Southwest Savings Association v. Dunagan

• Citation: 392 S.W.2d 761
• Decision Date: 11 June 1965
• Docket Number: No. 16595,16595
• Parties: SOUTHWEST SAVINGS ASSOCIATION, Appellant, v. Billy A. DUNAGAN et al., Appellees.
• Court: Court of Appeals of Texas. Court of Civil Appeals of Texas

Page 761

392 S.W.2d 761

SOUTHWEST SAVINGS ASSOCIATION, Appellant, v. Billy A. DUNAGAN et al., Appellees.

No. 16595.

Court of Civil Appeals of Texas, Dallas.

June 11, 1965.

Rehearing Denied July 9, 1965.

DeBusk & DeBusk, and Kilgore & Kilgore, James A. Kilgore, Dallas, for appellant.

Lester L. May, Thomas D. Reagor, Goldberg, Gump, Strauss & Hauer, James L. Mitchell; Erhard, Cox & Ruebel, Robert C. Cox, Storey, Armstrong & Steger, Donald W. Jackson, Dallas, for appellees.

WILLIAMS, Justice.

This appeal involves summary judgment proceedings in a suit brought by Southwest Savings Association against Billy A. Dunagan and a number of other defendants to recover upon a written guaranty agreement. The trial court sustained motions by the several defendants, either for summary judgment or for dismissal, and overruled the motion for summary judgment by Southwest Savings Association. From a take-nothing judgment rendered in favor of all defendants plaintiff appeals.

Appellant's assault upon the judgment is implimented by ten points of error, such points being of such a nature that an intelligent consideration thereof requires a recitation, in some detail, of the material antecedent facts.

FACTS

The essential facts recited herein are undisputed and are revealed by various depositions and exhibits attached thereto, together with responses to requests for admissions of fact.

Billy A. Dunagan originally conceived the idea of a country club to be established in the northern part of Dallas County. He broached the subject to H. Leslie Hill and from their initial talks a plan evolved to acquire a block of land in the neighborhood of Garland, a portion of which would be used for the country club and golf course and the remainder of which would be used by developing the same for residential and commercial use. Ed Drake, an attorney who had represented Dunagan's advertising agency, was called upon to do the necessary legal work in connection with forming the legal entities to carry out the plans. Four separate legal entities were created.

1. The Buckingham Joint Venture was a voluntary association organized for the purpose of acquiring land. The affairs of the joint venture were to be managed by H. Leslie Hill and Billy A. Dunagan, as agents for the joint venturers under the terms of a joint venture agreement which expressly provided that Hill and Dunagan, as agents, would have the power to bind the assets of the joint venture by contract, but that they had no power to bind the assets of the members of the joint venture individually.

2. Roanoke Development Company, a business corporation, was formed to own and develop the properties which would not be used for the country club.

3. Buckingham Country Club was a nonprofit corporation organized to own the actual country club facilities.

4. The Buckingham Management Corporation was a business corporation organized for profit to manage the country club property and to supervise the construction and maintenance of the improvements placed upon the country club property.

All of the appellees held some type of membership in Buckingham Country Club. All of appellees, except C. C. Huffhines, were parties to the Buckingham Joint Venture agreement. Throughout the formative stages and through the acquisition of the properties, the affairs of the organizing group were held at informal meetings. Those participating in these meetings included Billy A. Dunagan, H. Leslie Hill, Ed Drake, C. W. Cassidy, Jr., Arthur White, DeWitt Ray, Jr., J. J. Freiberger, and J. W. Campbell. H. Leslie Hill was in charge of planning and carrying out the construction of the country club buildings. Billy Dunagan was in charge of publicity and the solicitation of membership.

Some time prior to the fall of 1960, H. Leslie Hill, as general contractor, commenced the erection of the country club building. Initial construction was financed in the name of Buckingham Management Corporation which used a portion of the initiation fees paid by members for that purpose. Finally it was decided by Buckingham Management Corporation to borrow $200,000 to complete improvements on the country club property.

