IN THE
TENTH COURT OF APPEALS
No. 10-06-00014-CV
Barbara KAY BLAKE Beard,
Appellant
v.
Norwest Mortgage, Inc., Norwest
Funding, Inc., Pat Beard, and
Bramlet Frank Beard,
Appellees
From the 170th District Court
McLennan County, Texas
Trial Court No. 99-2017-4
MEMORANDUM Opinion
Barbara Blake Beard (Barbara) appeals the granting of a summary judgment and a take nothing judgment in favor of Pat Beard (Pat) and Bramlet Beard (Bramlet) notwithstanding the jury’s verdict in Barbara’s favor. In three issues she complains the trial court erred 1) by granting summary judgment that Pat was the holder of the note; 2) by finding that Pat and Bramlet were entitled to a settlement credit; and 3) by granting judgment notwithstanding the jury’s verdict. Pat and Bramlet bring cross appeals for alleged errors in the jury charge. We will affirm.
This dispute centers on the foreclosure sale of the former marital residence of Barbara and Bramlet. After they filed for divorce in 1997, Bramlet left the marital home. He continued to make the mortgage and tax payments. In the spring of 1999, Bramlet was in danger of foreclosure on the mortgage so his father Pat purchased the note and deed of trust from Norwest Mortgage. Pat secured an assignment of the note from both Norwest Mortgage and Norwest Funding, a related entity. Pat then pursued payment from Barbara. She failed to make payments, and he began foreclosure proceedings. Barbara filed suit against the Beards and the Norwest entities asking the court to determine the holder of the note, among other claims. Pat moved for summary judgment on the ground that he was the holder. The trial court originally denied Pat’s motion, but a subsequent motion on the same ground was granted. Pat then foreclosed on the house, selling it to Bramlet. Barbara subsequently settled all her claims against both Norwest entities for $50,000, but went to trial on her fraud claim against Pat and Bramlet. Prior to trial, Pat and Bramlet elected to have a dollar-for-dollar credit of the settlement with the Norwest entities. The jury found that the Beards engaged in a conspiracy to deprive Barbara of her rights as a co-tenant and awarded her $35,500 in damages. The Beards successfully moved the court for a take-nothing judgment notwithstanding the jury’s findings.
Barbara first complains of the trial court granting a partial summary judgment in favor of Pat finding as a matter of law he is the owner or holder of the note in question. She claims there is a factual dispute as to whether Norwest Funding, Norwest Mortgage, or Pat was the owner or holder of the note.
We conduct a de novo review of a summary judgment. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661, (Tex. 2005). To prevail on summary judgment motion, the movant must demonstrate that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. See Diversicare Gen. Partner, Inc. v. Rubio, 185 S.W.3d 842, 846 (Tex. 2005). We take as true all competent evidence favorable to the nonmovant and indulge every reasonable inference and resolve any doubts in the nonmovant's favor. Id. To be entitled to enforcement of the note, Pat must prove that he is the owner or holder of the note. SMS Fin., LLC v. ABCO Homes, Inc., 167 F.3d 235, 238 (5th Cir. 1999) (emphasis added).
The Uniform Commercial Code (UCC) distinguishes between owner and holder. Id. A person becomes the holder of an instrument if it is issued to that person or by negotiation. Tex. Bus. & Com. Code Ann. § 3.201 cmt. 1 (Vernon 2002); see also Leavings v. Mills, 175 S.W.3d 301, 309 (Tex. App.—Houston [1st Dist.] 2004, no pet.). Where a note is payable to an identified party, negotiation requires both an indorsement from the prior holder and possession. Tex. Bus. & Com. Code Ann. § 3.201(b). Thus, to be a holder, Pat must prove the chain of title through successive transfers of both possession and indorsement to him. Leavings 175 S.W.3d at 310. The note on Bramlet’s and Barbara’s house was originally held by Norwest Mortgage but was indorsed to Norwest Funding. “When specially indorsed, an instrument becomes payable to the identified person and may be negotiated only by the indorsement of that person.” Tex. Bus. & Com. Code Ann. § 3.205 (Vernon 2002) (emphasis added). Norwest Mortgage subsequently indorsed the note to Pat; however there was a gap in the chain of title because of the prior indorsement to Norwest Funding.
