Texas Bankers Ass'n v. Acorn

• Decision Date: 08 January 2010
• Docket Number: No. 03-06-00273-CV.,03-06-00273-CV.
• Citation: 303 S.W.3d 404
• Parties: TEXAS BANKERS ASSOCIATION, Finance Commission of Texas, and Credit Union Commission of Texas//Association of Community Organizations for Reform Now (ACORN), Valerie Norwood, Elsie Shows, MaryAnn Robles-Valdez, Bobby Martin, Pamela Cooper, and Carlos Rivas, Appellants//Cross-Appellants, v. ASSOCIATION OF COMMUNITY ORGANIZATIONS FOR REFORM NOW (ACORN), Valerie Norwood, Elsie Shows, MaryAnn Robles-Valdez, Bobby Martin, Pamela Cooper, and Carlos Rivas//Texas Bankers Association, Finance Commission of Texas, and Credit Union Commission of Texas, Appellees//Cross-Appellees.
• Court: Texas Court of Appeals

303 S.W.3d 404

TEXAS BANKERS ASSOCIATION, Finance Commission of Texas, and Credit Union Commission of Texas//Association of Community Organizations for Reform Now (ACORN), Valerie Norwood, Elsie Shows, MaryAnn Robles-Valdez, Bobby Martin, Pamela Cooper, and Carlos Rivas, Appellants//Cross-Appellants, v. ASSOCIATION OF COMMUNITY ORGANIZATIONS FOR REFORM NOW (ACORN), Valerie Norwood, Elsie Shows, MaryAnn Robles-Valdez, Bobby Martin, Pamela Cooper, and Carlos Rivas//Texas Bankers Association, Finance Commission of Texas, and Credit Union Commission of Texas, Appellees//Cross-Appellees.

No. 03-06-00273-CV.

Court of Appeals of Texas, Austin.

January 8, 2010.

Alex S. Valdes, Winstead, Sechrest & Minick, Ann Hartley, Assistant Attorney General, Jack Hohengarten, Deputy Division Chief, Financial Litigation Division, Craig T. Enoch, Winstead PC, Austin, TX, for Appellants.

Bruce E. Priddy, Stephen Gardner, Dallas, TX, Robert L. Wharton, Nacogdoches, TX, Nelson H. Mock, Robert W. Doggett, Austin, TX, for Appellees.

Before Justices PATTERSON, PURYEAR and HENSON.^*

OPINION

DIANE M. HENSON, Justice.

The Association of Community Organizations for Reform Now (ACORN) and a number of individuals who took out home equity loans in Texas filed suit against the Finance Commission of Texas and the Credit Union Commission of Texas (collectively, the Commissions), seeking to invalidate certain regulations adopted by the Commissions in relation to home equity lending.¹ See Tex. Gov't Code Ann. § 2001.038 (West 2008) (allowing declaratory-judgment actions to challenge validity of regulation). The Texas Bankers Association (TBA) intervened, arguing that the interpretations were a proper exercise of the Commissions' authority. Both sides filed motions for summary judgment, and the trial court granted each motion in part, invalidating seven of the nine challenged regulations. TBA and the Commissions appealed, arguing that the trial court erred in invalidating four of the regulations.² ACORN cross-appealed, contending that the trial court erred in refusing to invalidate the remaining two regulations. The trial court's judgment was stayed pending resolution of this appeal. We affirm the trial court's judgment in part and reverse and render in part.³

BACKGROUND

In 1997, Texas voters approved an amendment to the Homestead Provision of the Texas Constitution, see Tex. Const. art. XVI, § 50, making Texas the last state in the nation to allow homeowners to borrow against their home equity. Id. § 50(a)(6); see also LaSalle Bank Nat'l Ass'n v. White, 246 S.W.3d 616, 618 (Tex.2007) ("For over 175 years, Texas has carefully protected the family homestead from foreclosure by limiting the types of liens that can be placed upon homestead property. Texas became the last state in the nation to permit home-equity loans when constitutional amendments voted on by referendum took effect in 1997.").

The Texas Constitution was amended again in 2003 to authorize the legislature to delegate the authority to issue interpretations of the home equity lending provisions:

The legislature may by statute delegate to one or more state agencies the power to interpret Subsections (a)(5)-(a)(7), (e)(p), and (t), of this section. An act or omission does not violate a provision included in those subsections if the act or omission conforms to an interpretation of the provision that is:

(1) in effect at the time of the act or omission; and

(2) made by a state agency to which the power of interpretation is delegated as provided by this subsection or by an appellate court of this state or the United States.

Id. § 50(u). Pursuant to this amendment, the legislature delegated interpretive authority over the home equity provisions to the Commissions, see Tex. Fin.Code Ann. §§ 11.308, 15.413 (West Supp.2008), and the Commissions in turn adopted a number of regulations interpreting the home equity provisions, see 7 Tex. Admin. Code §§ 153.1-.96 (2009) (Joint Fin. Regulatory Agencies, Home Equity Lending).⁴ The Commissions' interpretations are subject to review under the Administrative Procedure Act (APA). See Tex. Fin.Code Ann. §§ 11.308, 15.413; see also Tex. Gov't Code Ann. § 2001.038.

