H&H Steel Fabricators, Inc., Towncreek Industrial, LLC, and James Tobey v. Wells Fargo Equipment Finance, Inc. ( 2016 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-15-00391-CV
H&H STEEL FABRICATORS, INC.; APPELLANTS
TOWNCREEK INDUSTRIAL, LLC;
AND JAMES TOBEY
V.
WELLS FARGO EQUIPMENT APPELLEE
FINANCE, INC.
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FROM THE 43RD DISTRICT COURT OF PARKER COUNTY
TRIAL COURT NO. CV15-0496
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MEMORANDUM OPINION1
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Appellants H&H Steel Fabricators, Inc.; Towncreek Industrial, LLC; and
James Tobey appeal from the trial court’s summary judgment entered in favor of
appellee Wells Fargo Equipment Finance, Inc. on its claim for breach of contract.
Because Wells Fargo established its right to judgment as a matter of law on its
1
See Tex. R. App. P. 47.4.
claim and because Appellants failed to present evidence sufficient to raise a fact
issue on each element of their affirmative defense of mitigation, we affirm the trial
court’s judgment.
I. BACKGROUND
On November 15, 2013, H&H executed a promissory note in favor of Wells
Fargo, showing that Wells Fargo had loaned H&H $451,829.40 at 4.84% annual
interest. To secure the loan, H&H contemporaneously signed a security
agreement, granting Wells Fargo a lien on H&H’s equipment.2 Towncreek―an
affiliate of H&H―and Tobey―the president of H&H and the managing partner of
Towncreek―signed continuing guaranties under which they agreed to be jointly
and severally liable for H&H’s payment obligations. Appellants concede that the
note, the security agreement, and the continuing guaranties are valid and
enforceable.
In December 2014, H&H failed to make its required installment payment on
the note, which triggered a default of the note. On February 2, 2015, Gary
Dreyling, a vice president with Wells Fargo, sent Appellants a notice of their
default occurring in December 2014 and January 2015, provided an opportunity
to cure, and notified Appellants that Wells Fargo would accelerate their
2
Equipment was defined in the security agreement as “including but not
limited to all present and future machinery, vehicles, furniture, fixtures,
manufacturing equipment, farm machinery and equipment, shop equipment,
office and recordkeeping equipment, parts and tools, and the goods described in
any equipment schedule or list herewith or hereafter furnished to [Wells Fargo]
by [H&H].”
2
obligations to repay the entire indebtedness if the default was not cured. On
March 30, 2015, Wells Fargo’s counsel sent Appellants a formal acceleration
notice, based on their failure to make payments on the note in December 2014,
January 2015, and February 2015, and demanded full payment of the remaining
balance on the note: $345,046.58. Appellants never cured their default of their
payment obligations.
On April 20, 2015, Wells Fargo filed suit against Appellants for breach of
contract―the note and the continuing guaranties―and sought to recover the
accelerated balance under the note of $345,046.58, jointly and severally. On
June 19, 2015, Wells Fargo filed a traditional motion for summary judgment on its
breach-of-contract claim, seeking an award of the then-outstanding balance of
$353,668.02 against Appellants jointly and severally.3 On June 22, 2015, Wells
Fargo notified Appellants that the trial court would hear its motion for summary
judgment on July 20, 2015. See Tex. R. Civ. P. 166a(c). On June 26, 2015,
Appellants filed an answer to Wells Fargo’s petition and raised the affirmative
defenses of mitigation of damages, offset, and payment.4
3
It appears the difference in this amount and the amount requested by
Wells Fargo in its petition is a result of Appellants’ continuing failure to pay on the
note.
4
Although Wells Fargo filed its summary-judgment motion before
Appellants filed their answer to the petition, Appellants did not raise this
procedural error to the trial court and do not complain of it on appeal. See Tex.
R. Civ. P. 166a(a).
3
Also on June 26, 2015, Appellants filed a verified motion for continuance of
the summary-judgment hearing, arguing that an extension was necessary to
enable them to take the deposition of Wells Fargo’s corporate representative and
to conduct discovery regarding the circumstances of Wells Fargo’s foreclosure
sale of H&H’s equipment and Wells Fargo’s efforts to mitigate its damages. See
Tex. R. Civ. P. 166a(g), 251–52. The trial court’s docket reflects that the trial
court heard the motion for continuance on July 7, 2015, and that a “Rule 11
Agreement” would be “forthcoming.” The docket also reflects that the July 20,
2015 hearing was “CANCELED.” On August 13 and 14, 2015, the docket shows
that letters were issued reflecting that the summary-judgment hearing had been
rescheduled for September 17, 2015.
