Texas Commerce Bank-Arlington v. Goldring ( 1984 )

WALLACE, Justice.

This is an appeal from a summary judgment in favor of the lender in an allegedly usurious transaction. The trial court granted summary judgment for the lender which was reversed by the court of appeals. 651 S.W.2d 361. We reverse the judgment of the court of appeals and affirm the judgment of the trial court.

P.A. Goldring and wife, Joyce (Goldring) had been customers of Texas Commerce Bank-Arlington (the Bank) since 1939. Three times between 1965 and 1970 they borrowed money from the Bank and signed promissory notes secured by liens on a parcel of real estate. None of the principal or interest was paid on the notes. In 1970 the three notes were renewed and extended into one note which covered the principal and interest due. The 1970 note was due one year from date of execution but was not paid at maturity. During this time Goldring’s children had filed suit claiming title to the property in question. The Bank intervened in the suit which terminated in judgment quieting title in Goldring.

After maturity of the 1970 note, the Bank posted the real property for foreclosure. At the request of Goldring the Bank pulled-down the foreclosure and on June 30, 1972, Goldring signed yet another note, in the amount of $89,539.38, which included all past due principal, interest, ad valorem taxes paid by the Bank on the property and $17,593.36 for attorney’s fees incurred by the Bank. The attorney’s fees were for the lawsuit concerning title to the property plus collection efforts by the Bank against Goldring. The parties agree that the Bank was not obligated to intervene in the title dispute on behalf of Goldring and that the intervention was to protect the Bank’s interest in its collateral.

The 1972 note is the instrument alleged by Goldring to be usurious. The 1970 note contained a provision for attorney’s fees equaling 10% of the past due principal and interest if placed in the hands of an attorney for collection. It is undisputed that the Bank paid the attorneys $17,593.36, and it is further undisputed that 10% of the unpaid principal and interest at the time of execution of the note was $13,233.05.

Based on these facts both parties filed motions for summary judgment. Goldring contends that the attorney’s fees were interest as a matter of law, that the transaction was usurious as a matter of law and that they are entitled to statutory penalties of $97,972.16 which is double the interest actually paid. The Bank contends that the attorney’s fees were not interest and that the transaction, as a matter of law, was not usurious.

Interest is defined by the Legislature as the compensation allowed for the use or foreclosure or detention of money. TEX. REV.CIV.STAT.ANN. art. 5069-1.01 (Vernon 1971). This court has on a number of occasions applied that definition to particular fact situations to determine if a usurious transaction had occurred. We have held that usury statutes are penal in nature and should be strictly construed. Houston Sash & Door, Co. v. Heaner, 577 S.W.2d 217 (Tex.1979).

In Stedman v. Georgetown Savings & Loan Association, 595 S.W.2d 486 (Tex.1979), we held that a commitment fee equal to 10% per annum of the loan was not interest even though the lender referred to it as interest. We held that a fee which entitled the borrower to a distinctly separate and additional consideration apart from the lending of money is not interest and cannot be the basis of usury. In Greever v. Persky, 140 Tex. 64, 165 S.W.2d 709, 712 (1942), we stated: “A lender may, without violating the usury law, make an extra charge for any distinctly separate and additional consideration other than the simple lending of the money .... ” In Ross v. Walker, 554 S.W.2d 189 (Tex.1977), the lender borrowed $50,000 from a bank and endorsed the proceeds check to the borrower. The borrower agreed to pay the interest on the $50,000 note to the bank and in addition executed a note to the lender for $55,000. The lender alleged that the additional $5,000 was for services in securing the loan and for a prior real estate commission due him from the borrower. We applied the above rule from Greever v. Persky, supra, even though the additional consideration was an event which had previously occurred.

In the case before us it is undisputed that the Bank hired attorneys to intervene in the lawsuit against Goldring, that the purpose of hiring the attorneys was to quiet title to the property in Goldring, and that the Bank paid the attorneys $17,593.36 for that service plus other legal services actually rendered in connection with the Goldring loans. We hold that the attorneys’ service was consideration in addition to the simple lending of money, and thus was not interest.

Where there is any dispute in the evidence as to whether a charge in addition to interest is actually for an additional consideration, a fact question is raised. Greever v. Persky, supra. In this case there is no dispute in the evidence as to the character of the $17,593.36. Both of the parties agree that it was for payment to the attorneys for services rendered. Therefore it is not necessary to remand the case to the trial court. As stated above, both parties moved for summary judgment based on undisputed facts. Contrary to the court of appeals’ holding, there are no fact issues to be resolved.

The judgment of the court of appeals is reversed and the judgment of the trial court is affirmed.

SPEARS, J., concurs with opinion in which KILGARLIN, J., joins. ROBERTSON, J., dissents with opinion.