Scott's Big Truck Sales, LLC Don's Big Truck Sales, LLC Donald R. Scott And Johnny A. Scott v. Automotive Finance Corporation ( 2020 )

In the
Court of Appeals
Second Appellate District of Texas
at Fort Worth
___________________________
No. 02-19-00304-CV
___________________________
SCOTT’S BIG TRUCK SALES, LLC; DON’S BIG TRUCK SALES, LLC;
DONALD R. SCOTT; AND JOHNNY A. SCOTT, Appellants
V.
AUTOMOTIVE FINANCE CORPORATION, APPELLEE
On Appeal from the 96th District Court
Tarrant County, Texas
Trial Court No. 096-291366-17
Before Gabriel, Womack, and Wallach, JJ.
MEMORANDUM OPINION BY JUSTICE GABRIEL
JUSTICE WOMACK CONCURS WITHOUT OPINION.
MEMORANDUM OPINION
This appeal is from a final judgment awarding damages and attorney’s fees to
appellee and lender Automotive Finance Corporation (AFC) in its suit to collect a
debt from appellants and borrowers Scott’s Big Truck Sales, LLC, and Don’s Big
Truck Sales, LLC and from appellants and guarantors Donald R. Scott and Johnny A.
Scott. The trial court’s final judgment incorporated and was based on its partial
summary judgment for AFC on its breach-of-contract, breach-of-guaranty, and
Indiana statutory claims for fraud and deception. We affirm in part and reverse and
remand in part.
I. BACKGROUND
Scott’s Big Truck Sales and Don’s Big Truck Sales signed notes1 with AFC
under a floorplan-lending arrangement, in which the lender provides financing to an
auto dealership on a vehicle-by-vehicle basis so that the dealership can buy inventory.
The dealer is obligated to repay the lender when the dealer sells the particular vehicle
that had been financed. In conjunction with the notes, Donald Scott signed a
guaranty of payment for amounts due on the Scott’s Big Truck Sales note, and Johnny
Scott signed a guaranty of payment for amounts due on the Don’s Big Truck Sales
note. Donald was a member of Scott’s Big Truck Sales and Johnny a member of
Don’s Big Truck Sales.
1
Scott’s Big Truck Sales signed two notes, and Don’s Big Truck Sales signed
one.
2
AFC eventually sued Scott’s Big Truck Sales, Don’s Big Truck Sales, Donald,
and Johnny (all four, collectively, the Scotts) to recover amounts it claimed were due
on the notes and guaranty agreements. As part of the suit, AFC attempted to recover
via sequestration four vehicles that had been sold but for which the Scotts had not
remitted payment to AFC. AFC recovered two of the vehicles and credited the
accounts accordingly. But it was not able to recover two others. As to those vehicles,
AFC sought statutory civil damages for fraud and deception under Indiana law.
After AFC moved for summary judgment on its claims, the Scotts filed a plea
to the jurisdiction challenging AFC’s standing to sue them. AFC filed a response and
attached evidence. The Scotts objected to a portion of AFC’s summary-judgment
evidence, but the trial court overruled all of their objections. The trial court did not
sign a written order on the plea to the jurisdiction at the time, but it did grant AFC
partial summary judgment on all of its claims except its request for attorney’s fees.2
AFC then filed a second summary-judgment motion as to attorney’s fees, and
the Scotts filed a motion asking the trial court to reconsider its partial summary
judgment ruling and the jurisdictional issue. The trial court granted AFC summary
judgment on its attorney’s fees request, denied the Scotts’ motion to reconsider, and
2
AFC had initially sought summary judgment on its attorney’s-fees request, but
it withdrew that part of its motion in light of the Texas Supreme Court’s opinion in
Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469, 496–503 (Tex.
2019). The trial court’s partial summary judgment order stated that the court would
consider the attorney’s fees request at a later date “upon presentation.”
3
rendered a final judgment incorporating the partial summary judgment and awarding
AFC attorney’s fees. The Scotts appeal.
II. STANDING TO ENFORCE NOTES
In their first issue, the Scotts argue that AFC did not prove its standing to
maintain a suit against them based on the debt. They base their argument primarily
on the loan-related documents attached to AFC’s pleadings and incorporated into
those pleadings by reference; all of those documents state, at the bottom of each page,
“This receivable has been sold to AFC Funding Corporation and an interest therein
has been granted to [either BMO Capital Markets Corp. or Bank of Montreal] as
agent.” The Scotts contend that this statement is a judicial admission that when AFC
filed suit, it no longer had any interest in the notes it sought to enforce and, therefore,
that AFC pled facts negating its standing. See Rockwell Commons Assocs., Ltd. v. MRC
Mtg. Grantor Trust I, 331 S.W.3d 500, 505 (Tex. App.––El Paso 2010, no pet.) (noting
that element of suit to recover on promissory note is that plaintiff is legal owner and
holder of note). The Scotts raised this issue in their plea to the jurisdiction and also in
their response to AFC’s summary-judgment motion.3 AFC argued in its motion for
summary judgment that it was the appropriate party to enforce the contracts.
