Rowley v. Lake Area Nat. Bank,

• Citation: 976 S.W.2d 715
• Decision Date: 19 February 1998
• Docket Number: No. 01-96-00314-CV,01-96-00314-CV
• Parties: Jack ROWLEY and Beverly Rowley, Appellants, v. LAKE AREA NATIONAL BANK, Mark E. Patterson, and Cynthia L. Patterson, Appellees. (1st Dist.)
• Court: Court of Appeals of Texas

Page 715

976 S.W.2d 715

Jack ROWLEY and Beverly Rowley, Appellants, v. LAKE AREA NATIONAL BANK, Mark E. Patterson, and Cynthia L Patterson, Appellees.

No. 01-96-00314-CV.

Court of Appeals of Texas Houston (1st Dist.).

Feb. 19, 1998.

Rehearing Overruled July 30, 1998.

Kenneth H. Keeling, Hunstville, for Appellants.

Joe B. Henderson, Jr., Dale Reynolds Duff, Huntsville, for Appellees.

Before WILSON, COHEN and NUCHIA, JJ.

OPINION

WILSON, Justice.

This is an appeal by the garnishors, Jack and Beverly Rowley (the Rowleys), from the trial court's judgment granting the garnishee's, Lake Area National Bank's (LANB), motion for summary judgment and in refusing to grant the Rowleys' motion for summary judgment. The Rowleys bring eight points of error. In points of error one, two, three, four, five, and six, the Rowleys attack each ground upon which LANB's summary judgment could have been granted. Points of error seven and eight concern the discharge of another party and the Rowley's motion for summary judgment. In addition, LANB brings two cross-points concerning the trial court's failure to discharge LANB on its answer and the trial court's refusal to award LANB its attorney's fees. We reverse the judgment insofar as it denies LANB attorney's fees, and remand to the trial court for consideration of the appropriate award of attorney's fees. We affirm the judgment in all other respects.

Facts

In February of 1994, Parsley Custom Homes, Inc. submitted a proposal concerning the construction of a house for Mark E. Patterson and Cynthia L. Patterson (the Pattersons). The proposal was signed by Parsley Custom Homes, Inc., per John W. Parsley. The proposal was accepted by the Pattersons, and in May of 1994, the Pattersons, John W. Parsley, ¹ and LANB entered into a builder's and mechanic's lien contract (the Contract) concerning the construction of the home. In addition, the Pattersons executed a promissory note (the Note) payable to LANB for $72,051.00. Pursuant to the Contract and the Note, LANB established a special account for the Pattersons in which LANB would deposit advancements in accordance with the Note. Only the Pattersons were authorized to withdraw funds from the account. The Pattersons wrote checks on the account to Parsley Custom Homes, Inc. in payment for work done.

In 1990, in an unrelated suit, the Rowleys obtained a judgment against Parsley Homes, Inc., John W. Parsly, and Barbara Parsley. The Rowleys filed an abstract of judgment against John W. Parsley and Parsley Homes, Inc. in Montgomery and Harris counties. On August 18, 1994, the Rowleys filed an application of writ of garnishment on the Pattersons' account and served LANB the same day. The Pattersons were served with notice of the writ of garnishment on August 31, 1994. After being notified of the writ, LANB disbursed the remainder of the loan money under the Note to the Pattersons (in their name) on August 29, 1994 ($18,733.26), August 31, 1994 ($1,441.02), and September 26, 1994 ($15,551.22).

Both LANB and the Pattersons answered the writ of garnishment. In LANB's first amended answer, filed September 29, 1994, ² LANB stated that it was served with the writ on August 18, 1994; it was not indebted to Parsley Homes, Inc., John W. Parsley, or Barbara Parsley; and it did not have any effects belonging to Parsley Homes, Inc., John W. Parsley, or Barbara Parsley. LANB also stated it had reason to believe the Pattersons may have been indebted to John W. Parsley, or that the Pattersons may have effects belonging to Parsley Homes, Inc., John W. Parsley, or Barbara Parsley. LANB also claimed that through the Contract, it may have been indebted to John W. Parsley as contractor, but these funds were trust funds for the purpose of building a home and were exempt from garnishment. The Pattersons, in separate answers to the writ of garnishment, alleged that they were served with the writ on August 31, 1994; that they were not indebted to John W. Parsley, Barbara Parsley, or Parsley Homes, Inc; and that they were not in possession of any effects belonging to John W. Parsley, Barbara Parsley, or Parsley Homes, Inc. The Pattersons additionally stated that they were indebted to Parsley Custom Homes, Inc., and that the funds in the LANB account were trust funds to be paid for work done on the construction of their home.

Both LANB and the Rowleys moved for summary judgment. The trial judge granted LANB's motion, but denied its request for attorney's fees, and denied the Rowleys' motion. In its judgment, the trial court discharged LANB and the Pattersons from the writ of garnishment.

