Vaughn v. DAP Financial Services, Inc., 01-96-01212-CV

• Decision Date: 30 October 1997
• Docket Number: No. 01-96-01212-CV,01-96-01212-CV
• Parties: Joe T. VAUGHN, Appellant, v. DAP FINANCIAL SERVICES, INC., Appellee. (1st Dist.)
• Court: Texas Court of Appeals

Page 1

982 S.W.2d 1

Joe T. VAUGHN, Appellant, v. DAP FINANCIAL SERVICES, INC., Appellee.

No. 01-96-01212-CV.

Court of Appeals of Texas,

Houston (1st Dist.).

Oct. 30, 1997.

I. Nelson Heggen, Houston, for Appellant.

Jarrold A. Galzer, Houston, for Appellee.

Before NUCHIA, MIRABAL and O'CONNOR, JJ.

OPINION

NUCHIA, Justice.

DAP Financial Services, Inc. (DAP) sued Joe T. Vaughn as the guarantor of a $122,500 promissory note executed by Gierhart/Vaughn Construction Company. The trial court held Vaughn personally liable to DAP for the principal amount of $122,500 with interest, costs, and attorney's fees. We affirm the judgment.

BACKGROUND

On July 25, 1984, Vaughn and Clell Gierhart, vice-president and president respectively of Gierhart/Vaughn Construction Company, signed an open continuing guaranty ("the 1984 guaranty") individually agreeing to repay all future loans made by Texas American Bank to their company. The guaranty covered a "guaranteed indebtedness" of the company up to $500,000. On November 4, 1987, Gierhart, in his capacity as president of Gierhart/Vaughn Construction Company, signed a promissory note ("the note") with Texas American Bank in the amount of $122,500. No payments were made on the note, which matured on November 3, 1989. Later, Texas American Bank became insolvent, and DAP purchased the note through a loan sale by Team Bank, who was acting as an agent of the FDIC, who in turn was acting as receiver for Texas American Bank.

On July 16, 1992, DAP filed suit against the guarantors Vaughn and Gierhart to recover from them individually the unpaid note signed by their company in 1987. Gierhart later filed bankruptcy and was eventually nonsuited. Following a one day bench trial on January 10, 1996, the trial court entered judgment in favor of DAP against Vaughn. Vaughn's motion for new trial was overruled and this appeal was subsequently perfected. Vaughn urges four points of error.

DISCUSSION

Point of Error No. 1

Vaughn challenges the legal and factual sufficiency of the evidence to support the trial court's conclusion that he failed to terminate the guaranty.

Findings of fact in a bench trial have the same function as a jury's answers to questions in the charge. Stern v. Wonzer, 846 S.W.2d 939, 942 (Tex.App.--Houston [1st Dist.] 1993, no writ). These findings are reviewable for legal and factual sufficiency of the evidence to support them. Id. In reviewing legal insufficiency points, we consider only the evidence and inferences that tend to support the finding, and disregard all evidence and inferences to the contrary. Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex.1989). If there is any evidence of probative force to support the finding, the point of error must be overruled. Sherman v. First Nat'l Bank, 760 S.W.2d 240, 242 (Tex.1988); U.S. Marine Corp. v. Kline, 882 S.W.2d 597, 600 (Tex.App.--Houston [1st Dist.] 1994, writ denied). Evidence may not be found insufficient unless a vital fact may not reasonably be inferred from the facts proved in the particular case. Cannon v. ICO Tubular Servs., Inc. 905 S.W.2d 380, 386 (Tex.App.--Houston [1st Dist.] 1995, no writ).

When examining factual insufficiency points, we must examine all of the evidence. Lofton v. Texas Brine Corp., 720 S.W.2d 804, 805 (Tex.1986); Klekar v. Southern Pac. Transp., 874 S.W.2d 818, 827 (Tex.App.--Houston [1st Dist.] 1994, writ denied). Under factual sufficiency points, the finding can only be set aside if it is so against the great weight and preponderance of the evidence that it is clearly wrong and manifestly unjust. Lofton, 720 S.W.2d at 805; Klekar, 874 S.W.2d at 827.

There is ample evidence in the record to dispose of Vaughn's legal sufficiency challenge. Vaughn testified that he signed the 1984 guaranty. The 1984 guaranty expressly states the guarantor may only terminate the agreement in writing. Vaughn admitted he was bound by the terms of the 1984 guaranty and that he did not terminate it in writing. This evidence is legally sufficient to find that Vaughn did not terminate the 1984 guaranty.

Further, when viewing the totality of the evidence, it is readily apparent that Vaughn's factual sufficiency challenge similarly fails. Vaughn testified that he orally terminated the 1984 guaranty, but did not offer any evidence of written termination, as required by the terms of the 1984 guaranty. Vaughn also testified that a later guaranty signed in 1986 ("the 1986 guaranty") was intended to replace the 1984 guaranty. However, the 1986 guaranty was a guaranty by Gierhart/Vaughn Construction Company of Vaughn's debt, unlike the 1984 guaranty, by which Vaughn guaranteed the debt of Gierhart/Vaughn Construction Company. The terms of the 1986 guaranty do not expressly or implicitly provide for the replacement of the 1984 guaranty.