3
In accordance with the Scotts’ briefing, we review this issue in the context of
the trial court’s ruling on the plea to the jurisdiction. Although the trial court did not
initially render an order on the plea to the jurisdiction, it expressly denied it by
denying the Scotts’ motion to reconsider, in which they had asked the trial court to
dismiss AFC’s “case for want of jurisdiction.” Cf. Bass v. Waller Cty. Sub-Reg’l Planning
Comm’n, 514 S.W.3d 908, 912 (Tex. App.––Austin 2017, no pet.) (declining to
4
A. STANDARD OF REVIEW
We review de novo a trial court’s ruling on jurisdiction. See Tex. Dep’t of Parks
& Wildlife v. Miranda, 133 S.W.3d 217, 228 (Tex. 2004) (op. on reh’g); Tex. Ass’n of Bus.
v. Tex. Air Control Bd., 852 S.W.2d 440, 443 (Tex. 1993) (holding that lack of standing
defeats a trial court’s subject-matter jurisdiction). A plaintiff must plead facts that
affirmatively show trial-court jurisdiction. Tex. Ass’n of Bus., 852 S.W.2d at 446. We
construe the pleadings liberally in the plaintiff’s favor, accept all factual allegations as
true, and look to the plaintiff’s intent. Heckman v. Williamson Cty., 369 S.W.3d 137, 150
(Tex. 2012). We consider relevant evidence of jurisdictional facts when necessary to
resolve the jurisdictional issues raised taking as true all evidence favorable to the
nonmovant, indulging every reasonable inference, and resolving any doubts in the
nonmovant’s favor. Miranda, 133 S.W.3d at 227–28. If the evidence creates a fact
question regarding the jurisdictional issue, then the trial court cannot grant the plea to
the jurisdiction, and the fact issue will be resolved by the factfinder. Id. But if the
relevant evidence is undisputed or fails to raise a fact question on the jurisdictional
issue, the trial court rules on the plea to the jurisdiction as a matter of law. Id. at 228.
consider trial court’s lack of ruling on jurisdictional plea in context of interlocutory
appeal from partial summary judgment). But even if we were to review the standing
issue solely in the context of the trial court’s partial-summary-judgment ruling, our
holding would be the same.
5
B. ANALYSIS
The notes and guaranty agreements provide that the documents are to be
construed according to Indiana law.4 Both Indiana and Texas law provide that a note
may be enforced by an owner and holder. See Ind. Code §§ 26-1-1-201(20)(A), 26-1-
3.1-301; Tex. Bus. & Com. Code Ann. § 3.301; Collins v. HSBC Bank USA, Nat’l Ass’n,
974 N.E.2d 537, 540–41 (Ind. Ct. App. 2012); cf. Manley v. Wachovia Small Bus. Capital,
349 S.W.3d 233, 240 (Tex. App.—Dallas 2011, pet. denied) (“The owner of a note
may enforce the note even if he is not a holder.”). A holder is a person who
possesses a negotiable instrument payable to an identified person when the one in
possession is the person identified in the note. Pichon v. Am. Heritage Banco, Inc.,
983 N.E.2d 589, 599 (Ind. Ct. App. 2013) (citing Ind. Code § 26-1-1-201(20)), trans.
denied; Haley v. Beneficial Fin. I Inc., No. 13-18-00058-CV, 2019 WL 2709015, at *4 (Tex.
App.—Corpus Christi–Edinburg June 28, 2019, no pet.) (mem. op.).
According to the Scotts, the form language on the notes stating that “[t]his
receivable has been sold” proves conclusively that AFC has no right to enforce them.
4
When parties have contractually chosen the law of another state to govern
disputes, matters of remedy and procedure are still governed by Texas law in Texas
courts. Bayer Corp. v. DX Terminals, Ltd., 214 S.W.3d 586, 594 n.3 (Tex. App.—
Houston [14th Dist.] 2006, pet. denied). Additionally, even if the parties had disputed
which state’s law applies, we would not need to engage in a choice-of-law analysis
here, except as to the Indiana statutory law, because Texas law regarding the notes
and guaranty agreements is consistent with Indiana law. See In re Wells Fargo Bank
Minn. N.A., 115 S.W.3d 600, 606 (Tex. App.—Houston [14th Dist.] 2003, orig.
proceeding [mand. denied]).
