      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                                        NO. 03-06-00273-CV



 Appellants, Texas Bankers Association, Finance Commission of Texas, and Credit Union
 Commission of Texas // Cross-Appellants, Association of Community Organizations for
   Reform Now (ACORN), Valerie Norwood, Elsie Shows, MaryAnn Robles-Valdez,
                    Bobby Martin, Pamela Cooper, and Carlos Rivas

                                                  v.

 Appellees, Association of Community Organizations for Reform Now (ACORN), Valerie
  Norwood, Elsie Shows, MaryAnn Robles-Valdez, Bobby Martin, Pamela Cooper, and
Carlos Rivas // Cross-Appellees, Texas Bankers Association, Finance Commission of Texas,
                         and Credit Union Commission of Texas


     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 126TH JUDICIAL DISTRICT
      NO. D-1-GN-04-000269, HONORABLE SCOTT H. JENKINS, JUDGE PRESIDING



            CONCURRING AND                        DISSENTING OPINION


               For the reasons that follow, I respectfully dissent from the majority’s resolution of

the first issue on appeal. I join the result reached by the majority in the other issues because I agree

that the rules promulgated by the Finance Commission of Texas and the Credit Union Commission

of Texas (collectively, the “Commissions”) should be upheld. However, I do not agree with the

analysis employed by the majority in these issues because in resolving all of the issues on appeal,

the majority reviews the rules promulgated by the Commissions in the same manner that this Court

typically treats rules promulgated by administrative agencies. The majority’s election to review the

rules using traditional canons of construction ignores the unique grant of authority bestowed upon

the Commissions by the constitution and by the legislature. It also fails to address what the
judiciary’s role is, if any, regarding the review of the Commissions’ rules in light of the sweeping

authorization given to those agencies.

                 The rules at issue in this appeal originate from a series of constitutional amendments.

As mentioned in the majority opinion, in 1997 the citizens of Texas passed an amendment to the

Homestead Provision of the constitution that allows bankers in Texas to issue home-equity loans

provided that certain criteria are met. See Tex. Const. art. XVI, § 50. The condition at issue in this

case limits the fees that a homeowner may be charged for obtaining the loan. Specifically, the

provision states that a bank may:


       not require the owner or the owner’s spouse to pay, in addition to any interest, fees
       to any person that are necessary to originate, evaluate, maintain, record, insure, or
       service the extension of credit that exceed, in the aggregate, three percent of the
       original principal amount of the extension of credit.


Tex. Const. art. XVI, § 50(a)(6)(E) (emphasis added). The voters also passed a second amendment

allowing the legislature to empower one or more state agencies to interpret the home-equity-loan

amendment to the Homestead Provision. Id. § 50(u).1 In light of this constitutional authorization,


       1
           Subsection 50(u) provides as follows:

       The legislature may by statute delegate one or more state agencies the power to
       interpret Subsections (a)(5)–(a)(7), (e)–(p), and (t), of this section. An act or
       omission does not violate a provision included in those subsections if the act or
       omission conforms to an interpretation of the provision that is:

                 (1) in effect at the time of the act or omission; and

                 (2) made by a state agency to which the power of interpretation is
                 delegated as provided by this subsection or by an appellate court of
                 this state or the United States.


                                                    2
the legislature enacted laws empowering the Commissions to issue “interpretations” of the home-

equity-loan amendment. Tex. Fin. Code Ann. §§ 11.308 (pertaining to finance commission), 15.413

(West Supp. 2009) (empowering credit union commission); see also Nootsie, Ltd. v. Williamson

County Appraisal Dist., 925 S.W.2d 659, 661 (Tex. 1996) (stating that courts “must liberally

construe any constitutional provision that directs the Legislature to act for a particular purpose”).

               After the legislature passed the provisions allowing the Commissions to interpret the

home-equity-loan amendment, the Commissions adopted rules governing home-equity lending. See

7 Tex. Admin. Code §§ 153.1-.96 (2009). Among other things, the rules clarify what the term

“interest” in the amendment means. Those rules form the subject of this appeal.

               The fact that the rules were promulgated in response to a delegation of authority to

administrative agencies by the constitution is significant and unprecedented. Typically, agencies are

empowered by the legislature, not by the constitution. Moreover, the delegation at issue specified

that the Commissions have the authority to “interpret” the home-equity-loan amendment. See Tex.

