Security State Bank v. Valley Wide Elec. Supply Co., Inc.

• Decision Date: 26 May 1988
• Docket Number: No. 13-87-216-CV,13-87-216-CV
• Citation: 752 S.W.2d 661
• Parties: SECURITY STATE BANK, Appellant, v. VALLEY WIDE ELECTRIC SUPPLY COMPANY, INC. and J.L.D. Construction Company, Appellees.
• Court: Texas Court of Appeals

Page 661

752 S.W.2d 661

SECURITY STATE BANK, Appellant, v. VALLEY WIDE ELECTRIC SUPPLY COMPANY, INC. and J.L.D Construction Company, Appellees.

No. 13-87-216-CV.

Court of Appeals of Texas,

Corpus Christi.

May 26, 1988.

Rehearing Denied June 23, 1988.

Ralph L. Alexander, Edinburg, Russell McMains, Corpus Christi, for appellant.

W. Michael Fisher, Jeffrey D. Roerig, Brownsville, Stephen M. Gano, Houston, for appellees.

Before SEERDEN, UTTER, and BENAVIDES, JJ.

OPINION

SEERDEN, Justice.

Appellees sued appellant for fraud and misrepresentation, conversion, and breach of contract. Pursuant to a jury verdict, the trial court entered judgment in favor of Valley Wide Electric Supply Co., Inc. (Valley Wide), for $70,000.00 actual damages and $50,000.00 exemplary damages, and in favor of J.L.D. Construction Co. (Drennan) for $75,000.00 actual damages and $150 000.00 exemplary damages. Each received prejudgment interest and attorney's fees. Appellant raises eleven points of error. We modify and, as modified, affirm the trial court's judgment.

Drennan was the general contractor for a construction project at Progreso High School. A subcontract for the electrical work was awarded to Jay Sweeney, d/b/a Sweeney Electric Co. (Sweeney). Sweeney contracted for materials with Valley Wide. Sweeney was already indebted to the bank, and after the transaction described below the bank extended further credit to Sweeney.

The bank, through Paul Moxley, its executive vice-president, wrote a letter to Valley Wide, with a copy to Drennan, which stated:

Security State Bank has agreed to extend credit to Mr. John J. Sweeney d/b/a Sweeney Electric Company, and has accepted the assignment of his contract with the Drennan Company as collateral.

It is our understanding that Mr. Sweeney has entered into a contract with the Drennan Company for materials totalling approximately $175,000.00.

The Drennan Company will submit their checks for services jointly to Security State Bank and Sweeney Electric Company. Your billing to Sweeney Electric should be current and payable within 30 days. Please advise me immediately if the account exceeds the 30 day period. Sweeney Electric will present your invoice to me for payment, which will be made by Cashier's Check for the invoice amount.

Please notify me if the arrangement is not suitable or if we can be of further assistance in regards to this account.

By point one, appellant claims that the trial court erred in awarding appellees judgment based on a theory of conversion, contending that money or "funds" may not be the subject of conversion unless specifically identified. Appellant also argues that the trial court erred for the same reason when it denied its Motion for a New Trial, Motion to Disregard Findings, Motion for Judgment, and Reply to Motion filed by Plaintiffs, and granted Plaintiff's Motion to Disregard Jury Findings and Motion to Disregard Findings on Special Issues and for Additional Express Findings.

In response to Special Issues 9, 10 and 11, the jury found that the bank knew that Drennan intended for the bank to use part of the funds Drennan paid to pay Valley Wide's invoices, that it used "such part of the fund" for some other purpose, and that this use was willful, intentional, and without just cause or excuse, or with a conscious indifference to, or in reckless disregard of, the rights and welfare of parties affected by the use of those funds.

Appellant does not challenge the sufficiency of the evidence to support these jury findings. Moxley testified that the funds from the checks Drennan issued for the Progreso job were earmarked to be used, at least in part, to pay Valley Wide. However, the funds were applied to Sweeney's overdrafts and to servicing Sweeney's debt to the bank, and Valley Wide was not paid.

A bank which has notice of the trust character of funds may not use those funds to offset a depositor's debt. Steere v. Stockyards National Bank, 113 Tex. 387, 256 S.W. 586, 591 (Comm'n App.1923, opin. adopted); Allied Bank West Loop, N.A. v. C.B.D. & Associates, Inc., 728 S.W.2d 49, 58 (Tex.App.--Houston [1st Dist.] 1987, writ ref'd n.r.e.); First National Bank v. Winkler, 146 S.W.2d 201, 205 (Tex.Civ.App.--Austin 1940), aff'd, 161 S.W.2d 1053 (Tex.Comm'n App.1942, opin. adopted).

The bank claims that it was impossible to determine what amount of Drennan's check was intended for Valley Wide, and points out that the checks themselves did not specify any part that was for Valley Wide. No evidence indicates that the bank attempted to determine the amount. Valley Wide sent invoices to Sweeney, whose account was in overdraft during the time Valley Wide was not being paid. Moxley testified that he approved all of Sweeney's expenditures daily, and that the bank had records of the payments made. Moxley testified that since Sweeney was unable to make payments without bank approval, the bank was able to obtain the invoices from Sweeney.

