Victor Lissiak, Jr. v. S.W. Loan OO, L.P. ( 2015 )

ACCEPTED
12-14-00344-CV
TWELFTH COURT OF APPEALS
TYLER, TEXAS
4/27/2015 1:58:05 PM
CATHY LUSK
CLERK
NO. 12-14-00344-CV
IN THE TWELFTH COURT OF APPEALS FILED IN
12th COURT OF APPEALS
TYLER, TEXAS
AT TYLER, TEXAS 4/27/2015 1:58:05 PM
CATHY S. LUSK
Clerk
VICTOR LISSIAK, JR.,
Appellant
V.
SW LOAN OO, L.P.,
Appellee
On Appeal from the 7th Judicial District Court, Smith County, Texas
The Honorable Kyle Russell Presiding in Trial Court Case Number 12-0384-A
APPELLANT’S BRIEF
THE HOLMES LAW FIRM, INC.
Robert H. Holmes
SBN 09908400
3401 Beverly Drive
Dallas, Texas 75205
Telephone: 214-384-3182
Facsimile: 214-522-3526
Email: rhholmes@swbell.net
ATTORNEYS FOR APPELLANT
IDENTITY OF PARTIES AND COUNSEL
Appellant submits the following list of all parties to the trial court’s judgment, and
the names and addresses of all trial and appellate counsel pursuant to Tex, R. App.
P. 38.1(a)
Appellant (defendant in the trial court): Victor Lissiak, Jr.
Represented by (In Trial and On Appeal): The Holmes Law Firm, Inc.
Robert H. Holmes
SBN 09908400
3401 Beverly Drive
Dallas, Texas 75205
Telephone: 214-384-3182
Email: rhholmes@swbell.net
Appellee (Plaintiff in Trial Court): S.W. LOAN OO, L.P.
Represented by (In Trial and On Appeal): Stephen Sakonchick II
Stephen Sakonchick II, P.C.
6501 Canon Wren Drive
Austin, Texas 78746
Telephone: 512-329-0375
Facsimile: 512-697-2859
Email: sakon@flash.net
APPELLANT’S REQUEST FOR ORAL ARGUMENT
Appellant, Victor Lissiak, Jr., respectfully request the opportunity to present
oral argument in connection with this appeal.
ii
TABLE OF CONTENTS
IDENTITY OF PARTIES AND COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
APPELLANT’S REQUEST FOR ORAL ARGUMENT. . . . . . . . . . . . . . . . . . . . ii
TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
TABLE OF AUTHORITIES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
ISSUES PRESENTED FOR REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
STATEMENT OF THE NATURE OF THE CASE. . . . . . . . . . . . . . . . . . . . . . . . xii
INDEX OF ABBREVIATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii
STATEMENT OF FACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A. Underlying Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
B. Underlying Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SUMMARY OF ARGUMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
A. Appellee did not meet its Burden of Proof on the Elements
of its Claim; Therefore, the Burden Never Shifted to Appellant .. . . . . . . . . . . . . . 7
B. Alternatively, Appellant Raised Disputed Issues of Material Fact on
Elements of Appellee’s Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
C. Appellant Pled Affirmative Defenses, Supported by Competent Summary
Judgment Proof, to Which Appellee did not Submit Competent Summary
Judgment Proof to Disprove at Least One Element of All Affirmative Defenses
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
D. Appellee’s Summary Judgment Proof was not Competent Summary
Judgment Evidence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
E. The Trial Court Abused its Discretion. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARGUMENT AND AUTHORITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
A. STANDARD OF REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
B. ISSUES PRESENTED FOR REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . 12
iii
ISSUE NO. 1. The trial court erred in granting a summary judgment
because the were disputed fact issues on elements of Appellee’s
claim; therefore, the burden never shifted to Appellant. . . . . . . . . . . . . . . . . . . . . 14
ISSUE NO. 1A. Holder in Due Course. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ISSUE NO. 1B.Validity/Authenticity of Signature. . . . . . . . . . . . . . . . . . . . . 16
ISSUE NO. 1C. Failure of Consideration.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ISSUE NO. 1D. Cancellation of Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ISSUE NO. 1E. Doctrine of Estoppel.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ISSUE NO. 2. Alternatively, The trial court erred in granting a
summary judgment because Appellant raised disputed issues
of material fact on elements of Appellee’s claim. . . . . . . . . . . . . . . . . . . . . . . . . . 24
ISSUE NO. 2A Holder in Due Course Status. . . . . . . . . . . . . . . . . . . . . . . . . 24
ISSUE NO. 2B. Authenticity/Genuineness of Appellant’s Signature. . . . . . . 24
ISSUE NO. 2C. Failure of Consideration.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ISSUE NO. 3. The trial court erred in granting a summary judgment
because Appellant submitted competent summary judgment proof
to create issue of the affirmative defenses pled by Appellant. . . . . . . . . . . . . . . . 25
ISSUE NO. 3A. Appellee Was Not a Holder in Due Course.. . . . . . . . . . . . . 26
ISSUE NO. 3B. Authenticity/Genuineness of Appellant’s Signature. . . . . . . 26
ISSUE NO. 3C. Failure of Consideration.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ISSUE NO. 3D. §3.401, Texas Business & Commerce Code,
Cancellation of Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
iv
ISSUE NO. 3E. Promissory Estoppel.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ISSUE NO. 3F. Material Alteration/Cancellation by Payment Extension. . . 28
ISSUE NO. 3G. §3.401, Texas Business & Commerce Code,
Discharge of Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ISSUE NO. 4. The trial court erred in granting a summary judgment
because Appellee’s summary judgment proof was not competent
summary judgment evidence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ISSUE NO. 5. The trial court erred in granting a summary judgment
because the trial court abused its discretion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ISSUE NO. 5A. By Failing to Rule on Appellant’s Objections to
the Summary Judgment Proof Offered by Appellee. . . . . . . . . . . . . . . . . . . 34
ISSUE NO. 5B. By Failing to Require Appellee to meet Its Burden of Proof.34
ISSUE NO. 5C. By Granting a Summary Judgment in the Face of
Fact Issues Supporting the Elements of Appellant’s Affirmative defenses. 35
CONCLUSION AND PRAYER FOR RELIEF. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
CERTIFICATE OF SERVICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
CERTIFICATE OF COMPLIANCE.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
APPENDIX - Filed Separately
v
TABLE OF AUTHORITIES
A. TABLE OF CASES
1001 McKinney Ltd. v. Credit Suisse First Boston Mortg. Capital,
192 S.W.3d 20, 27 (Tex.App.–Houston [14th Dist.] 2005, pet. denied). . . . . . . . 32
Advance Components, Inc. v. Goodstein, 608 S.W.2d 737, 739
(Tex.App.–Dallas 1980, writ ref’d n.r.e.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Alejandro v. Bell, 84 S.W.3d 383, 388
(Tex.App.–Corpus Christi 2002, no pet.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Amedisys, Inc. v. Kingwood Home Health Care, LLC, 437 S.W.3d 507, 511
(Tex.2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 13
Austin Hardwoods Inc. v. Vanden Berqhe, 917 S.W.2d at 320, 325
(Tex.App.–El Paso 1995, writ denied). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Bastida v. Aznaran, 444 S.W.3d 98, 105 (Tex.App.–Dallas 2014, no pet.).. . . . . 14
Belew v. Rector, 202 S.W.3d 849, 854 n. 4 (Tex.App.–Eastland 2006, no pet.). . 20
Boerschig v. Southwestern Holdings, Inc., 322 S.W.3d 752, 762–63
(Tex.App.–El Paso 2010, no pet.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Bowen v. Briscoe, 453 S.W.2d 287, 289 (Tex.1970). . . . . . . . . . . . . . . . . . . . . . . 30
Braugh v. Corpus Christi Bank & Trust, 605 S.W.2d 691, 696
(Tex.Civ.App.–Corpus Christi 1980, writ ref’d n.r.e.). . . . . . . . . . . . . . . . . . . . . . 22
Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex.1984). . . . . . . . . . . . . . . . 25, 35
Bullock v. Kehoe, 678 S.W.2d 558, 559
(Tex.App.–Houston [14th Dist.] 1984, writ ref’d n.r.e.). . . . . . . . . . . . . . . . . . . . 28
Burges v. Mosley, 304 S.W.3d 623, 628 (Tex.App.–Tyler 2010, no pet.). . . . . . . 22
vi
Burns v. Gonzalez, 439 S.W.2d 128, 133
(Tex.Civ.App.–San Antonio 1969, writ ref’d n.r.e.).. . . . . . . . . . . . . . . . . . . . . . . 16
Canfield v. Bank One, Texas, N.A. 51 S.W.3d 828(Tex.App. 6 Dist. 2001pet. denied).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Casso v. Brand, 776 S.W.2d 551, 556 (Tex.1989). . . . . . . . . . . . . . . . . . . . . . . . . 12
City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 n.5
(Tex.1979). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 12
Cont’l Dredging, Inc. v. De–Kaizered, Inc., 120 S .W.3d 380, 394–95
(Tex.App.–Texarkana 2003, pet. denied). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Diversicare Gen. Partner, Inc. v. Rubio, 185 S.W.3d 842, 846 (Tex.2005). . . . . 13
Dolcefino v. Randolph, 19 S.W.3d 906, 926-27
(Tex.App.–Houston [14th Dist.] 2000, pet. denied). . . . . . . . . . . . . . . . . . . . . . . . 14
Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241–42 (Tex.1985). . 34
Eli Lilly & Co. v. Marshall, 829 S.W.2d 157, 158 (Tex.1992). . . . . . . . . . . . . . . 34
Federal Deposit Insurance Corp. v. Attayi, 745 S.W.2d 939, 944
(Tex.App.–Houston [1st Dist.] 1988, no writ). . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Food Mach. Corp. v. Moon, 165 S.W.2d 773, 775
(Tex.Civ.App.–Amarillo 1942, no writ). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Gibbs v. General Motors Corp., 450 S.W.2d 827 (Tex.1970). . . . . . . . . . . . . . . . 11
Gooch v. Am. Sling Co., 902 S.W.2d 181, 185
(Tex.App.–Fort Worth 1995, no writ).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Goode v. Shoukfeh, 943 S.W.2d 441, 446 (Tex.1997). . . . . . . . . . . . . . . . . . . . . . 34
Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex.2007). . . . . . 13
vii
Hanks v. GAB Bus. Servs., Inc., 644 S.W.2d 707, 708 (Tex.1982). . . . . . . . . . . . 29
Harvey v. Harvey 40 S. W. 185 (Tex.Civ.App.1897). . . . . . . . . . . . . . . . . . . . . . 16
Haynes v. City of Beaumont, 35 S.W.3d 166, 178
(Tex.App.–Texarkana 2000, no pet.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Hays v. First State Bank of Dell City, Tex.Civ.App., 377 S.W.2d 210, 212
(Tex.App.–Amarillo, 1964 writ ref., n.r.e.).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Hiles v. Arnie & Co., P.C., 402 S.W.3d, 820, 832
(Tex.App.–Houston [14th Dist.], 2013, pet. denied). . . . . . . . . . . . . . . . . . . . . . . . 30
Hudspeth v. Investor Collection Serv. Ltd. P’ship, 985 S.W.2d 477, 479
(Tex.App.–San Antonio 1998, no pet.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
In re Kleven, 100 S.W.3d 643, 644
(Tex. App–Texarkana 2003 orig. proceeding). . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
In re Shredder Co., 225 S.W.3d 676, 679
(Tex. App–El Paso 2006 orig. proceeding).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
In re Weekley Homes, L.P., 180 S.W.3d 127, 133 (Tex.2005). . . . . . . . . . . . . . . . 23
Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 471-72 (Tex.1991). . . . . . . . . . . . . 11
LeBlanc v. Lamar State College, 232 S.W.3d 294, 301
(Tex.App.–Beaumont 2007, no pet.).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32, 33
Lee v. McCormick, 647 S.W.2d 735, 738 (Tex.App.–Beaumont 1983, no writ). . 16
Limestone Prods. Distrib. v. McNamara, 71 S.W.3d 308, 311 (Tex.2002). . . . . . 11
McGraw v. Brown Realty Co., 195 S.W.3d 271, 276
(Tex.App.–Dallas 2006, no pet.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex.2006). . . . . . . . . . . . . . . 13
viii
Maykus v. Tex. Bank & Trust Co. of Dallas, 550 S.W.2d 396, 398
(Tex.Civ.App.–Dallas 1977, no writ). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
