Jones v. Missouri Sav. Ass'n, 05-87-01199-CV

• Decision Date: 10 August 1988
• Docket Number: No. 05-87-01199-CV,05-87-01199-CV
• Citation: 756 S.W.2d 423
• Parties: Allen N. JONES, Appellant, v. MISSOURI SAVINGS ASSOCIATION, Appellee.
• Court: Texas Court of Appeals

Page 423

756 S.W.2d 423

Allen N. JONES, Appellant, v. MISSOURI SAVINGS ASSOCIATION, Appellee.

No. 05-87-01199-CV.

Court of Appeals of Texas Dallas.

Aug. 10, 1988.

Timothy M. Fults, Dallas, for appellant.

Stephen A. Khoury, Dallas, for appellee.

Before STEPHENS, HECHT and KINKEADE, JJ.

KINKEADE, Justice.

Allen N. Jones appeals from a summary judgment granted in favor of Missouri Savings Association (MSA) for a $143,618 deficiency on five promissory notes. Jones contends in his sole point of error that the trial court erred in granting MSA's motion for summary judgment because a genuine issue of material fact exists regarding MSA's status as a holder in due course. We disagree.

Jones purchased five condominiums in 1982. Congressional Mortgage Corporation provided the initial financing for the condominiums and then sold the loans in the secondary market to MSA. Eventually, Jones became delinquent and pursuant to the terms of the notes and their accompanying deeds of trust, MSA posted the properties for foreclosure and sold them. MSA then brought suit for the $143,618.87 deficiency, plus fees and expenses. The trial court granted summary judgment in favor of MSA.

Jones claims that MSA cannot be a holder in due course and such status was certainly not established as a matter of law. Jones contends that as a purchaser, MSA is precluded from claiming the status of a holder in due course because it acquired the notes in the secondary market and the summary judgment evidence shows that the loan packages reveal irregularities on their face sufficient to give notice to any purchaser.

Section 3.302 of the Texas Business and Commerce Code sets forth the prerequisites of a holder in due course, and provides that five conditions must be met in order to attain that status. Williams v. Stansbury, 649 S.W.2d 293, 295 (Tex.1983). Specifically, the party must be:

1. A holder

2. of a negotiable instrument who took it

3. for value

4. in good faith

5. without notice that it was overdue or had been dishonored or of any defense against or a claim to it on the part of any person.

Every noteholder is presumed to be a holder in due course of the instrument absent evidence to the contrary. See Bryan v. Citizens National Bank, 628 S.W.2d 761, 763 (Tex.1982); Jonwilco, Inc. v. C.I.T. Financial Services, 662 S.W.2d 664, 665-66 (Tex.App.--Houston [14th Dist.] 1983, no writ.). However, after the notemaker shows that a defense to the instrument exists, a person claiming the rights of a holder in due course has the burden of establishing his status as such. See Favors v. Yaffe, 605 S.W.2d 342, 345 (Tex.Civ.App.--Houston [14th Dist.] 1980, writ ref'd n.r.e.); TEX.BUS. & COM.CODE § 3.307(c) (Vernon 1968).

The sole controversy on appeal is whether MSA established as a matter of law that it took the loan packages in "good faith" and "without notice of any defense." "Good faith" is defined in Section 1.201(19) of the Texas Business and Commerce Code as "honesty in fact in the conduct of a transaction concerned." The test for "good faith" is whether the purchaser had actual knowledge of facts and circumstances amounting to bad faith. Richardson Co. v. First National Bank, 504 S.W.2d 812, 816 (Tex.Civ.App.--Tyler 1974, writ ref'd n.r.e.).

The only evidence presented by Jones was his affidavit which states:

Specifically, accompanying each original closing file was a FNMA Form 1003, a Residential Loan Application. One such form was completed and...