author: SPURLOCK, Justice.

text:
    Paul E. TACKETT, Appellant, v. MID-CONTINENT REFRIGERATOR COMPANY, Appellee.
    No. 18080.
    Court of Civil Appeals of Texas, Fort Worth.
    March 22, 1979.
    Rehearing Denied April 19, 1979.

      Senterfitt, Adams, Miller & Childress, and Richard T. Miller, San Saba, for appellant.
    Martin & Millican, Michael M. Martin, Lampasas, for appellee.
   OPINION

SPURLOCK, Justice.

This is an appeal from a directed verdict against a lessee for rent owed and accelerated under a lease agreement after the lessee defaulted.

Paul Tackett, the lessee, acquired a refrigerator from Mid-Continent Refrigerator Company by executing a contract which Mid-Continent claims is a lease agreement, and which Tackett claims is a purchase money security interest. After a dispute over some payments Tackett stopped making the payments required under the contract and Mid-Continent repossessed the refrigerator. Lessee Tackett appealed from the judgment.

We reverse and render.

The contract provided that if Tackett defaulted, Mid-Continent could accelerate the payments and declare the entire amount of the rent immediately due and payable. Mid-Continent accelerated the rent payments and sued Tackett for the rent in arrears plus the amount accelerated, the interest thereon until judgment, costs of repossession of the refrigerator, and attorney’s fees.

Mid-Continent claims this court has no jurisdiction to hear Tackett’s appeal because he failed to timely file his record. The appeal was originally filed in the Court of Civil Appeals for the Third Supreme Judicial District of Texas sitting in Austin. It was transferred to this Court by order of the Supreme Court of Texas. Therefore, we must determine this question according to the record as it appears in this Court.

The record indicates Tackett filed a motion for new trial in the trial court on November 18, 1977. Both parties agree that the forty-fifth day after the motion was filed was January 2, 1978. Mid-Continent claims the motion was overruled by operation of law on January 2, 1978 under Rule 329b(3) and therefore, March 3, 1978 was the last day on which Tackett’s transcript could have been timely filed under Rule 386. The envelope containing his transcript and made a part thereof was post marked on March 4, 1978 and filed by the Clerk of the Third Court of Civil Appeals on March 8, 1978.

Tackett claims that although January 2, 1978 was the forty-fifth day under Rule 329b(3), it was a legal holiday in 1978. Mid-Continent responds that only the days listed in Art. 4591 are legal holidays for purposes of Rule 4 which governs calculation of time limits found in the rules. It cites Smith v. Harris County-Houston Ship Chan. Nav. Dist., 160 Tex. 292, 329 S.W.2d 845 (1959) for this proposition. While we accept this proposition as true, the Supreme Court in Smith certainly did not decide that the legislature could not declare additional days as holidays.

The Texas legislature in 2 General and Special Laws of the State of Texas, Ch. 872 at 3145 (1977), declared January 2, 1978, a holiday for state employees. January 1 was on a Sunday in 1978. Although January 2 was not declared to be a “legal” holiday, state offices were closed just as if it had been a legal holiday. In our opinion the legislature’s declaration that January 2, 1978 was a holiday for state employees was intended to apply to Rule 4. Therefore, Tackett’s motion for .new trial was overruled by operation of law on January 3, 1978. His sixty days to file his transcript began to run on January 4,1978. The sixty day period expired on Saturday, March 4. Thus, under Rule 4 the last day which Tack-ett could have timely filed his transcript was March 6, 1978. Although the Clerk of the Third Court of Civil Appeals filed the transcript on March 8, the postmark on the envelope' containing the transcript is March 4, 1978. Therefore, under Rule 5 Tackett timely filed his record. The Third Court of Civil Appeals correctly overruled Mid-Continent’s motion to dismiss Tackett’s appeal and we overrule this contention of Mid-Continent.

Mid-Continent relies solely on its contention that the transcript was not timely filed. It did not respond to Tackett’s points of error with reply points, counterpoints, or cross-points of error. However, since there is the general presumption that the judgment is correct, we must consider Tackett’s points of error to determine if they have merit, albeit without the benefit of argument from Mid-Continent.

Tackett contends the contract with Mid-Continent is a security interest rather than a mere lease. He claims the contract is one for a security interest as a matter of law under § 1.201(37) (Supp.1978) because the shipping order he signed upon receipt of the refrigerator gave him the option to acquire title to the unit with the payment of no additional consideration. He was required to pay only the sales tax upon the expiration of the contract. § 1.201(37) provides in pertinent part as follows:

“ ‘Security interest’ means an interest in personal property or fixtures which secures payment or performance of an obligation. . . . Whether a lease is intended as security is to be determined by the facts of each case; however, . (B) an agreement that upon compliance with the terms of the lease the lessee shall become or has the option to become the owner of the property for no additional consideration or for a nominal consideration does make the lease one intended for security.”

This provision was construed by the Court of Civil Appeals in Davis Brothers v. Misco Leasing, Inc., 508 S.W.2d 908 (Tex.Civ.App.—Amarillo 1974, no writ). In a well reasoned opinion the Court adopted two tests to determine whether a lessee has the option to acquire title to the property for no additional consideration or for a nominal consideration under § 1.201(37). We agree that the best test is a comparison of the fair market value of the property at the time the option is exercisable with the option price. Another test is whether the terms of the option leave the lessee with no sensible alternative but to exercise it. The Court concluded that evidence indicative of the fair market value of the property at the time the option was exercisable is necessary for these tests to apply.

We agree with the approach by the Court in Davis Brothers, supra. However, it is our opinion that evidence of fair market value at the time the option can be exercised is not required when the lessee can take title without paying any additional consideration. In Davis Brothers, supra, the option price was the fair market value of the leased property at the end of the lease term, not to exceed ten per cent of the original purchase price. The question facing the Court was whether the option price was nominal. Certainly evidence of fair market value of the property is necessary for such a determination. However, where, as here, no additional consideration is required for the lessee to take title, it is our opinion that evidence of fair market value is not required. The fact that Tackett had the option to take title for no additional consideration upon compliance with the terms of the lease falls squarely within § 1.201(37) (B). Therefore the contract between Tackett and Mid-Continent was intended as a security interest as a matter of law.

In addition we note that Mid-Continent typed “Financing Statement” across the top of the contract and filed a copy with the Secretary of State and a copy with the County Clerk. Further, it was established that the fair market value of the refrigerator equalled the total of the monthly “rental” payments. Tackett under the terms of the “lease” bore the risk of loss or damage, was required to maintain hazard insurance, bore expenses of repairs, and paid all ad valorem taxes and costs of installation. We therefore sustain his point of error on this contention.

Because the lease agreement was intended as a security interest, the provisions of § 9 apply.

Tackett claims the trial court erred in instructing the jury to reach a verdict against him because it allowed Mid-Continent a double recovery prohibited by the provisions of § 9. We agree. Mid-Continent repossessed the refrigerator. Then it accelerated the rent under the contract and obtained a judgment against Tackett without crediting him with the proceeds obtained from the disposition of the property or its value.

It is well settled that an injured party has the duty to mitigate his damages. At common law the party claiming failure to mitigate had the burden of proof on this issue. §§ 9.501-07 governs the remedies for enforcement of security interests after default. Under these provisions a secured party who repossesses property has the duty to make a commercially reasonable disposition thereof, and account for the proceeds of such disposition or the fair market value of the property on the date the property was converted, and credit the debtor with the proceeds or fair market value. Kolbo v. Blair, 379 S.W.2d 125 (Tex.Civ.App.—Corpus Christi 1964, writ ref’d n. r. e.). Therefore, it is our opinion that the secured party must prove that any alleged deficiency arose after the debtor was credited with the proceeds from a commercially reasonable disposition of the repossessed collateral or fair market value at the time the property was converted to the secured party’s use.

Mid-Continent repossessed the refrigerator. There is evidence that it is Mid-Continent’s usual practice to repair the repossessed refrigerators and sell them. There is no evidence in the record of what disposition, if any, was made of the refrigerator in question. The only representative of Mid-Continent who testified stated he did not know what happened to the refrigerator. There is no evidence in the record of the fair market value of the refrigerator at the time of or after its repossession. Thus Mid-Continent has failed to prove a commercially reasonable disposition of the refrigerator or fair market value at the time of conversion.

Where there is no proof of a commercially reasonable disposition of the collateral and crediting the debtor with the proceeds, a presumption arises that the proceeds equal the deficiency. O’Neil v. Mack Tracks, Inc., 533 S.W.2d 832 (Tex.Civ.App.—El Paso 1974), rev’d on other grounds at 551 S.W.2d 32 (Tex.1977). In our opinion this also applies where there is no proof of credit for the fair market value at the time of conversion. Therefore, we must presume Mid-Continent received proceeds from the disposition of the refrigerator or value thereof equal to the amount of debt owed by Tackett.

Because of this presumption the trial court erred in instructing a verdict against Tackett. The relief Tackett seeks on appeal is the reversal of the judgment against him and a rendition of judgment that Mid-Continent take nothing. It is our opinion he is entitled to this relief.

We reverse the judgment of the trial court and render judgment that Mid-Continent take nothing against Tackett.

