Gordon Klatt, Sr., Gordon Klatt, Jr. and Klatt Hardware and Lumber, Inc. v. Value Bank, Texas

No. 04-00-00856-CV Gordon KLATT, Sr., Gordon Klatt, Jr. and

Klatt Hardware and Lumber, Inc.

Appellants v. VALUE BANK, TEXAS, Appellee From the 79th Judicial District Court of Jim Wells County, Texas Trial Court No. 99-10-37965-B Honorable Terry A. Canales, Judge Presiding

Opinion by: Karen Angelini, Justice

Sitting: Phil Hardberger, Chief Justice
Paul W. Green, Justice
Karen Angelini, Justice

Delivered and Filed: November 28, 2001

AFFIRMED

Gordon Klatt, Sr., Gordon Klatt, Jr., and Klatt Hardware and Lumber, Inc. appeal the summary judgment granted in favor of Value Bank, Texas ("Value Bank"). We affirm the judgment of the trial court.

Background

The Klatts own Klatt Hardware and Lumber, Inc. ("the corporation"). From 1988 to 1999, the Klatts had individual checking accounts with Value Bank, and the corporation had a commercial checking account. Although the Klatts sued in their individual capacity, they both testified during their depositions that all allegations contained within the petition relate to the corporation's checking account and not to their individual checking accounts.

In 1993, the corporation's commercial checking account was converted to an International Business Checking Account. Value Bank notified the Klatts of the terms and conditions associated with the new account. In 1995, Value Bank again notified the Klatts of new terms and conditions associated with the International Business Checking Account. Both the 1993 and 1995 agreements provided for a "nonsufficient funds" fee of $20 per item and a monthly service charge if the earnings credit on balances did not exceed the calculated account charges. If the earnings credit on balances exceeded the calculated account charges, then there was no service charge for the month. The amount of the service charge was calculated by using a formula described in the agreements.

Beginning in 1998, many checks were written on the corporation's account when the account had insufficient funds. Value Bank would honor the checks and impose a $20 nonsufficient funds fee ("NSF fee") per item. Additionally, more times than not, the corporation would also incur a service charge or "analysis fee," because its earnings credit on balances would not exceed the calculated account charges. Each month, the corporation received a "Statement of Account Analysis," which reflected these charges. The Klatts allege that from 1988 to 1999, Value Bank debited the corporation's account for $88,526.00.

The Klatts and the corporation filed suit for breach of contract, violations of the Texas Finance Code, usury, and deceptive trade practices. Value Bank moved for summary judgment, which the trial court granted. Value Bank's motion did not specify whether it was seeking a traditional summary judgment pursuant to Texas Rule of Civil Procedure 166a(b) or a no-evidence summary judgment under rule 166a(i). The trial court did not clarify this point in its Order Granting Summary Judgment. When the order granting summary judgment does not specify the grounds upon which the trial court relied, we must affirm the judgment if any of the theories raised in the motion for summary judgment are meritorious. State Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374, 380 (Tex. 1993).

Standard of Review

To obtain a traditional summary judgment, a party moving for summary judgment must show that no genuine issue of material fact exists and that the party is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Randall's Food Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995); Nixon v. Mr. Property Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985). In reviewing a summary judgment, we must indulge every reasonable inference and resolve any doubts in favor of the nonmovant. Johnson, 891 S.W.2d at 644; Nixon, 690 S.W.2d at 549. In addition, we must assume all evidence favorable to the nonmovant is true. Johnson, 891 S.W.2d at 644; Nixon, 690 S.W.2d at 548-49. A defendant is entitled to summary judgment if the evidence disproves as a matter of law at least one element of the plaintiff's cause of action. Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 471 (Tex. 1991). Once the movant has established a right to summary judgment, the burden shifts to the nonmovant to present evidence that would raise a genuine issue of material fact. City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979).