M.D. Anderson Hosp. & Tumor Inst. v. Willrich, 28 S.W.3d 22, 23
(Tex.2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 30
MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex.1986).. . . . . . . . . . . . . . . . . . . . . . . 12
Mustang Pipeline Co. v. Driver Pipeline Co., 134 S .W.3d 195, 196 & 199
(Tex.2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28, 30
Neely v. Wilson, 418 S.W.3d 52, 59-60 (Tex.2013). . . . . . . . . . . . . . . . . . 11, 12, 13
MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex.1986).. . . . . . . . . . . . . . . . . . . . . . . 12
Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex.1985). . . . . . . 12, 15
Old Colony v. City of Quitman, 352 S.W.2d 452, 456 (Tex.1962). . . . . . . . . . . . 28
Park Place Hosp. v. Estate of Milo, 909 S.W.2d 508, 511 (Tex.1995). . . . . . . . . 11
Priest v. First Mortgage Company of Texas, Inc., 659 S.W.2d 869, 871
(Tex .Civ.App.–San Antonio 1983, writ ref’d n.r.e.). . . . . . . . . . . . . . . . . . . . . . . 22
Provident Life & Acc. Ins. v. Knott, 128 S.W.3d 211, 215 (Tex.2003). . . . . . 12, 35
Reliance Ins. Co. v. Dahlstrom Corp., 568 S.W.2d 733, 736
(Tex.Civ.App.–Eastland 1978, writ ref’d n.r.e.). . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 496 (Tex.1991).. . . . . . . . 20
Shah v. Moss, 67 S.W.3d 836, 842 (Tex.2001).. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
State v. $90,235, 390 S.W.3d 289, 292 (Tex.2013). . . . . . . . . . . . . . . . . . . . . . . . 13
Steiner v. Jester, 25 S. W. 411, (Tex.1894). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ix
Swilley v. Hughes, 488 S.W.2d 64 (Tex.1972). . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Town N. Nat’l Bank v. Broaddus, 569 S.W.2d 489, 491 (Tex.1978). . . . . 16, 19, 20
Truestar Petroleum Corp. v. Eagle Oil & Gas Co., 323 S.W.3d 316, 319
(Tex.App.–Dallas 2010, no pet.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
United Concrete Pipe Corp.v. Spin-Line Co., 430 S.W.2d 360, 365
(Tex.1968). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
US Bank, N.A. v. Prestige Ford Garland Ltd. P’ship, 170 S.W.3d 272, 279
(Tex.App.–Dallas 2005, no pet.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Wal–Mart Stores, Inc. v. Gonzalez, 968 S.W.2d 934, 936 (Tex.1998). . . . . . . . . 32
Wesson v. Jefferson S&L Ass’n, 641 S.W.2d 903, 906 (Tex.1982). . . . . . . . . . . . 12
Wheeler v. White, 398 S.W.2d 93, 96–97 (Tex. 1965). . . . . . . . . . . . . . . . . . . . . . 23
Wilcox v. Hempstead, 992 S.W.2d 652, 656–57
(Tex.App.–Fort Worth 1999, no pet.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Willis v. Nucor Corp., 282 S.W.3d 536, 547 (Tex.1980). . . . . . . . . . . . . . . . . . . . 14
Wilson v. Skaggs, 10 Tex. 298, 1853 WL 4340 (Tex.1853). . . . . . . . . . . . . . . . . . 16
Wright v. Robert & St. John Motor Co., 58 S.W.2d 67, 69 (Tex.1933). . . . . . . . . 21
B. TABLE OF STATUTES
Tex.Bus. & Com. Code § 1.201(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Tex.Bus. & Com. Code § 1.201 (21).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Tex.Bus. & Com. Code § 1.202(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Tex.Bus. & Com. Code § 1.206. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
x
Tex.Bus. & Com. Code§ 3.302(a)(2)(iii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Tex.Bus. & Com. Code § 3.306. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16, 19
Tex.Bus. & Com. Code § 3.308. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17, 19
Tex.Bus. & Com. Code § 3.401(a). . . . . . . . . . . . . . . . . . . . . . . . . 10, 12, 19, 22, 27
Tex.Bus. & Com.C. § 3.605. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 29
Tex.R. Civ. P. 93(7).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Tex.R. Civ. P. 166a(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32, 33
ISSUES PRESENTED FOR REVIEW
Issue No. 1. Whether the trial court erred in granting a summary judgment because
the were disputed fact issues on elements of Appellee’s claim?
Issue No. 2. Alternatively, whether the trial court erred in granting a summary
judgment because Appellant raised disputed issues of material fact on elements of
Appellee’s claim?
Issue No. 3. Whether the trial court erred in granting a summary judgment because
Appellant submitted competent summary judgment proof to create issue of the
affirmative defenses pled by Appellant?
Issue No. 4. Whether the trial court erred in granting a summary judgment because
Appellee’s summary judgment proof was not competent summary judgment
evidence?
Issue No. 5. Whether the trial court erred in granting a summary judgment because
the trial court abused its discretion?
STATEMENT OF THE NATURE OF THE CASE
This appeal arising out of a cross-claim (CR238) filed by Appellee against
xi
Appellant, who were both defendants in a suit brought by J. Randolph Light against
the predecessor of Appellee, Stillwater National Bank (“SNB”) for “lender abuse”
and breach of contract. The cross-claim involves the suit for collection under a
promissory note, the 2008 Note (CR215-217), allegedly executed by Appellant.
What is ironic and inconsistent about the facts of the case is that Light sought
contribution from Appellant (CR1¶31-33) under a note dated the same date as the
2008 Note but not executed by Appellant (CR95), and alleged that he had paid
Appellant’s obligations to SNB (CR1¶32) and Appellee sought collection from
Appellant under the 2008 Note, allegedly paid by Light (CR1¶32).
The Appellant denied the authenticity of his purported signature on the 2008
Note (CR242¶4.14) under which collection is sought. In addition, Appellant raised
affirmative defenses of holder in due course, failure of consideration, cancellation
under §3.401, Texas Business & Commerce Code, promissory estoppel, and
discharge of liability under §3.401, Texas Business & Commerce Code.
(CR242¶¶4.1-4.13)
Appellee filed a Motion for Summary Judgment with summary judgment proof
(CR203),. Appellant filed objections to the summary judgment proof (CR245-254)
and a Response. (SCR2-422). Appellant also submitted competent controverting
summary judgment proof by way of affidavits of Appellant (SCR24-27), Larry Don
xii
(CR29-61) and Robert H. Holmes (SCR63-215).
The Trial Court granted Plaintiff’s motion for summary judgment without
ruling on Appellant’s objections to summary judgment submitted by the Appellee.
(CR634).
Appellee’s summary judgment proof was not competent. (CR245-254) The
Trial Court abused its discretion in failing to rule on Appellant’s objections to
Appellee’s summary judgment proof.
Moreover, the Trial Court erred in granting the summary judgment in the face
of sworn allegations of the authenticity of Appellant’s signature on the 2008 Note and
summary judgment proof supporting that allegation as well as supporting the other
affirmative defenses of Appellant.
INDEX OF ABBREVIATIONS
The record will be referred to herein as follows:
Clerk’s Record.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CR ___
Supplemental Clerk’s Record. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SCR ___
By way of example, a reference to:
pages 14-17 of the Clerk’s Record will be cited as CR14-17.
pages 14-17 of the Supplemental Clerk’s Record will be cited as SCR14-17.
xiii
STATEMENT OF FACTS
A. UNDERLYING TRANSACTION
The Stretford at the Cascades Limited Partnership (“Stretford”) was organized to
be the development and marketing entity for a 72 unit high rise condominium
residential building in Tyler, Texas (“Project”) in 2005. (CR56¶¶9; SCR29¶2) The
developer was Lawrence C. Don (“Don”), who arranged for the purchase and
financing for the Project; organized the group of investors in the Stretford; and
engaged Appellant’s engineering firm be a part of the team to develop and construct
the Project. (SCR29¶3)
Tyler-Stretford General Partner, LLC (“Tyler-Stretford”) whose members were
Don, and J. Randolph Light, Jr. (“Light”) was organized to be the general partner of
the Stretford. (SCR29¶4) The primary investors in the Stretford were Light and Carl
Black (‘Black”). (SCR29¶4) Don and Light jointly requested Appellant be the tie-
breaking member of Tyler-Stretford management team, to which Appellant agreed.
However, Appellant’s role was limited to engineering and construction matters.
(SCR29¶9; SCR24¶6)
Tyler-Stretford owned a 1.129% no profits or equity limited partnership in
Stretford. (SCR30¶¶7-9) Appellant held a 25% membership interest in the Tyler-
Stretford, giving him a .28225% no profits or equity interest in Stretford. (SCR30¶¶7-
1
8) Appellant’s only financial interest in the Project was compensation for providing
engineering services through his engineering firm, Viewtech, Inc. (SCR24¶9;
SCR30¶9)
Construction financing for the Project was arranged and funded with a loan from
Stillwater National Bank & Trust Company (“SNB”). (SCR25¶5; SCR29¶5) Capital
was invested by Light and Black, who were also guarantors, along with Don on the
notes to SNB. (SCR29¶5)
In January 2008, it was realized additional funds were required to complete the
Project. Several budget estimates were generated for the cost of completion of the
Project, both by SNB’s advisors and by third-party’s engaged by Stretford. Interim
funds were required for the Project to continue while the budget analyses and
refinancing options were being reviewed, SNB agreed to provide short-term loans in
amounts matching cash contributions made by Stretford. Stretford agreed to provide
the additional capital. (SCR30¶¶11-12)
During the first ten months of 2008, Stretford funded an additional $2,500,000,
in cash. (SCR30¶13) While dealing with the need for interim funds, Black, one of the
two Stretford principals who had provided personal guarantees for portions of
Stretford’s $20,956,000.00 debt to SNB, challenged the validity of his signature on
one of the guaranty agreements bearing his signature. (SCR30¶14)
2
As a result of Black’s disputing the validity of his signature on the guaranty
agreement, SNB changed courses, stating it could not make the short-term matching
loans directly to Stretford. (SCR30¶14-15) Without the additional loan funds
construction on the Project would be stopped for lack of funds. As an alternative,
SNB agreed to make short-term loans to Light, Don and Appellant, evidenced by
promissory notes executed by Light, Don and Appellant. SNB required no security
for the loans, no loan applications, no proof of credit worthiness and no financial
statement from the makers of these short term notes. (SCR30¶16)
February 20, 2008, SNB made the first short-term loan, in the amount of
$1,200,000.00. (SCR30¶17; SRC 34) Two additional short-term loans, one March 28,
2008 in the amount of $500,000.00 (SCR30¶18; SRC38) and another July 7, 2008 in
the amount of $800,000.00 (SCR30¶18; SRC42) were made. (cumulatively “Short-
Term Notes”). Light, Don and Appellant executed the Short-Term Notes. (SCR34,
38, 42)
SNB told Light, Don and Appellant the Short-Term Notes would be satisfied and
paid in full by consolidating and restructuring the Stretford loans, as soon as the
budget analyses and refinancing options were completed. (SCR24¶19; SCR31¶20)
March 28, 2008, SNB advised Appellant and Don it would not be necessary to renew
the Short-Term Notes because the debts would be paid from the proceeds of a new
3
loan to the Stretford. (SCR26¶20; SCR31¶21)
The Short-Term Notes were set up as “personal” loans to Light, Don and
Appellant; however, Light, Don and Appellant received neither directly nor indirectly
and did authorize the use of any proceeds advanced on the Short-Term Notes.
(SCR26¶23; SCR31¶24) Contrary to the affirmative statements of SNB to the
contrary, without authorization from Light, Don or Appellant, SNB solely controlled
the use and disbursement of all loan proceeds from the Short-Term Notes.