      . All references to Rules are to Tex.R.Civ.P.

      . All references to Articles are to Tex.Rev.Civ. Stat.Ann.

      .All references to Sections are to Tex.Bus. & Comm.Code Ann.


source: Caselaw Access Project

author: SUMMERS, Chief Justice.

license: Public Domain

text:
    SOUTHWEST LIVESTOCK AND TRUCKING COMPANY, Appellant, v. TEXAS AIR CONTROL BOARD, Appellee.
    No. 1240.
    Court of Civil Appeals of Texas, Tyler.
    March 22, 1979.
    Rehearing Denied April 19, 1979.

      Winfred Hooper, Jr., Hooper, Chappell & Broiles, Douglas R. Hudman, Fort Worth, for appellant.
    Jim Mathews, Environmental Protection Division, Asst. Atty. Gen., Austin, for appel-lee.
   SUMMERS, Chief Justice.

This is an appeal from a judgment of the district court upholding an order issued by the Texas Air Control Board, appellee, which found appellant, Southwest Livestock and Trucking Company, to be in violation of the Texas Clean Air Act, Article 4477 — 5, Tex.Rev.Civ.Stat.Ann., and requiring certain corrective measures to be taken by appellant.

Appellant owns and operates a livestock holding facility in Del Rio, Val Verde County, Texas. Such facility includes approximately 40 livestock pens, a repair shop, some scale houses, a shearing barn, two sets of weighing scales, and has a maximum capacity for handling about 5000 head of livestock at one time. The pens were built about 1900 at their present location. Appellant utilizes these facilities in its business of shipping, weighing, buying, selling, sorting and temporarily confining sheep, goats, cattle and other livestock.

In response to complaints lodged with appellee concerning offensive odors allegedly emitted from appellant’s facility, public hearings were conducted by appellee in Del Rio, Texas. Following four days of hearings, appellee issued its Order No. 76-8 finding appellant in violation of the Texas Clean Air Act, supra, and requiring certain procedures to bring appellant into compliance with the Act.

Pursuant to Section 6.01 of the Texas Clean Air Act, appellant sought judicial review of appellee’s order in the 53rd Judicial District Court of Travis County. In accordance with Section 19, Administrative Procedure and Texas Register Act, Article 6252— 13a, Tex.Rev.Civ.Stat.Ann., judicial review was conducted under the substantial evidence rule, whereupon the district court entered a judgment upholding the order of the Board and denying appellant all relief sought. From this adverse judgment, appellant has perfected its appeal to this court.

We affirm.

Appellant predicates its appeal upon three points of error which complain that the district court erred in (1) its finding that the Texas Air Control Board had jurisdiction of the subject in this case when it issued its enforcement Order No. 76-8 against the appellant; (2) its finding that the “Findings of Fact stated by the Board constitute a concise and explicit statement of underlying facts which as a matter of law support an implied finding of fact in statutory language that the odors in question are produced by processes other than natural”; and (3) its finding that the odors emitted by plaintiff’s facility are air “contaminants” as that term is defined in Section 1.03 of the Texas Clean Air Act.

All three points of error urged by appellant go to the single issue presented for decision on this appeal, i. e., whether the Texas Air Control Board has jurisdiction under the Texas Clean Air Act, supra, to exercise control over the emission of odors from appellant’s said livestock facility. The precise question which is before this court is one of law, not of fact. It has been factually established and not attacked on this appeal that appellant’s livestock pens create an odoriferous condition highly objectionable to many of its neighbors. The issue on appeal will determine whether appellee, as the statutorily established representative of the public with regard to the quality of Texas’ air resources, has the statutory power to impose reasonable abatement practices upon the operation of appellant’s livestock facility. Thus the issue boils down to one of proper construction and interpretation of the language of the Texas Clean Air Act.

The Texas Clean Air Act is a comprehensive measure for controlling and abating air pollution and emission of air contaminants. Section 1.05 provides that the Texas Air Control Board is “the principal authority in the state on matters relating to the quality of the air resources in the state and for setting standards, criteria, levels and emission limits for air content and pollution control.” Section 1.02 provides that the purpose of this Act is “to safeguard the air resources of the state from pollution by controlling or abating air pollution and emissions of air contaminants, consistent with the protection of health, general welfare, and physical property of the people.” The Board is directed to “seek the accomplishment of the purposes of this Act through the control of air contaminants by all practical and economically feasible methods consistent with the powers and duties of the board,” Section 3.01, and in Section 3.09 of the Act, the Board is empowered to make rules and regulations consistent with the general intent and purposes of the Act. It is therefore the responsibility of appellee under the Clean Air Act to protect the air resources of Texas through the control of air pollution, which is to be accomplished by the control of air contaminant emissions. Sections 1.02 and 3.01, supra.

Section 1.03 of the Act goes on to define these all important terms of air pollution and air contaminants. “Air pollution” is defined in Section 1.03(3) as meaning

“the presence in the atmosphere of one or more air contaminants or combinations thereof, in such concentration and of such duration as are or may tend to be injurious to or adversely affect human health or welfare, animal life, vegetation or property, or as to interfere with the normal use and enjoyment of animal life, vegetation or property.”

Section 1.03(1) of the Act defines “air contaminant” as meaning “particular matter, dust, fumes, gas, mist, smoke, vapor or odor, or any combination thereof produced by processes other than natural." (Emphasis added.)

Thus, under the Clean Air Act appellee is granted the power to control the emission of all the above listed elements, except for when they are naturally produced. Appellant contends the odors emitted by its livestock facility are naturally produced, as that concept is intended in the Act, thus placing its odor emissions beyond control of appellee. Appellee disputes this and contends that appellant’s odors are produced by “processes other than natural” and therefore subject to regulation by the Board. We agree with appellee’s contention.

A beginning point for interpreting the meaning to be given the phraseology “natural processes” under the Texas Clean Air Act is provided by the court in Europak, Inc. v. County of Hunt, 507 S.W.2d 884 (Tex.Civ.App.—Dallas 1974, no writ). This decision is the sole reported judicial authority to date speaking to the construction of the statutory language in dispute here. In that case the Dallas Court of Civil Appeals upheld a temporary injunction preventing the construction of a proposed horse slaughtering facility without a permit under Section 3.27 of the Act. The projected facility in that case consisted of both stockpens to confine 300 horses and the rendering plant itself. The operators in Europak resisted any jurisdiction of the Air Control Board over the odors to be created by their proposed facility, arguing that these odors would not be “produced by processes other than natural.” The Dallas Court disagreed and held that the trial court was justified in concluding that the odor from the pens as well as from the building would be “produced by processes other than natural” and that Section 3.27(a) of the Act forbids construction of such a facility without a permit.

In interpreting the meaning of “natural processes,” the court in Europak concerned itself with two separate but related concepts: (1) that which occurs in nature, as distinguished from that which is brought about by man’s devices, and (2) that which occurs in the course of normal experience, as distinguished from the abnormal or unusual. Under the first concept, the important consideration is the kind or degree of human intervention involved in the production of the emission problem. The second concept involves a consideration of geographic or locational normality in determining the naturalness of an emission, i. e., whether particular emissions are normal for a certain area. The Europak court, applying both concepts, then held as follows:

“[A] ‘natural process’ is one that occurs in nature and is affected or controlled by human devices only to an extent normal and usual for the particular area involved. All other contaminants are ‘produced by processes other than natural’ within the meaning of the Act.” (Supra at 891)

In the instant case appellant’s holding pens are located well within the city limits of Del Rio, Texas, and have a maximum capacity for confining approximately 5000 head of livestock at one time. This maximum capacity is reached on 10 to 15 days per year, and the average number of livestock in the pens on a given day would be about 900 head. The administrative record is replete with competent evidence that private residences and service-oriented businesses are situated in close proximity to appellant’s livestock facility. The record shows that these close neighbors, as well as private homes and businesses farther out, are adversely affected by the odors generated by appellant’s livestock operation. It should not be considered normal, usual or natural to find odoriferous livestock pens situated in such close proximity to urban land uses such as homes and small commercial establishments which are particularly susceptible to strong odors.

Accordingly, in this ease we hold that the Board and the trial court were justified in concluding that the odor from appellant’s livestock pens would be “produced by processes other than natural”; and that, although the process which directly produces the odor may be one that occurs in nature, the administrative record supports a finding that the concentration of such a large number of livestock into such a small area as the pens at appellant’s livestock facility would not now be normal in this vicinity. Although the livestock pens have been in their present location since about 1900, we must consider the vicinity as the same is presently constituted, an urban area with private homes and service-oriented businesses in close proximity to appellant’s facility. Therefore, the trial court correctly held that the Texas Air Control Board had jurisdiction under the Texas Clean Air Act when it entered its enforcement order No. 76-8 to control and abate the emission of odors as air contaminants from appellant’s livestock facility.

We have considered all of appellant’s points of error and believe them to be without merit and the same are overruled. The judgment of the trial court is affirmed.


author: PHILLIPS, Chief Justice.

text:
    COMMISSIONER OF INSURANCE et al., Appellants, v. ALLSTATE INSURANCE COMPANY, Appellee.
    No. 12911.
    Court of Civil Appeals of Texas, Austin.
    March 28, 1979.
    Rehearing Denied April 18, 1979.

