L. A. Berry, et al. v. Financial Commercial Corporation--Appeal from 85th District Court of Brazos County

IN THE

TENTH COURT OF APPEALS

No. 10-94-348-CV

L. A. BERRY, ET AL.,

Appellants

v.

FINANCIAL COMMERCIAL CORPORATION,

Appellee

From the 85th District Court

Brazos County, Texas

Trial Court # 33,048-85

O P I N I O N

This is an appeal from a series of three partial summary judgments that ultimately resulted in a final judgment. L.A. Berry, Shelly House, and Charles H. House (collectively "Berry") appeal on four points of error. By points one, three, and four, they claim that two of the judgments were granted erroneously because material fact questions remain. In point two, they assert that the court erred in granting summary judgment on a motion that failed to set out any specific grounds for relief. We will affirm.

BACKGROUND

L.A. Berry, as president of Custom Operating Systems, Inc., dba KLS Computers, signed four promissory notes and a computer-equipment lease agreement with the Texana Bank in College Station. He also signed the notes in his individual capacity and individually guaranteed KLS's performance of the lease obligations. Charles House guaranteed one of the four notes and, along with Shelly House, joined L.A. Berry in guaranteeing the lease obligations. The lease was executed in June 1984, three of the notes were executed in October 1985, and the last note was executed in November 1985. The notes matured over November-December 1985 and January 1986. The lease ran from August 1984 to June 1989. The lease payments were partially made, and some of the payments on the notes were made, but Berry failed to pay the balance due when the notes matured.

Texana Bank failed, and on November 20, 1986, the Federal Deposit Insurance Corporation (FDIC) took it over. The FDIC sold the notes and the lease guarantee to Financial Commercial Corporation (FCC) in September 1987, and FCC sought to collect on those obligations from Berry. After preliminary attempts to collect the notes and the lease failed, FCC filed suit at the end of October 1989, seeking judgment for the balance due on the notes and lease guarantees, attorney's fees, and costs. In his original answer, Berry raised the affirmative defenses of laches and estoppel against FCC's claim on the four notes and asserted a usury counterclaim.

In its first motion for a summary judgment, filed July 19, 1990, FCC argued that it was entitled to judgment for the balance due on the four notes and the unpaid amount on the lease guarantee. It attached copies of the notes, the lease, and the guarantee to the motion, as well as an affidavit from Jerry Cowan, an FCC vice-president. Cowan stated in his affidavit that the copies of the attached documents were true and correct, that FCC owned the notes and the lease guarantee, that Berry was the maker of the notes, that all three defendants were guarantors of the lease, and that a certain balance remained unpaid on each of the instruments.

Berry filed a response to the motion in which he alleged that (1) FCC had failed to show that it owned the notes, (2) FCC was guilty of laches and estopped from collecting on the notes by failing to explain the delay in bringing the suit, (3) FCC was guilty of usury with respect to the claim against House as guarantor of one note and the claim against all three defendants on the lease, and (4) Cowan's statement that he had personal knowledge of all the facts testified to "was a false one."

The court granted FCC's motion for a summary judgment on October 30, 1990, ruling that it should recover $16,603.66, plus $3,825 for attorney's fees, from L.A. Berry, individually; $3,154.42, plus $1,275 for attorney's fees, from L.A. Berry and Charles House, jointly and severally; and $31,259.52, plus $6,251.90 for attorney's fees, from L.A. Berry, Charles House and Shelly House, jointly and severally. //

FCC again moved for a summary judgment by a second motion filed in July 1991 relying on "the D'Oench Duhme Doctrine and Federal Holder in Due Course Doctrine." // However, this motion was not presented to the court, and FCC filed a third motion for a summary judgment on April 15, 1994, seeking to have the court reject Berry's usury claims. FCC asserted three theories: (1) that it had never demanded or received interest payments from Berry; (2) usury could not be raised as a defense by a guarantor of an obligation; and (3) a "savings clause" on the notes prevented FCC from charging usurious interest as a matter of law. The motion was supported by an affidavit from Earl Broadway, another FCC vice-president, who stated that "no interest on principal has ever been requested, demanded, charged or received" by FCC. Berry did not respond to FCC's third motion, and the court granted a take-nothing judgment against Berry's usury claims on July 7, 1994.

