Court Opinion

ID: 9764278
Source: CourtListenerOpinion
Date Created: 2023-08-29 03:17:54.034824+00
Date Added: 2024-06-11T07:29:55.409815
License: Public Domain

McGEE, Justice,
dissenting.
I dissent.
The only issue on appeal is whether, because of the technical language of the acceleration provisions, Jim Walter Homes, Inc. has contracted to collect time-price differential in excess of double the amount allowed by law in violation of section 8.02 of the Credit Code. The court of appeals affirmed the trial court’s award to the Schuenemanns of penalties totalling $64,-385.29. Of this amount, $38,546.00 represented damages for a violation of section 8.01. This portion of the judgment was not *334appealed. The effect of the lower court’s award was to give the Schuenemanns a free house.
This is a case in which there have essentially been no damages. The Schuene-manns allege the acceleration provisions in the contract would, under hypothetical circumstances, entitle Jim Walter Homes, Inc. to collect double the permissible finance charge. Jim Walter completed the house and the Schuenemanns moved in. The Schuenemanns are not in default. Jim Walter has never attempted or threatened to accelerate the note or the other contract documents in question. Jim Walter has not charged or attempted to collect from the Schuenemanns any unearned time-price differential.
In evaluating the issue before us, this court should bear in mind certain presumptions, the measure of proof applied when a penal statute is involved, and general rules of contract construction.
To begin with, there is a presumption that in contracting the parties intended to obey the law and intended a non-usurious contract. Smart v. Tower Land and Investment Co., 597 S.W.2d 333, 340 (Tex.1980); Walker v. Temple Trust Co., 124 Tex. 575, 80 S.W.2d 935, 936-37 (1935); Marble Sav. Bank v. Davis, 124 Tex. 560, 80 S.W.2d 298, 299 (1935). “[WJhen the contract by its terms, construed as a whole, is doubtful, or even susceptible to more than one reasonable construction, the court will adopt the construction which comports with legality.” Smart v. Tower Land and Investment Co., 597 S.W.2d 333, 340-41 (Tex.1980); W.E. Grace Manufacturing Co. v. Levin, 506 S.W.2d 580, 584 (Tex.1974); Shropshire v. Commerce Farm Credit Co., 120 Tex. 400, 30 S.W.2d 282, on rehearing, 120 Tex. 400, 39 S.W.2d 11, cert. denied, 284 U.S. 675, 52 S.Ct. 130, 76 L.Ed. 571 (1931); Haley v. Pagan Lewis Motors, Inc., 647 S.W.2d 319, 320 (Tex.App.—Corpus Christi 1983, writ ref’d n.r.e.).
The measure of proof is especially strong in Credit Code cases. The Texas Consumer Credit Code is penal in nature. It provides for severe penalties that include not only double the amount of interest or, in this case, time-price differential, but also provides for the forfeiture of the principal amount of the note and attorney’s fees. It is the practice and policy of Texas courts to strictly construe penal statutes. Texas Commerce Bank-Arlington v. Goldring, 665 S.W.2d 103 (Tex.1984); First State Bank of Bedford v. Miller, 563 S.W.2d 572, 577 (Tex.1978). “[TJhe more severe the penalty, the more rigid the construction.” Eubanks v. State, 203 S.W.2d 339, 340 (Tex.Civ.App.—Austin 1947, writ ref’d).
The majority relies heavily upon cases decided in the 1930’s involving a repealed usury statute. The penalties under the Credit Code (as amended in 1977) are much harsher than those involved under prior usury law. The severe nature of these penalties compels a more strict construction of section 8.02 than that given by courts interpreting the old usury statute.
The documents in question constitute the contract between the parties and must be construed together. Section 6.02(6)(a) of the Texas Consumer Credit Code expressly provides that a retail installment contract, such as the one before us, may be contained in more than one instrument. Tex. Rev.Civ.Stat.Ann. art. 5069(6)(a) (Vernon 1971). It is well settled that separate instruments, executed as a part of the same transaction and dealing with the same subject matter are to be construed together. See, e.g., Jones v. Kelley, 614 S.W.2d 95, 98 (Tex.1981); Miles v. Martin, 159 Tex. 336, 321 S.W.2d 62, 65 (1959); Veal v. Thomason, 138 Tex. 341, 159 S.W.2d 472, 475 (1942). This is true whether or not the documents make express reference to each other.
I realize it is not the lender’s subjective intent to charge usury that makes a loan usurious, but rather his intent to make the bargain that was made. Alamo Lumber Co. v. Gold, 661 S.W.2d 926 (Tex.1983). In determining what bargain the parties made, however, the intent of the parties, as expressed in their agreement, is of primary concern. Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983). It is well settled that the question of usury must be determined by a *335construction of all the documents constituting the loan transaction, interpreted as a whole and in the light of the attending circumstances. Nevels v. Harris, 129 Tex. 190, 102 S.W.2d 1046, 1048 (1937); Walker v. Temple Trust Co., 124 Tex. 575, 80 S.W.2d 935, 936 (1935); Spanish Village, Ltd. v. American Mortgage Co., 586 S.W.2d 195, 199 (Tex.Civ.App.—Tyler 1979, writ ref d n.r.e.). Moreover, the rule applies “even though the result be to modify one of the instruments which, standing alone, would have a different construction.” Rudes v. Field, 146 Tex. 133, 204 S.W.2d 5, 7 (1947).
