Carpet Services, Inc. v. George A. Fuller Co. of Texas, Inc.

• Decision Date: 29 November 1990
• Docket Number: No. 05-89-01008-CV,05-89-01008-CV
• Citation: 802 S.W.2d 343
• Parties: CARPET SERVICES, INC., Appellant, v. GEORGE A. FULLER COMPANY OF TEXAS, INC., Appellee.
• Court: Texas Court of Appeals

Page 343

802 S.W.2d 343

CARPET SERVICES, INC., Appellant, v. GEORGE A. FULLER COMPANY OF TEXAS, INC., Appellee.

No. 05-89-01008-CV.

Court of Appeals of Texas Dallas.

Nov. 29, 1990.

Rehearing Denied Jan. 8, 1991.

David M. Berman, Robert E. Hager, Dallas, for appellant.

Luke Madole, Dallas, John C. Hayes, Jr., Washington, D.C., for appellee.

Before the court en banc.

OPINION

HOWELL, Justice.

Carpet Services, Inc. ("Creditor") appeals from a judgment rendered in favor of George A. Fuller Company of Texas, Inc. ("Debtor"). In its first point of error, Creditor contends that the trial court erred in finding a usurious charge of interest in Creditor's original petition because no such charge was made as a matter of law. By counterpoint, Debtor urges affirmance without regard to the trial court's rulings, contending that it was conclusively established that Creditor did not perform its contractual obligations on time. We sustain the first point of error and overrule the counterpoint. Accordingly, we reverse the judgment of the trial court and render judgment in favor of Creditor.

Debtor was the general contractor and Creditor was a subcontractor on a commercial construction project. Both parties entered into a written subcontract providing that Creditor would supply and install carpet in a building being renovated. When Debtor refused to pay for the work and materials, Creditor brought suit.

In its original petition, Creditor pleaded for prejudgment interest as follows:

Plaintiff would show that it is entitled to pre-judgment interest at the rate of six percent (6%) per annum of and from ten (10) days after the delivery dates specified in Exhibit "A" [the invoices by which Creditor billed Debtor] in accordance with the provisions of Article 5069-1.03.

In its amended answer and second amended counterclaim, Debtor alleged that Creditor's original petition and first amended petition, by means of their requests for prejudgment interest, "charged" interest during interest-free periods.

Trial was before the court; findings of fact and conclusions of law were filed. The trial court concluded that Debtor had breached its contract with Creditor and that Creditor had been damaged. However the court also found that Creditor's original petition contained a usurious charging of interest which was in excess of twice the amount allowed by law. It determined that such charge was not the result of a bona fide error or accident. The court therefore concluded that Creditor "shall forfeit all principal, interest and other charges" and rendered judgment against Creditor for the minimum statutory penalty of $2,000.

The trial court's judgment regarding usury was grounded upon a determination that no amounts were contractually due until Debtor was paid by the owner of the property. The court found that there was insufficient evidence to determine the exact date when Debtor received payment from the owner. However, it did find that payment did not occur until after March 9, 1987. ¹ Under the contract, statutory prejudgment interest did not begin to accrue until thirty days after Debtor received payment from the owner. See TEX.REV.CIV.STAT.ANN. art. 5069-1.03 (Vernon 1987). Creditor pleaded for prejudgment interest on two of its three invoices from February 6, 1987. Inasmuch as it sued for interest running from a date prior to March 9, 1987, it is clear that Creditor was demanding prejudgment interest with respect to an interest-free period.

Creditor argues in its first point of error that its pleading for interest did not constitute the charging of usury as a matter of law. Creditor urges that a demand for interest at a usurious rate which is contained in a pleading should not be considered as the "charging" of usurious interest as forbidden by statute. The authority on this point is in conflict. However, for the reasons stated below, we agree with Creditor.

The principal case that might support the proposition that a pleading seeking a usurious rate of interest constitutes a charging of interest is Moore v. Sabine National Bank, 527 S.W.2d 209 (Tex.Civ.App.--Austin 1975, writ ref'd n.r.e.). In that case, the debtor attacked on appeal the trial court's conclusion that the statements contained in the creditor's notice of intention to repossess, in its original petition, and in its sequestration affidavit did not constitute the charging of an unearned time-price differential or finance charge. Reading articles 5069-8.01 and 5069-8.02, the appellate court found that there had been a "charging" of interest forbidden by statute and found for the debtor. See id. at 210-12.