      John L. Hill, Atty. Gen., Catherine Brown Fryer, Asst. Atty. Gen., Austin, for appellants.
    J. Chrys Dougherty, Graves, Dougherty, Hearon, Moody & Garwood, Austin, for ap-pellee.
   PHILLIPS, Chief Justice.

Allstate Insurance Company brought suit against the Commissioner of Insurance, the State Board of Insurance, the Attorney General, and the Treasurer of the State of Texas to recover taxes paid on gross premium receipts pursuant to Tex.Rev.Civ.Stat. Ann. art. 7064 (1960).

After trial to the court, judgment was rendered that Allstate recover the sum of over six million dollars, including interest, from the State for excess taxes on gross premiums paid by Allstate for the taxable years of 1972 and 1975.

We affirm the judgment.

The State is before us on a number of points of error which assert the error of the trial court in refusing to hold that Allstate was subject to the highest rate of tax permitted under the statute for gross premium tax returns filed by Allstate for the taxable years 1972 and 1975.

Article 7064 imposes an annual tax on the gross premiums collected by certain classes of insurance companies, of which appellee is one. The tax rate is determined by a formula which compares the investments of the company in “Texas securities” with investments in the “similar securities” of another state in which it does business. The tax is reduced by investments in Texas securities.

The background facts of this cause, briefly stated, are as follows. After audit of the Allstate tax return for 1972, the Commissioner of Insurance determined that Delaware, rather than California, as claimed by Allstate, was the correct comparison state, or state in which Allstate “had its highest percentage of admitted assets invested.” Based upon the ratio of Texas securities to similar securities in the state of Delaware, the Commissioner determined that Allstate should be taxed at the highest rate, 3.85 percent, and that Allstate owed the State of Texas a substantial amount of additional gross premiums taxes. In addition, the Commissioner assessed a sizable penalty against Allstate. There then followed a series of discussions between the parties culminating in an order issued by the Commissioner of Insurance affirming that Allstate was liable for the additional tax and penalty. Allstate then requested, and was granted, a hearing before the State Board of Insurance; however, the Board denied the appeal and upheld the order issued by the Commissioner. Allstate initiated an appeal to the district court of Travis County pursuant to Article 1.04(f) of the Texas Insurance Code.

After audit of Allstate’s 1975 gross premiums tax return, the Commissioner determined that Delaware, rather than Illinois, as claimed by the company, was the correct comparison state for 1975. Based upon the ratio of Texas securities to similar securities in the state of Delaware, the Commissioner determined that the applicable tax rate should be 3.85 percent and that Allstate owed the State of Texas an. additional tax and penalty. Substantially the same administrative procedure was followed between the parties as with the 1972 tax with the same result. Allstate then amended its original petition in the district court to encompass its protest of the 1975 tax.

The first question for our determination is the proper construction of that part of Article 7064 which is as follows:

“Each such insurance organization shall also report to the Board of Insurance Commissioners . . . the amount that it had invested on the 31st of December, preceding, in Texas securities as defined herein and the amount that it had invested on said date in similar securities in the State in which it had its highest percentage of admitted assets invested . . . (Emphasis added).

This statute imposes an annual tax on fire and casualty insurance companies based on the gross premiums received from insurance on property or risks located in Texas. The basic tax rate is 3.85 percent of the gross premiums; however, the rate is reduced as the insurance company’s investment in certain Texas properties, defined by the statute as Texas securities, rises above a certain percentage of its investments in similar securities in the state in which it had invested the most “admitted assets” (the comparison state). If the amount of Texas securities reaches the proper percentage of similar securities in the comparison state, the premium tax is reduced to 1.1 percent.

The State contends that in determining the actual state in which an insurance company has its highest percentage of admitted assets invested, the Board should look to the state in which the insurance company has the most similar securities. This is so because the Board considers the terms “admitted assets invested” and “Texas securities” (and therefore “similar securities”) to be synonymous. The supervising tax analyst for the Board, and the person responsible for administering the Act, testified that she determines the state in which a company has its highest percentage of admitted assets invested as follows:

“We go through the list that we are provided; then we go through the annual statement itself and check the listings by the state of incorporation of each of the investments listed and determine first whether or not it is a Texas security or a similar security and then from there we fill in the state of domicile of each security.”

The similar securities are then totaled, and the domicile state with the most similar securities is designated the state in which the taxpayer has the highest percentage of admitted assets invested.

Article 7064 defines Texas securities by listing various types of investments that qualify, as follows:

“For the purposes of this Act, Texas securities are defined as real estate in this State; bonds of the State of Texas; bonds or interest bearing warrants of any county, city, town, school district or any municipality or subdivision thereof which is now or may hereafter be constituted or organized and authorized to issue bonds or warrants under the Constitution and laws of this State; notes or bonds secured by mortgage or trust deed on property in this State insured by the Federal Housing Administrator; the cash deposits in regularly established national or state banks or trust companies in this State on the basis of average monthly balances throughout the calendar year; that percentage of such insurance company’s investments in the bonds of -the United States of America, that its Texas reserves for the unearned premiums and loss reserves as may be required by the Board of Insurance Commissioners, are of its total reserves; but this provision shall apply only to United States Government bonds purchased between December 8, 1941, and the termination of the war in which the United States is now engaged; in any other property in this State in which by law such insurance carriers may invest their funds.” (Emphasis added).

This suit involves an interpretation of the italicized omnibus clause.

Although the term similar securities is not defined in Article 7064, a similar security is generally understood to be the same as a Texas security except that it is located in another state. See Kansas City Title Insurance Co. v. Butler, 253 S.W.2d 318 (Tex.Civ.App.1952, writ ref’d n. r. e.).

The State contends that it is the policy of the State Board of Insurance to construe “in any other property in this State in which by law such insurance carriers may invest their funds” to mean any property in which, under Texas law, insurance carriers may lawfully invest their funds.

From here the State points to Article 2.10 of the Texas Insurance Code contending that authorized investments include corporate stock, notes, and debentures and that such are considered to be similar securities under the omnibus clause cited above. The State contends that it has always been the policy of the State Board of Insurance to use the state of incorporation of the company issuing the stock as the situs of the stock. Therefore, stock in a Texas chartered corporation is a Texas security. Likewise, stock in a Delaware chartered corporation is a similar security in the state of Delaware.

The State’s argument is basically that corporate stocks and bonds should be included in determining the comparison state, that is, the one in which Allstate “had the highest percentage of its admitted assets invested,” and in computing the amount of Texas securities (and therefore similar securities). Such a construction of Article 7064 would result in an increase in the percentage of similar securities. This is true because appellants’ interpretation of the statute would make Delaware the comparison state and Allstate owns a great many shares of stock of corporations chartered in Delaware.

We first will consider appellants’ contention that corporate stocks and bonds are to be treated as admitted assets invested. Admitted assets are not defined by the statute, and we must look to their accepted meaning in the insurance field. It has been held that admitted assets are any lawful investments that are counted in determining solvency of an insurance company. See Commonwealth Insurance Department v. Safeguard Mutual Insurance Co., 478 Pa. 592, 387 A.2d 647 (1978); National Life Insurance Co. v. Haines, 255 Pa. 599, 100 A. 517 (1917). See also 13A Appleman, Insurance Law and Practice § 7746, at 633 (1976). There is no doubt that Allstate’s invest-' ments in stocks and bonds are lawful. Tex. Ins.Code Ann. art. 2.10, § 5 (1963).

We need not determine, however, whether corporate stocks and bonds do indeed qualify as admitted assets invested. Assuming arguendo that they do, we would still be faced with the issue of deciding the situs of the stocks and bonds for purposes of determining the comparison state. As a result of our holding infra concerning treatment of stocks and bonds as Texas securities and similar securities, it would make no difference whether the comparison state was Delaware, as appellants contend, or California and Illinois, as appellee argues. We do not believe that corporate stocks and bonds are to be treated as similar securities, and under this construction of the statute Allstate is entitled to the 1.1 percent lowest tax rate even with Delaware as the comparison state. Exclusion of stocks and bonds from the similar securities total for Delaware would result in a very low figure in proportion to the total of Texas securities. No matter which state was the comparison state, Allstate would still be entitled to the 1.1 percent tax rate.

As indicated previously, we hold that corporate stocks and bonds do not qualify as Texas securities, and thus necessarily not as similar securities either. Appellants seek to show that the three terms used in Article 7064, Texas securities, similar securities, and admitted assets invested, are all synonymous. If this were true, a conclusion that corporate stocks and bonds are admitted assets invested would automatically mean that the stocks and bonds are also similar securities. This Court held in a prior case that the terms are not synonymous; that premium notes were admitted assets but not Texas securities. Commercial Standard Fire and Marine Co. v. Commissioner of Insurance, 429 S.W.2d 930 (Tex.Civ.App.1968, no writ).

