SURVEY
OF R E C E N T C A S E S
DEBORAH
IN TEXAS
WELCH
723
USURY
LAW
To test a loan for usury, it is necessary only to find
whether the teres of the loan reauire payments in excess of
the legal rate of interest''" on the true arrount of the loan
2
for the length of time that such payments represent.
This test is deceivingly simple, however, the determination of
whether usury exists or not is not nearly so easy as evidenced
by the number of cases on usury.
The established rule in Texas is one of net finding usury
if the language of the contract, taken as a whole, is fairly
susceptible of that construction.The question of whether usury
exists is ascertained from the dominant purpose and intent of
the parties embodied in the contract interpreted as a whole
and in light of attending circumstances and of the governing
rules of lew that the parties are presumed to have intended
h
to obey.
All papers connected with the transaction are
considered.-'
If the contract evidences an intention to exact
more than the maximum amount of interest legally allowed,
then the court will find tha.t the contract is usurious.
usury is truly a matter of intention.
Thus
Unless the contract
shows on its face an intention to charge a usurious rate of
interest, the burden is on the party pleadirg usury to show
the existence of some agreement, device, or subterfuge to charge
usury and that both parties had that purpose in contemplation.^
Even though the borrower intended to pay more interest than
permitted by law, the transaction is net usurious unless the
lender also supposed and intended it to be so.
The question of whether a contract is usurious
is to be
p
determined as of the time of its Inception.
730
Therefore,
the law in effect on the date the note in question was originally
executed wil] be deterrninative of whether usury exists or not.
Furthermore, if the original transaction is tainted with
usury, that vice will follow the debt based on usury in
o
whatever form it iray assume.'
Because the inception date
of the contract is the focal point, the agreement determines
usury and not the performance of the agreement.
As stated in
Southwestern Investment Co. v. Hockley County Seed and
Delintina, Inc.* 0 "usury does not depend on the question as
to whether the lender actually receives more than the legal
rate, for it is the agreement to exact and pay usurious interest
and not the performance of the agreement that renders it
usurious.This
same argument arose in Pinemont Bank v.
1?
DuCroz
wherein the defendant argued that because the note
had been paid, the court should have entered judgement in
accord with the facts as to what actually transpired between
the parties and not what could have transpired under the
terms of the n o t e . ^
The court disagreed by pointing out that
transactions between the parties after execution of the note
ik
do net necessarily govern the usurious nature of the note.
Compare, however, the court's opinion in W. 5. Grace
Manufacturing Co. v. L e v i n ! T h i s case involved a contract
to pay a fixefl charge for an uncertain period of time,
basefl on a contingency.
The court stated that in these
circumstances and wher the contingency is reasonable, the contract
3s not necessarily usurious merely because there is a possibility
that more thsn legal interest might be paid.
This same court
extended additiona.1 latitude to the creditor when it noted
tfrr-t in such a case when a debtor fails to properly exercise
his power to direct the application of the payment, the
creditor ordinarily may apply the payment to any valid and
J
subsisting claiir he has gainst the debtor. 1 ^
Under Vernon's Ann. Civ. St. art. 1302-2.09
17
' a corporation
is authorized to borrow money at a rate which would be illegal
if made by an individual.
In order to obtain this higher
interest rate some lenders have required a corporate borrower
to assume liability for the loan.
This practice was questioned
18
in Skeen v. Glenn Justice Mortgage Co., Inc.
The defendant-
borrower in Skeen contended that the corporation was formed
by its president at the insistence of the plaintiff-lender
for the sole purrose of evading the usury statutes of Texas.
The court of civil appeals held that the mere fact that the
corroration was formed in order to obtain the loan did not
render the loan transaction void or illegal.
The court cited
an earlier case involving similar facts that had held that
the law had not been evaded but had been followed meticulously
in order to accomplish a result which
all parties desired
19
and which the law did not forbid.
20
A related problem arose in Sud v. Morris.
An individual
and a corporation had jointly and severally executed a
promissory note as co-makers.
