DONHAM OIL COMPANY, INC., Appellant v. METLIFE CAPITAL CORPORATION, Appellee

Affirmed and Opinion filed November 30, 1989
 
 
S
In The
Court of Appeals
Fifth District of Texas at Dallas
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No. 05-89-00420-CV
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DONHAM OIL COMPANY, INC., Appellant
V.
METLIFE CAPITAL CORPORATION, Appellee
 
.................................................................
On Appeal from the 14th District Court
Dallas County, Texas
Trial Court Cause No. 86-16541-A
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O P I N I O N
Before Chief Justice Enoch and Justices Carver FN:1 and Bissett FN:2
Opinion By Chief Justice Enoch
        This is an appeal from a summary judgment granted in favor of appellee, Metlife Capital Corp. (Metlife), and against appellant, Donham Oil Company, Inc. (Donham), for default and deficiency on a conditional sales contract and security agreement for the purchase of an airplane. Metlife, as assignee of Seattle First National Bank, filed suit against Donham under a corporate guaranty and also as partner with Keith Alexander (Alexander), primary obligor under the sales contract and security agreement, for the purchase of an airplane. Donham claims that the trial court erred in granting summary judgment because there are fact issues as to whether it entered into a partnership with Alexander for the purchase of the airplane and whether the sale of the airplane by Metlife was commercially reasonable. We overrule Donham's two points of error and affirm the trial court's judgment.         
        This case arises out of the default on a Conditional Sales Contract (Sales Contract) executed by Alexander and guaranteed by Donham. Alexander was the President of Donham at the time of the purchase of the airplane. Metlife is the assignee of Seattle First National Bank of all of the rights arising out of the Sales Contract and Guaranty Agreement dated December 21, 1978. The sales contract explicitly states that "this contract is made with reference to and is to be construed in accordance with the laws of the state of Washington." Additionally, the guaranty agreement signed by Donham states that "in case of suit or action to enforce the terms of this Guaranty, the undersigned (Donham) consents to the jurisdiction of the courts of the state of Washington."
        Because of default, Metlife exercised its right with regard to the airplane and sold it. Metlife offset the proceeds against the sums due under the sales contract and sued for the deficiency balance.
        The purpose of the sales contract and guaranty agreement was to allow Donham to obtain a company airplane. Alexander would not have been able to purchase the plane without the execution of Donham's guaranty. Pursuant to Donham's company rules, the airplane was to be used solely for Donham's business. In addition, Donham made all the payments on the airplane, provided the maintenance and insurance for the airplane, provided a hanger for the airplane, and hired all of the pilots for the airplane. Donham does not dispute that it signed the guaranty agreement in order to obtain funds for the purchase of the airplane.
        In response to Metlife's suit, Donham filed a motion for summary judgment asserting the affirmative defense of illegality. Metlife thereafter filed a motion for summary judgment against Donham which rested on four grounds: 1) that Donham and Alexander were partners in procuring the loan proceeds of the sales contract and thus are jointly and severally liable on the debt under Texas law; 2) that the laws of the state of Washington govern enforceability of the Sales Contract and Guaranty Agreement, under which Donham is liable; 3) that general statutory prohibitions under Texas law do not render an act illegal which is merely ultra vires, and that Metlife is entitled to summary judgment as a matter of law based on the Guaranty Agreement; and 4) that the sale of the airplane was commercially reasonable as evidenced by the deemed admissions of Alexander. The trial court granted Metlife's motion for summary judgment and Donham brings this appeal. FN:3
        The standards for review of summary judgment evidence are well established. As mandated by the Texas Supreme Court, they are:
                1. The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.
 
