Zapata v. Ford Motor Credit Co.

• Decision Date: 06 May 1981
• Docket Number: No. B-9889,B-9889
• Citation: 24 Tex.Sup.Ct.J. 377,615 S.W.2d 198
• Parties: Arnulfo ZAPATA, Petitioner, v. FORD MOTOR CREDIT COMPANY et al., Respondents.
• Court: Texas Supreme Court

Page 198

615 S.W.2d 198

Arnulfo ZAPATA, Petitioner, v. FORD MOTOR CREDIT COMPANY et al., Respondents.

No. B-9889.

Supreme Court of Texas.

May 6, 1981.

Rehearing Denied June 3, 1981.

Boyle & Grigson, James G. Boyle, Austin, for petitioner.

Baker & Botts, Randall A. Hopkins, Houston, Perkins, Oden, Warburton, McNeill & Adami, J. G. Adami, Alice, for respondents.

McGEE, Justice.

Arnulfo R. Zapata sued Yates Ford, Inc. and Ford Motor Credit Company (FMCC) for statutory penalties, alleging that certain provisions in a retail installment contract violate the Texas Consumer Credit Code. ¹ The trial court granted Zapata's motion for partial summary judgment and, after a nonjury trial on the issue of attorney's fees, rendered final judgment against Yates Ford and Ford Motor Credit Company. The court of civil appeals reversed the judgment of the trial court and rendered judgment that Zapata take nothing. 605 S.W.2d 362 (Tex.Civ.App.1980). We reverse the judgment of the court of civil appeals and affirm the judgment of the trial court.

On July 15, 1976, Zapata purchased a new pickup truck from Yates Ford in Austin, Texas. He financed the purchase by executing a retail installment contract which was later assigned to FMCC. The contract was on a preprinted form prepared and supplied by FMCC. Twenty-six months later, in September 1978, Zapata sued to recover a $2,000 statutory penalty and reasonable attorney's fees under section 8.01(b) for violations of the Credit Code. ² When suit was filed, Yates Ford and FMCC had not repossessed or attempted to repossess the truck; Zapata was current in his obligations under the contract, and Zapata claimed no actual damages. The recovery sought by Zapata is purely penal in nature.

Zapata moved for a partial summary judgment. He alleged the retail installment contract contained seven violations of the Credit Code. ³ The trial court granted the motion and assessed a $2,000 penalty against Yates Ford and FMCC but did not say on which violation it based its ruling. After a trial on the issue of attorney's fees, the trial court rendered final judgment against Yates Ford and FMCC, jointly and severally, for a $2,000 penalty and $5,000 in attorney's fees. The court of civil appeals reversed the judgment and rendered judgment that Zapata take nothing. The court of civil appeals ruled against Zapata on each alleged violation.

We granted Zapata's application for writ of error on two points of error. In the first point, Zapata contends the waiver clause in paragraph nineteen (19) of the retail installment contract violates section 7.07(4) of the Code. This section prohibits waiver of buyer's rights of action against a seller in installment contracts for illegal acts committed in the repossession of a motor vehicle. In the second point, he argues the retail installment contract fails to "clearly and conspicuously" disclose that physical damage insurance is required in violation of section 7.06(3) of the Code. We hold the waiver clause violates section 7.07(4). Thus, we find it unnecessary to discuss Zapata's point concerning a violation of section 7.06(3) because a single violation of the Code will trigger the penalties under section 8.01.

The waiver clause is found in paragraph nineteen (19) on the back of the contract. It provides:

"Any personalty in or attached to the property when repossessed may be held by Seller without liability and Buyer shall be deemed to have waived any claim thereto unless written demand by certified mail is made upon Seller within 24 hours after repossession."

Zapata contends the second part of the waiver clause, which provides "... Buyer shall be deemed to have waived any claim thereto unless written demand by certified mail is made upon Seller within 24 hours after repossession," violates section 7.07(4) of the Code. He relies on Southwestern Investment Company v. Mannix, 557 S.W.2d 755 (Tex.1977), and Ford Motor Credit Company v. Cole, 503 S.W.2d 853 (Tex.Civ.App. Forth Worth 1973, writ dism'd).

Section 7.07(4) provides:

"No retail installment contract or retail charge agreement shall:

....

"(4) Provide for a waiver of the buyer's rights of action against the seller or holder or other person acting therefor for any illegal act committed in the collection of payments under the contract or agreement or in the repossession of a motor vehicle; ..."

In Southwestern Investment Company v. Mannix, supra, the question was whether a provision in a retail installment contract of goods violated section 6.05(4) of the Code. The statutory language in section 6.05(4) is identical to the statutory language in section 7.07(4). However, section 6.05(4) applies to retail installment sales of goods generally and section 7.07(4) applies exclusively to motor vehicle installment sales. The contract provision in Mannix provided "Nothing shall prevent the Secured Party from removing (the property) from any premises to which same may be attached, upon default or breach of this Retail Installment Contract and Security Agreement or any part thereof, and the Debtor agrees to sustain the cost of repairs, if any, of any physical injury to the real estate caused by such removal."

In Mannix, we held this provision violated section 6.05(4) because it waived a buyer's right of action for a tort committed in the repossession of goods. We explained the Legislature intended for such unconscionable contract provisions to be unenforceable and to penalize creditors for including these provisions in installment contracts.

In Ford Motor Credit Company v. Cole, supra, the same waiver clause was before the Fort Worth Court of Civil Appeals. That was a venue case where the court stated it would not be permissible to construe the waiver clause to exempt Ford Motor Credit Company from liability should it convert or deprive the buyer of use of unsecured property. This construction of the clause, the court concluded, would be unenforceable as contrary to the public policy of this State.

The parties concede the first part of the waiver clause, which provides "(a) ny personalty in or attached to the property when repossessed may be held by Seller without liability ...," merely restates the bailor-bailee relationship existing at common law with respect to personalty in a repossessed vehicle. However, a person in lawful possession of personalty may still be guilty of trespass or conversion for its unlawful detention. A detention of personalty lawfully obtained, after demand, is a wrongful act constituting a trespass. Brite v. Pfeil, 334 S.W.2d 596 (Tex.Civ.App. San Antonio 1960, no writ); see Mountain States Tel. & Tel. Co. v. Vowell Construction Co., 161 Tex. 432, 341 S.W.2d 148 (1960). The commission of a trespass does not necessarily mean the actor will be liable for damages. Restatement (Second) of Torts § 217, Comment a (1965). Liability does not attach, unless the wrongful detention is accompanied by actual damage to the property or deprives the owner of its use for a substantial period of time. See Lyle v. Waddle, 144 Tex. 90, 188 S.W.2d 770 (1945); Restatement (Second) of Torts § 218 (1965). Even in the absence of damages, a trespass has occurred which is important in determining the legal relations between the parties. ⁴

If the wrongful detention seriously interferes with the owner's right to control the personalty, there is not only a trespass but a conversion which justifies an action to require the actor to pay the full value of the personalty. Smith v. Texas & N. O. Ry. Co., 101 Tex. 405, 108 S.W. 819 (1908); Norris v. Bovina Feeders, Inc., 492 F.2d 502 (5th Cir. 1974). Section 237 of the Restatement of Torts (Second) reads: "One in possession of a chattel as bailee or otherwise who, on demand, refuses without proper qualification to surrender it to another entitled to its immediate possession, is subject to liability for conversion." Trespass and conversion are torts designed to protect against interferences with one's possessory interest in personalty. They are "illegal acts" within the meaning of section 7.07...