Esparza v. Nolan Wells Communications, Inc. ( 1983 )

ON MOTION FOR REHEARING

Appellant and appellee raise in their respective motions for rehearing several matters worthy of comment.

Appellant contends that we erred in our computation of “the amount of interest allowed by” Tex.Rev.Civ.Stat.Ann., Title 79, Subtitle 1. Tex.Rev.Civ.Stat.Ann. art. 5069-1.06(2) (1971) (emphasis added). By our computation, we determined the amount of interest which appellee legally could have charged under subtitle 1. We did so for the purpose of determining whether the amount of interest actually charged by appellee was “in excess of double” the amount “allowed” under the subtitle. In our computation, we applied the maximum legal rate under the subtitle to the amounts owed by appellant to appellee, for the period of time the various amounts were shown by the undisputed evidence to be past due. This is, of course, an application of the familiar formula that “interest” is the product of multiplying the principal sum by the annual legal rate and by the period of time the principal was due and unpaid.

We determined by the foregoing that under Tex.Rev.Civ.Stat.Ann. art. 5069-1.03 (Supp.1982), appellee was legally entitled or “allowed” to charge $63.92 in interest as of September 9, 1980, the date appellee charged $93.60 in interest on the amounts which comprised appellant’s unpaid trade account debt. It is therefore obvious that the amount actually charged by appellee was not double the amount of interest legally allowed under the subtitle, at least under our computations. Accordingly, we refused to impose the additional penalty directed by art. 5069-1.06(2), that is, forfeiture of interest and all other charges made by appellee against appellant, including the principal sum of appellant’s debt to appel-lee.

Appellant contends we computed the interest allowed by the subtitle over too long a period of time. He argues that we should not have computed the interest based upon the period of time the various sums were shown to be past-due under the undisputed evidence; rather, we should have computed the lawful amount of interest allowed by the subtitle based solely upon those months which appellee actually purported to charge interest on appellee’s trade account debt, which was June, July, and August of 1980. Applying the highest permitted rate of interest over the shorter time period claimed to be proper by appellee, the interest actually charged by appellee would clearly be in excess of double the amount allowed by the subtitle and the additional statutory penalty would be applicable. Appellant cites the following decisions: Houston Sash & Door v. Heaner, 577 S.W.2d 217, 221 (Tex.1979); Watson v. Cargill, 573 S.W.2d 35 (Tex.Civ.App.1978, writ ref’d n.r.e.); Hagar v. Williams, 593 S.W.2d 783 (Tex.Civ.App.1979, no writ); Flato Electric Supply Co. v. Grant, 620 S.W.2d 915 (Tex.Civ.App.1981, writ ref’d n.r.e.); Avia Jet Management v. Aeroplace Service, 626 S.W.2d 325 (Tex.App.1981, no writ); PJM Inc. v. Walter Clark, 624 S.W.2d 282 (Tex.App.1981, writ ref’d n.r.e.); and Concrete Construction Supply Co. v. M.F.C., Inc., 636 S.W.2d 475 (Tex.App.1982, no writ).

These decisions in relevant part stand solely for the proposition that the term “amount of interest allowed” by the subtitle does not include: (1) interest which the creditor could have charged, but did not, on amounts which the debtor had paid before he was assessed the interest charge of which he complains; and (2) interest which the creditor could have charged following the date he assessed the interest charge of which the debtor complains. Neither circumstance applies in the present case.

We think the term “amount of interest allowed” by the subtitle means the amount of interest derived from applying the maximum lawful percentage rate allowed by the subtitle to the principal sums which were unpaid and owing on the date of the charge of which the debtor complains, for the period of time each component principal sum was due and owing. That is the formula we have applied in the present case and we can-imagine no clearer meaning of the term “the amount of interest allowed” by the subtitle. Cf. Tanner Development Co. v. Ferguson, 561 S.W.2d 777 (Tex.1977) (interest required to be “spread” over the term of the promissory note to determine whether the amount of interest charged is usurious). We overrule appellant’s point of error.

