Simpson v. MBank Dallas, N.A.

• Decision Date: 09 January 1987
• Docket Number: No. 05-86-00110-CV,05-86-00110-CV
• Parties: 3 UCC Rep.Serv.2d 652 Ernest F. SIMPSON, Appellant, v. MBANK DALLAS, N.A. f/k/a Mercantile National Bank at Dallas, Appellee.
• Court: Texas Court of Appeals

Page 102

724 S.W.2d 102

3 UCC Rep.Serv.2d 652

Ernest F. SIMPSON, Appellant, v. MBANK DALLAS, N.A. f/k/a Mercantile National Bank at Dallas, Appellee.

No. 05-86-00110-CV.

Court of Appeals of Texas Dallas.

Jan. 9, 1987.

Rehearing Denied Feb. 11, 1987.

John Wright, Dallas, for appellant.

James J. Lee, Michael J. Quilling, Dallas, for appellee.

Before AKIN, STEPHENS and STEWART, JJ.

STEPHENS, Justice.

Ernest F. Simpson appeals from a summary judgment granted in favor of Mercantile National Bank at Dallas (MBank). In eight points of error Simpson asserts that the trial court erred in granting summary judgment: (1) because there was a fact issue regarding appellant's counterclaim for impairment of collateral; (2) because appellant presented evidence to raise an issue of fact regarding impairment of collateral; (3) because there was a fact issue as to whether the failure of MBank to obtain a landlord's waiver discharged the appellant from his guaranty; (4) because the appellant presented evidence to raise an issue of fact as to whether appellant received consideration from appellee at the time of execution of the guaranty; (5) because appellant presented evidence to raise an issue of fact concerning the affirmative defense of estoppel; (6) because there was a fact issue as to whether MBank had committed a deceptive trade practice under the Texas Deceptive Trade Practices Act; (7) because there was a fact issue as to whether MBank committed fraud as part of a scheme to force appellant to sign the guaranty at closing; and (8) because there was a fact issue as to whether appellant was under duress at the time of the execution of the guaranty. In his ninth point of error, Simpson contends that the trial court erred in awarding attorney's fees because appellee failed to present summary-judgment evidence that the amount of attorney's fees it claimed was reasonable. Finally, in his tenth point of error, Simpson contends that the trial court erred in granting summary judgment because there was a fact issue regarding failure to notify the guarantor of the repossession and sale of secured property. We disagree with Simpson's points of error one through eight and point of error ten. We agree with Simpson's ninth point of error. Therefore, we reverse the trial court's judgment awarding attorney's fees to MBank and sever and remand MBank's claim for attorney's fees. In all other respects the trial court's judgment in favor of MBank is affirmed.

The present suit arose from the following facts. In May 1978, MBank extended a six-month commitment for a $300,000 line of credit to LumberKing, Inc. The loan proceeds were to be used by LumberKing as working capital and were evidenced by notes corresponding to the amount of each draw. The notes were due ninety days from the date of draw, or on demand, with interest thereon at MBank's prime rate plus two and one-half percent per annum being due and payable monthly.

In December 1978, MBank renewed and extended the above-referenced commitment and increased the amount of the line of credit to $325,000. Again, borrowings under the increased line of credit were to be used as working capital and the terms of notes generated by the draws remained the same as under the original line of credit. The line of credit was fully funded by June 1979. MBank renewed and extended the $325,000 line of credit for another one-year period, under the same terms and conditions.

In July 1979, MBank loaned LumberKing $45,000 for building improvements. The $45,000 extension of credit was evidenced by a one-year installment note with monthly principal payments of $1,250 plus accrued interest due and payable beginning November 15, 1979. In connection with the above loans by MBank to LumberKing, the shareholders of LumberKing, Ron Beattie and Keith Hendrickson, executed personal guaranties of the entire indebtedness.

In early 1980 LumberKing requested an additional loan of $100,000 from MBank, which was refused.

In February 1980, Ernest Simpson, appellant, purchased Ron Beattie's interest in LumberKing. In conjunction with his purchase, Simpson executed a personal guaranty for the previously funded debts of $325,000 and $45,000. Under the terms of the guaranty, Simpson and Hendrickson were jointly and severally liable for the indebtedness. MBank then released Beattie from his guaranty.

Due to LumberKing's difficulty in servicing its debts, Hendrickson and Simpson arranged for United Foam Industries, Inc. (UFI) and W.W. Cordes to purchase their shares in LumberKing. In connection with this sale, MBank renewed and restructured the $325,000 line of credit and the $45,000 note, consolidating the two debts into one note. The sale took place on October 10, 1980. On October 10, 1980, UFI, Cordes, and Simpson each executed a written guaranty of any and all amounts of indebtedness then existing or thereafter to become due from LumberKing to MBank.

