Newsom v. Starkey

• Decision Date: 29 July 1976
• Docket Number: No. 18861,18861
• Parties: Rex R. NEWSOM, Appellant, v. Jerry STARKEY et al., Appellees.
• Court: Texas Court of Appeals

Page 468

541 S.W.2d 468

Rex R. NEWSOM, Appellant, v. Jerry STARKEY et al., Appellees.

No. 18861.

Court of Civil Appeals of Texas,

Dallas.

July 29, 1976.

Rehearing Denied Sept. 9, 1976.

B. Michael Chitty, Terrell, for appellant.

B. Bryan Leitch, III, Dallas, for appellees.

AKIN, Justice.

This is an appeal from a summary judgment granted plaintiffs-appellees. Since plaintiffs' summary-judgment proof and defendant's deposition establish plaintiffs' primary cause of action as a matter of law, the principal question on this appeal is whether the defendant has sustained his burden of raising fact issues with respect to his affirmative defenses. Because defendant has not sustained his burden, we affirm.

Jerry Starkey, Ben F. Freeman, and R. L. Taylor sued Rex R. Newsom for breach of a covenant to pay the prior lien note and to recover $36,383.90, previously paid by plaintiffs to defendant in a real estate transaction. The sale from defendant to plaintiffs was consummated on December 21, 1973, and was a fourth 'wraparound' note and deed of trust transaction. Plaintiffs paid defendant on this note a total of $36,383.90, inclusive of a down payment and a subsequent annual installment on December 21, 1974. The basis of plaintiffs' cause of action is the following language, contained in all instruments in the sale transaction:

3(b) Seller hereby agrees for the benefit of Purchaser, to pay or cause to be paid the principal of and the interest on the First, Second and Third Lien Notes as and when such amounts become due and payable, in strict accordance with their terms, both before and after the closing date, and that the indebtedness evidenced by the First and/or Second and/or Third Lien Notes (or any part thereof) will not be renewed or extended beyond the date of maturity of the First and/or Second and/or Third Lien Notes without Purchaser's consent.

Although plaintiffs made all payments to defendant pursuant to the fourth lien 'wraparound' note, defendant failed to pay the March 1, 1975, payment due on the third lien note as he had agreed to do in the sale documents. Consequently, the holder of the third lien note foreclosed upon the property on May 6, 1975.

In response to plaintiffs' action, defendant alleged that without his knowledge his real estate agent in the transaction was acting (1) in the dual capacity of broker and undisclosed principal and (2) as agent for the plaintiffs. Defendant asserted that the broker thereby perpetrated a fraud and pleaded this in defense of plaintiffs' suit. Alternatively, he alleged mutual mistake because he claimed there was an agreement with his agent that he would have no personal liability in the transaction. He has neither prayed for reformation of the contract to vitiate the effect of the above-quoted language in the transaction documents nor filed a third-party action against his agent, J. E. Taylor.

During the pendency of the suit, plaintiffs obtained a temporary restraining order preventing the defendant from disposing of funds in his bank account and from alienating funds due him on a note payable by a third party. Additionally, plaintiffs sought a temporary injunction and a prejudgment writ of garnishment to impound these funds. The trial court denied the temporary injunction, but ordered in this cause that a prejudgment writ of garnishment be issued in a separately docketed ancillary proceeding. Thereafter, the trial court granted plaintiffs' motion for summary judgment and defendant appeals.

The defendant's points of error are that the trial court erred (1) in rendering summary judgment because the defendant established his affirmative defenses by proper summary-judgment evidence; and (2) in issuing a writ of garnishment because no application for it had been filed and because the Texas garnishment statutes are unconstitutional since they deny due process.

Summary Judgment

Summary judgment is properly rendered if it is shown that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Tex.R.Civ.P. 166--A; Great American Reserve Insurance Co. v. San Antonio Plumbing Supply Co., 391 S.W.2d 41, 47 (Tex.1965). The burden of proof is on the moving party and any doubt as to the existence of a material question of fact will be resolved against him. Great American Reserve Insurance Co. v. San Antonio Plumbing Supply Co., supra; Wyche v. Works, 373 S.W.2d 558, 560 (Tex.Civ.App.--Dallas 1963, writ ref'd n.r.e.). The rule is different, however, where a defendant asserts an affirmative defense to the plaintiffs' action. If the defendant wishes to avoid the summary judgment, he must adduce summary-judgment evidence raising a fact issue on all elements necessary to establish his affirmative defense. Swilley v. Hughes, 488 S.W.2d 64, 67 (Tex.1972); See Nichols v. Smith,507 S.W.2d 518, 520 (Tex.1974); Seale v. Nichols, 505 S.W.2d 251, 254 (Tex.1974); 'Moore' Burger, Inc. v. Phillips Petroleum Co., 492 S.W.2d 934, 936 (Tex.1972). Since plaintiffs have sustained their burden of proof, the question is whether the defendant raised fact issues on each element of the pleaded affirmative defenses of fraud and mutual mistake by proper summary-judgment evidence. Santos v. Mid-Continent Refrigerator Co., 471 S.W.2d 568, 569 (Tex.1971).

Defendant, in his affidavit, avers that: His real estate agent, J. E. Taylor, represented to him at all times that there would be no personal liability on defendant resulting from the transaction; he relied upon this representation in signing all of the instruments without reading them; R. L. Taylor, one of the plaintiffs, is the wife of J. E. Taylor; J. E. Taylor was acting in a dual capacity as broker and undisclosed principal; J. E. Taylor had an agreement with plaintiff Starkey, prior to consummation of the sale, whereby, upon closing, J. E. Taylor would have an ownership interest in the property; and J. E. Taylor was acting in the transaction as an agent for plaintiffs.

Fraud

Defendant argues that he has established his affirmative defense of fraud because his affidavit shows that he relied on the representation of his agent, J. E. Taylor, that he would have no personal liability as a result of the transaction, and that J. E. Taylor was acting in a dual capacity representing both parties to the contract. He reasons that since J. E. Taylor's wife is one of the plaintiffs, and, since J. E. Taylor in December 1974 tendered to him a check in partial payment of an interest payment due him, this established his affirmative defense of fraud. We cannot agree. The only evidence that connects J. E. Taylor to the plaintiffs is the averment that his wife is a party plaintiff. We cannot draw from this an inference that J. E. Taylor was acting for plaintiffs. J. E. Taylor is not a party here and, consequently, even if fraud on his part were proved, it would not affect plaintiffs' right to recover in the absence of evidence showing plaintiffs' responsibility for J. E. Taylor's alleged fraud. To sustain defendant's burden on his affirmative defense it was incumbent upon him to show by proper summary-judgment evidence that his agent was acting for plaintiffs in the sale. This he failed to do.

Defendant also contends that he has established fraud because J. E. Taylor, his agent, was an undisclosed principal in the sale and that this constituted fraud. With respect to this contention, defendant avers that he would not have entered into the sale had he known his agent was an undisclosed principal. In his deposition, which was before the trial court, in response to an inquiry of in what way J. E. Taylor deceived him, he answered: 'He didn't let me know who the purchasers were, that he was interested in it.' He also testified that he first knew that J. E. Taylor had an interest in the property on December 20, 1974, when he accepted a check from J. E. Taylor as part of the payment due him from plaintiffs. Thereafter, he accepted and deposited a second check for the balance of the payment from plaintiffs...