*1 INVESTMENT SOUTHWESTERN Petitioner, COMPANY,
v. MANNIX, Respondent. W.
Robert B-6337.
No. Texas.
Supreme Court 27, 1977.
July 2,
Rehearing Nov. Denied
757 *2 Act,
the federal Truth-In-Lending 15 U.S. C.A., 1601, et seq., Section Z, C.P.R., 226.1, et seq.2 SIC counterclaimed for the monthly payments, $499.20, totaling which would become due under the retail installment contract. The *3 trial court found six violations of state law and five violations of federal law and granted Mannix’ motion for summary judg- ment. SIC’s counterclaim was dismissed. The trial court awarded Mannix as $731.68 $1,000 statutory damages plus attorneys’ fees. appealed SIC the summary judgment it, against rendered but not the dismissal of its counterclaim. The court of civil appeals affirmed the summary judgment. 540 S.W.2d 747. judgments We affirm the the trial court and the court appeals. of civil $1,181.04 worth of purchased Mannix Com- Banner Sales from equipment stereo Clayton Stubblefield, Clayton, & Cleo G. made a cash He Antonio. pany in San Jr., Amarillo, petitioner. for executed a payment $381.04 down the re- contract for sales installment retail Kelleher, Loveland, Kunczt & Robert M. agreed to Mannix maining $800. balance Austin, Kunczt Boyle, and James G. $15.48, insurance for life credit purchase respondent. financed the total amount increased which charge on finance The to $815.48. an annual $182.92,representing was $815.48 JOHNSON, D. Justice. SAM bring- percent and of 20.24 rate percentage payments twenty-four ing the total Application writ of error was made to paid was to be total The $998.40 to $998.40. court, per and we handed down cu- installments monthly twenty-four gave which opinion riam our reason for 22, February each, commencing on $41.60 refusing the writ with the “no notation to sales contract assigned Banner 1974. Tex.Sup.Ct.J. reversible error.” to form contract SIC, provided which 5, 1977). (March rehearing, On motion for proce- a normal it is granted, Apparently, writ of error was per and the Banner. prior opinion curiam contact SIC withdrawn. The follow- Banner dure for ing opinion is substituted. to a consumer Banner goods sale of from purchase agrees If SIC as Mannix. Mannix, debtor, Robert as sued South- by the executed contract Banner Company western Investment as as- [SIC] the form with Banner sumer, supplies signee of a retail installment contract which (in this case consumer contract allegedly contained nine violations of the portions pertinent Mannix) sign. Code, is to Texas Consumer Credit Texas Re- following on set out Annotated, are vised Civil Statutes of this 5069-6.01, seq.,1 et and seven violations of page: regula- seq., originally 5069-6.01, herein to federal laws 2. References et enacted
1. Article 1968, 1, pertain January effective as of the date tions to those on and effective in 1967 contract, 23, January 1974. May indi- Unless effective amended otherwise, Arti- herein to the references cated seq., pertain the statute et. cle in 1967. enacted *4 Subsequent to the execution of this con- charge only “on each installment in default tract Mannix instituted litigation. ..” days than ten of more period for a *5 When SIC filed its alleging counterclaim 3. The requirement Mannix, presently owing by due and “[t]here buyer, pay any for damages to real estate Cross-Defendant on such contract [Mannix] due to repossession and the provision which $499.20, the sum of exclusive of attorneys allowed repossession forceable violated Ar- fees,” Mannix was not and had not been ticle 5069-6.05(4), provides which in perti- payments. behind in his From the record it nent part that “no retail installment appear does not that Mannix was ever late tract or retail charge agreement shall: payments. in his . . (4) . Provide for a waiver of the buyer’s rights of action against the seller or eleven The trial court found a total of holder or person other acting therefor applicable violations of the law. The trial any illegal act committed in the . following provisions court held the of the repossession goods; of . . .” Texas law: contract violated 4. The deduction of unpaid delinquency charges from any refund of unearned inter- pur- requirement 1. The that Mannix upon est prepayment did not comply with with comply chase fire insurance did not 5069-6.02(10), Article which allows the buy- 5069-6.02(5)(d), requires Article which er to prepay in full any at time before the any contract to disclose retail installment final due date and which sets forth the insurance, charge included for separate formula for the refund of the unearned insurance and the specifying type interest upon such prepayment. with Article 5069-6.- coverage, terms of or 5. The deduction of any from $12 refund 04, require which allows the creditor to of unearned upon interest prepayment also sold, which property to insure but violated Article 5069-6.02(10), and this de- kind, requires the contract to “state the duction was not by authorized Article 5069- premium for coverage, term and amount of 6.02(9)(e), which provides minimum that the such insurance.” time-price differential, e., interest, i. which may be charged on the retail installment delinquency provision 2. The contract in the instant ease would be $12. 