediting unearned interest is based upon (1) a letter on behalf of Tanner dated August 12, 1975, notifying Ferguson that because of default the owner of the note had elected to accelerate maturity and demanding “the full unpaid principal balance together with accrued interest, delinquent interest, and attorney’s fees”; (2) an enclosed notice of trustee’s sale to satisfy “said indebtedness . now wholly due . . .”; and (3) a letter to Ferguson on behalf of Tanner dated August 20, 1975, returning a $2,000 late cash deposit; reiterating that the maturity of the loan had already been accelerated; and stating that the tendered $2,000 was insufficient to pay “the full principal balance of the note, accrued interest, delinquent interest, collection fees and attorney’s fees.”
The letter of August 20, 1975, written by the Trustee under the deed of trust, Julian M. Moss, Jr., stated: “You may obtain the exact pay off amount necessary by calling my office between 8:30 a. m. and 5:00 p. m. Monday through Friday.” Ferguson testified that he called Moss for such information; that Moss was out of town; and that Ferguson never received any pay off amount from Moss or Tanner. The first time Tanner associates calculated the balance due on the note was on September 1, 1975, at which time unearned interest was credited to the principal as provided in the note. This was also done in arriving at the sum of $206,778.74 as the balance due on the note when Tanner first filed its counterclaim for debt and judicial foreclosure on December 10, 1975.
Article 5069-1.06 applies in the disjunctive to either a contract for, a charge of, or receipt of usurious interest, and the occurrence of any one of such conditions triggers the penalty provisions of the statute. Windhorst v. Adcock Pipe and Supply, 547 S.W.2d 260 (Tex.1977). In Adcock there was no contract between the parties, but the retailer unilaterally charged to its customer’s open account definite sums equal to one and one-half percent per month interest as a “finance charge.” This was held to be a usurious “charging.” A similar holding was made with reference to “charging” under the provisions of Articles 5069-8.01 and 5069-8.02 of the Texas Consumer Credit Code in Moore v. Sabine National Bank of Port Arthur, 527 S.W.2d 209 (Tex.Civ.App.1975, writ ref’d n.r.e.), wherein the bank had demanded a definite sum of $11,842.96 in its notice of intention to repossess, its original petition, and its sequestration affidavit. This sum included an unearned finance charge of $3,957.89, and the demand, suit and sequestration action were held to be an unlawful “charging” under Articles 5069-8.01 and 5069-8.02.
The foregoing cases are the only ones cited by Ferguson in support of his *789contention that Tanner’s letters and notice amounted to a “charging” of usurious interest. Both are distinguishable from the facts of this case. The letters to Ferguson on behalf of Tanner refer only to a claim for the “full unpaid principal balance," and “the full principal balance,” respectively. (Emphasis supplied.) Neither they nor the notice demand payment of the full face amount of the note. Rather, the use of the term “principal balance” in the letters implies a demand for something less than the full face amount of the note. We construe the letters as referring to whatever balance was due on the principal after applying all payments and credits under the terms of the note. One of the terms was that any unearned interest payments shall be credited on the principal, and that is what Tanner did in arriving at the first and only dollar amount demanded of Ferguson. Since Tanner neither demanded nor sued for any interest in excess of ten percent per annum during the period of forbearance, we agree with the conclusion of the trial court that Tanner did not charge Ferguson any interest in excess of the amount permitted by law. Therefore, Ferguson’s alternative points on “charging” are overruled.
Accordingly the motion for rehearing is overruled.