                2. In deciding whether or not there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true.
 
                3. Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor.
Nixon v. Mr. Property Management, 690 S.W.2d 546, 548-49 (Tex 1985); Montgomery v. Kennedy, 669 S.W.2d 309, 310-11 (Tex. 1984). If a summary judgment order does not state the specific grounds upon which it is granted, a party appealing from such order must show that each of the independent arguments alleged in the motion is insufficient to support the order. Tilotta v. Goodall, 752 S.W.2d 160, 161 (Tex. App.--Houston [1st Dist.] 1988, writ denied); McCrea v. Cubilla Condominium Corp., 685 S.W.2d 755, 757 (Tex. App.--Houston [1st Dist.] 1985, writ ref'd n.r.e.). An appellant must adequately brief each issue raised on summary judgment. Rodriguez v. Morgan, 584 S.W.2d 558, 559 (Tex. Civ. App.--Austin 1979, no writ).         
        When the court's order does not specify the grounds relied on for its ruling, summary judgment will be affirmed if any of the theories advanced are meritorious. Carr v. Brasher, 776 S.W.2d 567, 569 (Tex. 1989); Malooly Brothers, Inc. v. Napier, 461 S.W.2d 119, 121 (Tex. 1970). Metlife is entitled to summary judgment if it can show that on at least one of its theories every element essential to its recovery is clearly established so that there is no material issue of fact as to the truth of its contentions. Borg-Warner Corp. v. C.I.T., 679 S.W.2d 140, 142 (Tex. App.--Amarillo 1984, writ ref'd n.r.e.).
        The final judgment states that Metlife's motion for summary judgment "is sound and should be in all things GRANTED." There is no indication on its face that Metlife's motion for summary judgment was denied with respect to any ground asserted therein. Since the judgment fails to specify the grounds relied on by the court for its ruling, it will be affirmed if any one of the theories advanced are meritorious. Carr v. Brasher, 776 S.W.2d at 569; Malooly Brothers, Inc. v. Napier, 461 S.W.2d at 121.
        Donham only asserts as its first point of error that the trial court erred in granting summary judgment because there are fact issues as to whether Donham entered into a partnership with Alexander for the purchase of the airplane. However, Metlife's motion contends that the guarantee agreement is enforceable anyway under Texas law on the theory that Donham's actions were merely ultra vires rather than illegal. Therefore, we look to see if summary judgment can be affirmed on this theory.
        The Texas Business Corporation Act, at the time Donham entered into the Guaranty Agreement, prohibited such a transaction between a corporation and its officers. "Subject to the provisions B and C of this article, each corporation shall have the power: . . . (6) To lend money to and otherwise assist, its employees, but not to its officers and directors." Tex. Bus. Corp. Act Ann. art. 2.02 A(6) (Vernon 1980). The Miscellaneous Corporation Laws Act also prohibited such a transaction between a corporation and its officers. The statute described the circumstances under which a corporation was empowered and authorized to give a guaranty, and read in pertinent part as follows:
         [A]ny corporation, domestic or foreign doing business in this state shall have the power and authority to make a guaranty if the guaranty reasonably may be expected to benefit, directly or indirectly, the guarantor corporation. For purposes of this Section and Section C of this Article, "guaranty" means a guaranty, mortgage, pledge, security agreement, or other agreement making the guarantor corporation or its assets responsible respecting the contracts, securities, or other obligations of any person (including, but not limited to, any domestic or foreign corporation, partnership, association, joint venture, or trust, but excluding any officer or director of such guarantor corporation).
Tex. Rev. Civ. Stat. Ann. art. 1302-2.06(B) (Vernon 1980).
        Donham does not dispute that it executed a guarantee agreement for the purchase of an airplane and that the company benefitted from the use of the airplane. Donham, however, now attempts to avoid liability by asserting that the guarantee agreement it voluntarily entered into is illegal under Texas statute.
        The Texas Supreme Court has recognized that the legislature espoused a general prohibition against lending money to officers and directors and guaranteeing their debts, but once the corporation violates that prohibition, it cannot thereafter use the defense that its own prohibited acts are illegal or unenforceable. Whitten v. Republic National Bank of Dallas, 397 S.W.2d 415, 418 (Tex. 1965). In Whitten, a corporation paid the debts of one of its officers. At the time of the payment of the debts, Article 2.02 A(6) of the Business Corporation Act prohibited corporations from lending money to, or otherwise assisting, corporate officers. Thereafter, the company went into bankruptcy. The bankruptcy trustee argued that the payment of corporate funds for its officer's debts was illegal because it violated the Business Corporation Act. The Court held that the statute in question was intended to prevent the creation of corporate guaranties of corporate officer's debts, but upon their creation and reliance by third parties, the guarantee is ultra vires, not illegal, and therefore is enforceable. Whitten, 397 S.W.2d at 417-418.         
        In addition, the Court held that Article 2.02 A(6) is by its very wording, a grant of powers and that the phrase "but not to its officers and directors," is but a limitation on a specific power granted, not a positive prohibition. Whitten, 397 S.W.2d at 418. The Court found the corporation estopped to assert that the payment was unenforceable because of the absence of fraud and because of the benefits received by the corporation from the payment. Whitten, 397 S.W.2d at 418.
        Other Texas courts have held that corporate guaranties in violation of Article 1302-2.06 are not illegal or unenforceable. Diamond Paint Co. v. Embry, 525 S.W.2d 529, 535 (Tex. Civ. App.--Houston [14th Dist.] 1975, writ ref'd n.r.e.). The Texas courts have held that by restricting the lending and guaranty authority of corporations, the legislature intended to provide shareholders with the opportunity for injunctive relief. Diamond Paint v. Embry, 525 S.W.2d at 535.
        In federal court, a defendant corporation was estopped from asserting illegality under Texas law as a defense based on its own violation of statutory power, and the court granted summary judgment in favor of the plaintiff. Whitter v. Triumph Smokes, Inc., 464 F.2d 1078 (5th Cir. 1972). The court held that the purpose of statutory restrictive language was to protect the corporation's creditors, and that a corporation cannot use as a sword the defense that its acts are illegal or in violation of its statutory power. Whitter, 464 F.2d at 107.
        The statutes relied upon by Donham do not provide for striking a guarantee once executed and relied upon by a creditor and in fact have since been repealed. Otherwise, a corporation like Donham could reap all of the benefits of the use of the property, such as an airplane, then unilaterally void its guaranty obligations based on its own alleged "illegal" act. Article 2.02 A(6) of the Business Corporation Act now permits a Texas corporation to lend money and provide financial assistance to its officers and directors, as well as to its non-officer and non-director employees. Tex. Bus. Corp. Act Ann. art. 2.02 A(6) (Vernon Supp. 1989). Article 2.06B of the Texas Miscellaneous Corporation Laws Act also conforms to amended subsection (6) of Article 2.02A by providing that a corporation may guarantee the obligations of any officers or directors of the guarantor corporation. Tex. Rev. Civ. Stat. Ann. art. 1302-2.06.B. However, in each instance the loan guaranty or assistance must reasonably be expected to benefit the assisting corporation, directly or indirectly. Tex. Bus. Corp. Act Ann. art. 2.02 A(6) (Vernon Supp. 1989); Tex. Rev. Civ. Stat. Ann. art. 13.02-2.06.B.
        We hold that the Guaranty Agreement voluntarily executed by Donham is not illegal, and is enforceable under Texas law. Accordingly, Donham is liable as corporate guarantor. Donham's first point of error is overruled.
        In its second point of error, Donham claims that there are fact issues as to whether the sale of the airplane by Metlife was commercially reasonable. Donham contends that the deposition testimony of Alexander raises such fact issues. Alexander testified, based solely on his own opinion, that Metlife could have received more money from the sale of the airplane. However, the record reflects that Alexander admitted in deemed request for admissions, that Metlife sold the airplane at a commercially reasonable sale and obtained a commercially reasonable price of $600,000 for the aircraft. The effect of an admission is that any matter admitted is conclusively established as to the party making the admission. Tex. R. Civ. P. 169. Accordingly, we hold that there is no genuine issue of material fact precluding summary judgment in favor of Metlife. Appellant's second point of error is overruled.
        The trial court's judgment is affirmed.
 
