Doye Baker v. Daymon Ray Howard

Baker-D v. Howard AFFIRMED OCTOBER 25, 1990 NO. 10-89-164-CV Trial Court # 88-1601-4 IN THE COURT OF APPEALS FOR THE TENTH DISTRICT OF TEXAS AT WACO * * * * * * * * * * * * * DOYE BAKER, Appellant v. DAYMON RAY HOWARD, Appellee * * * * * * * * * * * * * From 170th Judicial District Court McLennan County, Texas * * * * * * * * * * * * * In January and February 1987, appellant Doye Baker loaned appellee Daymon Howard $55,000.00 with four advances of funds that ended on February 18th. Baker agreed to finance the loan over a period of seven years, at fifteen percent interest per annum, with monthly payments of $1,061.32 beginning March 1, 1987. The loan agreement between the parties was oral, and it was completed on February 18th. Baker testified that on that day, "When we were discussing it, [Howard] asked me what his payments would be on the $55,000.00 at the 15 percent interest, and I did have an amortization book and we looked it up in an amortization book, and that is where we came up with a figure of $1,061.00, whatever it is." Appellee did not execute a promissory note or any other instrument evidencing the loan. However, between February 18th and March 1st, after the terms of the loan had been agreed upon, appellant gave appellee a printed amortization schedule setting forth the amount of the loan, the rate of interest, and the 84 payments of $1,061.32 each required under the original agreement. After appellee had made eight payments and a part of the ninth, he quit paying on the loan. This lawsuit was filed in May 1988 and tried to a jury in April 1989. The jury found that the transaction between the parties was a loan. The judgment that followed in the case awarded appellant the balance due on the note less the penalty for usurious interest set forth in Texas Civil Statutes Article 5069--1.06(1) on the trial court's conclusion that the interest charged on the loan was usurious as a matter of law under the provisions of Articles 5069--1.02 and 5069--1.04 of the Texas Civil Statutes because the interest exceeded ten percent and the loan contract was not in writing. These statutes provide in pertinent parts as follows: Art. 5069-1.02. Except as otherwise fixed by law, the maximum rate of interest shall be ten percent per annum. A greater rate of interest than ten percent per annum unless otherwise authorized by law shall be deemed usurious. All contracts for usury are contrary to public policy and shall be subject to the appropriate penalties prescribed in Article [5069--1.06]. Art. 5069-1.04. (a) The parties to any written contract may agree to and stipulate for any rate of interest, . . . that does not exceed: (1) an indicated rate ceiling that is the auction average rate quoted on a bank discount basis for 26-week treasury bills issued by the United States government, as published by the Federal Reserve Board, for the week preceding the week in which the rate is contracted for, multiplied by two, and rounded to the nearest one quarter of one percent; or, as an alternative, (2) an annualized or quarterly ceiling that is the average of the computations under Subsection (1) of this section and is computed pursuant to Section (d) of this Article. (b)(1) If a computation under Section (a)(1), (a)(2), or (c) of this Article is less than 18 percent a year, the ceiling under that provision is 18 percent a year. If a computation under Section (a)(1), (a)(2), or (c) of this Article is more than 24 percent a year, the ceiling under that provision is 24 percent a year. Art. 5069-1.06. Penalties (1) Any person who contracts for, charges or receives interest which is greater than the amount authorized by this Subtitle, shall forfeit to the obligor three times the amount of usurious interest contracted for, charged or received, such usurious interest being the amount the total interest contracted for, charged, or received exceeds the amount of interest allowed by law, and reasonable attorney fees fixed by the court except that in no event shall the amount forfeited be less than Two Thousand Dollars or twenty percent of the principal, whichever is the smaller sum; provided, that there shall be no penalty for any usurious interest which results from an accidental and bona fide error. (2) Any person who contracts for, charges or receives interest which is in excess of double the amount of interest allowed by this Subtitle shall forfeit as an additional penalty, all principal as well as interest and all other charges and shall pay reasonable attorney fees set by the court; . . . . The amortization schedule that appellant gave to appellee set forth near the top of the first page, "Loan Amount $55,000.00"; "Interest Rate 15.0000%"; "First Payment Due 03/01/87"; and "Payment Amount $1061.32." This was followed by the listing of 84 numbered payments of $1,061.32 each with columns showing the payment due dates, the amount of interest and principal included in each payment, and the balance