However, the case appears distinguishable in that a "notice of intention to repossess" was provided to the debtor. Id. at 211. ² The Moore opinion does not expand upon the nature of this instrument, but we consider that, in all probability, it was a non-statutory document directly served by the creditor upon the debtor prior to the filing of suit and that such writing contained a direct and unqualified demand that the debtor forthwith pay an unlawful amount of interest to the creditor upon pain of legal action if the demand were not met. Thus, it was unnecessary for the Moore court to address, and it apparently did not address, the precise question before us: If a demand for interest is contained only in a pleading, does that pleading make the pleader liable for statutory penalties if the pleading seeks the recovery of interest at an unlawful rate? We hold that it does not.

We cannot agree that a petition or other pleading constitutes a demand upon the adverse party. Although a pleading constitutes notice to the opposing party of the pleader's contentions, Tennell v. Esteve Cotton Co., 546 S.W.2d 346, 356 (Tex.Civ.App.--Amarillo 1976, writ ref'd n.r.e.), it contains neither requests nor demands addressed to the opposing party. A pleading is addressed to the court; its only demand is that the court grant judgment; it demands no action whatever by the opposing party. If the debtor chooses to ignore the lawsuit, the court is still charged to examine the pleadings, often to consider evidence, and then to render judgment to the creditor-plaintiff for no more than the amount to which the creditor is lawfully entitled. Of course, the debtor defaults at his peril, but such fact does not alter the essential nature of a pleading. The demand is addressed to the court, not the debtor; the court is legally obligated, even on default, to limit its judgment to that part of the demand to which the creditor shows himself to be lawfully entitled. Thus, a request or demand contained in a pleading is wholly unlike the delivery to the debtor by the creditor of a writing in which the creditor demands or "charges" an excessive rate of interest. The distinction is critical respecting whether a usurious rate of interest has been "charged" within the meaning of the usury statutes. See TEX.REV.CIV.STAT.ANN. arts. 5069-1.06, 5069-8.01(a), 5069-8.02 (Vernon 1987). In distinguishing Moore, we note the court's finding that "appellee's notice of intention to repossess, its original petition, and its sequestration affidavit ... shows a demand by appellee upon appellant to pay [interest at an excessive rate]." Moore, 527 S.W.2d at 212 (emphasis added). We question whether any of the enumerated instruments other than the notice of intention to repossess showed a direct and unequivocal demand that the debtor make any payment to the creditor. Moore is distinguishable. At a minimum, it fails to address the turnpoint of this case.

In the cases applying Moore, we find no discussion of the foregoing distinction. The cases assume rather than decide that pleadings seeking excessive interest constitute the "charging" of usurious interest. Like Moore, they ignore the distinction between pleadings addressed to a court and writings addressed to the debtor. See, e.g., Moore v. White Motor Credit Corp., 708 S.W.2d 465, 468 (Tex.App.--Dallas 1985, writ ref'd n.r.e.); Rick Furniture Distrib. Co. v. Kirlin, 634 S.W.2d 738, 740 (Tex.App.--Dallas 1982, writ ref'd n.r.e.); Nationwide Fin. Corp. v. English, 604 S.W.2d 458, 461 (Tex.Civ.App.--Tyler 1980, writ dism'd); General Motors Acceptance Corp. v. Uresti, 553 S.W.2d 660, 663 (Tex.Civ.App.--Tyler 1977, writ ref'd n.r.e.).

The question in hand has never been directly addressed by the Texas Supreme Court. See Danziger v. San Jacinto Sav. Ass'n, 732 S.W.2d 300, 305 (Tex.1987) (Gonzalez, J., concurring). That court has repeatedly held that usury statutes are penal in nature and must be strictly construed. See Houston Sash and Door Co. v. Heaner, 577 S.W.2d 217, 222 (Tex.1979); First State Bank v. Miller, 563 S.W.2d 572, 577 (Tex.1978). When there is any doubt regarding legislative intent, the usury statutes should be construed so as to give the alleged violator the benefit of that doubt. See PJM, Inc. v. Walter Clark Advertising, Inc., 624 S.W.2d 282, 286 (Tex.App.--Dallas 1981, writ ref'd n.r.e.); Hight v. Jim Bass Ford, Inc., 552 S.W.2d 490, 491 (Tex.Civ.App.--Austin 1977, writ ref'd n.r.e.). We decline to follow the cases holding, with little or no analysis, that demands contained in pleadings for the recovery of excessive interest trigger the penal provisions of the usury statutes.

Today's decision is consonant with the modern day theory of pleading, that a party's pleadings must be liberally construed in favor of the pleader so as to effectuate the rights of the pleader to full relief. The law of pleading, to the full extent possible, should be free of traps for the unwary. If a party is possessed of a tenable theory or tenable facts from which he may arguably assert a right to the recovery of interest, the party should be entitled to exhibit his claim to the court without being held in terrorem. Other provisions of the law are available to visit sanctions upon those who consume the courts' time with unfounded and frivolous claims for the recovery of...