On August 24, 2015, Wells Fargo filed a no-evidence motion for summary
judgment on each of Appellants’ affirmative defenses on the basis that
Appellants had no evidence to support “several elements of their affirmative
defenses.” Wells Fargo requested judgment in its favor in the amount of
$353,781.46. In H&H and Towncreek’s September 10, 2015 response to Wells
Fargo’s no-evidence motion for summary judgment,5 they argued only that the
no-evidence motion must be denied because an adequate time for discovery had
not passed to allow H&H and Towncreek to marshal its proof. See Tex. R. Civ.
P. 166a(i). H&H and Towncreek attached Tobey’s affidavit in which he asserted
5
Tobey did not join in this response or file his own response to the no-
evidence motion.
4
that he could not locate, and Wells Fargo had failed to produce, the “review and
appraisal of the value of H&H’s equipment,” which was conducted at the time of
the note in 2013. That same day, Appellants also responded to Wells Fargo’s
traditional motion for summary judgment and asserted that Wells Fargo had
failed to produce any evidence that it attempted to mitigate its damages, that
more time for discovery was needed, and that Dreyling’s affidavit attached to
Wells Fargo’s motion was conclusory and relied on inadmissible hearsay
documents. Appellants again attached Tobey’s affidavit regarding his attempts
to locate and gain production of the “review and appraisal” of H&H’s equipment.
On September 17, 2015, the trial court held a hearing on Wells Fargo’s
motions and considered “the Motion for Summary Judgment” filed by Wells
Fargo, “any timely response filed by [Appellants],” the pleadings, and “the
argument and authority of counsel.”6 No record was made of this hearing, but
the trial court signed a docket notation that it took the motion “[u]nder
advisement-ruling forthcoming.” On September 21, 2015, the trial court granted
the motion “because there is no genuine issue of material fact and [Wells Fargo]
is entitled to judgment as a matter of law.” The trial court “OVERRULED”
Appellants’ affirmative defenses and entered judgment against Appellants for
$353,668.02 in actual damages. Appellants filed a motion for new trial and
argued that the summary judgment was in error because Dreyling’s affidavit was
6
The trial court noted on the docket sheet that counsel for Wells Fargo and
Appellants were “Present” at the hearing.
5
conclusory and based on inadmissible hearsay documents and because Wells
Fargo failed to mitigate its damages or sell the equipment in a commercially
reasonable manner. The motion was overruled by operation of law. See Tex. R.
Civ. P. 329b(c).
II. CONTINUANCE
In their third issue, Appellants argue that the trial court abused its
discretion by denying their motion to continue the hearing on Wells Fargo’s no-
evidence motion for summary judgment. Appellants specifically do not contend
that it was an abuse of discretion for the trial court to refuse to continue the
hearing on Walls Fargo’s traditional motion for summary judgment directed to its
breach-of-contract claim. We review a trial court’s decision on a motion to
continue a summary-judgment hearing for an abuse of discretion. See D.R.
Horton–Tex., Ltd. v. Savannah Props. Assocs., L.P., 416 S.W.3d 217, 222 (Tex.
App.―Fort Worth 2013, no pet.).
Even though the trial court granted summary judgment in an unusually
expedited manner, we cannot conclude that the trial court abused its discretion
for several reasons. First, Appellants did not file a verified motion for
continuance directed to Wells Fargo’s no-evidence motion for summary
judgment. See Tex. R. Civ. P. 251–52; Kelly v. Ocwen Loan Servicing, LLC,
No. 02-14-00232-CV, 2016 WL 279262, at *2 (Tex. App.―Fort Worth Jan. 14,
2016, pet. denied) (mem. op.). Appellant’s motion for continuance, which
resulted in the summary-judgment hearing being held two months later than its
6
original setting, was filed before Wells Fargo filed its no-evidence motion. See
Tex. R. App. P. 33.1(a). Second, the record does not reflect that H&H and
Towncreek brought its continuance arguments to the attention of the trial court or