remaining on the principal of the loan after the payment. However, the schedule was not signed by either party and contained no identifying information as to the parties to be bound. In his single point of error appellant urges on appeal as he did in the trial court that the amortization schedule, which set forth the loan agreement of the parties, including the fifteen percent interest rate, satisfied the requirement in Article 5069--1.04(a) for a "written contract" that permits an agreement for a rate of interest above ten percent that is not usurious. We disagree. The question of whether or not the unsigned amortization schedule was the written contract of the parties or merely a memorial of the prior oral agreement of the loan transaction was a fact issue for the jury, turning on the intent of the parties. Simmons And Simmons Construction Co. v. REA, 155 Tex. 353, 286 S.W.2d 415 (1955). This fact issue was not submitted to the jury in our case. The judgment carries the implied finding of the trial court that the schedule was not the written agreement of the parties. Rule 279, Vernon's Tex.Rules Civ.Proc. Evidence we have recited supports this finding, showing that the loan agreement was entirely completed, including the amount of the monthly payments, several weeks before the schedule was supplied to Howard by Baker. Additionally, the schedule was not sued on or pleaded by either party. Under the evidence, the trial court was justified in determining that the parties merely intended and used the amortization schedule as evidence of the prior completed oral contract of the loan transaction upon which they acted. As mere evidence of the oral contract, the schedule was not a "written contract" within the meaning of Article 5069--1.04(a). The maximum legal rate of interest that the parties could have agreed upon orally for the loan in question was ten percent per annum. Article 5069--1.02, ante. Because the fifteen percent rate agreed upon and used by the parties was not "in excess of double the amount of [legal] interest," the proper penalty to be assessed against appellant, and the one used by the trial court, was the requirement that appellant forfeit to appellee "three times . . . the amount the total interest contracted for. . . exceed[ed] the amount of interest allowed by law," plus attorney's fees. Article 5069--1.06, ante. The total amount of interest at fifteen percent per annum that was charged on the loan of $55,000.00 was $34,151.13. This was based upon a loan period of seven years that called for monthly payments of $1,061.32 each. In computing the penalty, the trial court assumed a loan of $55,000.00 bearing interest at ten percent per annum for a term of seven years. This assumption called for 84 monthly payments of $916.06, and it produced a total interest charge of $21,697.14. Thus, by subtracting $21,697.14 from $34,151.13, the court determined that the amount of usurious interest was $12,453.49 and used this figure in calculating the penalty to be assessed against appellant. In his single crosspoint on appeal, appellee contends that since the evidence conclusively established that the monthly payments agreed to and paid by him were $1,061.32 each, the trial court should have determined the amount of interest that would have been charged on a loan of $55,000.00 bearing interest at ten percent per annum and being repaid in monthly installments of $1,061.32 each. This would have called for repayment of the loan in sixty-eight payments, producing a total interest charge of $17,305.13. Thus, under appellee's argument, the usurious interest charged by appellant was $16,806.00 ($34,151.13 less $17,305.13). We disagree with appellee. The undisputed evidence shows that the loan agreement made by appellee and appellant centered upon the amount of the loan ($55,000.00), the term of the loan (seven years), and the interest rate (finally settled at fifteen percent). Appellee testified that he agreed that he would "repay that $55,000.00" with "monthly payments, seven years," that he would pay interest, that he did not know the interest would be "fifteen percent until [appellant] brought me the amortization," and that he "agreed to pay him fifteen percent." Appellant testified, "I would finance the $55,000.00 to him over a period of, I believe it was seven years, at fifteen percent interest." Appellee centers his method for computing the usurious interest on the amount of the monthly payment. However, the parties' agreement was not built on this payment. The amount of the payment merely resulted from the amortization of the loan agreement that centered on the amount of the loan, the term and rate. We agree with the trial court that the proper method for determining the amount of usurious interest charged is to substitute the legal rate of interest for the usurious rate in the loan agreement made by the parties. The parties' points and contentions are overruled. The judgment is affirmed. VIC HALL PUBLISH Justice