RR Maloan Invs., Inc. v. New Hge, Inc.

• Citation: 428 S.W.3d 355
• Decision Date: 01 May 2014
• Docket Number: No. 14–13–00080–CV.,14–13–00080–CV.
• Parties: RR MALOAN INVESTMENTS, INC., Appellant v. NEW HGE, INC., Appellee.
• Court: Texas Court of Appeals

428 S.W.3d 355

RR MALOAN INVESTMENTS, INC., Appellant

v.NEW HGE, INC., Appellee.

No. 14–13–00080–CV.

Court of Appeals of Texas,

Houston (14th Dist.).

March 27, 2014.

Rehearing and Rehearing En Banc Overruled May 1, 2014.

Keith T. Gilbert, Magnolia, for Appellant.

John Charles Lagrappe, Houston, for Appellee.

Panel consists of Justices BOYCE, CHRISTOPHER, and BROWN.

OPINION

WILLIAM J. BOYCE, Justice.

A check cashing service, RR Maloan Investments, Inc. sued New Houston Gold Exchange, Inc. to recover on a post-dated check upon which Houston Gold Exchange stopped payment. The trial court signed a judgment in favor of Houston Gold Exchange, and RR Maloan appealed. We reverse the trial court's judgment; render judgment in favor of RR Maloan for the amount of the check; and remand to the trial court for computation of interest and court costs.

Background

On September 23, 2011, Houston Gold Exchange issued a $3,500 check as payor to Shelly McKee as payee to buy a purported Rolex watch from her. The check was post-dated September 26, 2011. McKee properly endorsed the check and presented it to RR Maloan, which cashed the check for her on September 24, 2011. On September 24, 2011, Houston Gold Exchange issued a stop payment order on the check based on information that the watch was counterfeit. RR Maloan presented the check to Houston Gold Exchange's bank for payment. Houston Gold Exchange's bank refused to honor the check based on the stop payment order.

RR Maloan sued Houston Gold Exchange in small claims court to collect on the check. RR Maloan filed a “Statement of Claim” asserting that it was a holder in due course entitled to collect on the check. Houston Gold Exchange responded by filing a letter detailing Houston Gold Exchange's account of the transaction and stating that the company placed a stop payment upon the check when it realized the watch was counterfeit. Houston Gold Exchange was not present on the appearance date, and the small claims court signed a default judgment in RR Maloan's favor.

Houston Gold Exchange appealed to the County Court at Law and filed a general denial. Following a bench trial, the trial court signed a take-nothing judgment in favor of Houston Gold Exchange on September 27, 2012. RR Maloan filed a motion for new trial or for reconsideration, in which it argued: (1) the court erred in failing to hold that RR Maloan was a holder in due course; (2) Houston Gold Exchange's defenses are inapplicable to RR Maloan and should be asserted against McKee; and (3) Houston Gold Exchange failed to plead or prove fraud on the part of RR Maloan. The motion for new trial or reconsideration was overruled by operation of law. This appeal followed.

Analysis

In one issue on appeal, RR Maloan challenges the trial court's failure to grant its post-trial motion and render judgment in favor of RR Maloan. We construe RR Maloan's argument to assert that the trial court erred by failing to find it was a holder in due course, and that no defenses apply to bar its recovery as a holder in due course. At trial, Houston Gold Exchange argued that RR Maloan was not a holder in due course because the check was not a negotiable instrument. On appeal, Houston Gold Exchange alternatively argues that the defenses of fraud and illegality bar RR Maloan from collecting on the check even if RR Maloan was a holder in due course.

I. Standard of Review

When no findings of fact are filed, as here, the reviewing court implies all necessary findings to support the judgment. Reservoir Sys., Inc. v. TGS–NOPEC Geophysical Co., 335 S.W.3d 297, 303 (Tex.App.-Houston [14th Dist.] 2010, pet. denied). Implied findings of fact are reviewable for legal sufficiency of the evidence by the same standards as applied in reviewing the sufficiency of the evidence supporting a jury's findings or a trial court's findings. See Harris Cnty. Hosp. Dist. v. Textac Partners I, 257 S.W.3d 303, 311 (Tex.App.-Houston [14th Dist.] 2008, no pet.); Curtis v. Comm'n for Lawyer Discipline, 20 S.W.3d 227, 231 (Tex.App.-Houston [14th Dist.] 2000, no pet.).

Evidence is legally insufficient if: (1) there is a complete absence of evidence of a vital fact; (2) the court is barred by rules of law or evidence from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the evidence establishes conclusively the opposite of the vital fact. City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex.2005).

We review the evidence in the light most favorable to the trial court's findings and assume that the court resolved all conflicts in accordance with its judgment. See id. at 820. We credit evidence favorable to the trial court's findings if reasonable factfinders could, and we disregard contrary evidence unless reasonable factfinders could not. See id. at 827. The ultimate test is whether the evidence at trial would enable reasonable and fair-minded people to reach the finding under review. Id.