Under Rule 166a(i), a party may move for a no-evidence summary judgment on the ground that there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of proof at trial. Tex. R. Civ. P. 166a(i). We review a no-evidence summary judgment de novo by construing the record in the light most favorable to the nonmovant and disregarding all contrary evidence and inferences. Merrill Dow Pharmaceuticals, Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997); Reynosa v. Huff, 21 S.W.3d 510, 512 (Tex. App.--San Antonio 2000, no pet.); Moore v. K Mart Corp., 981 S.W.2d 266, 269 (Tex. App.--San Antonio 1998, pet. denied). A no-evidence summary judgment is improperly granted when the respondent brings forth more than a scintilla of probative evidence that raises a genuine issue of material fact. Tex. R. Civ. P. 166a(i); Gomez v. Tri City Cmty. Hosp., Ltd., 4 S.W.3d 281, 283 (Tex. App.--San Antonio 1999, no pet.). Less than a scintilla of evidence exists when the evidence is "so weak as to do no more than create a mere surmise or suspicion" of a fact, and the legal effect is that there is no evidence. Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983).

Failure to Disclose

The plaintiffs' second amended petition alleges that Value Bank violated section 34.303 of the Texas Finance Code by failing to give written notice of the NSF fee. Section 34.303 provides,

(a) Except as otherwise provided by law, a bank may charge an account holder a fee, service charge, or penalty relating to service or activity of a deposit account, including a fee for an overdraft, insufficient fund check, or stop payment order.

(b) Except as otherwise provided by the Truth in Savings Act (12 U.S.C. Section 4301 et seq.) or other federal law, a bank shall disclose the amount of each fee, charge, or penalty related to an account or, if the amount of a fee, charge, or penalty cannot be stated, the method of computing the fee, charge, or penalty. The disclosure must be made by written notice delivered or mailed to each customer opening an account not later than the 10th business day after the date the account is opened. A bank that increases or adds a new fee, charge, or penalty shall give notice of the change to each affected account holder in the manner provided by Section 34.302 (b) for notice of an amendment of a deposit contract.

Tex. Fin. Code Ann. § 34.303 (Vernon 1998). Section 34.302 permits a bank to amend the deposit contract by agreement or "by mailing a written notice of the amendment to the account holder, separately or as an enclosure with or part of the account holder's statement of account or passbook. The notice must include the text and effective date of the amendment." Id. § 34.302(b).

Value Bank attached to its motion for summary judgment a copy of the corporation's signature card and original deposit agreement, letters informing the corporation of the amendments to its deposit agreement, and the amended deposit agreements. Appellants argue that the following language contained in Klatt Jr.'s affidavit ⁽¹⁾ creates a fact issue:

Neither my father nor I have ever been able to find out how the Value Bank charges to our account ⁽²⁾ were calculated. We asked the bankers how these fees were calculated on more than one occasion, but were told that it was complicated and were not ever furnished the formula.

These statements in Klatt Jr.'s affidavit only show that the Klatts were unable to determine how to calculate the fees. The statements do not controvert the fact that Value Bank disclosed the fees to the corporation as required by section 34.303. Indeed, Klatt Jr. admitted in his deposition that he received documents, including monthly statements, from Value Bank informing him of the fees. Value Bank presented evidence proving that it disclosed the fees to the corporation. The corporation did not submit evidence to controvert this fact. Therefore, the trial court properly granted summary judgment on the failure to disclose claim.

Breach of Contract

The plaintiffs' second amended petition alleges that Value Bank "failed to perform and breached its deposit agreement . . . by arbitrarily withdrawing funds from the Plaintiffs' account without prior approval of Plaintiffs and without lawful justification." Value Bank attached the original deposit agreement to its motion for summary judgment, along with two subsequent deposit agreements. We enforce an unambiguous contract as written. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). The question of whether a contract is ambiguous is one of law for the court. Id. "A contract is ambiguous when its meaning is uncertain and doubtful or is reasonably susceptible to more than one interpretation." Id. We give the terms of the contract their plain, ordinary, and generally accepted meaning unless the contract shows that the parties used them in a technical or different sense. Id.

The original deposit agreement provided that Value Bank and the corporation agree

to the terms of this account and the schedule of charges that may be imposed. [The corporation] authorize[s] [Value Bank] to deduct these charges as accrued directly from the account balance. [The corporation] also agree[s] to pay additional reasonable charges we may impose for services you request which are not contemplated by this agreement. [The corporation] also agrees to be jointly and severally liable for any account deficit resulting from charges or overdrafts, whether caused by [the corporation] or another authorized to withdraw from this account, and the costs [Value Bank] incur[s] to collect the deficit including, to the extent permitted by law, [Value Bank's] reasonable attorneys' fees. . . . From time to time [Value Bank] may amend any terms of this agreement upon giving [the corporation] reasonable notice in writing or by any other method permitted by law, including, in appropriate circumstances, posting notice in [Value Bank's] building.