5069-6.02(11), comply with Article failed to to include in the which allows the creditor 6. The acceleration of the unearned in- terest, provision delinquency for a if there was a prior default date, comply 8(a)(1) did not with the final due 226.8(b)(4), Section which re- the refund of unearned interest formula for quire under the circumstances of the in- 5069-6.02(10). in Article contained stant penalties case disclosure of by default debtor on “the same side of addition, court, held the con- The trial page place and above the for the cus- the following federal law in tract violated signature.” tomer’s manner: charge” 11.The terms “finance “an- placement provision 7. of the for a The nual percentage rate” printed were not property security after-acquired interest more conspicuously required than other ter- Z, 226.8(a)(1), Regulation violated Section minology in Regulation Z, violation of Sec- provides that disclosures under the 226.6(a). tion case required circumstances of the instant by 226.8(b)(5) Section shall be on “the same SIC appealed to the court of civil appeals place page of the and above the for the side urging each these findings eleven as a ” signature; . . customer’s . Section point of error. The court of civil appeals requires: “A 226.8(b)(5), pertinent part, affirmed on the basis of three violations. description type or identification of Two violations of state law were found security held to be interest or retained the court of appeals: civil Article 5069-6.- acquired by the creditor connection or 02(11) 2, [point ten-day charge], late . . ..If with the extension credit 5069-6.02(10) 6, [point acceleration be after-acquired property subject will of unearned One violation of fed- interest]. interest, security or if other or future eral law was found court of civil may by any is or be secured indebtedness appeals: Z, Regulation 226.8(a)(1) Section clearly property, this fact shall set [point security disclosure of interest]. conjunction with description forth in appealed to court contending this there type security identification of the inter- were not violations of state or federal held, acquired.” est retained or law and raised the same points eleven error. prepayment penalty vio- $12 Z, 226:6(a), which lated At we juncture, dispo- note that our clearly, “made requires disclosures require sition of this case does a consid- *6 conspicuously, meaningful in se- [and] points all eration of eleven raised by SIC. Z, 226.8(a), quence,” Regulation and Section parties stipulated The damages that the in 226.8(b)(6), together re- and Section amount of and $731.68 reasonable attor- quire charge of “any penalty the disclosure $1,000 neys’ in fees the amount of were to imposed by creditor his may be awarded if there existed one violation of assignee of the of prepayment principal for one state law and violation of federal law.3 . ..” obligation . We also note SIC has not raised at in point proceedings these of description 9. of the inter- defense security The accidental and bona fide nor de- inadequate thereby and violated error est was Z, 226.8(b)(5). fense available to it because of its status as Regulation Section assignee an of the installment contract. right 10. The of creditor to acceler- determining meaning was in “In of stat- the installments not disclosed a ate Z, ute, with 226.- accordance Section the dominant consideration is to as- $182.92, stipulation charge] viola- reflects the fact that a the finance and one violation recovery statutory damages laws in a tion of Texas credit results of federal law in of results statutory damages $365.84, $731.68. of of the finance twice which totals charge and a violation of 5069-8.01] [Article seq., et which sets forth the recovery law in a of statuto- federal results for a remedies available violation of Texas ry damages of with a twice finance credit laws was amended in 1977 65th recovery $100 minimum and a maximum Legislature, Regular Session. The amendment $1,000 recovery of In § [15 1640]. U.S.C.A. damages does not affect awarded in the case, one law violation state results instant case. statutory damages $365.84 times [two