(SCR26¶¶24, 25; SCR31¶¶24, 25) Neither Light, Don nor Appellant received or had
use or benefit of the proceeds advanced under the Short-Term Notes. (SCR26¶¶24,
25; SCR31¶¶24, 25)
SNB extended the due dates on the Short-Term Notes to September 31, 2008,
without Appellant’s or Don’s knowledge or approval. (SCR25¶18; SCR31¶19)
In September 2008 Lissiak received a document titled Omnibus Agreement, an
agreement between negotiated between SNB and Light, apparently contemplated to
be an agreement between Stretford, Light, Lissiak and Don, and SNB detailing the
consolidation and restructuring of all debts related to the Project (“Omnibus
Agreement”). (CR365-401; 424-427) The Omnibus Agreement removed Appellant
and Don from any future management role of the Project. (CR365-401; 424-427)
Along with the Omnibus Agreement, Appellant received a debt instrument
4
consolidating the Short-Term Notes into one new note in the amount of $2,500,000,
“effective” September 30, 2008 (“2008 Note”). (CR424-427) Appellant did not sign
the Omnibus Agreement or the 2008 Note, his name was struck from the Omnibus
Agreement in pen. (CR365-401; 424-427)
While a likeness of Appellant’s signature appears on the 2008 Note, Appellant
does not recall signing that debt instrument and disputes the authenticity/genuineness
of his signature thereon in sworn pleadings. (SCR26¶26; SCR31¶27) While it is clear
Appellant did not execute the Omnibus Agreement, a document of equal date of the
2008 Note and related to the Omnibus Agreement, Appellant would not have
executed the 2008 Note when Appellant was no longer a participant in the Project.
(CR365-401, 424-427; 429-432)
Appellant was unaware his name had been appended to the 2008 Note until Light
brought suit against Appellant and listed the 2008 Note in the petition as a note he
had discussions with SNB about. (SCR26¶¶26-28) Moreover, although Light
mentions the 2008 Note in the fact section of his Petition, (CR1-49), Light avers in
his petition, Light paid the 2008 Note and the Short-Term Notes, and was bring suit
against Appellant for contribution under the $2,500,000.00 note appended as Exhibit
“E” to Light’s petition which was executed by Light alone. (CR1-49) That note of
equal date did not reference Appellant or Don as makers and there were no blank
5
spaces for Appellant or Don on the signatory page. (CR42-43) Neither Light nor SNB
ever sought collection from Appellant for liability under the Short-Term Notes or the
2008 Note. (CR 424-427; 429-432)
In the lawsuit filed by Light on January 11, 2012 in the U.S. District Court,
Eastern District (Cause No. 4-11- CV-833), the predecessor of this lawsuit, Light
attached copies of correspondence from and to SNB wherein Light requested SNB’s
assistance with collections from Appellant on the Short-Term Notes; however, no
action was taken by SNB. (CR424-427; 429-432)
SNB renewed and extended the 2008 Note numerous times without Appellant’s
knowledge, joinder, or approval, with “effective” dates of June 30, 2009, March 31,
2010, and July 31, 2010, executed only by Light as new debt instruments. (“Renewal
Notes”). (CR424-427; 429-432)
SNB assigned eight debt instruments related to the Project to SWOO on or about
December 13, 2011, which did not include the Short-Term Notes. (CR103¶¶8-16)
SWOO marked paid and delivered all debt instruments executed by Stretford
and/or Light, payable to SNB, assigned to SWOO, except the 2008 Note, which
included the Renewal Notes. (SCR65-76)
A. UNDERLYING LITIGATION
February 20, 2012, Light and Stretford filed a First Amended Petition naming
6
Starwood Capital Group, LLC as additional defendant and deleting Don. (CR-1)
April 30, 2012, Light and Stretford filed a Second Amended Petition naming
SWOO as a defendant in place of Starwood, (CR54) stating:
“On that same date, [Appellant], Don, and Light entered into a Promissory
Note consolidating the two previous Notes wherein the three of them, jointly
and severally, promised to pay SNB the principal sum of $2,500,000.00,
together with interest (the “2.5 Note”). This 2.5 Note was executed in
conjunction with a second amendment to the Omnibus Agreement pertaining
to the Tyler Project. [Appellant] has wholly failed to meet his obligations under
the 2.5 Note, leaving Light as the sole individual making payments. As such,
Light is entitled to contributions from [Appellant] for the payments he has
made on [Appellant]’s behalf pursuant to said Promissory Note.”
Light goes on in ¶¶ 17-19 to explain how he was forced to acquire Note 6721400
dated 9/30/08 in the amount of $2,500,000.00, allegedly executed by Light, Don, and
Appellant. (CR59¶¶17-19”). Then Light states:
“The 2.5 Note purports to be a joint and several Note signed by Light, Don and
[Appellant]. See Exhibit ‘E.’ By virtue of the payments made by Light on the
2.5 Note in connection with the Tyler project, [Appellant] received valuable
benefits equal to at least the amount of payments made by Light. . . . As a result
7
of [Appellant]’s breach of his contribution obligations . . . .”
(CR63,¶32) Light goes on to allege in the alternative:
“ . . . . [Appellant] accepted Light’s assistance in meeting his obligations in
connection with the Tyler Project Note, all while knowing he would have to
repay the funds advanced. Light has provided such assistance, and made
payments to date in the amount of not less than $2.5 million. . . .”
(CR64,¶35)
May 21, 2012, SWOO filed counterclaims/cross actions (CR103) against Light
and Stretford on various debt obligations, suing Light and Appellant under the
“Principals Note” (CR106, ¶12) the 2008 Note. (CR109, ¶21)
June 11, 2012, Suggestion of Don’s bankruptcy proceeding filed.
January 15, 2013, Light Nonsuits Appellant. (CR156)
January 28, 2013, Stretford Nonsuits SNB and SWOO. (CR163)
January 29, 2013, SWOO Nonsuits Stretford. (CR164)
September 12, 2013, Light Nonsuits SWOO. (CR174)
September 12, 2013, SWOO Nonsuits Light. (CR175)
November 15, 2013, Light Nonsuits SNB. (CR183)
January 13, 2014, SWOO filed a Motion for Summary Judgment. (CR198)
January 24, 2014, Appellant Answer to SWOO Crossclaim. (CR226)
8
February 7, 2014, SWOO’s Supplemental Crossclaim against Appellant. (CR233)
February 10, 2014, Appellant Amended Answer to SWOO’s Supplemental
Crossclaim. (CR237)
SUMMARY OF ARGUMENT
Appellant brings this appeal on the granting of the Appellee’s Motion for
Summary Judgment.
A. APPELLEE DID NOT MEET ITS BURDEN OF PROOF; THEREFORE, THE BURDEN
NEVER SHIFTED TO APPELLANT:
1. Appellee was a holder in due course; and
2. Appellant signed the 2008 Note.
B. ALTERNATIVELY, APPELLANT RAISED DISPUTED ISSUES OF MATERIAL FACT
ON ELEMENTS OF APPELLEE’S CLAIM, TO WIT:
1. holder in due course status of Appellee;
2. authenticity/genuineness of Appellant’s signature on the 2008 Note; and
3. failure of consideration.
C. APPELLANT PLED AFFIRMATIVE DEFENSES, SUPPORTED BY COMPETENT
SUMMARY JUDGMENT PROOF, APPELLEE DID NOT SUBMIT COMPETENT SUMMARY
JUDGMENT PROOF TO DISPROVE AT LEAST ONE ELEMENT OF ALL AFFIRMATIVE
DEFENSES, TO WIT:
1. holder in due course status of Appellee;
2. authenticity/genuineness of Appellant’s signature on the 2008 Note;
3. failure of consideration;
9
4. § 3.401, Texas Business & Commerce Code, cancellation of debt instrument;
5. promissory estoppel;
6. material alteration/cancellation by payment extension; and
7. § 3.605, Texas Business & Commerce Code, discharge of liability.
D. APPELLEE’S SUMMARY JUDGMENT PROOF WAS NOT COMPETENT SUMMARY
JUDGMENT EVIDENCE.
Appellee’s summary judgment was from affiants who were not knowledgeable
about the facts they were testifying about, there was no foundation in the affidavits
to show the affiants to have the knowledge of the facts to which they ere testifying.
Appallant filed proper objections which were first not ruled upon, then over-ruled as
a matter of law when the trial court denied the Appemmant’s Motion for New Trial.
E. THE TRIAL COURT ABUSED ITS DISCRETION.
The trial court’s ruling in granting the summary judgment was arbitrary,
unreasonable, and without reference to guiding principles:
1. The trial court failed to consider the objections to summary judgment proof
made by the Appellant.
2. The trial court failed to require the Appellee to meet its burden of proof.
3. By granting a summary judgment in the face of fact issues supporting the
elements of Appellant’s affirmative defenses.
ARGUMENTS AND AUTHORITIES
10
A. STANDARD OF REVIEW.
The purpose of the summary judgment procedure is to permit the trial court to
promptly dispose of cases involving unmeritorious claims or untenable defenses. City
of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 n.5 (Tex.1979).
However, a Court may not grant a properly contested summary judgment if there
exists any genuine issue of material fact. Swilley v. Hughes, 488 S.W.2d 64(Tex.1972); Gibbs v. General Motors Corp., 450 S.W.2d 827 (Tex.1970).
When a movant files a motion for summary judgment based on the summary
judgment evidence, the court can grant the motion only when the movant’s evidence,
as a matter of law, either proves all the elements of the movant’s claim or disproves
the facts of at least one element of each of the nonmovant’s claims or defenses. Park
Place Hosp. v. Estate of Milo, 909 S.W.2d 508, 511 (Tex.1995); Lear Siegler, Inc. v.
Perez, 819 S.W.2d 470, 471-72 (Tex.1991). Even if the nonmovant does not file a
response and the motion for summary judgment is uncontroverted, the movant must
still carry the burden of proof. Clear Creek, 589 S.W.2d at 678. When evaluating a
motion for summary judgment based on summary judgment proof, the trial court
must:
Assume all the nonmovant’s proof is true. Limestone Prods. Distrib. v.
McNamara, 71 S.W.3d 308, 311 (Tex.2002); Shah v. Moss, 67 S.W.3d 836, 842
11
(Tex.2001); M.D. Anderson Hosp. & Tumor Inst. v. Willrich, 28 S.W.3d 22, 23
(Tex.2000); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex.1985).
Make every reasonable inference in favor of the nonmovant. Neely v. Wilson,
418 S.W.3d 52, 59-60 (Tex.2013); Provident Life & Acc. Ins. v. Knott, 128 S.W.3d
211, 215 (Tex.2003); M.D. Anderson, 28 S.W.3d at 23; Nixon, 690 S.W.2d at 548-
49.
Resolve doubts about the existence of a genuine issue of a material fact against
the movant. Neely, 418 S.W.3d at 59-60; M.D. Anderson, 28 S.W.3d at 23; Nixon,
690 S.W.2d at 548-49.
When the plaintiff moves for summary judgment on its own cause of action, the
plaintiff must prove it is entitled to summary judgment by establishing each element
of its claim as a matter of law. MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex.1986).
If the plaintiff does not conclusively establish all the elements necessary to its cause
of action, summary judgment is improper. Wesson v. Jefferson S&L Ass’n, 641
S.W.2d 903, 906 (Tex.1982).
When the movant does not meet its burden of proof, the burden does not shift to
the nonmovant and the summary judgment must be denied. Amedisys, Inc. v.
Kingwood Home Health Care, LLC, 437 S.W.3d 507, 511 (Tex.2014); M.D.
Anderson, 28 S.W.3d at 23; Clear Creek, 589 S.W.2d at 678. The burden shifts to the
12
nonmovant only after the movant has established it is entitled to summary judgment
as a matter of law. Amedisys, Inc, 437 S.W.3d at 511; State v. $90,235, 390 S.W.3d
289, 292 (Tex.2013); Casso v. Brand, 776 S.W.2d 551, 556 (Tex.1989). At that point,
the nonmovant must produce summary judgment evidence to raise a fact issue.
Amedisys, 437 S.W.3d at 511.
A motion for summary judgment is reviewed de novo. Neely, 418 S.W.3d at 59.
Furthermore, “[i]n reviewing a summary judgment, we consider all grounds presented
to the trial court and preserved on appeal in the interest of judicial economy.”
