Houston Nat. Bank v. Biber

• Decision Date: 25 February 1981
• Docket Number: No. A2430,A2430
• Citation: 613 S.W.2d 771
• Parties: HOUSTON NATIONAL BANK, Appellant, v. Stanley H. BIBER et al, Appellees. (14th Dist.)
• Court: Texas Court of Appeals

Page 771

613 S.W.2d 771

HOUSTON NATIONAL BANK, Appellant, v. Stanley H. BIBER et al, Appellees.

No. A2430.

Court of Civil Appeals of Texas, Houston (14th Dist.).

Feb. 25, 1981.

Rehearing Denied March 25, 1981.

Willis Witt, Liddel, Sapp, Zivley, Brown & LaBoon, Joe C. Holzer, Hirsch, Westheimer, Block & Wilk, Houston, for appellant.

Eugene J. Pitman, DeLange, Hudspeth, Pitman & Katz, Houston, for appellees.

Before J. CURTISS BROWN, C. J., and PAUL PRESSLER and JUNELL, JJ.

JUNELL, Justice.

This is an appeal from a judgment entered in a conversion suit to recover the proceeds of certain checks received by Houston National Bank which checks represented capital contributions from two proposed limited partners to an as yet unformed limited partnership. Judgment was entered on the jury verdict which found that the bank converted the proceeds of the checks, and the actual and exemplary damages as found by the jury were awarded the plaintiffs. The bank appeals contending a conversion action is inappropriate under the facts of this case, that certain definitions submitted were erroneous, and that the damage awards, both actual and exemplary, were not supported by the evidence.

Appellees Biber and Meinhard were contacted in 1973 by R. E. Walker regarding investment as limited partners in a project called French Oaks West, Limited ("French Oaks"). The limited partnership project involved the purchase of property in Beaumont, Texas, on which would be constructed an 80-unit apartment complex to be known as French Oaks West and to be owned by the partnership. Walker was employed by Don Bodin and John Jamail to secure investors in the project. Walker had served as broker for Bodin and Jamail on similar projects in the past. Bodin was the president of Urbane Constructors, Inc. ("Urbane") which held an option to purchase the subject property. A loan of $1,150,000.00 had been made to Urbane on August 20, 1973, by Houston National Bank, to finance the purchase of the property and construction of the project. Bodin signed the promissory note and deed of trust associated with the loan in his capacity as president of Urbane and, along with his wife and Jamail, personally guaranteed the note. The loan was made in the name of Urbane instead of French Oaks because the partnership was not yet formed. It was intended that after the partnership was formed and approval obtained from the bank for the partnership to assume the loan, the liability for the loan was to be assumed by the partnership upon conveyance of title to the property. On August 20, 1973, and September 19, 1973, a total of $271,813.00 was advanced under the loan to Urbane in order to purchase the property and pay certain expenses.

Appellees Biber and Meinhard agreed to participate in the limited partnership and each sent Walker their personal checks payable to French Oaks in payment of their respective capital contributions. Biber's check, dated October 13, 1973, was in the amount of $24,208.10; and Meinhard's, dated November 9, 1973, was in the amount of $20,173.39. On separate occasions Walker took both checks to Houston National Bank where, there being no bank account established in the name of the partnership in which to deposit the checks, K. E. Pulley, the service officer for the loan to Urbane, reissued the checks in the form of two cashiers' checks for each personal check, one payable to Walker for 10% of the amount of each personal check, representing Walker's commission, and the other payable to French Oaks for the remaining 90%. The two checks payable to French Oaks were then placed in a bank file, supposedly to be held until the partnership was formed and an account opened into which they could be deposited. The two payable to Walker were given to Walker, one on October 16, 1973, and the other on November 23, 1973.

A certificate of limited partnership for French Oaks was filed with the secretary of state on December 14, 1973, which was signed by Don Bodin on December 12, 1973, as general partner and as attorney-in-fact for Biber and Meinhard, the limited partners. Also on December 14, 1973, Bodin, as president of Urbane, executed an assumption deed to French Oaks, on the Beaumont property, the consideration for which was recited to be the assumption by French Oaks of the outstanding balance on the loan to Urbane. This assumption deed was never recorded. No other documents, partnership agreements, powers of attorney, etc. were ever signed by Biber or Meinhard. Their understanding was that their contributions were being held until the partnership was formed and the loan assumption approval obtained for the partnership and that if such did not occur, their checks would be returned to them.

There was no evidence that the bank ever transferred the liability for the debt to French Oaks on their books or that French Oaks ever accepted the assignment of the debt. On January 7, 1975, interest payments on the note being in default, a foreclosure sale of the property was held at which the bank purchased the property. The property was subsequently sold and the sales price credited against the loan balance. On January 30, 1975, the proceeds of the cashiers' checks held by the bank were applied against the outstanding loan and the remaining balance charged off as bad-debt loss. After demand was made by plaintiffs for return of their funds, suit was filed against the bank alleging conversion and conspiracy with Don Bodin.

Appellant's points of error one through five complain of the submission of the case to the jury on the theory of conversion for the reason that the bank was under no obligation to return specific, unique money; that the definition of conversion given the jury was erroneous; that the finding of conversion was supported by no evidence and insufficient evidence; and that exemplary damages were not recoverable. The basis of appellant's argument is that money cannot be a proper subject for conversion unless there is an obligation to return specific money, and because the bank's liability to plaintiffs could be satisfied by repayment of equivalent sums, the subject matter of this suit was not specific money. We disagree.

An action will lie for conversion of money when its identification is possible and there is an obligation to deliver the specific money in question or otherwise particularly treat specific money. The general rule is that trover lies for the conversion of money only when there is an obligation resting on the defendant not to convert to his own use specific coin or notes. Marston v. Hill, 32 S.W.2d 520 (Tex.Civ.App. El Paso 1930, no writ). An action for conversion must be supported by title in the plaintiff and there must be a means of identification of it as a specific chattel for it to constitute the subject of conversion. A suit for conversion will not lie where a debtor-creditor relationship is created by deposit of a check to the depositor's account, because when deposited the money becomes the property of the bank. The making and acceptance of an ordinary deposit creates, as between the bank and the depositor, the relation of debtor and creditor, the title to the money passing to the bank. Smith v. Burns, 107 S.W.2d 397 (Tex.Civ.App. Eastland 1937, no writ). An action for conversion will not lie for money represented by a general debt. The cases distinguish between an obligation to pay money generally, or...