In The
Court of Appeals
Sixth Appellate District of Texas at Texarkana
______________________________
No. 06-01-00067-CV ______________________________
JOHN BRECKENRIDGE, SHIRLEY BRECKENRIDGE, RICHARD HAAS, AND KAREN HAAS, Appellants
V.
NATIONSBANK OF TEXAS, N.A., Appellee
On Appeal from the County Court at Law No. 3 Harris County, Texas Trial Court No. 713,780
Before Cornelius, C.J., Grant and Ross, JJ. Opinion by Justice Ross
O P I N I O N
Nationsbank of Texas, N.A. sued John Breckenridge, Shirley Breckenridge, Richard Haas, and Karen Haas (Appellants) for damages arising from a breach of a retail installment contract for the sale of a mobile home, and for possession of the mobile home, which served as collateral under the contract. The Bank pled breach of contract by the Breckenridges and conversion by the Haases. The Breckenridges filed counterclaims against the Bank for violations of the Truth-in-Lending Act and the Texas Deceptive Trade Practices Act. (1) After a bench trial, the court rendered judgment in favor of the Bank against the Breckenridges jointly and severally for $68,638.39, prejudgment interest from September 5, 2000, to the end of the trial, attorney's fees, postjudgment interest, all costs incurred by the Bank, and the recovery by the Bank of the mobile home. The court rendered judgment in favor of the Bank against the Haases, ordering the Haases to immediately remove themselves from and quit the mobile home. The court rendered judgment in favor of the Bank on the claims of violations of the Truth-in-Lending Act. The court rendered judgment in favor of the Breckenridges against the Bank on their counterclaim under the Deceptive Trade Practices Act (DTPA) for forum abuse, awarding the Breckenridges $115.20 and $2,500.00 in attorney's fees. The Bank does not challenge the court's ruling on abuse of forum under the DTPA.
The Appellants allege three points of error. They first contend the trial court erred in denying their motion to dissolve a writ of sequestration. Second, the Appellants contend the trial court erred in granting judgment in favor of the Bank because the Breckenridges established all of their affirmative defenses: (a) presentment and demand, (b) notice of default and opportunity to cure, and (c) waiver of timely payment. Finally, the Appellants contend the trial court erred in finding the Bank did not violate the Truth-in-Lending Act.
The Bank is the assignee of a retail installment contract signed by the Breckenridges. The Breckenridges signed the contract as "joint purchasers" in March 1998 for the purchase of a mobile home from Victory Mobile Homes, a dealer located in Spring, Texas. The Breckenridges promised "to pay the Secured Party or its Assigns" in accordance with the terms of the contract. According to the testimony, the Breckenridges purchased the mobile home for the Haases, their daughter and son-in-law, and the Haases were to make the payments. Although there was no written agreement, Richard testified the agreement between the Haases and the Breckenridges was that the Breckenridges were "not going to pay a dime." The installment contract for the mobile home is not assumable, and neither of the Haases is a party to that contract. There is no evidence in the record that the Breckenridges ever made any monthly payments as provided in the contract.
From the beginning of the contract, the Appellants were continuously behind in their payments to the Bank. The first payment was due in April 1998. The Bank contacted the Breckenridges on May 7, 1998, regarding the April payment and was informed the Haases were to make payments. On May 7, 1998, the Bank contacted Richard, who said he would mail the payment that day. On May 21, 1998, the Bank again contacted the Breckenridges regarding the delinquent April payment. John again informed the Bank the Haases lived in the mobile home and were to make the payments. John gave the Bank the Haases' telephone number. Despite letters from the Bank regarding notice of default and the right to cure the default, the Appellants remained behind in payments until bringing the account current on September 23, 1998.
The Appellants made no more payments after curing the default in September 1998. Richard testified he has no recollection of making any payments after September 1998. The Bank left messages with Richard and the Breckenridges in November regarding the October payment. On December 2, 1998, the Bank informed the Breckenridges that the Haases had failed to return the Bank's calls, that the account would not be held any longer, and that satisfactory arrangements must be made by the next day or the matter would be referred out for repossession. On December 5, 1998, the Breckenridges reported to the Bank that the Haases were not returning their calls, either. They told the Bank to proceed with posting an eviction notice and picking up the mobile home. The Haases never vacated the mobile home, and the Bank sued to recover the debt and for possession of the mobile home.