The plaintiff-individual
sued alleging a usurious rate of 15^ interest.
?1 As to the
corporation this rate would not be usurious,' however, it
22
would be as to an individual.
The defendant-lender filed
a plea in abatement alleging that the corporation was a necessary
p^rty who had not been joined.
The court in ruling on the
plea stated that where a corporation and an individual
are joint makers upon a note which is usurious, the individual
m8y prosecute a penalty action without joinder of the corporation.^
73?
The construction of V.A.C.S. art. 1302-2.09 was a contention
in Commerce Savings Association of Brazoria County v. GGE
?h
Fanacement Co.
It was argued that V.A.C.S. art. 1302-2.09
requires that each month during a given loan period is to be
considered as a separate and distinct time interval for the
purpose of computation and that any monthly payment which
exceeds the maximum corporate rate of \\f per month is to be
considered usurious.
The court answered that this construction
of the article would be manifestly unfair and beyond the
obvious intent of the legislature in the enactment of the
usury statute to impose the severe penalties afforded by
V.A.C.S. art. 5069-1.06 2 ^ solely upon proof that one monthly
payment exceeds the statutory limit, particularly when over
the effective period of the loan payments did neb, in the
afrarretrate, exceed the airount authorised by law. 26
A lender will often reouire its loans to be further
secured by the signsture of a surety or a guarantor.
A
surety or a guarantor can assert any defense to a suit on a.
?7
note available to the principal."'
Consisteit with this
approach is V.A.C.S. art. 1302-2.09 which provides that
the claim or defense of usury by a corporation, its successors,
guarantors, assigns or anyone on its behalf is prohibited, provided
that the corporation meets the requirements of the article.
This prohibition of the usury defense was employed in Universal
28
Petals and yachlnery, Inc. v. Bohart.
The plaintiff-lender
sought judgement against the defendants on the theory that they
were primary obligors under their guaranty agreement.
counterclaimed that usurious interest had been charged.
733
The defendants
15
The court held that the defendants had agreed to be the type
of guarantors who are primarily liable, that is, the defendants
waived any requirement that the holder of the note must
exhaust its rights or take action against the maker as a
condition precedent to the guarantor's liability.
The court
held that the defendants were not entitled to claim usury
even though the promissory note for the corporation which
they absolutely guaranteed charged more than 10^ interest.^
The court noted that V.A.C.S. art. 1302-2.09 prohibits the
claim or defense of usury by a guarantor of a corporate loan
30
that is made in accordance with that section.
An additional problem in the area of usury involves
savings and loan associations.
Fees charged by these institutions
are often alleged to be additi^ral interest.
The Texas
Savings and Loan Act, art. 852a g 5.Onsets forth special
provisions applicable to savings and loan associations which
sheds some light on the usury problem.
V.A.C.S. art. 852a g 5.07
formed the pivotal issue in Freeman v. Gonzales County Savings
and Loan Association.
In Freeman the Savings and Loan
had charged a loan fee of 2.% of the loan amount ($768)
due on closing.
The borrowers alleged that this loan fee
plus the interest on the loan constituted usury.
The court
of civil appeals noted that g 5.07 is an exception to the
general usury laws ond that the Legislature intended that,
before such a charge can be made (without being treated as
interest), there must be proof that such an expense was a
"reasonable expense" and was Incurred in connection with the
making of the real estate loan.
The court of civil appeals
therefore, reversed and remanded the case for a new trial.
734
6
This decision was thereafter arpealed to the Suprenre Court. J
Tn affirming the decision of the court of civil appeals,
t'-e Supreme Court stated that if the evidence produced at
the new trial resulted in a finding of fact that the "loan
fee" was a legitimate "commitment fee" in the sense that it
was intended only as compensation for having a future loan
available, and for no
other purpose, then such fee would
rih
not be interest.
The Savings and Loan also asserted that
the "loan fee" was a premium allowable under g 5*07.
