Riverside Nat. Bank v. Lewis

• Decision Date: 18 June 1980
• Docket Number: No. B-8046,B-8046
• Parties: RIVERSIDE NATIONAL BANK et al., Petitioners, v. James LEWIS, Respondent.
• Court: Texas Supreme Court

Page 169

603 S.W.2d 169

RIVERSIDE NATIONAL BANK et al., Petitioners, v. James LEWIS, Respondent.

No. B-8046.

Supreme Court of Texas.

June 18, 1980.

Rehearing Denied July 16, 1980.

Barrow, Bland & Rehmet, Charles J. Wilson and Kenneth C. Raney, Jr., Houston (on appeal only), for petitioners.

Haynes & Fullenweider, Robert B. Wallis and Jan Woodward Fox, Houston, for respondent.

GREENHILL, Chief Justice.

This case primarily involves the question whether one who seeks a loan from a bank in order to refinance a car qualifies as a "consumer" under the Deceptive Trade Practices Act (DTPA). ¹ The trial court disallowed recovery under the DTPA, but the court of civil appeals reformed the judgment to hold the bank liable under the DTPA. 572 S.W.2d 553. Since we believe The relevant facts are as follows: In February, 1975, Lewis purchased a new Cadillac El Dorado. Allied Bank provided almost $10,500.00 in financing. To secure the loan, Allied Bank took a security interest in the car and kept a $6,000.00 certificate of deposit as security. Lewis failed to make the first payment due on April 10, and a check that he gave a few days later was returned for insufficient funds. After these occurrences, Mr. Little, Lewis' loan officer at Allied Bank, asked Lewis to move the loan to another bank.

that Mr. Lewis was not a "consumer" in the instant transaction, we hold that the trial court correctly denied recovery under the DTPA. We also hold that under this record, Lewis is entitled to recover from Riverside Bank upon his cause of action for common law fraud. Further, we hold that there is some evidence to support recovery of exemplary damages for fraud. We remand the cause to the court of civil appeals to pass upon the sufficiency of the evidence as to exemplary damages.

After two unsuccessful attempts to refinance the loan, Lewis went to Riverside Bank on May 2. Arthur Carroll, a junior loan officer, helped Lewis complete a loan application, and told Lewis that the application would have to be approved by his superiors at the Bank. At that time, Carroll called the Allied Bank loan officer, Mr. Little, and told him that Lewis had applied for the loan at Riverside Bank.

On May 6, 1975, Carroll called Little once again. During this phone conversation, Carroll informed Little that the loan had been approved, and requested Little to have Allied Bank forward a draft, the title, and the certificate of deposit to Riverside Bank. After forwarding these items, there was no communication between Little and Carroll until May 14, 1975.

On May 14, Little called Carroll in order to determine why the draft had not been paid. Carroll told Little that the draft had been held up due to a senior loan officer's questions, but that it would be paid on the next day. On May 15, Little informed Carroll that he wanted the draft paid immediately, or returned. Carroll replied that the draft had been paid, and the cashier's check was in the mail. The next day, May 16, Carroll told Little that the draft would not be paid.

During the course of these communications between Little, at Allied Bank, and Carroll, at Riverside Bank, James Means, executive vice-president at Riverside National Bank, did some investigation of Lewis' loan application. Upon calling Allied Bank, Means discovered that Lewis' application misrepresented his net income and did not disclose the fact that he had already failed to make his first, and only, payment. Thus, on May 14, Means decided that Riverside would not make the loan to Lewis.

On May 15, however, Carroll called Lewis, told him that the loan had been approved, and asked him to come to the bank to sign the necessary papers. Lewis complied with the request, signing a promissory note in the amount of $12,871.80 on May 15. This note was kept by Riverside until the time of trial, although it was never sought to be collected. As previously stated, on May 15, Carroll was also representing to Allied Bank that the loan would be taken by Riverside Bank.

After being told on May 16 that Riverside would not take the loan, Allied Bank repossessed the car and sold it at auction. The sale failed to generate sufficient money to cover the full loan at Allied, and a deficiency of $3,177.50 was deducted from Lewis' certificate of deposit, with the balance being returned to him.

Lewis sued Riverside for the losses he suffered in this transaction, claiming that Riverside, through Carroll, had (1) engaged in fraud, (2) breached its contract to loan money, (3) engaged in deceptive trade practices against him, and (4) converted his property by retaining the promissory note, yet refusing to lend him money.

