Jim Walter Homes, Inc. v. Gibbens

• Decision Date: 30 September 1980
• Docket Number: No. 16330,16330
• Citation: 608 S.W.2d 706
• Parties: JIM WALTER HOMES, INC., Appellant, v. William F. GIBBENS and Phyllis Jean Gibbens, Appellees.
• Court: Texas Court of Appeals

Page 706

608 S.W.2d 706

JIM WALTER HOMES, INC., Appellant, v. William F. GIBBENS and Phyllis Jean Gibbens, Appellees.

No. 16330.

Court of Civil Appeals of Texas, San Antonio.

Sept. 30, 1980.

Rehearing Denied Oct. 29, 1980.

William H. Daniel, McGinnis, Lochridge & Kilgore, Austin, Morris Atlas, Gary Gurwitz, Atlas, Hall, Schwarz, Mills, Gurwitz & Bland, McAllen, for appellant.

Don Krause, Bayne, Snell & Krause, San Antonio, Hector Gonzalez, Sinton, for appellees.

OPINION

KLINGEMAN, Justice.

This is an appeal by Jim Walter Homes, Inc., from a summary judgment granted to William F. Gibbens and wife, Phyllis Jean Gibbens, awarding the Gibbens recovery for alleged violation of Chapter 6 of the Texas Consumer Credit Code, Article 5069-6.01 et seq. Appellant will sometimes be hereinafter referred to as "Jim Walter" or "defendant," and appellees as "Gibbens" or "plaintiffs."

On June 9, 1976, the Gibbens entered into a contract with Jim Walter which provided that Jim Walter would build a new home for the Gibbens on their unencumbered property in Sandia, Texas, for a cash price of $20,860, plus a finance charge of $22,682, for a total of $43,542, with the total amount to be repaid in 180 monthly installments of $241.90 each. The contract disclosed that the annual percentage rate was 11.4%. To secure payment of this contract Jim Walter acquired a first deed of trust lien on the Gibbens' property.

The pre-printed form contract of Jim Walter here involved includes in bold print the statement that "the buyer also acknowledges that he had the election of purchasing either for cash or upon a time price basis and has elected to purchase on the time price basis." The contract here involved is virtually the identical type of form as the contract construed and passed on by this court in Anguiano v. Jim Walter Homes, Inc., 561 S.W.2d 249 (Tex.Civ.App.-San Antonio 1978, writ ref'd n.r.e.). In Anguiano, this court held that such a financial arrangement was a "time price differential" and was not an "interest transaction" and was governed by Chapter 6 of the Consumer Credit Code, Article 5069-6.01 et seq., and that such contract violated Chapter 6. In 1977, the Legislature passed certain amendments to the Consumer Credit Code, the applicable provisions of which will be hereinafter discussed, and which are sometimes referred to as the "cure" or "savings" amendments. Shortly after the decision by this court in Anguiano, Jim Walter sent to the Gibbens a letter attempting to correct the violations of Chapter 6 held by this court in Anguiano. The letter in part stated it would refund the portion of payment previously paid and attributed to the time price differential charge in excess of an annual percentage rate of 10% and stated that in addition the amount of the future monthly payments would be decreased to reflect the reduction of the time price differential to an annual percentage rate of 10%. No formal release of its first lien was sent or tendered to the Gibbens by such letter but such letter had certain provisions thereon that the mortgage lien would be waived under certain stated conditions or contingencies set forth in the letter. On March 10, 1978, Jim Walter forwarded to the Gibbens a check representing the refund hereinabove referred to, and new coupon books for reduced payments in the future.

Thereafter, appellees filed suit against Jim Walter in the District Court of Jim Wells County, Texas, alleging that Jim Walter had violated Chapter 6 of the Texas Consumer Credit Code by taking a first lien on real estate and also alleging that Jim Walter had violated the Texas Deceptive Trade Practices-Consumer Protection Act in connection with the sale and construction of the house. Gibbens moved for partial summary judgment on their Chapter 6 claim and this motion was granted by the trial court. Thereafter, plaintiffs non-suited their deceptive trade practices claim and final judgment was entered for plaintiffs upon their claim for the Chapter 6 violations.

On this appeal, Jim Walter asserts that the trial court erred in granting the Gibbens' motion for summary judgment on their claim that the contract violated Chapter 6 of the Texas Consumer Credit Code by providing for its first lien on the real estate involved because (1) the evidence conclusively established or at least raised a fact question that if Jim Walter violated Chapter 6, it cured such violations in accordance with the provisions of Article 5069-8.01(c); (2) the contract involved is not covered by and is not a Chapter 6 transaction; (3) if such contract is covered by Chapter 6 and violates the first lien prohibition contained in Chapter 6, Article 5069-6.05(7), such prohibition violates Article I, section 3, and Article XVI, sections 37 and 50, of the Texas Constitution, and is unconstitutional under the Texas Constitution.

