Court Opinion

ID: 35292
Source: CourtListenerOpinion
Date Created: 2010-04-25 19:26:21+00
Date Added: 2024-06-11T17:13:24.269095
License: Public Domain

United States Court of Appeals
                                                                              Fifth Circuit
                                                                            F I L E D
                            UNITED STATES COURT OF APPEALS                   May 10, 2004
                                     FIFTH CIRCUIT
                                                                       Charles R. Fulbruge III
                                                                               Clerk
                                       No. 03-20811

                             PARKCHESTER HOLDINGS, INC.,

                  Plaintiff, Counter Defendant, Appellant-Cross-Appellee,

                                            versus

                     GE LIFE AND ANNUITY ASSURANCE COMPANY,

                  Defendant, Counter Claimant, Appellee-Cross-Appellant.

                  Appeal from the United States District Court
                       for the Southern District of Texas
                                  (H-03-CV-762)

Before BARKSDALE, EMILIO M. GARZA, and STEWART, Circuit Judges.

PER CURIAM:*

       Parkchester Holdings, Inc. executed a promisory note in favor

of GE Life and Annuity Assurance Company for $1,675,000.00, with

interest at eight percent per annum, payable monthly for 180

months.            The    note   contained      a    prepayment   penalty    clause.

Parkchester repaid its obligation prior to the maturity date of the

note       and,    pursuant      to   the   prepayment    clause,   paid    GE   Life

$267,236.07.             Parkchester then filed this action in Texas state

       *
      Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
court,    claiming   the   prepayment   was    an    unreasonable   and

unenforceable penalty. GE Life removed the action to federal court

and counterclaimed for a declaratory judgment that the prepayment

was enforceable and for attorney’s fees pursuant to the note and

corresponding deed of trust.    Pursuant to GE Life’s FED. R. CIV. P.

12(b)(6) motion, the district court dismissed Parkchester’s claim

and entered final judgment, referencing the reasons stated in its

order of dismissal; but, in so doing, it did not rule on GE Life’s

claims.

     Under Texas law, there is no merit to the contention that a

prepayment of the type at issue must be reasonable; therefore,

Parkchester’s claim was properly dismissed.         See, e.g., TEX. FIN.

CODE ANN. § 306.005 (Vernon 2002) (“A creditor and an obligor may

agree to a prepayment penalty in a loan subject to this chapter.”);

Bearden v. Tarrant Sav. Ass’n, 643 S.W.2d 247, 249 (Tex. App.—Fort

Worth 1982, writ ref’d n.r.e.) (holding, under Texas law, no

requirement for prepayment penalty to be reasonable).        Presumably

through oversight, the district court did not address GE Life’s

claims for declaratory judgment and attorney’s fees.

     Accordingly, dismissal of Parkchester’s claim is AFFIRMED; the

remainder of the judgment is VACATED; and this matter is REMANDED

for consideration of GE Life’s claims.        Parkchester’s motion to

certify the reasonableness vel non issue to the Texas Supreme Court

is DENIED.

                                  2
MOTION TO CERTIFY DENIED; AFFIRMED IN PART;
               VACATED AND REMANDED IN PART

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