Custom Leasing, Inc. v. Texas Bank & Trust Co. of Dallas

• Decision Date: 20 November 1974
• Docket Number: No. B--4254,B--4254
• Citation: 516 S.W.2d 138
• Parties: CUSTOM LEASING, INC., Petitioner, v. TEXAS BANK AND TRUST COMPANY OF DALLAS, Respondent.
• Court: Texas Supreme Court

Page 138

516 S.W.2d 138

CUSTOM LEASING, INC., Petitioner, v. TEXAS BANK AND TRUST COMPANY OF DALLAS, Respondent.

No. B--4254.

Supreme Court of Texas.

Nov. 20, 1974.

Rehearing Denied Dec. 18, 1974.

Key, Carr, Evans & Fouts, Donald M. Hunt, Lubbock, for petitioner.

Stigall, Maxfield & Collier, John F. Maxfield, Dallas, for respondent.

DANIEL, Justice.

This is our second time to consider appeals from this one of four severed causes of action which grew out of a case originally filed in Lubbock County by Custom Leasing, Inc., on January 19, 1965, against Gentry Construction Company, Inc., George W. Gentry, Alma Gentry, and James E. Lyles, for recovery of past due rentals and possession of dirt moving equipment alleged to have been purchased by Custom Leasing from and then leased back to Gentry Construction Company. Texas Bank and Trust Company of Dallas was later joined as a defendant on March 29, 1965, and this cause against it was transferred to Dallas County.

For background, factual details, and previous holdings, see the opinion of the court of civil appeals reversing the judgment of the trial court in favor of Custom Leasing and rendering judgment for Texas Bank and Trust Company, 470 S.W.2d 123 (1971); our opinion reversing the court of civil appeals and remanding this cause to that court for consideration of other points, 491 S.W.2d 869 (1973); and the opinion of the court of civil appeals again reversing and rendering in favor of Texas Bank and Trust, 498 S.W.2d 243. ¹ We granted this application for writ of error in order to review certain holdings in the latter opinion. For the reasons hereinafter set forth, we reverse the judgment of the court of civil appeals and affirm the judgment of the trial court.

The instant case concerns only the claim of Custom Leasing against Texas Bank and Trust for recovery of money paid for the release of an alleged invalid mortgage on equipment which Custom purportedly purchased from Gentry Construction Company. It is necessary however, to summarize the related transactions and proceedings.

James E. Lyles was the son of Mrs. Gentry by a former marriage. He had served as vice-president of Gentry Construction Company several years prior to all transactions involved in this lawsuit, but he held no office in the company nor authority to act for it during any of the transactions relevant to this lawsuit. Under false representations of his authority to act for the company, Lyles borrowed $18,900 on April 3, 1963, from the Texas Bank and Trust Company of Dallas in the name of Gentry Construction Company upon a note signed by him as purported vice-president of Gentry Construction Company and purportedly co-signed by George W. Gentry, individually. As security, Lyles gave the bank a mortgage on certain earth moving equipment signed and acknowledged only by him as purported vice-president of the company.

Thereafter, on April 23, 1964, Lyles negotiated with Custom Leasing for a purchase of this and other equipment from Gentry Construction Company for $25,000, accompanied by lease-back contracts from Custom Leasing to Gentry Construction Company. In connection with these negotiations, Lyles advised Custom that $19,089 of the agreed consideration for Custom's purchase would have to be paid to Texas Bank in order to obtain a release of its mortgage. This amount and the fact that the bank held a mortgage on the property, which would be released upon payment of the bank's sight draft for $19,089, was confirmed by the bank to Custom Leasing in a telephone call placed by Lyles to Texas Bank. Custom paid Texas Bank's sight draft in that amount upon receipt of the mortgage duly stamped and signed as released. There was no assignment of the mortgage. Custom, however, subsequently alleged that it would not have paid the bank for the release if it had not been falsely represented by the bank in the telephone call that the bank held a note secured by a mortgage on the equipment.

