Bernhardt v. McGuire & Pritchard
| Decision Date | 10 September 1980 |
| Docket Number | No. 9123,9123 |
| Citation | 607 S.W.2d 8 |
| Parties | 30 UCC Rep.Serv. 601 Donald R. BERNHARDT and wife, Shirley H. Bernhardt, Appellants, v. McGUIRE & PRITCHARD, a Partnership, Composed of Wilson McGuire and KipPritchard, et al., Appellees. |
| Court | Texas Court of Appeals |
Key, Carr, Evans & Fouts, Donald M. Hunt, Lubbock, for appellants.
White, Self & Davenport, Charles G. White and Erwin Davenport, Plainview, for appellees.
In this action, Donald R. Bernhardt and wife Shirley H. Bernhardt are the appellants and McGuire & Pritchard, a partnership composed of Wilson McGuire and Kip Pritchard, are the appellees. The action arises from the construction of a home by McGuire & Pritchard for the Bernhardts. The home is located in Plainview, Hale County, Texas. As payment for the construction of the residence, the Bernhardts executed and delivered to McGuire and Pritchard their one certain promissory note in the original principal sum of $131,000 with interest and attorney's fees as therein provided. The note was secured by a mechanics' and materialmen's lien on the homesite. McGuire and Pritchard brought this action to recover the alleged unpaid balance due on the note and for foreclosure of the mechanics' and materialmen's lien. By answer and counterclaim, the Bernhardts' allege, among other things, that they discharged the note by reacquisition and that the contractors failed to construct the residence according to the plans and specifications.
The trial was to a jury. The jury found, among other things, that the contractors did not materially fail to construct the house in accordance with the specifications, terms and conditions of the contract and subsequent modifications agreed to by the owners; that the contractors did fail to construct the house in accordance with the plans, the specifications and the contractual agreement made by the parties; that the sum of $5,000 would reasonably and adequately compensate the owners for damages caused by defects, failure to complete and deviations from the contractual agreements made by the parties; that the contractors did fail to construct the house in accordance with the time for completion called for in the written contract; and that the sum of $11,300 would be a reasonable attorney's fee for the contractors for all phases of this litigation including an appeal to the Supreme Court of Texas.
The owners filed a motion for the court to disregard certain issues which the jury answered favorable to the contractor and a motion for judgment notwithstanding the jury's verdict. The trial court overruled these motions. Allowing certain credits and offsets, the trial court rendered judgment for the contractors for the unpaid balance on the note plus interest and attorney's fees and ordered foreclosure of the lien. From this judgment, the owners duly appeal. We modify the judgment, in part, as to prejudgment interest and as modified, we affirm.
On appeal, the Bernhardts claim, inter alia, that the judgment should be reversed because: (1) they discharged the note and mechanics' lien by paying $78,808 plus interest and reacquired the note; (2) the contractors are not entitled to a lien or foreclosure where they failed to complete the house as contracted and failed to request or secure a finding of substantial performance; (3) the trial court refused their request for a separate damage special issue on certain non-conforming cabinets; (4) the trial court failed to construe the specifications as requiring the cabinets to be built of birch; (5) the trial court refused to instruct the jury "that where there are at least two (2) reasonable constructions to be given an instrument, it should be construed against the party who prepared it"; (6) the evidence is legally and factually insufficient to support the jury finding of $5,000 in damages for failure to complete the house according to plans and specifications; (7) the trial court awarded prejudgment interest on the unpaid balance of the note at the rate of ten percent per annum from 25 October 1977; (8) the contractors are not entitled to attorney's fees as a matter of law; (9) the evidence is legally and factually insufficient to support the jury's finding of $7,500 for the contractor's attorney's fees in the trial court; and (10) the court refused to submit their requested special issue on breach of express warranties.