sought a ruling on them. See McKinney Ave. Props. No. 2, Ltd. v. Branch Bank
& Trust Co., No. 05-14-00206-CV, 2015 WL 3549877, at *5 (Tex. App.―Dallas
June 5, 2015, no pet.) (mem. op.); Bench Co. v. Nations Rent of Tex., L.P.,
133 S.W.3d 907, 909 (Tex. App.―Dallas 2004, no pet.); see also Tex. R. App. P.
33.1(a). Third, Appellants do not attack the propriety of the timing of the hearing
regarding Wells Fargo’s traditional motion for summary judgment, which arguably
was the only motion that the trial court expressly granted. Fourth, Appellants did
not ensure that the court reporter recorded the hearing at which their argument
requesting more time for discovery could have been made. Therefore, we cannot
assay whether the trial court’s decision to hold the summary-judgment hearing on
September 20―even in light of H&H and Towncreek’s arguments that they
needed more time for discovery, which they raised in their summary-judgment
responses―was outside the zone of reasonable disagreement. See McKinney,
2015 WL 3549877, at *6; Barnes v. Athens, No. 02-12-00173-CV, 2012 WL
4936624, at *2 (Tex. App.―Fort Worth Oct. 18, 2012, no pet.) (mem. op.). See
generally Tex. Gov’t Code Ann. § 52.046(a)(2) (West 2013) (imposing on court
reporters duty to take notes of court proceedings only “[o]n request”); Judge
David Hittner & Lynne Liberato, Summary Judgments in Texas: State and
Federal Practice, 52 Hous. L. Rev. 773, 809–12, 814 (2015) (discussing factors
7
trial courts are to consider in determining motions for continuance based on the
need for additional discovery and noting a record of the hearing should be
requested “if the court makes rulings on the evidence or proceedings during the
hearing”). We overrule issue three.
III. PROPRIETY OF SUMMARY JUDGMENT
A. ADMISSIBILITY OF AFFIDAVIT
In their second issue, Appellants argue that the trial court erred by
considering Dreyling’s affidavit on summary judgment because it was conclusory
and because he relied on inadmissible hearsay documents to attest to the
balance due on the note.7 A trial court may not consider inadmissible evidence
over a party’s objection in ruling on a motion for summary judgment. Dolcefino v.
Randolph, 19 S.W.3d 906, 927 (Tex. App.―Houston [14th Dist.] 2000, pet.
denied) (op. on reh’g). An affidavit that is conclusory or is based on hearsay is
incompetent as summary-judgment proof. See Tex. R. Civ. P. 166a(f); Querner
Truck Lines, Inc. v. Alta Verde Indus., 747 S.W.2d 464, 468 (Tex. App.―San
Antonio 1988, no writ). We review a trial court’s evidentiary rulings for an abuse
of discretion. See Roth v. JPMorgan Chase Bank, N.A., 439 S.W.3d 508, 512
(Tex. App.―El Paso 2014, no pet.); Owens v. Comerica Bank, 229 S.W.3d 544,
548 (Tex. App.―Dallas 2007, no pet.).
Appellants also state that Dreyling’s affidavit included “inconsistent
7
statements.” However, Appellants do not brief this portion of their stated issue,
and we will not address it.
8
As a preliminary matter, it is important to point out that Appellants failed to
get a ruling on their evidentiary objections. There is nothing in the record
indicating that the trial court ruled on or even considered their objections to
Dreyling’s affidavit, and the summary-judgment order does not expressly address
Appellants’ objections. As such, they arguably failed to preserve any error for
our review. See Schuetz v. Source One Mortg. Servs. Corp., No. 03-15-00522-
CV, 2016 WL 4628048, at *5 (Tex. App.―Austin Sept. 1, 2016, no pet. h.) (mem.
op.); Haase v. Abraham, Watkins, Nichols, Sorrels, Agosto & Friend, L.L.P.,
No. 14-14-00572-CV, 2016 WL 3902735, at *4 (Tex. App.―Houston [14th Dist.]