The
Supreme Court answered that savings and loans may net be
allowed a convenient avenue of escape from the usury laws
by singly contending that a front-end charge that they require
borrowers to pay is a legislatively authorised "premium" and
is therefore not interest. The Supreme Court noted that there
is no maximum rate set for premium charges nor does the
definition of interest rela.te to premiums; therefore, such
premium charges will be deemed to constitute interest
when seeking to determine the existence or nonexistence of
usury.
The Eeaumont court of civil appeals had one year prior
to the Freeman Supreme Court decision addressed this sane
problem of premiums in V/agner v. AustiN
Savings and Loan
Association.-^ Tn the Wagner case the savings and loan association
had made a loan to a corporation engaged in the development
of a subdivision.
A deed of trust securing a promissory note
in regard to this loan covered lots in the subdivision and
provided that partial releases from the deed of trust lien
could be obtained by paying $2500 for each lot so released,
735
$2000 of which would "be credited to the face of the note and
$500 charzed as a release fee.
The plaintiff-borrower sued
37
to recover usury penalties.
The court held, inter alia,-"
that the release fees charged the plaintiff-borrower were not
interest because (3 5*0? authorizes savings and loan associations
to charge penalties for prepayments.
In reference to this section,
the court pointed out that the prepayment penalty had been
removed from the reach of the usury statute.
Exactly what constitutes interest appears to be an everrecurring problem for the courts.
The courts have held that
where the parties designate a payment as interest they can
not later retroactively apcly the payment to the
og principal
indebtedness in order to obtain a usury claim.
Contingencies also cloud the usury picture.
30
Manufacturing Co.
W.B. Grace
involved a contract to pay a fixed
charge for an uncertain period of time, based on a contingency.
The court held, inter alia, that the contract was not necessarily
usurious merely because there was a possibility that more
tha.n the legal interest might te paid.
and Loan Association
Wagner v. Austin Savings
also involved a contingency.
In order
to establish its line of credit, the plaintiff-borrower
assigned to the defendant-lender a contract which provided
that the city would refund to the plaintiff corporation
BQr of the amount the corcorstion had expended in construction
of the water system in a sutdivision.
The city was not obligated
to pay anything under the conterrlated agreement until several
contingencies had occured.
The plaintiff asserted that the
value of the contract assignment to the defendant-lender
should be calculated as interest to determine if usury existed.
736
6
The court of civil appeals held that usury is r.dt proved by
showing that the lender is to receive something of doubtful
value; a loan is not usurious where the promise to pay a sum
depends upon a contingency.
Because the city was under no
obligation to pay it was impossible to assign a true dollar
value to the contract.
Closing fees often present the nuestion of whether they
l±2
constitute interest or not.
One court of civil appeals
stated that closing fees not representing any specific,
identifiable service rendered to the borrower are charged
by the lender for the use, forbearance or detention of money
and are/therefore, to be considered as interest.
Interest took a quite different form in Cormerceh? Savings
Association of Brazoria County v. GGE Management Co.
J
In order to obtain financing for certain improved property
the owner of the property transferred it to a savings association
in return for &3^9.000.
The association in turn transferred
the
property to a joint enterrrise comprised in part by the original
owner of the property.
The joint enterprise paid the association
$^00,000 for the property.
Thus the transfers resulted in. an
immediate front-end profit to the savings association of
-§51,000.
The ouestion arose as to whether the §51,000
represented a bona, fide real estate profit or merely constituted
an additional charge for the loan of money.
The jury found
that such profit constituted interest and was merely a disguise
to evade the usury statute. ^
A borrower's agreement to pay his own undisputed prior
obligation to the lender, as part of the consideration for a
where a lender, as a condition of a loan and as a consideration
for making it, requires the "borrower to pay the debt that another
owes to the same lender, the amount of the pay-off debt is considered as interest in determining whether the loan is usurious.
47
Tt has been held that a payment of bona fide fees to
third parties for services actually rendered to the parties
to a loan does not constitute interest, even though paid to
the lender's specia.1 agent, if the agent" has only limited or
special authority and the lender does not participate in the
ii-8
funds so paid.
