Court Opinion

ID: 9675455
Source: CourtListenerOpinion
Date Created: 2023-08-24 04:54:26.416565+00
Date Added: 2024-06-11T18:16:34.746292
License: Public Domain

ON MOTION FOR REHEARING
In reviewing our opinion on motion for rehearing the court has determined that certain clarifications and modifications should be made in the construction of Article 5069-6.04, Texas Revised Civil Statutes Annotated. In construing paragraph (5) of Article 5069-6.04 the court held that where a retail installment contract requires insurance the agreement must specify the “kind, coverage, term and amount of premium” for each insurance coverage required. In so holding the court did not distinguish between buyer-provided and seller-procured insurance. After reconsidering Article 5069-6.04 the court is of the opinion that this limited but necessary distinction should be made.
The meaning of Article 5069-6.04(5) is ambiguous because the antecedent for the term “such insurance” is unclear. In order to properly construe paragraph (5) in accordance with legislative intent it is necessary to read the statute as a whole rather than isolated portions thereof. Calvert v. Texas Pipe Line Company, 517 S.W.2d 777 (Tex.1974). Article 5069-6.04 provides as follows:
“(1) On any retail installment contract or retail charge agreement made under the authority of this Chapter, a seller or holder may request or require a buyer to provide credit life insurance and credit health and accident insurance as additional protection for such contract or agreement and include the cost of such insurance as a separate charge in such contract or agreement. Only one policy of life insurance and one policy of health and accident insurance on any one buyer *767may be in force with respect to any one contract or agreement at any one time. “(2) A seller or holder may, in addition, request or require a buyer to insure property involved in such contract or agreement, made under the authority of this Chapter, and include the cost of such insurance as a separate charge in such contract or agreement. Such insurance and the premiums or charges thereon shall bear a reasonable relationship to the amount, term and conditions of the contract or agreement, the existing hazards or risk of loss, damage or destruction, and shall not provide for unusual or exceptional risks or coverages which are not ordinarily included in policies issued to the general public.
“(3) When insurance is required in connection with such a contract or agreement made under this Chapter, the seller or holder shall furnish the buyer a statement which shall clearly and conspicuously state that insurance is requested or required in connection with the contract, and that the buyer shall have the option of furnishing the required insurance either through existing policies of insurance owned or controlled by him or of procuring and furnishing equivalent insurance coverages through any insurance company authorized to transact business in Texas. In addition when any requested or required insurance is sold or procured by the seller or holder at a premium or rate of charge not fixed or approved by the State Board of Insurance, the seller or holder shall include such fact in the foregoing statement, and the buyer shall have the option for a period of five days from the date of the contract or agreement of furnishing the required insurance coverage either through existing policies of insurance owned or controlled by him or of procuring and furnishing equivalent insurance coverage through any insurance company authorized to transact business in Texas. Such statement or statements may be made in conjunction with or as part of the retail installment contract required by Article 6.02 or the retail charge agreement required by Article 6.03, respectively. “(4) Such insurance shall be written at lawful rates and in accordance with the provisions of the Texas Insurance Code by a company authorized to do business in this State.
“(5) The contract or agreement must state the kind, coverage, term and amount of premium for such insurance.
“(6) The buyer shall have the privilege at the time of execution of the contract or agreement of purchasing such insurance from an agent or broker of his own selection and of selecting an insurance company acceptable to the seller or holder, but, in such case the inclusion of the insurance premium in the contract or agreement shall be optional with the seller or holder.
“(7) If the insurance is to be procured by the seller or holder, he shall, within forty-five days after delivery of the goods or furnishing of the services under the contract or agreement, deliver, mail, or cause to be mailed to the buyer at his address as specified in the contract or agreement, a policy, or policies, or certificates of insurance, clearly setting forth the amount of the premium, the kind or kinds of insurance, the coverages and all the terms, options, limitations, restrictions and conditions of the policy or policies of insurance.