Const. art. XVI, § 50(u); see also id. art. II, § 1 (explaining that one branch of government may

exercise powers typically reserved for one of remaining branches when expressly authorized by

constitution). In light of this unique delegation, it is not entirely clear that this Court has any

authority to review or invalidate the rules at issue in this case. Cf. State v. Thomas, 766 S.W.2d 217,

219 (Tex. 1989) (explaining that legislature cannot “by statute abrogate the Attorney General’s

constitutional grant of power” and that constitutional balance of powers may only be altered “by

constitutional amendment”). Assuming that such authority exists, our ability to review the




Tex. Const. art. XVI, § 50(u).

                                                  3
Commissions’ rules regarding the home-equity-loan amendment would have to be more limited than

the review that we typically use regarding agency rules and that was used by the majority in this case.



                In its opinion, the majority concludes that the rules identified in all but the first issue

should be upheld. Because I believe that a more deferential standard should have been applied, I

would also conclude that the rules should be upheld. Accordingly, I join the result reached by the

majority in its resolution of these issues.

                Under that more deferential standard, I would also conclude that the rules addressed

in the first issue survive appellate scrutiny. However, even assuming that the typical and less

deferential standard applies, I would still conclude that the rules discussed in that issue should be

upheld. The traditional guidelines instruct us that an agency’s construction of a governing law that

it is charged with enforcing is entitled “to serious consideration by reviewing courts, so long as the

construction is reasonable and does not contradict” the law’s plain language. Employees Ret. Sys.

v. Jones, 58 S.W.3d 148, 151 (Tex. App.—Austin 2001, no pet.). In other words, when determining

whether a rule is valid, courts must determine whether the rule is in harmony with or contrary to the

relevant governing scheme. Texas Orthopaedic Ass’n v. Texas State Bd. of Podiatric Med. Exam’rs,

254 S.W.3d 714, 719 (Tex. App.—Austin 2008, pet. abated) (op. on reh’g). If the rule has “no

supporting statutory authority, the rule is void.” Id.

                Before delving into the merits of this issue, a brief discussion of the context in which

the rules were promulgated is necessary. The home-equity-loan amendment is not the only

constitutional provision implicated by this case. Another provision empowers the legislature to

define “interest.” Tex. Const. art. XVI, § 11 (stating that “Legislature shall have the authority to

                                                    4
define interest and fix maximum rates of interest”). In light of this broad authority, the legislature

defined interest in the financial code. Tex. Fin. Code Ann. § 301.002(a)(4) (West 2006). That

definition provides as follows:


       “Interest” means compensation for the use, forbearance, or detention of money. The
       term does not include time price differential, regardless of how it is denominated.
       The term does not include compensation or other amounts that are determined or
       stated by this code or other applicable law not to constitute interest or that are
       permitted to be contracted for, charged, or received in addition to interest in
       connection with an extension of credit.


Id. § 301.002(a)(4) (West 2006). When they promulgated their rules interpreting the home-equity-

loan amendment, the Commissions adopted the definition of “interest” found within the financial

code, 7 Tex. Admin. Code § 153.1(11), and explained that interest charges “are not fees subject to

the three percent limitation” found in the home-equity-loan amendment, id. § 153.5(3).

               The majority supports its determination that the definition chosen by the

Commissions is invalid by asserting that the definition adopted by the Commissions is pulled from

the financial code provisions governing usury.        See Tex. Fin. Code Ann. §§ 302.001-.002

(West 2006) (constituting subchapter entitled “Usurious Interest”). The majority reasons that the

usury provisions require a broad definition for interest because they are consumer oriented whereas

the fee cap in the home-equity-loan amendment must be given a more limited definition in order to

comply with the legislative intent of protecting homeowners.

               However, the legislative definition for “interest” is not found within the usury

provisions and is instead listed in the “GENERAL PROVISIONS” of the financial code containing

the definitions for terms that are to be used in the subtitle governing the use of interest. See id.

                                                  5
§§ 301.001-.002 (West 2006) (containing general provisions); see also id. §§ 301.001-339.005

(West 2006 & Supp. 2009) (encompassing “INTEREST” subtitle of title 4 of finance code; title 4

is entitled “REGULATION OF INTEREST, LOANS, AND FINANCED TRANSACTIONS”).