A similar factual situation arose in
tyo
Crow v. Home Savings Association of Dallas County.'
The
savings association had helped to arrange funding for Crow
•with First National Fank.
The savings association guaranteed
payment of the loan and received $2^,985 from Crow as a
"fee for services rendered in connection with origination of
the mortgage."
Crow sued the savings association in order to
recover usury penalties.
The court stated that the sayings
association could be held to have overcharged for the use and
detention of money only, if in substance, if not ir forrr,
it was the saving association's money, and not the money of
First rational Bank that was used and detained by Crow.-'0
The court noted that it is a fundamental principle governing
the law of usury that it must be founded on a loan or forbearance
of money; if neither of these elements exist, there can be
no u s u r y . T h e
court stated that when one negotiates a loan
through a third, party with a money lender, and the latter
bona fide lends the money at a legal rate of interest, the
contract as to the actual lender is not made usurious cerely
by the fact that the intermediary charges the borrower with, a
heavy commission, the intermediary having no legal or established
738
1U
connection with the lender.
There was no proof establishing,
or froT which it might be inferred, that the savings and loan
association transferred to the bank funds with which to make
the loan, or obligated itself to leave on deposit with the
<2
bank funds that would otherwise have been subject to withdrawal.
The contract between a borrower and a lender may provide
that failure to moke a payment will result in acceleration of
the due dates of future payments.
Cases decided by the Texas
courts hold that the mere presence of such an acceleration
clause under circumstances potentially enabling the lender to
recover interest in excess of the statutory rate is sufficient
to invoke the penalties of the usury lav:.
J
The traditional
Texas rule is that a. creditor's past, unexercised option to
accelerate the maturity of an obligation upon the borrower's
default renders the transaction usurious if the contract
terms would have called
for default
payments in excess of
.
ejJi
principal plus 10? interest.-
Note, however., that the
failure to pay1 interest as stipulated in a usurious contract
does not authorize the lender to accelerate future payments
of either interest or principal.--'
Several Texas cases have held that commitment fees are
the equivalent of interest, as that term is- defined in V.A.C.S.
art. 50^9-1.Olf^
In Mlcrea, Inc. v. Eureka Life Insurance
57
Co. of America-" the borrower corporation wa.s charged ^10,125
"commitraent fee" as part of the consideration for making the
loan.
The corporation in obtaining a $168,750 loan agreed
to and did, deliver back to the company the aforementioned
sun of #10,125 as payment by it to the lender for making the
loan. T^e court observed that: the cl0,12.5 was interest which
739
should have "been credited as such upon the interest calculated as
15
owing on the note at the time of the judgement.-'
Tn Imperial
Corp. of America v. Frenchman's Creek Corp,-^ the court held
that a $67,500 payment labeled as a "con-mitment fee" was
actually "front-end interest."
The initial advance from the
lender to the borrower was 1860,000 from which there was
deducted the"commitmerit fee"of $67,500 in order to arrive at
the real amount of principal received, $792,500.^°
The maximum
a.llowable interest was then calculated on the "true" principal.
Compare, however, the treatment of the "commitment fee" in
Imperial Corp. with the treatment of a similarly-labeled fee
in the Freeman^ 1 case.
The Supreme Court in Freeman stated
that if the fee in question was a legitimate "commitment fee"
in the sense that it was intended only as compensation for
having the future loan, available, and for no other purpose,
62
then such a fee would not be interest.
The Texas Supreme
Court distinguished the fee in the Imperial Corp. case
by stating, "the 'commitment fee' in that case does not
a.ppear to have been a charge for having a loan available in
the future.
Instead, the obligation to pay the 'commitment
fee' seems to have arisen only after the parties had entered
into the loan agreement.
The problem of differentiating between true expenses and
interest is often a difficult one.
Lenders often require
borrowers to, reimburse them for the expenses of making the loan.
