Hinojosa v. Castellow Chevrolet Oldsmobile, Inc.

• Decision Date: 06 September 1984
• Docket Number: No. 13-83-363-CV,13-83-363-CV
• Citation: 678 S.W.2d 707
• Parties: 40 UCC Rep.Serv. 1154 Thomas N. HINOJOSA, Appellant, v. CASTELLOW CHEVROLET OLDSMOBILE, INC. and GMAC, Appellees.
• Court: Texas Court of Appeals

Page 707

678 S.W.2d 707

40 UCC Rep.Serv. 1154

Thomas N. HINOJOSA, Appellant, v. CASTELLOW CHEVROLET OLDSMOBILE, INC. and GMAC, Appellees.

No. 13-83-363-CV.

Court of Appeals of Texas,

Corpus Christi.

Sept. 6, 1984.

Rehearing Denied Oct. 4, 1984.

Thomas M. Schumacher, Hector Gonzalez Law Office, Corpus Christi, for appellant.

Andrew J. Lehrman, Sorrell, Anderson & Sorrell, William Chriss, Kleberg, Dyer, Redford & Weil, Corpus Christi, for appellees.

Before NYE, C.J., and KENNEDY and SEERDEN, JJ.

OPINION

KENNEDY, Justice.

Appellant brought suit alleging violations of the Credit Code. After a trial to the court, judgment was entered that appellant take nothing.

The facts are undisputed. Appellant purchased a new pickup truck from appellee, Castellow Chevrolet (Castellow). Appellant signed a retail installment contract providing that the purchase price would be paid in 36 monthly payments, that a finance charge would be added to the purchase price and that other terms and conditions would apply. The contract was assigned to appellee, General Motors Acceptance Corporation (G.M.A.C.). The vehicle was purchased for personal use and not for resale. It is undisputed that this transaction was a retail installment transaction subject to the provisions of the Credit Code. Tex.Rev.Civ.Stat.Ann. art. 5069-2.01 et seq. (Vernon 1971). Findings of fact and conclusions of law were filed.

Appellant's first through fifth points of error complain that the trial court erred in holding that the retail installment contract did not violate the Credit Code.

By the first point of error, the appellant asserts that the retail installment contract was in violation of TEX.REV.CIV.STAT.ANN. art. 5069-7.07(6) (Vernon Supp.1984) which reads:

No retail installment contract ... shall:

(6) Provide that the buyer agrees not to assert against the seller or holder of (sic) ¹ any claim or defense arising out of the sale ...

Paragraph 7(c) of the retail installment contract provides:

7. It is mutually understood and agreed that:

(c) except where the seller is also the manufacturer of said property, buyer will not assert against any subsequent holder as assignee of this contract any claim or defense which the buyer may have against the manufacturer or a seller other than the seller of said property obtained pursuant hereto.

Appellees point out that the contract in question contained this provision in Paragraph 10:

Any provision of this contract prohibited by law by any state shall as to such state be ineffective to the extent of such prohibition without invalidating the remaining provisions of the contract.

A seller has a duty to prepare a contract in accordance with the standards established by the Credit Code, and a general disclaimer provision cannot save an otherwise illegal provision in a contract. Tradewinds Ford Sales, Inc. v. Paiz, 662 S.W.2d 164 (Tex.App.--Corpus Christi 1983, writ ref'd n.r.e.).

In reviewing a contract as a whole, we are obligated to adopt a rule of construction that comports with legality and compliance. Haley v. Pagan-Lewis Motors, Inc., 647 S.W.2d 319 (Tex.App.--Corpus Christi 1982, writ ref'd n.r.e.); Grant v. Friendly Chrysler-Plymouth Inc., 612 S.W.2d 667 (Tex.Civ.App.--Corpus Christi 1981, writ ref'd n.r.e.). Furthermore, contracting parties are presumed to have intended to obey the law unless the contrary clearly appears from the contract; and courts must presume the parties intended an interpretation of the terms that is legal and complies with the Code. Directly above appellant's signature on the contract, in bold print, is the following language:

NOTICE ²

ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF.

We find that a reasonable construction of the contract as a whole grants the buyer the right to assert against the seller, as well as any holder of the retail installment contract, all claims and defenses arising out of the sale. We further hold that the provision on the back of the contract does not limit the buyer to the contrary. Flores v. Charlie Thomas Courtesy Ford, Inc., 669 S.W.2d 165 (Tex.App.--Corpus Christi 1984, no writ); see Haley, 647 S.W.2d at 320; see also Lundquist Buick-Opel, Inc. v. Wikoff, 659 S.W.2d 466 (Tex.App.--Corpus Christi 1983, no writ); Ford Motor Credit Co. v. Gamez, 617 S.W.2d 720 (Tex.Civ.App.--Eastland 1980, writ ref'd n.r.e.). Appellant's first point of error is overruled.