Standard of Review

When both parties move for summary judgment and one such motion is granted, but the other denied, an appellate court should determine all questions presented. Jones v. Strauss, 745 S.W.2d 898, 900 (Tex.1988); Phillips Natural Gas Co. v. Cardiff, 823 S.W.2d 314, 317 (Tex.App.--Houston [1st Dist.] 1992, writ denied). The appellate court may reverse the trial court's judgment and render such judgment as the trial court should have rendered, including rendering judgment for the other movant. Jones, 745 S.W.2d at 900; Cardiff, 823 S.W.2d at 317.

In a motion for a summary judgment, the movant has the burden of showing there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548 (Tex.1985). If a defendant moves for judgment based on an affirmative defense, the defendant must conclusively establish each element of the affirmative defense as a matter of law. Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex.1995); Fernandez v. Memorial Healthcare Sys., Inc., 896 S.W.2d 227, 230 (Tex.App.--Houston [1st Dist.] 1995, writ denied). In reviewing a summary judgment, we must accept as true evidence in favor of the nonmovant, indulging every reasonable inference and resolving all doubts in the nonmovant's favor. Randall's Food Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex.1995); Marchal v. Webb, 859 S.W.2d 408, 412 (Tex.App.--Houston [1st Dist.] 1993, writ denied). We will affirm the summary judgment if any of the theories advanced in the motion are meritorious. Cincinnati Life Ins., Co. v. Cates, 927 S.W.2d 623, 625 (Tex.1996).

Was LANB Indebted to John W. Parsley?

In point of error four, the Rowleys contend the trial court erred in granting LANB's motion for summary judgment on the ground that LANB was not indebted to John W. Parsley. Garnishment is a statutory proceeding whereby the property, money, or credits of a debtor in the possession of another are applied to the payment of the debt. Bank One, Texas, N.A. v. Sunbelt Sav., F.S.B., 824 S.W.2d 557, 558 (Tex.1992); Baytown State Bank v. Nimmons, 904 S.W.2d 902, 905 (Tex.App.--Houston [1st Dist.] 1995, writ denied). The only real issue in a garnishment action is whether the garnishee is indebted to the judgment debtor, or has in its possession effects belonging to the debtor, at the time of service of the writ on the garnishee, and at the time the garnishee files its answer. Baytown, 904 S.W.2d at 905.

Funds placed with a bank become general deposits that create a debtor-creditor relationship between the bank and the depositor. Bank One, 824 S.W.2d at 558. A garnishee bank is not indebted to a judgment debtor unless some form of deposit agreement creates a debtor-creditor relationship between the bank and the judgment-debtor. Id. A plaintiff in garnishment is subrogated to the rights of his debtor against the garnishee. Beggs v. Fite, 130 Tex. 46, 106 S.W.2d 1039, 1042 (1937); Rome Indus., Inc. v. Intsel Southwest, 683 S.W.2d 777, 779 (Tex.App.--Houston [14th Dist.] 1984, writ ref'd n.r.e.). By strict compliance with the garnishment statutes, a plaintiff in garnishment merely steps into the shoes of his debtor as against the garnishee, and may enforce, as against such garnishee, whatever rights the debtor could have enforced had such debtor been suing the garnishee directly. Beggs, 106 S.W.2d at 1042; San Felipe Nat'l Bank v. Caton, 668 S.W.2d 804, 805 (Tex.App.--Houston [14th Dist.] 1984, no writ).

The funds at issue in this case are the proceeds of a loan from LANB to the Pattersons to provide interim financing for the construction of the Pattersons' home. Based upon the Note, LANB agreed to lend money at a prescribed rate of interest to the Pattersons. Upon proper circumstances, LANB would transfer proceeds into the Pattersons account to be used for the construction of the Pattersons' home. The Note provides in part:

The parties agree that the entire principal sum stated above is not to be advanced immediately. Advancement will be made from time to time in such amounts as may be requested by Borrower provided that Bank determines that construction is progressing in a manner which Bank deems to be satisfactory to comply with the terms of that certain Builder's & Mechanic's Lien Contract (With Power of Sale) of even date herewith between MARK EDWARD PATTERSON, and wife, CYNTHIA PATTERSON and LAKE AREA NATIONAL BANK.

The money was deposited in the Pattersons' account only upon the request by the Pattersons and approval by LANB. Only the Pattersons could draw or write checks on that account. John W. Parsley never had direct access to the account, and in fact, never had an account relationship with LANB.

In their brief, the Rowleys argue that the Contract entered into by the Pattersons, John W. Parsley, and LANB constituted a debt owed to John W. Parsley. We disagree. The applicable language of the Contract is as follows:

THIS CONTRACT made and entered into by, and between MARK EDWARD PATTERSON and wife, CYNTHIA PATTERSON, ... hereinafter called Owner (whether one or more) and JOHN W. PARSLEY, ... hereinafter called Contractor (whether one or more) and LAKE AREA NATIONAL BANK ... hereinafter called Lender.

....

In consideration of the agreement by Lender to advance the contract amount, being SEVENTY TWO...