However, when the "recompensation" of the lender turns out
to be more thar the payment of bona fide charges or fees
representing payment for services rendered "by some third
rarty or compensation for services or expenses other than
those incurred by the actual loan of money, the usury laws
740
15
must take their place, as such charges constitute "front-end
interest.The
term "front-end interest" has been used to
denote a fee or charge, received by the lender, in consideration
for the loan of money, at the inception of the loan.
Such
fees or charges are ordinarily in addition to the stated
interest rate on the face of the loan and may or may not be
referred to as interest by the loan contract.
Front-end
interest often results from a judicial determination that
65
"loan fees" are not bona-fide.
Ferguson v. T a m e r Development
66
Co.
concerned a loan whereby the lender required that one
year's advance interest be paid at the time of the closing of
the loan transaction.
The court held that the amount of
money (principal) on which the lender was due interest must
be reduced by the s.mount of the advance interest required to
determine the amount of 67
money that the lender was permitting
the borrower to detain.
The note and deed of trust evidencing the loan will often
contain
a saving
as the following involved in
68
the Imperial
Corp.clause
case: stich
No provision of this instrument or of the Notes
shall require the payment or permit the collection
of interest in excess of the maximum permitted by
law.
If any excess of interest in such respect is
herein or in the notes provided for, or shall be
adjudicated to be so prevised for herein or in the
Notes, the provisions of this paragraph shall
govern, and neither the Mortgagors nor their
heirs, successors and assigns shall be obligated
to pay the amount of such interest to the extent
that it is in excess of the amount permitted by law.
741
13
Nevertheless, the courts have not allowed the lender to
escape the penalties of usury merely by writing into the
loan papers a disclaimer of any intention to do that which
60
under his contract he has plainly done, i.e., to exact usury. '
The courts have held that such a saving clause can not operate
to change the plain terms of the note.''0
Application of the
saving clause comes into play when the period for which
interest is considered to be "payment for the use of money"
is not specified.^ 1
The Fifth Circuit in Imperial Corp.
stated that Texas courts will give effect to a saving clause
by spreading over the 3ife of the loan the impact of judicially72
determined interest.' The Fifth Circuit referred to NeveIs v.
Harris
71
and quoted thusly from that case:
It is the rule that all parts of a contract
must be given effect if it is reasonably possible to
do so.
It is also the rule that men are presumed to
have intended to obey the law unless the contrary
appears . . .
If the
(saving clause] can be given
effect, and, as already said, it must be given some
effect if it is reasonably possible to do so, it
must be held to operate to deny the noteholder the
right, in any event, to collect usury.
In other
words, it denies the noteholder the right to collect
more than the principa.1 debt and 10 per cent,
interest per annum from the time the borrower had
the use of the money until he should repay it.
A similar problem involving a saving clause and the question
of usury arose in Southwestern Inv. Co. v. Hockley Cty.
Seed and Delint.. Inc.
The court of civil appeals in that
case stated that a loan contract is regarded as usurious
if during the first year, or first few years, it requires the
743
16
payment of interest at greater than the legal rate, even though
the interest calculated over the entire period of the loan
7K
does not exceed the statutory l i m i t . E v e n
though the
deed of trust contained a saving clause the court determined
that interest would not be spread over the life of the loan
in order to decide the usury question.
Thereafter another
court of civil appeals in Commerce Savings Assoc. of Brazoria
v. GGE Management Co.*^ held that a -$51,000 front-end interest
payment was to be apportioned over the effective period of
the loan per a saving clause in the deed of trust.
Clarification of this problem regarding saving clauses
and the spreading of interest has been brought about by the
passage of V.A.C.S. art. 5069-1.07.- Determination of the
rate of Interest on loans secured by a lien on any interest
77
in real property:' This article affects only those loans
consummated after September 25, 1975.
provides, in part,
for the spreading of interest over the life of a loan secured
by an interest in realty.
The defenses to a usury charge do not often prove
successful.