We first consider Jim Walter's contention that the transaction here involved is not a Chapter 6 transaction and is not governed by the terms and provisions of Chapter 6. Such contention is based on two premises: (1) this court in Anguiano incorrectly held that the transaction was a Chapter 6 transaction; that such holding creates numerous problems and this court should reconsider its original holding; (2) if such transaction was originally a Chapter 6 transaction, the so-called cure letters of February 22 and March 10, 1978, sent out by Jim Walter to the Gibbens, transformed the transaction from a "time price differential transaction" to an "interest transaction," and as so restructured the transaction is no longer a Chapter 6 transaction and does not violate Chapter 6.

The contracts involved in Anguiano and the case herein are the same form of contract and are virtually identical in their provisions. In Anguiano, this court held that a financial arrangement in which the landowners were to pay the contract of Jim Walter a cash price of $13,910 plus a finance charge of $13,124, for a total amount of $29,034, to be repaid in 180 monthly installments of $161.30 each, with an annual percentage rate of 11.4%, was a "time price differential transaction" and was not an "interest transaction" and that such contract fits squarely within the definition of "retail installment transaction" and is within and was covered by Chapter 6 of the Credit Code. Jim Walter now reiterates basically the same contentions in this connection as made in Anguiano as to why the transaction is not a Chapter 6 transaction. We again reject this contention and adhere to our holding in Anguiano.

With regard to Jim Walter's contention that the changes and restructuring contained in the letters of February and March, 1978, changed or transformed the transaction so that it was no longer a Chapter 6 transaction, we have examined and reviewed such letters and find nothing therein that would change such transaction from a "time price differential transaction" to an "interest transaction," or that would remove it from the coverage of Chapter 6. We reject Jim Walter's contention in this regard.

Jim Walter's basic contentions herein made and the primary thrust of its appeal is that, assuming it was guilty of any violations of the Texas Consumer Credit Code in the original transaction, it cured such violations under the terms and provisions of the 1977 amendment to the Credit Code, the so-called "cure statute," and relieved itself of any penalty for violating the Credit Code.

In 1977, the Legislature passed the statute sometimes referred to as the "cure statute," and the pertinent portion of such statute here involved, Article 5069-8.01(c), provides as follows:

(c)(1) A person has no liability to an obligor for a violation of this Subtitle or of Chapter 14 of this Title if within 60 days after having actually discovered such violation such person corrects such violation as to such obligor by performing the required duty or act or by refunding any amount in excess of that authorized by law.

Tex.Rev.Civ.Stat.Ann. art. 5069-8.01(c)(1) (Vernon Supp. 1971-1979).

In 1977 the Legislature also amended Chapter 6 of the Credit Code, and the applicable amendment, Article 6.05(7), here involved, in pertinent part reads as follows:

No retail installment contracts shall:

(7) Provide for or grant a first lien upon real estate to secure such obligation, except ... (b) such lien as is provided for or granted by a contract or series of contracts for the sale or construction and sale of a structure to be used as a residence so long as the time price differential does not exceed an annual percentage rate of 10 percent. (amending language underscored)

Tex.Rev.Civ.Stat.Ann. art. 6.05(7) (Vernon Supp. 1971-1979).

On January 18, 1978, this court held in Anguiano that Jim Walter's contract, structured as the one here involved, was governed by Chapter 6 of the Texas Consumer Credit Code, Article 5069-6.01 et seq., and such contract violated Chapter 6 because it provided for a first lien on real estate.

Shortly after the Anguiano decision was handed down, Jim Walter on February 22, 1978, mailed to the Gibbens a letter purporting to correct the violations of Chapter 6, in which letter Jim Walter stated it would refund that portion of payments previously paid and attributable to the time price differential charged in excess of an annual percentage rate of 10% per annum, and stated that future payments would be decreased to reflect the reduction of the time price differential as a percentage rate of 10%. On March 10, 1978, Jim Walter sent to the Gibbens a check making a refund of that portion of previous payments made in excess of 10%, as hereinabove discussed, and also sent new payment coupons to be used in connection with the reduced future payments. The Gibbens cashed the refund check and began making payments at the reduced rate.

We have concluded that Jim Walter's acts and conduct after the passage of the cure statute were in compliance with the terms and provisions of such statute for curing...