 
 
                                                          
                                                          CRAIG TRIVELY ENOCH
                                                          CHIEF JUSTICE
 
Do Not Publish
Tex. R. App. P. 90
 
890420.U05
 
FN:1 The Honorable Spencer Carver, Justice, retired, Court of Appeals, Fifth District of Texas at Dallas, sitting by assignment.
FN:2 The Honorable Gerald T. Bissett, Justice, retired, Court of Appeals, Thirteenth District of Texas at Corpus Christi, sitting by assignment.
FN:3 Initially, the trial court granted Donham partial summary judgment as to its liability under the guaranty agreement on the basis that, at the time the contract was executed, Texas statutory law prohibited corporate guaranties of corporate officer's debts. Subsequently, the trial court modified its order and limited its finding to the fact that Alexander was the record owner of the airplane in question. However, the final judgment in this case grants Metlife's motion in "all things."
        This Court may review only final judgments, excepting well known statutory deviations from this rule which are not applicable here. Tex. R. Civ. P. 301. The trial court has jurisdiction to set aside an interlocutory judgment. This discretionary authority may be exercised by the judge at any time prior to final judgment. Stout-Jennings-Schmidt Co. v. Schmidt, 615 S.W.2d 267, 269 (Tex. Civ. App.--Dallas 1981, writ dism'd). The trial court's final judgment dated February 21, 1989, that grants summary judgment for Metlife, is controlling and supercedes the interlocutory orders issued by the court in favor of Donham.
 
 
File Date[11-30-89]
File Name[890420]