WILLIAM H. VITZ, ET UX FROM A DISTRICT COURT JUDY A. VITZ APPELLANTS, v. FIRST BANK AT FARMERSVILLE, AND JOE ASTON, III APPELLEES

COURT OF APPEALS
FIFTH DISTRICT OF TEXAS
AT DALLAS
NO. 05-89-00170-CV
 
WILLIAM H. VITZ, ET UX                                FROM A DISTRICT COURT
JUDY A. VITZ
 
                APPELLANTS,
 
v.
 
FIRST BANK AT FARMERSVILLE, AND
JOE ASTON, III
 
                APPELLEES.                                  OF COLLIN COUNTY, TEXAS
 
 
 
BEFORE CHIEF JUSTICE ENOCH AND JUSTICES BISSETT FN:1 AND STEPHENS FN:2
OPINION BY JUSTICE STEPHENS
SEPTEMBER 7, 1989
        In one point of error, William H. Vitz, et ux, Judy A. Vitz, Appellants, appeal the denial of their application for a temporary injunction to stay the non-judicial foreclosure of certain real property by Joe Aston III, as Trustee for First Bank at Farmersville, Farmersville, Texas, contending that the trial court abused its discretion by its failure to enjoin appellees from conducting the foreclosure sale during the pendency of this suit. We disagree with appellants, and, accordingly, we affirm the judgment of the trial court.
        In 1983, Mr. and Mrs. Vitz initiated a loan from the Bank securing it with a deed of trust on certain real estate situated in McKinney, Collin County, Texas. In January of 1988, the loan was in a delinquent state and on January 29, 1988, the parties entered into a Loan Modification Agreement, whereby the Bank reduced the interest rate, advanced the past due interest of 120 days in the sum of $10,546.80, to make the loan current as of January 15, 1988, and added the advance of interest to the principal balance then due. Under the modified agreement the first installment of $2,722.40 was due February 15, 1988. On February 25, 1988, the first installment not having been made, the Bank, through its attorney Mr. Aston, demanded payment of $3,372.40 to bring the note current. This sum consisted of the installment payment of $2,722.40, together with a late charge of $599.94, and an attorney's fee of $50.00. Upon receipt of this demand Mr. Vitz called the Bank and was informed that the sum needed to bring the note current was $912.40. When he took a check for this amount to the Bank, the Bank refused to accept it, informing him that the $912.40 sum was in error and that the correct amount was $450.00 higher, or the sum of $1,362.40. FN:3 Mr. Vitz refused to pay the additional sum and on the following day wrote a letter to Mr. Aston, the trustee, complaining that the sum demanded by the bank was in violation of the Consumer Credit Code. After review of this letter, Mr. Aston wrote Mr. Vitz, giving him credit for February rent payments made directly to the Bank by tenants of the property FN:4 , together with notice of the intention to accelerate the maturity of the note.
        As matters deteriorated between the Bank and Mr. Vitz, additional rental payments were tendered the Bank by tenants, but were not cashed and instead were forwarded unendorsed to Mr. Vitz. Finally, Mr. Aston was authorized to post the property for foreclosure sale. One day before the scheduled sale, a temporary restraining order was obtained preventing the sale. No hearing was scheduled on the temporary injunction, and the property was again posted for sale on May 3, 1988. On the morning of May 3, 1988, Mr. Vitz filed bankruptcy proceedings, which again stayed the scheduled sale. On January 9, 1989, the Bankruptcy Court granted the Bank's motion to lift stay order, and the property was again posted for foreclosure sale. On January 20, 1989, Mr. Vitz obtained a hearing date of January 30, 1989, on the temporary injunction in the case. The hearing resulted in denial of the temporary injunction, and this interlocutory appeal was instituted.
        The sole question presented this Court on this interlocutory appeal is whether the trial court abused its discretion by its denial of the temporary injunction. In connection with this question we note that no findings of fact or conclusions of law were filed.