We have held in another earlier case that investment in stock of a corporation is not an investment “in any other property in this State in which by law such insurance carriers may invest their funds” as provided in the omnibus clause of Article 7064. State Board of Insurance v. Southwest Gen eral Insurance Co., 401 S.W.2d 369 (Tex.Civ.App.1966, writ ref’d n. r. e.). In that case the corporation in which Southwest General had invested was chartered in Delaware, but its principal office and place of business was in Dallas. Virtually all its assets and property were in Texas. It was held the investment was not a Texas security. The Court did not consider whether or not the stock would qualify as a similar security in Delaware.

The Texas Supreme Court has stated that before an investment may qualify as a tax-reducing investment under the omnibus clause it must have “a direct and beneficial relationship to the domestic economy of the State.” State Board of Insurance v. Petroleum Casualty Co., 447 S.W.2d 666, 668 (Tex.1969). Investment in the stock of a corporation whose only contact with a state is that it is the state of incorporation does not provide sufficient benefit to the economy of the state. “The omnibus clause is to be strictly construed” against increasing the number of tax-reducing securities. Id. at 668. As a result, Allstate’s investments in corporate stocks and bonds should not be treated as similar securities.

We recognize that there are certain monetary benefits that accrue to the state of incorporation. See, e. g., Tex.Bus.Corp.Act Ann. art. 10.01 (Supp.1978) ($100.00 filing fee); Tex.Tax.-Gen.Ann. art. 12.01 (Supp. 1978) (franchise tax with a $55.00 minimum). These benefits are not, however, the sort of direct benefits that the legislature intended, or that flow from the investments specifically enumerated in Article 7064.

It is appellants’ contention that the State Board of Insurance had a consistent administrative policy of including corporate stock within the omnibus clause. The State insists the departmental construction of the Act must be followed because of the longstanding agency policy. In this case we are controlled by the cited case law rather than policy of the agency. A departmental interpretation may not be followed when contrary to the unambiguous words of the statute. Citizens National Bank of Paris, Illinois v. Calvert, 527 S.W.2d 175 (Tex.1975).

To restate the conclusion of the Court, we find it unnecessary to decide whether or not Delaware is the comparison state because, excluding stocks and bonds as similar securities, appellee still prevails. Delaware is left with virtually no similar securities. Thus appellee has the bulk of its assets as Texas securities if Texas is compared to Delaware. In order for the State to have prevailed it must have shown that Delaware was not only the comparison state but also that corporate stocks and bonds qualified as similar securities there. Allstate could have satisfied its burden by either showing California and Illinois were the comparison states or by showing that stocks and bonds were not similar securities. We hold that Allstate satisfied its burden by proving the latter.

The judgment of the trial court is affirmed.

      . In that case the Supreme Court refused to consider U.S. Treasury bills as tax-reducing investments.


text:
    AMERICAN AUTOMOBILE INSURANCE COMPANY et al., Appellants, v. STATE BOARD OF INSURANCE et al., Appellees.
    No. 12966.
    Court of Civil Appeals of Texas, Austin.
    March 28, 1979.
    Rehearing Denied April 18, 1979.

      R. Vernon Coe, James D. Webb, III, Thompson, Coe, Cousins & Irons, Dallas, for appellants.
    Mark White, Atty. Gen., Don W. Koth-mann, Asst. Atty. Gen., Austin, for appel-lees.
   PHILLIPS, Chief Justice.

Appellants American Automobile Insurance Company and Associated Indemnity Corporation have paid under protest what they alleged to be excessive insurance premium taxes claimed by the State under Tex.Rev.Civ.Stat.Ann. art. 7064 (1960). Appellants seek to recover, each in its own behalf, their protested payments together with the interest earned thereon during the period payment is held in suspense by the State Treasurer. The suit was brought pursuant to Article 1.05 of Chapter 1 of Title 122A of Tex.Rev.Civ.Stat.Ann. (1969) and also under Section (f) of Article 1.04 of the Texas Insurance Code (1963).

Appellants exhausted their administrative remedies under the Texas Insurance Code, and as all the orders of the State Board of Insurance were inimical to their position, appellants perfected their appeal to the district court. The case was heard by the court on motions for summary judgment filed by each of the appellees and the appellants. The trial court granted appel-lees’ motion, denied appellants’, and held that appellees are entitled to $251,959.40 taxes paid under protest by appellant Associated Indemnity Corporation, together with penalty thereon of $25,195.94 and that appellees are entitled to the $345,152.42 taxes paid under protest by appellant American Automobile Insurance Company, together with a penalty of $34,515.24.

The judgment of the trial court is reversed and judgment here rendered that appellants recover the taxes paid under protest.

Appellants are before us on four points of error; however, as we sustain points one and two, we do not reach the remaining points.

This is a companion case to Commissioner of Insurance, et al. v. Allstate Insurance Company, 579 S.W.2d 553, handed down this day by this Court. The opinion in that case answers, and sustains, for all practical purposes, appellants’ first point of error here that the trial court erred in holding that the term “Texas securities” as defined in Article 7064, and therefore the term “similar securities,” includes the capital stock of private corporations. The language of the Act establishes that it was the intention of the Legislature that such class of securities not be included by the omnibus clause of the statute.

Appellants’ second point, which we also sustain, is the error of the trial court in failing to grant appellants’ motion for summary judgment. The trial court held in effect that the term “Texas securities,” as defined in Article 7064, includes unsecured and uninsured short-term notes of private corporations (commonly referred to as commercial paper) and first mortgage bonds not insured by the Federal Housing Administrator. In fact, the language of the Act establishes that it was the intention of the Legislature that such class of securities not be included.

The securities alleged to qualify as Texas securities are not specifically enumerated in Article 7064, as quoted in the companion case of Allstate Insurance. In order for appellees to prevail the securities must fall within the omnibus clause. We hold they do not.

This Court has held in two previous cases that the rule of ejusdem generis restricts qualifying securities to the same general class as those specifically mentioned in the Article. Commercial Standard Fire and Marine Co. v. Commissioner of Insurance, 429 S.W.2d 930 (Tex.Civ.App.1968, no writ); State Board of Insurance v. Southwest General Insurance Co., 401 S.W.2d 369 (Tex.Civ.App.1966, writ ref’d n. r. e.). The securities involved in this case are not of the same general class. Especially is this evident as to first mortgage bonds not insured by the Federal Housing Administrator. Appellees’ contention that these qualify as tax-reducing securities is in sharp contrast to the Legislature’s specific enumeration in Article 7064 of “. . . notes or bonds secured by mortgage or trust deed on property in this state insured by the Federal Housing Administrator. . . .” (Emphasis added).

The rationale of the Texas Supreme Court in State Board of Insurance v. Petroleum Casualty Co., 447 S.W.2d 666 (Tex.1969), is also applicable. There the Court stated the property must be “. . . Texas property in the sense of having originated in the State and having a direct and beneficial relationship to the domestic economy of the State.” Id. at 668 (Emphasis added). Such is not true with commercial paper.

The judgment of the trial court is reversed and judgment is here rendered that appellants recover the taxes paid under protest together with interest thereon.

      . State Board of Insurance of Texas; the Commissioner of Insurance; the State Treasurer; and the. Attorney General of Texas.


author: HALL, Justice.

text:
    Richard F. LOOMIS, Jr., Appellant, v. BLACKLANDS PRODUCTION CREDIT ASSOCIATION, Appellee.
    No. 5934.
    Court of Civil Appeals of Texas, Waco.
    March 29, 1979.
    Rehearing Denied April 19, 1979.
    William Andress, Jr., William Andress & Associates, P. C., Dallas, L. L. Geren, Bradley & Geren, Groesbeck, for appellant.

      Joe Cannon, Cannon, Cannon & Reed, Groesbeck, for appellee.
   HALL, Justice.

Plaintiff-Appellee Blacklands Production Credit Association brought this suit against defendant-appellant Richard F. Loomis, Jr., to recover the balance allegedly due to plaintiff on a promissory note in the original principal amount of $550,000.00, executed by defendant and payable to plaintiff, and to recover attorneys’ fees provided for in the note. Defendant answered that plaintiff had charged usurious interest on the note, and pleaded for recovery against plaintiff of the penalties set forth in our usury statutes. Defendant also filed a counterclaim alleging in detail that he was entitled to an offset of at least the amount $500,000.00, based upon the Trustee’s sale of certain realty located in Dallas County under a deed of trust executed by defendant to plaintiff to secure the note. Prior to the trial, defendant’s counterclaim for the offset was struck upon exceptions by plaintiff setting up that a suit by defendant to set aside the Trustee’s sale was then pending in Dallas County. Defendant then dismissed the Dallas County suit, but the court persisted in its ruling striking the counterclaim.

The trial began with a jury. After the parties had rested their proof they moved the court to discharge the jury, asserting there were no fact questions for decision. The motion was granted, and the jury was discharged. Eventually, judgment was rendered awarding plaintiff a recovery of $580,514.97, representing principal and interest due on the note, plus $71,000.00 for attorneys’ fees. The award of attorneys’ fees was based upon a provision in the note in which the maker agreed “to pay Fifteen (15%) per cent additional upon the principal and interest then unpaid as attorney’s fees or cost of collection” if the note “was placed in the hands of an attorney for collection or collected through court proceedings.”