6
The Scotts also point to legends printed on a report attached as evidence to AFC’s
motion for partial summary judgment for their argument’s support:
THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD
TO AFC FUNDING CORPORATION PURSUANT TO AN
AMENDED AND RESTATED PURCHASE AND SALE
AGREEMENT, DATED AS OF MAY 31, 2002 BETWEEN
AUTOMOTIVE FINANCE CORPORATION AND AFC
FUNDING CORPORATION, AS AMENDED; AND AN
INTEREST IN THE RECEIVABLES DESCRIBED HEREIN HAS
BEEN GRANTED TO THE AGENT FOR THE BENEFIT OF
THE SECURED PARTIES, PURSUANT TO A SEVENTH
AMENDED AND RESTATED RECEIVABLES PURCHASE
AGREEMENT, DATED AS OF DECEMBER 20, 2016 AMONG
AFC FUNDING CORPORATION, AS SELLER, AUTOMOTIVE
FINANCE CORPORATION, AS SERVICER, FAIRWAY FINANCE
COMPANY, LLC AND SUCH OTHER ENTITIES FROM TIME
TO TIME AS MAY BECOME PURCHASERS THEREUNDER,
BANK OF MONTREAL, AS AGENT, BMO CAPITAL MARKETS
CORP. AS PURCHASER AGENT FOR FAIRWAY FINANCE
COMPANY, LLC, AND THE PURCHASER AGENTS FOR SUCH
OTHER PURCHASERS THEREUNDER, AS AMENDED.[5]
But AFC contends that it sold only the right to payment under the notes and
that it retains an ownership interest in the loan documents.6 AFC attached to its
response to the Scotts’ plea to the jurisdiction two affidavits from Dwayne Price:7 one
5
The report also contains a similar legend as to “CANADIAN
RECEIVABLES.”
6
AFC also argued in its response to the Scotts’ plea to the jurisdiction that its
status as servicer of the “receivables” gave it standing. But we need not address that
alternative ground for standing. See Tex. R. App. P. 47.1.
7
On appeal, the Scotts complain that the affidavits were unsworn and that one
of them did not sufficiently authenticate the attached pool-receivables sales
agreement. But the Scotts did not complain about these form defects in the trial
7
as its assistant treasurer and the other as the assistant treasurer of AFC Funding
Corporation (Funding). Price averred that AFC created Funding as a wholly owned
subsidiary “solely for the purpose of purchasing finance receivables from AFC and
selling undivided participation interests in the pool of finance receivables, referred to
as a securitization pool, to a bank[-]conduit facility on a revolving basis.” According
to Price, “AFC does not sell, and Funding does not purchase, the underlying loan
contracts between AFC and the used vehicle dealers who are its customers.” Price
averred that AFC made loans to the two dealerships––Scott’s Big Truck Sales and
Don’s Big Truck Sales––“and [then] sold the rights to payment thereunder (the
‘Receivables’) into Funding’s securitization pool.” AFC is the servicer for the pool
and is responsible for collecting all the pool receivables.
AFC also attached as evidence the “Receivables Purchase Agreement” signed
by Funding as “Seller,” AFC as “Servicer,” and Bank of Montreal as the agent for
seven named purchasers. Under that agreement, each purchaser would periodically
“purchase and make reinvestments of” defined percentages of “Pool Receivables.” A
“Pool Receivable” is defined as “a Receivable conveyed to the Seller pursuant to the
court; therefore, they did not preserve that part of their complaint for appeal. See Seim
v. Allstate Tex. Lloyds, 551 S.W.3d 161, 166 (Tex. 2018) (per curiam); Cty. of El Paso v.
Baker, 579 S.W.3d 686, 694 (Tex. App.––El Paso 2019, no pet.); see also Mansions in the
Forest, L.P. v. Montgomery Cty., 365 S.W.3d 314, 317 (Tex. 2012) (per curiam); Haase v.
Abraham, Watkins, Nichols, Sorrels, Agosto & Friend, L.L.P., 499 S.W.3d 169, 175, 178
(Tex. App.—Houston [14th Dist.] 2016, pet. denied).
8
Purchase and Sale Agreement and not reconveyed to the Originator[8] in accordance
with the terms of the Purchase and Sale Agreement.” “Receivable” is defined as
any right to payment from any Person, whether constituting an account,
chattel paper, instrument, payment intangible or a general intangible,
arising from the providing of financing and other services by the
Originator . . . to (i) new, used and wholesale automobile, light truck or
other Specialty Vehicle dealers . . . and includes the right to payment of
any interest or finance charges and other obligations of such Person with
respect thereto.
[Emphasis added.]
AFC’s evidence shows that its arrangement with Funding involved selling only
its right to payment under the notes it entered into with Scott’s Big Truck Sales and
Don’s Big Truck Sales; AFC did not divest itself of its entire interest in the notes and
guaranty agreements. Moreover, under the Funding Receivables Purchase Agreement,
Funding did not transfer all of its payment rights to a particular purchaser; instead, it
sold the purchasers percentage interests according to a formula. The language the
Scotts contend is proof that AFC has no interest in the notes was required by the
Receivables Purchase Agreement. The use of the word “receivable” is consistent with
the definition in the Funding Receivables Purchase Agreement and, in the context of
that agreement, is not conclusive proof that AFC divested itself of all ownership
interest in the notes and guaranty agreements.
