




NUMBER 13-01-646-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI



 JAVIER GARCIA , Appellant, 

v.



TEXAS CABLE PARTNERS, L.P., TIME WARNER, INC., AND TIME
WARNER TELECOM OF TEXAS, L.P. , Appellees.


On appeal from the 206th District Court
of Hidalgo County, Texas.

O P I N I O N
Before Justices Hinojosa, Castillo, and Dorsey (1)


Opinion by Justice Dorsey



 Javier Garcia, a cable-television subscriber, sued appellees, alleging their assessment of a five-dollar administrative late
fee for delinquent payment of his monthly cable bill constituted usury.  Appellees moved for summary judgment, asserting
the late fee did not constitute usury as a matter of law.  The trial court granted summary judgment.  The issue is whether the
late fee amounts to usury under the Texas Finance Code.  We affirm.
I. Background

 Javier Garcia entered into a consumer lease with Time Warner Communications covering cable equipment for the purpose
of receiving cable services, which the company provided.  Pursuant to the cable service contract, Garcia agreed to pay a
monthly fee for cable television services.  The monthly billing statement notified the customer that a five-dollar
administrative late fee would be charged monthly for payments received ten days after the due date.  Garcia alleged that
Time Warner Communications charged him, and other similarly situated persons, for late fees when the company billed its
customers for cable-television services.  He sued Time Warner Communications (2) and Time Warner, Inc., alleging the late
fee constituted usury under Texas law.  He sought class certification for this lawsuit.
 Appellees moved for summary judgment alleging, among other things, that the late fee is not usurious as a matter of law. 
Garcia specially excepted to the summary- judgment motion, conditionally responded to it, and objected to deficiencies in
appellees' summary judgment evidence.
 The trial court denied Garcia's special exceptions, overruled his objections to appellees' summary judgment evidence, and
granted summary judgment on June 20, 2001.  Garcia appeals from that judgment.
II. Standard of Review

 The standards for reviewing a summary judgment motion are well established: (1) the movant has the burden of showing
that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law; (2) in deciding whether a
disputed material fact issue exists precluding summary judgment, we take as true evidence favorable to the nonmovant; and
(3) indulge every reasonable inference in the nonmovant's favor and resolve any doubts in its favor.  Nixon v. Mr. Prop.
Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985).  Summary judgment for a defendant is proper only when the defendant
negates at least one element of each of the plaintiff's theories of recovery, Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910,
911 (Tex. 1997), or pleads and conclusively establishes each element of an affirmative defense.  City of Houston v. Clear
Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979).
II. Analysis