Although that definition is used in the usury provisions of the “Interest Rates” chapter, see id.

§ 302.001-.002, (West 2006), it is also used in the provisions of the subtitle not specifically

addressing usury, see generally id. §§ 302.102-339.005 (addressing, among other things, rate

ceilings, judgment interest, and commercial loans). This definition is also directly incorporated into

another subtitle of the financial code governing loans and financial transactions and containing

provisions that do not pertain to usury. See id. § 341.001(8) (West 2006); see also id. §§ 341.001-

350.004 (West 2006 & Supp. 2009) (comprising subtitle B of title 4).

               These non-usurious provisions would not seem to have the same consumer-oriented

concerns that the majority relies on in asserting that the Commissions’ definition is improper.

Because the legislature chose to use the same definition for interest in the usury and in the non-usury

portions of the financial code, we must presume that the legislature weighed any potential conflicts

between these types of statutes and crafted a definition for interest that reconciled those conflicts.

               In addition, when determining the validity of a law, we must presume that the

legislature enacted the statute “with complete knowledge of existing law and with reference to it.”

In re Garcia, 944 S.W.2d 725, 727 (Tex. App.—Amarillo 1997, no writ). Although that canon of

construction is typically employed when construing statutes, it would also seem to apply to

constitutional provisions proposed by the legislature. In this case, the legislature proposed a

constitutional amendment allowing an agency to interpret the home-equity-loan amendment after the



                                                  6
legislature had already codified a definition for interest. Moreover, after the Commissions’ rule

became effective in 2004, see 7 Tex. Admin. Code § 153.1, the legislature revised its definition of

“interest” by adding the last sentence found in the current definition,2 see Act of May 29, 2005,

79th Leg., R.S., ch. 1018, § 2.01, 2005 Tex. Gen. Laws 3438, 3439-40. In light of the prior

promulgation of the rule, the fact that the legislature chose not to exclude its definition for interest

from the home-equity-loan context is some indication that the legislature intended for its definition

to apply. See Bullock v. Marathon Oil Co., 798 S.W.2d 353, 357 (Tex. App.—Austin 1990, no writ)

(explaining that “if an agency interpretation is in effect at the time the legislature amends the law

without making any substantial change in the statute, the legislature is deemed to have accepted the

agency’s interpretation”).

               Furthermore, because the Commissions chose to adopt the definition for interest that

was codified by the legislature, the Commissions’ rules are consistent with the statutory definition

of “interest” and, accordingly, clearly have statutory support. See 7 Tex. Admin. Code § 153.1(11).

It is hard to imagine a more reasonable manner in which the Commissions could have attempted to

give effect to the legislature’s intent than using the very definition adopted by the legislature. This

seems particularly true where, as here, the legislature’s definition was also made in response to a

constitutional directive.




        2
          The last sentence reads as follows: “The term does not include compensation or other
amounts that are determined or stated by this code or other applicable law not to constitute interest
or that are permitted to be contracted for, charged, or received in addition to interest in connection
with an extension of credit.” Tex. Fin. Code Ann. § 301.002(a)(4) (West 2006).

                                                   7
               In light of the preceding, I would conclude that the Commissions’ rule is reasonable,

does not contradict the amendment’s plain language, and is in harmony with the relevant governing

scheme.     Accordingly, I would reverse the portion of the trial court’s ruling invalidating the

Commissions’ rules adopting and using the definition of interest found in the financial code.3

Although I personally might not endorse a definition for interest that could lead to homeowners

being charged higher fees in connection with home-equity loans, this Court does not have the

authority to countermand the actions of the legislature or the will of the people expressed by the

passage of a constitutional amendment empowering the Commissions to act in the manner that

they did.

               For the reasons previously given, I dissent from the majority’s resolution of the first

issue but concur with the result reached by the majority in all of the remaining issues on appeal.




                                               David Puryear, Justice

Before Justices Patterson, Puryear, and Henson

Filed: January 8, 2010




       3
          In its judgment, the district court invalidated the rule containing the definition of interest
and various rules using that definition. See 7 Tex. Admin. Code §§ 153.1(11), 153.5(3), (4), (6), (8),
(9), (12) (2009). The same reasons compelling my determination that the district court erred by
invalidating the rule defining interest would also compel me to conclude that the district court erred
by invalidating the rules using that definition.

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