7fi1 “(5) These facts Legislature conclusively of the indicate a the intention certain comprehensive legisla- need for a code of is to be found . This intention clearly define interest and usury, tion to Jones the statute itself.” language of regulate lenders, loans classify to and and Associates, 539 and S.W.2d v. Del Andersen services, regulate to credit sales and equally “An funda- 348, (Tex.1976). place charges limitations on imposed in statutory construction is that rule of mental services, connection with such sales and must be Legislature the intention provide to for consumer education and Act, entire and not from the ascertained counseling, prohibit deceptive debt to thereof.” Calvert v. portions isolated from practices types trade in all of consumer 777, Company, Line Pipe Texas S.W.2d transactions, provide and to firm and ef- (Tex.1974). penalties usury pro- fective and other practices. hibited construing When the statutes involved in “(6) It is error, Legislature must not the intent of the points of this court SIC’s enacting this revision of Title 79 of the guided by these two rules of inter- only be Texas, 1925, Revised Civil Statutes purpose expressed by also the pretation, but protect the citizens of Texas from abusive Legislature following in the declaration deceptive practices being perpe- now of intent: by unscrupulous operators, trated lenders being “(1) Many citizens of our State are and vendors in both cash and credit con- types and abused in various victimized to implement sumer transactions and These prac- credit and cash transactions. II mandate of Section of Article XVI of great hardship upon the impose tices a the Constitution of Texas which autho- of our people State. Legislature classify rizes the loans and “(2) in its various forms is one of Credit lenders, lenders, regulate license and most essential and vital elements of define interest and fix maximum rates of interest, public and thus serve the inter- truly It can be said that economy. our people est of the of this State.” Declara- every every day. credit affects citizen Intent, Legislative tion of Texas Laws transactions in our amount Credit State 1967, 274, Chapter at 608. per year. billions dollars many Annotated, Texas Revised Civil Statutes “(3) existing Credit abuses now our 15, pp. (1971). Volume 1-2 many types stem from fact that State subject of credit transactions are not now OF VIOLATIONS STATE LAW public regulation to effective and control FIRE penalties imposed usury do outset, At urges INSURANCE: SIC provide effective or workable safe- not considered civil point court of ac- guards in this vital area of economic appeals. argues that there no tivity. *7 5069-6.02(5)(d) of Article violation or Arti- “(4) especially prevalent abuses are Such proper- cle both of which concern in the area of consumer transactions both ty insurance. Unscrupulous operators, and credit.
cash Clearly there was no violation of vendors, many lenders and of whom are 5069-6.02(5)(d). pertinent Article The text State, en- presently transient to our are provision is as that follows: many deceptive in abusive and gaged “The contract con- retail installment shall in the conduct of their business- practices following items: tain and disclose bring unregulated practices These es. hardship to great social and economic “(d) amount, aggregate any, The if in- many They impose citizens of our State. insurance, separate cluded for if a identi- segments on those intolerable burdens therefor, charge specifying fied is made which can least afford to bear society our type types or of insurance and the uneducated, unsophisticat- them —the . coverage; term or terms of . .” ed, elderly. [Emphasis poor and the added.]
762 “sepa-
The in issue indicates no coverage, contract premium term and amount of for . charge rate identified . . made” for such insurance.” The failure to complete insurance. Mannix was not property remaining Since 6 blanks Item does not in insurance, charged by way any property any SIC for indicate provision requir- that the ing purchase Mannix necessary it was not for the information to fire insurance was to required by 5069-6.02(5)(d) be deleted from Article to be the contract. contained the installment contract. 5069-6.02(5)(d)
Although Article was not
violated, provides Article was. It 5069-6.04 pertinent part:
“(2) . may A or holder . .re- seller
quest require buyer proper- a to insure or
ty in such involved [retail installment] agreement, or .
contract
“(3) required insurance is When agree-
nection with such a contract or Chapter,
ment made under this the seller
or shall furnish the holder state- conspicuous-
ment clearly which shall
ly requested state that insurance is or contract,
required in connection with the
. [and] “(5) agreement The contract or must nothing, Since there was to indicate that kind, coverage, state term and the provision on the back premium amount for such insurance.” not applied transaction, was to be [Emphasis added.] is, out, that it was not struck it was neces- for sary the contract to argues requirement kind, there was no state “the SIC coverage, premium term and amount of any insurance this retail installment under such insurance.” The failure to include this An examination of the instru- contract. information was a violation of Article 5069- refutes this contention. The follow- ment 6.04. See v. Savoy, McDonald 501 S.W.2d ing provision is contained on back (Tex.Civ.App. 400 Antonio no agrees installment contract: “5. The Debtor —San writ). against insure such Goods loss fire in Party, its successorsor favor Secured DELINQUENCY assigns.” There are no marks of kind CHARGE: next maintains provi- the contract to indicate that this on following provision contract, that the of its sion was to deleted. SIC maintains that agrees to pay that “Debtor a