        The proper standard for appellate review of an order granting or denying a temporary injunction was stated in Manning v. Wieser, 474 S.W.2d 448 (Tex. 1971), as:
        The decision of the trial court in either granting or refusing the temporary injunction will not be reversed upon appeal unless it is determined that the trial court has been guilty of abuse of discretion or has failed to apply the law correctly to undisputed facts.
Thus, we are not at liberty to reverse the trial court unless we find a clear abuse of discretion. Furthermore, this is not a case where the facts are undisputed. The record is replete with dispute of the parties as to the application of the various sums. Furthermore, it has been held that even if the loan is shown to be usurious, this court should not reverse absent a showing of a clear abuse of discretion. Riverdrive Mall, Inc. v. Larwin Mortgage Investors, 515 S.W.2d 5 (Tex. Civ. App.--San Antonio 1974, writ ref'd n.r.e.). Abuse of discretion implies more than a mistake of judgment; it must amount to "arbitrary and unreasonable" action by the trial court. Parks v. U.S. Home Corp., 652 S.W.2d 479 (Tex. App.--Houston [1st. Dist.] 1983, writ dism'd).
        Appellants make numerous arguments under their one point of error. First, they argue that the Loan Modification Agreement forms the basis of the legal relationship between them and the Bank and cannot be varied by parole evidence. They argue that since the Loan Modification Agreement recites the principal indebtedness to be $294,337.87, this is the sum on which interest may be charged and thus the accrued past due interest of $10,546.80, due at the time of the execution of the modification agreement, cannot be added to the sum shown in the agreement, and therefore it constitutes usurious interest. We disagree. The question of usury must be determined by a construction of all the documents constituting the transaction, interpreted as a whole, and in light of the attending circumstances. Spanish Village, Ltd. v. American Mortgage Co., 586 S.W.2d 195 (Tex. Civ. App.--Tyler 1979, writ ref'd n.r.e.). The evidence clearly shows that at the time of the Loan Modification Agreement, the note was 120 days past due, and a computation of the interest for bringing the note current comports with the sum of $10,546.80, which was the sum due for the extension of the note to bring it current. This sum, added to the $294,337.87, creates the new principal indebtedness of $304,884.67 on the date of the execution of the Loan Modification Agreement.
         Next appellants argue that the loan in question is an installment loan, governed by Chapter Four of the Texas Consumer Credit Code. We disagree. To qualify as a Chapter Four loan, three factors must exist: (1) the loan must contain pre-computed interest added on to the cash advance so that the loan is a combined balance of principal and interest, which is then divided into equal payments over the life of the loan, (2) the loan must not be secured by real estate, and (3) the loan must be "primarily for personal, family or household use, but not for business, commercial, investment, agricultural or other similar purposes, or primarily for the purchase of a motor vehicle, and that is payable in two or more installments, not secured by a lien on real estate". This loan simply does not qualify as a Chapter Four Loan.
        Next appellants contend that the amount of interest charged violates both Chapter Four and Chapter One of the Code. Having held that this is not a Chapter Four loan we do not address the interest charges permissible under Chapter Four. As to Chapter One, we agree with Appellees that 12 U.S.C § 1735f-7(a)(1) governs this loan. This statute holds:
        The provisions of the Constitution of the laws of any state expressly limiting the rate or amount of interest, discount points, finance charges or other charges which may be charged, taken, received or reserved shall not apply to any loan, mortgage, credit sale, or advance which is --
 