After Gentry Construction Company became delinquent in some of its rental payments and Custom could not obtain compliance with its lease agreements, Custom declared all unpaid rentals due, in the sum of $29,514.95, and filed its original suit in Lubbock County against Gentry Construction Company, George W. Gentry, Alma Gentry, and James E. Lyles, for recovery of the rentals and attorneys' fees, totaling $33,942.95, and for possession of the leased equipment.

Soon thereafter, upon taking the depositions of Mr. and Mrs. Gentry, Custom Leasing learned for the first time that the Gentrys claimed they did not sign, and that James E. Lyles had no authority to sign for the corporation, any of the bills of sale, lease-back agreements, or the note and mortgage given to Texas Bank and Trust Company.

Thereafter, Custom took an interlocutory default judgment against Lyles on March 12, 1965, for the full amount claimed. On March 29, 1965, Custom amended its petition to make Texas Bank and Trust a defendant on an alternative count of breach of warranty.

Pleas of privilege by the Gentrys and Gentry Construction Company were sustained, and Custom's cause of action against them was transferred to Midland County, where it is still pending. A plea of privilege by Texas Bank was also sustained and the cause against it was transferred to Dallas County. ² On February 13, 1968, Texas Bank made the Gentrys and Gentry Construction Company third party defendants. It asserted that the bank is entitled to recover contribution or indemnity against them for any amount recovered against the bank by Custom Leasing, alleging that the third party defendants either authorized or ratified any and all actions of James E. Lyles in connection with the note and mortgage transaction. Upon pleas of privilege, this third party action of Texas Bank against the Gentrys and their construction company was transferred on May 20, 1969, to Midland County, where it is still pending.

In the meantime, on August 16, 1966, after Custom's suit against all other defendants had been transferred to other counties, the District Court of Lubbock County severed the cause as to Lyles and made final the interlocutory judgment previously rendered against him in favor of Custom Leasing for possession of the equipment and $33,942.95.

The instant suit by Custom Leasing against Texas Bank was tried under Custom's amended pleadings alleging that Lyles had no authority to execute the note and mortgage on behalf of Gentry Construction Company; that the bank had actual or constructive notice of such fact at the time it falsely represented to Custom that it held a valid note and mortgage on the equipment; and that Custom acted in reliance upon such false representations in paying $19,089 to the bank for the release of an invalid mortgage. Custom asserted alternative claims for money had and received (based upon failure of consideration, misrepresentation, undue advantage and unilateral mistake), mutual mistake, and fraud.

Upon jury findings, the trial court entered a judgment for Custom Leasing in the sum of $11,000. Both parties appealed, and the court of civil appeals held that the judgment of Custom Leasing against Texas Bank could not be sustained because Custom had elected an inconsistent remedy in affirming the purchase and lease contracts and suing Lyles, Gentry Construction Company, and the Gentrys for full performance thereunder. The court of civil appeals reasoned that Custom could not recover the judgment against Lyles for the amount due under the contracts, continue to pursue the same alleged joint and several obligation against the Gentrys and Gentry Construction for full recovery under the purchase and lease contracts, and at the same time recover $19,089 from the bank. 470 S.W.2d 123.

The opinion of the court of civil appeals was well reasoned on the general rule of election of remedies and is applicable to those remedies sought by Custom against Texas Bank, such as money had and received, failure of consideration, unilateral mistake and mutual mistake, all of which would have called for a rescission of the contracts which Custom had elected to affirm and stand upon. We recognized the general rule, 491 S.W.2d at 871--872, but held that it did not apply to Custom's cause of action against the bank in tort for alleged false representation under which it secured payment for the release of an alleged invalid chattel mortgage. This was held to be a distinct cause of action against the bank which was not inconsistent with Custom's suit against other parties for performance under their alleged contracts. As indicated, we remanded the case to the court of civil appeals for consideration of all other points, including those challenging the sufficiency of the evidence to support certain jury findings. It is the duty of the appellant courts to sustain the judgment of the trial court if it is correct on any theory of law applicable to the case. Gulf Land Co. v. Atlantic Refining Co., 134 Tex. 59, 131 S.W.2d 73, 84 (1939). The court of civil appeals recognized this duty in its latest opinion, apparently overruling Texas Bank's evidentiary points, and holding that the judgment for Custom cannot be sustained upon the jury findings and law as they relate to any of the...