Court Opinion

ID: 9766723
Source: CourtListenerOpinion
Date Created: 2023-08-29 04:57:13.401196+00
Date Added: 2024-06-11T07:30:24.908227
License: Public Domain

DEVANY, Justice,
dissenting.
I respectfully dissent.
Mark T. and Wendy Coppedge, appellants, borrowed $87,300 from Colonial Savings and Loan Association on or about December 21,1977, secured by a deed of trust on their home. It is undisputed that the Coppedges made their mortgage payments timely. The loan was for 359 months at an interest rate of 9.375% to be repaid in installments of $727.21 each. They had had the use of the loan for 67 months at the time of the closing of their home resulting from a sale to third parties. They instructed the title company handling the closing to pay off the mortgage to Colonial in full. The record further indicates that during the life of the mortgage the Coppedges had made conveyances of their property to third parties in the form of contracts for deed without first securing the consent of Colonial, which Colonial claimed were in violation of the underlying deed of trust securing the Coppedge’s mortgage note.
At the time of the closing, Colonial instructed the title company as to the amount owing to pay off the mortgage. In addition, Colonial instructed the title company to hold in escrow the sum of $9,100, which appears to be additional interest on the loan resulting from the violations of the contractual provisions in the deed of trust governing the transfers to third parties without securing the prior approval of Colonial. The title company set that sum aside in escrow in order to effect the closing. Shortly thereafter, Colonial sent a letter to the Coppedges asking for an explanation of the prior transfers in violation of the deed of trust. In that letter Colonial made demand for the $9,100 based upon those violations. The record does not indicate that the Coppedges responded to that letter. Some weeks later, Colonial secured the escrowed $9,100 from the title company. More than eight months after the closing, Colonial refunded the $9,100, together with interest thereon, to the Cop-pedges. Thereupon, the Coppedges filed suit against Colonial for usury. The parties filed cross motions for summary judgment. Summary judgment was granted to Colonial. I would affirm that judgment.
Important in the stipulations are the following facts:
The mortgage payments over the full 359 months would have resulted in total interest of $173,497.97 as compared with the maximum legal interest that could have been. contracted for at the rate of 10% of $187,857.70. If we were to add the $9,100 to the $173,497.97, we would have a sum that was less than the maximum legal interest of $187,857.70.
Article 5069-1.07(a) provides as follows:
On any loan or agreement to loan secured or to be secured, in whole or in part, by a lien, mortgage, security inter*940est, or other interest in or with respect to any interest in real property, determination of the rate of interest for the purpose of determining whether the loan is usurious under all applicable Texas laws shall be made by amortizing, prorating, allocating, and spreading, in equal parts during the period of the full stated term of the loan, all interest at any time contracted for, charged, or received from the borrower in connection with the loan. However, in the event the loan is paid in full by the borrower prior to the end of the full stated term of the loan and the interest received for the actual period of the existence of the loan exceeds the maximum lawful rate, the lender contracting for, charging, or receiving all such interest shall refund to the borrower the amount of the excess or shall credit the amount of the excess against amounts owing under the loan and shall not be subject to any of the penalties provided by law for contracting for, charging, or receiving interest in excess of the maximum lawful rate.
TEX.REV.CIY.STAT.ANN. art. 5069-1.-07(a) (Vernon Supp.1986) (emphasis added).
It is further stipulated by the parties that the 67 months of the existence of the loan was subject to a maximum interest charge of $48,749.00, whereas the actual interest paid, before the collection of the $9,100 by Colonial, was $45,592.77. Therefore, if the additional $9,100 is classified as interest, it resulted in total interest which exceeded the lawful rate by $5,943.77. Accordingly, under the above quoted language of the statute, Colonial was obligated to refund $5,943.77 to the Coppedges to avoid the penalties of the law for usury. However, instead, Colonial refunded the entire $9,100 plus interest on that sum for the number of months it held the $9,100. Applying the test in the statute for determining whether the loan was usurious, I would hold that the loan was not usurious, and that Colonial’s failure to timely refund the $9,100 to the Coppedges did not make it so. Article 5069-1.07(a) does not condition the determination of usury on prompt repayment of the excess in the event of prepayment. On the contrary, the language that the “lender ... shall refund” the excess to the borrower and “shall not be” subjected to usury penalties in the event of prepayment does not indicate that the former requirement is a condition precedent to the latter.
