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

Citation: Not availableDocket: 04-00-00856-CV

Court: Court of Appeals of Texas; November 27, 2001; Texas; State Appellate Court

Original Court Document: View Document

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The case involves Gordon Klatt, Sr., Gordon Klatt, Jr., and Klatt Hardware and Lumber, Inc. as appellants against Value Bank, Texas, as the appellee, stemming from a summary judgment granted in favor of the bank by the 79th Judicial District Court of Jim Wells County, Texas. The Klatts owned individual accounts with Value Bank from 1988 to 1999, alongside a corporate commercial checking account, which was converted to an International Business Checking Account in 1993. The Klatts alleged that all claims in their lawsuit related solely to the corporation's account, despite suing in their individual capacities. 

The bank had notified the Klatts of terms and conditions regarding fees for nonsufficient funds and service charges, which were applicable when account balances did not meet the required earnings credit. From 1998 onward, the corporation incurred numerous NSF fees and analysis fees due to insufficient funds, totaling $88,526. The Klatts filed suit for breach of contract, violations of the Texas Finance Code, usury, and deceptive trade practices. 

Value Bank's motion for summary judgment was granted, but it did not specify whether it was a traditional or no-evidence summary judgment. The trial court's lack of clarification meant that the appellate court affirmed the judgment if any of the theories presented were valid. The standard for a traditional summary judgment requires showing no genuine issue of material fact exists and entitlement to judgment as a matter of law, with all evidence viewed in favor of the nonmovant.

A defendant may obtain summary judgment if evidence negates at least one element of the plaintiff's claim, shifting the burden to the plaintiff to demonstrate a genuine issue of material fact. Under Texas Rule of Civil Procedure 166a(i), a party can file for a no-evidence summary judgment when there is insufficient evidence for an essential claim or defense that the opposing party must prove at trial. Such motions are reviewed de novo, favoring the nonmovant and disregarding contrary evidence. A no-evidence summary judgment is inappropriate if the respondent presents more than a scintilla of probative evidence indicating a genuine issue of material fact. Less than a scintilla exists when evidence is too weak to establish a fact, leading to no evidence being present.

The plaintiffs allege that Value Bank violated section 34.303 of the Texas Finance Code by failing to provide written notice of an NSF fee. This section requires banks to disclose fee amounts or, when not possible, the method for calculating fees, within ten business days of account opening, and to notify customers of any changes to fees. Value Bank submitted evidence, including the corporation's signature card and deposit agreements, to support its summary judgment motion. The plaintiffs argue that an affidavit from Klatt Jr., stating they could not determine how charges were calculated, raises a factual issue. However, this statement does not contradict the bank's compliance with section 34.303, as Klatt Jr. acknowledged receiving documents detailing the fees from Value Bank.

Value Bank provided evidence showing it disclosed fees to the corporation, which failed to contest this evidence. Consequently, the trial court correctly granted summary judgment on the failure to disclose claim. The plaintiffs' second amended petition alleged that Value Bank breached its deposit agreement by withdrawing funds from their account without prior approval or lawful justification. Value Bank submitted the original and subsequent deposit agreements, which were deemed unambiguous and enforceable as written. These agreements allowed Value Bank to deduct charges from the account balance and stipulated that the corporation would be liable for any account deficits or overdrafts. Value Bank could amend terms with reasonable notice.

Affidavits from Value Bank officials confirmed that the fees charged were standard in the industry, with no evidence presented by the appellants to dispute this. The subsequent agreements explicitly mentioned a $20 NSF fee and provided a formula for other fees. Despite the clarity of the agreements, the appellants argued that Value Bank acted arbitrarily in withdrawing funds. However, their claims, based on an affidavit asserting disagreement with the fee amounts, did not create a factual dispute, as the agreements clearly authorized the charges. The complaints centered on the fee amounts rather than the legitimacy of Value Bank's authority to impose them.

Klatt Jr. acknowledged in his deposition that Value Bank did not mistakenly charge the corporation an NSF fee when there were adequate funds. He confirmed that his complaint was solely about being charged for writing hot checks and that he believed the fee was excessive. He expressed that there could have been alternative methods for charging, rather than a flat fee of $20 per check. Klatt Jr. had complained to bank officials about this matter but did not seek information from other banks regarding their policies.

The court found that Value Bank did not breach its deposit agreement, as the terms were clear and the fees charged were consistent with that agreement. The trial court correctly granted summary judgment on the breach of contract claim. 

Regarding usury, the appellants claimed that when Value Bank covered checks without sufficient funds, it effectively loaned the corporation the overdraft amount and that the associated analysis fees constituted interest charges. The analysis fee was determined by comparing the earnings credit on account balances with account charges, leading to higher fees for lower average balances. 

Usury is defined as charging interest above a lawful limit, but if a fee is based on separate considerations beyond simply lending money, it does not qualify as interest. The Texas Supreme Court ruled that bank fees for checks drawn on insufficient funds were supported by separate considerations and thus were not considered interest. Each NSF fee was deemed a processing fee for the extra work involved in handling bad checks, and the profitability of the fee did not render it usurious. Consequently, the analysis fees charged were categorized as costs for servicing the corporation's account rather than interest charges.

A corporation's average balance impacts the fees charged by Value Bank for account servicing; a sufficient balance results in no analysis fee, while a low balance incurs larger costs and an analysis fee. This fee is classified as a charge for services rather than interest, thus exempting it from usury claims. The trial court correctly dismissed the appellants' usury claim. Furthermore, the appellants alleged that Value Bank violated Texas Finance Code section 302.002 by charging excessive interest through analysis fees, but since these fees are not classified as interest, the court did not err in dismissing this allegation. The appellants also claimed that Value Bank's deduction of NSF and analysis fees constituted unconscionable conduct under the Texas Deceptive Trade Practices-Consumer Protection Act. However, Value Bank provided affidavits from Kirchoff and Black affirming that the fees were reasonable and customary, which the appellants did not contest. Klatt Jr. lacked knowledge of competitors' charges, bolstering Value Bank's position. Consequently, the trial court's summary judgment in favor of Value Bank was affirmed. Additionally, regarding Klatt Jr.'s affidavit conflicting with his deposition, the court determined that the inconsistencies were not significant enough to disregard the affidavit, as it did not materially contradict earlier testimony. Klatt Jr. clarified that references to "our account" pertained to the corporation's account.