8
Originator is defined in a separate agreement not included as jurisdictional
evidence.
9
Moreover, as servicer of the receivables, AFC was required to “hold for the
benefit of the Secured Parties in accordance with their respective interests, all records
and documents (including without limitation computer tapes or disks) with respect to
each Pool Receivable.” In the affidavit attached to AFC’s summary-judgment
motion, its Senior Corporate Investigator Jerome Bosl averred that the attached notes
were “records held by AFC.” [Emphasis added.] Thus, the jurisdictional evidence
showed that AFC possessed the Scott’s Big Truck Sales and Don’s Big Truck Sales
notes made payable to it and that it still retained an ownership interest in those notes,
having sold only the right to payment thereunder.9
The Scotts analogize this case to Shipley v. Unifund CCR Partners, 331 S.W.3d 27,
29 (Tex. App.––Waco 2010, no pet.) (op. on reh’g), and argue that it commands a
different result. In Shipley, the original lender on a credit-card account had sold the
account; the new owner had assigned only the right to collect the debt to Unifund
CCR Partners but had retained title to the account. Id. at 28. Unifund CCR Partners
then filed suit to collect the debt. Id. The Waco Court of Appeals held that Unifund
CCR Partners failed to show its standing to sue to collect the debt because the owner
of the debt had not assigned any ownership interest to Unifund. Id. at 29–30. Here,
however, the evidence shows that AFC sold the receivables––the right to payments
9
Even if, as the Scotts contend, the stamped language on the notes––attached
to and incorporated into AFC’s pleadings––constitutes a judicial admission, that
factual admission is not contrary to, and does not disprove, AFC’s evidence that it
remains the owner of the notes except as to the right of payment.
10
on the notes––to Funding but retained ownership and possession of the notes.
Therefore, the facts in this case are distinguishable from the facts in Shipley.
We hold that the trial court did not err by determining that AFC did not plead
facts negating its jurisdiction and therefore had standing to sue the Scotts to collect
the debt. We overrule the Scotts’ first issue.
III. OBJECTIONS TO SUMMARY-JUDGMENT EVIDENCE
We next turn to the remainder of the Scotts’ summary-judgment issues. In part
of their second issue, the Scotts argue that the trial court erred by overruling their
objections to Bosl’s affidavit. We review the trial court’s order overruling the Scotts’
objections for an abuse of discretion. See Starwood Mgmt., LLC v. Swaim, 530 S.W.3d
673, 678 (Tex. 2017) (per curiam).
A. BOSL’S PERSONAL KNOWLEDGE
Bosl stated in his affidavit that he had personal knowledge of the facts therein
based on “the performance of [his] duties” as AFC’s Senior Corporate Investigator;
he also stated that he was the custodian of “Deficiency Accounting Records” for AFC
and that the records referenced in and attached to the affidavit were kept and made in
the regular course of AFC’s business. The Scotts objected that Bosl never stated how
he came to acquire personal knowledge of the records; therefore, his averment that he
had personal knowledge of the records’ contents is “conclusory, based on hearsay and
speculation, [and] without foundation.”
11
Bosl’s explanation of his employment with AFC and his status as a records
custodian for this particular account was sufficient to show his personal knowledge of
the transaction. See Espinoza v. Wells Fargo Bank, N.A., No. 02-13-00111-CV, 2013
WL 6046611, at *3 (Tex. App.—Fort Worth Nov. 14, 2013, pet. denied) (mem. op.);
Energico Prod., Inc. v. Frost Nat’l Bank, No. 02-11-00148-CV, 2012 WL 254093, at *6
(Tex. App.––Fort Worth Jan. 26, 2012, pets. denied) (mem. op.). Therefore, the trial
court did not abuse its discretion by overruling this objection.
B. CLAIMS-SPECIFIC STATEMENTS
The Scotts challenge several of Bosl’s other statements. They first challenge
Bosl’s averment that “AFC has accelerated maturity of [the] Note[s]” as lacking
foundation and as being conclusory. The notes attached as summary-judgment
evidence state that in the event of a default, AFC could declare the entire unpaid
amount of the note due and owing without notice or demand. Therefore, Bosl’s
statement––as custodian of the accounts’ records––is a factual statement that is based
on his knowledge of the loan records and is not conclusory or without foundation.
See Thanphirom v. Wells Fargo Bank, N.A., No. 07-20-00034-CV, 2020 WL 3957832, at
*3–4 (Tex. App.––Amarillo July 10, 2020, no pet.) (mem. op.) (per curiam); Gandara v.
