Court Opinion

ID: 9668740
Source: CourtListenerOpinion
Date Created: 2023-08-24 02:24:21.103366+00
Date Added: 2024-06-11T18:15:47.599962
License: Public Domain

MAUZY, Justice,
concurring and dissenting.
I concur in parts III and IV of the majority opinion. I dissent, however, from the Court’s holding in part II, concerning Vic*941toria Bank’s alleged usury. In my view, the transaction at issue here falls squarely within this Court’s holding in Alamo Lumber Co. v. Gold, 661 S.W.2d 926 (Tex.1983).
In Alamo Lumber Co., we held that “a lender who requires as a condition to making a loan, that a borrower assume a third party’s debt, as distinguished from a requirement that the borrower pay another one of his own debts, must include the amount of the third party’s debt in the interest computation.” 661 S.W.2d at 928. Following this Court’s guidance, the trial court in the present case submitted to the jury the following question:
Do you find that Victoria Bank & Trust Co., as a condition for making the $150,-000 line of credit, required Fancher Cattle Co., Inc. to assume Marlyn Brady’s $121,796.75 debt?
The jury answered “Yes.”
That finding alone would seem to bring this case within the clear language of Alamo Lumber Co. The majority, however, chooses to disregard the jury’s finding. Brady’s pre-existing debt, the majority explains, was to Winter Garden; thus, Victoria Bank “did not ‘receive’ the $121,796.75 used to pay the pre-existing debt,” and that sum cannot be considered interest. 811 S.W.2d at 936-937.
Whether it “received” the $121,796.75 or not, Victoria Bank did charge exactly that amount to the new, $150,000 line of credit, for which Fancher was responsible. In return for assuming that $121,796.75 obligation, Fancher received only the remaining $29,203.25 in credit, plus the opportunity to pay the Bank $150,000 at a nominally-legal rate of interest.
This is precisely the sort of transaction which we examined in Alamo Lumber Co. There, as here, a lender conditioned a loan on the borrower’s assumption of a third party’s debt. And there, as here, the borrower received no independent benefit from assuming that debt. On the basis of clear precedents from Texas and elsewhere, we rightly held that the Bank’s requirement made the pre-existing debt interest as to the borrower who assumed it.
The majority strains to distinguish Alamo Lumber Co. on the ground that the pre-existing debt in this case was owed to a different lender. In fact, though, Fancher never owed a dime to that prior lender. As the court of appeals observed, Brady became indebted to Victoria Bank before the note at issue ever became effective.1 Thus, in reality, Fancher did not assume a debt to Winter Garden; Fancher assumed a debt to Victoria Bank.
To determine the existence or non-existence of usury, a court should look beyond a transaction to its substance. Gonzales County Savings & Loan Ass’n v. Freeman, 534 S.W.2d 903, 906 (Tex.1976). Regardless of the label placed upon it by the lender, a charge which is in fact compensation for the use, forbearance or detention of money is, by definition, interest within the usury statute. Id.; see Tex.Rev.Civ. Stat.Ann. art. 5069-1.01(a). Victoria Bank’s requirement that Fancher assume Brady’s debt was exactly that sort of charge. I would therefore affirm the court of appeals’ judgment for Fancher and the Cattle Company on their counterclaim against the Bank for usury.

. This critical point was confirmed at trial during cross-examination of the Bank’s own loan officer, David Barnhart:
Q: And, in fact, Marlyn Brady’s land had a lien against it to Victoria Bank & Trust and that had to be accomplished first before that line of credit went into effect; isn’t that right?
A: The Bank is saying with this document that it was not going to fund the loan until it received a first lien on the Zavala County property, that is correct.