Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Click here for the full text of this decision FACTS:In 1999, Lawrence E. Sturm executed a promissory note to Guenther Muens in the amount of $85,000, payable within one year at an annual interest rate of 18 percent. Sturm paid a total of $18,502.65 on the note, and Muens filed suit to collect the balance, also alleging fraud. Sturm asserted usury as a defense and as a counterclaim. The trial court granted Muens’ motion for partial summary judgment on the note claim. After a jury trial, the court entered judgment on the verdict in favor of Muens on the fraud claim. The trial court also ordered that Sturm take nothing on his usury counterclaim. HOLDING:Reversed and remanded in part, reversed and rendered in part. Sturm first challenged the summary judgment awarding recovery on the promissory note claim and the denial of his counterclaim for usury on the grounds that there was a fact question as to whether the note was usurious. Contracts for usurious interest, the court noted, are contrary to public policy and prohibited by Art. XVI, � 11 of the Texas Constitution and Texas Finance Code ��302.001(b), 305.001-.008. A usurious transaction 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. Conversely, the court stated, a charge that is supported by distinctly separate and additional consideration, other than the lending of money, is not interest for usury purposes. Any dispute in the evidence, however, as to whether a charge in addition to stated interest is actually for separate consideration, rather than a device to conceal usury, raises a fact issue. Muens argued that because the note was the final agreement between the parties, the parol evidence rule barred introduction of the underlying agreement into evidence. But the court disagreed. The existence of the loan, the court stated, was clearly set forth in the note and undisputed by the parties. Therefore, for the purpose of showing that the note is a usurious loan, the agreement was valid evidence. Muens also contended that the transaction was not usurious, because the agreement does not refer to an interest rate, and because he never demanded payment of the amount due under the agreement. But the court stated that whether an amount of money is interest depends not on what the parties call it but on the substance of the transaction. Moreover, the court stated that it is not necessary that a demand be made for the payment of usurious interest, because merely contracting for it is a violation of the usury statutes. The court found that Sturm presented legally sufficient summary judgment evidence to raise a fact issue on each element of his defense for usury. For similar reasons, the court held that the trial court erred by granting summary judgment to Muens on Sturm’s usury counterclaim. In Sturm’s second issue, he contended that the trial court erred by awarding recovery on Muens’ fraud claim, because there was no evidence or, alternatively, insufficient evidence that: 1. he made a false statement and 2. he intended to defraud Muens. A promise of future performance, such as to repay the note in this case, constitutes an actionable misrepresentation if the promise was made with no intention of performing it at the time it was made, the court stated. But, the court stated, the mere failure to perform a contract is not alone evidence of such fraud. Rather, there must be evidence relevant to the promisor’s intent not to perform at the time the promise was made. There was no evidence, the court stated, that Sturm did not intend to repay the note at the time of entering into the note. Rather, the court found uncontroverted evidence that Sturm made a considerable effort to obtain better financing and to develop a project but was unsuccessful. Even so, he made five payments to Muens on the note totaling over $18,000 even without obtaining the new financing. The court found that such evidence did not reasonably support an inference of an intent not to repay the note at the time it was entered. The court reversed the trial court’s judgment in its entirety, remanded the promissory note claim and the usury counterclaim to the trial court for further proceedings, and rendered a take-nothing judgment on Muens’ claim for fraud. OPINION:Edelman, J.; Anderson and Edelman, J.J. DISSENT:Frost, J. “The court should affirm the take-nothing judgment on appellant Lawrence E. Sturm’s usury counterclaim. Because the court instead reverses that portion of the judgment and remands the usury counterclaim for a new trial, I respectfully dissent. “Sturm’s usury counterclaim against appellee Guenther Muens was an independent claim for affirmative relief. It was never the subject of a motion for summary judgment. . . . Sturm does not complain on appeal that the trial court erred in rendering this take-nothing judgment on his usury counterclaim following the jury trial.”

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 3 articles* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.