RR Maloan filed a motion for reconsideration, which stated: “Plaintiff requests the court to reconsider its judgment and conform such judgment consistent with the facts and law presented to the court; or alternatively, requests a new trial.” We construe this as a request for rendition of judgment in RR Maloan's favor because the evidence at trial conclusively establishes its right to receive payment on the disputed check.

II. Holder in Due Course

The holder of a negotiable instrument is a holder in due course if the holder takes the instrument: (1) for value; (2) in good faith; and (3) without notice of any claim or defense to the instrument. Tex. Bus. & Com.Code Ann. § 3.302(a)(2) (Vernon 2002).

At trial, Houston Gold Exchange argued that the check at issue was not a negotiable instrument because it was post-dated. We reject this contention because the negotiability of a check is not affected by post-dating. SeeTex. Bus. & Com.Code Ann. § 3.113; First Nat'l Bank of Trinity, Tex. v. McKay, 521 S.W.2d 661, 664 (Tex.Civ.App.-Houston [1st Dist.] 1975, no writ). ¹

A holder is presumed to be a holder in due course unless there is evidence to the contrary. Williams v. Stansbury, 649 S.W.2d 293, 295 (Tex.1983); Max Duncan Family Invs., Ltd. v. NTFN Inc., 267 S.W.3d 447, 452 (Tex.App.-Dallas 2008, pet. denied). “A holder in due course takes the instrument free from all claims and all defenses of any party to the instrument with whom he has not dealt” unless a defense that bars recovery by a holder in due course applies. Favors v. Yaffe, 605 S.W.2d 342, 344 (Tex.Civ.App.-Houston [14th Dist.] 1980, writ ref'd n.r.e.); Tex. Bus. & Com.Code Ann. § 3.305(b) (Vernon Supp.2013). When the signatures on a check are admitted, as they are here, production of the check entitles the holder to recover on it unless the defendant establishes a defense. See Favors, 605 S.W.2d at 344;Tex. Bus. & Com.Code Ann. § 3.308(b) (Vernon 2002).

The evidence adduced at trial conclusively establishes that RR Maloan was a holder in due course. SeeTex. Bus. & Com.Code Ann. § 3.302(a).

Under section 3.302(a)(1), a holder of an instrument is a holder in due course if “the instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity.” Id. No evidence in this record suggests that the check was forged, altered, or not authentic.

There is no dispute on this record that RR Maloan took the check “for value” as required under section 3.302(a)(2)(A).²

With respect to good faith under section 1.201(b)(20), “good faith” is defined as “honesty in fact and the observance of reasonable commercial standards of fair dealing.” Tex. Bus. & Com.Code Ann. § 1.201(b)(20) (Vernon 2009). The record here conclusively establishes RR Maloan's good faith as that concept is defined for these purposes in the statute.

RR Maloan's owner testified that the company is a check cashing business. The owner testified that an employee of RR Maloan took Houston Gold Exchange's check from McKee in exchange for cash in the normal course of business. The owner testified that at the time the check was taken, he did not have knowledge that the purported Rolex watch was not authentic and did not have knowledge of any claims or defenses to the check. See Jones v. Mo. Sav. Ass'n, 756 S.W.2d 423, 425 (Tex.App.-Dallas, 1988 no pet.) (“The test for ‘good faith’ is whether the purchaser had actual knowledge of facts and circumstances amounting to bad faith.”). No evidence was presented that the owner or any employee of RR Maloan had knowledge at the time the check was accepted that the watch was not authentic.

As for “reasonable commercial standards,” Texas law holds that knowledge of post-dating by itself does not (1) give notice of a defense or claim; or (2) impose a duty to “make any investigation to ascertain whether or not the maker had any defenses which would have justified him in refusing to pay the payee.” McKay, 521 S.W.2d at 663. Because the fact of post-dating did not impose a duty on RR Maloan to investigate the surrounding circumstances, Houston Gold Exchange cannot establish that RR Maloan failed to observe “reasonable commercial standards of fair dealing” by failing to investigate based on the post-dating of the check. See id.

The dissenting opinion urges a contrary conclusion because McKay predicated its no-duty-to-investigate determination on former section 3.304(d)(1), which stated: “Knowledge of the following facts does not of itself give the purchaser notice of a defense or claim ... that the instrument is antedated or postdated....” Act of May 24, 1967, 60th Leg., R.S., ch. 785, § 3.304(d)(1), 1967 Tex. Gen. Laws 2343, 2421 (amended 1995) (current version at Tex. Bus. & Com.Code Ann. § 3.302 (Vernon 2002)). Former section 3.304(d)(1) was deleted as part of a wholesale revamp of Article 3 and other provisions...