In 2008 Aneita Weaver loaned her nephew John Jamar
$193,000 so that John could purchase a Harris County townhouse. The two parties
prepared and signed a loan agreement, without the help of lawyers or title
agents. That was their first (well maybe their second) mistake.
The
funds were loaned at 8.00% interest for one year. Jamar was supposed to pay
Weaver $1,400 per month during the term of the loan, which by my math
establishes an amortization of 31.5 years.
The loan
agreement stated: “If the . . . property does not sell [by January 1, 2010,
then] . . . Aneita J. Weaver has the right to assume the title to the property
free and clear from John Jamar, for the balance of the loan.”
Seriously.
That’s what it says.
Jamar
neither sold the property by January 1, 2010, nor did he make his payments to
Weaver. So Weaver sued, asking the trial court for specific performance under
the loan agreement, unpaid interest at the stated rate of 8.00% and attorney’s
fees.
Weaver
sued because Jamar did not sign a Deed of Trust, which would have otherwise
allowed her to foreclose. Without a Deed of Trust Weaver’s only choices were to
ignore the default or assert a lawsuit and ask the Court to force Jamar to
convey the property to her.
Weaver
won the case. The trial court ordered Jamar to convey the Property to Weaver.
However, Weaver did not receive 8.00% interest in the Judgment. Instead, the
trial court awarded her only 5.00% interest on all post-judgment amounts.
So Weaver
appealed.
The
Appellate Court looked at the security clause and focused on Weaver’s right to
“. . . assume the title to the property . . . for the balance of the loan.”
The
Court decided that the everyday meaning of “balance”
includes principal and interest. And that Weaver’s exercise of her right to get
title to the townhouse extinguished the balance of the loan, including
interest.
So,
Weaver’s interest rate of 8.00% was reduced to 00%. However, once the Judgment
was entered by the trial court, the full Judgment amount accrued interest at
the statutorily-mandated rate of 5.00%. Which wasn’t quite as painful. But
still.
All of
this pain was caused by the preparation by the parties of their own loan
agreement, written with terms and provisions they could understand. And we can
appreciate that.
But the
other side is that Weaver was inadequately protected. I shudder to think of her
legal expenses to clean up this mess, when a properly worded Promissory Note
and Deed of Trust would likely have avoided both courthouses entirely.
See Weaver v. Jamar; 14-11-00516-CV;
Texas Court of Appeals 14th District; October 30, 2012.
Lessons learned:
1. Loan
documents written by non-lawyers cause problems.
2. Loan
docs with problems generate lawsuits.
3. Lawsuits
keep lawyers employed.
4. It
is probable that Weaver and Jamar could have avoided the Courthouse if they had
proper loan docs.
Reprinted with the permission of North
Texas Commercial Association of REALTORS®, Inc.