Appellant's second point of error complains that the contract contains a provision which authorizes appellees to unlawfully enter upon appellant's premises to repossess the vehicle in case of default.

TEX.REV.CIV.STAT.ANN. art. 5069-7.07(3), at the time that the contract was signed, read as follows:

No retail installment contract ... shall:

(3) Authorize the seller or holder or other person acting on his behalf to enter upon the buyer's premises unlawfully or to commit any breach of the peace in the repossession of a motor vehicle. ³

Paragraph six of the "Additional Terms" located on the backside of the retail installment contract signed by appellant contained this language:

Further in any such event, [ (default) ] seller or any sheriff or other officer of the law may take immediate possession of said property without demand, ... and for this purpose seller may enter upon the premises where said property may be and remove same.

Appellant asserts that this provision would give appellee the right to trespass upon private property, open a locked garage and take the vehicle. Appellee replies that the above-quoted contract language merely regulates the bailor-bailee relationship and defines the right of the parties, citing the Rights of Secured Parties under TEX.BUS. & COM.CODE § 9.503 (Vernon Supp.1984), which reads:

Unless otherwise agreed, a secured party has on default the right to take possession of the collateral. In taking possession a secured party may proceed without judicial process if this can be done without breach of peace or may proceed by action.

Although the contract now before us was executed prior to the time art. 5069-7.07 was amended to specifically refer to Chapter 9 of the Texas Business and Commerce Code, we are guided by § 9.503 in addressing appellant's point of error.

In Martens v. General Motors Acceptance Corp., 584 S.W.2d 941 (Tex.Civ.App.--Dallas 1979, no writ), the Court, interpreting an identical GMAC contract provision, found that it did not authorize illegal acts in repossession of the vehicle on the part of vendor, and the language was understood not to allow a breach of the peace in the vehicle.

The Court stated:

The provision that '[s]eller may enter upon the premises where said property may be and remove same,' does not waive any rights of the buyer. If a breach of peace is committed by the seller, the buyer has an action in tort.

Martens, 584 S.W.2d at 943.

The Court further set forth:

We conclude that even if the Code is construed most strongly in favor of the consumer, it does not invalidate any provision of the GMAC contract. No provision of that contract expressly waives any of the buyer's rights of action for illegal acts of the seller during repossession. It is unclear what acts of the seller are intended to be covered by the term "illegal acts." Even if this expression is taken to include negligent acts, this contract cannot reasonably be construed to waive liability for seller's negligent acts. To be effective for that purpose, an express waiver of liability for negligence would be required.

Martens, 584 S.W.2d at 944. While Martens pertained to an alleged violation of art. 5069-7.07(4), the reasoning set forth therein is just as sound when applied to the issues raised by appellant today.

Again, it must be understood that contracting parties are presumed to have intended to obey the law unless the contrary clearly appears from the contract. Courts must presume that the parties intended an interpretation of the terms that is legal and complies with the Code; and, courts, in reviewing the contract as a whole, are obligated to adopt a rule of construction which comports with legality and compliance. Haley, 647 S.W.2d at 319.

In our case, the language of the additional terms of the installment contract did not permit the seller or his assignee to break the law in repossession of a vehicle warranted because of a buyer's failure to make payments. See Ormsby v. Parker Square Bank, 610 S.W.2d 246 (Tex.Civ.App.--Fort Worth 1980, no writ), where a contract authorizing a "right to peaceably enter" was approved. See also Charlie Hillard, Inc. v. Heath, 624 S.W.2d 758 (Tex.App.--Fort Worth 1981, no writ); Dub Shaw Ford, Inc. v. Jackson, 622 S.W.2d 664 (Tex.App.--Fort Worth 1981, no writ); and Woolard v. Texas Motors, Inc., 616 S.W.2d 706 (Tex.Civ.App.--Fort Worth 1981, no writ), where language authorizing repossession with "free right-of-entry" has been interpreted by Texas Courts not to mean that seller is given a contractual right to break the law by allowing trespass. The Courts read such language as a limitation; that is, recognizing that public policy favors peaceful, non-trespass repossessions, would allow seller to repossess property only where he found free right-of-entry. Appellant's second point of error is overruled.

Appellant's third point of error complains that the trial court erred in holding that the retail installment contract did not violate the Credit Code in that the contract contained a provision allowing appellee to accelerate the note under circumstances not permitted by the Code.

The installment contract contained this provision in Paragraph 6:

6. If buyer defaults in any payment due hereunder, ... or in the event either that the buyer fails for any reason to comply with paragraph 3(a) above or that said required physical damage insurance (whether procured by the seller...