There is evidence that other lending agencies were approached but finally Southwest Savings Association was brought into the picture by DeWitt Ray, Jr. and became interested in making the loan. Following negotiations by attorney Ed Drake, representing Buckingham Management Corporation, a letter dated October 14, 1960, addressed to Southwest Savings Association, was written by Ed Drake wherein he proposed that a loan of $200,000 be made to Buckingham Management Corporation, the note therefor to be endorsed by DeWitt Ray, Jr., C. W. Cassidy, Jr., H. Leslie Hill, J. J. Freiberger, Ed Drake and Billy A Dunagan. It is undisputed that Drake had authority from these parties to write the letter. On October 28, 1960, following additional negotiations, Ed Drake addressed another letter to Mr. L. E. Guillot, President of Southwest Savings Association, wherein it was proposed that a loan of $200,000 be made to Buckingham Management Corporation, to be secured by a deed of trust upon 217.0134 acres of land, and an agreement to give a lien upon additional lands totaling 182.64 acres then held under option. It was therein proposed that the loan was to be further secured by a collateral guaranty agreement to be signed by C. W. Cassidy, Jr. and others interested in the project, their guaranty liability being limited by the amount expressly stated in the agreement. The letter of October 28th was signed 'Buckingham Management Corporation by Edward J. Drake, Secretary.' When asked in his deposition concerning the writing of the two letters above referred to and as to whether he had any authority to represent the individual guarantors in making the proposals, Ed Drake testified that he did not represent any of the individuals but only represented the joint venture and the management corporation. On October 31, 1960 Southwest Savings Association issued a loan commitment for a loan in the amount of $200,000 to be made to Buckingham Management Corporation. On November 25, 1960 Southwest Savings Association issued a letter of instructions addressed to Mr. Ed Layton of Texas Title & Abstract Company of Dallas directing the preparation of a note in the amount of $200,000 to be executed by Buckingham Management Corporation and payable to Southwest Savings Association. The instruction letter directed that Cliff Cassidy, Jr. and eleven others sign the note on the back indicating personal liability to the amount set opposite each name. On November 25, 1960 Ed Drake had prepared a guaranty agreement, a draft of which was submitted to Southwest Savings Association in connection with the application for the loan, and such agreement was circulated among the various individuals listed thereon. The first paragraph of said guaranty agreement provided that:

'For valuable consideration and to induce you to loan money and extend credit in reliance hereon, we, the undersigned, guarantee in the amounts indicated, unconditionally, the payment, when due, of that certain promissory note in the principal amount of $200,000.00, dated the 29th day of November, 1960, repayable in ten (10) equal semi-annual installments plus interest, executed by Buckingham Management Corporation.'

The third paragraph of the agreement provides:

'This guaranty shall extend to and cover every extension or renewal of, and every obligation accepted in substitution for, any obligation guaranteed hereby, and we shall be bound hereby irrespective of the existence, value or condition of any collateral security you may at any time hold in the amounts and to the extent indicated after our respective names.'

The note recited in the guaranty agreement was never executed by Buckingham Management Corporation. Mr. Ed Layton, acting on behalf of Texas Title & Abstract Company, examined the record title to the land to be given as security in connection with the loan and rendered a title opinion on or about November 26, 1960. At some time between November 26 and December 1, 1960 Mr. Layton called Mr. Alan Lundahl, Vice-President of Southwest Savings Association and advised him that Buckingham Management Corporation did not have record title to the security to be given in connection with the loan, and advised Lundahl that it would be necessary to change the terms of the loan, and properly identify the borrower. Layton also gave this information to Ed Drake. Layton suggested that the note be executed by H. Leslie Hill and Billy A. Dunagan, agents for Buckingham Joint Venture, the legal entity which held record title to the land to be given as security. At the time Layton made this suggestion concerning change in the name of the borrower, Southwest Savings Association had in its possession a draft of the guaranty agreement and such agreement was then being circulated among the proposed guarantors. There is no evidence in the record that the various guarantors were advised of the change in the loan transaction prior to their execution of the guaranty agreement.

Mr. Layton was authorized by Southwest Savings Association and by Ed Drake, attorney for the Buckingham entities, to change the transaction so that the note and deed of trust would be executed by H. Leslie Hill and Billy A. Dunagan, agents for Buckingham Joint Venture project. On December 1, 1960 the closing of the loan was held in the offices of Texas Title & Abstract Company. Present at that time were Billy A. Dunagan, H. Leslie Hill, Ed Drake and Ed Layton. The note was then and there signed by Hill and Dunagan, as agents of the joint venture, as was the deed of trust. The guaranty agreement was not made a part of the papers at the closing session. Southwest Savings Association, upon receipt of the note and deed of trust executed by Hill and Dunagan, agents, placed $200,000 in escrow with Texas Title & Abstract Company to be paid out...