Diversicare Gen. Partner, Inc. v. Rubio, 185 S.W.3d 842, 846 (Tex.2005).
In the de novo review of a trial court’s summary judgment, the appellate court
considers all the evidence in the light most favorable to the nonmovant, crediting
evidence favorable to the nonmovant if reasonable jurors could, and disregarding
contrary evidence unless reasonable jurors could not. Mack Trucks, Inc. v. Tamez, 206
S.W.3d 572, 582 (Tex.2006). The evidence raises a genuine issue of fact if reasonable
and fair-minded jurors could differ in their conclusions in light of all of the summary
judgment evidence. Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755
(Tex.2007).
In the context of a summary judgment, if a party does not get a ruling on an
objection to summary judgment proof or object to the court’s refusal to rule and have
13
either the ruling, or the objection to the refusal to rule, included in the appellate
record, the objections are waived. Wilcox v. Hempstead, 992 S.W.2d 652, 656–57
(Tex.App.–Fort Worth 1999, no pet.). However, a trial court implicitly rules on
objections to summary judgment evidence where a party complained in his motion
for new trial of the trial court’s refusal to rule on his objections. Alejandro v. Bell, 84
S.W.3d 383, 388 (Tex.App.–Corpus Christi 2002, no pet.); Dolcefino v. Randolph,
19 S.W.3d 906, 926-27 (Tex.App.–Houston [14th Dist.] 2000, pet. denied).
Defects in the substance of an affidavit or its attachments can be raised for the first
time on appeal. Willis v. Nucor Corp., 282 S.W.3d 536, 547 (Tex.1980). A conclusion
in an affidavit unsupported by evidence is a defect in substance and an objection in
the trial court is not required to preserve the complaint for appellate review. See id.
at 548. See also Bastida v. Aznaran, 444 S.W.3d 98, 105 (Tex.App.–Dallas 2014, no
pet.).
B. ISSUES PRESENTED FOR REVIEW
ISSUE NO. 1. THE TRIAL COURT ERRED IN GRANTING A SUMMARY JUDGMENT
BECAUSE THE WERE DISPUTED FACT ISSUES ON THE FOLLOWING ELEMENTS OF
APPELLEE’S CLAIM; THEREFORE, THE BURDEN NEVER SHIFTED TO APPELLANT:
To prevail in a suit on a promissory note, a plaintiff must prove: (1) the note in
question; (2) the defendant signed the note; (3) the plaintiff was the legal owner or
holder of the note; and (4) a certain balance was due and owing on the note. Truestar
14
Petroleum Corp. v. Eagle Oil & Gas Co., 323 S.W.3d 316, 319 (Tex.App.–Dallas
2010, no pet.); Hudspeth v. Investor Collection Serv. Ltd. P’ship, 985 S.W.2d 477,
479 (Tex.App.–San Antonio 1998, no pet.).
ISSUE NO. 1A. HOLDER VS. HOLDER IN DUE COURSE.
The holder of an instrument is a holder in due course if the holder takes the
instrument: (1) for v–Dallas, 2008, pet. denied).
A person has “notice of a fact” when he has knowledge of it. Id.; Tex. Bus. &
Com. Code § 1.202(a)(1).
To be a holder in due course, one must take without notice that an instrument is
overdue. Tex. Bus. & Com. Code§ 3.302(a)(2)(iii).
A “holder” is:
(A) the person in possession of a negotiable instrument that is payable either to
bearer or to an identified person that is the person in possession;
(B) the person in possession of a negotiable tangible document of title if the goods
are deliverable either to bearer or to the order of the person in possession; or
(C) a person in control of a negotiable electronic document of title.
Tex. Bus. & Com. Code § 1.201 (21).
Where a sworn pleading denies that a party is a holder in due course the burden
to prove the contrary is on the party claiming to be a holder in due course. Nixon, 690
15
S.W.2d at 548; Lee v. McCormick, 647 S.W.2d 735, 738 (Tex.App.–Beaumont 1983,
no writ).
It is undisputed, the 2008 Note was past due when SWOO acquired the 2008 Note;
therefore, SWOO is a holder, not a holder in due course.
The defenses that can be asserted against a holder include all defenses of any party
which would be available in an action on a simple contract, including without
limitation, want or failure of consideration, non-performance of any condition
precedent, delivery for a special purpose, and payment or satisfaction to such holder
would be inconsistent with the terms of a restrictive endorsement. Tex. Bus. & Com.
Code § 3.306; Town N. Nat’l Bank v. Broaddus, 569 S.W.2d 489, 491 (Tex.1978).
ISSUE NO. 1B. VALIDITY/AUTHENTICITY OF SIGNATURE. A Rule 93(7) verified
denial challenges the authenticity of the document and addresses the document’s
admissibility as an evidentiary issue. Tex.R. Civ. P. 93(7). A sufficient sworn denial
of the execution of a note, such as filed by Appellant in this case, imposes upon a
plaintiff seeking to enforce payment on the note, the burden of establishing its
execution by the defendant or by one authorized to bind him. Burns v. Gonzalez, 439
S.W.2d 128, 133 (Tex.Civ.App.–San Antonio 1969, writ ref’d n.r.e.); Wilson v.
Skaggs, 10 Tex. 298, 1853 WL 4340 (Tex.1853); Steiner v. Jester, 25 S. W. 411,
(Tex.1894); Harvey v. Harvey 40 S. W. 185 (Tex.Civ.App.1897).
16
The UCC has codified that law, stating:
“In an action with respect to an instrument, the authenticity of, and authority
to make, each signature on the instrument are admitted unless specifically
denied in the pleadings. If the validity of a signature is denied in the pleadings,
the burden of establishing validity is on the person claiming validity, but the
signature is presumed to be authentic and authorized unless the action is to
enforce the liability of the purported signer and the signer is dead or
incompetent at the time of trial of the issue of validity of the signature.”
Tex. Bus. & Com. Code § 3.308 (a).
Under the UCC, the “burden of establishing” a fact means the burden of
persuading the trier of fact that the existence of the fact is more probable than its
nonexistence. Tex. Bus. & Com. Code § 1.201 (8).
The UCC defines “presumption” with respect to a fact, or that a fact is
“presumed,” to mean the trier of fact must find the existence of the fact unless and
until evidence is introduced that supports a finding of its nonexistence. Tex. Bus. &
Com. Code § 1.206.
In salient part, the UCC Comment to § 3.308 states:
“. . . . The purpose of the requirement of a specific denial in the pleadings is to
give the plaintiff notice of the defendant’s claim of forgery or lack of authority
17
as to the particular signature, and to afford the plaintiff an opportunity to
investigate and obtain evidence. . . . In the absence of such specific denial the
signature stands admitted, and is not in issue. . . . The question of the burden
of establishing the signature arises only when it has been put in issue by
specific denial. “Burden of establishing” is defined in Section 1-201. The
burden is on the party claiming under the signature, but the signature is
presumed to be authentic and authorized except as stated in the second
sentence of subsection (a). “Presumed” is defined in Section 1-201 and means
that until some evidence is introduced which would support a finding that the
signature is forged or unauthorized, the plaintiff is not required to prove that
it is valid. The presumption rests upon the fact that in ordinary experience
forged or unauthorized signatures are very uncommon, and normally any
evidence is within the control of, or more accessible to, the defendant. The
defendant is therefore required to make some sufficient showing of the grounds
for the denial before the plaintiff is required to introduce evidence. The
defendant's evidence need not be sufficient to require a directed verdict, but it
must be enough to support the denial by permitting a finding in the defendant's
favor. Until introduction of such evidence the presumption requires a finding
for the plaintiff. Once such evidence is introduced the burden of establishing
18
the signature by a preponderance of the total evidence is on the plaintiff. The
presumption does not arise if the action is to enforce the obligation of a
purported signer who has died or become incompetent before the evidence is
required, and so is disabled from obtaining or introducing it. “Action” is
defined in Section 1-201 and includes a claim asserted against the estate of a
deceased or an incompetent.”
Tex. Bus. & Com. Code § 3.308 cmt. 1.
A person is not liable on an instrument unless the person:
(1) signed the instrument; or
(2) is represented by an agent or representative who signed the instrument and the
signature is binding on the represented person under Section 3.402.
Tex. Bus. & Com. Code § 3.401(a)
Where the maker’s signature was forged, the maker cannot be liable since his valid
signature does not appear on the instrument. Canfield v. Bank One, Texas, N.A. 51
S.W.3d 828 (Tex.App. 6 Dist. 2001pet. denied).
When the holder of the note is not the payee and not a holder in due course the
party holds the note subject to all defenses available in an action on a simple contract.
Broaddus, 569 S.W.2d at 491; Tex. Bus. & Com. Code § 3.306. Therefore, evidence
is admissible that tends to prove a defense to the action on the promissory note, such
19
as failure of consideration, non-performance of a condition precedent, delivery for a
special purpose, fraud in the inducement, or other defenses which would be available
in an action on a simple contract. Broaddus, 569 S.W.2d at 491.
As shown in the uncontroverted sworn summary judgment proof presented by
Appellant, Appellant disputed the authenticity of his signature on the Note under
sworn pleadings as well as sworn summary judgment proof.
ISSUE NO. 1C. FAILURE OF CONSIDERATION.
The affirmative defense of failure of consideration defeats a summary
judgment if the nonmovant presents evidence he did not receive the consideration
set forth in the agreement. McGraw v. Brown Realty Co., 195 S.W.3d 271, 276
(Tex.App.–Dallas 2006, no pet.). A failure of consideration may be either partial
or total. A total failure of consideration is grounds for cancellation or recission of
the contract. Food Mach. Corp. v. Moon, 165 S.W.2d 773, 775
(Tex.Civ.App.–Amarillo 1942, no writ).
Consideration is a present exchange bargained for in return for a promise.”Roark
v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 496 (Tex.1991). “It consists of either
a benefit to the promisor or a detriment to the promisee.” Id. Failure of consideration
is distinct from lack of consideration. Belew v. Rector, 202 S.W.3d 849, 854 n. 4
(Tex.App.–Eastland 2006, no pet.). Failure of consideration generally “occurs when,
20
because of some supervening cause after an agreement is reached, the promised
performance fails.” US Bank, N.A. v. Prestige Ford Garland Ltd. P’ship, 170 S.W.3d
272, 279 (Tex.App.–Dallas 2005, no pet.).
When parties reduce their agreement to writing, the “written contract presumes
that there was consideration given for its execution.”Gooch v. Am. Sling Co., 902
S.W.2d 181, 185 (Tex.App.–Fort Worth 1995, no writ) (citing Wright v. Robert & St.
John Motor Co., 58 S.W.2d 67, 69 (Tex.1933)).
Appellant is not contesting consideration in the execution of the Short-Term
Notes, but the failure of consideration thereafter.
Because there is a presumption the Short-Term Notes were supported by
consideration, the burden was on Appellant to show none was actually received, thus
there was a failure of consideration. Maykus v. Tex. Bank & Trust Co. of Dallas, 550
S.W.2d 396, 398 (Tex.Civ.App.–Dallas 1977, no writ). Appellant did this
(SCR26¶¶23-25; SCR31¶¶23-25)
Appellant executed the Short-Term Notes in his individual capacity and SNB
agreed to advance Appellant and the other makers of those notes, in their individual
capacities, the amount of money specifically delineated in each note; however, SNB
did not do that. As shown in the uncontroverted summary judgment proof presented
by Appellant, Appellant received no consideration from advances on the Short-Term
21
Notes. (SCR26¶¶23-25; SCR31¶¶23-25)
Appellee presented no evidence to raise a disputed fact issue on the elements of
this affirmative defense. (CR203)
There was a total failure of consideration in the Short-Term Notes because SNB
did not advance the funds to Appellant or as directed by Appellant after the Short-
Term Notes were executed - a supervening cause arising after the execution of the
Short-Term Notes. Burges v. Mosley, 304 S.W.3d 623, 628 (Tex.App.–Tyler 2010,
no pet.). Thus, the 2008 Note fails likewise.
ISSUE NO. 1D. CANCELLATION OF NOTE.
Tex.Bus. & Com.Code § 3.401(a) provides: “[n]o person is liable on an
instrument unless his signature appears thereon.”
