Court Opinion

ID: 9682495
Source: CourtListenerOpinion
Date Created: 2023-08-24 08:12:01.168695+00
Date Added: 2024-06-11T18:17:39.674308
License: Public Domain

WALLACE, Justice.
This suit was brought for statutory penalties and attorney’s fees pursuant to the Texas Consumer Credit Code, TEX.REV. CIV.STAT.ANN. art. 5069-7.01, et seq. (Vernon Supp.1984). The trial court rendered a take nothing judgment. The court of appeals affirmed. 684 S.W.2d 740. We reverse the judgment of the court of appeals. A companion case is Garcia v. Gainan's Chevrolet City, Inc. and General Motors Acceptance Corp., 690 S.W.2d 892 (Tex.1985), decided this same day. The issues presented in both cases are identical; therefore, they will be discussed together in this opinion.
In 1976, Gonzalez contracted with Gain-an’s for the purchase of a used station wagon. He executed a retail installment contract with Gainan’s which was subsequently assigned to General Motors Acceptance Corporation. It is this contract which is at issue before us. Gonzalez contends that various provisions in the contract violated the Texas Consumer Credit Code, TEX.REV.CIV.STAT.ANN. art. 5069-7.01, et seq. (Vernon Supp.1984) (the Code). The court of appeals held that none of the provisions in question violated the Code. We disagree for the reasons set out below and therefore reverse the judgment of the court of appeals.
The Consumer Credit Code contains a lengthy litany of requirements for installment credit contracts in Texas. The list of provisions prohibited by the Code is found in art. 5069-7.07. A creditor has a duty to prepare a contract in accordance with these standards. Southwestern Investment Co. v. Mannix, 557 S.W.2d 755 (Tex.1977). Including unlawful provisions in a contract subjects the creditor to statutory penalties pursuant to art. 5069-8.01 of the Code. A finding that only one of the provisions of the contract violates the Code will establish liability.
The threshold issue to be addressed concerns the standard of construction to be given consumer credit contracts. The court of appeals relies upon the cases of Haley v. Pagan Lewis Motors, Inc., 647 S.W.2d 319 (Tex.App.—Corpus Christi 1982, writ ref’d n.r.e.) and Grant v. Friendly Chrysler-Plymouth, Inc., 612 S.W.2d 667 (Tex.Civ.App.—Corpus Christi 1981, writ ref’d n.r.e.), for the proposition that this type contract must be construed to comport with legality and the parties must be presumed to have intended to obey the law. These cases in turn rely upon the cases of Nevels v. Harris, 129 Tex. 190, 102 S.W.2d 1046 (1937) and Walker v. Temple Trust Co., 124 Tex. 575, 80 S.W.2d 935 (1935).
Walker and Nevels were both concerned with usurious contracts. Walker held that a court will adopt a construction which comports with legality if the contract, when taken as a whole, is doubtful or susceptible of more than one reasonable construction. Nevels held that parties to a contract are presumed to have intended to obey the law unless the contrary appears.
The court of appeals in this case utilized the above standard to decide whether the questionable provisions were violative of the statute. The court of appeals held that *887all ambiguities were to be construed in favor of legality. Therefore, according to the court of appeals, all of the provisions which could reasonably be construed to comply with the statutory requirements were found to be in compliance..
The Walker and Nevels doctrine of presumed legality, as carried forward and applied to contracts governed by the Consumer Credit Code in the cases of Haley and Grant, has been erroneously utilized. The Walker and Nevels cases were decided many years before the enactment of the Consumer Credit Code and were based upon the common law of usury. The Consumer Credit Code contains an express declaration of legislative intent. The declaration of intent includes the following language:
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(3) Credit abuses now existing in our State stem from the fact that many types of credit transactions are not now subject to effective public regulation and control and the penalties imposed for usury do not provide effective or workable safeguards in this vital area of economic activity.
(4) ... These unregulated practices bring great social and economic hardship to many citizens of our State. They impose intolerable burdens on those segments of our society which can least afford to bear them — the uneducated, the unsophisticated, the poor and the elderly.
(5) These facts conclusively indicate a need for a comprehensive code of legislation to ... regulate credit sales and services ... and to provide firm and effective penalties for usury and other prohibited practices. Declaration of Legislative Intent, Texas Laws 1967, Chapter 274, Section 1, at 608. Texas Revised Civil Statutes Annotated, Volume 15, pp. 1-2 (Vernon 1971). (Emphasis added).
In Southwestern Inv. Co. v. Mannix, 557 S.W.2d 755 (Tex.1977), this court recognized the legislature’s intent and recognized the burden it placed upon creditors. This court wrote:
... [t]he legislative pronouncements concerning the form and contents of the retail installment contract must be construed as imposing duties on the seller, since it is the conduct of the seller which the Legislature sought to regulate. 557 S.W.2d at 764. (Emphasis by the court) [quoting from Mitchell Motors, Inc. v. Bell, 528 S.W.2d 856 (Tex.Civ.App.—San Antonio 1974, writ ref'd n.r.e.) ].