After trial to a jury, the jury found that Riverside had (1) wrongfully dishonored the draft sent by Allied to Riverside, (2) committed fraud on Lewis by refusing to make the loan, and (3) violated the Deceptive The trial court entered judgment for Lewis in the amount of $13,277.50, representing the actual and exemplary damages under the fraud theory of action. The court also held that the DTPA was not applicable to the instant transaction, and declined to enter judgment under the theory of recovery for treble damages and attorney's fees.

Trade Practices Act by refusing to lend the money. The jury found that Lewis had suffered actual damages in the amount of $3,277.50. As a consequence of finding that Riverside had acted with malice in refusing this loan, the jury also found that $10,000.00 should be awarded as exemplary damages. The jury also found that reasonable attorney's fees would be $6,700.00.

On appeal, the court of civil appeals, sitting in Houston, reformed the judgment, and as reformed, affirmed. 572 S.W.2d 553. The Houston court held that: (1) Lewis was not entitled, under the pleading and proof, to recover under the theory of wrongful dishonor; (2) Lewis did establish his cause of action under the fraud theory, but that there was no evidence of malice that could justify the jury's award of exemplary damages; (3) Lewis' transactions with Riverside Bank were covered by the Deceptive Trade Practices Act, and that he was thus entitled to treble damages plus attorney's fees. Thus, the Houston court entered judgment for Lewis in the amount of $16,562.50, representing $9,862.50 as treble damages under the DTPA and $6,700.00 as attorney's fees.

Both Riverside and Lewis have perfected writs of error to this Court. Riverside contends that the court of civil appeals erred in holding that Lewis could recover under the DTPA for its failure to loan money, as promised. Lewis contends that the court of civil appeals erred in holding that there was no evidence of malice to support the award of exemplary damages. We agree with both parties' contentions; i. e., that there is some evidence to support a recovery of exemplary damages, but that Lewis does not have a cause of action under the Deceptive Trade Practices Act.

RIVERSIDE'S LIABILITY UNDER THE DECEPTIVE TRADE PRACTICES ACT.

The alleged deceptive acts in this case occurred during May, 1975. Accordingly, the statutory provisions that govern this case are those that were in effect at the time that the alleged deceptive acts occurred. See Woods v. Littleton, 554 S.W.2d 662, 666 (Tex.1977). At the time of these actions, the pertinent parts of the Act read as follows:

Sec. 17.44. Construction and Application.

This subchapter shall be liberally construed and applied to promote its underlying purposes, which are to protect consumers against false, misleading, and deceptive business practices, unconscionable actions, and breaches of warranty and to provide efficient and economical procedures to secure such protection.

Sec. 17.45. Definitions.

As used in this subchapter:

(1) "Goods" means tangible chattels bought for use.

(2) "Services" means work, labor, and services for other than commercial or business use, including services furnished in connection with the sale or repair of goods.

(3) "Person" means an individual, partnership, corporation, association, or other group, however organized.

(4) "Consumer " means an individual who seeks or acquires by purchase or lease, any goods or services.

(6) "Trade" and "commerce" mean the advertising, offering for sale, sale, lease, or distribution of any good or service, of any property, tangible or intangible, real, personal, or mixed, and any other article, commodity, or thing of value, wherever situated, and shall include any trade or commerce directly or indirectly affecting the people of this state.

Sec. 17.46. Deceptive Trade Practices Unlawful.

(a) False, misleading, or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.

Sec. 17.47. Restraining Orders.

(a) Whenever the consumer protection division has reason to believe that any person is engaging in, has engaged in, or is about to engage in any act or practice declared to be unlawful by this subchapter, and that proceedings would be in the public interest, the division may bring an action in the name of the state against the person to restrain by temporary or permanent injunction the use of such method, act, or practice.

Sec. 17.50. Relief for Consumers.

(A) A consumer may maintain an action if he has been adversely affected by any of the following:

(1) the use or employment by any person of an act or practice declared to be unlawful by Section 17.46 of this subchapter . . . .

Texas Laws 1973, chapter 143, section 1, at 322-326.

The Act thus differentiates between the remedies available to correct violations of the Act. A "person" may have engaged in a deceptive act by presenting any misleading information concerning any item of value. See sections 17.46(a), 17.45(6). Any person engaging in such deceptive practices may be subjected to a suit by the Consumer Protection Division of the Attorney General's Office, under section 17.47. But, one who engages in deceptive acts may not be subjected to a private suit for damages under the...