Williams v. Back

• Decision Date: 07 October 1981
• Docket Number: No. 13230,13230
• Citation: 624 S.W.2d 272
• Parties: Calvin W. WILLIAMS, et al., Appellants, v. L. A. BACK, d/b/a Back Plumbing Company, Appellee.
• Court: Texas Court of Appeals

Page 272

624 S.W.2d 272

Calvin W. WILLIAMS, et al., Appellants, v. L. A. BACK, d/b/a Back Plumbing Company, Appellee.

No. 13230.

Court of Appeals of Texas, Austin.

Oct. 7, 1981.

James L. Cutcher, Barkley & Cutcher, Taylor, for appellants.

Dan E. Mayfield, Jr., Sheehy, Lovelace & Mayfield, Waco, for appellee.

POWERS, Justice.

Appellee, L. A. Back, sued appellant, Calvin W. Williams, to recover sums allegedly owed for labor and materials furnished by appellee under contracts pertaining to two construction projects, one in Georgetown, Texas, and the other in Hearne, Texas. The claims were founded upon two separate contracts, the first partly written and partly oral (the Georgetown project) and the second oral (the Hearne project). Appellee also sued for statutory attorney's fees under Tex.Rev.Civ.Stat.Ann. art. 2226 and for foreclosure of his statutory liens.

Based upon the jury's answers to special issues, the trial court awarded appellee judgment as follows: $3,470.00 for the Georgetown project; $1,010.13 for the Hearne project; and a combined amount of $6,000.00 in statutory attorney's fees, to be reduced by $1,200.00 and $1,500.00 in the event no appeals were taken to the Court of Civil Appeals and to the Supreme Court of Texas, respectively.

In this appeal, appellant contends that the trial court abused its discretion by denying him leave to file a trial amendment. Appellant requested leave to file the amendment when appellee offered in evidence a statement of account he had earlier mailed to appellant, but which appellant never received. The statement was received in evidence.

The statement is dated September 25, 1975, and under the heading "charges and credits" refers to the Hearne project and claims a "balance" of $1,060.64. This amount is broken down on the statement into two parts: a principal sum of $1,010.13 and $50.51 described as "1/2% per mo 12/13/75." In addition, there is stamped on the statement the following notation:

"If this account is not paid by 12/5/75 it will be referred to our Credit Protective Service Division of I. C. System, Inc."

Appellee removed the statement from its sealed envelope in open court at the time he offered it into evidence. Although the envelope was correctly addressed to appellant, the envelope bears notations by the postal service which read: "Return to Writer" and "Undeliverable as Addressed." On seeing the statement for the first time, in open court, appellant advised the court of his contention that it constituted a charge of usury under the holding in Houston Sash & Door Co. v. Heaner, 577 S.W.2d 217 (Tex.1979). He requested a mistrial and when his request was denied, after hearing, appellant asked leave to file a trial amendment pleading the defense and counterclaim based upon the asserted charge of usury. The trial court denied him leave to file the amendment, which he contends was an abuse of discretion.

Rule 66, Tex.R.Civ.P., provides that the trial court shall freely allow the pleadings to be amended when the presentation of the merits of the action will be subserved thereby. The trial court has wide discretion in its application of this rule. Vermillion v. Haynes, 147 Tex. 359, 215 S.W.2d 605 (1948). Accordingly, the rule is liberally construed, as the word "freely," contained therein, might indicate. City of Houston v. Hagman, 347 S.W.2d 355 (Tex.Civ.App.-Houston 1961, writ ref'd n. r. e.).

When discretion is allowed the trial court, it must be exercised in accordance with fixed principles or rules of law. The operative rule in this instance is that leave of court shall be granted freely unless the party resisting the amendment makes a showing of surprise, or that he will be prejudiced in the maintenance of his suit if the amendment is allowed. Hardin v. Hardin, 597 S.W.2d 347 (Tex.1980) (Campbell, J., concurring). Appellee made no such showing or attempted showing in this case.

Appellee objected to the filing of the trial amendment solely on the following grounds: the case had been pending for four to five years; any counterclaim would be barred by the statute of limitations; and the trial amendment was "without merit." It is apparent that none of these suggest surprise or prejudice to the maintenance of appellee's actions on their merits. The statement that the amendment was "without merit" amounted to no more than appellee's conclusion or opinion, the soundness of which was open to question. See Vermillion v. Haynes, supra. Moreover, we cannot say, as a matter of law, that a counterclaim or defense of usury could not be founded upon the statement in question because appellant never received it.

