University Sav. Ass'n v. Intercontinental Consol. Companies, Inc.

• Citation: 751 S.W.2d 657
• Decision Date: 19 May 1988
• Docket Number: No. 01-87-00750-CV,01-87-00750-CV
• Parties: 6 UCC Rep.Serv.2d 788 UNIVERSITY SAVINGS ASSOCIATION and Petrolife, Inc., Appellants, v. INTERCONTINENTAL CONSOLIDATED COMPANIES, INC., Appellee. (1st Dist.)
• Court: Court of Appeals of Texas

Page 657

751 S.W.2d 657

6 UCC Rep.Serv.2d 788

UNIVERSITY SAVINGS ASSOCIATION and Petrolife, Inc., Appellants, v. INTERCONTINENTAL CONSOLIDATED COMPANIES, INC., Appellee.

No. 01-87-00750-CV.

Court of Appeals of Texas,

Houston (1st Dist.).

May 19, 1988.

Rehearing Denied June 16, 1988.

James H. Leeland, W. David East, Walsh, Squires & Tompkins, Mark K. Glasser, John E. Nelson, III, Porter & Clements, Houston, for appellants.

Dalton L. Jones, Gregg, Jones, Mieszkuc & Pollard, Don B. Morgan, Wettinger, Steelhammer, Tucker, Fred C. Allen, Fulbright & Jaworski, W. James Kronzer, Law Offices of W. James Kronzer, Houston, for appellee.

Before JACK SMITH, COHEN and HOYT, JJ.

OPINION

JACK SMITH, Justice.

The primary issue in this case is whether a savings association has a legal right to stop payment on a "teller's check," and what the legal consequences are when payment of the "teller's check" is stopped.

It is undisputed that Petrolife, Inc. and the appellee, Intercontinental Consolidated Companies, Inc., entered into a contract for the purchase of gasoline, but the date of delivery was contested. On November 7, 1986, Petrolife, which maintained a revolving credit account with University Savings Association ("University"), requested University to issue a check in the amount of $2,008,125, payable to Intercontinental Consolidated ("Intercontinental"). University issued the check by drawing upon one of its accounts at the Federal Home Loan Bank of Little Rock, Arkansas. On November 12, 1986, University, pursuant to a request by Petrolife, requested Federal Home Loan Bank to stop payment on the check. The Federal Home Loan Bank stopped payment. No gasoline was ever delivered under the contract.

On April 2, 1987, Intercontinental filed suit for recovery of the amount of the check and for damages. It also requested and obtained a temporary restraining order that restrained University from issuing any drafts or checks on its accounts at the Federal Home Loan Bank in any amount that would deplete its accounts below the sum of $2,008,125. The court also set a date for the hearing on Intercontinental's request for a temporary injunction. Prior to the hearing on the temporary injunction, Petrolife filed a plea in intervention, setting forth certain defenses to Intercontinental's cause of action, offering to defend University in the cause of action, and cross-filing against Intercontinental for damages.

At the temporary injunction hearing on April 13, 1987, the judge granted Intercontinental's request for a temporary injunction, and ordered University to desist from enforcing the stop payment order on the check. On May 11, Intercontinental filed its motion for a partial summary judgment in which it alleged that as a matter of law it was entitled to judgment against University. It also alleged that on two dates after the court had entered its injunction against University, the Federal Home Loan Bank had refused to honor the check. It further asserted that there were no material fact issues and that it was entitled to judgment. In this connection, we note that Intercontinental's motion for a partial summary judgment asserts that the trial court had denied Petrolife's petition in intervention on April 13, 1987, but the record before this Court indicates that the trial court denied Petrolife's petition on May 20, 1987.

On May 20, 1987, Intercontinental's motion for partial summary judgment was granted on all issues, except attorney's fees. On that same date, a jury trial was held on the issue of attorney's fees. On June 2, 1987, the court entered its final judgment.

In their first point of error, the appellants contend that the trial court erred in granting the appellee's motion for partial summary judgment. Specifically, the appellants contend that the trial court misapplied the law and that there remained substantial fact issues to be resolved.

A summary judgment is proper only when a movant establishes that there is no genuine issue of material fact and that he or she is entitled to judgment as a matter of law. Swilley v. Hughes, 488 S.W.2d 64, 67 (Tex.1972). In a summary judgment proceeding, the burden of proof is on the movant, and all doubts about the existence of a genuine issue of fact are resolved against him or her. Roskey v. Texas Health Facilities Comm'n, 639 S.W.2d 302, 303 (Tex.1982) (per curiam). When the movant has established a right to a summary judgment, the burden shifts to the non-movant. The non-movant must then respond to the motion for summary judgment and present to the trial court any issues that would preclude summary judgment. City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex.1979).

