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Brown v. Oaklawn Bank

Texas Supreme Court
718 S.W.2d 678, 29 Tex. Sup. Ct. J. 548, 1986 Tex. LEXIS 568 (1986)
ELI5:

Rule of Law:

A creditor's threat of criminal prosecution to collect a debt is a per se violation of the Texas Debt Collection Act, as a creditor does not have the authority to determine the guilt or innocence of a debtor.


Facts:

  • Oaklawn Bank was ordered to garnish $7,150 from the Browns' savings account but failed to post the withdrawal to the account's ledger.
  • When Mr. Brown later went to close the account, he questioned the balance of $9,348, which was $7,150 more than it should have been.
  • Bank employees, including a senior vice president, confirmed the incorrect amount was correct, attributing the discrepancy to interest.
  • Brown accepted the check for $9,348 and deposited the funds into accounts for his children.
  • After realizing its error, Oaklawn Bank demanded the overpayment back.
  • The next day, a bank vice president and the local district attorney, who was also an associate director of the bank, sent letters to Brown threatening him with criminal charges and arrest if the money was not returned.

Procedural Posture:

  • Oaklawn Bank filed a Writ of Attachment on the funds the Browns deposited in a credit union.
  • The Browns filed a counterclaim against Oaklawn Bank in the trial court, alleging violations of the Texas Debt Collection Act.
  • After a non-jury trial, the trial court found in favor of Oaklawn Bank, holding it did not violate the Act and that the Browns suffered no damages.
  • The Browns, as appellants, appealed the trial court's judgment to the court of appeals.
  • The court of appeals affirmed the trial court's judgment in an unpublished opinion.
  • The Browns then appealed to the Supreme Court of Texas.

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Issue:

Does a creditor's threat of criminal prosecution to collect a debt, based on the creditor's own determination of the debtor's guilt, violate the Texas Debt Collection Act?


Opinions:

Majority - Justice Wallace

Yes, a creditor's threat of criminal prosecution violates the Texas Debt Collection Act as a matter of law. The Act was specifically designed to prevent creditors from using a consumer's fear of the law to collect debts. The court reasoned that allowing a creditor to determine a debtor's criminal guilt circumvents the entire criminal justice system and its constitutional protections, such as the presumption of innocence. A creditor cannot assume the role of judge and jury in a civil debt matter. Therefore, threatening criminal action is a per se violation, regardless of the creditor's belief in the debtor's guilt.



Analysis:

This decision establishes a bright-line rule that a creditor's threat of criminal prosecution is a violation of the Texas Debt Collection Act, irrespective of the debtor's actual culpability. It firmly separates civil debt collection from the criminal justice system, preventing creditors from using the coercive power of the state as a collection tool. The ruling significantly strengthens debtor protections by making such threats actionable without requiring the debtor to prove the creditor's accusations were false. This precedent simplifies litigation for debtors by focusing the court's inquiry on the creditor's conduct—the threat itself—rather than the underlying facts of the debt or potential criminal liability.

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