JP Morgan Chase Bank, No. 01-03-00926-CV, 2005 WL 615628, at *3 (Tex. App.—
Houston [1st Dist.] Mar. 17, 2005, no pet.) (mem. op.). The trial court did not abuse
its discretion by overruling this objection.
12
The Scotts also argue that Bosl’s statement that “[a]ll conditions precedent to
AFC’s right to recover judgment . . . [h]ave been performed or have occurred[] and all
notices required have been given or have been waived” lacks foundation and is
speculative and conclusory. Even if the trial court should have granted the Scotts’
objections as to this statement, it was not necessary for AFC to prove its claims
because although the Scotts complained generally in their answer that all conditions
precedent had not occurred, they did not deny that any specific condition precedent
had occurred. Thus, AFC was not required to prove that it performed all required
conditions precedent to recover on its claims. See Tex. R. Civ. P. 54; Madhavan A.
Pisharodi, M.D., P.A. v. United Biologics, L.L.C., No. 04-18-00324-CV, 2020 WL
1443561, at *3 (Tex. App.—San Antonio Mar. 25, 2020, pets. denied) (mem. op.); see
also Affordable Motor Co., Inc. v. LNA, LLC, 351 S.W.3d 515, 520 (Tex. App.—Dallas
2011, pet. denied) (“To prevail on its motion for summary judgment to enforce the
promissory note, LNA was required to prove that (1) the note exists, (2) LNA is the
legal owner and holder of the note, (3) Affordable Motor is the maker of the note,
and (4) a certain balance is due and owing on the note.”). Accordingly, we need not
decide whether the trial court abused its discretion by overruling this objection. See
Tex. R. App. P. 47.1.
13
The Scotts also complain about statements in Bosl’s affidavit that relate to the
fraud-and-deception causes of action10 under Indiana law. Specifically, they complain
about the following paragraph:
Defendants misapplied the proceeds of the sale of a motor vehicle,
which were Purchase Money Inventory and held in Trust, by failing to
make payment to AFC from said proceeds as provided in the Note. By
misapplying entrusted property and property of a credit institution in a
manner that Defendants knew was unlawful and knew involved substantial risk of
loss or detriment to AFC, Defendants committed criminal deception, as
that term is defined by Indiana Code § 35-43-5-3-1. Furthermore, by
transferring the proceeds of the sales in derogation of the Note with the
intent to defraud Plaintiff, Defendants committed criminal fraud, as that
term is defined by Indiana Code § 35-43-5-4(8).
[Emphasis added.]
This statement is conclusory; it asserts a legal conclusion without stating any
specific facts upon which it relies. Indiana Code Section 35-43-5-3 provides, in part:
A person who . . . misapplies entrusted property . . . or property of a
credit institution in a manner that the person knows is unlawful or that
the person knows involves substantial risk of loss or detriment to either
the owner of the property or to a person for whose benefit the property
was entrusted . . . commits [the Class A misdemeanor of] deception.
10
Although Indiana law describes fraud and deception as criminal offenses, see
Ind. Code §§ 35-43-3-1, 35-43-5-4(8), it expressly allows a person to recover civil
damages for a violation of either of those provisions, see id. § 34-24-3-1. See also Ecker
v. Rochester Ford New Holland, Inc., 694 N.E.2d 289, 291 (Ind. Ct. App. 1998) (providing
that to recover for civil damages, plaintiff must prove commission of statutorily
defined deception or fraud by a preponderance of evidence). AFC asked the trial
court to take judicial notice of these provisions of Indiana law in its motions for
summary judgment. The trial court did not expressly rule on this request, but it
referenced Section 34-24-3-1 in its partial summary judgment and in its final
judgment.
14
Ind. Code § 35-43-5-3. Indiana Code Section 35-43-5-4(8) provides that a person
commits fraud if, “with intent to defraud the person’s creditor or purchaser, [the
person] conceals, encumbers, or transfers property.” Id. § 35-43-5-4(8).
Bosl did not include any facts in his affidavit relevant to the Scotts’ intent in
failing to pay or showing that they knew their actions were unlawful; instead, he
merely presented facts showing that they did not timely remit proceeds from sold
vehicles, and then he restated the elements of the two causes of action under Indiana
law. Likewise, Bosl did not state what the Scotts did with the sales proceeds other
than failing to timely remit them to the lender. He simply concludes that they
committed statutory deception and fraud under Indiana law without explaining why.
See Anderson v. Snider, 808 S.W.2d 54, 55 (Tex. 1991) (per curiam) (op. on reh’g)
(holding that attorney’s expert opinion that he did not commit malpractice, violate the
DTPA, or breach a contract was conclusory because it did not explain its legal basis or
reasoning for the opinion); see also Auto. Fin. Corp. v. Kan. Motor Co., No. 1:05-cv-
01614-RLY-WTL, 2006 WL 1455553, at *3 (S.D. Ind. May 22, 2006) (holding that
AFC was not entitled to summary judgment against note guarantors, pursuant to a
similar floorplan-financing arrangement, under civil-damages provision of Indiana
Code for criminal fraud and deception where AFC provided only general assertions
and no facts in support and noting, “Nor would it be easy for it to do so in light of
the intent and knowledge requirements to establish deception and fraud”).