An agreement to extend the time of payment of a negotiable instrument
constitutes a new contract between the parties. Priest v. First Mortgage Company
of Texas, Inc., 659 S.W.2d 869, 871 (Tex .Civ.App.–San Antonio 1983, writ ref’d
n.r.e.). The execution of a renewal note is generally treated as a new contract,
evidencing the existing debt. Priest, 659 S.W.2d at 871; Braugh v. Corpus Christi
Bank & Trust, 605 S.W.2d 691, 696 (Tex.Civ.App.–Corpus Christi 1980, writ
ref’d n.r.e.).
It is clear from the record shown in the CSA, Light alone renewed and
22
extended the 2008 Note at least three times; therefore, whether the Renewal Notes,
notes which Appellant undisputed did sign as a co-maker, extinguished the Short-
Term Notes and/or the 2008 Note, are disputed fact issues, questions of fact for
the jury. Hays v. First State Bank of Dell City, Tex.Civ.App., 377 S.W.2d 210,
(Tex.App.–Amarillo, 1964 writ ref., n.r.e.).
Moreover, The Short-Term Notes were not transferred to SWOO and they no
longer exist - they were deemed to have been marked paid in full and returned to
Light in the CSA (SCR65); therefore, it is a disputed fact issue to whether the
2008 Note was extinguished by the terms of the Omnibus Agreement and/or the
Renewal Notes. Id.ISSUE NO. 1E. DOCTRINE OF ESTOPPEL
Promissory estoppel is an equitable doctrine ordinarily used defensively to
prevent “a party from insisting upon [its] strict legal rights when it would be
unjust to allow [it] to enforce them.” Wheeler v. White, 398 S.W.2d 93, 96–97
(Tex. 1965); In re Weekley Homes, L.P., 180 S.W.3d 127, 133 (Tex.2005).
SWOO is estopped by the acts of its predecessor, SNB, as SWOO is not a
holder-in-due-course. SNB promised Appellant and the other co-makers of the
Short-Term Notes that if Appellant and the co-makers would execute the Short-
Term Notes in their individual capacities, SNB would: (i) disburse the funds
23
advanced on the Short-Term Notes to the co-makers for their use on the Project
as the co-makers deemed fit in their sole discretion, as set forth in the Short-Term
Notes; and (ii) SNB would not seek payment from the co-makers, but would pay
the Short-Term Notes by rolling the balances due on the Short-Term Notes into
the refinancing of the Stretford debt. (SCR25-26¶¶19, 20; SCR25-26¶¶20, 21).
ISSUE NO. 2. ALTERNATIVELY, APPELLANT RAISED DISPUTED ISSUES OF
MATERIAL FACT ON ELEMENTS OF APPELLEE’S CLAIM.
Legal arguments and disputed fact issues raised by Appellant on these issues are:
ISSUE NO. 2A. HOLDER IN DUE COURSE.
Legal arguments in §1A above.
Fact issues raised:
a. Appellant provided competent summary judgment evidence showing the
2008 Note was past due when acquired by SWOO. (CR104-106¶¶8-16)
b. Appellee had knowledge the 2008 Note was in default when acquired by
SWOO. (CR104-106¶¶8-16)
ISSUE NO. 2B. AUTHENTICITY/GENUINENESS OF SIGNATURE.
Legal arguments in §1B above.
Fact issues raised:
a. Appellant did not execute the 2008 Note. (SCR26¶¶27, 28; SCR31¶¶27, 28)
b. Appellant was no longer a partner, member or participant in the Stretford
24
Project when the 2008 Note was executed. (SCR181-216)
c. Appellant did not execute the Omnibus Agreement. (SCR181-216)
ISSUE NO. 2C. FAILURE OF CONSIDERATION.
Legal arguments in § 1C above.
Fact issues raised:
a. Appellant did not receive any funds from advances under the Short-Term
Notes. (SCR26¶¶24, 25; SCR31¶¶24, 25)
b. Appellant did not receive any funds from advances under the 2008 Note.
(SCR26¶¶24, 25; SCR31¶¶24, 25; CR365-401; 424-427)
ISSUE NO. 3. THE TRIAL COURT ERRED IN GRANTING A SUMMARY JUDGMENT
BECAUSE APPELLANT SUBMITTED COMPETENT SUMMARY JUDGMENT PROOF TO
CREATE ISSUES ON THE AFFIRMATIVE DEFENSES PLED BY APPELLANT.
If the party opposing a summary judgment relies on an affirmative defense, he
must come forward with summary judgment proof sufficient to raise an issue of fact
on each element of the defense to avoid summary judgment. Brownlee v. Brownlee,
665 S.W.2d 111, 112 (Tex.1984). A defendant is not required to prove his affirmative
defense as a matter of law, he is only required to raise fact issue on each element of
the affirmative defense. Id. Appellant filed a response to the Motion identifying his
affirmative defenses, the law related thereto and provided competent summary-
judgment evidence raising a fact issue on each element of his affirmative defenses.
25
(SCR1-216 Specifically those fact issues raised by Appellant are:
ISSUE NO. 3A. APPELLEE WAS NOT A HOLDER IN DUE COURSE.
Fact issues raised.
Appellant raised the following fact issues:
a. the 2008 Note was in default when acquired by SWOO. (CR104-106¶¶8-16)
b. SWOO had knowledge that the 2008 Note was in default when acquired by
SWOO. (CR104-106¶¶8-16)
ISSUE NO. 3B. AUTHENTICITY/GENUINENESS OF APPELLANT’S SIGNATURE
ON THE 2008 NOTE.
Legal arguments in §1B above.
Fact issues raised:
a. Appellant did not execute the 2008 Note. (SCR26¶¶27, 28; SCR31¶¶27, 28)
b. Appellant was no longer a participant in the Stretford Project when the 2008
Note was executed. (SCR181-216)
c. Appellant did not execute the Omnibus Agreement. (SCR181-216)
ISSUE NO. 3C. FAILURE OF CONSIDERATION.
Legal arguments in §1C above.
Fact issues raised:
a. Appellant received no funds or benefits from advances under the Short-Term
Notes. (SCR26¶¶24, 25; SCR31¶¶24, 25)
26
b. Appellant received no funds or benefits from advances under the 2008 Note.
(SCR26¶¶24, 25; SCR31¶¶24, 25; CR365-401; 424-427)
ISSUE NO. 3D. § 3.401, TEXAS BUSINESS & COMMERCE CODE,
CANCELLATION OF DEBT INSTRUMENT.
Legal arguments in §1D above.
Appellant raised the following fact issues:
a. Appellant did not execute the Renewal Notes - three of them as shown in the
second full paragraph of the renewal dated July 11, 2011. (SCR91@92 2nd
paragraph)
b. Appellant was not consulted about the Renewal Notes - none of them.
(SCR27¶30; SCR31¶19)
c. The Short-Terms Notes were marked paid and returned to Light. (SCR65-
167)
ISSUE NO. 3E. PROMISSORY ESTOPPEL.
Legal arguments in §1E above.
Fact issues raised:
a. Appellant was told by SNB the Short-Term Notes would be paid by new
notes issued to the Stretford. (SCR25-27¶¶19, 20, 21; SCR31¶¶20, 21)
b. Appellant relied on that representation. (SCR25-27¶¶19, 20, 21;
SCR31¶¶20, 21)
27
c. Appellee reliance on the representations caused Appellant injury - Appellant
raised the following fact issues: (SCR25-27¶¶19, 20, 21, 33; SCR31¶¶20, 21)
ISSUE NO. 3F. MATERIAL ALTERATION/CANCELLATION BY PAYMENT
EXTENSION.
Whether the note is materially altered by a payment extension is a question of
law. Austin Hardwoods Inc. v. Vanden Berqhe, 917 S.W.2d 320, 325
(Tex.App.–El Paso 1995, writ denied); Federal Deposit Insurance Corp. v. Attayi,
745 S.W.2d 939, 944 (Tex.App.–Houston [1st Dist.] 1988, no writ).
A material alteration of a contract between a creditor and principal debtor is
one that either injures or enhances the risk of injury to the guarantor/co-maker.
United Concrete Pipe Corp.v. Spin-Line Co., 430 S.W.2d 360, 365 (Tex.1968);
Attayi, 745 S.W.2d at 944. Material alteration is an affirmative defense. Bullock
v. Kehoe, 678 S.W.2d 558, 559 (Tex.App.–Houston [14th Dist.] 1984, writ ref’d
n.r.e.); Reliance Ins. Co. v. Dahlstrom Corp., 568 S.W.2d 733, 736
(Tex.Civ.App.–Eastland 1978, writ ref’d n.r.e.). The elements of the defense are
threefold: (1) a material alteration of the underlying contract; (2) made without a
guarantor’s/co-maker’s consent; (3) which is to his detriment (i.e., is prejudicial
to his interest). Old Colony v. City of Quitman, 352 S.W.2d 452, 456 (Tex.1962);
Austin Hardwoods, 917 S.W.2d at 326; Attayi, 745 S.W.2d at 944.
28
Fact issues raised:
a. There was a material alteration in the Short-Term Notes by the extension of
the due date. (SCR27¶¶18-21, 28-31; SCR31¶¶19-23)
b. Appellant was not consulted about the renewal and extension of the Short-
Term Notes or the 2008 Note or any of the Renewal Notes. (SCR27¶30;
SCR31¶19)
c. The various renewals were to Appellant’s detriment. (SCR26¶22; CR1;
CR238)
ISSUE NO. 3G. § 3.605, TEXAS BUSINESS & COMMERCE CODE, DISCHARGE
OF LIABILITY.
Tex.Bus. & Com.C. § 3.605 sets forth the acts by a holder that discharge a
party to an instrument is intended to discharge a co-maker of note only to the
extent of his right of recourse against his fellow co-maker.
When one party to a contract commits a material breach of contract, the other
party is discharged or excused from further performance. Mustang Pipeline Co.
v. Driver Pipeline Co., 134 S .W.3d 195, 196 (Tex.2004). The covenant breached
must be part of mutually dependent promises in order to excuse further
performance by the non-breaching party. Hanks v. GAB Bus. Servs., Inc., 644
S.W.2d 707, 708 (Tex.1982). Generally, the issue of whether a breach rises to the
level of a material breach that will render the contract unenforceable presents a
29
dispute for resolution by the trier of fact. Hiles v. Arnie & Co., P.C.,
14–12–00088–CV, 2013 WL 2120658, *8 (Tex.App.–Houston [14th Dist.] Apr.
25, 2013, pet. filed) (citing Cont’l Dredging, Inc. v. De–Kaizered, Inc., 120
S.W.3d 380, 394–95 (Tex.App.–Texarkana 2003, pet. denied). 13.3. The
determination of whether a breach is a material breach of the contract necessarily
turns on the facts of each case. Advance Components, Inc. v. Goodstein, 608
S.W.2d 737, 739 (Tex.App.–Dallas 1980, writ ref’d n.r.e.) ( citing Bowen v.
Briscoe, 453 S.W.2d 287, 289 (Tex.1970)). Citing the Restatement (Second) of
Contracts, section 241 (1981), the Texas Supreme Court noted five circumstances
significant in determining whether a failure to perform is material: (a) the extent
to which the injured party will be deprived of the benefit which he reasonably
expected; (b) the extent to which the injured party can be adequately compensated
for the part of that benefit of which he will be deprived; (c) the extent to which the
party failing to perform or to offer to perform will suffer forfeiture; (d) the
likelihood the party failing to perform or to offer to perform will cure his failure,
taking account of the circumstances including any reasonable assurances; (e) the
extent to which the behavior of the party failing to perform or to offer to perform
comports with standards of good faith and fair dealing. Mustang Pipeline, 134
S.W.3d at 199.
30
Another factor relevant to assessing the materiality of the breach is the extent
to which it reasonably appears to the injured party that delay may prevent or
hinder him in making reasonable substitute arrangements. Id. (citing Restatement
(Second) of Contracts § 242 (1981)).