ACORN filed suit against the Commissions under the APA, seeking to invalidate nine of the Commissions' regulations, and TBA intervened in support of upholding the regulations. ACORN argued that the regulations either contradicted the plain meaning and intent of the constitutional provisions or represented new rules that the Commissions had no authority to enact. The trial court granted summary judgment, invalidating seven of the challenged regulations and determining that the remaining two were valid. This appeal and cross-appeal followed.

STANDARD OF REVIEW

Summary judgments are reviewed de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex.2005). When, as here, both parties move for summary judgment on the same issues, and the trial court grants one motion and denies the other, the appellate court considers the summary-judgment evidence presented by both sides, determines all questions presented, and if the reviewing court finds that the trial court erred, renders the judgment the trial court should have rendered. Id.

"The validity or applicability of a rule ... may be determined in an action for declaratory judgment if it is alleged that the rule or its threatened application interferes with or impairs, or threatens to interfere with or impair, a legal right or privilege of the plaintiff." Tex. Gov't Code Ann. § 2001.038. Because section 2001.038 of the APA does not prescribe a standard of review, the Texas Supreme Court has held that "[j]udicial review of rules is thus largely unlimited in ... scope." Railroad Comm'n v. WBD Oil & Gas Co., 104 S.W.3d 69, 75 (Tex.2003).

The parties disagree on the level of deference to be afforded to the Commissions' interpretations of the home equity provisions of the constitution. Typically, "[c]onstruction of a statute by the administrative agency charged with its enforcement is entitled to serious consideration, so long as the construction is reasonable and does not contradict the plain language of the statute." Tarrant Appraisal Dist. v. Moore, 845 S.W.2d 820, 823 (Tex.1993). The guidelines applicable to the construction of statutes are equally applicable to the construction of the Texas Constitution. See Rooms With a View, Inc. v. Private Nat'l Mortgage Ass'n, 7 S.W.3d 840, 844 (Tex.App.-Austin 1999, pet. denied). ACORN argues, however, that the constitution and the finance code provide the Commissions with only a limited grant of interpretive authority, as opposed to the broader type of enforcement authority that warrants deference to an agency's interpretation. See Tex. Const. art. XVI, § 50(u) (authorizing legislature to delegate to agencies "the power to interpret" home equity provisions of constitution); Tex. Fin.Code Ann. §§ 11.308, 15.413 (providing that Commissions may issue interpretations of home equity provisions). On that basis, ACORN contends that the Commissions' interpretations are entitled to little or no deference. We disagree with ACORN's contention that the power to interpret portions of the constitution is necessarily a more narrow grant of authority than a state agency's enforcement power over matters within its jurisdiction. In expressly delegating interpretive authority over the constitution to state agencies, the legislature must have intended to afford the resulting interpretations at least the same level of deference given to an agency's interpretation of a statute it is charged to enforce. As a result, we will defer to the Commissions' interpretations unless they are unreasonable or contrary to the plain language of the constitution. See Moore, 845 S.W.2d at 823.

We must presume "that the language of the Texas Constitution is carefully selected," and "construe its words as they are generally understood." Spradlin v. Jim Walter Homes, Inc., 34 S.W.3d 578, 580 (Tex.2000). We must also "strive to give constitutional provisions the effect their makers and adopters intended." Doody v. Ameriquest Mortgage Co., 49 S.W.3d 342, 344 (Tex.2001).

DISCUSSION

Cap on Fees Other Than Interest

In their first issue on appeal, the Commissions and TBA argue that the trial court erred in invalidating the Commissions' interpretation of the meaning of "interest" for purposes of the cap on fees other than interest in the context of a home equity loan. Section 50(a)(6)(E) of article 16 of the Texas Constitution states that the only permissible type of home equity loan is one that:

does not require the owner or the owner's spouse to pay, in addition to any interest, fees to any person that are necessary to originate, evaluate, maintain, record, insure, or service the extension of credit that exceed, in the aggregate, three percent of the original principal amount of the extension of credit.

Tex. Const. art. XVI, § 50(a)(6)(E) (emphasis added).

This provision limits fees, other than interest, to three percent of the principal amount of the loan. In Rule 153.1(11), the Commissions defined "interest" for purposes of this fee cap as "[i]nterest as defined in the Texas Finance Code § 301.002(4)[sic] and as interpreted by the courts." Rule 153.1(11). Section 301.002(a)(4) of the finance code, located in the subtitle governing usury, defines interest as "compensation for the use, forbearance, or detention of money." Tex. Fin. Code Ann. § 301.002(a)(4) (West 2006).⁵ The Commissions further clarified their interpretation of the meaning of "interest" in Rule 153.5(3), stating, "Charges an owner or an owner's spouse is required to pay that constitute interest under the law, for example per diem interest and points, are not fees subject to the three percent limitation." Rule 153.5(3).⁶

ACORN argues that the commonly understood meaning of "interest" is not the broad definition found in the usury statutes, but the amount of interest...