Defendant appealed. We reverse the judgment.

Defendant’s main contentions on appeal are that the court erred (1) in rejecting his plea of usury and (2) in striking his counterclaim for the offset.

Defendant is a lawyer and a rancher. The note in question was in the principal sum $550,000.00, and represented a loan to defendant to be used by him in his ranching operations. The note was dated February 14, 1974, and was payable on or before February 15, 1975. It provided that a variable rate of interest would be charged on funds to be advanced to defendant under the loan; that the first advance would bear interest from its date until paid at the rate of 9.36 per cent per annum; and that each advance thereafter would bear interest from its date until paid “at the established rate of interest being charged by payee on new loans at the time of each such advance, but in no event shall any such interest rate be in excess of the maximum permitted under the laws of Texas.”

Production Credit Associations are federally chartered institutions functioning under the terms and regulations of the Farm Credit Act of 1971, 85 Stat. 583,12 U.S.C.A. §§ 2001 et seq. Section 2.13 of the Act (12 U.S.C.A. § 2094) contains these pertinent provisions:

(a) A production credit association may issue voting stock, nonvoting stock, preferred stock, participation certificates, and provide for an equity reserve. Holders of stock, participation certificates, and equity reserve shall have such rights, not inconsistent with the provisions of this section, as are set forth in the bylaws of the association. Stock shall be divided into shares of $5 par value each, and participation certificates shall have a face value of $5 each.
(f) Each borrower from the association shall be required to own at the time the loan is made voting stock or participation certificates as provided in the bylaws of the association, in an amount equal in fair book value (not exceeding par or face amount, as the case may be), as determined by the association, to $5 per $100 or fraction thereof of the amount of the loan. .
(h) As a further means of providing capital, an association may . . .require borrowers to purchase stock or participation certificates in addition to that required in subsection (f) hereof . in an aggregate amount not exceeding $5 per $100 or fraction thereof of the amount of the loan. .
(k) In any case where the debt of a borrower is in default, the association may retire all or part of the capital investments in the association held by such debtor at the fair book value thereof, not exceeding par or face amount, as the case may be, in total or partial liquidation of the debt.

Under those provisions of the Farm Credit Act, plaintiff has issued shares of voting stock denominated by it “Class B Stock,” of $5.00 par value each, and requires borrowers to own shares of that stock in an amount equal to $10.00 per $100.00 or fraction thereof of the full amount of his loan balance. If it develops during the course of a loan that the borrower owns more than the required amount of Class B Stock, he may use it for further advances, or sell it to another borrower, or seek credit for it against his loan balance. Upon the borrower’s request, the stock certificates are delivered to him. Without such request, certificates are not delivered, but the stock transfer to the borrower is reflected in plaintiff’s books. The borrower may borrow from plaintiff funds needed for the stock purchase in addition to his advances for farm or ranching operations, or he may purchase the stock with funds from a source other than plaintiff. All that is required is that he own Class B Stock equal in value at $5.00 per share to 10% of the total amount of his loan. Class B Stock may not be sold publicly and it does not pay dividends. However, only owners of that stock are eligible to be elected to plaintiff’s Board of Directors or to vote for the Directors, and for that reason many owners retain the stock after their loans are paid.

The record shows without contradiction that defendant borrowed from plaintiff all the money used by him for the purchase of his required Class B Stock. Simply stated, for every $100.00 advanced to plaintiff which was used by him for his ranching enterprise, defendant was issued two shares of Class B Stock on plaintiff’s books valued at $5.00 per share; the total loan advance charged to defendant by plaintiff was $110.00; and the interest rate applicable at the time of the advance was charged against the $110.00 total advance.

The evidence shows that defendant was familiar with the stock requirement when he made the loan; and that he “knew when [he] borrowed sixty thousand [he] would also be borrowing six thousand additional unless [he] purchased six thousand dollars worth of stock” with money from another source. It shows that during the one-year term of the loan he was advanced funds for the purchase of 9190 shares of stock at $5.00 per share, and that after he became delinquent plaintiff redeemed the stock at its par value and credited the principal of defendant’s note with $45,950.00 for the stock.

The maximum interest rate charged on all advances to defendant (for both stock and for ranching purposes) was 9.96 per cent per annum; and the minimum rate charged was 9.36 per cent.

The term “interest” is defined in our usury statutes as “the compensation allowed by law for the use or forebearanee or detention of money.” Article 5069-1.01, Vernon’s Tex.Civ.St. With exceptions not applicable here, a greater rate of interest than ten per cent per annum “shall be deemed usurious.” Article 5069-1.02. Penalties ranging from forfeiture of interest and payment of attorneys’ fees against one who contracts for, charges or receives interest in excess of the legal amount, to forfeiture of “all principal . and all other charges” with payment of attorneys’ fees when the interest is in excess of double the legal amount, are prescribed in Article 5069 — 1.06.

In cash loan transactions from which the lender deducts interest, fees, commissions or other front-end charges, the actual amount of money of which the borrower has use, detention or forbearance is held to be the true principal of the loan in testing for usury. Tanner Development Co. v. Ferguson, 561 S.W.2d 777, 787 (Tex.1977); First State Bank of Bedford v. Miller, 563 S.W.2d 572, 575 (Tex.1978). The Miller case is an example of the application of the rule, where the borrowers obtained a loan of $70,000.00, but they were required to leave $14,000.00 in a noninterest bearing account without use of it for any purpose other than satisfaction of postdated interest checks; and it was held that the true principal of the loan was $56,000.00 in deciding the question of usury.

In our case, the advances received by defendant from plaintiff totaled $508,-932.73. Of that sum, $462,982.73 was used by defendant for purchasing livestock and ranch supplies, and the remaining $45,-950.00 was used by him for the purchase of Class B Stock.

Defendant’s claim of usury is based upon his assumption that under the rule in the Tanner and Miller cases, supra, the required purchase of the Class B Stock was a “front-end charge” which resulted in usurious interest on his loan. Using the interest rate of 9.36% per annum (the lowest charged by plaintiff) he reasons as follows in his brief: “Defendant’s drafts [for livestock and supplies] were honored for $462,-982.73, for which he was obligated to repay $508,932.73, including his Class B Stock, plus interest at 9.36% per annum or $47,-636.10 for the year term of the note. This makes a total repayment of $556,568.83 for a year’s use of $462,982.73, or $93,586.10 interest, which is an effective interest rate of 20.21%.”

It is our view that the advance of funds to defendant for Class B Stock purchase was not a “front-end charge.” Defendant was not required to borrow funds from plaintiff for purchase of the stock. Ownership of the stock by defendant as a borrower from plaintiff was required and authorized by federal statute; and it qualified defendant to borrow money from plaintiff, a right not held by non-owners of the stock. The stock had an actual value of $5.00 which was eventually returned to defendant. And, finally, ownership of the stock vested in defendant the right of participating directly in the selection of plaintiff’s Board of Directors and the right to seek election to that body. Defendant received valuable use of the money invested in the stock.

Defendant’s usury claim was properly rejected by the trial court under the record before us.

In July, 1975, after the note in question had matured, defendant executed a deed of trust to plaintiff on certain improved realty located in the City of Dallas to secure the note. On March 1, 1977, at an extra-judicial sale by the Trustee in Dallas County, plaintiff bought the property for $13,500.00. Plaintiff then credited the principal of the note with that amount. Thereafter, defendant filed suit in the 101st District Court of Dallas County to set aside the sale of the property, alleging irregularities in the holding of the sale and asserting the property’s true value was $550,000.00.

The case at bar was brought by plaintiff in Limestone County. Plaintiff’s original petition was filed in August, 1976; and its first amended original petition, upon which it went to trial, was filed on May 13, 1977. On June 6, 1977, deféndant filed a plea in abatement in this case, alleging the pending suit in Dallas County to set aside the Trustee’s sale and asserting that his “rights, credits, and offsets in [the instant] proceeding cannot be ascertained and finally adjudicated” until the Dallas County suit was resolved.

On October 26,1977, expressly “subject to said plea in abatement and without waiving same, but still insisting upon said plea in abatement in all things,” defendant filed his fourth amended answer and his counterclaim in the case at bar. In those pleadings, he alleged his defense of usury, and also pleaded in great detail that the Trustee’s sale was irregular; that the market value of the property sold under the Trustee’s deed to plaintiff for $13,500.00 was at least $500,000.00; and that accordingly he was entitled to an offset of $500,000.00 on the note.

On October 28,1977, plaintiff filed special exceptions to defendant’s counterclaim for the asserted $500,000.00 offset, on the ground that the basis of the alleged offset, irregularity of the Trustee’s sale, was the basis of a pending lawsuit in Dallas County to set aside the sale.

Plaintiff’s special exceptions were heard by the court on Monday, November 7, 1977, which was the day before the trial in the instant case began. The exceptions were sustained, and defendant’s counterclaim for the offset was stricken. Later that day (November 7th), through co-counsel in Dallas, defendant took a nonsuit without prejudice of his lawsuit in Dallas County. He then orally moved the court in the instant case, in the light of the nonsuit, to overrule plaintiff’s special exceptions and permit him to proceed to trial on his action for the offset. The motion was overruled, and the case proceeded to trial the next day. Before the jury was discharged, defendant perfected a bill of exception on his counterclaim for the alleged offset and tendered the proof made on the bill into the evidence of the ease. The proof supported an offset of $600,000.00. The tender was denied by the court.

