In The
Court of Appeals
Ninth District of Texas at Beaumont
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NO. 09-05-283 CV
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OLYMPUS INSURANCE COMPANY, Appellant
V.
BEAUMONT DEALERS AUTO AUCTION, INC., Appellee
Jefferson County, Texas
Trial Cause No. 95689
Olympus Insurance Company ("Olympus"), the surety on a motor vehicle dealer's surety bond executed by Marcia Guillory d/b/a G & G Auto Sales as principal, challenges the trial court's summary judgment in favor of Beaumont Dealers Auto Auction, Inc. ("BDAA"). After she failed to pay for eleven vehicles, BDAA took a default judgment against Guillory, then sued Olympus on its bond and obtained the summary judgment now on appeal. (1) To recover, BDAA must prove it obtained the first judgment based on the dealer's failure to pay valid bank drafts or checks drawn to buy motor vehicles. The instruments submitted as BDAA's summary judgment evidence of dishonored drafts are not "valid bank drafts" or "checks." Because BDAA failed to establish as a matter of law that it obtained judgment against Guillory for acts or omissions covered by the bond, we reverse and remand.
First, we must resolve BDAA's challenge to the timeliness of this appeal. The summary judgment signed on July 7, 2004, grants judgment for BDAA on its claim against Olympus, recites the plaintiff shall have execution and other process necessary to enforce the judgment, and states that all relief not expressly granted is denied. The judgment does not expressly dispose of Olympus's live counterclaim for declaratory relief. The trial court signed an order of nonsuit on the counterclaim on June 10, 2005. Olympus filed notice of appeal twenty days later. BDAA contends the summary judgment disposed of Olympus's counterclaim for declaratory judgment because Olympus's answer and counterclaim deal with the same issue, namely, the validity of BDAA's claim under the bond and the statute. A judgment issued without a conventional trial is final if, and only if, "it actually disposes of every pending claim and party or . . . it clearly and unequivocally states that it finally disposes of all claims and all parties." Lehmann v. Har-Con Corp., 39 S.W.3d 191, 205 (Tex. 2001). The 2004 "Order on Plaintiff's Motion for Summary Judgment" mentions neither Olympus's request for declaratory judgment nor its request for attorney fees. Neither the "Mother Hubbard" clause nor the execution clause finalize an otherwise interlocutory judgment. Id. at 206; In re Burlington Coat Factory Warehouse of McAllen, Inc., 167 S.W.3d 827, 830 (Tex. 2005) (mandamus proceeding staying execution authorized by interlocutory default judgment). Because the summary judgment signed in this case became final and appealable when the trial court signed the order of nonsuit, Olympus timely perfected its appeal.
The statute at issue in this appeal requires that an applicant for a motor vehicle dealer general distinguishing number must furnish proof of an executed $25,000 surety bond. Tex. Transp. Code Ann. § 503.033 (Vernon 1999). The bond must be in a form approved by the attorney general, must be conditioned on "the payment by the applicant of all valid bank drafts, including checks, drawn by the applicant to buy motor vehicles" and "the transfer by the applicant of good title to each motor vehicle the applicant offers for sale." Id. According to the Transportation Code, recovery on the bond may be had by a party obtaining "a judgment [against a motor vehicle dealer] assessing damages and reasonable attorney's fees based on an act or omission on which the bond is conditioned that occurred during the term for which the general distinguishing number was valid." Id. The surety's liability on the bond is limited to the amount "of the valid bank drafts, including checks, drawn by the applicant to buy motor vehicles" or "paid to the applicant for a motor vehicle for which the applicant did not deliver good title" and "attorney's fees that are incurred in the recovery of the judgment and that are reasonable in relation to the work performed." Id. The contract between Guillory and Olympus provided "the Principal shall pay all valid bank drafts, including checks, drawn by the Principal for the purchase of motor vehicles and transfer good title to each motor vehicle that the Principal purports to sell. . . ." According to the terms of the bond, recovery may be made by a person who obtains a judgment against a dealer assessing damages and attorney's fees "for an act or omission on which the bond is conditioned or if the act or omission occurred during the term for which the general distinguishing number will be valid." Although the contract varies slightly from the language of the statute, BDAA does not contend that the parties contractually expanded the protections mandated by the statute. To recover, BDAA must establish that Guillory failed to pay valid bank drafts, including checks, drawn to buy motor vehicles.
BDAA's judgment in its suit against Guillory does not specify the cause of action in controversy. The petition filed in the Guillory suit states a cause of action for breach of contract and breach of duty of good faith and fair dealing but does not mention dishonored drafts. As summary judgment evidence, BDAA submitted ten documents it contends are dishonored bank drafts. None of the documents identify an account at any financial institution upon which they purport to be drawn. Each bears the printed notation: "This draft drawn on your bank at your customer's request pay at par or return giving reason." As BDAA concedes, however, Guillory had no financial institution on which to draw. We discern no apparent controversy between the parties over whether Guillory honored these drafts (she did not) or whether the drafts were drawn to purchase motor vehicles (they were). The parties limit their dispute to whether the documents at issue are "valid bank drafts."
