O'Hara v. First Nat. Bank of Ft. Worth
| Decision Date | 11 December 1980 |
| Docket Number | No. 18345,18345 |
| Citation | 613 S.W.2d 306 |
| Parties | 31 UCC Rep.Serv. 743 John G. O'HARA, Appellant, v. The FIRST NATIONAL BANK OF FORT WORTH, Appellee. |
| Court | Texas Court of Appeals |
John G. O'Hara (O'Hara) appeals a judgment obtained against him by The First National Bank of Fort Worth (Bank) for a deficiency on a note. O'Hara, an accommodation co-maker, contends that collateral was not sold in a commercially reasonable manner and he received no notice of a proposed sale of the collateral. There is further contention that an agreement between the Bank and the principal debtor, Sidney N. Shults (Shults), released him from the debt.
We reverse and render.
Shults was a customer of the Bank and had borrowed money from the Bank and had signed notes and renewed notes. On October 24, 1974, he wanted to renew a note owed the Bank in the sum of $7,007.76. The Bank required him to put up collateral and obtain the signature of another person who would also be liable on the note. As it developed this person was O'Hara. O'Hara received no portion of any of the loans made by the Bank.
Before signing the note O'Hara talked to Tommy Turner, a vice president of the Bank. This officer told him that Shults had put up 100 shares of stock in Live Oak State Bank, Rockport, Texas. In response to questions Turner told O'Hara that the book value of the stock was close to $20.00 per share but that such stock usually sold for two or three times its book value. With this assurance, O'Hara signed the note guaranteeing payment of Shults' debt.
Shults made payments on the note over a period of time. A default occurred and the Bank made an arrangement with Shults, without the knowledge of O'Hara, for the Bank to sell the stock. Mr. White, a vice president of the Bank, sold the collateral to Live Oak State Bank, Rockport, Texas, at the only price the Bank offered, pursuant to a telephone conversation. The officer testified that he did not know the market value or book value of the stock. They did not have it appraised and made no investigation as to its market value and sought no other offer for the sale of the stock. They admitted that they made no contact with O'Hara about the delinquency or the sale of the stock prior to its sale.
Mr. Lockhart, an adjustment officer of the Bank in charge of the collection of delinquent notes, testified that part of December, 1975 installment was delinquent when the stock was sold. He further testified that he knew that O'Hara was the co-maker of the note only as an accommodation party. After the stock was sold, the proceeds of the sale was applied to the December and future payments on the note. The Bank's first contact with O'Hara about the note was April 1, 1977. After the collateral was sold the proceeds were applied to the note. The Bank contacted O'Hara who made a payment in excess of $950.00 on the note not knowing that the collateral had been sold.
O'Hara testified that he had planned to pay off the balance of the note and pick up the collateral and become subrogated to the Bank's interest therein. When he later talked to the officer of the Bank about doing this he was told, for the first time, that the collateral had been sold before this. O'Hara testified that he would have paid off the note in order to obtain the subrogation rights if he had been advised that there was a contemplated sale of the collateral. He also said he would have paid two times the $20.00 book value of the stock.
All references herein made are to Tex. Bus. & Comm. Code Ann. (Supp. 1980-81) (Uniform Commercial Code). O'Hara was a "debtor" as defined in sec. 9.105(a) (4). Said section in part provides that:
" 'Debtor' means the person who owes payment or other performance of the obligation secured, whether or not he owns or has rights in the collateral, ...."
Sec. 9.504(c) contains the provisions concerning right to dispose of collateral after default. It provides that the collateral may be disposed of...
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