Stone v. First City Bank of Plano, N.A.

• Decision Date: 03 July 1990
• Docket Number: No. 05-90-00031-CV,05-90-00031-CV
• Citation: 794 S.W.2d 537
• Parties: Alex STONE and Grace Stone, Appellants, v. FIRST CITY BANK OF PLANO, N.A., Appellee.
• Court: Texas Court of Appeals

Page 537

794 S.W.2d 537

Alex STONE and Grace Stone, Appellants, v. FIRST CITY BANK OF PLANO, N.A., Appellee.

No. 05-90-00031-CV.

Court of Appeals of Texas Dallas.

July 3, 1990.

Rehearing Denied Aug. 28, 1990.

Paul J. Franzettk, W. Ralph Canada, Jr., Dallas, for appellants.

Kenneth E. Horn, Dallas, for appellee.

Before McCLUNG, BAKER and THOMAS, JJ.

OPINION

BAKER, Justice.

The trial court granted the First City Bank of Plano a summary judgment, holding that it was not liable for paying two drafts which named Grace Stone as a joint payee, one without Grace's indorsement and the other on Grace's alleged forged indorsement. Alex and Grace Stone contend that the trial court erred in granting the Bank's motion for summary judgment and in not granting their motion for summary judgment. We affirm in part and reverse and remand in part.

FACTS

The Stones contracted with Keith Peterson Builders, Inc. to build them a home for $252,620. Mortgage Corporation of the South provided KPBI interim financing and secured the loan with a deed of trust on the property. MCOS requested a deposit of $60,000 from the Stones to indicate their ability to close on the house once it was completed. The Stones made the deposit with the understanding that MCOS would transfer the funds to the title company to apply on the contract price when the transaction closed. However, MCOS issued two drafts totaling $52,000 payable jointly to KPBI and Grace Stone. The Stones were not informed that these drafts were issued.

The first draft for $39,000 was issued on July 25, 1985. The draft was deposited into KPBI's account with the Bank. This draft contained Grace Stone's indorsement, but she claims that her name was forged. The second draft for $13,000 was issued on September 4, 1985. It too was deposited into KPBI's account. This draft contained no indorsement for Grace Stone. The Bank subsequently collected payment for both drafts from the First National Bank of Boston, the payor/drawee bank.

In August or September of 1985, the Stones moved into the house with KPBI's permission even though construction was not complete and the transaction had not closed. The Stones agreed to pay KPBI the interest on the MCOS interim financing as a condition to move in. The Stones paid the interest to KPBI, but KPBI did not tender it to MCOS. In February of 1986, MCOS foreclosed on the property and attempted to evict the Stones. The Stones then became aware of the two drafts that had been issued to KPBI and Grace jointly.

On May 2, 1986, the Stones purchased the property from MCOS for $205,000. MCOS and the Stones executed a mutual release of claims. Subsequently, both MCOS and the First National Bank of Boston assigned to the Stones all of their rights against the Bank.

On August 14, 1987, the Stones instituted this action against the Bank for conversion, for money had and received, and for breaches of the warranties of presentment and transfer. Negotiations were conducted between the parties and a tentative oral agreement was reached. The Bank submitted a proposed settlement agreement and a check for $17,200 to the Stones. The Stones signed the agreement and Alex Stone indorsed the check, but the Stones later changed their minds and returned the check to the Bank unnegotiated and with the indorsement crossed out. The release was not returned to the Bank. Both parties moved for summary judgment, and the trial court granted the Bank's, holding that it was not liable upon any theory asserted.

THE BANK'S MOTION FOR SUMMARY JUDGMENT

The Bank's motion for summary judgment asserted that it was entitled to a judgment as a matter of law for the following reasons:

(1) There was an enforceable settlement agreement between the Stones and the Bank.

(2) Execution of the MCOS release discharged the Bank because the underlying basis for the litigation was MCOS's wrongful issuance of the drafts.

(3) Execution of the MCOS release constituted a ratification of any forged or missing indorsement.

(4) The Stones were not holders and never gained possession of the drafts.

(5) The $39,000 draft was barred by the two year statute of limitations for conversion.

(6) Adoption of the Texas Business and Commerce Code ¹ displaced the cause of action for money had and received.

(7) An imposter induced MCOS to issue the $39,000 draft and indorsed it, and, therefore, the indorsement is effective to transfer title in accordance with Code § 3.405(a)(1).