In a recent opinion of this court, we stated:
Moore and Caravan seek to enforce the penal provisions of the statute; we must, therefore, consider the statute as penal for the purpose of construing it. Board of Insurance Commissioners v. Great Southern Life Insurance Co., 150 Tex. 258, 239 S.W.2d 803, 809 (1951). In Texas, a penal statute must be strictly construed against imposing the penalty. Agey v. American Liberty Pipe Line Co., 141 Tex. 379, 172 S.W.2d 972, 974 (1943). A statute which provides penalties for excessive interest rates should be construed in such a way as to give the lender “the benefit of the legislative doubt against imposing the penalties imposed by the statute.” PJM, Inc. v. Walter Clark Advertising, Inc., 624 S.W.2d 282, 286 (Tex.App.—Dallas 1981, writ ref’d n.r.e.).
Moore v. White Motor Credit Corp., 708 S.W.2d 465, 470 (Tex.App.—Dallas 1986, no writ).
I am of the opinion that the majority lays some stress on the fact that Colonial did not make the refund for eight months. If this time period were unreasonable, such unreasonable delay in making the refund does not change the test mandated by the statute which clearly establishes that the loan was not usurious. Indeed, if the refund had been made within only four months, would this have changed the result reached by the majority? I suspect that if the refund had been forthcoming within a few weeks the majority would have reached a different result. If unreasonableness troubles the majority, I direct their attention to the fact that the Cop-pedges were refunded an amount that was $3,156.23 more than was required by the above quoted statute and they received in*941terest on the entire $9,100 refund. Colonial has been generous with the Coppedges in correcting the error. Some consideration-must be given to the failure of the Coppedges to furnish the requested explanation about the transfers in violation of the deed of trust. I further note that the Coppedges waited until they had received the inflated refund and interest thereon before filing their law suit. I have a question as to whether they lay behind the log by not giving the requested explanations. We do not have a typical usury case before us. A mortgage was paid in full. There was no principal left. The mortgage company mistakenly directed the title company to hold back $9,100. However incorrect this might have been, to impose the penalty advocated by the majority is not within the purview of the legislature. Moore v. White Motor Credit Corp., 708 S.W.2d 465, 470.
One further observation should be made. The loan was paid in full at the time of closing. The amount of $9,100 was held in escrow by the title company because of alleged prior deed of trust violations and was not paid to Colonial for some time after that. Since Colonial apparently determined that the sum of $9,100 was erroneously withheld from the proceeds and should have been paid to the Coppedges, one could say that the amount withheld was not in fact interest. Of course, if it was not interest, the usury statute would not apply to it. This theory can be supported by the fact that the $9,100 was not for the use of money loaned, since the loan no longer existed. The majority treats the $9,100 as usurious interest, but on what principal? If it is interest on the original real estate loan, then it must be treated under article 5069-1.07(a) and the test applied. If it is not a payment for the use of money, since the majority concedes the loan was paid at closing, then it is not interest and, therefore, under either theory it cannot be called usurious interest. Regardless of what theory we use, the penalty imposed by the majority is a punishment that is unrealistic in a complex world of commerce where an error is made and corrected. If one takes advantage of a borrower and exacts a usurious rate of interest, the legislature clearly intended to put a stop to that practice. But where the rate of interest is legally correct and the loan paid off, but an error is made at closing and then corrected, the legislature, in my opinion never intended to give a windfall as advocated by the majority to one who sits back and contributes to the error.
I would affirm the judgment of the trial court.