(emphasis added). Value Bank attached the affidavits of Linda Kirchoff, Assistant Vice President of Value Bank, and Sandi Black, Chief Operating Officer of Value Bank. Both Kirchoff and Black testify in their affidavits that they are familiar with standard bank charges and fees in the State of Texas and in Jim Wells County. Kirchoff's affidavit states that a NSF fee of $20 per item is a standard and customary fee in the banking industry. Black's affidavit states that the analysis fees charged by Value Bank were reasonable and customary fees in the banking industry. Appellants did not produce any evidence to controvert the reasonableness of the fees in question. The two subsequent deposit agreements explicitly provided for a NSF fee of $20 per item and explain the formula for calculating the analysis fee per month.

Despite the unambiguity of the contractual terms, appellants argue that Value Bank arbitrarily withdrew funds from the corporation's account without their prior approval. In particular, appellants rely on Klatt Jr.'s affidavit, which states that

[n]either my father nor I ever agreed to allow Value Bank to debit our accounts for the large "analysis fees" that were charged to us. We did not agree to be charged such high amounts, nor did we condone the charges when they appeared on our bank statements. In fact, we routinely complained to the Bank Officers of Value Bank about these charges.

The terms of the deposit agreement, however, clearly gave Value Bank the authority to debit the corporation's account for the charges in question. Klatt Jr.'s affidavit does not create a fact issue, because the terms of the deposit agreement are unambiguous. See Heritage Res., 939 S.W.2d at 121.

Moreover, in reviewing the depositions of both Klatts, it is apparent that their complaints center on the amount of the fees in question, not on whether Value Bank had the authority to charge the fees. Klatt Jr. admitted during his deposition that Value Bank never erroneously charged the corporation for an NSF fee when, in fact, there were sufficient funds.

Q: [Value Bank] never charged you for a hot check if the check wasn't hot, did [it]?

A: No.

Q: . . . your complaint is [that] you got charged when you wrote a hot check . . . and you think [the fee] was too [high], correct?

A: Correct.

Q: Anything else the bank did other than that?

A: No. That's what we're complaining about.

Q: Now, you - your lawsuit says it's an unreasonable fee.

A: I think it is.

Q: And what's the basis of that thought?

A: Well, if you take those averages that we were - that we're talking about and if we would have been treated - treated fairly - Like there could have been - there should have [been] some other means of charging rather than $20 a check.

Q: And what did you do as a result of you - Well, you saw what they were charging you, right?

A: Yes, sir. Yes, sir.

Q: And you knew they were charging you how much?

A: Well, to begin with, if my memory is right when I went through these things, it was $15. Then it went up to $20.

Q: So back in the beginning of [1988], you started getting charged $15 a hot check, right?

A: Yes, sir.

Q: And you knew that?

A: Yes, sir.

Q: And what did you do as a result of that?

A: I complained to every banker that was there within that time.

Q: And would it be fair to say that since 1988 when [Value Bank] first started charging you those hot check fees through today, I guess, they've continued to charge you those fees?

A: That's correct.

Q: . . . Are you familiar with what other banks charge people for writing hot checks?

A: No, sir. I've never talked to a bank to determine what kind of policies they have.

Because the terms of the deposit agreement were unambiguous and because the fees charged by Value Bank conformed to the agreement, Value Bank did not breach its deposit agreement with the corporation. The trial court properly granted summary judgment on the appellants' breach of contract claim.

Usury

Appellants alleged in the underlying lawsuit that each time Value Bank honored a check when the account did not have sufficient funds, Value Bank in fact loaned the corporation the amount overdrawn. Appellants argue that the analysis fees associated with each "overdraft was, in reality, an interest charge for the use of the bank's money during the period between the date on which the Bank paid the overdraft check or checks, and the date on which the [corporation] subsequently deposited sufficient funds to cover the overdraft." Thus, appellants argue that these "loans" were usurious.