Although Berry did not respond to the third motion for summary judgment, on June 15, 1994, he filed an "amended counter-claim," alleging that FCC had violated the Texas Uniform Commercial Code (UCC) by failing to sell the collateral securing the notes in a commercially reasonable manner. Thus, the court's July 7 judgment was interlocutory. On July 27, FCC filed a fourth motion for a summary judgment, alleging that Berry's UCC claim was barred by the statute of limitations, and that FCC was not a proper party to such a complaint because it was not a party to the initial contracts and the collateral had been disposed prior to its ownership of the notes. In an affidavit attached to the motion, Broadway stated that FCC "never acquired or had possession or the right to possess any collateral related to the four notes and the lease," and that the notes FCC purchased "were never secured by any collateral whatsoever." Berry responded to this motion, claiming that FCC's files indicated that the notes were secured by collateral and that no credit for the collateral had been applied against the balance of the accounts. Berry attached his attorney's affidavit and some 115 pages of photocopied bank records obtained from FCC's files to his response. The court granted FCC a take-nothing judgment on Berry's UCC claims on October 18, 1994. It also acknowledged its prior judgments and stated that "as Final Judgment in this cause" F.C.C. was to recover the amounts set out in the court's first judgment, with costs and interest. This appeal follows from this final summary judgment.

REVIEWING A SUMMARY JUDGMENT

In reviewing a summary judgment record, we apply the established standards. McConnell v. Southside School Dist., 858 S.W.2d 337, 343 (Tex. 1993); Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-549 (Tex. 1985). When the plaintiff moves for summary judgment, it must show that it is entitled to prevail on each element of the cause of action. Brooks v. Sherry Lane Nat. Bank, 788 S.W.2d 874, 876 (Tex. App. Dallas 1990, no writ); Bergen, Johnson and Olson v. Verco Mfg. Co., 690 S.W.2d 115, 117 (Tex. App. El Paso 1985, writ ref'd n.r.e.). The plaintiff meets the burden if it produces evidence that would be sufficient to support an instructed verdict at trial. Ortega-Carter v. Am. Intern. Adjustment, 834 S.W.2d 439, 441 (Tex. App. Dallas 1992, writ denied); Braden v. New Ulm State Bank, 618 S.W.2d 780, 782 (Tex. Civ. App. Houston [1st Dist.] 1981, writ ref'd n.r.e.).

FIRST MOTION FOR A SUMMARY JUDGMENTBerry argues in point one that the court erred by granting FCC's first motion for a summary judgment because (1) FCC failed to conclusively establish that there were no material facts regarding ownership of the obligations and the balance due, (2) Cowan's affidavit did not establish the source of his personal knowledge of the facts about which he testified, and (3) fact questions existed regarding Berry's affirmative defenses of laches and estoppel.

To collect on a promissory note as a matter of law, the holder must establish that (1) there is a note; (2) he is the legal owner and holder of the note; (3) the defendant is the maker of the note; and (4) a certain balance is due and owing on the note. Edlund v. Bounds, 842 S.W.2d 719, 724 (Tex.App. Dallas 1992, writ denied); Resolution Trust Corp. v. Thurlow, 820 S.W.2d 51, 52 (Tex.App. San Antonio, 1991 no writ).

To prove ownership of the notes, FCC relied on Cowan's affidavit, copies of the notes and guarantees, and a bill of sale from the FDIC. Cowan stated in several places that FCC purchased the four notes and the lease from the FDIC. This affidavit-testimony, together with the copies of the notes, prove ownership for summary-judgment purposes. Zarges v. Bevan, 652 S.W.2d 368, 369 (Tex. 1983); Bean v. Bluebonnet Sav. Bank FSB, 884 S.W.2d 520, 522 (Tex.App. Dallas 1994, no writ).