Fact issues raised:
a. SNB and Light jointly breached the agreement the Short-Term Notes would
be rolled into new debt of the Stretford. (SCR26¶¶20, 21, SCR31¶¶19, 20, 21)
b. SNB and Light conspired to keep Appellant liable by the renewal of the
Short-Term Notes into the 2008 Notes, instead of rolling that debt into new
debt of the Stretford. (SCR83)
c. Had SNB followed through with its agreement, Light would have sole
liability under his guaranty agreements to SNB for all debts of the Stretford.
(SCR65-167)
ISSUE NO. 4. THE TRIAL COURT ERRED IN GRANTING A SUMMARY JUDGMENT
BECAUSE APPELLEE’S SUMMARY JUDGMENT PROOF WAS NOT COMPETENT
SUMMARY JUDGMENT EVIDENCE.
Competent summary judgment proof must be clear, positive, direct, credible, free
from contradiction, and susceptible of being readily controverted. Tex.R. Civ. P.
166a(c); Haynes v. City of Beaumont, 35 S.W.3d 166, 178 (Tex.App.–Texarkana
2000, no pet.). Conclusory statements in affidavits are not competent evidence to
31
support a summary judgment. Id. A conclusory statement is one not providing the
underlying facts to support the statements. Id. Speculative evidence is not competent
summary judgment evidence. Wal–Mart Stores, Inc. v. Gonzalez, 968 S.W.2d 934,
936 (Tex.1998). Moreover, an to be competent summary judgment proof an affidavit
must be made on personal knowledge, and are conclusory as a matter of law if the
affiant fails to provide underlying facts supporting the affiant’s statements. Tex.R.
Civ. P. 166a(f); LeBlanc v. Lamar State College, 232 S.W.3d 294, 301
(Tex.App.–Beaumont 2007, no pet.) (citing 1001 McKinney Ltd. v. Credit Suisse
First Boston Mortg. Capital, 192 S.W.3d 20, 27 (Tex.App.–Houston [14th Dist.]
2005, pet. denied)).
Appellee’s summary judgment evidence consists of four affidavits: Brent A Bates,
L. Read Mortimer, Anson Lang and Kyle A. Owens. (CR208-225)
Bates, an employee of SNB, is merely a custodian of records, and not familiar with
the Stretford loan transactions other than in a custodial manner. The Affidavit of
Bates provides no underlying facts supporting the conclusions in his affidavit that
Appellant signed the 2008 Note, and he proffers no evidence on the issue of failure
of consideration. (CR219) The statements in Affidavit of Bates about Appellant’s
signature and liability are conclusory as a matter of law. Tex.R. Civ. P. 166a(f);
LeBlanc, 232 S.W.3d at 301.
32
Mortimer, an employee of SWOO, is merely a custodian of records, and not
familiar with the Stretford transactions at SNB in any manner. The Affidavit of
Mortimer provides no underlying facts to support the conclusion in his affidavit that
Appellant signed the 2008 Note, and he proffers no evidence on the issue of failure
of consideration. (CR208) The statements in Affidavit of Mortimer about Appellant’s
signature and liability are conclusory as a matter of law. Tex.R. Civ. P. 166a(f);
LeBlanc, 232 S.W.3d at 301.
Lang, an employee of Situs Asset Management, is even more remote to the
Stretford transactions at SNB and his statements are hearsay and conclusions. The
Affidavit of Lang provides no underlying facts to support the conclusion in his
affidavit that Appellant signed the 2008 Note, and he proffers no evidence on the
issue of failure of consideration. (CR213) The statements in Affidavit of Mortimer
about Appellant’s signature and liability are conclusory as a matter of law. Tex.R.
Civ. P. 166a(f); LeBlanc, 232 S.W.3d at 301.
Owens an attorney with Hunton & Williams only has knowledge about the
litigation, and offers no evidence on the issues of liability of the Appellant. (CR224)
ISSUE NO. 5. THE TRIAL COURT ERRED IN GRANTING A SUMMARY JUDGMENT
BECAUSE THE TRIAL COURT ABUSED ITS DISCRETION.
A trial court abuses its discretion if its decision “is arbitrary, unreasonable, and
without reference to guiding principles.” Boerschig v. Southwestern Holdings, Inc.,
33
322 S.W.3d 752, 762–63 (Tex.App.–El Paso 2010, no pet.); Goode v. Shoukfeh, 943
S.W.2d 441, 446 (Tex.1997); Downer v. Aquamarine Operators, Inc., 701 S.W.2d
238, 241–42 (Tex.1985). Specifically, the Trial Court abused its discretion in the
follow matters:
ISSUE NO. 5A. BY FAILING TO RULE ON THE APPELLANT’S OBJECTIONS TO
THE AFFIDAVIT OF BRENT A. BATES; OBJECTIONS TO THE AFFIDAVIT OF
ANSON LANG; AND OBJECTIONS TO THE AFFIDAVIT OF READ MORTIMER.
A trial court does not have the discretion to refuse to rule on objections filed.
In re Shredder Co., 225 S.W.3d 676, 679 (Tex. App–El Paso 2006 orig.
proceeding). The trial court must consider and rule on objections within a
reasonable time. In re Kleven, 100 S.W.3d 643, 644 (Tex. App–Texarkana 2003
orig. proceeding). It is error and abuse of discretion to refuse to rule on a pending
objections. Eli Lilly & Co. v. Marshall, 829 S.W.2d 157, 158 (Tex. 1992).
However, since the trial court implicitly ruled on the Objections by overruling the
Motion for New Trial the Trial Court’s implicit overruling was an abuse of
discretion not founded in reference to guiding principles.
ISSUE NO. 5B. BY FAILING TO REQUIRE APPELLEE TO MEET HIS BURDEN
OF PROOF.
When a plaintiff fails to meet its burden of proof on its , thus the burden did not
shift to Appellant. M. D. Anderson, 28 S.W.3d at 23; therefore, since SWOO was
required to show there was no genuine issue of material fact and it was entitled to
34
judgment as a matter of law and did not, Rule 166a(c); Knott, 128 S.W.3d at 215-
16, thus the Trial Court’s granting the summary judgment was an abuse of
discretion not founded in reference to guiding principles.
ISSUE NO. 5C. BY GRANTING A SUMMARY JUDGMENT IN THE FACE OF FACT
ISSUE SUPPORTING THE ELEMENTS OF APPELLANT’S AFFIRMATIVE DEFENSES.
Appellee pled affirmative defenses and provided summary judgment proof in
support of his affirmative defenses, which evidence was not controverted by the
Appellee as required by law; therefore, Appellee was not entitled to summary
judgment, Brownlee, 665 S.W2d at 112, thus the Trial Court’s granting the
summary judgment was an abuse of discretion not founded in reference to guiding
principles.
CONCLUSION & PRAYER
The Trial Court erred as set forth herein, Appellant respectfully request this
Honorable Court to:
1. Reverse the Summary Judgment and render judgment in favor of Appellant that
Appellee take nothing.
2. Alternatively, reverse the Summary Judgment and:
a. remand this case for a new trial on all issues;
b. remand the case to the Trial Court with instructions to conduct a jury trial
on the disputed fact issues determined by this Honorable Court; or
c. remand the case to the Trial Court with instructions to conduct a jury trial on
the issues of misapplication of law by the Trial Court, as determined by this
Honorable Court.
35
Respectfully submitted,
THE HOLMES LAW FIRM, INC.
By: /s/ Robert H. Holmes
Robert H. Holmes
State Bar No. 09908400
3401 Beverly Drive
Dallas, Texas 75205
Telephone: 214-384-3182
email: rhholmes@swbell.net
ATTORNEY FOR APPELLANT
APPELLANT’S RULE 9.4 CERTIFICATE OF COMPLIANCE
This brief complies with the type-volume limitations of Rule 9.4 because it
contains words 7,463, excluding the parts of the brief exempted by the rule.
/s/ Robert H. Holmes
Robert H. Holmes
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing instrument has been
delivered to the attorney of record for, by electronic service using eFileTexas, on
April 27, 2015.
/s/ Robert H. Holmes
Robert H. Holmes
36
NO. 12-14-00344-CV
IN THE TWELFTH COURT OF APPEALS
AT TYLER, TEXAS
VICTOR LISSIAK, JR.,
Appellant
V.
SW LOAN OO, L.P.,
Appellee
On Appeal from the 7th Judicial District Court, Smith County, Texas
The Honorable Kyle Russell Presiding in Trial Court Case Number 12-0384-A
APPENDIX TO APPELLANT’S BRIEF
THE HOLMES LAW FIRM, INC.
Robert H. Holmes
SBN 09908400
3401 Beverly Drive
Dallas, Texas 75205
Telephone: 214-384-3182
Email: rhholmes@swbell.net
ATTORNEYS FOR APPELLANT
INDEX TO APPENDIX
1. Order Granting Summary Judgment.
2. Amended Motion for New Trial.
3. Omnibus Agreement.
4. Settlement Agreement between Appellee and J. Randolph Light.
5. Tex. Bus. & Com. Code § 1.201 (8) & (21).
6. Tex. Bus. & Com. Code § 1.202(a)(1).
7. Tex. Bus. & Com. Code § 1.206.
8. Tex. Bus. & Com. Code§ 3.302(a)(2)(iii).
9. Tex. Bus. & Com. Code § 3.306
10. Tex. Bus. & Com. Code § 3.308
11. Tex. Bus. & Com. Code § 3.401(a)
12. Tex.Bus. & Com.C. § 3.605
EXHIBIT “1”
EXHIBIT “2”
EXHIBIT “3”
EXHIBIT “4”
or not asserted in the litigation styled J. Randolph Light, et al. v. Stillwater National Bank &
Trust Company, et al., Cause No. 12-0384-A in the 7th District Court of Smith County, Texas,
but excludes any claims arising out of the performance or nonperformance of the Final
Settlement Agreement providing for execution of this Mutual Release. This Mutual Release is
not effective unless and until it has been fully executed by the parties hereto. This Mutual
Release may be executed with one or more separate counterparts and by facsimile or pdf, each of
which, when so executed, shall together constitute and be one of the same instrument.
DATED: ____________________
SW LOAN OO LP
BY SW LOAN OO GP, LLC
GENERAL PARTNER
By: _________________________________
Name: _________________________________
Its: _________________________________
_________________________________
James Randolph Light, Jr.
_________________________________
Merrill Light
_________________________________
Paul Barringer Light
_________________________________
Thomas Gray Light
FORMAL SETTLEMENT AGREEMENT - Page 13 of 16
EXHIBIT “5”
V.T.C.A., Bus. & C. § 1.201 Page 1
Effective: September 1, 2005
Vernon's Texas Statutes and Codes Annotated Currentness
Business and Commerce Code (Refs & Annos)
Title 1. Uniform Commercial Code (Refs & Annos)
Chapter 1. General Provisions (Refs & Annos)
Subchapter B. General Definitions and Principles of Interpretation (Refs & Annos)
§ 1.201. General Definitions
(a) Unless the context otherwise requires, words or phrases defined in this section, or in the
additional definitions contained in other chapters of this title that apply to particular chapters or parts
thereof, have the meanings stated.
(b) Subject to definitions contained in other chapters of this title that apply to particular chapters or
parts thereof:
(1) “Action,” in the sense of a judicial proceeding, includes recoupment, counterclaim, set-off, suit
in equity, and any other proceeding in which rights are determined.
(2) “Aggrieved party” means a party entitled to pursue a remedy.
(3) “Agreement,” as distinguished from “contract,” means the bargain of the parties in fact, as
found in their language or inferred from other circumstances, including course of performance,
course of dealing, or usage of trade as provided in Section 1.303.
(4) “Bank” means a person engaged in the business of banking and includes a savings bank,
savings and loan association, credit union, and trust company.
(5) “Bearer” means a person in control of a negotiable electronic document of title or a person in
possession of a negotiable instrument, a negotiable tangible document of title, or a certificated
security that is payable to bearer or indorsed in blank.
(6) “Bill of lading” means a document of title evidencing the receipt of goods for shipment issued
by a person engaged in the business of directly or indirectly transporting or forwarding goods. The
term does not include a warehouse receipt.
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
V.T.C.A., Bus. & C. § 1.201 Page 2
(7) “Branch” includes a separately incorporated foreign branch of a bank.
(8) “Burden of establishing” a fact means the burden of persuading the trier of fact that the
existence of the fact is more probable than its nonexistence.