STANDARD OF REVIEW

The standards for reviewing a motion for summary judgment are:

(1) The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.

(2) In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true.

(3) Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor.

Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985). A defendant is entitled to a summary judgment if it establishes, as a matter of law, that at least one element of a plaintiff's cause of action does not exist or, if it is relying on an affirmative defense, that it has conclusively established all the essential elements of that defense. See Rosas v. Buddies Food Store, 518 S.W.2d 534, 537 (Tex.1975); Swilley v. Hughes, 488 S.W.2d 64, 67 (Tex.1972). When both sides have filed motions for summary judgment, the reviewing court may determine whether the granting or denial of any of the motions was error and 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 v. Strauss, 745 S.W.2d 898, 900 (Tex.1988); Tobin v. Garcia, 159 Tex. 58, 316 S.W.2d 396, 400-01 (1958).

1. The Bank and Stones' Settlement Agreement

The Bank claims that any recovery by the Stones should be limited to $17,200 because there was an enforceable settlement agreement between the Bank and the Stones. Although a settlement agreement appears in the record, the Bank conceded in its brief and in oral argument that the Stones did not deliver an executed release to it or to its attorneys.

A release, in order to become effective, must be delivered to the person in whose favor it was executed or to a third person in his behalf. See Pevesdorf v. Union Elec. Light & Power Co., 333 Mo. 1155, 64 S.W.2d 939, 949 (1933). See generally 76 C.J.S. Release § 8 (1952). The written release was ineffective because it was never delivered to the Bank. See Pevesdorf, 64 S.W.2d at 949. Any alleged oral agreement is unenforceable as it was not reduced to writing, signed, and filed with the papers as part of the record or announced in open court and entered of record. See Kennedy v. Hyde, 682 S.W.2d 525, 530 (Tex.1984); TEX.R.CIV.P. 11. We hold that this defense does not bar recovery.

2. MCOS Release

The Bank's second ground for summary judgment asserts that:

Execution of the MCOS Agreement discharged First City from any liability to the Stones. The underlying basis for the Drafts was MCOS's relationship to the Stones as a result of the $60,000 payment. The Stones released and discharged any debt of MCOS to them that formed the basis of the Drafts. Such a release and discharge also discharged a collecting bank such as First City from any further liability to Grace Stone as the payee whose indorsement was allegedly forged.

Support for the Bank's contention is predicated solely on their interpretation of Starcraft v. C.J. Heck Co. of Texas, Inc., 748 F.2d 982 (5th Cir.1984). This case analyzed Texas law regarding releases and double recovery in the context of the check collection process. In Starcraft, the payee sued the maker of the check. The payee also sued the drawee bank which failed to timely return the check by the midnight deadline in accordance with the Code. The bank in turn sued the maker of the check, its customer. Prior to trial, the payee and maker executed a mutual release. The trial court held that the drawee bank was absolutely liable to the payee but gave the drawee a chargeback against the maker of the check, its customer. On appeal, the bank asserted that the payee received a double recovery because it had received the benefit of the consideration under the release and had recovered against the bank the full amount of the check. The Fifth Circuit held that since the maker was liable to the drawee bank, the drawee bank would be subrogated to the rights that the maker had against the payee. In order to prevent a double recovery, the court held that the release of the maker extinguished the payee's cause of action for absolute liability of the drawee bank. Starcraft, 748 F.2d at 988.

This case is distinguishable from Starcraft. First, the drawer, MCOS, has no liability to the Bank. Second, the Bank is not subrogated to any rights of MCOS against the Stones. Finally, the Bank's liability, if any, to the Stones is not absolute. In order for the Stones to recover, they must prove their damages, if any, either in their own right or under the causes of action assigned by MCOS and First National Bank of Boston. The Bank's reliance on Starcraft is misplaced.

The Bank further contends that it was released under the broad language of the settlement agreement. The Bank points to the language that the Stones release MCOS and "all others who may be liable." Further, the Bank contends that since the rights against it were not specifically reserved in the release, they have been waived by operation of this clause. The Bank asserts no authority for its argument.

The mere naming of a general class of tort-feasors in a release does not discharge the liability of each member of that class. A tort-feasor can claim protection only if a release refers to him by name or with such descriptive particularity that his identity or his connection with the tortious event...