15
The Scotts objected to two other statements in Bosl’s affidavit related to the
deception-and-fraud claims: Bosl’s averments setting forth the amounts of AFC’s
“actual damages from the deception and fraud of” Scott’s Big Truck Sales and Don’s
Big Truck Sales and opining that AFC “is entitled to recover from” the Scotts “three
(3) times [AFC’s] actual damages from such violations, together with attorney’s fees,
interest, and other costs of collection set out therein.” These statements are likewise
conclusory. See Anderson, 808 S.W.2d at 55. Thus, we sustain this part of the Scotts’
second issue and do not consider Bosl’s conclusory statements in our review of the
propriety of the trial court’s summary judgment.
IV. PROPRIETY OF SUMMARY JUDGMENT
Also in part of their second issue, the Scotts challenge the trial court’s summary
judgment for AFC on its breach-of-contract and fraud-and-deception causes of
action.11
11
Although most of the Scotts’ argument as to the propriety of summary
judgment on the merits restates their standing complaint, they also claim––with a bare
minimum of argument––that AFC presented no credible evidence of default or actual
damages and that AFC “never presented any evidence that would rise to the level of
fraud, deception, or any other criminal conduct.” Because the Scotts make at least
some argument challenging each ground on which the summary judgment was based,
we address their complaints. See Tex. R. App. P. 38.1(f); Ganter v. Indep. Bank, No. 05-
15-00413-CV, 2016 WL 4376284, at *7 (Tex. App.—Dallas Aug. 16, 2016, pet.
denied) (mem. op.) (“Although the nonmovant may assert in a general appellate issue
that the summary judgment was erroneous, it must also support that issue with
argument challenging all possible grounds on which the summary judgment could
have been granted or a reviewing court will affirm the summary judgment.”).
16
A. STANDARD OF REVIEW
We review a summary judgment de novo. Travelers Ins. v. Joachim, 315 S.W.3d
860, 862 (Tex. 2010). We consider the evidence presented in the light most favorable
to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors
could and disregarding evidence contrary to the nonmovant unless reasonable jurors
could not. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848
(Tex. 2009). We indulge every reasonable inference and resolve any doubts in the
nonmovant’s favor. 20801, Inc. v. Parker, 249 S.W.3d 392, 399 (Tex. 2008). A plaintiff
is entitled to summary judgment on a cause of action if it conclusively proves all
essential elements of the claim. See Tex. R. Civ. P. 166a(a), (c); MMP, Ltd. v. Jones,
710 S.W.2d 59, 60 (Tex. 1986).
B. CRIMINAL DECEPTION AND FRAUD UNDER INDIANA LAW
The trial court found that AFC was entitled to judgment from the Scotts under
Indiana Code Section 34-24-3-1: $8,828.72 from Scott’s Big Truck Sales and Donald
Scott and $22,800.00 from Don’s Big Truck Sales and Johnny Scott. The trial court’s
judgment did not specify whether it had found that AFC proved its entitlement to
damages for fraud, deception, or both.
Under the Indiana Crime Victims Compensation Act (CVCA), a plaintiff can
recover civil damages for a violation of either the fraud or deception statute, in
addition to certain other offenses, on proof by a preponderance of the evidence. Ind.
Code §§ 34-24-3-1, 35-43-3-1, 35-43-5-4(8); Klinker v. First Merchants Bank, N.A.,
17
964 N.E.2d 190, 193 (Ind. 2012); see Heckler & Koch, Inc. v. German Sport Guns GmbH,
976 F. Supp. 2d 1020, 1035 (S.D. Ind. 2013) (order). Because the CVCA is punitive in
nature and must be strictly construed, it cannot be enlarged by construction,
implication, or intendment beyond the fair meaning of the language used. Flaherty &
Collins, Inc. v. BBR-Vision I, L.P., 990 N.E.2d 958, 968 (Ind. Ct. App. 2013), trans.
denied. To establish a viable claim for civil damages under Section 34-24-3-1, a
plaintiff must show, in addition to statutory fraud or deception, that the violation
caused the plaintiff’s loss. Ind. Code § 34-24-3-1; Flaherty & Collins, 990 N.E.2d at
968. The mens rea requirement of the underlying criminal actions (i.e., fraud or
deception) differentiates those acts from the more innocent breach of contract, which
the criminal statutes were not intended to reach. Flaherty & Collins, 990 N.E.2d at
968.