(9) “Buyer in ordinary course of business” means a person that buys goods in good faith, without
knowledge that the sale violates the rights of another person in the goods, and in the ordinary
course from a person, other than a pawnbroker, in the business of selling goods of that kind. A
person buys goods in the ordinary course if the sale to the person comports with the usual or
customary practices in the kind of business in which the seller is engaged or with the seller's own
usual or customary practices. A person that sells oil, gas, or other minerals at the wellhead or
minehead is a person in the business of selling goods of that kind. A buyer in ordinary course of
business may buy for cash, by exchange of other property, or on secured or unsecured credit, and
may acquire goods or documents of title under a preexisting contract for sale. Only a buyer that
takes possession of the goods or has a right to recover the goods from the seller under Chapter 2
may be a buyer in ordinary course of business. “Buyer in ordinary course of business” does not
include a person that acquires goods in a transfer in bulk or as security for or in total or partial
satisfaction of a money debt.
(10) “Conspicuous,” with reference to a term, means so written, displayed, or presented that a
reasonable person against which it is to operate ought to have noticed it. Whether a term is
“conspicuous” or not is a decision for the court. Conspicuous terms include the following:
(A) a heading in capitals equal to or greater in size than the surrounding text, or in contrasting
type, font, or color to the surrounding text of the same or lesser size; and
(B) language in the body of a record or display in larger type than the surrounding text, or in
contrasting type, font, or color to the surrounding text of the same size, or set off from
surrounding text of the same size by symbols or other marks that call attention to the language.
(11) “Consumer” means an individual who enters into a transaction primarily for personal, family,
or household purposes.
(12) “Contract,” as distinguished from “agreement,” means the total legal obligation that results
from the parties' agreement as determined by this title as supplemented by any other applicable
laws.
(13) “Creditor” includes a general creditor, a secured creditor, a lien creditor and any representative
of creditors, including an assignee for the benefit of creditors, a trustee in bankruptcy, a receiver
in equity and an executor or administrator of an insolvent debtor's or assignor's estate.
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
V.T.C.A., Bus. & C. § 1.201 Page 3
(14) “Defendant” includes a person in the position of defendant in a counterclaim, cross-claim, or
third-party claim.
(15) “Delivery,” with respect to an electronic document of title, means voluntary transfer of
control, and with respect to an instrument, a tangible document of title, or chattel paper, means
voluntary transfer of possession.
(16) “Document of title” means a record that in the regular course of business or financing is
treated as adequately evidencing that the person in possession or control of the record is entitled
to receive, control, hold, and dispose of the record and the goods the record covers, and purports
to be issued by or addressed to a bailee and to cover goods in the bailee's possession which are
either identified or are fungible portions of an identified mass. The term includes a bill of lading,
transport document, dock warrant, dock receipt, warehouse receipt, and order for delivery of goods.
An electronic document of title is evidenced by a record consisting of information stored in an
electronic medium. A tangible document of title is evidenced by a record consisting of information
that is inscribed on a tangible medium.
(17) “Fault” means a default, breach, or wrongful act or omission.
(18) “Fungible goods” means:
(A) goods of which any unit, by nature or usage of trade, is the equivalent of any other like unit;
or
(B) goods that by agreement are treated as equivalent.
(19) “Genuine” means free of forgery or counterfeiting.
(20) “Good faith,” except as otherwise provided in Chapter 5, means honesty in fact and the
observance of reasonable commercial standards of fair dealing.
(21) “Holder” means:
(A) the person in possession of a negotiable instrument that is payable either to bearer or to an
identified person that is the person in possession;
(B) the person in possession of a negotiable tangible document of title if the goods are
deliverable either to bearer or to the order of the person in possession; or
(C) a person in control of a negotiable electronic document of title.
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V.T.C.A., Bus. & C. § 1.201 Page 4
(22) “Insolvency proceeding ” includes an assignment for the benefit of creditors or other
proceeding intended to liquidate or rehabilitate the estate of the person involved.
(23) “Insolvent” means:
(A) having generally ceased to pay debts in the ordinary course of business other than as a result
of a bona fide dispute;
(B) being unable to pay debts as they become due; or
(C) being insolvent within the meaning of the federal bankruptcy law.
(24) “Money” means a medium of exchange currently authorized or adopted by a domestic or
foreign government. The term includes a monetary unit of account established by an
intergovernmental organization or by agreement between two or more countries.
(25) “Organization” means a person other than an individual.
(26) “Party,” as distinguished from “third party,” means a person that has engaged in a transaction
or made an agreement subject to this title.
(27) “Person” means an individual, corporation, business trust, estate, trust, partnership, limited
liability company, association, joint venture, government, governmental subdivision, agency, or
instrumentality, public corporation, or any other legal or commercial entity.
(28) “Present value” means the amount as of a date certain of one or more sums payable in the
future, discounted to the date certain by use of either an interest rate specified by the parties if that
rate is not manifestly unreasonable at the time the transaction is entered into or, if an interest rate
is not so specified, a commercially reasonable rate that takes into account the facts and
circumstances at the time the transaction is entered into.
(29) “Purchase” means taking by sale, lease, discount, negotiation, mortgage, pledge, lien, security
interest, issue or reissue, gift, or any other voluntary transaction creating an interest in property.
(30) “Purchaser” means a person that takes by purchase.
(31) “Record” means information that is inscribed on a tangible medium or that is stored in an
electronic or other medium and is retrievable in perceivable form.
(32) “Remedy” means any remedial right to which an aggrieved party is entitled with or without
resort to a tribunal.
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
V.T.C.A., Bus. & C. § 1.201 Page 5
(33) “Representative” means a person empowered to act for another, including an agent, an officer
of a corporation or association, and a trustee, executor, or administrator of an estate.
(34) “Right” includes remedy.
(35) “Security interest” means an interest in personal property or fixtures which secures payment
or performance of an obligation. “Security interest” includes any interest of a consignor and a
buyer of accounts, chattel paper, a payment intangible, or a promissory note in a transaction that
is subject to Chapter 9. “Security interest” does not include the special property interest of a buyer
of goods on identification of those goods to a contract for sale under Section 2.401, but a buyer
may also acquire a “security interest” by complying with Chapter 9. Except as otherwise provided
in Section 2.505, the right of a seller or lessor of goods under Chapter 2 or 2A to retain or acquire
possession of the goods is not a “security interest,” but a seller or lessor may also acquire a
“security interest” by complying with Chapter 9. The retention or reservation of title by a seller of
goods notwithstanding shipment or delivery to the buyer under Section 2.401 is limited in effect
to a reservation of a “security interest.” Whether a transaction in the form of a lease creates a
security interest is determined pursuant to Section 1.203.
(36) “Send” in connection with a writing, record, or notice means:
(A) to deposit in the mail or deliver for transmission by any other usual means of communication
with postage or cost of transmission provided for and properly addressed and, in the case of an
instrument, to an address specified thereon or otherwise agreed, or if there be none to any address
reasonable under the circumstances; or
(B) in any other way cause to be received any record or notice within the time at which it would
have arrived if properly sent.
(37) “Signed” includes using any symbol executed or adopted with present intention to adopt or
accept a writing.
(38) “State” means a State of the United States, the District of Columbia, Puerto Rico, the United
States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United
States.
(39) “Surety” includes a guarantor or other secondary obligor.
(40) “Term” means a portion of an agreement that relates to a particular matter.
(41) “Unauthorized signature” means a signature made without actual, implied, or apparent
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
V.T.C.A., Bus. & C. § 1.201 Page 6
authority. The term includes a forgery.
(42) “Warehouse receipt” means a document of title issued by a person engaged in the business
of storing goods for hire.
(43) “Writing” includes printing, typewriting, or any other intentional reduction to tangible form.
“Written” has a corresponding meaning.
CREDIT(S)
Amended by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1, 2003; Acts 2005, 79th Leg., ch. 122,
§ 2, eff. Sept. 1, 2005.
Current through the end of the 2013 Third Called Session of the 83rd Legislature
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END OF DOCUMENT
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
EXHIBIT “6”
V.T.C.A., Bus. & C. § 1.202 Page 1
Effective: September 1, 2003
Vernon's Texas Statutes and Codes Annotated Currentness
Business and Commerce Code (Refs & Annos)
Title 1. Uniform Commercial Code (Refs & Annos)
Chapter 1. General Provisions (Refs & Annos)
Subchapter B. General Definitions and Principles of Interpretation (Refs & Annos)
§ 1.202. Notice; Knowledge
(a) Subject to Subsection (f), a person has “notice” of a fact if the person:
(1) has actual knowledge of it;
(2) has received a notice or notification of it; or
(3) from all the facts and circumstances known to the person at the time in question, has reason to
know that it exists.
(b) “Knowledge” means actual knowledge. “Knows” has a corresponding meaning.
(c) “Discover,” “learn,” or words of similar import refer to knowledge rather than to reason to know.
(d) A person “notifies” or “gives” a notice or notification to another person by taking such steps as
may be reasonably required to inform the other person in ordinary course, whether or not the other
person actually comes to know of it.
(e) Subject to Subsection (f), a person “receives” a notice or notification when:
(1) it comes to that person's attention; or
(2) it is duly delivered in a form reasonable under the circumstances at the place of business
through which the contract was made or at another location held out by that person as the place for
receipt of such communications.
(f) Notice, knowledge, or a notice or notification received by an organization is effective for a
particular transaction from the time it is brought to the attention of the individual conducting that
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
V.T.C.A., Bus. & C. § 1.202 Page 2
transaction and, in any event, from the time it would have been brought to the individual's attention
if the organization had exercised due diligence. An organization exercises due diligence if it
maintains reasonable routines for communicating significant information to the person conducting
the transaction and there is reasonable compliance with the routines. Due diligence does not require
an individual acting for the organization to communicate information unless the communication is
part of the individual's regular duties or the individual has reason to know of the transaction and that
the transaction would be materially affected by the information.
CREDIT(S)
Amended by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1, 2003.
Current through the end of the 2013 Third Called Session of the 83rd Legislature
(C) 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
END OF DOCUMENT
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
EXHIBIT “7”
V.T.C.A., Bus. & C. § 1.206 Page 1
Effective: September 1, 2003
Vernon's Texas Statutes and Codes Annotated Currentness
Business and Commerce Code (Refs & Annos)
Title 1. Uniform Commercial Code (Refs & Annos)
Chapter 1. General Provisions (Refs & Annos)
Subchapter B. General Definitions and Principles of Interpretation (Refs & Annos)
§ 1.206. Presumptions
Whenever this title creates a “presumption” with respect to a fact, or provides that a fact is
“presumed,” the trier of fact must find the existence of the fact unless and until evidence is
introduced that supports a finding of its nonexistence.
CREDIT(S)
Amended by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1, 2003.
Current through the end of the 2013 Third Called Session of the 83rd Legislature
(C) 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
END OF DOCUMENT
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
EXHIBIT “8”
V.T.C.A., Bus. & C. § 3.302 Page 1
Effective:[See Text Amendments]
Vernon's Texas Statutes and Codes Annotated Currentness
Business and Commerce Code (Refs & Annos)
Title 1. Uniform Commercial Code (Refs & Annos)
Chapter 3. Negotiable Instruments (Refs & Annos)
Subchapter C. Enforcement of Instruments
§ 3.302. Holder in Due Course
(a) Subject to Subsection (c) and Section 3.106(d), “holder in due course” means the holder of an
instrument if:
(1) the instrument when issued or negotiated to the holder does not bear such apparent evidence
of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its
authenticity; and
(2) the holder took the instrument:
(A) for value;
(B) in good faith;
(C) without notice that the instrument is overdue or has been dishonored or that there is an
uncured default with respect to payment of another instrument issued as part of the same series;
(D) without notice that the instrument contains an unauthorized signature or has been altered;
(E) without notice of any claim to the instrument described in Section 3.306; and
(F) without notice that any party has a defense or claim in recoupment described in Section
3.305(a).
(b) Notice of discharge of a party, other than discharge in an insolvency proceeding, is not notice of
a defense under Subsection (a), but discharge is effective against a person who became a holder in
due course with notice of the discharge. Public filing or recording of a document does not of itself
constitute notice of a defense, claim in recoupment, or claim to the instrument.