When, following the sale of LumberKing to UFI and Cordes, payment on the consolidated note became delinquent, MBank declared LumberKing in default and accelerated the maturity date of the entire indebtedness evidenced by the consolidated note. Neither LumberKing nor the guarantors on the note paid the note, therefore, MBank instituted this lawsuit.

MBank sued LumberKing, UFI, Cordes, and Simpson seeking judgment against defendants under the consolidated note, together with injunctive relief to prevent LumberKing from liquidating its inventory. MBank claimed that the inventory constituted collateral securing the indebtedness of LumberKing to MBank. On April 5, 1982, the trial court entered a temporary restraining order restraining LumberKing from selling its inventory other than in the ordinary course of business. On April 16, 1982, the trial court issued its temporary injunction to the same effect.

LumberKing, UFI, Cordes and Simpson all denied liability to MBank and asserted defenses and counterclaims. After discovery, MBank moved for summary judgment against each defendant as to both MBank's claims for relief and as to defendants' counterclaims. The trial court, on February 6, 1984, granted interlocutory summary judgment in favor of MBank against all defendants except Simpson. After additional discovery involving only Simpson and MBank, MBank on August 22, 1985, again moved for summary judgment. The trial court held a summary judgment hearing on September 25, 1985, and on January 15, 1986, granted summary judgment in favor of MBank on all of MBank's affirmative claims for relief and denied all of Simpson's counterclaims against MBank. Simpson appeals from the January 15, 1986 summary judgment against him.

In his first point of error, Simpson argues that the trial court erred in granting summary judgment because a fact issue existed regarding Simpson's counterclaim for impairment of collateral. Simpson's first point of error is multifarious in that Simpson raises three subpoints under his point of error. In subpoints A, B, and C, respectively, Simpson contends: that MBank impaired the collateral by failing to obtain a waiver of the landlord's lien; that MBank impaired the collateral by failing to protect the collateral after the temporary injunction issued; and that MBank mistakenly interpreted one paragraph of the guaranty as a consent by Simpson to the impairment of the collateral. We will address each subpoint.

First, Simpson argues that the collateral was "impaired" under section 3.606(a) of the Texas Business and Commerce Code at the time he signed the October 10, 1980 guaranty because MBank had not obtained a waiver of the landlord's lien. Section 3.606(a) is not applicable in the present case. That section provides:

(a) The holder discharges any party to the instrument to the extent that without such party's consent the holder

....

(2) unjustifiably impairs any collateral for the instrument given by or on behalf of the party or any person against whom he has a right of recourse.

(emphasis added). TEX.BUS. & COM.CODE ANN. § 3.606 (Tex.UCC) (Vernon 1968). Simpson is not a party to LumberKing's consolidated note, and the guaranty under which appellant is sued is not an instrument, as defined in section 3.102(a)(5) of the Texas Business and Commerce Code. See TEX.BUS. & COM.CODE ANN. § 3.102(a)(5), § 3.104 (Tex.UCC) (Vernon 1968); Cortez v. National Bank of Commerce of Brownsville, 578 S.W.2d 476, 478-79 (Tex.Civ.App.--Corpus Christi 1979, writ ref'd n.r.e.); Eikel v. Bristow Corporation, 529 S.W.2d 795, 799-800 (Tex.App.--Houston [1st Dist.] 1975, no writ).

Furthermore, we have found no cases, and appellant fails to cite any cases, holding that MBank had a duty to obtain a waiver of the landlord's lien prior to securing Simpson's guaranty. Simpson's first contention, subpoint A, under point of error number one is overruled.

Next, Simpson argues, in subpoint B, that MBank impaired the collateral by failing to protect it after the temporary injunction issued and, in subpoint C, that the guaranty did not contain a paragraph whereby Simpson consented to any impairment of collateral. Under subpoint A, we held that section 3.606 is not applicable to the present case and that, therefore, Simpson is precluded from asserting that under section 3.606 MBank owed him a duty to refrain from impairing the collateral. Simpson has failed to cite authority, other than section 3.606, in support of his proposition that MBank owed him a duty to refrain from impairing the collateral. We find that even if MBank did owe Simpson the duty in question, Simpson nonetheless consented to any impairment of collateral. The guaranty signed by Simpson provides:

Bank may from time to time, at its discretion and with or without valuable consideration, surrender, release, exchange or alter any collateral or security for any Guaranteed Indebtedness without affecting the liability of Guarantors under this guaranty ...

Even when appearing on "instruments," as defined in section 3.102(a)...