Appellee, on its part, contends in its motion for rehearing that we erred in affirming the trial court’s award of attorney’s fees to appellant and in offsetting such award against the amount of attorney’s fees awarded appellee by the trial court. Appellee asserts that we erred because appellant did not obtain a net recovery against appellee with regard to the principal amount of the latter’s judgment, that is, the $390.00 statutory forfeiture recovered by appellant (20% of the principal amount of the debt) is less than the $1,887.01 which the trial court judgment awards to appellee as its trade account debt. Appellee contends that only the party who recovers a net sum under the trial court judgment is entitled to the attorney’s fees authorized by Tex.Rev.Civ.Stat.Ann. art. 2226 (Supp. 1982). Appellee cites the decisions in Jon-T Farms, Inc. v. Goodpasture, Inc., 554 S.W.2d 743 (Tex.Civ.App.1977, writ ref d n.r.e.) and L Q Motor Inns, Inc. v. Boysen, 503 S.W.2d 411 (Tex.Civ.App.1973, writ ref’d n.r.e.).

These decisions interpret and apply art. 2226 in the context of a breach of contract case and do, of course, stand for the proposition that only the party obtaining a net recovery is entitled to judgment for the attorney’s fees authorized by that statute. In the present case, however, appellant would require us to deny appellant the attorney’s fees authorized by art. 5069-1.06, while affirming appellee’s award of attorney’s fees under art. 2226. We decline to do so. In L Q Motor Inns v. Boysen, supra, the Court said:

[t]he purpose of Article 2226 was to encourage the payment of small claims and to forestall their litigation.... [W]e believe the purpose of Article 2226 is still to encourage the settlement out of court of the enumerated types of claims when no bona fide controversy exists.

503 S.W.2d at 412. More precisely, the purpose of art. 2226 is to discourage debtors from refusing to pay small claims in anticipation that the cost of the litigation to the creditor, including attorney’s fees, will discourage the creditor from pursuing even a just claim. This rationale does not apply, of course, where the debtor himself has a valid and greater claim against the creditor. Id. at 411.

It is uncertain whether the rule of L Q Motor Inns remains effective. See Figari, Graves & Gordon, Texas Civil Procedure, 36 Sw.L.J. 435, 468-69 (1982); cf. Davis Masonry, Inc. v. B-F-W Construction Co., Inc., 622 S.W.2d 144 (Tex.Civ.App.1981), writ ref’d n.r.e., 639 S.W.2d 448 (Tex.1982) (contractor recovering against subcontractor for breach of contract claim is “prevailing party” entitled to attorney’s fees under contract provision, even though subcontractor counterclaimed for sums due under the contract, and under trial court judgment contractor was held to owe a net amount to the subcontractor with regard to the principal sums in dispute, but the contractor obtained a net recovery when attorney’s fees were added to the principal sums). In any event, we will not follow the rule advocated by appellee because we believe it contrary to the letter, spirit, and purpose of art. 5069-1.06, directing the creditor’s forfeiture of twice the amount of excessive interest charged and reasonable attorney’s fees without any proviso denying attorney’s fees when the creditor’s principal claim exceeds the forfeiture.

Without the statutory right to recover attorney’s fees, we think it plain that most debtors would forego the litigation of just claims for the statutory forfeitures, owing to the fact that the amount likely to be recovered would not exceed the cost of litigation, a result manifestly not intended by the statute. This would encourage and certainly not discourage usury. The purpose of an award of attorney’s fees under art. 5069-1.06 is to deter usury, a purpose which is equally applicable whether or not the creditor’s recovery is greater in a particular case than the statutory forfeiture for usury. Williams v. Back, 624 S.W.2d 272 (Tex.App.1981, no writ). Appellee’s point of error is overruled.

The remaining points in appellee’s and appellant’s respective motions for rehearing are overruled.