Berry did not contest whether he was the maker of the notes, and Cowan's affidavit stated that Berry was the maker and guarantor of the notes and lease; thus, FCC conclusively established the second element of their claim. Tex. R. Civ. P. 93.7; Cockrell v. Republic Mortg. Ins. Co., 817 S.W.2d 106, 111 (Tex. App. Dallas 1991, no writ).

Finally, Cowan testified that a certain sum was due and owing on each of the notes and the lease guarantee. Cowan's testimony along with the notes and guarantee established the balance of the notes for summary-judgment purposes. Schafer v. Federal Services Corp., 875 S.W.2d 455, 458 (Tex. App. Houston [1st Dist.] 1994, no writ); Rea v. Sunbelt Sav., FSB, Dallas, 822 S.W.2d 370, 372 (Tex. App. Dallas 1991, no writ); see also Cadle Co. v. Bankston & Lobingier, 868 S.W.2d 918, 921 (Tex. App. Fort Worth 1994), writ denied per curiam, 893 S.W.2d 949 (Tex. 1994). Thus, FCC established that it was entitled to judgment on its claim for the debt as a matter of law.

A claim that an affidavit does not show it was made on the personal knowledge of the affiant is an attack on the form of the affidavit. Grand Prairie I.S.D. v. Vaughn, 792 S.W.2d 944, 945 (Tex. 1990). Thus, Berry's complaint must have been raised and ruled on in the trial court before it may be relied upon in this court. Tex. R. App. P. 52(a); Giese v. NCNB Tex. Forney Banking Center, 881 S.W.2d 776, 782 (Tex. App. Dallas 1994, no writ). In his response, Berry argued that Cowan's affidavit was necessarily based on hearsay and not on his personal knowledge. However, no ruling on this argument appears in the record before us. Any ruling by the court should have been reduced to writing, signed, and entered of record. Eads v. American Bank, N.A., 843 S.W.2d 208, 211 (Tex. App. Waco 1992, no writ). Absent an order determining the objections, we have no way of knowing if they were explicitly presented to the trial court, what disposition the court made of the objections or whether the court considered the objected-to matters in granting summary judgment. Id. Because there is no ruling in the record on Berry's challenge to the form of Cowan's affidavit, this complaint cannot be raised on appeal. Id.

To avoid a plaintiff's summary judgment on the basis of an affirmative defense, the defendant must present sufficient summary judgment evidence to raise an issue of fact on each element of the defense. Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex. 1984); Wilson v. General Motors Acceptance Corp., 897 S.W.2d 818, 823 (Tex. App. Houston [1st Dist.] 1994, n.w.h.). To establish laches as a defense, Berry must show an unreasonable delay by FCC in asserting its legal rights and a good faith change in his position to his detriment because of the delay. Rogers v. Ricane Enterprises, Inc., 772 S.W.2d 76, 80 (Tex. 1989); Thompson v. Thompson Air Conditioning, 884 S.W.2d 555, 561 (Tex. App. Texarkana 1994, no writ). To establish equitable estoppel Berry is required to show, among other elements, that he detrimentally relied upon a misrepresentation. Schroeder v. Texas Iron Works, Inc, 813 S.W.2d 483, 489 (Tex. 1991); Herschbach v. City of Corpus Christi, 883 S.W.2d 720, 736-37 (Tex. App. Corpus Christi 1994, writ denied). Berry did not produce summary-judgment evidence indicating that he relied on any acts or statements of FCC to his detriment. Thus, he failed to raise a fact issue by competent summary-judgment evidence regarding every element of his asserted affirmative defense.

Because FCC conclusively established its entitlement to a summary judgment on liability and damages under the notes and lease guarantee, and Berry failed to produce evidence sufficient to raise fact issues regarding his affirmative defenses, the court properly granted FCC's first motion for a summary judgment. Point one is overruled.