In this case, the monthly analysis fee, or service charge, was calculated by comparing the earnings credit on balances with the calculated account charges. In other words, if the corporation maintained on average a sufficient amount of money in its account, Value Bank did not charge a monthly analysis fee. If, on the other hand, the corporation had on average a low balance (or negative balance in the case of overdrafts), Value Bank charged a higher monthly analysis fee.

Usury is contracting for, charging, or receiving interest in excess of a lawful amount. First USA Mgmt., Inc. v. Esmond, 960 S.W.2d 625, 627 (Tex. 1997). "If there is no interest, there can be no basis for usury." First Bank v. Tony's Tortilla Factory, Inc., 877 S.W.2d 285, 287 (Tex. 1994). Whether an amount of money is interest depends not on what the parties call it but on the substance of the transaction. Esmond, 960 S.W.2d at 627. "Fees which are an additional charge supported by a distinctly separate and additional consideration, other than the simple lending of money, are not interest and thus do not violate the usury laws." Tony's Tortilla Factory, 877 S.W.2d at 287. The Texas Supreme Court has held that a bank's fee for checks drawn on an account with insufficient funds was supported by separate consideration and thus, was not interest. Id. at 288. The court noted,

It is undisputed that each NSF fee was assessed as a processing fee for the additional work required in connection with handling the bad check. . . . The NSF fees were charged for the costs of processing a check drawn on an account with insufficient funds. There mere profitability of the NSF fee to First Bank does not make the fee usurious interest. Each NSF fee was separate and additional consideration for processing each bad check. Thus, the NSF fee was for consideration other than the lending of money.

Id. at 287-88 (citation omitted). Likewise, in this case, the analysis fees were charged for the costs of servicing the corporation's account. If the corporation had a sufficient average balance, the costs associated with servicing the account were small, and Value Bank would not charge an analysis fee. If the corporation had a low balance, the costs associated with servicing the account were larger, and Value Bank would charge an analysis fee. Therefore, the analysis fee was for consideration other than the lending of money and was not interest. Because the fee was not interest, it cannot be usurious. The trial court properly dismissed appellants' claim for usury.

Compensation Greater than Allowed by Law

Appellants also alleged in their petition that Value Bank violated section 302.002 of the Texas Finance Code by charging more interest than allowed by law with regard to the analysis fees. Because we have held that the analysis fee was not interest, Value Bank could not have violated section 302.002. Thus, the trial court did not err in dismissing this claim.

Deceptive Trade Practices Act

Appellants argue that Value Bank's practice of debiting the corporation's account for NSF and analysis fees was unconscionable conduct in violation of the Texas Deceptive Trade Practices- Consumer Protection Act. See Tex. Bus. & Comm. Code Ann. § 17.50(a)(3) (Vernon Supp. 2001). As noted previously, Kirchoff and Black attest in their affidavits that the fees charged by Value Bank were reasonable and customary in the banking industry. Appellants submitted no evidence to contradict Kirchoff or Black. In fact, Klatt Jr. testified in his deposition that he has no idea what other banks charge for similar services. Value Bank established as a matter of law that its fees were reasonable.

Conclusion

The trial court did not err in granting summary judgment and dismissing appellants' claims. We affirm the judgment of the trial court.

Karen Angelini, Justice

Do not publish

1. Value Bank argues that we should disregard Klatt Jr.'s affidavit because it contradicts his deposition testimony. In Cantu v. Peacher, we held that a court must examine the nature and extent of the differences in the facts asserted in the deposition and the affidavit. 53 S.W.3d 5, 10 (Tex. App.--San Antonio 2001, pet. denied). If the differences fall into the category of variations on a theme, consistent in the major allegations but with some variances of detail, this is grounds for impeachment, and not a vitiation of the later filed document. Id. If, on the other hand, the subsequent affidavit clearly contradicts the witness's earlier testimony involving the suit's material points, without explanation, the affidavit must be disregarded and will not defeat the motion for summary judgment. Id. Comparing Klatt Jr.'s deposition testimony to his affidavit, we recognize some variances between Klatt Jr.'s deposition testimony and his affidavit, but we do not consider the differences to be so material that we must disregard the affidavit.

2. It is clear from Klatt Jr.'s deposition testimony that when he refers to "our account," he is speaking of the corporation's account, not the individual accounts.