Defendant contends that after he had dismissed the Dallas County suit his action for the offset growing out of the Trustee’s sale was a compulsory counterclaim within the terms of Rule 97, Vernon's Tex.Rules Civ.Proc., and argues that the court therefore erred in sustaining plaintiff’s special exceptions and refusing to let him prove the offset. Plaintiff says the claim was not a compulsory counterclaim under the rule. Both cite cases in support of their theories.

Claims which are “the subject of a pending action” are expressly excluded from the term “compulsory counterclaim” in Rule 97. It is clear therefore that when plaintiff’s special exceptions were initially sustained by the court defendant’s claim for the offset did not fall within the term. It is our view that whether the claim was a compulsory counterclaim after defendant dismissed the Dallas County suit is not a justiciable issue inasmuch as defendant had pleaded it and reasserted it, and we do not decide that question. However, we agree with defendant that the counterclaim was then properly before the court and was erroneously dismissed upon plaintiff’s exceptions. To the extent that defendant would have succeeded on his counterclaim he would have been entitled to reduce plaintiff’s recovery on the note, and, concomitantly, to reduce plaintiff’s recovery of attorneys’ fees. It follows that defendant was prejudiced by the court’s ruling, and that the judgment must be reversed.

We need not discuss defendant’s remaining complaints.

The judgment is reversed, and this cause is remanded for trial.


text:
    Robert E. HEMPHILL, Appellant, v. S & Q CLOTHIERS, Appellee.
    No. 18081.
    Court of Civil Appeals of Texas, Fort Worth.
    March 29, 1979.

      Bowmer, Courtney, Burleson & Pember-ton and Karen M. Neeley, Temple, for appellant.

      Burrows & Cure and James 0. Cure, Temple, for appellee.
   OPINION

SPURLOCK, Justice.

This is an appeal from a take nothing judgment. Robert E. Hemphill, debtor on a retail sales account, counterclaimed the sworn account action of the creditor on the account. The counter-claim alleged a violation of disclosure provisions of the Fair Credit Billing Act, 15 U.S.C. § 1637(a)(8) (Supp.1978). The trial court without a jury found no violation. It rendered judgment for the creditor for the amount of the account, plus finance charges and attorney’s fees, and that the debtor take nothing by his counter-claim. The debtor does not appeal the portion of the judgment against him for the amount of the account plus finance charges. He appeals only the portions of the judgment that he take nothing and the award of attorney’s fees.

We affirm in part and reverse and remand in part.

Hemphill applied for a retail charge account with S & Q Clothiers. S &■ Q approved his application and opened an account for him in 1973. Credit was extended for retail purchases made, and finance charges were assessed.

Although there were some months in which payment was not made, Hemphill was consistent in making payments on his account between June 1973 and October 1975. After October 1975 Hemphill became less consistent in making payments. He stopped making payments in January 1977, but the exact date collection procedures were instituted is the ultimate fact question raised by Hemphill’s appeal and is disputed. However, S & Q filed its sworn account suit against him on November 15, 1977.

Hemphill bases his counter-claim on the fact that he never received a notice from S & Q outlining his right to claim his bill was erroneous and the procedure to follow in making such a declaration. This notice is required to be sent semiannually by creditors to debtors having current open end credit accounts. 15 U.S.C. § 1637(a)(8) (Supp.1978). The contents of the required notice is contained in 12 C.F.R. § 226.7(a)(9) as follows:

“IN CASE OF ERRORS OR INQUIRIES ABOUT YOUR BILL
“The Federal Truth in Lending Act requires prompt correction of billing mistakes.
“1. If you want to preserve your rights under the Act, here’s what to do if you think your bill is wrong or if you need more information about an item on your bill:
“a. Do not write on the bill. On a separate sheet of paper write . . . the following:
“i. Your name and account number (if any).

“ii. A description of the error and an explanation . . . why you believe it is an error.

“iii. The dollar amount of the suspected error.
“iv. Any other information which you think will help the creditor to identify . . . the reason for your complaint or inquiry. . . . ”

S & Q admits they never sent Hemphill any notice concerning his right to dispute his bill. It claims no notice was required because at the time the requirement became effective, delinquency collection procedures had been instituted on his account. The disclosure requirement became effective October 28, 1975. 12 C.F.R. § 226.7(i) covers open end credit accounts in existence on effective date of the disclosure requirement and provides as follows:

“(i) Open end credit accounts existing on October 28, 1975. In the case of any open end credit account in existence and in which a balance of more than $1 is outstanding at or after the closing date of the creditor’s first full billing cycle after October 28,1975, and which account is deemed to be collectible and with respect to which delinquency collection procedures have not been instituted, the items described in paragraph (a) of this section, to the extent applicable and not previously required to be disclosed to the customer, shall be disclosed in the form prescribed in paragraph (a) of this section, and mailed or delivered to the customer not later than the time of mailing or delivery of the periodic statement required under paragraph (b) of this section for that billing cycle.”

A thorough review of the fair credit billing notice provisions reveals that under the facts here S & Q was not required to give the notice if Hemphill’s account was deemed uncollectible or if delinquency collection procedures had been instituted. It is our opinion that once it was established that Hemphill was a debtor under an open end type credit account and S & Q admitted having not sent him any of the notices, S & Q had to prove Hemphill’s account was past due and that it had either deemed it uncollectible or had instituted delinquency collection procedures. In our opinion placing the burden on S & Q is consistent with the spirit of the act. Also, S & Q would have knowledge of the relevant facts.

Both parties have erroneously assumed that no findings of fact were made by the trial court. S & Q so states in its brief and claims that we must affirm the judgment on any theory that could sustain the judgment which is supported by the pleadings and evidence. It asks us to assume the trial court’s findings support its judgment. This might be correct if there were no findings made. However, the trial court recited in its judgment the findings of fact upon which it relied. Findings of fact are usually made separately from the judgment upon the request of the party desiring to appeal the case. In our opinion this is the best practice. However, findings of fact recited in the judgment can meet the requirement of filing findings of fact. 4 McDonald, Texas Civil Practice § 16.05 (1971). We conclude the findings of fact recited in this judgment are to be given the same consideration as if they had been separately filed. The fact that they were unrequested is immaterial in this case.

Because the judgment states it was based on the findings recited therein, we may not make any assumptions or implications concerning findings or theories which may support the judgment. We cannot imply or assume the trial court found that S & Q deemed Hemphill’s account uncollectible. We may consider only the finding that it had instituted delinquency collection procedures on his account before the billing error notice became effective.

Hemphill asserts two points of error in complaint of the portion of the judgment that he take nothing. They are as follows:

1. “The trial court reversibly erred by failing to find as a matter of law that Appellant was entitled to recovery against Appellee for Appellee’s violation of the Fair Credit Billing Act, 15 U.S.C. § 1601 et seq., through Appellee’s failure to send Appellant ‘billing rights notices’ as required.
2. “The trial court reversibly erred in that its implied finding that Appellant was not entitled to recover against Ap-pellee for Appellee’s violation of the Fair Credit Billing Act, 15 U.S.C. § 1601 et seq., was contrary to the weight and preponderance of the evidence.”

These points fail to challenge the court’s finding on the institution of collection procedures. Hemphill’s argument under these points complains that the evidence fails to support S & Q’s contention that it deemed the account uncollectible. Therefore, technically Hemphill’s points of error fail to complain of the finding. However, we are to liberally construe points of error and arguments so that if they reasonably direct the attention of the reviewing court to the issue complained of, they will be held sufficient. Hemphill’s argument about the sufficiency of the evidence concerning the deeming of the account uncollectible is readily applicable to the finding of the institution of collection procedures and has directed our attention to this issue.

Hemphill’s claim that he is entitled to recover as a matter of law raises a no evidence question. Under the facts, for Hemphill to be entitled to recover as a matter of law, either it must be conclusively established that no collection procedures were instituted or it must be shown that there is no evidence to support the trial court’s finding that procedures were instituted. In either case, if there is any probative evidence which supports the finding, it must be sustained.

In our opinion there is evidence which supports the finding. S & Q’s central credit manager testified as follows:

“Q. Just refresh the Court’s recollection on this. When was it that this account went into this past due status collection efforts?
“A. It was in the middle approximately of October of ’75. Prior to that he was in a past due condition, he went to serious collect condition.”

In our opinion past due status, is synonymous with delinquency and that the institution of collection procedures can properly be inferred from the testimony. Therefore, this evidence supports the finding of the trial court.

Our attention is further directed to the sufficiency of the evidence to support the finding by Hemphill’s second point of error. In addition to the testimony above, S & Q’s local credit manager testified that Hemp-hill’s account was past due. Although from the context we are able to ascertain that the time being referred to is around October of 1975, there was no time or date of the delinquency specified by this testimony. In our opinion there is a significant distinction between an account which is past due and one that has been deemed uncollectible, or that has had collection procedures instituted to collect the account. Therefore, although relevant, testimony that an account is past due, only, does not carry much weight on the issue of deemed uncol-lectibility or the institution of collection procedures.