             (A)        secured by a first lien on residential real property, by a first lien on all stock allocated to a dwelling unit in a residential cooperative housing corporation, or by a first lien on a residential manufactured home;
 
             (B)        made after March 31, 1980; and
 
             (C)        described in § 527(b) of the National Housing Act (12 U.S.C. 1735f-5(b) that the property must be designed principally for the occupancy of from one to four families shall not apply;
The record reflects that a bank officer testified that the Bank's accounts are insured by the Federal Deposit Insurance Corporation, and both the bank officer and Mr. Vitz confirmed that the loan was secured by a first lien on residential real property and was made after March 31, 1980. 12 U.S.C. 1735 (f)-5(b) states that a "federally related mortgage loan" is a loan which is secured by residential real property and which loan is made in whole or in part by any lender whose deposits or accounts are insured by any agency of the federal government. The Texas Supreme Court has expressly held that "for loans made after April 1, 1980 secured by first liens on residential real property, state usury laws do not apply, and federal law prevails." Seiter v. Veytia, 756 S.W.2d 303 (Tex. 1988).
        Appellants next argue that Seiter v. Veytia further stands for the proposition that the federal preemption statute quoted above does not apply to late charges applied to notes. We agree with Appellants. Seiter v. Veytia, clearly states:
        The court of appeals correctly held that the federal statute did not preempt usurious late charges, and we affirm that holding.
Appellants argue that the demand letter containing a late charge of $599.94 constitutes a "charging" of usurious interest. We agree that the demand letter constitutes "charging" under the statute. Danziger v. San Jacinto Sav. Ass'n, 732 S.W.2d 300 (Tex. 1987); Coppedge v. Colonial Sav. & Loan Ass'n, 721 S.W.2d 933 (Tex.App. - Dallas 1986 no writ). However, appellants contend that the late charge is for the delinquent payment after the Loan Modification Agreement, and appellees contend that the late charge is for the four months delinquent payments before the Loan Modification Agreement coupled with the delinquent payment after the Loan Modification Agreement. Absent findings of fact and conclusions of law, this certainly is a disputed fact which the trial court may have taken into consideration. Abuse of discretion is non existent if the trial court bases its decision on conflicting evidence and the evidence reasonably supports its conclusion. Seaborg Jackson Partners v. Beverly Hills Sav., 753 S.W.2d 242 (Tex. App.--Dallas 1988, no writ).
        We conclude that this is a Chapter One loan which is governed by the spreading doctrine set forth in article 5069-1.06 which states:
        (a) On any loan or agreement to loan secured or to be secured, in whole or in part, by a lien, mortgage, security interest, or other interest in or with respect to any interest in real property, determination of the rate of interest for the purpose of determining whether the loan is usurious under all applicable Texas laws shall be made by amortizing, prorating, allocating, and spreading, in equal parts during the period of the full stated term of the loan, all interest at any time contracted for, charged, . . . .
 
        By enacting TEX. REV. CIV. STAT. ANN., art 5069-1.07(a) (Vernon Supp. 1986), the legislature adopted the spreading doctrine with respect to loans secured by a lien on any interest in real property. The doctrine spreads "all interest at any time contracted for, charged, or received" in connection with the loan over a contractual term of the loan for the purpose of determining whether it is usurious. See Coppedge v. Colonial Sav. & Loan Ass'n, 721 S.W.2d 933 (Tex. App.--Dallas 1986, no writ).
        Finally we are mindful of the holding in Riverdale, supra that:
        It is not necessary for us to determine on this interlocutory appeal if usurious interest was "contracted, charged or received" by Larwin, in that we cannot say that the trial court abused its discretion in refusing to enjoin the foreclosure sale even if the interest on the notes was shown to be usurious. We, therefore, reserve the pivotal questions until full development of the case is had.
        This Court is unable to find a clear abuse of discretion in the acts of the trial court in denying the temporary injunction, and, accordingly, appellant's Point of Error is overruled, the temporary injunction entered by this court is dissolved, and the judgment of the trial court is affirmed.
 
                                                                  
                                                                  BILL J. STEPHENS
                                                                  JUSTICE
 
 
DO NOT PUBLISH
TEX. R. APP. P. 90
 
890170F.U05
 
FN:1 The Honorable Gerald T. Bissett, Justice, retired, Court of Appeals, Thirteenth District of Texas at Corpus Christi, sitting by assignment.
FN:2 The Honorable Bill J. Stephens, Justice, retired, Court of Appeals, Fifth District of Texas at Dallas, sitting by assignment.
FN:3 This figure was apparently arrived at by giving a credit of $1,360.00 for rental payments made by the tenants of the property, which together with the $1,362.40 would equal $2,722.40, the exact amount of the first past due installment of the Modified Agreement.
FN:4 As a part of the Loan Modification Agreement, appellants had agreed that the tenants could make their monthly rental payments directly to the Bank for credit to the note.
 
File Date[09-06-89]
File Name[890170F]