Edlund v. Bounds

• Decision Date: 14 September 1992
• Docket Number: No. 05-90-00085-CV,05-90-00085-CV
• Citation: 842 S.W.2d 719
• Parties: James A. EDLUND, Appellant, v. R.W. BOUNDS, Appellee.
• Court: Texas Court of Appeals

Page 719

842 S.W.2d 719

James A. EDLUND, Appellant, v. R.W. BOUNDS, Appellee.

No. 05-90-00085-CV.

Court of Appeals of Texas,

Dallas.

Sept. 14, 1992.

Rehearing Denied Oct. 26, 1992.

John Alan Goren, Dallas, for appellant.

Will Ford Hartnett, Jack Kent Davenport, Dallas, for appellee.

Before ENOCH, C.J., and BISSETT ¹ and ONION ², JJ.

OPINION ON REHEARING

ENOCH, Chief Justice.

We withdraw our opinion of July 3, 1992. This is now the opinion of the court. R.W. Bounds sued James A. Edlund on a promissory note. Edlund answered with a general denial and asserted affirmative defenses and a counterclaim. Edlund now appeals the trial court's judgment rendered in favor of Bounds. Bounds cross-appeals the judgment on the issue of attorney's fees. We affirm in part, modify and affirm in part, and reverse and remand in part.

FACTUAL BACKGROUND

Bounds testified that he and Edlund formed the real estate brokerage company, K-John Real Estate, Inc. (K-John) in the early 1980s. Bounds owned fifty-one percent of the shares. Edlund was president of K-John, ran its day-to-day affairs, and owned forty-nine percent of the shares. In February, 1981, they agreed to purchase the Frances Powell Gallery of Homes for $150,000. The purchase was accomplished with a $150,000 promissory note to Frances Powell in which both Bounds and Edlund were personal guarantors. Frances Powell required security of at least 125% of $150,000, which Bounds satisfied by pledging a 9.7 acre tract of real property located in Plano. The property was owned by R-Co Corporation (R-Co), a corporation in which Bounds owned a majority of the shares. Bounds further testified that since Edlund had no security to pledge, Edlund voluntarily signed a $75,000 note payable to Bounds. In 1982, Edlund informed Bounds that he was leaving K-John and surrendered his stock to him. Bounds agreed to wind up the affairs of K-John. The business was "broke" and owed over $400,000 to various creditors. Per Edlund's request, Bounds told Edlund that he could delay payment of the $75,000 note until after Edlund sold his home. Bounds testified that he never agreed to forgive the $75,000 note. Edlund sold his home, moved to New York, and failed to pay Bounds the $75,000 due him. In the meantime, Bounds sold the Plano property and with the sale proceeds paid Frances Powell $150,000. Bounds filed suit against Edlund on June 23, 1987 to collect on the note. Bounds also mentioned that he was awarded the $75,000 note in his divorce from Suzanne Stringer.

Kent Davenport testified that reasonable and necessary legal expenses for trying this case for Bounds was $20,000, to appeal this case to the court of appeals would cost $7,500, and to file an application for writ of error with the Texas Supreme Court would cost $2,500. If the Supreme Court granted the writ, Bounds would incur an additional $2,500 in fees.

For the defense, Suzanne Stringer testified that she was formerly Bounds's wife. At the time of their divorce, she was unaware of the $75,000 note. She stated that she claimed a one-half interest in this note because she was married to Bounds at the time it was executed. The divorce decree was admitted into evidence. She also stated that she received nothing from Edlund when she assigned her interest in the note to him on January 13, 1988.

Edlund testified that he became acquainted with Bounds when Bounds sold him a Richard Euting testified that he was president and forty-nine percent owner of R-Co. The remainder of his testimony was excluded by the court as not relevant.

home. Bounds appeared to be a successful real estate developer and builder. Edlund agreed to go into business with Bounds, and they formed K-John in February, 1981. They invested equal amounts of money in K-John. To expand their business, they agreed to purchase the Frances Powell Gallery of Homes. Edlund would not have signed the note to Bounds had he known that Bounds did not own the Plano property securing the Frances Powell note. In January, 1982, Edlund and Bounds formed Zanz Corporation (Zanz) for franchise transactions. In February, 1982, Bounds and Edlund agreed to close the businesses because they were losing money. They thought that they "could settle out of the relationship on an equal basis," and Edlund "would make up the difference" if they did not break even. Bounds never told Edlund that K-John was over $400,000 in debt. Edlund stated that in addition to the $150,000 Frances Powell debt, K-John owed about $30,000 to $40,000 to various creditors. Bounds told Edlund that K-John expected to collect about $70,000 in income during the winding up period. Edlund testified that their settlement agreement included the forgiveness of the $75,000 note and the distribution of the furniture and over $51,000 to Bounds. Edlund never had any stock in Zanz to surrender. Bounds stated that he left K-John in March, 1982, and left Dallas after he sold his home in August, 1984. In January, 1987, Bounds requested payment of $75,920.09. Edlund believed that the $75,920.09 represented the net difference between amounts collected and debts owed and included interest and a credit on the $75,000 note.

