Domizio v. Progressive County Mutual Ins. Co.

• Decision Date: 30 August 2001
• Citation: 54 S.W.3d 867
• Parties: (Tex.App.-Austin 2001) Jeff Domizio, Frank Valenzuela and Maria Valenzuela, Appellants v. Progressive County Mutual Insurance Company, Appellee NO. 03-00-00423-CV
• Court: Texas Court of Appeals

Page 867

54 S.W.3d 867 (Tex.App.-Austin 2001)

Jeff Domizio, Frank Valenzuela and Maria Valenzuela, Appellants v. Progressive County Mutual Insurance Company, Appellee

NO. 03-00-00423-CV

Court of Appeals of Texas, Austin.

August 30, 2001

Rehearing Overruled Oct. 4, 2001

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 345TH JUDICIAL DISTRICT NO. 99-14902, HONORABLE ERNEST C. GARCIA, JUDGE PRESIDING

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

Before Justices Kidd, Yeakel and Puryear

David Puryear, Justice

Appellants Jeff Domizio, Frank Valenzuela, and Maria Valenzuela filed a lawsuit against appellee Progressive County Mutual Insurance Company ("Progressive") in Travis County district court, individually and on behalf of an alleged class, alleging that the late fees charged by Progressive for untimely payment of automobile insurance policies constituted usurious charges of interest. Alternatively, appellants allege that those charges were improper and unenforceable liquidated damages constituting unjust enrichment. Progressive filed a counterclaim seeking a declaration that the payment of insurance premiums in monthly installments does not involve a lending transaction to which the usury statutes apply. Both parties filed motions for summary judgment. The trial court, in granting summary judgment in favor of Progressive, found that Progressive's installment payment plan was not a loan, financing, or any form of an extension of credit to Progressive's policyholders and that the late fees Progressive charged its policyholders did not constitute interest under the Texas usury statutes. We will affirm the judgment of the trial court.

FACTUAL AND PROCEDURAL BACKGROUND

Appellants individually purchased Texas standard automobile policies from Progressive and made premium payments consistent with an installment payment plan as authorized by Manual Rule 14 of the Texas Automobile Rules and Rating Manual. Appellants, by agreement, were charged service charges in accordance with Manual Rule 14.¹ In addition to this service charge, Progressive assesses a six dollar late fee for each premium installment payment post marked later than two days after the date on which the payment is due. Domizio was charged the six dollar late fee on his $62.38 installment payment, and the Valenzuelas were also charged six dollars for late payment of their $79.12 installment payment.

Appellants filed this lawsuit as a prospective class action on behalf of all persons in Texas who had been charged by and paid a late fee to Progressive in connection with installment payment plans for automobile and motorcycle insurance policies issued by Progressive. Appellants alleged that the late fees Progressive collected constituted usurious charges of interest. In addition, appellants alleged that these late fees were improper and unenforceable liquidated damages. Appellants filed a motion for class certification, and both parties filed motions for summary judgment. On April 11, 2000, the trial court declined to hear appellants' motion for class certification and instead granted Progressive's motion to sever and abated the class action pending a final, non-appealable adjudication of appellants' threshold legal question: whether the late fees were usurious. On May 17, 2000, the trial court denied appellants' motion for summary judgment and granted Progressive's motion for summary judgment. The trial court found that Progressive's installment plan was not a loan, financing, or extension of credit, and that the late fees were not usurious. Appellants appeal from the April 11 and May 17 orders.

DISCUSSION

Standard of Review

To prevail on summary judgment, a plaintiff must conclusively establish all elements of his cause of action as a matter of law. Tex. R. Civ. P. 166a(c); City of Houston v. Clearcreek Basin Auth., 589 S.W.2d 671, 679 (Tex. 1979). On the other hand, a defendant who moves for summary judgment must disprove at least one essential element of each of the plaintiff's theories of recovery or conclusively establish each element of an affirmative defense. Tex. R. Civ. P. 166a(c); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985). We disregard all conflicts in the evidence and accept the evidence favoring the nonmovant as true. Great Am. Reserve Ins. Co. v. San Antonio Plumbing Supply Co., 391 S.W.2d 41, 47 (Tex. 1965); Kehler v. Eudaly, 933 S.W.2d 321, 324 (Tex. App. Fort Worth 1996, writ denied). We indulge every reasonable inference from the evidence in favor of the nonmovant and resolve any doubts in its favor. American Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425 (Tex. 1997).

When the parties file competing motions for summary judgment and one is granted and the other denied, the reviewing court should review the summary-judgment evidence presented by both sides and determine all questions presented. Commissioners Court v. Agan, 940 S.W.2d 77, 81 (Tex. 1997). This Court may reverse the judgment of the trial court and render such judgment as the trial court should have rendered, including rendering judgment for the other movant. Jones v. Strauss, 745 S.W.2d 898, 900 (Tex. 1988).