delinquency placement appears of what a zero charge and collection on each installment in opposite repro- in the blank Item [Item more,” days default for 10 does vio property duced below* refers to insurance 5069-6.02(11). late pertinent appears contract], on the front part 5069-6.02(11) of Article states complete remaining the failure to “holder of retail if installment contract in Item indicates no blanks contained provides it may delinquency so collect a contrary, To the it required. insurance on each installment in default for a opposite Item 6 is obvious this blank *8 period of than ten days more . . ..” comply be with SIC, was intended to used According phrase the contract “in 5069-6.02(5)(d), requires which the Article days equivalent default for 10 or more” is proper- the of to set forth cost statutory phrase creditor “in default for through acquired insurance when the . ten ty days.” more than Mannix creditor; 5069-6.04, argues provision not Article which re- that under the contract a “kind, penalty day. to set forth the can be assessed on the tenth quires the creditor
763 goods. “[njothing prevent The installment Since shall reject argument. We days,” Party removing proper- for 10 from have been “in default Secured must [the delinquency any premises may a from to which same plainly ty] means that breach,” attached, imposed expira- upon until the default or charge cannot be be could, forcefully enter Mannix’ days. example, In order to be “in default for tion of ten Furthermore, example, must have in this Man- days,” day 10 the tenth home. re- that a to absorb “the cost of payment; without the earliest nix would have passed injury” to his imposed pairs, any, any physical could under if of delinquency entry a result of such forceable day, the eleventh as the home as this contract is on a result of though injury Thus, even requires. the trial court and statute It is well- intentionally tortious conduct. appeals erroneously civil held the court of would not be provision such a settled that there was a violation of Article 5069-6.- First, of Texas. a by the courts enforced 02(11). during repossession peace of the breach WAIVER OF 9.503, Article Texas Business would violate Although the trial court RIGHTS: Second, such uncon- and Commerce Code.4 found a violation of Article by not be excused scionable conduct would appeals civil did not consider this court of in a form contract contained provision point pertinent part, third of error. In bargaining posi- resulting unequal from provides: 5069-6.05 Article Brecheen, v. Corporation Exxon tions. See “No retail installment contract or retail (Tex.1975); v. Crowell 526 519 S.W.2d charge agreement shall: Dallas, 495 City Housing Authority Tel. (Tex.1973); Western Union S.W.2d 887 “(4) for a waiver of the buyer’s Provide (1894); Linn, 7, 26 490 87 Tex. S.W. Co. v. rights against of action the seller or hold- Whitington, v. Compress Cameron Co. person acting er or other therefor for any jdgmt adopt- (Tex.Com.App.1926, S.W. 527 illegal act committed in the collection of Comment, of Uncon- ed); The Doctrine payments agree- under the contract or (1977). Baylor L.R. scionability, the repossession goods; ment or in have Thus, only must not Legislature unconscionable contract intended such an argues Mannix this Article is violated unenforceable, to be provision to continue by following provision contained on the who in- penalize any but creditor also to back of contract: in a re- prohibited provision cluded such a “Nothing prevent Party shall the Secured presence contract. The tail installment removing property] any from from [the clause in a retail installment such a attached, premises may to which same Leg- very individuals would deceive upon default or breach of this Retail In- “the protect; namely, islature intended to Security Agree- stallment and Contract poor uneducated, unsophisticated, thereof, any part ment or and the Debtor their believing that elderly” into agrees repairs, to sustain the cost of if blessing, could, with the law’s creditors any, any physical injury to the real any time of homes at forcibly enter their by estate caused such removal.” goods remove their day night or damages to the indeed without concern provision This contract does Accordingly, property. real buyer’s waive the cause of action for debtor’s have intended for repossession Legislature of the must tort committed in party agreed party at a has make it available to the secured otherwise a secured 4. “Unless party possession designated right place to be the secured on default to take reasonably parties. possession par- taking convenient to both a secured which is collateral. In may party ty may proceed judicial process if this a secured render without Without removal unusable, may dispose peace equipment of collat- breach of the can be done without security agree- premises may proceed action. If the on the debtor’s under eral may party provides [Emphasis re- the secured ment so 9.504.” added.] quire the collateral and debtor to assemble *9 764 impose duty upon to the credi- ulate.”
