Fibergrate Corp. v. Research-Cottrell, Inc., CA 3-79-0365-G.

Citation481 F. Supp. 570
Decision Date28 December 1979
Docket NumberNo. CA 3-79-0365-G.,CA 3-79-0365-G.
PartiesFIBERGRATE CORP. v. RESEARCH-COTTRELL, INC.
CourtUnited States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Northern District of Texas

Raymond D. Noah & Associates, Richardson, Tex., Lancaster Smith, Harvey L. Davis, Dallas, Tex., for plaintiff.

Calhoun & Spillman by Mark Alan Calhoun, Roy L. Stacy, Dallas, Tex., for defendant.

ORDER

PATRICK E. HIGGINBOTHAM, District Judge.

This case revolves around certain services and materials plaintiff Fibergrate Corporation allegedly provided defendant Research-Cottrell and a cancellation of an order defendant placed with plaintiff. Specifically, plaintiff asserts (1) that defendant, by purchase orders defendant issued, ordered and received plaintiff's services and materials, valued at $124,187.17, as set out in certain invoices and (2) that in another transaction, defendant ordered and insured plaintiff's services, but that prior to completion of manufacture of items ordered, defendants cancelled the order, thereby incurring a cancellation charge of $45,449.10. Plaintiff, alleging that it had not received either sum, initially sought judgment in state court in the amount of $169,633.47 (the total of $124,187.17 and $45,449.10), together with interest thereon at the rate of 6% per annum from June 7, 1978, to date of judgment and at 9% per annum thereafter until paid, and costs of suit. In the amended complaint, filed after removal to this court, plaintiff also sought punitive damages and attorney's fees.

Defendant Research-Cottrell has filed a motion for summary judgment. Research-Cottrell argues that Texas law, as decided in Houston Sash and Door, Inc. v. Heaner, 577 S.W.2d 217 (Tex.1979) is that the charging of interest on an "open account" during the calendar year in which the account is made is in excess of twice that permitted by Article 5069-1.03,1 Tex.Rev.Civ.Stat. (Vernon), i. e., in excess of twice zero, and that this would subject the creditor to the penalty provisions of Article 5069-1.06.2 Defendant argues that since plaintiff Fibergrate was not entitled to any interest on what defendant alleges was an "open account" until after January 1, 1979, its prayer for interest in this suit from June 7, 1978, constitutes a violation of Article 5069-1.03, subjecting plaintiff to the penalty provisions of Article 5069-1.06. The defendant urges that plaintiff is thus subject to forfeiture of twice the amount of interest charged, all principal, interest, and other charges and reasonable attorneys' fees set by the court, and as a result plaintiff does not have the right to recover the principal amount sought.

In essence, Research-Cottrell urges that because the plaintiff in its prayer for relief sought too much interest, it is entitled to summary judgment. Fibergrate replies that assuming that too much interest was prayed for, to grant a summary judgment for reasons suggested would violate fundamental concepts of procedural fairness. Fibergrate points out that plaintiffs often seek amounts larger than that which they can reasonably expect or may be entitled to by law, and argues that it should not be denied all relief simply because it may have similarly prayed for more than it is entitled to.

The Usury Statute

Since Article 5069-1.06 is a usury statute and is penal in nature, it should be strictly construed. See Home Savings Association v. Crow, 514 S.W.2d 160, 165 (Tex. Civ.App.—Dallas 1974), aff'd 522 S.W.2d 457 (Tex.1975). Aside from the court's uncertainty at this stage in the proceedings as to whether plaintiff's suit is indeed based on an "open account," this court finds that plaintiff's prayer for 6% interest ought not be construed as a "charge" of usurious interest.

Defendant has cited two cases under Article 5069-1.06 in support of its assertion that the prayer for allegedly proscribed interest itself constitutes a "charge" of usurious interest, Windhorst v. Adcock Pipe and Supply Co., 547 S.W.2d 260 (Tex.1977), and Watson v. Cargill, Inc., 573 S.W.2d 35 (Tex. Civ.App.—Waco 1978, writ ref'd n.r.e.). In Windhorst, a retailer unilaterally imposed on a customer's open account a 1½% per month finance charge. The customer did not pay that imposed fee, and the customer sued for penalties under the usury laws. The court held that by unilaterally imposing that fee, the retailer "charged" more than 10% per annum, and was thus liable for penalties. Similarly, in Watson, the creditor had also himself assessed usurious interest against the debtor, and himself sought payment of both the principal and usurious interest from the debtor. Watson v. Cargill, supra, at 40, 43.

In the present instance, unlike Windhorst and Watson, the "creditor" did not ask the defendant to pay a principal amount and interest on that principal. Instead, the "creditor" here asked the debtor to only pay the principal. Upon the debtor's alleged refusal to pay such principal, Fibergrate sought to convince this court that the court should assess principal and interest against the debtor. A permissible construction of the statute is that a creditor seeking to recover interest as damages is not making a "charge" of interest. The interest claim is not rooted in a free contractual relationship between two private parties, but is an element of nonconsensual damages.

Defendant has cited cases under certain other usury statutes, Articles 5069-8.01 and 8.02, to support its assertion that the plaintiff's prayer here is a charge. The court's...

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9 cases
  • Haralson v. E.F. Hutton Group, Inc.
    • United States
    • U.S. Court of Appeals — Fifth Circuit
    • 26 December 1990
    ...elements of a usurious transaction are a loan and an absolute obligation that the principal be repaid); Fibergrate Corp. v. Research-Cottrell, Inc., 481 F.Supp. 570, 572 (N.D.Tex.1979) (a usurious interest claim must be "rooted in a free contractual relationship between two private parties"......
  • Gibraltar Sav. v. LDBrinkman Corp.
    • United States
    • U.S. Court of Appeals — Fifth Circuit
    • 2 December 1988
    ...was squarely presented, 25 we agree with the district court, however, that the factually-similar case of Fibergrate Corp. v. Research-Cottrell, Inc., 481 F.Supp. 570 (N.D.Tex.1979), is fully dispositive of the defendants' usury counterclaim. There, the defendant's motion for summary judgmen......
  • Danziger v. San Jacinto Sav. Ass'n
    • United States
    • Texas Supreme Court
    • 27 May 1987
    ...1977, writ ref'd n.r.e.) (bona fide error not discussed). As Judge Higginbotham stated in Fibergrate Corp. v. Research-Cottrell, Inc., 481 F.Supp. 570, 572 (N.D.Tex.1979): "construing a claim asserted only in a pleading filed in a law suit as an interest charge triggering the draconian pena......
  • Federal Deposit Ins. Corp. v. Tito Castro Const., Civ. No. 81-1604(GG).
    • United States
    • U.S. District Court — District of Puerto Rico
    • 14 October 1982
    ...under Puerto Rico law. First of all, usury statutes, being penal in nature, are to be strictly construed. Fibergrate Corp. v. Research-Cottrell, Inc., 481 F.Supp. 570 (N.D.Tex.1979). In addition, where the face of an instrument provides for a lawful interest rate (as do the ten notes execut......
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