Reagan Bruton and Judy Bruton v. NationsBank of Texas, N.A.--Appeal from County Court at Law No 5 of Dallas County

IN THE

TENTH COURT OF APPEALS

No. 10-94-105-CV

REAGAN BRUTON AND JUDY BRUTON,

Appellant

v.

NATIONSBANK OF TEXAS, N.A.,

Appellee

From the County Court at Law No. 5

Dallas County, Texas

Trial Court # CC93-01372-E

O P I N I O N

Reagan and Judy Bruton sued NationsBank of Texas over an alleged misrepresentation of the payoff balance of their home-improvement loan. NationsBank moved for a summary judgment on three grounds. The court granted a take-nothing judgment without specifying the grounds it was ruling on. In the first of their three points of error, the Brutons argue that the court erred in granting the summary judgment because of a fact issue about the amount of the payoff balance. In their second point, they attack the second ground for the summary judgment motion, claiming that the D'Oench Duhme doctrine does not apply. See 12 U.S.C.A. 1823(e) (West Supp. 1995); D'Oench, Duhme & Co. v. Federal Deposit Ins. Corp., 315 U.S. 447, 62 S. Ct. 676, 86 L. Ed. 956 (1942). In their last point, they attack the third ground asserted in NationsBank's motion and argue that the parol evidence rule is not invoked in this case either. We will reverse the summary judgment.

In November 1985, the Brutons executed a retail installment contract and note for the purchase and installation of a swimming pool at their residence. The agreement called for 180 monthly payments of $221.68 each. RepublicBank purchased the note from the contractor, and NationsBank acquired it from the FDIC after RepublicBank failed.

In the process of selling their home, the Brutons requested the payoff balance of the loan in December 1992. Contemplating an early payoff of the loan, the contract specifically provided:

Prepayment: If I [i.e., the Brutons] pay off early, I will not have to pay a penalty and I may be entitled to a refund of part of the finance charge. I will see my contract documents for any additional information about nonpayment, default, any required repayment in full before the scheduled date, and prepayment refunds and penalties.

. . .

PREPAYMENT: I may prepay this Contract in full at any time without penalty and you [i.e., the holder of the note] will refund or credit any unearned finance charge based upon the method described in the Texas Credit Code and called the "Sum of the Monthly Unpaid Balances Method" after deducting a minimum time price differential not to exceed $12.00 if the initial balance is $75.00 or more. You will do this if the refund is one dollar or more. No refunds will be made for partial prepayments.

NationsBank quoted the Brutons a payoff amount of $14,777.51, consisting of an outstanding balance on the loan of $21,059.60, less an interest refund of $6,282.09. The Brutons objected to NationsBank's balance calculations because the figure varied from an amortization schedule for the life of the loan allegedly provided them at the time the agreement was executed. They paid the amount demanded under protest and then sued NationsBank, claiming that it violated both the Deceptive Trade Practices Act and the Consumer Credit Code by misrepresenting the amount due. See Tex. Bus. & Com. Code Ann. 17.46(b)(12), 17.50(a)(1), (3) (Vernon 1987 & Supp. 1995); Tex. Rev. Civ. Stat. Ann. art. 5069, ch. 6 (Vernon 1987 & Supp. 1995).

NationsBank moved for a summary judgment on the grounds that: (1) it followed the method for calculating the prepayment interest refund provided for in the contract and the Consumer Credit Code; (2) any misrepresentations about the contract by RepublicBank, the original payee of the note, were not in the records of the banks and, so, claims based on such misrepresentations were barred by the D'Oench Duhme doctrine; and (3) the Brutons could not use the amortization schedule provided by RepublicBank to vary the prepayment calculations under the provisions of the agreement because the parol evidence rule barred consideration of those figures. To its motion for summary judgment NationsBank attached: (1) a certified portion of Reagan Bruton's deposition, in which he stated that he had read, understood, and signed the installment agreement; (2) a certified copy of the agreement; and (3) an affidavit of Bill Weatherford, a NationsBank vice-president, stating that under the agreement and the Credit Code the payoff balance was $14,777.51.

In response, the Brutons argued that (1) NationsBank had miscalculated the payoff balance; (2) the D'Oench Duhme doctrine did not apply because they were suing NationsBank for its own misrepresentations; and (3) the parol evidence rule did not apply because the amortization schedule was provided contemporaneously with the note, but even if the rule did apply, the evidence of the payoff balance is still conflicting. They attached an affidavit from Reagan Burton which stated that he had been provided the amortization schedule and the contract at the same time. In his affidavit, he also authenticated attached copies of the agreement, the amortization schedule, and a December 22, 1992, letter from NationsBank asserting that the payoff balance on the loan was $14,777.51. Finally, the Brutons provided an affidavit from James Oates, a certified public accountant, who concluded after reviewing the note and the amortization schedule that the payoff balance on December 28, 1992, was $12,941.84.

