Court Opinion

ID: 9772109
Source: CourtListenerOpinion
Date Created: 2023-08-29 17:07:43.678078+00
Date Added: 2024-06-11T07:31:42.141452
License: Public Domain

CADENA, Chief Justice,
dissenting.
I do not agree that appellant, Jim Walter Homes, Inc., has corrected the clear violation of Article 5069-6.05(7) in the manner required by Article 5069-8.01(c)(l).
All references to the Texas Consumer Credit Code in this opinion will be made without including the prefix Article 5069. For example, Article 5069-6.05(7) will be referred to simply as 6.05(7).
On June 9, 1976, the date of execution of the contract involved in this case, 6.05(7) provided that no retail installment contract should provide for or grant a first lien on real estate to secure the obligation evidenced by the contract “except such lien as is created by law upon the recording of an abstract of judgment.” In Anguiano v. Jim Walter Homes, Inc., 561 S.W.2d 249 (Tex.Civ.App.-San Antonio 1978, writ ref’d n.r. e.), this court held that a contract executed by appellant, similar to the one now before us, was a “retail installment contract” and was subject to the provisions of the Consumer Credit Code, including 6.05(7). An-guiano expressly held that the retention by *714appellant of a first lien in such contract which provided for an annual percentage rate, as does the one now before us, of 11.4%, was a violation of 6.05(7).
In 1977, 6.05(7) was amended to prohibit provisions in a retail installment contract creating a first lien upon real estate “except (a) such lien as is created by law upon the recording of an abstract of judgment or (b) such lien as is provided for or granted by a contract or series of contracts for the sale or construction and sale of a structure to be used as a residence, so long as the time price differential does not exceed an annual percentage rate of 10 percent.” The Anguiano decision was based on the wording of 6.05(7) prior to the 1977 amendment, but it is clear that the amendment wrought no change in the law as applied in Anguiano since Anguiano explicitly recognized that a mechanic’s lien could be created so long as the interest rate did not exceed 10%. 561 S.W.2d at 254.
There can be no doubt that the contract before us violated the prohibition contained in 6.05(7), even after the 1977 amendment became effective, since it provides for a first lien and a time price differential in excess of an annual percentage rate of 10%. The statement in the majority opinion that Jim Walter “should not be penalized in 1979 for violation of the statutory prohibition eliminated by the 1977 amendment to Article 6.05(7)” is simply not true, since the amendment merely authorized the retention of a first lien in retail installment contracts if the annual percentage rate does not exceed 10%.
If Jim Walter has absolved itself of liability it can only be because, as required by 8.01(c)(2), within 60 days after it “actually discovered” the violation, it corrected the violation.
The majority’s conclusion that Jim Walter corrected the violation assumes that the violation of 6.05(7) was completely corrected when Jim Walter reduced the time price differential rate from 11.4% to 10% and made the refund of prior payments required by such reduction. As pointed out in the majority opinion, at no time did Jim Walter release the first lien. The majority holding is based on the theory that by reducing the annual percentage rate from 11.4% to 10% and by making the refund and reducing the amount of the required future payments to conform to such reduced annual percentage rate, Jim Walter “unilaterally amended the contract in the consumer’s favor,” bringing such contract into full compliance with the law. That is, while the original contract, providing for an annual percentage rate of 11.4% and providing for a first lien, violated the statute, the new contract, created by Jim Walter’s unilateral amendment, provides for an annual percentage rate of only 10%, so that the contract, thus “unilaterally amended” is in compliance with 6.05(7).