The notes, which AFC attached as summary-judgment proof, provided in
Section 2.6,
Dealer shall pay to LENDER at the offices of LENDER the
Obligations, on demand and without notice, and in any event, with
respect to an item of Purchase Money Inventory on the earliest of:
(a) LENDER’s demand[;] (b) forty-eight (48) hours after the disposition
by sale or otherwise of an item of Purchase Money Inventory; or (c) the
Curtailment Date. All proceeds of any such disposition shall be received
by Dealer in trust for LENDER and forwarded promptly to LENDER
as noted below.
The notes further provided that when any Purchase Money Inventory item was sold,
the debtor would “hold the amount received from the disposition of inventory in
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trust for the benefit of LENDER and . . . pay promptly to LENDER, in accordance
with Section 2.6, an amount equal to the unpaid balance of the Purchase Money
Inventory Obligations and any other Obligations relating to such Purchase Money
Inventory.”
Bosl averred that Scott’s Big Truck Sales had sold “$4,414.36 worth of
vehicles . . . out of trust” and that Don’s Big Truck Sales had sold “$11,400.00 worth
of vehicles . . . out of trust.” He also averred that the dealerships had “failed to pay
AFC the proceeds from the following vehicle[s]”; specifically, he stated that Don’s Big
Truck Sales had sold and failed to remit payment for a 2013 Nissan Altima for a total
of $11,400.00 and that Scott’s Big Truck Sales had sold and failed to remit payment
for a 2007 Lexus ES 350 for a total of $4,414.36.
Other than this unobjected-to affidavit evidence and the conclusory statement
in Bosl’s affidavit, which we do not consider, AFC provided no evidence that any of
the Scotts specifically intended to cause AFC injury or loss by failing to remit payment
for the two sold vehicles. Thus, the trial court erred by granting summary judgment
to AFC under Indiana Code Section 34-24-3-1 if based on a finding that the Scotts
committed criminal fraud under Indiana law. See Klinker, 964 N.E.2d at 193, 195
(holding that “summary judgment [for civil damages for criminal fraud] is proper only
if the undisputed facts show that, when [the defendant] made the challenged transfers,
his conscious objective was to cause injury or loss to [lender] by deceit” and that
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“summary judgment is almost never appropriate where the claim requires a showing
that the defendant acted with criminal intent or fraudulent intent”).
As to the criminal-deception statute, the most AFC showed via its summary-
judgment proof is that Scott’s Big Truck Sales and Don’s Big Truck Sales––as makers
of the notes––knew that the notes obligated them to hold the proceeds of any auto
sales in trust for AFC and to timely remit payment of those proceeds to AFC.
Although this is sufficient evidence to support a finding that Scott’s Big Truck Sales
and Don’s Big Truck Sales violated the Indiana deception statute, see Greg Allen Constr.
Co. v. Estelle, 762 N.E.2d 760, 781 (Ind. Ct. App. 2002) (“[T]he only mental element
required to be shown here was McGaughey’s knowledge that the manner in which she
misapplied the line of credit involved a substantial risk of loss or detriment to Allen
Construction.”), aff’d in part and rev’d in part in other grounds, 798 N.E.2d 171 (Ind. 2003),
it is not sufficient evidence to support a finding that Donald and Johnny––who signed
only the guaranty agreements in their individual capacities––did so,12 see Auto. Fin.
Corp. v. Auto Maxx, L.L.C., No. 1:06-cv-00623-LJM-WTL, 2006 WL 2024376, at *3
(S.D. Ind. July 17, 2006) (order) (holding that showing of failure of note makers to
timely remit payment was not sufficient to prove that closely related note guarantors
had sufficient knowledge); Kan. Motor, 2006 WL 1455553, at *3 (“All that is attested to
12
Although Donald and Johnny agreed to repay amounts due on the notes, the
guaranty agreements did not obligate them to hold any funds in trust, nor is there any
evidence that they personally held or applied any of those funds.
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at this point is that an inventory of vehicles shows that some vehicles which were
floor planned by AFC are no longer on the lot and the proceeds of any sale of those
vehicles was not applied to the AFC debt.”).
Thus, although the trial court’s judgment under Indiana Code Section 34-24-3-
1 was proper as to Scott’s Big Truck Sales and Don’s Big Truck Sales based on a
finding that they violated the Indiana deception statute, the trial court erred by also
finding Donald and Johnny liable under Section 34-24-3-1 because no evidence
supports a finding that they violated either the fraud or deception statutes. We sustain
this part of the Scotts’ second issue in part and overrule it in part.
C. BREACH OF CONTRACT AND GUARANTY AGREEMENTS
Other than AFC’s standing, which we have already addressed, the Scotts raise
only two arguments as to the propriety of summary judgment on the breach-of-
contract and breach-of-guaranty claims: AFC provided no credible proof of default or
of any actual damage to AFC. Their arguments appear to hinge on their contention
that the trial court should have granted their objection that Bosl did not adequately
demonstrate his personal knowledge of the facts, an argument that we have already
rejected.