By their first point of error, the owners claim the judgment should be reversed because they discharged the note and mechanic's lien by paying $78,808 plus accrued interest, and reacquired the note. In support of their position, the owners rely on Tex.Bus. & Com.Code Ann. subsection 3.601(c)(1) (Vernon Supp.1980), which provides, in part: "The liability of all parties is discharged when any party who has himself no right of action or recourse on the instrument reacquires the instrument in his own right." This subsection of the Code presupposes that the instrument is reacquired by a no-recourse party and then, in effect, states the general principle "that all parties to an instrument are discharged when no party is left with rights against any other party on the paper " (emphasis added). 3 R. Anderson, Uniform Commercial Code 102-03 (2d ed. 1971). In this instance, discharge by reacquisition is pled as an affirmative defense to the contractor's action on the note. Thus, as one of the essential elements of the defense, the owners must establish that they reacquired the note when the contractors were left with no rights against them on the paper.
The evidence shows that on 22 January 1977, the owners executed and delivered to the contractors their one certain promissory note in the original principal sum of $131,000 with interest and attorney's fees as therein provided. The note was given in payment for the construction of a residence on certain real property located in the City of Plainview, Hale County, Texas. Simultaneously, the owners executed and delivered to the contractors a mechanics' and materialmen's lien on the Plainview property to secure payment of the note. The contractors transferred the note and mechanics' lien to the First National Bank of Plainview, Texas, to obtain a portion of the interim financing for the construction of the residence.
The due date on the note was eight months from the date of execution and delivery, 22 January 1977. The mechanics' lien contract provides for completion of the residence within 160 days from that date (22 January 1977) or "within a reasonable time thereafter." Proceeding under the contract with the owners, the contractors began and continued with the construction of the residence. As construction of the residence proceeded, the bank made monthly advances to the contractors. Although the contractors had not completed construction of the residence by October of 1977, the bank had paid out $78,808 on the note.
Considering the note past due, the bank requested the owners to renew and extend the note or pay the $78,808 plus accrued interest. Being dissatisfied with the construction of the residence, the owners refused to renew and extend the note and, on or about October 1977, paid the $78,808 plus accrued interest. An official of the bank handed or mailed the note to the owners. After the owners received the note, the bank official told them to return the note for delivery to the contractors. On the same day the owners received the note from the bank, they delivered it to the contractors. On the back side of the note appears a no-recourse endorsement by the contractors to the bank and a transfer and assignment from the bank to the contractors. No other transfers appear on the instrument. Absent from the note is a recitation of payment or partial payment. On 25 October 1977, only 60 to 65 percent of the construction on the residence was completed. Proceeding under their contractual rights and obligations, the contractors continued with the construction of the residence.
In essence, the owners say that by paying the $78,808 to the bank and momentarily receiving the note from the bank, they discharged the note, unilaterally rescinded the construction contract and left the contractors with only an action, if any, on quantum meruit for the remaining construction of the residence. We do not agree. The evidence conclusively establishes that the parties did not mutually rescind the construction contract and the owners did not pay to the bank, the contractors or anyone else the face amount of the note. Nor do the owners so contend. Assuming, arguendo, that the owners reacquired the note from the bank by paying $78,808, by failing to show that the parties mutually rescinded the construction contract or that they paid the face amount of the note, they failed to establish that the contractors were left without any rights against them on the paper. Accordingly, we overrule the owners' first point of error.
By point fifteen, the owners say the judgment should be reversed because "the Contractors were not entitled to a lien or foreclosure, where they failed to complete the house as contracted and failed to request or secure a finding of substantial performance and thereby waived any such finding." We disagree. In response to special issue number eight, the jury found, in effect, that the contractors did not materially fail to construct the house in accordance with the specifications, terms and conditions of the contract executed on 22 January 1977 and the subsequent modifications agreed to by the owners. Following this issue in the charge, the court gave a definition of the phrase "materially fail." As used in the charge the word "materially" is synonymous with the word "substantially." 1 Thus, the jury's answer to special issue number eight is tantamount to a finding that the contractors did not substantially fail to complete the house in accordance with the plans and specifications agreed to by the parties.
The ...
To continue reading
Request your trial
-
Lee v. Ardoin
...substantially performed and could enforce payments due and owing under the contract agreement. Bernhardt v. McGuire & Pritchard, 607 S.W.2d 8 (Tex.Civ.App.--Amarillo 1980, writ ref'd n.r.e.). Warren v. Denison, 563 S.W.2d 299, 303 (Tex.Civ.App.--Amarillo 1978, no writ); Perryman v. Sims, 50......