5069-6.05 a [Empha- S.W.2d at 860. . to include such an unconscionable tor not sis added.] in the contract. provision installment Snell, Assignee See Liability Under the that the has This same conclusion creditor Code, Texas Consumer Credit 8 St. Mary’s prepare to contract in duty a a accordance 696 (1977). L.J. of inclusion this pro- by Legis with the standards established the hibited item in the contract which waived by the lature Texas credit laws was reached right Mannix’ of action for certain illegal Motors, Bell, v. in Mitchell Inc. 528 S.W.2d might acts which be committed in the re- (Tex.Civ.App. Antonio writ — San possession goods subjected SIC to the n.r.e.). ref’d Bell involved a violation of penalties provided for in Article 5069-7.02(2), provided per which in provides pertinent which part: in that part “printed portion tinent the of the “Any person who violates this Subtitle vehicle . contract installment] [motor by . failing perform to any duty to equal eight-point shall be size at least specifically imposed by on any provi- him type.” The court reasoned: Subtitle, sion this shall forfeit to the legislative view of the clear to “In intent obligor twice the amount of interest or protect buyers by preventing abusive and price time . . differential . charged sellers, practices by and to deceptive received, attorneys’ reasonable by the objective regulating achieve court, fees the by provided fixed sellers, and activities of there can conduct there shall a penalty be no violation legislature be no doubt that the intended from results an accidental and goal by imposing its on to achieve duties [Emphasis bona fide error.” added.] who, legislative judg- persons DEDUCTION ment, had, law, guilty old under the been OF Thus, practices. and deceptive of abusive DELINQUENCY purpose can be no that the there doubt Under points CHARGES: four and impose Article 7.02 was duties on sell- to five, ers, who, argued persons provisions ordinary here, business, relating to did delinquency charges course as did defendant not vio- 5069-6.02(10). present ready Having a document late Article found buyer’s signature. law, state for the two violations of we do not need by imposition of rules presupposes points by control to consider these two peti- raised followed, be and it and standards to tioner SIC. be to
would nonsensical hold that ACCELERATION to legislature sought impose rules and UNEARNED OF by with- standards to be followed sellers point INTEREST: Because of er- imposing duty regulated on out six ror the court of considered civil with persons comply to such rules and appropriate we to appeals, feel it comment attempt regulate standards. To to on this item. persons conduct of a class of without provides: The contract “Should the imposing duties on members pay Debtor fail to such or any indebtedness attempt regulated class would an due, part thereof when then the entire un regulate regulating. It is obvious shall, paid balance at the Party’s Secured that, legislative attempt protect if the option, immediately pay become due and buyers motor vehicles is to credit able and shall interest thereafter bear at regarded anything as other than an ” rate, highest . . lawful . Mannix legislative pro- futility, exercise alleged by using phrase “entire concerning the form and nouncements provision unpaid contents of the balance” this provided retail installment contract must on the acceleration of the and of imposing principal be construed as duties seller, upon since it is conduct unearned interest default and that legislature sought reg- provision which the seller violated Article 5069-6.-
765 pertinent While it is clear that the court of civil 02(10). provides Article That buyer may prepay appeals holding was correct in that an ac- any “. . . part: any at unpaid upon time balance thereof celeration of unearned interest default full the and, if he final due date time before its in the instant case would be a violation of so, shall receive a refund unearned prohibits charging does Article which [of prepayment.” such interest, thereon for usurious Moore v. Sabine National interest] however, does not provision, Arthur, (Tex. The contract Bank of Port S.W.2d Instead, situation. prepayment n.r.e.), we Civ.App. concern writ ref’d —Austin to a default relates provision the contract this counterclaim need not decide whether has been Once the debt by buyer. attempt was indeed an by SIC asserted default, and it is then due upon accelerated as interest inasmuch accelerate unearned possible buyer, for the owing. It is not found two violations of already we have Mannix, point at in time. prepay state law. Therefore, 5069-6.02(10), reg- which FEDERAL LAW More- VIOLATIONS OF apply. does not prepayment, ulates over, clear, examination of the it is from an SECURITY contract, provision does that the above-cited point In its seventh INTEREST: un- the acceleration of contemplate Regu error maintains it did not violate SIC bal- “unpaid The term interest. earned 226.8, Z, provides which lation Section princi- obviously unpaid refers to the ance” pertinent part as follows: amount unpaid portion of the pal; “(a) ... all of the disclosures shall On originally was financed. which together be on either: made bal- “unpaid the term of the contract front “(1) The note or other instrument evi- First in the places. was used in two ance” dencing obligation on the side same CASH BALANCE OF phrase “UNPAID page place and above the for the $800, PRICE,” second in the which was and signature; . customer’s BALANCE —AMOUNT phrase “UNPAID $815.48, in- FINANCED,” which was “(b) subject ... In transaction the cost of credit price the cash cluded section, items, following to this as Thus, phrase “unpaid life insurance. applicable, shall be disclosed: pay- does not refer to the total of balance” not been made under the ments that have “(5) description A or identification of the contract, unpaid principal; to