In this case, the building contract expressly refers to the mechanics’ lien and note and requires that those documents provide for optional acceleration of “all of the remainder of said debt.” The provision in the building contract that “all of the remainder of said debt” can be accelerated upon default does not call for the collection of usurious interest. Southwestern Investment Co. v. Mannix, 557 S.W.2d 755, 765 (Tex.1977); Southland Life Insurance Co. v. Egan, 126 Tex. 160, 86 S.W.2d 722, 724 (1935), and does not call for the collection of unearned time-price differential under the Consumer Credit Code. Ford Motor Credit Co. v. McDaniel, 613 S.W.2d 513, 518 (Tex.App.—Corpus Christi 1981, writ ref’d n.r.e.).
In Clements v. Williams, 136 Tex. 97, 147 S.W.2d 769 (1941), we held a note to be usurious because it permitted the holder to “mature said note ...” upon default. We further held, however, that if the default maturity clause had provided for the maturity of “the debt,” the note would not be usurious. Id. at 769. The majority holds that the mere use of the words “of said note” in the note and lien make the entire transaction illegal. I disagree. This holding ignores the language in the building contract and note that “the remainder of said debt” and “the remainder of said installments” may be accelerated upon default. According to Clements, such language is legal and does not call for the collection of unearned interest in the event of default.
The decision in Belzung v. Capital Bank, 598 S.W.2d 14 (Tex.Civ.App.—Dallas 1980, writ ref’d n.r.e.) is on point and supports a legal construction of the documents before us. In Belzung, the documents before the court, consisting of two notes, each contained two acceleration provisions. The first acceleration clause provided for the acceleration of “the whole of this note” and is similar to the acceleration provisions in the note and lien involved here. That provision, standing alone, is susceptible to a usurious interpretation. Clements v. Williams, 136 Tex. 97, 147 S.W.2d 769, 769 (1941). The other provision called for the acceleration of “the indebtedness secured hereby” and is similar to the provision in the building contract involved here. That provision is susceptible to a legal interpretation. Southwestern Investment Company v. Mannix, 557 S.W.2d 755, 765 (Tex.1977). The Belzung court stated “the reasonable construction of each clause is diametrically opposed to the reasonable construction of the other.” Id. at 16. The court, citing our decision in Smart v. Tower Land and Investment Company, 597 S.W.2d at 333, held that since the contract, like the contract now before us, was susceptible to a legal interpretation, it was bound to adopt the construction which rendered the contracts legal. Id. Thus, although there is language in the documents that is susceptible to a construction that calls for the collection of unearned time-price differential, this language is not controlling.
The Schuenemanns claim the documents should not be construed together because the note was negotiable and could have been assigned to a holder in due course. This contention is without merit. First this controversy involves only the original parties to the documents. No holder in due course is involved. Second, the rule that several instruments executed as part of the same transaction will be read together applies equally when one of the instruments is a note. Texas State Bank of Austin v. Sharp, 506 S.W.2d 761, 763 (Tex.Civ.App.—Austin 1974, writ ref’d n.r.e.); B *336& B Pharmacy and Drug, Inc. v. Lake Air National Bank of Waco, 449 S.W.2d 340, 341 (Tex.Civ.App.—Waco 1969, writ dism’d) (loan agreement, note, and deed of trust, being in course of single transaction are to be considered as though they were a single instrument). This rule has specifically been applied in usury cases. Spanish Village, Ltd. v. American Mortgage Co., 586 S.W.2d 195, 199-200 (Tex.Civ.App.—Tyler 1979, writ ref’d n.r.e.) (contract documents consisting of note, deed of trust, Federal Housing Insurance Commitment, and various other documents when construed together were not usurious); Beavers v. Taylor, 434 S.W.2d 230, 231 (Tex.Civ.App.—Waco 1968, writ ref’d n.r. e.). I would hold that the rule allowing documents executed as part of the same transaction to be construed together applies equally when one of the instruments is a negotiable instrument, at least as between the original parties to the agreement.
The documents here at issue contain language that clearly does not call for the acceleration of unearned time-price differential. When construed together, they are at the very least susceptible to an interpretation that is legal and does not call for the acceleration of unearned time-price differential. It is that construction which this court should adopt.
I would reverse the award of penalties under section 8.02 and render judgment that the Schuenemanns take nothing under that section.
BARROW and KILGARLIN, JJ., join in this dissenting opinion.