Eckman v. Centennial Sav. Bank

• Decision Date: 21 February 1990
• Docket Number: No. C-7291,C-7291
• Citation: 784 S.W.2d 672
• Parties: Carl E. ECKMAN, Jr., et al., Petitioner, v. CENTENNIAL SAVINGS BANK, Respondent.
• Court: Texas Supreme Court

Page 672

784 S.W.2d 672

Carl E. ECKMAN, Jr., et al., Petitioner, v. CENTENNIAL SAVINGS BANK, Respondent.

No. C-7291.

Supreme Court of Texas.

Feb. 21, 1990.

Rehearing Overruled Feb. 21, 1990.

Frank Gilstrap and Shane Goetz, Arlington, for petitioner.

Michael Lowenberg, Kathleen M. LaValle, Dallas, and Larry W. Green, Greenville, for respondent.

ON MOTION FOR REHEARING

HIGHTOWER, Justice.

Respondent's motion for rehearing is overruled. The opinion of October 26, 1988 is withdrawn and the following is substituted.

This case under the Deceptive Trade Practices--Consumer Protection Act (DTPA), Tex.Bus. & Com.Code Ann. § 17.41 et seq. (Vernon 1987), involves the issue of whether the plaintiff has the burden to plead and prove the inapplicability of the $25,000,000 exception to business consumer status under section 17.45(4) of the DTPA. A jury returned a verdict in favor of the petitioners, Carl E. Eckman, Jr., James E. Nicholson, M.D., and Gary Hutchison, M.D. (hereinafter "the Eckman group") on their DTPA claim. The trial court, however, rendered judgment non obstante veredicto favoring respondent Centennial Savings Bank (hereinafter "Centennial"). The court of appeals affirmed. 742 S.W.2d 826. We reverse and remand this cause to the court of appeals.

The Eckman group, together with Kenneth Jackson, formed the Gaslight Square Apartments Venture in 1983. ¹ The sole purpose of the venture was to construct an 88 unit apartment complex. Centennial agreed to provide both interim and permanent financing for the venture. The interim loan closed in June 1984, at which time the first draw of $158,000 was disbursed to the joint venture, of which $54,000 was retained by Centennial as a loan commitment fee.

Meanwhile, a separate venture formed by the Eckman group and Jackson, also financed by Centennial, was having financial problems. The accounts created for the venture were constantly overdrawn and the borrowers were failing to make timely interest payments. Because of these problems, Centennial announced that it would not advance any more interim funds for the Gaslight project until the partners provided updated financial statements. Several months went by and the group failed to provide the requested statements and failed to make their first quarterly interest payment on the Gaslight loan. Thereafter, Centennial refused to provide any more funds and refused to return the commitment fee. The Eckman group filed a breach of contract action against Centennial and later amended their pleadings to include a DTPA claim. ² Centennial filed special exceptions, generally asserting that the Eckman group had "failed to plead that they are consumers within the meaning of the DTPA." However, Centennial's special exceptions did not mention the exclusion concerning business consumers that have assets of $25,000,000 or more. In their amended pleadings, the Eckman group specifically alleged that "they are business consumers within the meaning of section 17.45(4), (10), Texas Deceptive Trade Practices--Consumer Protection Act, and sought to acquire goods or services during the course of the transaction".

After a jury verdict in favor of the Eckman group on their DTPA claim, ³ the trial court rendered judgment non obstante veredicto in favor of Centennial. The trial court apparently reasoned that since the joint venture claimed gross assets in excess of $25,000,000, the Eckman group lacked standing as consumers under the DTPA. ⁴ The court of appeals affirmed, holding that Centennial was entitled to judgment n.o.v. because the Eckman group failed to prove that their assets were less than $25,000,000 ⁵ and therefore did not qualify as a "business consumer" under the DTPA.

A plaintiff must be a "consumer" to maintain a private action under the DTPA. Knight v. International Harvester Credit Corp., 627 S.W.2d 382, 388 (Tex.1982). The DTPA defines a consumer as:

... an individual, partnership, corporation, this state, or a subdivision or agency of this state who seeks or acquires by purchase or lease, any goods or services, except that the term does not include a business consumer that has assets of $25 million or more, or that is owned or controlled by a corporation or entity with assets of $25 million or more.

Tex.Bus. & Com.Code Ann. § 17.45(4) (Vernon 1987) (emphasis added). "Business consumers" are defined to include individuals, partnerships, or corporations who seek or acquire by purchase or lease, any goods or services for commercial or business use. Tex.Bus. & Com.Code Ann. § 17.45(10) (Vernon 1987). Thus, business consumers, whether individuals or businesses, with assets of $25,000,000 or more are excluded from DTPA coverage. This case raises the narrow issue of whether the plaintiff must plead and prove the inapplicability of the $25,000,000 exception or whether the defendant has the burden to plead and prove the applicability of the $25,000,000 exception as an affirmative defense.

The Eckman group asserts that the court of appeals erred in holding that the plaintiffs had the burden to plead and prove that they did not have assets of $25,000,000 or more in order to qualify as a "business consumer" under the DTPA. In response, Centennial asserts that the Eckman group should be required to show that they did not have assets of $25,000,000 or more as part of the proof required to establish consumer status.

In support of the proposition that the defendant should bear the burden to plead and prove the applicability of the $25,000,000 exception of section 17.45(4), the Eckman group relies upon Challenge Transportation v. J-Gem Transportation, Inc., 717 S.W.2d 115 (Tex.App.--Houston [14th Dist.] 1986, writ ref'd n.r.e.). In that case, the court of appeals held that the defendant had the burden to plead and prove that the plaintiff fell within the category of excepted businesses. The court observed that:

J-Gem pled and proved by undisputed evidence that it was a corporation which had acquired services by lease; in so doing J-Gem satisfied its burden of proof regarding its status as a consumer. J-Gem was not required to prove a negative by showing it did not fall within the exception. Appellants had the burden of proving the affirmative defense that J-Gem fell within the category of excepted businesses.

Id. at 117. We agree with the Eckman group and hold that the defendant has the burden to plead and prove the applicability of the $25,000,000 exception to business consumer status as an affirmative defense.

Treating the $25,000,000 exception as an affirmative defense promotes efficiency in DTPA litigation. The comparative likelihood that a certain situation may occur in a reasonable percentage of cases should be considered when determining whether a fact should be allocated as an element of the plaintiff's case or to the defendant as an affirmative defense. See 2 R. McDonald, Texas Civil Practice in District and County Courts, § 7.34.1 (rev. 1982). Obviously, most litigants do not have assets of $25,000,000 or more. Requiring every DTPA plaintiff to prove that he is not a multimillionaire would be an inefficient and uneconomical use of judicial resources. Section 17.44 requires that the DTPA "shall be liberally construed and applied to promote its underlying purposes, which are to protect consumers ... and to provide efficient and economical procedures to secure such protection." Tex.Bus. & Com.Code Ann. § 17.44 (Vernon 1987). See Jim Walter Homes, Inc. v. Valencia, 690 S.W.2d 239, 242 (Tex.1985); Joseph v. PPG Industries, Inc., 674 S.W.2d 862, 865 (Tex.App.--Austin 1984, writ ref'd n.r.e.). Requiring the defendant to plead and prove the $25,000,000 exception as an affirmative defense is consistent with the statutory mandate "to provide efficient and economical procedures" to protect consumers. Adopting this procedure best serves the interests of judicial efficiency and economy.

Since...