A party may also move for a "no-evidence" summary judgment. Tex. R. Civ. P. 166a(i). Such a motion asserts that there is no evidence of one or more essential elements of claims upon which the opposing party would have the burden of proof at trial. Id.; McCombs v. Children's Med. Ctr., 1 S.W.3d 256, 258 (Tex. App. Texarkana 1999, no pet.). Unlike a movant for traditional summary judgment, a movant for a no-evidence summary judgment does not bear the burden of establishing a right to judgment by proving each claim or defense. McCombs, 1 S.W.3d at 258. A no-evidence summary judgment is essentially a pretrial directed verdict, to which we apply the same legal sufficiency standard of review. Jackson v. Fiesta Mart, Inc., 979 S.W.2d 68, 70 (Tex. App. Austin 1998, no pet.). A no-evidence summary judgment is properly granted if the nonmovant fails to produce more than a scintilla of probative evidence raising a genuine issue of fact as to an essential element of a claim on which the nonmovant would have the burden of proof at trial. Tex. R. Civ. P. 166a(i); Jackson, 979 S.W.2d at 70-71.

Usury

In their first issue on appeal, appellants complain that the trial court erred in finding that the late fees assessed by Progressive did not constitute usurious interest. Specifically, appellants argue that the six dollar late fee Progressive charged is interest because it is compensation for the detention of money due. In addition, they argue that Progressive's installment plan involves an extension of credit and is therefore subject to Texas's usury statutes. And finally, appellants contend that they did not agree to pay the late fee and that the fee exceeds the maximum legal rate of interest that can be charged, thereby subjecting Progressive to the penalty of forfeiture.²

The essential elements of a usurious transaction are: (1) a loan of money, (2) an absolute obligation that the principal be repaid, and (3) the exaction of a greater compensation than allowed by law for the use of the money by the borrower. Holley v. Watts, 629 S.W.2d 694, 696 (Tex. 1982); Varel Mfg. Co. v. Acetylene Oxygen Co., 990 S.W.2d 486, 491 (Tex. App. Corpus Christi 1999, no pet.); Pentico v. Mad-Wayler, Inc., 964 S.W.2d 708, 714 (Tex. App. Corpus Christi 1998, pet. denied). Moreover, because usury statutes are penal in nature, they must be strictly construed, and if there is any doubt as to legislative intent to punish the activity complained of under usury statutes, the doubt must be construed in favor of the lender. Steves Sash & Door Co. v. Ceco Corp., 751 S.W.2d 473, 476 (Tex. 1988); Hatzenbuehler v. Call, 894 S.W.2d 68, 69 (Tex. App. San Antonio 1995, writ denied). We will first address whether the late fees charged by Progressive constitute interest.

A. Interest

The Texas Finance Code defines "interest" as the "compensation for the use, forbearance, or detention of money." Tex. Fin. Code Ann. § 301.002(a)(4) (West Supp. 2001). Citing Varel Manufacturing, appellants state that "it is well-settled that late charges or late fees fall within the statutory definition of interest." Varel Mfg., 990 S.W.2d at 490-91. Appellants argue that the late charges fall into the category of "contingent additional charges" and are treated as interest if and when a payment is received after the expiration of the grace period. Id. As a result, appellants contend that the late fees were charges for the detention of money and therefore constitute interest. See Butler v. Holt Mach. Co., 741 S.W.2d 169, 173-74 (Tex. App. San Antonio 1987, writ denied) (holding that detention of money arises when debt has become due and debtor withholds payment without new contract giving debtor right to do so). Appellants also contend that the statutory definition of interest does not strictly require a lending transaction, but also can apply to any situation where credit is extended. They argue that Progressive's business practice amounts to an extension of credit to its customers. Appellants misconstrue the usury statute.

The Texas Supreme Court has held that "it is a fundamental principle governing the law of usury that it must be founded on a loan or forbearance of money; if neither of these elements exist, there can be no usury." Crow v. Home Sav. Ass'n, 522 S.W.2d 457, 459 (Tex. 1975). Our usury statutes are derived from the Texas Constitution, which provides the following grant of authority to the legislature: "The legislature shall have authority to classify loans and lenders, license and regulate lenders, define interest and fix maximum rates of interest." Tex. Const. art. XVI, § 11 (emphasis added). It is apparent from the language of the provision that it was drawn to govern only lending and credit transactions. See Sage St. Assocs. v. Northdale Constr. Co., 863 S.W.2d 438, 440 (Tex. 1993)...