Under old common law, a lender attempting to collect a note was required to present the note, then provide a notice of attempt to accelerate and finally was required to provide a notice of acceleration. Presentment, for sales of personal goods like autos, has been defined by the Texas Business and Commerce Code § 3.501 (The Texas UCC). One court comments generally regarding presentment.
Under the Texas Uniform Commercial Code (UCC), a demand upon the maker of a promissory note to pay the note is called presentment. UCC § 3.504(a).4 Ordinarily, the UCC does not require presentment of a note to a maker or other primarily liable party. See UCC § 3.501. However, presentment to the maker of a note is required before the note holder can exercise an optional right to accelerate the time for any payment due on the note. Ogden v. Gibraltar Sav. Ass’n, 640 S.W.2d 232, 233 (Tex.1982); Allen Sales & Servicenter v. Ryan, 525 S.W.2d 863, 865 (Tex.1975); Faulk v. Futch, 147 Tex. 253, 214 S.W.2d 614, 616–17 (1948). The note holder must also notify the maker both of his intent to accelerate and of the acceleration. Ogden, 640 S.W.2d at 233; Allen Sales, 525 S.W.2d at 865; Faulk, 214 S.W.2d at 616–17.
Presentment and notice can be waived. UCC section 3.511(b)(1) states: “Presentment or notice or protest as the case may be is entirely excused when the party to be charged has waived it expressly or by implication either before or after it is due….” As early as 1854, and as recently as 1982, this Court has recognized that parties to a promissory note can waive presentment and notice. Sydnor v. Gascoigne, 11 Tex. 449, 456 (1854); Ogden, 640 S.W.2d at 233. In Ogden, the Court stated:
“Thus, in the absence of a waiver, the holder of a delinquent installment note must present the note and demand payment of the past due installments prior to exercising his right to accelerate. Id. (emphasis added). Texas courts of appeals have consistently followed this rule.”
Shumway v. Horizon Credit Corp., 801 S.W.2d 890, 892–93 (Tex. 1991). The Shumway Court writes extensively on language that is clear enough to waive presentment, notice of intent to accelerate and notice of acceleration.
However, the Texas Administrative Code has prescribed plain language clauses that waive the notice of intent to accelerate and the notice of acceleration. 7 TAC § 84.808(35).
Acceleration, waiver of notice of intent to accelerate, and notice of acceleration. A model clause regarding the holder’s right to accelerate maturity of the contract and to waive the buyer’s or co-buyer’s common law right to notice of intent to accelerate, notice of acceleration, or both reads: “If I default, or you believe in good faith that I am not going to keep any of my promises, you can demand that I immediately pay all that I owe. You don’t have to give me notice that you are demanding or intend to demand immediate payment of all that I owe.”
Id. However, it is important to note that the code does not appear to waive presentment in any form. So, it appears that those collecting under a motor vehicle installment contract must present the note. “Presentment may be made by any commercially reasonable means, including an oral, written, or electronic communication.” Tex. Bus. & Com. Code Ann. § 3.501. The person upon whom demand is made may demand that the person enforcing the note: (A) exhibit the instrument; (B) give reasonable identification and, if presentment is made on behalf of another person, reasonable evidence of authority to do so; and (C) sign a receipt on the instrument for any payment made or surrender the instrument if full payment is made. Id.
The Tex. Bus. & Com. Code Ann. § 3.501 does not appear clear as to whether a person enforcing a note must allow the debtor to pay the past-due installments when it makes a demand to “pay the instrument [to]… a party obliged to pay the instrument.” However, in its discussion of this section of the code, the Shumway Court said that absent a waiver, “the holder of a delinquent installment note must present the note and demand payment of the past due installments prior to exercising his right to accelerate.” (emphasis added).
A failure to present the note could result in damages in favor of the debtor. Covington v. Burke, 413 S.W.2d 158, 159 (Tex. Civ. App.—Eastland 1967, writ ref’d n.r.e.)(a deed of trust holder failed to present the note, leading to damages); Fair Deal Auto Sales v. Brantley, 24 S.W.3d 543, 546 (Tex. App.—Houston [1st Dist.] 2000, no pet.)(lost equity is a measure of damages), abrogated by Smith v. Brown, 51 S.W.3d 376 (Tex. App.—Houston [1st Dist.] 2001, pet. denied)(abrogated only as to a bad faith requirement in appeal sanctions); Lowe v. Lowe, 09-06-178 CV, 2006 WL 3239852, at *4 (Tex. App.—Beaumont Nov. 9, 2006, no pet.)(citing ExxonMobil Corp. v. Valence Operating Co., 174 S.W.3d 303, 316 (Tex.App.-Houston [1st Dist.] 2005, pet. denied))(lost equity is a measure).
Loss of use may be a proper measure of damage. Id. “The reasonable cost of renting a replacement is the usual measure of damages for loss of use, although a plaintiff need not actually rent a replacement…Monthly payments can be considered by a fact finder in determining the value of loss of use.” Id.(citing Luna v. North Star Dodge Sales, Inc., 667 S.W.2d 115, 118-19 (Tex.1984)).Injunctive relief may also be available. Parker v. Mazur, 13 S.W.2d 174 (Tex. Civ. App.—San Antonio 1928, writ dism’d)(case involving real property).
A wrongful repossession may be a breach of contract, for which attorney fees may result. See
Lowe v. Lowe, 09-06-178 CV, 2006 WL 3239852, at *3 (Tex. App.—Beaumont Nov. 9, 2006, no pet.). Finally, it appears that a declaratory judgment action, which could yield attorney’s fees, could be brought to declare the right to presentment.
Other schemes by dealers include a variation of the following trick: taking a lesser down payment than what is on the written, promising that the buyer can pay the remainder with his first payment, and then reneging on that promise. See Villarreal v. Elizondo, 831 S.W.2d 474, 476 (Tex. App.—Corpus Christi 1992, no writ); Fair Deal Auto Sales v. Brantley, 24 S.W.3d 543, 545 (Tex. App.—Houston [1st Dist.] 2000, no pet.), abrogated by Smith v. Brown, 51 S.W.3d 376 (Tex. App.—Houston [1st Dist.] 2001, pet. denied).