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NUMBER 13-00-753-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI
FRANK J. PAGEL, Appellant,
v.
RICHARD WHATLEY
D/B/A WHATLEY FLYING SERVICE, Appellee.
On appeal from the County Court at Law
of Calhoun County, Texas.
DISSENTING OPINION ON
MOTION FOR REHEARING EN BANC
Before the Court En Banc
Dissenting Opinion by Justice Dorsey
I believe the panel erred in determining that Whatley gave Pagel the required statutory written notice of his usury violation. The notice is required in order to maintain the statutory defense to usury. Whatley merely attached to his petition a note that he, Whatley, had been notified by his lawyer of Athe possibility and consequences of a usury violation.@ That is not notice to Pagel that Whatley violated the statute. I would grant rehearing and reverse.
Whatley sued Pagel for non-payment of an open account for crop-dusting services. Pagel filed a counterclaim against Whatley, seeking damages for usurious interest charged on the account. Pagel=s counterclaim alleged that AWhatley charged interest at the rate of 18% per annum and that there was no written or oral agreement authorizing such charge.@ The trial court entered a judgment in favor of Whatley on his claim for damages against Pagel, and it entered a take-nothing judgment against Pagel on his counterclaim for usury.
One of Whatley=s defenses to Pagel=s counterclaim is found in the Texas Finance Code, which states:
(a) A creditor is not liable to an obligor for a violation of this subtitle if:
(1) not later than the 60th day after the date the creditor actually discovered the violation, the creditor corrects the violation as to that obligor by taking any necessary action and making any necessary adjustment, including the payment of interest on a refund, if any, at the applicable rate provided for in the contract of the parties; and
(2) the creditor gives written notice to the obligor of the violation before the obligor gives written notice of the violation or files an action alleging the violation.
Tex. Fin. Code Ann. ' 305.103(a) (Vernon Supp. 2002). Accordingly the issue in this case is whether Whatley=s statement attached to his original petition meets the requirements of section 305.103(a)(2) and, therefore, qualifies as a defense to Pagel=s counterclaim for usury. Whatley=s statement provided:
I, RICHARD WHATLEY, hereby certify that I was fully and completely informed by CHARLES HOOD of the possibility and consequences of a usury violation in regard to collection work he is doing for me, and told him to proceed.
The majority found that Whatley, by this statement, conclusively established an affirmative defense to the counterclaim under section 305.103(a)(2), stating
the record before us establishes that by Whatley=s statement attached to his original petition, he provided Pagel notice of the possibility and consequences of a usury violation. The sufficiency of the notice can reasonably be inferred by Pagel=s actions after he received Whatley=s written statement. First, we note that Pagel admittedly made no claim for a usury violation at any time prior to his attorney=s letter dated over seven months after the lawsuit was filed against him. Second, Pagel filed his counterclaim over fifteen months after receiving Whatley=s statement. The trial court could reasonably infer that the statement was sufficient to prompt the counterclaim for usury where none had been urged previously.
Pagel filed a motion for rehearing en banc, stating that this Court found that Whatley, appellee,
proved as a matter of law, that he is entitled to the statutory defense of cure to his usury violation. The Court=s basis for this holding is the fact that Appellee, after charging Appellant illegal usurious interest for four years, filed a lawsuit that itself did not include any interest charges, along with an attached affidavit stating that he understood the consequences of a possible usury violation and instructed his lawyer to proceed anyway.
(emphasis in original). Pagel argues that Whatley=s statement had absolutely nothing to do with any intent on Whatley=s part to notify him of a usury violation. I agree.
Construing Section 305.103(a)(2)
Our objective when we construe a statute is to determine and give effect to the Legislature's intent. Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482, 484 (Tex. 1998). We accomplish that purpose, first, by looking to the plain and common meaning of the statute's words. Id. We must also view a statute's terms in context and give them full effect. Id. Section 305.103(a)(2) requires the creditor to give Awritten notice to the obligor of the violation. . . .@ (emphasis added). Whatley=s statement stated only that he had been advised of the possible consequences of a usury violation. However the plain and common meaning of the statute's words required Whatley to give Pagel written notice Aof the violation@, and not a possible violation. Nowhere in Whatley=s pleadings or attached statement did Whatley admit or notify Pagel that he had actually violated the usury statute, a requirement under section 305.103(a)(2). See Tex. Fin. Code Ann. ' 305.103(a)(2) (Vernon Supp. 2002).
The question here is whether a creditor, Whatley, upon discovering he has committed usury, has taken timely and sufficient steps to cure it by correcting it and notifying the debtor in writing that he had violated the statute. See id. I perceive the statute to address primarily inadvertent charges of usury, so in order to avoid the statutory penalties, the one charging excessive interest can confess the violation and delete the charges. The inference that the affidavit notified Pagel of the usury violation cannot be derived from the fact that Pagel later counterclaimed for the penalties. It has been recognized by the Texas Supreme Court in a unanimous opinion in Steves Sash & Door Co. v. Ceco Corp., 751 S.W.2d 473 (Tex. 1988), "that since the time of the Code of Hammurabi (around 1800 B.C.) legislatures have imposed exceedingly harsh penalties for usury." Id. at 476. The statutes that the legislatures have enacted, which are penal in nature, are enacted for the protection of those who owe money. They were enacted for the prevention of unjust oppression by unscrupulous persons who are ready to take undue advantage of others. Risica & Sons, Inc. v. Tubelite, 794 S.W.2d 468, 470 (Tex. App.BCorpus Christi, 1990), aff=d, 819 S.W.2d 801 (Tex. 1991).
I would grant the motion for rehearing.
J. BONNER DORSEY,
Justice
Publish.
Tex. R. App. P. 47.3(b).
Opinion delivered and filed
this 22nd day of August, 2002.