“(8) If the insurance is cancelled, adjusted or terminated for any reason, the refund for unearned insurance premiums received by the seller or the holder shall be credited to the final maturing installments of the retail installment contract or retail charge agreement, and the remaining balance of the unearned insurance premiums shall be refunded to the buyer; provided, however, that no cash refund shall be required if the amount thereof is less than One Dollar.
“(9) Any gain, or advantage to the seller or holder, or any employee, officer, director, agent, general agent, affiliate or associate from such insurance or its provision or sale shall not be considered as an additional charge or further time price differential in connection with any con*768tract or agreement made under this Chapter except as specifically provided herein.”
The term “such insurance” is used in paragraphs (1), (2), (4), (5), (6), and (9). No ambiguity is created by the use of the term in paragraphs (1) and (2); under normal grammatical rules of construction, the antecedent is provided internally within each paragraph and refers to the types of insurance described in that paragraph. Therefore, “such insurance” refers to credit life and/or health and accident insurance in paragraph (1) and refers to credit property insurance in paragraph (2).
The ambiguity in the statute results from the use of the phrase “such insurance” in paragraphs (4), (5), (6), and (9). None of these paragraphs provide an antecedent internally. As all of these paragraphs are part of Article 5069-6.04, it is logical to conclude that all four paragraphs have the same antecedent; therefore, the antecedent is provided somewhere within paragraphs (1), (2), or (8). Upon analysis, paragraphs (1) and (2) are the only paragraphs which describe types of insurance. Paragraph (1) specifies that credit life and/or health and accident insurance may be required in a retail charge or installment agreement and the cost may be included therein. Paragraph (2) outlines similar specifications concerning credit property insurance. On the other hand, the principal purpose of paragraph (3) is to establish the burden of disclosure placed on the seller or holder,1 who requires insurance in a retail charge or installment contract. The entire focus of paragraph (3) is on the contents of an insurance requirement clause in the contract. Paragraph (3) requires: that the disclosure be in clear and conspicuous language; that it provide an option allowing the buyer to obtain insurance from another source or to provide it from existing policies; and that it state that rates and premiums are not set or approved by the State Board of Insurance, if applicable. Therefore, a review of the initial three paragraphs of Article 5069-6.04 reveals that the only paragraphs which deal directly and purposefully to define insurance are paragraphs (1) and (2). Accordingly, the most appropriate and reasonable antecedent for the phrase “such insurance” is jointly provided by paragraphs (1) and (2).
Having determined that paragraphs (1) and (2) provide the antecedent for “such insurance,” the court must determine what insurance is described by these paragraphs. Paragraph (1) deals specifically with credit life and/or health and accident insurance which is required by the seller and for which a charge is included in the contract. Paragraph (2) concerns property insurance which is required by the seller and for which a charge is included in the contract. Including the cost in the contract indicates that the seller has sold the insurance policy to the buyer, that the seller is financing the insurance acquired by the buyer from other sources, or that the seller in some manner has been involved in the procurement of the insurance coverage. Therefore, both paragraphs (1) and (2) refer strictly to seller-procured insurance. This type of insurance is distinguishable from buyer-provided insurance which is available as a mandatory option under paragraph (6); whereby the buyer may provide insurance coverage from existing policies or obtain insurance from another source. Therefore, it is the opinion of the court that “such insurance” refers only to seller-procured insurance. However, this court construes the term “seller-procured insurance” to include any insurance coverage whereby the seller becomes involved in the insurance acquisition process or directly or indirectly benefits from such insurance coverage. This involvement may be accomplished by actual sales of insurance policies, referrals to insurance agencies, re*769ceipts of direct or hidden commissions, fi-nancings of insurance purchases from other sources, or by other similar devices. Only that insurance obtained totally independent of the seller and from which the seller will obtain no direct or indirect benefit from the procuring of the required insurance shall be considered “buyer-provided.”