 The issue is whether the late fee constitutes usury under the Texas Finance Code.  The essential elements of a usurious
transaction are:  (1) a loan of money; (2) an absolute obligation that the principal be repaid; and (3) the exaction of a greater
compensation than allowed by law for the borrower's use of the money.  First Bank v. Tony's Tortilla Factory, Inc., 877
S.W.2d 285, 287 (Tex. 1994); Varel Mfg. Co. v. Acetylene Oxygen Co., 990 S.W.2d 486, 491 (Tex. App.-Corpus Christi
1999, no pet.). Usury is defined as "interest that exceeds the applicable maximum amount allowed by law."  Tex. Fin. Code
Ann. § 301.001(4) (Vernon 1998).  Interest is the "compensation for the use, forbearance, or detention of money."  Tex.
Fin. Code Ann. § 301.002(a)(4) (Vernon Supp. 2003).
 Our usury statutes are derived from the Texas Constitution, which provides the following grant of authority to the
legislature:  "The legislature shall have authority to classify loans and lenders, license and regulate lenders, define interest
and fix maximum rates of interest."  Tex. Const. art.  XVI, § 11 (emphasis added).  Pursuant to this grant of authority, the
legislature has enacted a statute addressing maximum rates of interest, which includes a definition of "interest."  See Tex.
Fin. Code Ann. § 301.002(a)(4) (Vernon Supp. 2003).  Therefore, for the usury laws to apply, there must be an overcharge
by a lender for the use, forbearance, or detention of the lender's money.  Stedman v. Georgetown Sav. & Loan Ass'n, 595
S.W.2d 486, 489 (Tex. 1979);Crow v. Home Sav. Ass'n of Dallas County, 522 S.W.2d 457, 460 (Tex. 1975); Domizio v.
Progressive Cty. Mut. Ins. County, 54 S.W.3d 867, 873 (Tex. App.-Austin 2001, pet. denied).  The judicial inquiry is
whether this has occurred.  Crow, 522 S.W.2d at 460. Whether an amount of money is interest does not depend on what the
parties call it but on the substance of the transaction.  First USA Mgmt., Inc. v. Esmond, 960 S.W.2d 625, 627 (Tex. 1997). 
Because usury statutes are penal in nature, we strictly construe them. Steves Sash & Door Co. v. Ceco Corp., 751 S.W.2d
473, 476 (Tex. 1988).  
 Courts of appeals have held that, because a rental or lease agreement is not a "lending transaction," the usury statute does
not apply to late charges assessed on overdue rental payments.  For example, Maloney v. Andrews, 483 S.W.2d 703 (Tex.
Civ. App.-Eastland 1972, writ ref'd n.r.e.), involved a suit for unpaid rentals under a lease agreement.  Id. at 703.  The
defendant counterclaimed that a lease provision for the payment of late charges amounted to usurious interest under former
article 5069-1.01 of the Texas Revised Civil Statutes (3) in effect at the time the lease was executed.  Id. at 704.  The court
noted that Article XVI, Section 11 of the Texas Constitution authorizing the Legislature to fix maximum interest rates
covered only loan transactions and applied to lenders of money.  Id. at 704-05.  Because there was no lending transaction,
the court held there was no usury.  Id. at 705.
 In Tygrett v. Univ. Gardens Home Owners Ass'n, 687 S.W.2d 481 (Tex. App.--Dallas 1985, writ ref'd n.r.e.), the court
discussed whether a late payment penalty charge resulting from overdue condominium assessments could be usurious.  Id.
at 482-83.  The court noted that since usury must be founded on an overcharge by a lender for the use, forbearance, or
detention of the lender's money, a lending transaction was necessarily required.  Id. at 483.  The court held that the late
charge was not within that category because no funds of the condominium association were transferred or loaned to Tygrett. 
Id.  The court concluded that the payment of late charges did not constitute the use, forbearance, or detention of a lender's
money within the meaning of the usury statute.  Id.
 In Rimco Enters., Inc. v. Texas Elec. Serv. Co., 599 S.W.2d 362 (Tex. Civ. App.-Fort Worth 1980, writ ref'd n.r.e.), Texas
Electric Service Company (TESCO) sued Rimco on a sworn account to recover nonpayment of electricity, plus late
charges.  Id. at 365.  Rimco counterclaimed for usury, contending that there was a charge of interest in excess of the lawful
rate.  Id. at 365, 366.  The trial court entered judgment for TESCO, and denied Rimco's usury counterclaim.  Id. at 363.  In
affirming the judgment, the appellate court stated:  "We think it obvious that the 'late charges' do not arise from the use,
forbearance, or detention of money.  It follows that there could be no usury in the demand of TESCO."  Id. at 366.
 A case which does not involve a rental or lease agreement, but which is nevertheless instructive, is First Bank v. Tony's
Tortilla Factory, Inc., 877 S.W.2d 285, 285 (Tex. 1994).  In that case, First Bank imposed NSF fees of $20 per check
against Tony's, totaling $47,600.  Id.  Tony's sued First Bank, alleging that the NSF fees constituted usury.  Id.  The trial
court directed a verdict for First Bank on the usury claim.  Id.  The issue before the supreme court was whether First Bank's
NSF fee for checks drawn on an account with insufficient funds constituted usury.  Id.  The supreme court stated:
 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. . . .  There is no dispute that the NSF fee was charged to all customers, in the same amount,
regardless of whether First Bank paid or rejected a check.  It is undisputed that the amount of the NSF fee had no
relationship to the amount of the funds advanced. . . .  Thus, the NSF fee was not interest on the amount advanced to cover
the bad checks.  The NSF fees were charged for the costs of processing a check drawn on an account with insufficient
funds.  The 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. . . .  Based on these undisputed facts, we hold that, as a matter of law, the
NSF fees charged in this case were not interest.


