Opinion
No. 14-06-00101-CV
Opinion filed May 10, 2007.
On Appeal from the 61st District Court Harris County, Texas. Trial Court Cause No. 04-20332.
Judgment rendered and Memorandum Opinion filed May 10, 2007.
Panel consists of Justices YATES, EDELMAN, and SEYMORE. (SEYMORE, J., concurs in the result only).
MEMORANDUM OPINION
In this joint venture dispute, Hermelinda Cruz appeals from a judgment in favor of Virgie Holleman on the ground that the trial court erred by failing to submit a question to the jury on her usury claim because it was properly raised by the pleadings and the evidence in the case. We affirm.
A party is entitled to a jury question if the pleadings and evidence raise the issue. TEX. R. CIV. P. 278; Union Pac. R.R. Co. v. Williams, 85 S.W.3d 162, 166 (Tex. 2002). Contracts for usurious interest are contrary to public policy and prohibited by the Texas Constitution and Texas Finance Code. See TEX. CONST. art. XVI, § 11; TEX. FIN. CODE ANN. § 302.001(b), 305.001-.008 (Vernon 2006). Usurious interest is compensation for the use, forbearance, or detention of money that exceeds the applicable maximum amount allowed by law. TEX. FIN. CODE ANN. § 301.002(a)(4), (a)(17) (Vernon 2006). A usurious transaction thus consists of: (1) a loan of money; (2) an absolute obligation to repay the principal; and (3) the exaction of greater compensation than is allowed by law for the borrower's use of the money. First Bank v. Tony's Tortilla Factory, Inc., 877 S.W.2d 285, 287 (Tex. 1994).
When an alleged usurious contract, by its terms, construed as a whole, is doubtful or even susceptible of more than one reasonable construction, the court should adopt the construction which comports with legality. Smart v. Tower Land Inv. Co., 597 S.W.2d 333, 340-41 (Tex. 1980). A contract to pay a fixed charge for an uncertain period of time based upon a contingency recited in the contract is not usurious merely because there was a possibility that more than legal interest might be paid. W.E. Grace Mfg. Co. v. Levin, 506 S.W.2d 580, 584 (Tex. 1974).
In this case, Cruz intended to buy and remodel a house, then resell it for a profit. On December 6, 2000, she entered into an agreement with Holleman's deceased husband to borrow the necessary funds. The agreement, which Cruz drafted, stated the following:
Mr. Holl[e]man agrees to lend Ms. Cruz money for the purchase of property, providing that upon resale of the property, he receives the sum of $5,000.00 in addition to the sum of the loan. There are no limits on the amount that can be borrowed. (Emphasis added).
In addition to not limiting or specifying how much money Cruz would borrow, this agreement does not include a deadline for repayment other than upon the eventual resale of the property. Nor does the agreement impose any rate of interest on the amount borrowed to purchase the property. Cruz claims that the agreement charges usurious interest in excess of 18% per annum because she could have been required to pay $5,000 in addition to the $23,351.14 she borrowed within one year. However, even though the house might have been sold within one year, it actually took Cruz almost four years to fix the house up and sell it. Under these circumstances, the agreement was not a contract to pay more than the legal rate of interest. Because Cruz has thus not shown that she was entitled to a jury question on usury, her sole issue is overruled, and the judgment of the trial court is affirmed.
Although the parties to the agreement did not specify how much money Cruz borrowed was borrowing, the evidence record reflects suggests that Mr. Holleman loaned her $23,351.14.
See W.E. Grace Mfg. Co., 506 S.W.2d at 584 (holding that contract was not usurious where it required payment of a fixed charge for an uncertain period of time based on a contingency, even though there was a possibility that more than the legal interest might be paid upon an early occurrence of the contingency).