Where the parties' intentions are clearly and unambiguously stated in the contract, a court gives effect to the intentions of the parties, as expressed in the contract. Citizens Nat. Bank v. Texas & Pac. Ry. Co., 136 Tex. 333, 150 S.W.2d 1003, 1006 (1941); Stern, 846 S.W.2d at 944. The terms of the guaranty contracts are plain and unambiguous, and Vaughn provided no evidence at trial that would contradict the guaranties. Thus, sufficient evidence exists to support the trial court's finding that Vaughn did not terminate the 1984 guaranty.

We overrule Vaughn's first point of error.

Point of Error No. 2

In his second point of error, Vaughn contends the trial court erred in granting judgment against him because DAP was not a holder of the note or the 1984 guaranty. Vaughn presents several arguments in support of this point of error.

Right to Recover

Vaughn first argues DAP did not establish the right to recover on the note. To recover on a note through a guaranty, the plaintiff must show: (1) the existence of the note and guaranty; (2) the debtor signed the guaranty; (3) the plaintiff legally owned or held the guaranty; and (4) that a certain balance remains due and owing. First Gibraltar Bank, FSB v. Farley, 895 S.W.2d 425, 427 (Tex.App.--San Antonio 1995, writ denied). The evidence and testimony submitted to the trial court sufficiently establish DAP's right to recover the amount of the promissory note under the 1984 guaranty.

A corporation signs a note by the authorized signature of its agent. Collin County Sav. & Loan v. Miller Lumber Co., 653 S.W.2d 114, 116 (Tex.App.--Dallas 1983, no writ). Gierhart testified he executed the note on behalf of Gierhart/Vaughn Construction Company. This testimony was uncontested. Further, Vaughn testified he personally signed the 1984 guaranty. A continuing guaranty is one which contemplates a future course of dealing between the lender and debtor, and is intended to apply to other liabilities as they accrue. Sonne v. FDIC, 881 S.W.2d 789, 793 (Tex.App.--Houston [14th Dist.] 1994, writ denied). As discussed above, Vaughn did not terminate this guaranty agreement. Thus, while Vaughn did not sign the note, he admittedly guaranteed the future debt of Gierhart/Vaughn Construction Company which accrued when the note defaulted.

In Hanks v. NCNB Texas Nat'l Bank, 815 S.W.2d 763, 765 (Tex.App.--Eastland 1991, no writ), the court held that where a bank officer stated that copies of a note and guaranty were true and genuine copies, provided principal balances and interest due, and confirmed that the bank was the legal holder and owner of certain notes and guarantees and the sole party to enforce the same, there was legally sufficient evidence to prove legal holder and ownership status. DAP established it was the legal holder and owner of the note and the 1984 guaranty through the testimony of Kenneth R. Smith, executive vice-president of DAP. Smith testified to each of the above components, and Vaughn offered no evidence to the contrary during trial. Therefore, the evidence is legally and factually sufficient to establish the right to recover on the 1984 guaranty.

Valid Transfer

Vaughn also attacks the sufficiency of the evidence to show a valid transfer of title from Texas American Bank/Galleria to DAP. Although the assignment document only recites that title to the documents passed from Texas American Banks/Dallas to the FDIC, Kenneth Smith, executive vice-president of DAP, testified that DAP purchased this particular loan in a loan sale, after Texas American Bank went defunct. At trial, Vaughn had the opportunity to cross-examine Smith and rebut his testimony; he did neither. Accordingly, the evidence was legally and factually sufficient to demonstrate a valid transfer of title to DAP.

Holder in Due Course

Vaughn argues the trial court's finding of fact and conclusion of law that DAP is a holder in due course of the note and the 1984 guaranty are in error.

Vaughn contends DAP is not a holder in due course of the note. Vaughn argues DAP had notice the note was in default when DAP purchased it from Team Bank in 1991. See TEX.BUS. & COMM.CODE ANN. § 3.302(a)(2) (Vernon Supp.1997) (stating that holder must have taken instrument without notice that instrument was overdue or in default to satisfy holder in due course status); Graham & Locke Invs., Inc. v. Madison, 295 S.W.2d 234, 244 (Tex.Civ.App.--Dallas 1956, writ ref'd n.r.e.). However, in its findings of fact and conclusions of law, the trial court specifically concluded that DAP was a holder in due course of the note pursuant to federal law.

The fact that DAP knew of the note's default is of no consequence under the federal holder in due course doctrine. The federal holder in due course doctrine prohibits debtors from asserting personal defenses against the FDIC and subsequent note holders of the FDIC whether or not they satisfy the technical requirements of state law. Campbell Leasing, Inc. v. FDIC, 901 F.2d 1244, 1249 (5th Cir.1990); FSLIC v. Cribbs, 918 F.2d 557, 559 (5th Cir.1990); RTC v. Crow, 763 F.Supp. 887, 895 (N.D.Tex.1991); RTC v. Ammons, 836 S.W.2d 705, 710 (Tex.App.--Houston ...