There can be no doubt that Jim Walter at least attempted a unilateral amendment of the contract. But some skeptics might question the assertion that the unilateral amendment was “in the consumer’s favor.” The contract was unilaterally changed from one calling for an annual percentage rate of 11.4%, unsecured by a first lien, to one calling for an annual rate of 10%, with payment of the debt secured by an enforceable first lien. As a result of this unilateral amendment, the consumer realized a total saving of $3,294.00 over a 15-year period, or a saving of $18.30 monthly. As a result of its unilateral amendment of the contract, Jim Walter, instead of having an unsecured debt, now has a debt secured by a first lien on the consumer’s real estate and has, according to the majority opinion, relieved itself of a liability in the amount of $45,-364.00, all at a cost of $18.30 a month. A suspicion that Jim Walter “unilaterally amended” the contract at least partially for its own benefit is justified. There is also some reason to believe that the legislative purpose in adopting 8.01(c)(1) was not to “benefit the consumer” but to relieve violators of the Consumer Credit Code from liability.
The majority opinion does not pinpoint the date on which Jim Walter actually discovered the violation involved in this case, nor does the brief of appellant mention a specific date which must be considered in *715order to determine whether the corrective action was, in fact, taken within 60 days of its actual discovery. But it can be fairly assumed that both the majority opinion and the contentions of Jim Walter are based on the assumption that Jim Walter actually discovered the violation on January 18, 1978, the date on which the opinion in An-guiano was handed down, or, perhaps, on February 15, 1978, the date on which this Court overruled Jim Walter’s motion for rehearing in Anguiano. In any event, the soundness of the majority opinion necessarily depends on the assumption that Jim Walter did not discover the violation prior to December 24, 1977, a date 60 days prior to February 22, 1978, the date of the “correction letter.” If Jim Walter actually discovered the violation prior to December 24, 1977, it did not take the corrective action with the 60 days prescribed by the statute.
The Anguiano opinion was delivered on January 18, 1978. This Court may, I think, take judicial notice of the fact that if the opinion in a case appealed to this Court was handed down on January 18, 1978, the pleadings specifically pointing out the illegal provisions in the Anguiano contract, including the violation of 6.05(7), were filed and served on Jim Walter prior to December 24, 1977.
Jim Walter’s theory, which the majority clearly accepts, necessarily is that it did not actually discover the violation of 6.05(7) until this Court rendered its decision on January 18, 1978, and that it took the required corrective action within 60 days of that date. That is, the theory is that a violation of a statute is actually discovered by the violator only when he discovers not only all of the relevant facts but also the legal significance of such facts, so that he cannot discover a violation of a statute until an appellate court tells him that his conduct amounts to a violation.
Jim Walter’s contention must be rejected. The only reasonable construction of “actually discovered such violation” is that the violation is actually discovered when there is an actual discovery of the facts which constitute the violation. The requirement that corrective action be taken within 60 days after the discovery of the violation is, as far as the right to correct is concerned, in the nature of a statute of limitations. It is well settled that a cause of action based on fraud must be commenced within two years after discovery of the fraud. All that is required to commence the running of limitations is that the plaintiff discover the facts which constitute fraud. When the defendant has shown discovery of such facts by plaintiff, plaintiff may not plead that, while he had knowledge of the facts, he did not know that, under applicable legal rules, such facts constituted fraud. Jim Walter’s contention in this case is nothing more than a plea of ignorance of the law.
As pointed out in the majority opinion, the contract in this case consists of a printed form identical to that used by Jim Walter in the Anguiano case. The pre-printed portion of both contracts embodies the provisions for a first lien. According to the affidavit filed by Jim Walter in the trial court and its brief in this Court, that form of contract has been used in thousands of cases.
The second paragraph of 8.01(c)(1) provides that the actual discovery of a violation in one transaction may constitute actual discovery of the same violation in other transactions if the violation actually discovered “is of such a nature that it would necessarily be repeated and would be clearly apparent in such other transactions without the necessity of examining all such other transactions.”
There is no basis for holding that Jim Walter did not actually discover the violation prior to December 24, 1977. The facts and circumstances of this case conclusively establish actual discovery of such violation prior to that date. The “correction” attempted on February 22, 1978, therefore, was not made within the 60-day period required by 8.01(c)(1).