In construing Article 5069-6.04 the court must determine if its construction is reasonable and comports with the legislative intent. McKinney v. Blankenship, 154 Tex. 632, 282 S.W.2d 691 (1955); Anderson v. Penix, 138 Tex. 596, 161 S.W.2d 455 (1942). As noted in its Declaration of Legislative Intent,2 the Texas Consumer Credit Code was intended to prevent abusive credit practices and deceptive trade practices. Abuse in the area of insurance requirements in credit transactions has been prevalent in at least two areas in the past: (1) the practice of charging for insurance coverage which the buyer had no notice he was buying; and (2) the practice of requiring insurance and selling it at exorbitant prices without giving the buyer the opportunity to acquire better terms.3 These abuses clearly arise when the insurance is procured, as broadly construed herein, by the seller; therefore, the present construction of Article 5069-6.04 would prevent the occurrence of either abuse in the future. Furthermore, the determination that “such insurance” excludes buyer-provided insurance reaches a reasonable result. Such construction avoids the impractical result of a seller having to monitor the terms, premiums, and coverage of new or existing policies purchased or owned by the buyer where such information is more readily available to the buyer than the seller.
Therefore, the statutory language, as well as the legislative intent, supports the interpretation of “such insurance” to include only life, health and accident, and/or property insurance which is seller-procured. Having determined the proper interpretation of “such insurance,” the court must now reconsider its construction of Article 5069-6.04(5) as it relates to the retail installment contract assigned to Southwestern Investment Company.
Article 5069-6.04(5) requires disclosure of the kind, coverage, term, and amount of premium of seller-procured insurance. Therefore, any time the seller becomes involved in the insurance acquisition process or directly or indirectly benefits from such insurance coverage, these paragraph (5) provisions must be included in the contract. In the instant case Southwestern Investment Company required Mannix to purchase fire insurance in section 5 of the installment contract, which reads:
“5. The Debtor agrees to insure such Goods against loss by fire in favor of the Secured Party, its successors or assigns.”
There are no marks to indicate that this provision was to be deleted; however, no separate identified charges were listed in the contract for property insurance. Therefore, from the facts and documents before this court it appears that the seller was not involved in the insurance acquisition process nor did the seller benefit directly or indirectly from the insurance coverage. Such findings support the conclusion that the property insurance was not seller-procured; therefore, compliance with Article 5069-6.-04(5) was not required.
This modification of the prior opinion of this court does not change the result. The parties stipulated that damages would be paid if there existed one violation of state law and one violation of federal law. The holding in the prior opinion is not modified with respect to the holding that Southwestern Investment Company violated Article 5069-6.05 in waiving the buyer’s cause of action for any tort committed during repossession; nor is the holding modified with respect to the finding that Southwestern Investment Company violated Section 226.8 *770of Regulation Z, 12 C.P.R., Section 226.1, et seq., by not disclosing the security interest in after-acquired property on the front of the credit agreement. Having found one violation of state law and one violation of federal law, the judgment of the court of civil appeals is affirmed.
The motion for rehearing is overruled.

. Article 5069-6.04 consistently refers to “seller or holder” in paragraphs (1), (2), (3), (6), (7), (8), and (9). This repeated utilization of the terms obviously demonstrates the intention of the Legislature to include all sellers, holders, or creditors involved in retail installment contracts or retail charge agreements. Accordingly, in this writing the words “seller” and “seller-procured” are to be understood to include “holder” and “holder-procured,” as well as “creditor” and “creditor-procured.”

. Declaration of Legislative Intent, 15 Tex.Rev. Civ.Stats.Ann., at 1-2.

. Texas Finance Commission, Report to the 60th Legislature on Consumer Credit Abuses in Texas, at 39-41; Davis, Does the Texas Credit Insurance Act “Legalize" Usury?, 11 Sw.L.J. 139 (1957).