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
V.T.C.A., Bus. & C. § 3.302 Page 2
(c) Except to the extent a transferor or predecessor in interest has rights as a holder in due course,
a person does not acquire rights of a holder in due course of an instrument taken:
(1) by legal process or by purchase in an execution, bankruptcy, or creditor's sale or similar
proceeding;
(2) by purchase as part of a bulk transaction not in ordinary course of business of the transferor;
or
(3) as the successor in interest to an estate or other organization.
(d) If, under Section 3.303(a)(1), the promise of performance that is the consideration for an
instrument has been partially performed, the holder may assert rights as a holder in due course of the
instrument only to the fraction of the amount payable under the instrument equal to the value of the
partial performance divided by the value of the promised performance.
(e) If (i) the person entitled to enforce an instrument has only a security interest in the instrument,
and (ii) the person obliged to pay the instrument has a defense, claim in recoupment, or claim to the
instrument that may be asserted against the person who granted the security interest, the person
entitled to enforce the instrument may assert rights as a holder in due course only to an amount
payable under the instrument that, at the time of enforcement of the instrument, does not exceed the
amount of the unpaid obligation secured.
(f) To be effective, notice must be received at a time and in a manner that gives a reasonable
opportunity to act on it.
(g) This section is subject to any law limiting status as a holder in due course in particular classes
of transactions.
CREDIT(S)
Amended by Acts 1995, 74th Leg., ch. 921, § 1, eff. Jan. 1, 1996.
Current through the end of the 2013 Third Called Session of the 83rd Legislature
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END OF DOCUMENT
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
V.T.C.A., Bus. & C. § 3.302 Page 3
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
EXHIBIT “9”
V.T.C.A., Bus. & C. § 3.306 Page 1
Effective:[See Text Amendments]
Vernon's Texas Statutes and Codes Annotated Currentness
Business and Commerce Code (Refs & Annos)
Title 1. Uniform Commercial Code (Refs & Annos)
Chapter 3. Negotiable Instruments (Refs & Annos)
Subchapter C. Enforcement of Instruments
§ 3.306. Claims to an Instrument
A person taking an instrument, other than a person having rights of a holder in due course, is subject
to a claim of a property or possessory right in the instrument or its proceeds, including a claim to
rescind a negotiation and to recover the instrument or its proceeds. A person having rights of a holder
in due course takes free of the claim to the instrument.
CREDIT(S)
Amended by Acts 1995, 74th Leg., ch. 921, § 1, eff. Jan. 1, 1996.
Current through the end of the 2013 Third Called Session of the 83rd Legislature
(C) 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
END OF DOCUMENT
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
EXHIBIT “10”
V.T.C.A., Bus. & C. § 3.308 Page 1
Effective:[See Text Amendments]
Vernon's Texas Statutes and Codes Annotated Currentness
Business and Commerce Code (Refs & Annos)
Title 1. Uniform Commercial Code (Refs & Annos)
Chapter 3. Negotiable Instruments (Refs & Annos)
Subchapter C. Enforcement of Instruments
§ 3.308. Proof of Signatures and Status as Holder in Due Course
(a) In an action with respect to an instrument, the authenticity of, and authority to make, each
signature on the instrument are admitted unless specifically denied in the pleadings. If the validity
of a signature is denied in the pleadings, the burden of establishing validity is on the person claiming
validity, but the signature is presumed to be authentic and authorized unless the action is to enforce
the liability of the purported signer and the signer is dead or incompetent at the time of trial of the
issue of validity of the signature. If an action to enforce the instrument is brought against a person
as the undisclosed principal of a person who signed the instrument as a party to the instrument, the
plaintiff has the burden of establishing that the defendant is liable on the instrument as a represented
person under Section 3.402(a).
(b) If the validity of signatures is admitted or proved and there is compliance with Subsection (a),
a plaintiff producing the instrument is entitled to payment if the plaintiff proves entitlement to
enforce the instrument under Section 3.301, unless the defendant proves a defense or claim in
recoupment. If a defense or claim in recoupment is proved, the right to payment of the plaintiff is
subject to the defense or claim, except to the extent the plaintiff proves that the plaintiff has rights
of a holder in due course that are not subject to the defense or claim.
CREDIT(S)
Added by Acts 1995, 74th Leg., ch. 921, § 1, eff. Jan. 1, 1996.
Current through the end of the 2013 Third Called Session of the 83rd Legislature
(C) 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
END OF DOCUMENT
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
V.T.C.A., Bus. & C. § 3.308 Page 2
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
EXHIBIT “11”
V.T.C.A., Bus. & C. § 3.401 Page 1
Effective:[See Text Amendments]
Vernon's Texas Statutes and Codes Annotated Currentness
Business and Commerce Code (Refs & Annos)
Title 1. Uniform Commercial Code (Refs & Annos)
Chapter 3. Negotiable Instruments (Refs & Annos)
Subchapter D. Liability of Parties
§ 3.401. Signature
(a) A person is not liable on an instrument unless the person:
(1) signed the instrument; or
(2) is represented by an agent or representative who signed the instrument and the signature is
binding on the represented person under Section 3.402.
(b) A signature may be made (i) manually or by means of a device or machine, and (ii) by the use
of any name, including a trade or assumed name, or by a word, mark, or symbol executed or adopted
by a person with present intention to authenticate a writing.
CREDIT(S)
Amended by Acts 1995, 74th Leg., ch. 921, § 1, eff. Jan. 1, 1996.
Current through the end of the 2013 Third Called Session of the 83rd Legislature
(C) 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
END OF DOCUMENT
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
EXHIBIT “12”
V.T.C.A., Bus. & C. § 3.605 Page 1
Effective: September 1, 2007
Vernon's Texas Statutes and Codes Annotated Currentness
Business and Commerce Code (Refs & Annos)
Title 1. Uniform Commercial Code (Refs & Annos)
Chapter 3. Negotiable Instruments (Refs & Annos)
Subchapter F. Discharge and Payment
§ 3.605. Discharge of Secondary Obligors
(a) If a person entitled to enforce an instrument releases the obligation of a principal obligor in whole
or in part, and another party to the instrument is a secondary obligor with respect to the obligation
of that principal obligor, the following rules apply:
(1) Any obligations of the principal obligor to the secondary obligor with respect to any previous
payment by the secondary obligor are not affected. Unless the terms of the release preserve the
secondary obligor's recourse, the principal obligor is discharged, to the extent of the release, from
any other duties to the secondary obligor under this chapter.
(2) Unless the terms of the release provide that the person entitled to enforce the instrument retains
the right to enforce the instrument against the secondary obligor, the secondary obligor is
discharged to the same extent as the principal obligor from any unperformed portion of its
obligation on the instrument. If the instrument is a check and the obligation of the secondary
obligor is based on an indorsement of the check, the secondary obligor is discharged without
regard to the language or circumstances of the discharge or other release.
(3) If the secondary obligor is not discharged under Subdivision (2), the secondary obligor is
discharged to the extent of the value of the consideration for the release, and to the extent that the
release would otherwise cause the secondary obligor a loss.
(b) If a person entitled to enforce an instrument grants a principal obligor an extension of the time
at which one or more payments are due on the instrument and another party to the instrument is a
secondary obligor with respect to the obligation of that principal obligor, the following rules apply:
(1) Any obligations of the principal obligor to the secondary obligor with respect to any previous
payment by the secondary obligor are not affected. Unless the terms of the extension preserve the
secondary obligor's recourse, the extension correspondingly extends the time for performance of
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
V.T.C.A., Bus. & C. § 3.605 Page 2
any other duties owed to the secondary obligor by the principal obligor under this chapter.
(2) The secondary obligor is discharged to the extent that the extension would otherwise cause the
secondary obligor a loss.
(3) To the extent that the secondary obligor is not discharged under Subdivision (2), the secondary
obligor may perform its obligations to a person entitled to enforce the instrument as if the time for
payment had not been extended or, unless the terms of the extension provide that the person
entitled to enforce the instrument retains the right to enforce the instrument against the secondary
obligor as if the time for payment had not been extended, treat the time for performance of its
obligations as having been extended correspondingly.
(c) If a person entitled to enforce an instrument agrees, with or without consideration, to a
modification of the obligation of a principal obligor other than a complete or partial release or an
extension of the due date and another party to the instrument is a secondary obligor with respect to
the obligation of that principal obligor, the following rules apply:
(1) Any obligations of the principal obligor to the secondary obligor with respect to any previous
payment by the secondary obligor are not affected. The modification correspondingly modifies any
other duties owed to the secondary obligor by the principal obligor under this chapter.
(2) The secondary obligor is discharged from any unperformed portion of its obligation to the
extent that the modification would otherwise cause the secondary obligor a loss.
(3) To the extent that the secondary obligor is not discharged under Subdivision (2), the secondary
obligor may satisfy its obligation on the instrument as if the modification had not occurred, or treat
its obligation on the instrument as having been modified correspondingly.
(d) If the obligation of a principal obligor is secured by an interest in collateral, another party to the
instrument is a secondary obligor with respect to that obligation, and a person entitled to enforce the
instrument impairs the value of the interest in collateral, the obligation of the secondary obligor is
discharged to the extent of the impairment. The value of an interest in collateral is impaired to the
extent the value of the interest is reduced to an amount less than the amount of the recourse of the
secondary obligor, or the reduction in value of the interest causes an increase in the amount by which
the amount of the recourse exceeds the value of the interest. For purposes of this subsection,
impairing the value of an interest in collateral includes failure to obtain or maintain perfection or
recordation of the interest in collateral, release of collateral without substitution of collateral of equal
value or equivalent reduction of the underlying obligation, failure to perform a duty to preserve the
value of collateral owed, under Chapter 9 or other law, to a debtor or other person secondarily liable,
and failure to comply with applicable law in disposing of or otherwise enforcing the interest in
collateral.
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
V.T.C.A., Bus. & C. § 3.605 Page 3
(e) A secondary obligor is not discharged under Subsection (a)(3), (b), (c), or (d) unless the person
entitled to enforce the instrument knows that the person is a secondary obligor or has notice under
Section 3.419(c) that the instrument was signed for accommodation.
(f) A secondary obligor is not discharged under this section if the secondary obligor consents to the
event or conduct that is the basis of the discharge, or the instrument or a separate agreement of the
party provides for waiver of discharge under this section specifically or by general language
indicating that parties waive defenses based on suretyship or impairment of collateral. Unless the
circumstances indicate otherwise, consent by the principal obligor to an act that would lead to a
discharge under this section constitutes consent to that act by the secondary obligor if the secondary
obligor controls the principal obligor or deals with the person entitled to enforce the instrument on
behalf of the principal obligor.
(g) A release or extension preserves a secondary obligor's recourse if the terms of the release or
extension provide that:
(1) the person entitled to enforce the instrument retains the right to enforce the instrument against
the secondary obligor; and
(2) the recourse of the secondary obligor continues as if the release or extension had not been
granted.
(h) Except as otherwise provided in Subsection (i), a secondary obligor asserting discharge under
this section has the burden of persuasion both with respect to the occurrence of the acts alleged to
harm the secondary obligor and loss or prejudice caused by those acts.
(i) If the secondary obligor demonstrates prejudice caused by an impairment of its recourse, and the
circumstances of the case indicate that the amount of loss is not reasonably susceptible of calculation
or requires proof of facts that are not ascertainable, it is presumed that the act impairing recourse
caused a loss or impairment equal to the liability of the secondary obligor on the instrument. In that
event, the burden of persuasion as to any lesser amount of the loss is on the person entitled to enforce
the instrument.
CREDIT(S)
Amended by Acts 1995, 74th Leg., ch. 921, § 1, eff. Jan. 1, 1996; Acts 2005, 79th Leg., ch. 95, § 14,
eff. Sept. 1, 2005; Acts 2007, 80th Leg., ch. 427, § 3, eff. Sept. 1, 2007.
Current through the end of the 2013 Third Called Session of the 83rd Legislature
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
V.T.C.A., Bus. & C. § 3.605 Page 4
(C) 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.
END OF DOCUMENT
© 2015 Thomson Reuters. No Claim to Orig. US Gov. Works.