Upon reviewing the record we find no evidence of any dun or collection effort of which Hemphill was aware before December 25, 1975.

We do find evidence which infers that no collection procedures had been instituted by December 25, 1975. An S & Q exhibit, showing the purchases, payments, and finance charges on the account reflects that for the 12 months preceding December of 1975, Hemphill made eight payments. The last of these payments was $100.00 credited on October 25, 1975. The report further reflects that credit was extended to Hemp-hill on two different occasions after December 25, 1975. Credit purchases were posted on March 25, 1976 and July 25, 1976. The report indicates that he was consistent in making payments between February 1976 and January 1977.

Hemphill testified that he was making payments in the amount of $25.00 and was being “pressed” for more money. This would infer that some collection efforts were being made at the time. However, S & Q’s report indicates that the first of these $25.00 payments was posted on October 25, 1976, almost a full year after it was required to send the billing error notices. From the evidence outlined above and other evidence in the record, it is our opinion that the finding of the trial court that delinquency collection procedures were instituted is against the great weight and preponderance of the evidence and is unjust.

We, therefore, reverse the portion of the trial court’s judgment that Hemphill take nothing. We sever his counter-claim and remand it for a new trial.

Although the court’s judgment does not separately award attorney’s fees, which is the best practice, the court recited in its judgment that a reasonable attorney’s fee was $500.00. The judgment also stated that the amount of Hemphill’s account which was past due is $448.86. The total amount of the judgment is $948.86. Thus, it is obvious that $500.00 attorney’s fees were awarded. Hemphill claims the amount awarded was excessive and that the trial court abused its discretion in making the award in that amount. He argues that the award was against the great weight and preponderance of the evidence.

Supporting his contention, Hemp-hill correctly states the law concerning the factors to be considered in awarding attorney’s fees. They are the nature of the case, including the complexity and difficulty thereof, the amount of time required, the skill and expertise of the lawyer, and the amount in controversy. He recognizes that attorney’s fees are authorized in this case, but complains that the time S & Q’s lawyer spent defending his counter-claim was erroneously included in awarding the attorney’s fees. Under the facts as contained in the record, Hemphill must show that the trial court did consider the time S & Q spent defending his counter-claim. There is no finding to this effect because no additional findings of facts or conclusions of law were requested or filed in this case. Therefore, we must presume that trial court acted correctly and did not base the award on the time spent on the defense. Here the sworn account suit was contested, and usury was alleged as an affirmative defense. There is other evidence in the record which supports the court’s award. After reviewing this evidence we find no abuse of discretion has been shown. We therefore overrule Hemp-hill’s point of error on attorney’s fees and affirm the portion of the trial court’s judgment against Hemphill for the amount of the sworn account, including finance charges, and attorney’s fees.

We affirm the portion of the trial court’s judgment relating to appellee’s sworn account. Having found that the trial court’s finding that appellee had instituted delinquency collection procedures on appellant’s account to be against the great weight and preponderance of the evidence, we reverse the portion of the trial court’s judgment that appellant take nothing on his counter-claim, sever the counter-claim, and remand it for a new trial.


author: MOORE, Justice.

text:
    MEDICAL SLENDERIZING, INC., Appellant, v. The STATE of Texas, Appellee.
    No. 1203.
    Court of Civil Appeals of Texas, Tyler.
    March 29, 1979.
    Rehearing Denied April 19, 1979.

      Murray L. Lieberman, Lieberman, Tra-tras & Markowitz, Houston, for appellant.
    Debra Ravel, Asst. Atty. Gen., Austin, for appellee.
   MOORE, Justice.

Medical Slenderizing, Inc., appellant, perfected this appeal from a judgment rendered in favor of appellee, the State of Texas; assessing civil penalties against Medical Slenderizing, Inc., for the total sum of $3,000.00 for the violation of an order of the court entered permanently enjoining appellant from making certain representations to its customers in conducting its weight control business.

We affirm.

In order to understand the case, a brief historical background will be helpful. The record reveals that in May 1975 appellant was engaged in operating several weight reduction and weight control clinics in this state under the name of Medical Slenderizing, Inc. Customers were solicited through advertisements placed in area newspapers. The weight reduction program consisted primarily of a 500-ealorie-a-day diet and a series of injections of vitamin B-12 and a substance called Human Chorionic Gonado-tropin. In the course of the business, appellant’s customers were advised that Human Chorionic Gonadotropin was effective in bringing about a loss of weight and were given a booklet extolling the use of such substance as a weight reduction method.

In May 1975, the State of Texas filed suit against appellant under the provisions of the Deceptive Trade Practices-Consumer Protection Act, sec. 17.41 et seq., Tex.Bus. & Commerce Code Ann., seeking a permanent injunction restraining appellant from representing to the public and to its customers that the injection of Human Cho-rionic Gonadotropin had any effect on weight reduction or that such substance would decrease hunger brought about by a low calorie diet. That case resulted in an agreed judgment in which appellant was permanently enjoined from committing certain acts and practices in conducting its weight reduction clinics. The practices permanently enjoined, material to this appeal, were as follows: (a) representing to consumer orally or in writing that Human Cho-rionic Gonadotropin (hereinafter referred to as HCG) has any effect on weight reduction or weight control, and (b) representing to consumers, orally or in writing that HCG causes a decrease in hunger or other discomforts associated with calorie-restricted diets.

Thereafter on August 17, 1977, the State filed the present suit against Medical Slenderizing alleging numerous violations of the injunction order and sought judgment for civil penalties pursuant to sec. 17.47(e) of the Act, supra. After a hearing before the court, without a jury, the trial court entered judgment reciting that appellant had committed certain acts in violation of the injunction order rendered by the court as follows: (1) that appellant had orally represented to a customer that HCG has an effect on weight reduction and weight control; and (2) appellant had orally represented to a customer that HCG causes a decrease in hunger associated with a calorie-restricted diet. Pursuant to such findings the trial court rendered judgment against appellant for civil penalties in the sum of $1,500.00 for each of the said violations for a total of $8,000.00, from which judgment appellant Medical Slenderizing perfected this appeal.

Before discussing the case on its merits, we note that both parties seem to have briefed the case on the theory that the court found that appellant violated the injunction by making both oral and written representations prohibited by the decree. The judgment, however, recites that the court found that appellant violated the injunction by “orally” making the prohibited representations. It is thus apparent that the penalties were assessed solely on the basis of agents’ oral violations and not written violations. Therefore issues to be decided are confined to: (1) whether appellant’s agent orally violated the injunction; and (2) and if so, whether the statutory penalties may be assessed against the appellant corporation based on its agents’ violations.

Upon appellant’s request the trial court filed extensive findings of fact and conclusions of law. The findings of fact material to this appeal, as numbered by the trial court, are as follows: (12) Defendant Medical Slenderizing, Inc., expressly represented through its employees at Medical Slenderizing Clinics in Austin, Texas, that Human Chorionic Gonadotropin (HCG) had an effect on weight reduction or weight control; (13) Defendant Medical Slenderizing, Inc., expressly represented through its employees at Medical Slenderizing Clinics in Austin, Texas, that HCG causes a decrease in hunger associated with a calorie-restricted diet; and (16) Defendant Medical Slenderizing, Inc., did not maintain procedures reasonably adapted to insure compliance with the Agreed Final Judgment and Permanent Injunction entered May 22, 1975.

The conclusions of law material to this appeal as numbered by the trial court are as follows: (3) Defendant Medical Slenderizing, Inc., is bound by the acts and representations of its agents, employees and representatives; (4) Defendant Medical Slenderizing, Inc., violated Paragraph 1A of said Agreed Final Judgment and Permanent Injunction by representing that HCG has any effect on weight reduction or weight control; (5) Defendant Medical Slenderizing, Inc., violated Paragraph IB of said Agreed Final Judgment and Permanent Injunction by representing that HCG causes a decrease in hunger or. other discomforts associated with a calorie-restricted diet; (6) Defendant Medical Slenderizing, Inc., is liable for civil penalties for violation of said Agreed Final Judgment and Permanent Injunction; and (7) Defendant Medical Slenderizing, Inc., violated the Agreed Final Judgment and Permanent Injunction on two separate occasions, for which a penalty of $1,500 per violation is assessed, for a total of $3,000.00.

Under the first, second, third, and fourth points of error, appellant contends that there is no evidence to support the court’s finding: (a) that appellant expressly represented through its employees that HCG had an effect on weight reduction or weight control; or (b) that appellant represented by way of a booklet that HCG had an effect on weight reduction or that HCG causes a decrease in hunger associated with a calorie-restricted diet as found by the court in findings of fact Nos. 12 and 13, or in the alternative that such findings are against the great weight and preponderance of the evidence.

In testing the sufficiency of the evidence to determine whether it will support the trial court’s findings, we must give credence only to the evidence and circumstances favorable to the findings, disregarding all evidence and circumstances to the contrary. Banks v. Collins, 152 Tex. 265, 257 S.W.2d 97 (1953); Heard v. City of Dallas, 456 S.W.2d 440 (Tex.Civ.App.—Dallas 1970, writ ref’d n.r.e.).

