F.D.I.C. v. Golden Imports, Inc.

• Decision Date: 12 August 1993
• Docket Number: No. 01-88-00307-CV,01-88-00307-CV
• Citation: 859 S.W.2d 635
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver for MBank Houston-National Association, Appellant, v. GOLDEN IMPORTS, INC. and Michael J. Montalbano, Appellees. (1st Dist.)
• Court: Texas Court of Appeals

Page 635

859 S.W.2d 635

FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver for MBank Houston-National Association, Appellant, v. GOLDEN IMPORTS, INC. and Michael J. Montalbano, Appellees.

No. 01-88-00307-CV.

Court of Appeals of Texas,

Houston (1st Dist.).

Aug. 12, 1993.

David Speed Elder, Susan L. Bickley, Houston, for appellant.

James R. Ansell, Galveston, Otto D. Hewitt, III, Evelyn T. Ailts, William T. Green, Houston, for appellees.

Before DUGGAN, O'CONNOR and HEDGES, ^* JJ.

OPINION ON MOTION FOR REHEARING

DUGGAN, Justice.

This is an appeal from a judgment against MBank in a suit for conversion. We withdraw our opinion of October 10, 1991, and substitute this opinion in its place.

Motion for Substitution

MBank Houston National Association (MBank) ¹ had already perfected its appeal from the trial court's final judgment, when, on March 28, 1989, it was declared insolvent and the Federal Deposit Insurance Corporation (FDIC) was appointed as receiver. On June 7, 1989, the FDIC moved for leave to substitute the FDIC as receiver for appellant, MBank; we granted that motion in our original opinion in this cause, issued on December 21, 1989, and the caption of the cause was amended to reflect the substitution. In the interest of clarity, however, references to "appellant" will mean MBank, unless otherwise indicated. The clerk has filed the briefs of the FDIC.

Motions for Rehearing

On January 15, 1990, appellant moved for rehearing. We granted appellant's motion for rehearing and withdrew our December 21, 1989, opinion on January 31, 1991, and substituted a second opinion. On February 14, 1991, appellant filed its second motion for rehearing and appellee, Golden Imports, Inc., then filed its motion for rehearing. On October 10, 1991, we denied appellant's second motion for rehearing; granted appellee's motion for rehearing; withdrew our January 31, 1991, opinion; and issued a third opinion in this cause. On November 8, 1991, appellant filed its third motion for rehearing.

We hereby deny appellant's third motion for rehearing, and withdraw our October 10, 1991, opinion. We reverse that portion of the judgment below requiring MBank (and the FDIC as receiver) to pay Golden Imports' and Montalbano's attorney's fees, and render judgment that Golden Imports and Montalbano receive no attorney's fees. We also reverse that portion of the judgment below awarding Golden Imports punitive damages, and render judgment that Golden Imports receive no punitive damages.

The remainder of the judgment is affirmed.

Facts and Procedural Background

The judgment against MBank, signed February 1, 1988, (1) awarded appellee, Golden Imports, $32,475 in actual damages, $100,000 in punitive damages, and pre- and postjudgment interest, and (2) awarded intervenor, Michael Montalbano, title to the BMW automobile made the subject of this suit. Both Golden Imports and Montalbano were awarded attorney's fees and court costs. Montalbano's motion for judgment nihil dicit against Motorcar Warehouse, Inc. was granted only on liability. MBank asserts nine points of error. The FDIC raises additional points in a reply brief.

The basic facts are not in dispute. In late 1982, Montalbano wanted to buy a 1983 lapis blue BMW 733i automobile for his wife, and visited Motorcar Warehouse, Inc. (MWI) in Houston. Although this specific car was not on the lot, MWI's owner, David Tips, told Montalbano he would telephone him if he could locate such a car. Thereafter, Tips found the BMW through Jim O'Brien, a salesman at Golden Imports in Beaumont, who located it through Bavarian Motors in Tulsa, Oklahoma.

On December 3, 1982, ² upon hearing from Tips that MWI had obtained the BMW, Montalbano tendered payment in full to MWI by two separate checks in amounts of $16,000 and $18,953.30. ³ Montalbano took possession of the car and assumed that its title would be forwarded to him shortly. MWI deposited Montalbano's two checks into its general operating account at MBank (the account) on December 6, 1982.

