## Facts

- Pedro and Paula De la Fuente hired Aluminum Industries, Inc. to perform improvements on their home.
- In connection with the transaction, the De la Fuentes executed a promissory note payable to Aluminum Industries.
- Aluminum Industries assigned the note to Home Savings Association.
- Home Savings sued the De la Fuentes to recover on the note as assignee.
- The De la Fuentes raised defenses and offsets based on alleged violations of the Texas Consumer Credit Code in the underlying consumer transaction.
- The trial court ruled for Home Savings on the theory that Home Savings, as an assignee and holder in due course, was insulated from the De la Fuentes’ Consumer Credit Code-based defenses.
- The De la Fuentes appealed.

## Issues

1. In a consumer home-improvement transaction governed by the Texas Consumer Credit Code, may an assignee of the promissory note claim holder-in-due-course status to cut off the borrowers’ Consumer Credit Code claims and defenses?
2. If the Code limits holder-in-due-course protection in this setting, to what extent may the borrowers assert statutory violations as defenses or offsets against the assignee’s suit on the note?

## Decision

- The court held that the Consumer Credit Code restricts traditional holder-in-due-course insulation in covered consumer transactions, so an assignee like Home Savings is not automatically free of the borrowers’ Code-based claims and defenses.
- The court rejected the trial court’s treatment of Home Savings as fully protected from the De la Fuentes’ statutory defenses merely because it took the note by assignment.
- The court reversed the judgment to the extent it barred the De la Fuentes’ Consumer Credit Code defenses and remanded for further proceedings consistent with allowing those defenses/offsets against the assignee’s claim on the note.

## Legal Principles

- In consumer credit transactions within the Texas Consumer Credit Code, statutory consumer-protection rules can limit or displace ordinary U.C.C. holder-in-due-course doctrine.
- An assignee of consumer paper may take subject to the consumer’s claims and defenses arising from statutory violations connected to the seller-originated transaction, rather than enforcing the note as if it were separate from that transaction.
- Consumer-credit statutes and “holder” concepts are aimed at preventing separation of a buyer’s obligation to pay from the seller’s obligation to comply with consumer-protection duties and to perform under the transaction.
- When a statute preserves consumer defenses against an assignee, the assignee’s good-faith purchase of the note does not, by itself, eliminate those defenses in a suit to collect.

## Conclusion

De la Fuente holds that, in a consumer home-improvement credit transaction governed by the Texas Consumer Credit Code, an assignee’s attempt to enforce a promissory note is subject to the borrowers’ statutory claims and defenses, and the assignee cannot rely on holder-in-due-course status as a blanket bar to those defenses; the case was sent back for proceedings applying that rule.


De la Fuente v. Home Savings Association, 669 S.W.2d 137 (1984)