If mutual mistake can be shown, a lender is
entitled to have a note which is usurious on its face, reformed
to reflect the parties* alleged
intent not to have the note
78
charge usurious interest.
The Texas courts, however,
Trill ndt acknowledge the argument that the "mistake" of not
having knowledge of the usury laws prevents the application
79
of those laws.
7
As one court of civil appeals pointed out,
"fijgnorance of the usury law is not a bona fide error within
the {usury/
statute if the parties intended to rake the
743
15
p0
bargain which they made.
And the argument that an agreement
to pay usury is a defense to usury, has not been accepted
8l
because usury generally occurs as a result of an agreement.
V.A.C.S. art. 5069-1.06. seis forth the statutory penalties
for usury.
Regardless of the fact that these penalties have
beer codified, judicial construction of them continues
in
82
Texas.
In Windhorst v. Adcock Fipe and Supply,
the court
of civil appeals had stated that "the 'charging* of interest
in excess of the amount authorized is not actionable unless
charged pursuant to agreement of the parties, or actually
collected." On appeal, 83
the Supreme Court held that this
statement was in error.
The Supreme Court noted that the
Legislature, by describing the conditions precedent to recovery
of penalties in the disjunctive, had made it clear that only
one such condition need occur to trigger penalties; either
QU
a contract for, a charge of, or receipt of usurious interest.
A similar constructional problem of V.A.C.S. art. 50691.06 (1) arose in Wall v. gast Texas Teachers Credit Union?-*
Subdivision (1) of the article provides for, inter
alia,
P. A
a penalty of twice the interest contracted for.
The
court of civil appeals had allowed the credit union.a recovery
against the borrower of the principal of the note plus the
usurious interest charged less the statutory forfeit of twice
the amount of the usurious interest.
The Supreme Court
in holding that the court of civil appeals erred, stated that
this recovery would result in forfeit in the borrower's
favor of not twice the interest contracted for, but only once.
W£
This same subdivision of
s construed in
87article 5°69
Pinemont Bank v. DuCroz.' The plaintiffs in this case were
744
16
three signers of a note payable to Pinemont Bank.
The trial
court awarded each of the plaintiffs a recovery of twice the
usurious interest contracted for.
On appeal, the court of
civil appeals noted that because the statute is penal in
88
nature it is to be strictly construed.
The statute provides
for forfeiture "to the obligor of twice the amount of interest
contracted for."
The court of civil appeals held that a
strict construction of the statute requires a retention of
Its singular phraseology in that "obligors" may not be
substituted for "obligor".
Here there was only one contract
for usurious interest; therefore, the maximum forfeiture
which could be awarded was twice
any interest contracted
80
for that might be usurious. '
This survej' of recent Texas cases involving usury claims
reveals that schemes in avoidance of the usury laws have
not ceased.
Neither have the questions as to the construction
to be given to the usury statutes ceased.
Some legal writers
have suggested that raising the legal rate of interest to
a more realistic level would make unnecessary
devices in
on
evasion and avoidance of the usury laws. 7
One questions,
however, whether a higher interest rate would be an answer
to the usury problems in Texas today.
Deborah Welch
745
I.
V.A.C.S. art. 5069-1.01 through 1.07; V.A.C.S. art.
1302-e. 09.
?.
Comment, Usury Implications of Front-End Interest
and Interest In Advance, 29 S.W.L.J. 748, 762 (1975)*
3.
Wall v. East Texas Teachers Credit Union, 533 S.W.2d
918, 921 (1976).
4.
Imperial Corp. of America v. Frenchman's Creek
Corp., 453 F.2d 1338, 1344 (5th Cir. 1972).
5-
Id.
6.
American Century Mortgage Investors v. Regional
ctr., 529 S.W.2d 578 (Tex. Civ. App.-Dallas 1975).
7.
Id.
8.
Southwestern Inv. Co. v. Hockley Cty. Seed and
Delint., Inc., 511 S.W.Ed 724, 731 (Tex. Civ. App.-Amarillo
1974, writ refs'd n.r.e. 516 S.W.2d 136);Finemont Eank v.