We first address the Appellants' second point of error, as it is dispositive of their first point. In connection with their second point, the Appellants complain the trial court erred in failing to file additional findings of fact and conclusions of law in response to their properly and timely requested additional findings of facts and conclusions of law on the elements of their affirmative defenses. We found that the Appellants were correct and abated the case to the trial court to make the requested findings. (2) The trial court filed these additional findings of facts and conclusions of law, and we requested supplemental briefing from the parties as to these findings.
The Appellants contend the trial court erred in finding against them on their affirmative defenses. They contend the evidence is legally and factually insufficient to support the trial court's findings. The Appellants pled three affirmative defenses: (a) presentment and demand; (b) notice of default and opportunity to cure; and (c) waiver of timely payment. The Appellants had the burden of proof on their affirmative defenses. The appropriate challenge to a fact-finder's finding concerning an issue on which the complaining party had the burden of proof is either a matter of law point or a great weight and preponderance point. Raw Hide Oil & Gas, Inc. v. Maxus Exploration Co., 766 S.W.2d 264, 275-76 (Tex. App.-Amarillo 1988, writ denied).
In reviewing matter of law points, we must examine the record for evidence that supports the finding, ignoring any evidence to the contrary; and, if there is no evidence to support the finding, we must then examine the entire record to determine if a contrary proposition is established as a matter of law. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001). In reviewing great weight and preponderance points, we must examine the entire record to determine if there is some evidence to support the finding, and then determine whether, in light of the entire record, the finding is manifestly unjust. Traylor v. Goulding, 497 S.W.2d 944, 945 (Tex. 1973); In re King's Estate, 150 Tex. 662, 244 S.W.2d 660, 661 (1951).
The Appellants appeal the court's finding that the Breckenridges waived their right to presentment and demand by signing the retail installment contract as guarantors. John signed the contract as purchaser and guarantor, and Shirley signed as joint purchaser and joint guarantor. The trial court found in its conclusions of law the Breckenridges waived acceptance, presentment, demand, protest, notice of protest, notice of dishonor, and any other conditions of their liability by executing the guaranty portion of the contract. The guaranty provision of the contract includes the following language: "The undersigned consent to and waive . . . presentment, demand, protest, notice of protest, notice of dishonor and any other conditions to the liability of the undersigned under this guaranty."
The Appellants contend this language in the guaranty section of the contract does not mean the Breckenridges waived presentment and demand in their capacity as makers of the contract, contending that, if the Breckenridges waived any right to presentment and demand, it was as guarantors and not as makers. The Appellants contend a strict, narrow reading of the guarantor provision is required under Texas law because, in the construction of language in a contract, we ordinarily give the language its plain, grammatical meaning. Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 529 (Tex. 1987). Because the language states: "The undersigned consent to and waive . . . presentment, demand, protest, notice of protest, notice of dishonor and any other conditions to the liability of the undersigned under this guaranty," the Appellants contend this limits the waiver of the Breckenridges to their role as guarantors. There is no evidence the Breckenridges waived presentment and demand in their capacity as makers of the contract.
Nonetheless, the Bank sued the Breckenridges generally under the note, thereby suing them in both capacities, as makers and guarantors. As guarantors, the Breckenridges clearly waived their right to presentment and demand, as well as their other affirmative defenses. The contract provides, "The undersigned agrees to pay all amounts owing hereunder upon demand, without requiring any prior action or proceedings against the Purchasers or the Collateral." Because the Bank sued the Breckenridges in their capacity as guarantors, the trial court properly held the Breckenridges liable under the contract. The Appellants' second point of error is overruled.
Because the trial court properly found in favor of the Bank, and the judgment awards the Bank the mobile home, there is no need to address the Appellants' first point of error that the trial court wrongfully issued and should have dissolved the writ of sequestration.
In their third point of error, the Appellants contend the trial court erred in finding the Bank did not violate the Truth-in-Lending Act. The Appellants complained the trial court failed to file additional findings of fact and conclusions of law in response to their properly and timely requested additional findings of fact and conclusions of law on the elements of the Truth-in-Lending Act. We found the trial court should have filed these additional findings of fact and conclusions of law, and abated the case to the trial court to make the requested findings. The trial court filed these additional findings of fact and conclusions of law, and we requested supplemental briefing from the parties as to these findings.