July 14, 2016, no pet. h.); Roth, 439 S.W.3d at 513. However, to the extent it
could be argued that the trial court implicitly overruled Appellant’s objections
because it granted Wells Fargo judgment as a matter of law, because it stated
that “[a]ll other relief . . . is denied,” and because Appellants re-urged their
objections in their motion for new trial, we will address their evidentiary
complaints. See Lissiak v. SW Loan OO, L.P., No. 12-14-00344-CV, 2016 WL
3568066, at *2 (Tex. App.―Tyler June 30, 2016, no pet.); see also Duncan-
Hubert v. Mitchell, 310 S.W.3d 92, 100–01 (Tex. App.―Dallas 2010, pet. denied)
(recognizing Mother Hubbard language in summary-judgment order will not imply
a ruling on evidentiary objections); Residential Dynamics, LLC v. Loveless, 186
S.W.3d 192, 195 (Tex. App.―Fort Worth 2006, no pet.) (concluding evidentiary
objections preserved where majority of response to no-evidence motion for
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summary judgment addressed incompetence of sole affidavit submitted in
support of motion).
Appellants first argue that Dreyling’s statement of the amount due on the
note was conclusory because the statement was not supported by “any payment
history showing payments made by Appellants and application of such payments
to the principal and interest accruing under [the] Note.” But Dreyling’s affidavit,
which was made on his personal knowledge, recited the terms of the note,
including payment due dates and the accrual of interest, and detailed the
payments Appellants paid and failed to pay. To his affidavit, Dreyling attached
the note, the continuing guaranties, the security agreement, the February 2015
default letter, and the March 2015 acceleration notice. We conclude Dreyling’s
affidavit was not impermissibly conclusory; thus, the trial court did not abuse its
discretion by implicitly overruling this objection. See, e.g., Duarte-Viera v. Mae,
No. 07-14-00271-CV, 2016 WL 737698, at *5–6 (Tex. App.―Amarillo Feb. 23,
2016, no pet.); Cha v. Branch Banking & Trust Co., No. 05-14-00926-CV, 2015
WL 5013700, at *3 (Tex. App.―Dallas Aug. 25, 2015, pet. denied) (mem. op.);
Myers v. Sw. Bank, No. 02-14-00122-CV, 2014 WL 7009956, at *2–3 (Tex.
App.―Fort Worth Dec. 11, 2014, pet. denied) (mem. op.); see also Valenzuela v.
State & Cty. Mut. Fire Ins. Co., 317 S.W.3d 550, 553 (Tex. App.―Houston [14th
Dist.] 2010, no pet.) (discussing form of affidavits sufficient to establish personal
knowledge).
10
Appellants next contend that Dreyling’s affidavit statements that Appellants
did not cure the default and made no payments on the note since December
2014 were not accompanied by production of the underlying payment history,
rendering the affidavit inadmissible as hearsay evidence and not readily
controvertible. To establish the amount owed, Dreyling’s affidavit needed to
state only the total amount due on the note based on his personal knowledge as
a bank officer; detailed proof of the balance of the note was not required. See
Diversified Fin. Sys., Inc. v. Hill, Heard, O’Neal, Gilstrap & Goetz, P.C.,
99 S.W.3d 349, 356 (Tex. App.―Fort Worth 2003, no pet.); Bohanon v. Franklin
Nat’l Bank of Long Island, 387 S.W.2d 699, 701–02 (Tex. Civ. App.―Dallas
1965, no writ). Dreyling’s assertions did not constitute inadmissible hearsay,
were readily controvertible, and the trial court did not abuse its discretion by
implicitly considering them as competent summary-judgment proof. See Duarte-
Viera, 2016 WL 737698, at *4; Stucki v. Noble, 963 S.W.2d 776, 780–81 (Tex.
App.―San Antonio 1998, pet. denied); Atchley v. NCNB Tex. Nat’l Bank,
795 S.W.2d 336, 337 (Tex. App.―Beaumont 1990, writ denied). We overrule
issue two.
B. CONCLUSIVE PROOF OF WELLS FARGO’S DAMAGES
In their first issue, Appellants argue that the trial court erred by “summarily
overruling” their affirmative defense of mitigation of damages. We construe this
argument to be an attack on the trial court’s summary judgment regarding Wells
11
Fargo’s damages.8 Appellants contend that because Wells Fargo presented no
evidence that it properly mitigated its damages through a reasonable disposition
of the equipment based on its fair market value, the summary judgment was in
error.9
We review a summary judgment de novo. Travelers Ins. Co. v. Joachim,
315 S.W.3d 860, 862 (Tex. 2010). We consider the evidence presented in the
light most favorable to the nonmovant, crediting evidence favorable to the
nonmovant if reasonable jurors could and disregarding evidence contrary to the
nonmovant unless reasonable jurors could not. Mann Frankfort Stein & Lipp
Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). We indulge every
reasonable inference and resolve any doubts in the nonmovant’s favor. 20801,
Inc. v. Parker, 249 S.W.3d 392, 399 (Tex. 2008). A plaintiff is entitled to
summary judgment on a cause of action if it conclusively proves all essential
elements of the claim. See Tex. R. Civ. P. 166a(a), (c); MMP, Ltd. v. Jones,
710 S.W.2d 59, 60 (Tex. 1986). If the plaintiff does so, the burden then shifts to
the defendant as the nonmovant to raise a genuine issue of material fact
Appellants attack no other element of Wells Fargo’s breach-of-contract
8
claim. Therefore, we will not address the propriety of the summary judgment as
to liability. See generally Tex. R. Civ. P. 166a(a) (recognizing interlocutory
summary judgment may be granted as to liability alone).