DuCroz, 528 S.W.2d 8?7 (Tex. Civ. App.-Houston jl4th DistTj
1975, writ ref'd n.r.e.).
9.
511 S.W.2d at 731.
10.
Id.
II.
Id. at 732.
1?.
528 S.W. 2d 877 (Tex. Civ. App.-Houston [l4th Dis-Q
1975, writ ref'd n.r.e.).
13.
Id. at 879.
1^.
Id.
15.
506 S.W.2d 580 (1974).
16.
Id. at 5 8 5 .
See Cherry v. Berg, 508 S.W.2d 8 6 9 ,
875 (Tex. Civ. App.-Corpus 1974).
17.
Authority of Certain Corporations to Borrow Money.
This article provides, inter alia, that the rate of interest
5s not to exceed one and one-half percent per month.
18.
526 S.VJ.2d 252 (Tex. Civ. App.-Dallas 1975).
19.
Td. at 2 5 6 citing Jenkins v. Moyse, 254 N.Y. 319,
17£ N.E. 521•
20.
492 S.W.2d 335 (Tex. Civ. A p p .-Beaumont 1973).
21.
V.A.C.S. art. 1302-2.09
22.
V.A.C.S. art. 5069-1.02
23.
492 S.W.2d at 3 3 8 .
24.
539 S.V,\2d 71 (Tex. Civ. App.-Houston 1976, modified,
543 S.W.2d 862 (1976).
25.
This article sets forth the penalties for violations
of the usury laws.
26.
539 S.W.2d at 82.
27.
Stephens v. First Bank and Trust of Richardson,
5^0 S.V.2d 572, 57^ (Tex. Civ. App.-Waco 1976, writ ref'd n.r.e.).
ZS.
539 s .W.2d 874 (1976).
^9.
Id. at 879.
30.
Id.
31.
Expenses, fees and charges for real estate loans.
32.
526 S.W.2d 774 (Tex. Civ. A P P .-Corpus 1975)» affirmed,
53^ S.W.2d 903 (1976).
33.
53^ s.w.2d 903 (1976).
34.
Id.
3C.
Id. at 908.
36.
525 S.W.2d 724 (Tex. Civ. A p p .-Beaumont 1975).
37.
Id.
The court took note of art. 852a g 5.07 authorizing
associations to charge premiums for the making of such loans
which shall be in addition to interest authorized by law and
shall not be deemed a part of the interest collected or agreed
to be paid on such loans within the meaning of any law of this
State which limits the rate of interest which may be exacted in any
transaction.
Thus the court found that the 2% premium charged
747
by the defendant to the corporation for the making of the loan
was not interest.
Compare this treatment of premiums with the
Supreme Court's treatment of premiums in Freeman v. Gonzales
County Savings & Loan Assoc., 534 S.W.2d 903, 908 (1976).
38.
Cherry v. Eerg, 508 S.W.2d 869, 875 (Tex. Civ. App.-
Corpus 1974).
39.
506 S.W.2d 580 (1974).
40.
525 S.W.2d 724 (Tex. Civ. App.-Beaumont 1975).
41.
T .
42.
Riverdrive Mall, Inc. v. Larwin Mortgage Investors,
515 S.W.2d 5, 8 (Tex. Civ. App.-San Antonio 1974).
43.
530 S.W.2d 71 (Tex. Civ. App.-Houston 1976), modified,
543 S.W.2d 862. (1976).
44.
45.
46.
530 S.W.2d at 7 8 .
IA'
Stephens v. First Eank and Trust of Richardson,
540 S.W.2d 572, 574 (Tex. Civ. App.-Waco 1976, writ ref'd
n.r.e.).
47.
Id. Accord, Laid Rite, Inc. v. Texas Industries,
Inc., 51? S.W.2d 384, 3 8 9 (Tex. Civ. App.-Ft. Worth 1974).
48.