The Appellants contend the trial court erred in finding the federal Truth-in-Lending Act does not apply to this case as a matter of law. The trial court held the contract evidences a transaction that is an "exempted transaction" as defined by Section 1603 of the Truth-in-Lending Act. (3) The Truth-in-Lending Act does not apply to "[c]redit transactions, other than those in which a security interest is or will be acquired in real property, or in personal property used or expected to be used as the principal dwelling of the consumer, in which the total amount financed exceeds $25,000." 15 U.S.C.A. § 1603(3) (West 1998). The Appellants contend the court need not reach the merits of this affirmative defense because the Bank has waived this defense by failing to plead it before trial.
The Appellants contend the exemption to the statute is like an affirmative defense that is waived if not affirmatively pled. However, the burden to show that the transaction falls within the Truth-in-Lending Act is on the Appellants in this case. In order to establish the creditor's liability under the Truth-in-Lending Act, the complaining party must show that the disputed transaction is the type of transaction covered by the Act. Katz v. Carte Blanche Corp., 496 F.2d 747, 751 (3d Cir. 1974). The Appellants point to United States v. First City Nat'l Bank, 386 U.S. 361, 366, 87 S. Ct. 1088, 18 L. Ed. 2d 151 (1967), and Fed. Trade Comm'n v. Morton Salt Co., 334 U.S. 37, 44-45, 68 S. Ct. 822, 92 L. Ed. 1196 (1948), in support of their contention the Bank had the burden of proof to show this transaction was exempt under the statute. These cases hold that the general rule is the party who claims the benefits of an exception to the prohibition of a statute bears the burden of proof. First City Nat'l Bank, 386 U.S. at 366; Morton Salt Co., 334 U.S. at 44-45. Both of these cases dealt with situations where the actions of the defendants were generally prohibited by law. First City National Bank involved the merger of two banks and whether they were exempt from prohibitions of merging under antitrust laws via an exemption. This is not a case in the Truth-in-Lending Act. As the more recent decision from the Third Circuit holds, the burden is on the plaintiff alleging violation of the Truth-in-Lending Act to show that the transaction is the type covered by the Act. Katz, 496 F.2d at 751. The court found the amount financed exceeds $25,000.00; the contract relates to personal property, not real property; and the Breckenridges affirmatively represented that the mobile home acquired was not to be their principal dwelling. The evidence proves the transaction qualifies as an exempt transaction under Section 1603(3).
We find the Bank did not have to plead the transaction's exemption as an affirmative defense and affirm the trial court's finding regarding the Truth-in-Lending Act. Because the Appellants did not attack the merits of the trial court's findings, we need not address whether the trial court's findings regarding the transaction were correct.
We affirm the judgment.
Donald R. Ross
Justice
Date Submitted: February 28, 2002
Date Decided: March 19, 2002
Publish
1. See 15 U.S.C.A. § 1601, et seq. (West 1998 & Supp. 2001); Tex. Bus. & Com. Code Ann. § 17.01, et seq. (Vernon 1987 & Supp. 2002).
2. See Buzbee v. Buzbee, 870 S.W.2d 335, 336 (Tex. App.-Waco 1994, no writ), where the same procedure was followed.
3. The following exemptions are provided in the Act:
(1) Credit transactions involving extensions of credit primarily for business, commercial, or agricultural purposes, or to government or governmental agencies or instrumentalities, or to organizations.
(2) Transactions in securities or commodities accounts by a broker-dealer registered with the Securities and Exchange Commission.
(3) Credit transactions, other than those in which a security interest is or will be acquired in real property, or in personal property used or expected to be used as the principal dwelling of the consumer, in which the total amount financed exceeds $25,000.
(4) Transactions under public utility tariffs, if the Board determines that a State regulatory body regulates the charges for the public utility services involved, the charges for delayed payment, and any discount allowed for early payment.
(5) Transactions for which the Board, by rule, determines that coverage under this subchapter [15 U.S.C.A. § 1601, et seq.] is not necessary to carry out the purposes of this subchapter.
. . . .
(7) Loans made, insured, or guaranteed pursuant to a program authorized by Title IV of the Higher Education Act of 1965 (20 U.S.C. 1070 et seq.).
15 U.S.C.A. § 1603 (West 1998).