9
Appellants similarly argued in their motion for new trial that Wells Fargo
“provided no evidence or testimony in its [traditional motion for summary
judgment] that [Wells Fargo] has taken any steps to mitigate its damages with
respect to the equipment.”
12
precluding summary judgment. See Amedisys, Inc. v. Kingwood Home Health
Care, LLC, 437 S.W.3d 507, 517 (Tex. 2014). Where the nonmovant relies on
an affirmative defense such as mitigation to defeat summary judgment, the
nonmovant has the burden in its summary-judgment response to present
evidence sufficient to raise a fact issue on each element of the affirmative
defense. See Am. Petrofina, Inc. v. Allen, 887 S.W.2d 829, 830 (Tex. 1994);
Levitin v. Michael Group, L.L.C., 277 S.W.3d 121, 124 (Tex. App.―Dallas 2009,
no pet.); Fid. & Deposit Co. of Md. v. Stool, 607 S.W.2d 17, 25 (Tex. Civ.
App.―Tyler 1980, no writ). Merely pleading an affirmative defense will not,
without more, defeat a motion for summary judgment. See Am. Petrofina,
887 S.W.2d at 830.
To establish its right to damages based on the breach of the terms of the
note, Wells Fargo had to show through competent summary-judgment evidence
that a balance on the note was due and owing. See Comm’l Serv. of Perry Inc.
v. Wooldridge, 968 S.W.2d 560, 564 (Tex. App.―Fort Worth 1998, no pet.).
Dreyling’s affidavit established this balance, and Appellants offered no
controverting evidence. See Lujan v. Navistar Fin. Corp., 433 S.W.3d 699, 705–
06 (Tex. App.―Houston [1st Dist.] 2014, no pet.) (op. on reh’g). In an attempt to
raise a genuine issue of material fact regarding the owed balance, Appellants
asserted that Wells Fargo failed to appropriately mitigate its damages.
Appellants recognized this was an affirmative defense and specifically pleaded
the defense in their answer. But Appellants failed to recognize in their motion for
13
new trial or on appeal that they bore the burden to establish this defense in an
attempt to avoid summary judgment. See Lunsford Consulting Grp., Inc. v.
Crescent Real Estate Funding VIII, L.P., 77 S.W.3d 473, 476–77 (Tex.
App.―Houston [1st Dist.] 2002, no pet.). Appellants did not meet this burden.
See id.; Stucki, 963 S.W.2d at 781. They offered no evidence raising a fact issue
on any element of their affirmative defense and improperly placed the burden to
produce such evidence on Wells Fargo. Because Appellants failed to raise a
genuine issue of material fact on any element of Wells Fargo’s claim, which
Wells Fargo conclusively established through competent summary-judgment
evidence, or on its affirmative defense of mitigation, the trial court did not err by
granting Wells Fargo summary judgment on its claim for breach of contract. See
Levertov v. Hold Props., Ltd., No. 11-11-00284-CV, 2014 WL 887225, at *7 (Tex.
App.―Eastland Feb. 27, 2014, no pet.) (mem. op.); Lunsford, 77 S.W.3d at 476–
77. We overrule issue one.
IV. CONCLUSION
We conclude that the trial court did not err or abuse its discretion in
granting Wells Fargo judgment as a matter of law on its breach-of-contract claim
against Appellants. We affirm the trial court’s judgment. See Tex. R. App. P.
43.2(a).
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/s/ Lee Gabriel
LEE GABRIEL
JUSTICE
PANEL: MEIER, GABRIEL, and SUDDERTH, JJ.
DELIVERED: October 27, 2016
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