Commerce Savings Assoc. of Brazoria County v. GGE
Management Co., 539 S.W.2d 71, 79 (Tex. Civ. App.-Houston
1976).
Accord, Imperial Corp. of American v. Frenchman's
Creek Corp., 453 F.2d 1338, 1343 (5th Cir. 1972).
49.
5?2 S.W.2d 457 (1975).
50.
Id.
51.
Id.
52.
Id. at 460.
53.
66
54.
_Id. at 6 5 6 ; Imperial Corp.of America v. Frenchman's
ALR 3d
655.
Creek Corp., 453 F.2d 1338, 1344 (5th Cir. 1972).
748
55.
Ferguson v. Tanner Development Co., 5^1 S.W.2d
^83, 493 (Tex. Civ. App.-Houston 1976).
56.
Article 5069-1.01. Definitions
(a) "Interest" is the compensation allowed by lav: for
the use or forbearance or detention of money; provided however,
this term shall not include any time price differential however
denominated arising out of a credit sale.
57.
534 S.W.2d 3^8 (Tex. Civ. App.-Ft. Worth 1976).
58.
Id.
59.
^53 F.2d at 1345.
60.
Id. at 1341.
61.
534 S.W.2d 903 (1976).
62.
Id.
63.
Id. at 906.
64.
Comment, Usury Implications of Front-End Interest
and Interest in Advance, 29 S.H.L.J. 7^8, 757 (1975).
65.
Id. at 751.
66.
541 S.W.Ed at 491.
67.
Id.
68.
453 F.2d at 134l.
69.
Riverdrive Mall, Inc. v. Larwin Mortgage Investors,
515 S.W. 2d 5 (Tex. Civ. App.-San Antonio 197*0.
70. Ferguson v. Tanner Development Co., 54l S.W,2d
483. 491(1976).
71.
453 F.2d at 1343.
72.
Id.
73-
Id. at 1343.
74.
511 S.W.2d 724 (Tex. Civ. App.-Amarillo 1974) writ
ref'd n.r.e., 5 1 6 S.W.2d
136.
75.
Id. at 732.
76.
5 3 9 S.W.2d at 81.
? f 9
77.
V.A.C.S. art. 5069-.1.07. (a) added by the 64th Legislature.
78.
Southwestern Jnv. Co. v. Hockley County Seed-and
Delint. , Inc., $11 S.W. 2d 724, 7 3 5
(Tex. Civ. App. -Amarillo
1974, writ ref'd n.r.e., 5 1 6 S.W.?d
136).
79.
Freeman v. Hernandez, 521 S.W.2d 108 (Tex. Civ. App.-
Dallas 1975).
80.
Johns v. Jaeb, 5 1 8 S.W.2d 8 5 7 ,
8 6 9 (Tex. Civ. ^pp.-
Dallas 1974).
81.
Ferguson v. Tanner.Development Co., 541
s
.W.2d
483, 493' (Tex. Civ. App.-Houston 1976).
82."
547 S.W.2d 260 (1977).
83.
Id.
84-.
Td. at 26l.
85.
533. S.W.2d 918 (1976).
•
86.
Art.
5069-I.O6.
Penalties
(1) Any person who contracts for, charges or
receives interest which 3s greater than the amount authorized
by this Subtitle, shall forfeit to the obligor twice the
amount of interest contracted for, charged or received, and
reasonable attorney fees fixed by the court provided that
there shall be no penalty for a violation which results from
an accidental and bona fide error.
87.
52.8 S.W.2d 877 (Tex. Civ. App.-Houston
|l4th DistTJ
writ ref'd n.r.e. ).
P8.
Id. at 879.
89.
Id.
90.
Comment, Usury Implications of Front-End
and Interest in Advance, 2 9 S.W.L.J. 748, 7 6 6
Interest
(1975)-
Note
also that the 64th Legislature added art. 5069-I.07(b) which
allows individuals to pa.y the sare rate of interest as corporations
in certain limited situations.
751