Usury is the contracting for, charging or receiving of interest in an amount greater than that allowed by law. Tex.Rev.Civ.Stat.Ann. art. 5069-1.06. There are no contentions that appellee contracted for or collected usury; the issue before us is whether, by reason of the undelivered statement of account, he charged usury. Appellee takes the not implausible position that there could be no charging of usury, since it was conclusively shown at trial that appellant never received the letter which contained the statement. We cannot, however, agree with the statutory interpretation which appellee's position requires.

Usury is neither a crime nor a tort in the ordinary sense. Harned v. E-Z Finance Co., 151 Tex. 641, 254 S.W.2d 81 (1953). Article 5069-1.06 creates a statutory cause of action that is sui generis. ¹ When such an action is founded upon the creditor's charge of usurious interest, the actionable conduct is that of the creditor acting unilaterally and independently. In Windhorst v. Adcock Pipe & Supply, 547 S.W.2d 260 (Tex.1977) (per curiam), the Supreme Court of Texas said:

"By unilaterally charging the one and one-half percent per month 'finance charge', the retailer in this case charged more than ten percent per annum, and is, therefore, liable for penalties. (emphasis added)."

The reaction of the debtor to the charging of usury and any financial or other consequences to him are immaterial to the cause of action created by the statute, for his "damages" are the specified sums that the statute declares shall be forfeited by the creditor or assessed against him. They are not measured by any injury to the debtor-his payment is not necessary to an action based upon the charging of usury. What then constitutes a unilateral act of charging usury?

In Moore v. Sabine National Bank, 527 S.W.2d 209 (Tex.Civ.App.-Austin 1975, writ ref'd n. r. e.), this Court determined that:

"... a charge could be 'the debiting of an amount due or more certainly, an act by the promissee constituting or implying a demand for its payment, e. g., the inclusion in a statement of indebtedness to the debtor.' "

See also Mecey v. Seggern, 596 S.W.2d 924 (Tex.Civ.App.-Austin 1980, no writ). The statement of account involved in the present case quite clearly constitutes a demand for payment of the amount claimed to be usurious.

In Hagar v. Williams, 593 S.W.2d 783 (Tex.Civ.App.-Amarillo 1979, no writ), the court held that the creditor's unilateral action in entering a usurious amount of interest on a statement of account constituted the charging of usury within the meaning of the statute. The court reasoned:

"Logically, the debtor, without knowledge from some source of the interest charged to his account, would have no occasion to seek any recourse provided by the statute, but it does not follow that the mailing of a statement showing the interest charged and a demand for its payment are prerequisite for a charge of interest within the meaning of the statute."

We agree.

These cases, taken together, correctly stand for the proposition that the foundation of the statutory action, in the case of a creditor who charges usury, is the independent, unilateral claim for usury made by the creditor and not any communication of that charge to the debtor or any effect produced thereby in the debtor. Appellee would distinguish these cases on the basis that in each of them there existed some evidence that the debtor actually received the statements which contained the claim alleged to be usurious. The distinction is immaterial.

The word "charges" used in the statute refers intrinsically to a unilateral action by the creditor or lender. The statute itself makes no requirement that the charge be actually communicated to the debtor. The statute is not ambiguous and we are required, therefore, to apply it literally. In addition, there exist other fundamental reasons which forbid our adoption of appellee's theory that there must be actual communication of the claim to the debtor.

Article 5069-1.01, et seq., is aimed at the regulation of business practices that the legislature concluded were unethical or undesirable. This regulation takes several forms. One method of regulation relied upon in the statute is that of providing a statutory cause of action in favor of individuals who have been the object of an unethical or undesirable business practice proscribed by the statute. In the case of borrowers and the purchasers of goods and services on credit, the legislature intended to protect them individually from excessive interest, but it intended also to curb such charges generally by providing the statutory cause of action as a means of policing the practice of assessing usurious interest unilaterally, as well as by the debtor's assent. See Declaration of Legislative Intent, 15 Tex.Rev.Civ.Stat.Ann. 1-2 (Vernon 1971). To engraft upon the statutory action the additional element of actual notice would, in effect, circumvent the regulatory purpose of the statute and the legislative intent behind it. Furthermore, when such statutory actions are created by the legislature, they are governed strictly by the statute of their creation. We are, therefore, not free to engraft upon the cause of action any additional elements that may appear to us to be wise or expedient. Texas Employment Comm'n...