We review the record of a summary judgment in accordance with the following standards:

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

(2) In deciding whether or not 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 his favor.

Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985). Issues not expressly presented to the trial court by written motion, answer, or other response to the motion for summary judgment cannot be considered on appeal as grounds for reversal. City of Houston v. Clear Creek Basin Auth., 589 S.W.2d at 676.

The question of a savings association's right to issue a stop payment order on "teller's checks" is apparently one of first impression for this state. The Texas Business and Commerce Code and Texas case law contain no reference to a "teller's check." However, "teller's checks" have been described as "checks drawn by savings banks and savings and loan associations on commercial banks with which they maintain checking accounts." See Note, Personal Money Orders and Teller's Checks: Mavericks under the U.C.C., 67 Colum.L.Rev. 524, 540 (1967). Thus, it appears that the term "teller's check" in the savings and loan industry is comparable to the term "bank draft" in the banking industry, where a check is drawn by a bank on an account it maintains in another bank or financial institution. See Fulton Nat'l Bank v. Delco Corp., 128 Ga.App. 16, 195 S.E.2d 455 (1973).

The appellee's position before the trial court and in this Court is that a "teller's check" is comparable to a "cashier's check" and that a bank may not stop payment on a "cashier's check."

We recognize that the Texas Supreme Court has held that under the Tex.Bus. & Com.Code Ann. § 4.303 (Tex. UCC) (Vernon Supp.1988), a bank may not stop payment on a "cashier's check." Wertz v. Richardson Heights Bank & Trust, 495 S.W.2d 572, 574 (Tex.1973). In Wertz, the court reasoned that because the bank was both the drawer and the drawee, the check when issued also acted as an acceptance. Therefore, it concluded that it was too late to stop payment.

The appellee's analogy between a "teller's check" and a "cashier's check" is misplaced because in a "teller's check" the savings association is the drawer of the check, but not the drawee. Thus, the check, when issued by the savings association on an account with another bank, has not been accepted. This distinction, however, does not resolve the question of whether University had the legal right to request the Federal Home Loan Bank to stop payment on the "teller's check" that it, University, had issued at the request of Petrolife. To unravel the issues in this case, it is necessary to determine the relationship between the Federal Home Loan Bank and University.

A Federal Home Loan Bank has limited authority to engage in banking business. 12 U.S.C. § 1431 (1982). Tex.Bus. & Com.Code Ann. § 1.201(4) (Tex. UCC) (Vernon 1968) defines the term "bank" as "any person engaged in the business of banking." We therefore conclude that the Federal Bank was a "bank" under the Tex.Bus. & Com.Code.

The Texas Business Code defines a "customer" as "any person having an account with a bank or for whom a bank has agreed to collect items and includes a bank carrying an account with another bank." Tex.Bus. & Com.Code Ann. § 4.104(a)(5) (Tex. UCC) (Vernon 1968) (emphasis added). Under these definitions, University was a customer of the Federal Home Loan Bank. Because the Federal Bank had not accepted the check, certified or paid it in cash, §§ 4.303(a)(1) & (2) do not apply as a bar to a stop payment order. The applicable code section provides that:

[a] Customer may by order to his bank stop payment of any item payable for his account but the order must be received at such time and such manner as to afford the bank a reasonable opportunity to act on it prior to any action by the bank with respect to the item described in § 4.303.

Tex.Bus. & Com.Code Ann. § 4.403(a) (Tex. UCC) (Vernon 1968).

Payment can be stopped even against a holder in due course. However, the drawer remains liable on the instrument and is barred from most defenses against a holder in due course. See Tex.Bus. & Com.Code Ann. § 3.305 (Tex. UCC) (Vernon 1968); and Tex.Bus. & Com.Code Ann. § 4.403, comment 8 (Tex. UCC) (Vernon 1968). It is necessary for the drawer to remain liable because the obligor in the underlying obligation is released from liability once the payee accepts a note from a drawer bank. Tex.Bus. & Com.Code Ann. § 3.802 (Tex. UCC) (Vernon 1968).

A holder in due course takes the instrument free from all claims to it on the part of any person and all defenses of any party to the instrument with whom the holder has not dealt except for infancy, incapacity, fraud in the factum, discharge through insolvency, and any other discharge of which the holder has notice. Tex.Bus. & Com.Code Ann. § 3.305 (Tex. UCC) (Vernon 1968). Unless a person is a holder in due course, he or she takes the instrument subject to...