We review the court's rulings under the well-established rules relating to summary judgments. See Tex. R. Civ. P. 166a(c); McConnell v. Southside School Dist., 858 S.W.2d 337 (Tex. 1993); Nixon v. Mr. Property Management, 690 S.W.2d 546 (Tex. 1985); City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671 (Tex. 1979). The court could grant the summary judgment only if there were no issues of material fact and NationsBank was entitled to the judgment as a matter of law. See id. Because the court did not indicate which of the three alternative grounds it was basing its ruling on, the Brutons must show that the summary judgment was improper on each of the grounds in NationsBank's motion. See Rogers v. Ricane Enterprises, Inc., 772 S.W.2d 76, 79 (Tex. 1989). Thus, we must sustain each of the Brutons' three points if we are to reverse the court's judgment.

Vice-president Weatherford's affidavit states that, by applying the sum of the monthly unpaid balances method as required by the contract and by the Credit Code, the payoff balance is $14,771.51. See Tex. Rev. Civ. Stat. Ann. art. 5069-6.02(10). However, Oates' affidavit states that, by applying the sum of the monthly unpaid balances method as required by the contact and by the Credit Code, the payoff balance is $12,941.84. See id. Neither party provided summary judgment evidence concerning the number of payments the Brutons had made, the total amount they had paid, or the underlying calculations used in arriving at a payoff balance. NationsBank argues now that "the reason for the dispute in the Affidavits in this case is that the Oates Affidavit does not truly apply the Sum of the Monthly Unpaid Balances formula, or that errors exist in Oates' math." The Brutons argued in their response to the motion for summary judgment that, due to the conflicting figures in the affidavits, "the veracity and/or calculating abilities of Bill C. Weatherford are called into question." Math errors and veracity of the affiants are fact questions, precluding summary judgment. See Tex. R. Civ. P. 166a(c); State v. Durham, 860 S.W.2d 63, 66 (Tex. 1993); Mr. Property Management, 690 S.W.2d at 548-49. Point one is sustained.

In the second ground in its motion for a summary judgment, NationsBank argued that "[a]ny purported acts, omissions, representations or misrepresentations regarding the Agreement were made by RepublicBank" and thus could not be asserted against NationsBank unless the Brutons met the requirements of the D'Oench Duhme doctrine. See 12 U.S.C.A. 1823(e). This doctrine prevents a debtor from asserting an unrecorded agreement to diminish or defeat the rights of the FDIC or its successors in an asset acquired from a failed financial institution. See FSLIC v. T.F. Stone-Liberty Land Associates, 787 S.W.2d 475, 479-80 (Tex. App. Dallas 1990, no writ); also Kilpatrick v. Riddle, 907 F.2d 1523 (5th Cir. 1990), cert. denied, 498 U.S. 1083, 111 S. Ct. 954, 112 L. Ed. 2d 1042 (1991). However, the Brutons' theory in their petition is that NationsBank misrepresented the agreement by claiming that it conferred rights and obligations which it did not contain, in violation of the DTPA. See Tex. Bus. & Com. Code Ann. 17.46(b)(12). That is, the Brutons claim that the agreement is clear and allows for a declining principle balance over the course of the life of the loan, and that NationsBank, in its own right, misrepresented the agreement. We agree with the Brutons that the D'Oench Duhme doctrine does not apply.

Even if the Brutons were proceeding on a theory that required some misrepresentation on the part of RepublicBank, so that the D'Oench Duhme doctrine applied, NationsBank failed to establish by summary-judgment evidence that the Brutons would not be able to hold them responsible for RepublicBank's actions. The D'Oench Duhme doctrine is in the nature of an affirmative defense because it requires that NationsBank confess that an agreement exists which diminishes its rights, but at the same time argue that the agreement should not be given effect because of new facts. See 12 U.S.C.A. 1823(e); Woods v. William M. Mercer, Inc., 769 S.W.2d 515, 517 (Tex. 1988). Thus, NationsBank had the burden of establishing by evidence that the doctrine applied to this case. See Roark v. Stallworth Oil and Gas, Inc, 813 S.W.2d 492, 495 (Tex. 1991). NationsBank did not produce any evidence invoking D'Oench Duhme. Therefore, the court could not have relied on the doctrine when it granted summary judgment. We sustain point two.

Finally, NationsBank argued that "the terms of prepayment are clear [and] unambiguous" in the note and that the Brutons could not rely on any other writing to vary the terms of prepayment because of the parol evidence rule. However, as the Brutons claim, nothing in Oates' affidavit indicates that he relied on documents outside the note itself to find the amount of the payoff balance. Oates states that he "reviewed" the note and the amortization schedule, but asserts that he calculated the payoff balance according to the method set out in the note. Thus, his affidavit creates a fact question regarding the payoff balance due and payable under the note. See Tex. R. Civ. P. 166a(c); Durham, 860 S.W.2d at 66; Mr. Property Management, 690 S.W.2d at 548-49. The parol evidence rule is not implicated by the state of the summary judgment evidence is this case. Thus, the court could not have relied on the parol evidence rule when it granted summary judgment. Point three is sustained.

Because we have sustained each of the Brutons' points, the summary judgment is reversed and this cause is remanded for further proceedings.

BOB L. THOMAS

Chief Justice

Before Chief Justice Thomas,

Justice Cummings, and

Justice Vance

Reversed and remanded

Opinion delivered and filed March 29, 1995

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