Robert Bounds was called for the defense. He explained that the figures totalling $75,920.09 that he supplied to Edlund in January, 1987, reflected figures Bounds copied from K-John's files. The $75,920.09 represented a settlement offer to prevent a lawsuit. Bounds stated that he never agreed to forgive Edlund's $75,000 note and that Edlund had paid him nothing on the note to date. Bounds was able to elucidate some of the credits and debts received during the winding-up period, but could not explain all of the figures provided to Edlund.

Edlund was recalled and testified that he never told Bounds that he would pay off the note after he sold his house. Bounds never told him that payment of $75,920.09 would prevent a lawsuit.

Bounds called Lawrence Kruger, K-John's accountant, by deposition as a rebuttal witness. Kruger stated that the files he produced were complete records for K-John. He was never told of any settlement agreement between Bounds and Edlund concerning the $75,000 note. Edlund told Kruger that he would be owed some money during the winding-up period but to write it off on his income tax return. Edlund reported a $36,000 loss.

Edlund urged a motion for instructed verdict which was overruled. Bounds presented a motion for instructed verdict which was granted with respect to Edlund's defenses of fraud in the inducement, limitations, and improper plaintiff, and all of Edlund's counterclaims. The jury determined reasonable and necessary attorney's fees for legal services in the preparation and trial of the cause to be one dollar and found that Bounds did not agree to an accord and satisfaction of the $75,000 note.

STANDARD OF REVIEW

In reviewing an instructed verdict, we consider all of the evidence in the light most favorable to the party against whom the verdict was instructed, disregarding all contrary evidence and inferences. We determine whether there is any evidence of probative force to raise fact issues on the material questions presented. C & C Partners v. Sun Exploration & Prod. Co., 783 S.W.2d 707, 712 (Tex.App.--Dallas 1989, writ denied). An instructed verdict is proper if (1) a specifically indicated defect in the opponent's pleading makes it insufficient to support a judgment; (2) the evidence proves conclusively the truth of fact propositions that, under the substantive

                law, establish the right of the movant, or negate the right of his opponent, to judgment;  or (3) the evidence is insufficient to raise a fact issue as to one or more fact propositions that must be established for the opponent to be entitled to judgment.  Fort Worth State School v. Jones, 756 S.W.2d 445, 446 (Tex.App.-Fort Worth 1988, no writ).  An instructed verdict is warranted when the evidence is such that no other verdict can be rendered and the moving party is entitled, as a matter of law, to judgment.  C & C Partners, 783 S.W.2d at 712.   It is error for the trial court to instruct a verdict when a material issue is raised by the evidence.  Graziadei v. D.D.R. Mach. Co., 740 S.W.2d 52, 55-56 (Tex.App.-Dallas 1987, writ denied).  An instructed verdict is improper when reasonable minds may differ as to the truth of the controlling facts.  Id. at 56.   If there is any conflicting evidence of probative value in the record, determination of the issue is for the jury.  White v. Southwestern Bell Tel. Co., 651 S.W.2d 260, 262 (Tex.1983)
                

PROMISSORY NOTE

In Edlund's first point of error, he contends that the trial court erred by granting Bounds's motion for instructed verdict and in rendering judgment because the evidence proves that the $75,000 note was not a conventional promissory note in which he would be considered the maker and Bounds the payee. Edlund argues that the evidence shows that the note was actually security for the Frances Powell transaction.

The Texas Business and Commerce Code defines a promissory note. It provides that a writing is a negotiable instrument if it (1) is signed by the maker; (2) contains an unconditional promise or order to pay a sum certain; (3) is payable on demand or at a definite time; and (4) is payable to order or to bearer. TEX.BUS. & COM.CODE ANN. § 3.104(a) (Vernon 1968). It further provides that "[a] writing which complies with the requirements of this section is ... (4) a "note" if it is a promise other than a certificate of deposit." TEX.BUS. & COM.CODE ANN. § 3.104(b) (Vernon 1968). In short, a note is a written unconditional promise to pay another a certain sum of money at a certain time. FDIC v. Eagle Properties, Ltd., 664 F.Supp. 1027, 1034 (W.D.Tex.1985).

Here, the $75,000 note was signed by Edlund and contained an unconditional promise to pay $75,000 to the order of Bounds. The note stated that it was "due on or before February 3, 1984." It was clearly designated a ...