At the time, MWI had a floor plan financing account with MBank (the loan agreement) for approximately $400,000, which was secured by an interest in MWI's account and its inventory. Under the loan agreement, MBank extended MWI a line of credit to purchase vehicles as inventory for sale, with MBank holding the vehicles' titles. ⁴

On December 13, 1982, Tips died. Tips' death constituted a default under the loan agreement. MBank learned of Tips' death on December 14, when Gene Russell, chairman and chief executive officer of the bank, called MWI's office and spoke to Janie Gonzales, Tips' secretary who "handled all of his bookkeeping, payroll, everything for almost all of the companies that he [Tips] had." The purpose of his call was to inquire about some funds that MWI had deposited into an account belonging to Reprint another business owned by Tips. ⁵ During that same conversation, Gonzales testified, she also told Russell that

we were expecting some drafts to come in, that we had the money in the bank to pay for them, and he said ... "David has lots of cars, some cars that he has floored way over the value. So at this time nothing is going to be paid. We can only pay whoever is working there."

She went on to say that she told Russell at that time that there were funds in the account that were designated to pay an outstanding draft to Golden Imports on the Montalbano transaction. The deposit slip for those funds identified their relation to that transaction, by notations of Montalbano's name and of the make and model and stock number of the car. Gonzales testified those notations were intended to indicate that the funds deposited were held by MWI for someone else.

Russell then sent a consultant to MWI's place of business to "lay his hands on our collateral"--that is, he later explained, to go out and look at the collateral and report back on its location, condition, value, and adequacy to secure the outstanding indebtedness. Russell received the consultant's report on the morning of December 15, and that day the bank sent MWI a demand letter that the full amount of that indebtedness be paid immediately. Also on the fifteenth, the bank authorized the withdrawal of funds from MWI's demand deposit account, to offset against MWI's indebtedness to the bank. That withdrawal was effected on December 16, when MBank withdrew $92,678.63 from MWI's account. Thus, there were no funds in MWI's account to pay MWI's draft in the amount of $32,475 to Golden Imports when it was presented at MBank sometime between December 16 and December 21. When the draft was dishonored, Golden Imports did not forward the BMW title to Montalbano.

MBank's Points of Error

By its first three points of error, MBank asserts the trial court erred in its submission of special issue number one, which inquired:

Do you find from a preponderance of the evidence that on the occasion in question [the bank] converted money belonging to Golden Imports, Inc.?

The jury answered "YES."

MBank's first point of error complains that the trial court erred in submitting special issue number one because (1) as a matter of law, money can be converted only when it can be identified specifically, but not when it is used generally to discharge a debt, and (2) the evidence is factually insufficient to support a finding that MBank converted money belonging to Golden Imports.

In determining "no evidence" points, we consider only the evidence and inferences that tend to support the jury finding, and disregard all evidence and inferences to the contrary. King v. Bauer, 688 S.W.2d 845, 846 (Tex.1985). In reviewing all questions of "factual sufficiency," regardless of whether the complaining party had the burden of proof on the issue, we consider and weigh all the evidence, both in support of, and contrary to, the challenged finding. The finding must be upheld unless the evidence is so weak, or the finding is so against the great weight and preponderance of the evidence, as to be manifestly erroneous or unjust. In re King's Estate, 244 S.W.2d 660, 661 (Tex.1951); M.J. Sheridan & Son v. Seminole Pipeline Co., 731 S.W.2d 620, 623 (Tex.App.--Houston [1st Dist.] 1987, no writ).

In special issue number one, the jury found that "MBank converted money belonging to Golden Imports." The court's charge defined "conversion":

The terms, 'converted' and 'converting', as used in this charge, mean the unlawful exercise of dominion, ownership or control by one party over the property of another to the exclusion of the exercise of the same rights by the owner, either permanently or for an indefinite time. Money is a subject of conversion only when it can be described specifically, as opposed to discharging a debt by payment of money generally.

When a person designates a particular use for proceeds from a check, those proceeds are "specific money" capable of conversion. Security State Bank v. Valley Wide Elec. Supply Co., 752 S.W.2d 661, 665 (Tex.App.--Corpus Christi 1988, writ denied). Both Montalbano's checks, deposited in MWI's account, and MWI's deposit slip, identified the deposited funds as relating to the BMW purchase. Gonzales, Tips' secretary, testified that the day after Tips died, she told Russell there were funds in MWI's account designated for Golden Imports. Nothing in the record indicates that she told Russell the exact amount due Golden Imports.

Russell testified about the bank's security interest in MWI's inventory, proceeds, and accounts on deposit. He testified that the security agreement expressly stated that "any deposit credited to the obligor is pledged to the performance of the note"; that MWI's account at MBank was not a special account or trust account; and that MBank had no prior agreement with MWI to use Montalbano's checks to pay Golden Imports. In sum, MBank argues, it exercised its right as a secured creditor to seize unrestricted funds from a bank account in which it had a perfected security...