SECOND MOTION FOR A SUMMARY JUDGMENT

In point two, Berry complains that FCC's second motion for a summary judgment, filed on July 1, 1991, did not specifically set out the grounds on which it was sought and was not accompanied by any summary-judgment evidence. However, this motion was never heard. On April 15, 1994, FCC filed its third motion for a summary judgment. This motion, like the July 1991 motion, sought to dispose of Berry's usury counterclaim. The third motion effectively amended and replaced the second motion for a summary judgment. The court heard the April 15 motion on June 3, 1994, and in its letter announcing its ruling specifically indicated that it was granting the motion filed on April 15. As FCC's second motion for a summary judgment was never ruled on, Berry's complaint addressing it is moot, and point two is overruled.

THIRD MOTION FOR A SUMMARY JUDGMENT

By point three, Berry attacks the court's summary judgment denying his usury counter-claim. This judgment was granted on the basis of FCC's third motion for a summary judgment, which asserted three theories: (1) that FCC had never demanded or received interest payments from Berry; (2) usury could not be raised as a defense by a guarantor of an obligation, and (3) a "savings clause" on the notes prevented FCC from charging usurious interest as a matter of law. Berry did not respond to this motion; therefore, he is limited to challenging the sufficiency of FCC's summary-judgment evidence and the application of the law to that evidence. McConnell, 858 S.W.2d at 343. Recognizing that he is so limited, Berry argues that FCC did not offer any summary-judgment evidence to counter his usury allegation. However, the motion was supported by Broadway's affidavit and contained excerpts from the notes. Thus, FCC did offer some evidence to support its motion.

Additionally, the summary judgment does not specify which of the three grounds that FCC advanced the court ruled on. Thus, to obtain a reversal of this judgment, Berry must show that none of the grounds set out in the motion are valid. Star-Telegram, Inc. v. Doe, 38 Tex. Sup. Ct. J. 718, 719-20 (June 8, 1995); Carr v. Brasher, 776 S.W.2d 567, 569 (Tex. 1989); Rogers, 772 S.W.2d at 79. Berry has failed to challenge FCC's legal theories regarding the "savings clause" on the notes or his standing to assert the usury claim. See First South Sav. v. Southern Partners, 957 F.2d 174, 176 (5th Cir. 1992); Woodcrest Assoc. v. Commonwealth Mortg., 775 S.W.2d 434, 437-38 (Tex. App. Dallas 1989, writ denied). Therefore, the summary judgment is affirmed on these unchallenged grounds. Star-Telegram, 38 Tex. Sup. Ct. J. at 720; Beavers v. Goose Creek Consol. I.S.D., 884 S.W.2d 932, 934 (Tex. App. Waco 1994, writ denied). Point three is overruled.

FOURTH MOTION FOR A SUMMARY JUDGMENT

In his amended counter-claim, Berry argued that FCC had violated the UCC by failing to dispose of the collateral securing the notes in a commercially reasonable manner. The court granted FCC's motion for summary judgment raising the statute of limitations and a claim by FCC that it was not a proper party for Berry's complaint. FCC supported its motion with an affidavit and a copy of the bill of sale from the FDIC indicating that the collateral had been sold prior to the sale of the notes to FCC. Berry alleges in the statement of his point of error that fact questions were raised by his response. However, he fails to argue in his brief under this point how FCC's evidence was deficient or what fact question his evidence raises. We have no duty to comb the 115 pages of bank records attached to Berry's response searching for fact issues in support of his claims. Bean, 884 S.W.2d at 523. Additionally, Berry has failed to attack FCC's statute-of-limitations ground asserted in the motion for a summary judgment. Star-Telegram, 38 Tex. Sup. Ct. J. at 720; Beavers, 884 S.W.2d at 934. For both of these reasons, we overrule point four.

Having overruled all of Berry's points, we affirm the judgment.

BOB L. THOMAS

Chief Justice

Before Chief Justice Thomas,

Justice Cummings, and

Justice Vance

Affirmed

Opinion delivered and filed October 31, 1995

Do not publish