the but rather interest held or to be type any security payments” the “total of still the amount of the creditor in acquired by retained or interest. outstanding, less unearned credit, with the extension of connection language the contract does not Accordingly, will after-acquired property . If 5069-6.02(10) accelerating by violate Article interest, or if subject security be to the upon default. unearned interest may other or future indebtedness is or respect argument that there With this fact by any property, secured attempt by to accelerate the was an SIC clearly conjunction shall be set forth in interest, appeals the court of civil unearned description with the or identification of of a by held the assertion apparently held, security interest re- type Mannix, against which recited counterclaim acquired.” [Emphasis tained added.] owing by presently due “[t]here Z, Therefore, under on such contract Cross-Defendant [Mannix] 226.8, interest in after-ac- any security $499.20, attorneys exclusive of the sum of property and future indebtedness se- quired fees,” to an acceleration of equivalent was been goods cured sold must have the time the unearned interest. At or first disclosed in this case on front made, the sum of $499.20 counterclaim the document. The contract con- page interest. It should included unearned provisions regarding following tained the record in this case indicates noted that the retained security never been in default. interest SIC: Mannix has on the front of the docu- Having found one [Contained violation of federal good “For valuable law, ment.] we decline consider the points other security sideration and as for the To- *11 by petitioner of error raised relating to Payments, tal of hereby Debtor ac- federal law. knowledges, ratifies and confirms the The judgment of the court of civil ap- security existence a in interest the peals is affirmed. Goods described above to Secured Party, to have to and hold the same
forever, upon the condition that if BARROW, J., sitting. not promptly pays Debtor or to causes paid the aforesaid indebtedness and ON MOTION FOR REHEARING performs all of the terms and condi- tions at time hereof and in the In reviewing our opinion on motion for then, then, manner specified and only rehearing the court has determined that title and to ownership said Goods certain clarifications and modifications in shall vest and this Con- Debtor should be in made the construction of Arti- void, tract shall otherwise the se- cle Texas Revised Civil Statutes curity interest herein created to re- Annotated. In construing (5) paragraph main in full force.” Article 5069-6.04 the court held that where on the docu- back [Contained a retail installment requires contract insur- “Title and ownership of said ment.] ance agreement specify “kind, must Goods, security and the interest here- coverage, term and premium” amount of in in goods, created said shall remain for each coverage required. insurance In so in the its Party, successors or Secured holding the court did not distinguish be- all assigns, until sums due or which buyer-provided seller-procured tween and owing become due or under any insurance. After reconsidering Article clause shall of this contract have been 5069-6.04 the court opinion is in fully paid cash and all duties on the necessary this limited but distinction should part of the Debtor shall been have be made. fully performed, thereupon the and ownership pass title and shall meaning The 5069-6.04(5) of Article is security Debtor and the interest in ambiguous because the antecedent goods said shall terminate. The term “such insurance” is In unclear. order agrees any Debtor labor or mate- properly (5) to construe paragraph in ac- rial to shall furnished him be added legislative cordance with intent it neces- to, part and become a of the purchase sary to read the as a statute whole rather hereof, price and that title own- and portions than isolated thereof. Calvert v. ership to property herein shall not Pipe Company, Texas Line S.W.2d pass fully paid until same is (Tex.1974). provides Article 5069-6.04 as security interest created in the follows: said Goods shall be terminated “(1) On retail contract or any installment fully paid.” until the same is [Em- agreement charge retail made under the phasis added.] a or authority Chapter, seller hold- provision, This second which was contained buyer er may request require or a to document, on the back of the creates a provide credit life insurance and credit security after-acquired interest certain health and accident insurance as addition- property sold goods and uses under this protection agree- al for such contract or contract secure certain future indebted- ment cost and include the of such insur- clearly ness and was dis- required to be separate ance as a on the closed front of the document under Only tract or Z, Thus, agreement. policy one 226.8(b)(5). life insurance and correctly policy of civil vio- one of health appeals court found a regulation. of this federal on any buyer lation accident insurance one “(4) respect one shall be written at force with Such insurance may be in at one time. agreement or contract lawful rates and in accordance with addition, may, holder “(2) provisions A seller or of the Texas Insurance Code prop- insure require buyer a request or by company authorized to do business agree- or in such contract erty involved this State. ment, authority of this made under “(5) agreement The contract or must the cost of such and include Chapter, kind, coverage, state the term and separate charge in such as a insurance premium amount of for such insurance. insurance agreement. or Such “(6) privilege shall at have charges thereon premiums *12 the time of execution of the contract or relationship to the a reasonable shall bear agreement purchasing such insurance the con- amount, and conditions of term agent from an or broker of his own selec- existing