In Knight v. International Harvester Credit Corp., 627 S.W.2d 382, 388 (Tex.1982), we recognized that "... ambiguities in legislation of this type must be liberally construed, ...” and, in Jim Walter Homes, Inc. v. Schuenemann, 668 S.W.2d 324, 332 (Tex.1984), we expressly refused to adopt a stricter construction against a finding of usury under the Consumer Credit Code. We stated that “... we are obliged to construe the Credit Code in a manner that comports with legislative intent and furthers the purposes of the statute.” Although we stated that we continue to adhere to the rule “that a contract which is alleged to be usurious on the ground that it calls for the collection of unearned interest is to be construed as complying with the law, if it is reasonably susceptible of such an interpretation,” we did not address the question of whether a term in the contract that is not relevant to a determination of usury should enjoy the same standard of construction.
We hold that there is no reason to presume the legality of terms and provisions of a contract which are required or prohibited by the Consumer Credit Code and which are not relevant to a finding of usury. We believe that this holding will best comport with the clearly enunciated legislative intent and the previous pronouncements of this court. To the extent that the Grant and Haley cases and their progeny conflict with this decision, they are disapproved.
We will therefore analyze the first of the contractual provisions at issue. Unlike the *888court of appeals, however, we will not presume the legality of the provision.
Gonzalez has alleged four violations of the statute. One of the alleged violations concerns the following provision:
Further, in any such event [default], seller or any sheriff or other officer of the law may take immediate possession of said property without demand, including any equipment or accessories thereto; and for this purpose seller may enter upon the premises where said property may be and remove same. (Emphasis added).
Article 5069-7.07(3) stated at the time that the contract was signed, that:
No retail installment contract ... shall (3) authorize the seller or holder or other person acting on his behalf to enter upon the buyer’s premises unlawfully or to commit any breach of the peace in the repossession of a motor vehicle.
Gainan’s contends that this contract provision merely authorizes a legal, peaceable entry to repossess the vehicle. It argues that this requirement of legality is implicit in the contract provision. Gainan’s also argues that TEX.BUS. & COM.CODE § 9.503 (Vernon Supp.1984) would control. Section 9.503 states that “in taking possession a secured party may proceed without judicial process if this can be done without breach of peace _” (Emphasis added). Gainan’s argues that this requirement of legality was incorporated in the clause and served to limit Gainan’s right of repossession.
This argument, however, ignores the requirement in the Code that the contract itself not authorize a trespass. As we stated in Mannix, 557 S.W.2d at 763, with regard to another section of the statute:
The presence of such a clause in a retail installment contract would deceive the very individuals the Legislature intended to protect; namely, ‘the uneducated, the poor and the elderly' into believing that their creditors could, with the law’s blessing, forcibly enter their homes at any time of the day or night and remove their goods without any concern for damages to the debtor’s real property. Accordingly, the Legislature must have intended for Article 5069-6.05 to impose a duty upon the creditor not to include such an unconscionable provision in the installment contract.
Gainan’s also argues that Martens v. General Motors Acceptance Corp., 584 S.W.2d 941 (Tex.Civ.App.—Dallas 1979, no writ) is authority that such a provision is not violative of the Consumer Credit Code. Martens involved an alleged violation of art. 5069-7.07(4), prohibiting a waiver of the buyer’s rights of action for illegal acts committed in collection or repossession. The present case involves a violation of art. 5069-7.07(3), which expressly prohibits an authorization of trespass. Although the contract provision in question in Martens was virtually identical to the provision at issue here, it was not alleged in that case that the provision violated art. 5069-7.07(3). Therefore the Martens court never addressed the question presently before us.
Similarly, the cases cited by the court of appeals are not applicable: Charlie Hillard, Inc. v. Heath, 624 S.W.2d 758 (Tex.App.—Fort Worth 1981, no writ); Dub Shaw Ford, Inc. v. Jackson, 622 S.W.2d 664 (Tex.App.—Fort Worth 1981, no writ); and Woolard v. Texas Motors, Inc., 616 S.W.2d 706 (Tex.Civ.App.—Fort Worth 1981, no writ). As recognized by the court of appeals below, all of these cases involved contract provisions which included the phrase “with free right of entry.” In Woolard, the court stated, “had the clause simply read: ‘Seller shall have the right to repossess the property wherever the same shall be found’ we would be inclined to find an unlawful purpose.” 616 S.W.2d at 709. It is unnecessary for us to address the question of whether the “free right of entry” phrase constitutes a term of limitation so as to avoid an authorization of trespass since neither this nor any other similar *889phrase is found in the contract provision at issue here.
We hold that the provision of the contract discussed above violates the statute. Our decision in this case does not conflict with our recent decision to refuse, with the notation “no reversible error,” the writ in Hinojosa v. Castellow Chevrolet Oldsmobile, Inc., 678 S.W.2d 707 (Tex.App.—Corpus Christi 1984, writ ref’d n.r.e.). The only point before us in that case concerned whether or not a provision requiring physical damage insurance was printed conspicuously in the contract as mandated by the Code. To the extent that the remainder of the court of appeals’ opinion in Hinojosa conflicts with this opinion it is disapproved.
Because we hold that the above provision of the contract is violative of art. 5069-7.-07(3), we find it unnecessary to discuss Gonzalez’ other points concerning different provisions of the contract. A single violation of the Code will trigger the penalties under § 8.01. Zapata v. Ford Motor Credit Co., 615 S.W.2d 198 (Tex.1981).
We reverse the judgment of the court of appeals and remand this cause to the trial court for a determination of damages and attorney’s fees.
McGEE, J., dissents with opinion in which GONZALEZ, J., joins.