Id. at 287-88 (citations omitted).
 Finally, in Rivera v. AT&T Corp., 141 F.Supp.2d 719, 721 (S.D. Tex. 2001), plaintiffs, who were cable-service customers,
sued numerous cable-systems operators, alleging the late fees, which the defendants charged for delinquent payment of
cable bills, constituted usury.  Id. at n.2.  The trial court dismissed the suit because the plaintiffs failed to plead usury under
Texas law.  The court stated:
 Plaintiffs have not alleged that Defendants charged any "interest" because they have not alleged that Defendants received
any compensation for the use, forbearance, or detention of money.  Plaintiffs have attempted to show a "lending
relationship" between the cable providers and their subscribers by arguing that Defendants are in the business of lending
cable equipment to their customers.  They claim that the "administrative fees" Defendants charged for late payments,
therefore, constitute usurious interest.  The Court disagrees with this characterization and finds that Defendants are more
accurately described as cable service providers and, as service providers, Defendants' late fees cannot be usurious.
 
  Even assuming, however, that Defendants' business could be accurately characterized as cable equipment lending,
Plaintiffs have failed to plead any usury. A contract between parties to "lend" property is a rental agreement and the late
fees charged are not construed as "interest" under Texas usury law. 


Id. at 723-24 (citations and footnote omitted).


 Here, appellees' summary judgment evidence showed that Javier Garcia was a subscriber of cable-television services from
Texas Cable Partners, L.P. ("TCP").  In his affidavit, Juan Herrera, the general manager of the Rio Grande Valley System
of the Southwest Division of TCP, stated the company does not lend money to its customers.
 In addition, the notice containing subscription rights and billing practices lists a five-dollar "Administrative Fee for
Delinquent Payment."  This notice further states:
 We do not anticipate that you will pay your bill late and the administrative late fee(s) and other related charges, fees, and
assessments related to late payment and nonpayment are set in advance because it would be difficult to know in advance: 
(a) whether or not you will pay your bill on time, (b) if you do pay late, when you will actually pay your bill, if ever, and (c)
what costs we will incur because of your late payment or nonpayment.  We do not extend credit to our customers and the
administrative fee(s), related fees, charges and assessments are not interest, a credit service charge or a finance charge. . . .


(emphasis added).  This notice also states:  "The administrative fee is intended to be a reasonable advance estimate of our
costs which result from customer's late payments and nonpayments."
 Thus, the five-dollar administrative late fee is not a loan; rather, appellees assessed the fee as a reasonable advance
estimate of the costs resulting from late payment or nonpayment of the monthly cable bill.  Moreover, like the NSF fees in
First Bank, there is no dispute that the five-dollar administrative late fee was charged to all customers in the same amount
and that the amount of the late fee had no relationship to the amount which the customer owed on the bill.  Following the
rationale in Maloney, Tygrett, Rimco, First Bank, and Rivera, we hold that because no lending transaction was involved in
this case, there was no use, forbearance or detention of a lender's money.  Therefore, the late fee does not constitute interest
as defined in section 301.002(a)(4) of the Texas Finance Code.  See Redman Indus., Inc. v. Couch, 613 S.W.2d 787, 789
(Tex. Civ. App.-Houston [14th Dist.] 1981, writ ref'd n.r.e.) ("For there to be a usury cause of action there must be some
type of loan in existence."). Without "interest," Garcia's usury claim must fail.  See First USA Mgmt., 960 S.W.2d at 628
(without interest, there can be no usury). 
 We AFFIRM the trial court's judgment.


______________________________
J. BONNER DORSEY,
Justice


Opinion delivered and filed
this 3rd day of April, 2003.
 
1. Retired Justice J. Bonner Dorsey assigned to the Court by the Chief Justice of the Supreme Court of Texas pursuant to
Tex. Gov't Code Ann. § 74.003 (Vernon 1998).
2. In his fifth-amended petition, Garcia named only Time Warner Communications and Time Warner, Inc., as defendants. 
He alleged that Time Warner Communications is the registered assumed name in Texas for Time Warner Telecom of
Texas, L.P., and for Texas Cable Partners, L.P.  He alleged that Time Warner, Inc., is the ultimate owner and manager of
Time Warner Communications and that Time Warner, Inc., and AT&T Corporation are the ultimate owners and managers
of Texas Cable Partners, L.P.
3. This statute defined "usury" as "interest in excess of the amount allowed by law."  See Act of May 8, 1967, 60th Leg.,
R.S., ch. 274, § 2, 1967 Tex. Gen. Laws 608, 609; (since repealed and recodified) (current version at Tex. Fin. Code Ann. §
301.001(4) (Vernon 1998)).