hazards agreement, tract or tion selecting compa- and of an insurance destruction, loss, and damage or or risk of holder, but, ny acceptable to the seller or excep- or provide not for unusual shall coverages which are not risks or insurance tional such case inclusion of the policies included in issued ordinarily premium agreement in the contract or public. general optional shall be with the seller or holder. in con- required insurance is “(3) When “(7) procured by the insurance to be If is agree- a contract or nection with such holder, shall, forty- the seller or he within Chapter, the seller made under this ment days delivery goods five of the or after a state- buyer furnish the or holder shall furnishing of the services under the con- clearly conspicuous- shall and ment which deliver, mail, agreement, tract or or cause or requested that insurance is ly state at buyer to be mailed to his address contract, in connection with the required specified agreement, as in the contract or option buyer that the shall have and policies, certificates of in- policy, or or ei- furnishing required insurance surance, setting forth the amount clearly insur- through existing policies of ther or kinds of premium, kind by controlled him or of ance owned or insurance, coverages and all in- furnishing equivalent and procuring terms, limitations, restrictions options, coverages through any insurance surance policy policies and conditions of the or business company authorized to transact insurance. any request- In when in Texas. addition pro- or required insurance is sold
ed or cancelled, adjust- “(8) If the insurance is premi- the seller or holder at a by cured reason, terminated for the re- ed or ap- fixed or charge rate of um or premiums insurance fund for unearned Insurance, Board of proved by the State by received the seller or the holder shall such fact or holder shall include the seller maturing be credited to the final install- statement, foregoing and in the contract ments of the retail installment of five option period for a shall have charge agreement, and the re- or retail date of the contract or days from the maining balance of the unearned insur- furnishing required in- agreement of premiums ance shall be refunded to the existing through either coverage surance however, no buyer; provided, cash or controlled policies of insurance owned amount required refund shall be if the furnishing and procuring him or of thereof is less than Dollar. One coverage through insurance equivalent “(9) Any gain, to the seller advantage or company authorized any insurance officer, holder, or di- any employee, or state- in Texas. Such transact business rector, affiliate or agent, general agent, in con- may be made ment or statements provi- associate from insurance or its part of the retail junction with or as sion or as an sale shall not be considered by Article required installment charge price time additional or further agreement re- charge the retail 6.02 or 6.03, respectively. differential in connection with quired by tract agreement made under ums are not set or approved by the State Chapter except provided as specifically Insurance, Board of if applicable. There- herein.” fore, a review initial para- three graphs of Article 5069-6.04 reveals that the The term “such para- insurance” is used in only paragraphs which deal directly and graphs (1), (2), (4), (5), (6), (9). and No purposefully to para- define insurance are ambiguity is created use of term graphs (1) (2). and Accordingly, the most (1) (2); in paragraphs and under normal appropriate and reasonable antecedent for construction, grammatical rules of the ante- phrase “such insurance” is jointly pro- cedent is provided internally within each by paragraphs (1) vided (2). paragraph types and refers to the of insur- ance paragraph. described There- Having determined that paragraphs fore, “such insurance” refers to credit life (1) (2) provide the antecedent for “such and/or health and accident insurance in insurance,” the court must determine what paragraph (1) and refers to property credit is insurance described by these paragraphs. (2). paragraph insurance in Paragraph (1) deals specifically with credit life and/or health and accident ambiguity the statute re insurance is required by the seller and phrase sults from the use of the “such in which a (4), included paragraphs (5), (6), (9). surance” in contract. *13 Paragraph (2) concerns property paragraphs provide None of these an ante insurance is required by internally. all the seller para cedent As of these and for which a charge is in graphs are of included the part Article it is contract. Including the cost in the logical to all paragraphs conclude that four indicates antecedent; that the seller has sold therefore, the the policy have same insurance the to buyer, provided that the is financing antecedent is seller somewhere within acquired insurance (2), (8). by buyer paragraphs (1), or from Upon analysis, other sources, or that paragraphs (1) (2) and are seller in some only para manner has been in the procurement involved graphs types which describe of the of insurance. Therefore, insurance coverage. Paragraph (1) specifies para both that credit life (1) graphs (2) and refer strictly to and/or health and accident insurance seller- may procured type insurance. This of required in a insurance retail or installment distinguishable is from buyer-provided in agreement and the may cost be included surance which (2) mandatory is available as a Paragraph therein. outlines similar option paragraph (6); under concerning whereby specifications credit property in may hand, buyer provide coverage surance. insurance principal On other from policies (3) existing or purpose paragraph is to establish obtain insurance from another source. placed Therefore, burden disclosure on it is the seller or the opinion holder,1 requires who insurance the court that in retail “such