By sending the invoices to Sweeney, Valley Wide was conforming to the arrangement Moxley described in his letter. The evidence shows that the bank not only had actual knowledge that funds intended for Valley Wide would be in the account, but that the bank instigated the arrangement.

Money can be converted if a bank, with knowledge of its trust character, applies it to reduce a debt to the bank. Houston National Bank v. Biber, 613 S.W.2d 771, 774-75 (Tex.Civ.App.--Houston [14th Dist.] 1981, writ ref'd n.r.e.). In this case, the money was to pay for specific expenses. When a person has designated a particular use for proceeds from a check, those proceeds count as "specific money" capable of conversion. Southwest Industries Investment Co. v. Berkeley House Investors, 695 S.W.2d 615, 617 (Tex.App.--Dallas 1985, writ ref'd n.r.e.).

Moreover, it is the bank's duty to segregate the funds in a mixed account before applying any to overdrafts. Steere, 256 S.W.2d at 591; see also City State Bank v. National Bank of Commerce, 261 S.W.2d 749, 752 (Tex.Civ.App.--Fort Worth 1953, writ ref'd n.r.e.).

The bank also argues that appellees failed to obtain a jury finding of a fiduciary agreement or trust arrangement. If the jury finds one or more elements of a ground of recovery, but another element is omitted from the issues submitted, and factually sufficient evidence would support a finding on the element, the judge may make the finding. If the judge makes no written findings, the omitted element is deemed found in support of the judgment. Tex.R.Civ.P. 279.

When one person delivers money to another for a specific purpose, the person accepting the money becomes a trustee and the transaction becomes a trust. City State Bank, 261 S.W.2d at 752; First National Bank v. Slaton Independent School District, 58 S.W.2d 870, 873 (Tex.Civ.App.--Amarillo 1933, writ dism'd).

Evidence supporting the trust character of part of the money includes the bank's letter and Moxley's testimony that he knew part of the funds were earmarked for a specific purpose.

Appellant's reply brief also contends that appellee did not adequately plead conversion and was not entitled to submit Issues 9 and 10 or to recover on theories of conversion or of wrongful offset. We have found no objection to the charge based on a lack of pleadings. Thus, appellant waived any right to complain. See Ortiz v. O.J. Beck & Sons, 611 S.W.2d 860, 867 (Tex.Civ.App.--Corpus Christi 1980, no writ). We overrule point one.

By point three, appellant attacks any recovery on appellees' contract theory, contending that the trial court erred in setting aside the jury's findings on Issues 2 and 3. Responding to Issue 1, the jury found that the bank had agreed to pay Valley Wide as Sweeney's account became due if Drennan made its checks to both the bank and Sweeney. To Issue 2, the jury answered that the bank's agreement was conditioned on Sweeney's submitting Valley Wide's invoices to the bank, and to Issue 3, it answered that Sweeney did not submit the invoices.

Appellees properly objected to the submission of Issue 2 on the grounds that the contract is in evidence and is clear, unambiguous, and, as a matter of law, not conditioned on Sweeney's submitting invoices.

Ambiguity in a contract is a question of law. A fact issue is not created unless the court finds that the contract is ambiguous after applying pertinent rules of construction. Walker v. Horine, 695 S.W.2d 572, 577 (Tex.App.--Corpus Christi 1985, no writ); O'Shea v. Coronado Transmission Co., 656 S.W.2d 557, 561 (Tex.App.--Corpus Christi 1983, writ ref'd n.r.e.). If the contract can be given a certain definite legal meaning or interpretation, then it is not ambiguous and the court will construe it as a matter of law. Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983); Corriveau v. 3005 Investment Corp., 697 S.W.2d 766, 767 (Tex.App.--Corpus Christi 1985, writ ref'd n.r.e.). The court will limit its search for the intent of the parties to the intent expressed within the four corners of a document. Smith v. Liddell, 367 S.W.2d 662, 666 (Tex.1963); Walker, 695 S.W.2d at 577.

Appellant argues that it was not obligated to pay Valley Wide, contending that the words, "Sweeney will submit your invoices to me for payment," created a condition, and the condition was not met.

While no particular words are necessary to create a condition, terms like "if," "provided that," "on condition that," or a similar phrase usually connote an intent for a condition rather than a promise. In the absence of such a limiting clause, to ascertain whether a certain contractual provision is a condition, rather than a promise, one must look to the contract as a whole and the intent of the parties. Temple-Eastex, Inc. v. Addison Bank, 672 S.W.2d 793, 798 (Tex.1984); Hohenberg Brothers Co. v. George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex.1976); Gulf Construction Co. v. Self, 676 S.W.2d 624, 627 (Tex.App.--Corpus Christi 1984, writ ref'd n.r.e.). The language of a contract...