In order to show that appellant had violated the injunction order, the State called two witnesses who had enrolled in the weight reduction program at a clinic operated by appellant in Austin, Texas. Betty Warner testified that when she enrolled, she was told by appellant’s manager, Ted Booker, that HCG would rid the body of fat and that if she followed the whole program consisting of the diet, B—12 shots and HCG shots she would not be hungry. She testified that contrary to such representation, that after following the program for a time she became hungry. Marsha McCowan testified that she also enrolled in the same weight reduction clinic operated by appellant and that upon enrolling, one of the employees stated to her that “You had to have HCG or you would not lose the fat proportionately all over your body at the same time” and “that HCG shots would help dislodge, loosen the fat all over your body and not just in certain areas.” Appellant’s manager was not called and did not testify in the case.

Upon applying the above mentioned rules of law to the facts, we are of the opinion that there is sufficient evidence of probative force to sustain each of the findings of fact challenged by appellant. Further, after having reviewed the entire record, and after having weighed and balanced all the evidence, both that in favor of findings Nos. 12 and 13, as well as that against such findings, we have concluded that neither of such findings are against the overwhelming weight and preponderance of the evidence. It follows that the judgment finding that appellant’s agent or employee had violated the injunction must be sustained. Points 1 through 4 are overruled.

Points 5 through 8 complain of thé court’s findings of fact Nos. 14 and 15 in which the court found that appellant represented, through a booklet given to the program participants, that HCG had an effect on weight reduction or weight control and that HCG caused a decrease in hunger associated with a calorie-restricted diet.

As pointed out before, the judgment recites that the penalties levied against appellant were based solely on oral representations in violation of the injunction decree. There is nothing in the judgment indicating that the trial court intended to assess penalties against appellant for making written representations in violation of the injunction decree. It is therefore immaterial to this appeal whether appellant violated the injunction decree by supplying the program participants with any type of written representations. Consequently, the findings complained of by these points must be disregarded as superfluous and immaterial. Accordingly, points 5 through 8 are overruled.

By the ninth point appellant contends that there is no evidence to support the trial court’s finding of fact No. 16, in which the court found that appellant failed to maintain procedures reasonably adapted to insure compliance with the agreed injunction decree entered by the court. Alternatively, appellant contends that such findings are against the overwhelming weight and preponderance of the evidence.

Section 17.47(e), Tex.Bus. & Commerce Code Ann., provides in part as follows:

“In determining whether or not an injunction has been violated the court shall take into consideration the maintenance of procedures reasonably adapted to insure compliance with the injunction.”

The record shows that after the injunction decree had been entered, appellant prepared a new Personnel Manual in which its employees were instructed not to state that HCG had any effect on weight reduction or weight control or that HCG caused a decrease in hunger or other discomforts associated with a diet. The manual stated that a violation of such instructions would result in dismissal. The evidence shows that each employee was required to sign the Personnel Manual. However, since none of appellant’s employees were called as witnesses there is no evidence that appellant’s manager, Ted Booker, or any other employee ever read the manual, nor is there any evidence that appellant took the precaution to orally instruct them not to make such representations. The record is devoid of any evidence showing whether appellant ever made any investigation to determine whether the instructions were being followed and there is nothing in the record showing whether its manager was ever disciplined or discharged for violating the instructions. Thus, under the record before us, it appears that the only effort made to comply with the terms of the injunction was the printing of the new personnel manual without any showing as to whether the same was read by the employees. In any event, the evidence establishes that instructions in the manual were ignored.

Section 17.47(e) of the Act requires only that the court consider the maintenance of procedures reasonably adapted to insure compliance with the injunction. Apparently the trial court concluded that the mere preparation of the new Personnel Manual, standing alone, was not sufficient to show that appellant instituted procedures reasonably adapted to insure compliance. In our view the record contains sufficient evidence of probative force to support the trial court’s finding that appellant failed to adopt reasonable procedures to insure compliance with the court’s order. Upon considering the record as a whole, we have concluded that the court’s finding is not against the overwhelming weight and preponderance of the evidence. Points 9 and 10 are overruled.

Under the eleventh point, appellant attacks conclusion of law No. 3 wherein the court concluded that appellant was legally bound by the acts of its agents, servants and employees in making the representations prohibited by the injunction decree. Appellant takes the position that this conclusion is erroneous in that a principal is bound only by the act of its agent when the act is within the ordinary and usual course of the business entrusted to the agent. Based on this premise, appellant argues that since its manager had been instructed not to make the prohibited representations, he was not acting in the course and scope of his employment and therefore appellant, Medical Slenderizing, was not bound thereby. We are not in accord with this proposition.

Section 17.47(e), supra, provides in part, as follows:

“Any person who violates the terms of an injunction under this section shall forfeit and pay to the State a civil penalty of not more than $10,000.00 per violation, not to exceed $50,000.”

The statute further provides that the term “person” includes a corporation. The statute does not require that the injunction be “knowingly” violated.

The injunction decree in the present case recites that the corporation, as well as its agents, servants and employees, were enjoined from making the previously mentioned representations to its customers. It having been established that appellant’s manager violated the injunction, the narrow question raised by this point of error is whether the appellant corporation may be held liable for the statutory penalty based on a violation committed by its agent or employee.

The general rule is that an employer may be held accountable for the wrongful act of his employee committed while acting in his employer’s business and within the scope of his employment, although he had no knowledge thereof or had even expressly forbidden it. 53 Am.Jur.2d, Master & Servant, sec. 435, p. 453; Internationa] & G.N.R. Co. v. Anderson, 82 Tex. 516, 17 S.W. 1039, 1040 (1891); Blackwell v. Ship Channel Development Co., 264 S.W. 223, 227-28 (Tex.Civ.App.—Beaumont 1924, writ dismissed).

We see no reason why the same rules should not be applicable to impose a civil penalty on a corporation based on the conduct of its agent in violating an injunction decree. The rule governing civil liability is applicable when the act is done by the agent in the course of his employment, although done wantonly or recklessly or against the express orders of the principal. In such cases the liability is not imputed because the principal actually participates in the malice or fraud, but because the act is done for the benefit of the principal, while the agent is acting within the scope of his employment in the business of the principal and justice requires that the latter shall be held responsible.

In the present case we are to consider the penal responsibility of the corporation for an act done while an authorized agent is exercising the authority conferred upon him. The evidence shows that appellant’s agent, Ted Booker, was in charge of the Austin, Texas clinic and violated the injunction by making prohibited representations. His motive in making the prohibited representations was to induce them to become paying customers. The record shows he succeeded in his efforts. Thus his conduct was within the scope of authority and employment of his company. Being clothed with authority by his employer he had a duty not to violate the injunction decree. Applying the principal governing civil liability, we go only a step further in holding that the act of the agent, while exercising the authority delegated to him to secure customers for appellant’s business, may be imputed to his employer thereby subjecting the appellant to the penalties imposed by the statute. Waters-Pierce Oil Co. v. State, 19 Tex.Civ.App. 1, 44 S.W. 936, 946 (1898).

It has been said that “The treasury of the business may not with impunity obtain the fruits of violations which are committed knowingly by agents of the entity in the scope of their employment. Thus pressure is brought on those who own the entity to see to it.that their agents abide by the law.” United States v. A & P Trucking Company, 1958, 358 U.S. 121, 126, 79 S.Ct. 203, 207, 3 L.Ed.2d 165; New York Central & Hudson River R.R. Co. v. United States, 1909, 212 U.S. 481, 29 S.Ct. 304, 53 L.Ed. 613; Standard Oil Company of Texas v. United States, 307 F.2d 120 (5th Cir. 1962). We are aware of the fact that the last cited cases stand for the proposition that a corporation is criminally liable for the acts of its agent done with a view of furthering the master’s business; however, in so holding the courts followed the same rules governing civil liability of a corporation for the acts of its agent. If a corporation is to be held responsible for the acts of its agent for violation of a criminal statute, we see no reason why a corporation should not be held responsible for statutory civil penalties based on the act of its agent in furthering the business of the corporation.

Under points 12 through 19 appellant attacks various conclusions of law made by the trial court. We perceive no error in any of the points. If, however, the conclusions could in some manner be deemed to be erroneous, we are not aware of any rule that requires the judgment to conform to the conclusions of law found by the trial court. If the trial court renders an otherwise correct judgment, it will not be set aside because the court may have made incorrect conclusions of law. Gulf Land Co. v. Atlantic Refining Co., 134 Tex. 59, 131 S.W.2d 73, 84 (1939); Mercedes Dusting Service, Inc. v. Evans, 353 S.W.2d 894, 895 (Tex.Civ.App.—San Antonio 1962, no writ history), citing cases. Having concluded that the trial court’s findings of fact were supported by the evidence and were not against the overwhelming weight and preponderance of the evidence, this court is bound by such finding and we would not be authorized to overturn the judgment on the ground that the judgment is not supported by conclusions of law.

Affirmed.

      . Hereinafter referred to as the “Act.”