insurance” refers charge or only installment seller-procured contract. entire to insurance. How paragraph (3) ever, focus of on the this contents of court construes the term “seller- requirement an insurance procured clause in the con insurance” to include any insur Paragraph (3) tract. requires: that coverage ance whereby seller becomes in disclosure be clear conspicuous and lan acquisition involved process insurance provide it guage; option that an allowing directly or or indirectly benefits from such buyer to obtain insurance from another coverage. insurance This may involvement provide or existing poli accomplished by source to it from actual sales of insurance cies; and it premi- policies, state that rates and agencies, referrals insurance re charge agreements. According or tracts ly, retail consistently 1. Article 5069-6.04 refers to “sell- writing in this (1), (3), the words “seller” “sell paragraphs (2), (6), (7), and er or holder” er-procured” are to be understood to include (8), (9). repeated and This utilization of the “holder-procured,” obviously “holder” and as well as terms demonstrates the intention of “creditor-procured.” “creditor” and Legislature sellers, holders, all include or involved in creditors retail installment
769 commissions, fi- insurance,” direct or hidden tion of “such ceipts of the court must other nancings purchases of insurance from now reconsider its construction of Article sources, Only other similar devices. or 5069-6.04(5) as it relates to the retail in- totally independent insurance obtained assigned stallment contract to Southwest- seller will of the seller and from which the ern Company. Investment direct or indirect benefit from the obtain no 5069-6.04(5)requires disclo required insurance shall be procuring kind, term, sure of the coverage, “buyer-provided.” considered premium seller-procured amount of in construing In Article 5069-6.04 Therefore, any surance. time the seller be determine if its construction the court must comes involved in the acquisition insurance comports with the legisla is reasonable and process directly or or indirectly benefits McKinney Blankenship, tive intent. v. 154 coverage, from such insurance these para 632, (1955); Tex. 282 S.W.2d Anderson (5) graph provisions must be included in the Penix, Tex. v. S.W.2d 455 contract. In the instant case Southwestern (1942). Leg As noted its Declaration of Company Investment required Mannix to Intent,2 islative the Texas Consumer Credit purchase fire insurance in section 5 of the was intended prevent Code abusive cred contract, installment which reads: practices deceptive practices. it trade “5. The agrees Debtor to insure such require Abuse in the area of insurance against Goods loss fire in favor of the ments in credit transactions has preva been Party, Secured its successors assigns.” (1) lent in at least two past: areas in the There are no marks to indicate that practice charging for insurance cov deleted; provision however, was to be no erage which the no he had notice was separate charges identified were listed (2) buying; practice requiring property contract for insurance. There- selling prices insurance and it at exorbitant fore, from the facts and documents before *14 giving buyer opportunity without the this appears court it that the seller was not acquire clearly better terms.3 These abuses involved in the acquisition insurance process procured, arise when the insurance is as nor did the seller benefit herein, seller; directly or indi- broadly construed therefore, rectly from the insurance present coverage. construction of Arti Such findings support prevent cle 5069-6.04 would the occurrence conclusion that Furthermore, property either in the future. insurance was not seller-procured; abuse therefore, compliance the determination that “such insurance” ex with Article 5069-6.- 04(5) buyer-provided required. cludes insurance reaches a was not reasonable result. construction avoids Such This modification of the prior opinion of result impractical having seller change court does not the result. The terms, premiums, coverage monitor the parties stipulated damages would be existing policies purchased of new or or paid if there existed one violation of state buyer owned where such information law and one of federal law. The violation readily is more available to the than holding prior opinion in the is not modified seller. respect holding with to the that Southwest- ern Therefore, Company Investment statutory language, as violated Article intent, waiving 5069-6.05 in legislative supports buyer’s cause of well as action for tort committed interpretation during repos- of “such insurance” to in- session; life, accident, holding nor is the only clude health and and/or modified with property seller-procured. respect finding insurance which is to the that Southwestern Having proper interpreta- determined the Investment Company violated 226.8 Section Texas, Intent, 39-41; Davis, Legislative 2. 15 Tex.Rev. at Does Declaration the Texas Credit Civ.Stats.Ann., Usury?, “Legalize" at 1-2. Act Insurance 11 Sw.L.J. (1957). Commission, Report Finance 3. Texas Legislature on Credit Abuses in 60th Consumer et Z, C.P.R., 226.1, Garner, Purdon, Vickers & John E. Vick- seq., disclosing security ers, Associates, interest by not Edwards & James R. Ed- front of property wards, Lubbock, on the after-acquired petitioners. Having found one agreement. the credit Clifford, Kidd, Sims & William A. Clif- one violation of of state law and violation Hubbert, Lubbock, Richard ford and S. law, judgment of the court of federal respondents. appeals is affirmed. civil rehearing is The motion for overruled. PER CURIAM. judgment
The trial court’s
in this person-
injury
al
suit absolved
Terry
co-defendant
McAfee
liability.
The Court of Civil
Appeals
judgment
reversed the
and re-
manded the case for new trial because of
instructing
jury
error in
on imminent
peril.
agree