BDAA relies on Gramercy Ins. Co. v. Au1ction Finance Program, Inc., 52 S.W.3d 360, 362-63 (Tex. App.--Dallas 2001, pet denied), to support its argument that its transactions with Guillory are covered by the bond. In Auction Finance, an auction house delayed depositing checks while the car dealer located buyers for the purchased vehicles. Id. Although the auction finance company never held title to the vehicles, it could recover against the bond because the dealer issued the dishonored checks to purchase the motor vehicles. Id. That case involved checks, and checks are expressly included in Transportation Code Section 503.033. See Tex. Transp. Code Ann. § 503.033 (Vernon 1999). In contrast, BDAA did not prove that the instruments at issue here were drawn on an account at a financial institution.
BDAA argues that neither the bond nor the statute requires the insured to operate her business using checks, concedes Guillory ran a "cash only operation," and contends the dishonored instruments are bank drafts. A draft is an unconditional order to pay the bearer or an identified person (in this case, BDAA) a fixed amount of money on demand or at a definite time from a definite place. See Tex. Bus. & Com. Code Ann. § 3.104 (Vernon 2002). "Bank draft" is a banking industry term for a draft drawn by a bank on an account maintained at a financial institution. Lawyers Surety Corp. v. Riverbend Bank, N.A., 966 S.W.2d 182, 185 (Tex. App.--Fort Worth 1998, no pet.). By definition, a "bank draft" is paid by a bank, not by the customer. Id. at 186. For purposes of Section 503.033 of the Transportation Code, the term "payment of valid bank drafts" means "bank drafts for which a car dealer has sufficient funds at its disposal so that the drawee bank will honor them." Id. In Riverbend Bank, the bank financing the dealer's floor plan could not recover on the bond after the car dealer defaulted because the obligation consisted of a promissory note secured by inventory, rather than a bank draft. Id. at 187. A "bank" is a person engaged in the business of banking. Tex. Bus. & Com. Code Ann. § 1.201(b)(4) (Vernon Supp. 2005). For the drafts at issue in this case to be "valid bank drafts," the instruments must have been drawn by or on a financial institution.
The "drawee" is the party ordered in the draft to make payment. Tex. Bus. & Com. Code Ann. § 3.103(a)(4) (Vernon Supp. 2005). On the face of five of the documents, it appears Community Bank is the drawee, by virtue of its name being handwritten on the lower left portion of the document; however, the parties agree that Guillory had no financial relationship with Community Bank. In its brief, BDAA concedes Guillory "did not have banking arrangements that would allow the normal use of banking channels." According to BDAA, Guillory was a "cash only" customer who would purchase vehicles at auction and "pay cash for the draft at BDAA's offices" three days later to obtain the titles. We therefore have the rather curious situation of an allegedly valid draft with no bank or other financial institution from which to draw the stated amount of the draft.
BDAA also failed to establish the validity of the drafts as a matter of law. The "drawer" is the person who signs or is identified in the draft as the person ordering payment. Tex. Bus. & Com. Code Ann. § 3.103(a)(5) (Vernon Supp. 2005). Guillory's name does not appear on any of the documents, but each purports to be authorized by "G & G Auto Sales." There appears to be no factual dispute that G & G Auto Sales is a business operated by Guillory as a sole proprietorship. Only two of the documents bear a signature. The amount payable on these documents and three others have been modified and now bear the notation "balance owed" in an amount substantially less than the original amount. Of the remaining documents, five are "To Community Bank - Central" and bear a bank stamp dated after the date of the Guillory judgment. Thus, it appears five of the ten instruments were presented to Community Bank after BDAA took its judgment against Guillory. None of the five presented documents are signed by the maker and the other five documents bear no indicia of presentment or dishonor. Thus, none of the documents establish that BDAA's judgment against Guillory is for failing to honor valid bank drafts or checks.
The summary judgment record does include a demand letter from BDAA to Guillory; the motor vehicle descriptions and amounts correspond to the drafts. The summary judgment evidence also includes the affidavit of BDAA's office manager. The affidavit states the documents described above depict "drafts given to BDAA by G & G Auto Sales for the purchase of vehicles at the auction." According to the office manager, "Each draft was dishonored by the bank and returned to BDAA through the normal banking channels." The summary judgment evidence of the documents themselves belies the office manager's assertion. Summary judgment cannot stand on a record containing conflicting evidence of whether a judgment purportedly taken for failure to pay valid bank drafts or to deliver titles actually concerns the failure to repay a loan. See Old Republic Sur. Co. v. Bonham State Bank, 172 S.W.3d 210, 216 (Tex. App.--Texarkana 2005, no pet.).
Because the drafts offered by BDAA as its evidence that Guillory failed to honor valid bank drafts are neither checks nor bank drafts, BDAA failed to establish it recovered judgment against Guillory for an act covered by Olympus's surety bond. The trial court erred in granting BDAA's motion for summary judgment. We reverse the judgment of the trial court and remand the cause for further proceedings consistent with this opinion.
REVERSED AND REMANDED.
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STEVE McKEITHEN
Chief Justice
Submitted on January 19, 2006
Opinion Delivered March 16, 2006
Before McKeithen, C.J., Gaultney and Horton, JJ.
1.