Lott State Bank v. Affiliated Computer Systems Financial Services, Inc.--Appeal from 170th District Court of McLennan County

IN THE

TENTH COURT OF APPEALS

No. 10-91-090-CV

LOTT STATE BANK,

Appellant

v.

AFFILIATED COMPUTER SYSTEMS

FINANCIAL SERVICES, INC.,

Appellee

From the 170th District Court

McLennan County, Texas

Trial Court # 90-2971-4

O P I N I O N

Following a bench trial, the court entered a judgment for Affiliated Computer Systems Financial Services, Inc. against Lott State Bank for breaching a data-processing contract. The Bank contends the court erred when it concluded that the contract was assignable to and thus enforceable by Affiliated. We affirm.

THE CONTRACT

First RepublicBank-Waco and Lott State Bank were the original parties to the three-year contract, dated January 1, 1988. It obligated First Republic to provide data-processing services for the bank's loans, demand deposits, savings accounts, certificates of deposits, and general ledger. Lott State Bank agreed to deliver by 7:30 p.m. each banking day all information and instruments necessary for First Republic to perform its services, and First Republic agreed to process the information and make the computer reports available by 6:00 a.m. the next banking day. The contract provided for the confidentiality of the information and data:

10. CONFIDENTIALITY and PROPRIETARY INTERESTS.

[First Republic] will use reasonable means to preserve the confidentiality of information communicated to it by [Lott State Bank] under this Agreement. Such information . . . shall not be disclosed to others except by force of legal process or in connection with the audit and examination provisions of this Agreement.

ASSIGNMENTS

InterFirst-Waco obtained the agreement in a merger with First Republic. NCNB-Waco then acquired the contract when it bought the assets of the financially defunct InterFirst. Finally, Affiliated purchased it from NCNB on June 9, 1989. Lott State Bank says it repudiated the contract approximately six months later on the ground that it was not assignable to Affiliated.

WAS THE CONTRACT ASSIGNABLE?

Lott State Bank contended in the trial court and argues on appeal that NCNB could not assign the contract to Affiliated because it required the delivery of personal services involving confidentiality. The court expressly concluded, however, that the contract did not involve personal services. Point one attacks this conclusion.

Generally, a contract is assignable unless it provides otherwise. Central Power & Light Co. v. Purvis, 67 S.W.2d 1086, 1088 (Tex. Civ. App. San Antonio 1934, writ ref'd) (quoting Dittman v. Model Baking Co., 271 S.W. 75, 77 (Tex. Comm'n App. 1925, judgm't adopted)); Cloughly v. NBC Bank-Seguin, N.A., 773 S.W.2d 652, 655 (Tex. App. San Antonio 1989, writ denied). Although parties do not expressly restrict assignment, the courts have nevertheless created exceptions to the general rule of assignability for contracts that are personal in character or based on personal credit, confidence, trust or skill peculiar to either party. Moran v. Wotola Royalty Corporation, 123 S.W.2d 692, 694 (Tex. Civ. App. Fort Worth 1938, writ ref'd); Purvis, 67 S.W.2d at 1088.

First Republic's data-processing department provided computer services to many Central Texas banks because only four or five banks were capable of performing the services "in house." When InterFirst and NCNB acquired the contract, they continued to provide the services to Lott State Bank and the other banks from the same location, with the same equipment, and with virtually the same personnel as First Republic. This is also true of Affiliated.

Nothing about the data-processing services was unique. In fact, an officer of Lott State Bank characterized them as routine, clerical, and mechanical and agreed they were available from other providers at a competitive price. Considering the type of services and the number of banks served, the court could reasonably conclude that the services were part of the "stock-in-trade" of First Republic, InterFirst, and NCNB. A contract that requires a party to provide stock-in-trade goods or services is not so personal as to be unassignable. Purvis, 67 S.W.2d at 1088.

Lott State Bank argues, however, that the contract was personal because it reposed trust and confidence in First Republic, InterFirst, and NCNB. It relies for this argument on the provision in the contract guarding the confidentiality of its information and data and on a preexisting correspondent-bank relationship with all three banks. Lott State Bank claimed it never objected to the assignments to InterFirst or NCNB because of its banking relationship with those banks. It had no such relationship with Affiliated, which is not a bank.

A contract cannot be assigned if it involves a relationship of such personal confidence that a party must have intended the obligations to be exercised only by the party to whom they are entrusted. Menger v. Ward, 87 Tex. 622, 30 S.W. 853, 855 (1895). That degree of confidence is inherent in the relationship of doctor-patient, lawyer-client, and lender-borrower. However, a contract for the delivery of routine data-processing services cannot be reasonably interpreted as creating a relationship of such unique personal confidence that Lott State Bank must have intended the services to be delivered only by First Republic, the original party to the contract, or by a correspondent bank. The provision protecting the confidentiality of Lott State Bank's data and information did not elevate a relationship involving the delivery of stock-in-trade services to one of unique personal confidence.

This was not a contract to deliver unique personal services but one to deliver a finished product. See Commissioner of Internal Revenue vs. Montgomery, 144 F.2d 313, 315 (5th Cir. 1944). Thus, the court correctly interpreted the contract as one not involving personal services. Point one is overruled.

CHANGE OF VENUE

Lott State Bank filed a motion to transfer the venue of the suit from McLennan to Robertson County. It specifically denied that venue was proper in McLennan County, alleging instead that it was proper in either Falls County (where a part of the cause of action arose and the bank is located) or in Robertson County (where a suit with identical facts and issues was then pending against the Bremond State Bank, a bank owned by the holding company that owns Lott State Bank). Point three is a complaint about the denial of the motion to transfer.

The specific denial of venue required Affiliated to make prima-facie proof of the venue allegations in its petition. See Tex. R. Civ. P. 87(2)(b). Affiliated filed an affidavit incorporating by reference the bank's responses to requests for admissions. See id. at 88. In the responses, Lott State Bank admitted: the authenticity of the contract, which required payment to be made in McLennan County; making payments in McLennan County; and terminating the contract in McLennan County. This was prima-facie proof that a part of the cause of action accrued in McLennan County. See Phillio v. Blythe, 12 Tex. 124, 127-28 (1854) (holding that a contract, its performance and breach are essential elements of a cause of action for breach of contract); Krchnak v. Fulton, 759 S.W.2d 524, 526 (Tex. App. Amarillo 1988, writ denied) (holding that a portion of a case of action for breach of contract accrues in the county where payment is required to be made but not paid). Thus, because a part of Affiliated's cause of action arose in McLennan County, venue was permissible there. See Tex. Civ. Prac. & Rem. Code Ann. 15.001 (Vernon 1986).

Affiliated's prima-facie proof of permissible venue in McLennan County then required Lott State Bank to establish that venue was either mandatory in Robertson County or that an impartial trial could not be had in McLennan County. See Tex. R. Civ. P. 87(3)(c). The bank made no such allegations or proof. Accordingly, the court properly denied the motion to transfer. See id. Point three is overruled.

Lott State Bank waived its second point at oral argument, and the point is therefore not addressed. The judgment is affirmed.

BOB L. THOMAS

Chief Justice

Before Chief Justice Thomas,

Justice Cummings, and

Justice Vance

Affirmed

Opinion delivered and filed May 27, 1992

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