To recover on the notes from Scott’s Big Truck Sales and Don’s Big Truck
Sales, AFC had to prove the existence of the notes, that the defendants signed them,
that AFC was the legal owner and holder of the notes, and that a certain balance was
due and owing on the notes. See Rockwall Commons, 331 S.W.3d at 505. To support a
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claim for breach of the guaranty agreements, AFC had to prove the existence,
ownership, and terms of the guaranty contracts; that the guarantors’ liability was
established under the contracts’ terms; and the guarantors’ failure or refusal to
perform. Chahadeh v. Jacinto Med. Grp., P.A., 519 S.W.3d 242, 246 (Tex. App.—
Houston [1st Dist.] 2017, no pet.). Indiana law is consistent; the failure to pay
amounts due under a guaranty agreement is a breach of contract. See Keesling v. T.E.K.
Partners, LLC, 861 N.E.2d 1246, 1251 (Ind. Ct. App. 2007); Estate of Hofgesang v.
Hansford, 714 N.E.2d 1213, 1217 (Ind. Ct. App. 1999). To prove a breach of contract,
a plaintiff must prove (1) the existence of a contract, (2) the defendant’s breach, and
(3) damages. McKeighen v. Davies Cty. Fair Bd., 918 N.E.2d 717, 721 (Ind. Ct. App.
2009).
Here, AFC attached as summary-judgment evidence the signed notes and loan
term sheets for Scott’s Big Truck Sales and Don’s Big Truck Sales, as well as the
guaranty agreements signed by Donald and Johnny. The guaranty agreements
obligate the guarantor to pay all amounts due under the notes. AFC also presented
Bosl’s affidavit, in which he averred that Scott’s Big Truck Sales and Don’s Big Truck
Sales had failed to make all required payments under the notes and that all amounts
due under both notes had been accelerated; that Scott’s Big Truck Sales owed AFC
$104,656.61, which included the $4,414.36 for the 2007 Lexus, under its notes; and
that Don’s Big Truck Sales owed AFC $45,987.43, which included the $11,400 for the
2013 Altima, under its note. Additionally, AFC attached to Bosl’s affidavit several
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“Dealer Payoff” reports that listed those same amounts due. The Scotts did not
provide any controverting evidence in their response to the motion for summary
judgment.
Because AFC presented uncontroverted evidence that it was entitled to enforce
the notes, that the Scotts had failed to pay the accelerated amounts due under the
notes as guaranteed, and the exact amounts due, we hold that the trial court properly
granted summary judgment for AFC on its breach-of-contract claim regarding the
notes and guaranty agreements. We therefore overrule this part of the Scotts’ second
issue.
V. ATTORNEY’S FEES
The Scotts bring two complaints related to the attorney’s fees assessed: that
there is no evidence to support the imposition of appellate attorney’s fees and that if
we reverse any part of the summary judgment, we must remand to the trial court for a
recalculation of attorney’s fees. We need not address the Scotts’ appellate attorney’s-
fees complaint because AFC argued that it was entitled to attorney’s fees based on
contractual provisions in the notes and guaranty agreements, as well as the Indiana
Code. Ind. Code § 34-24-3-1, § 1(3). Its attorney’s affidavit did not distinguish fees
among the claims and parties and neither did the trial court’s judgment. Because we
are reversing the summary judgment on the statutory causes of action as to Donald
and Johnny, we also reverse the attorney’s fees award. See Reed v. Lake Country Prop.
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Owners Ass’n, Inc., No. 02-14-00282-CV, 2016 WL 3655589, at *9 (Tex. App.—Fort
Worth July 7, 2016, no pet.) (mem. op.).
VI. CONCLUSION
Having overruled the Scotts’ first issue and their second issue in part, we affirm
the trial court’s judgment awarding damages for breach of contract and breach of
guaranty to AFC. We also affirm the trial court’s judgment awarding additional
damages to AFC from Scott’s Big Truck Sales and Don’s Big Truck Sales under
Indiana Code Section 34-24-3-1. But having sustained part of the Scotts’ second issue
as to the award of $8,828.72 in additional damages from Donald Scott and the award
of $22,800 from Johnny Scott under Indiana Code Section 34-24-3-1, we reverse that
part of the trial court’s summary judgment.13 Because we reverse part of the trial
court’s summary judgment, we additionally reverse the trial court’s attorney’s fees
award. We remand this case to the trial court for further proceedings on AFC’s claim
for additional damages from Donald and Johnny Scott and its attorney’s fees request.
/s/ Lee Gabriel
Lee Gabriel
Justice
Delivered: December 17, 2020
13
Donald and Johnny did not file their own summary-judgment motion as to
these claims; therefore, we cannot render judgment for them. See Dyegard Land P’ship
v. Hoover, 39 S.W.3d 300, 315 (Tex. App.––Fort Worth 2001, no pet.).
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