Pat argues that possession of the note by the former holder gives rise to a presumption the purported transfer is incomplete. However, under the UCC, where a former holder reacquires possession of a note without an indorsement, that party is only a transferee unless the reacquiring party cancels all indorsements made prior to reacquiring the note. Tex. Bus. & Com. Code § 3.207 cmt. 1 (Vernon 2002) (if the reacquisition is not the result of negotiation the former holder can obtain holder status only by striking the former holder’s indorsement). The note on its face shows that Norwest Mortgage did not strike its prior indorsement to Norwest Funding. Because Pat cannot prove a chain of negotiation, he is not the holder of the note. See Leaving, 175 S.W.3d at 301; Jernigan v. Bank One, Tex., N.A., 803 S.W.2d 774, 776-77 (Tex. App.—Houston [14th Dist.] 1991, no writ).
Nonetheless, Pat is still entitled to enforcement of the note upon proof that he is the owner. SMS Fin., LLC, 167 F.3d at 238-39. An owner of the note is entitled to enforce the note by foreclosure and deficiency judgment. Tex. Bus. & Com. Code Ann. § 3.301 cmt. 1 (Vernon 2002); see also Waters v. Waters, 498 S.W.2d 236, 242 (Tex. Civ. App.—Tyler 1973, writ ref’d n.r.e.). Ownership of a note may be transferred by possession, even if it is not indorsed by the transferee. The transferee then acquires the rights of the transferor, but he does not become the holder. Tex. Bus. & Com. Code Ann. § 3.201. Pat had physical possession of the note coupled with an assignment from both Norwest Mortgage and Norwest Funding. Therefore, he was a transferee who has received all the rights of each transferor. Tex. Bus. & Com. Code Ann. § 3.203 (Vernon 2002). As a transferee he was the owner of the note and entitled to enforcement. See Tex. Bus. & Com. Code Ann. § 3.301; see also Leavings, 175 S.W.3d at 309.
Barbara relies on deposition testimony that computer records showed a third related Norwest entity, Norwest Bank, to be the owner of the note and showed that Norwest Funding had no interest in the note. However, a negotiable instrument is transferred by possession and/or indorsement. See Tex. Bus. & Com. Code Ann. §§ 3.201-203. This testimony regarding a party’s belief as to its holder or transferee status does not raise a fact question. The trial court did not err in granting summary judgment that Pat is the owner of the note. We overrule Barbara’s first issue.
Next, Barbara contends the trial court erred by offsetting the jury’s verdict by the amount of her settlement with the Norwest entities. According to Barbara, the settlement is for violations of the federal Real Estate Settlement Procedures Act (RESPA), and these damages were separate from those caused by Pat and Bramlet. She contends that RESPA encompasses the entire field of law with regard to her claims and therefore, state laws changing the allocation of liability should not be applied.
In support Barbara points to a Texas Supreme Court case holding that the UCC covered the entire law for a statutory conversion claim, and proportionate responsibility statutes should not apply. Sw. Bank v. Information Support Concepts, Inc., 149 S.W.3d 104, 111 (Tex. 2003). In that case, the plaintiff brought only a UCC claim. Here, in addition to RESPA claims, Barbara alleged tort and contract claims. Assuming RESPA creates a complete scheme for proving liability and damages, the settlement credit law would still apply to those additional state-law claims. Further, Southwest Bank did not discuss settlement credits. See id.
A non-settling defendant is entitled only to an offset of those amounts of the settlement representing common damages caused by all defendants. Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 391-92 (Tex. 2000). Once the defendant has proven the amount of the settlement, the plaintiff must provide a settlement agreement allocating damages. Goose Creek Consol. Indep. Sch. Dist. v. Jarrar’s Plumbing, Inc., 74 S.W.3d 486, 501 (Tex. App.—Texarkana 2002, pet. denied); see also Casteel, 22 S.W.3d at 392. Pat and Bramlet proved the amount of the settlement, but Barbara could prove no allocation of the money. Pat and Bramlet are entitled to a credit for the entire settlement amount. Goose Creek, 74 S.W.3d at 501. We overrule the second issue.
Because of our disposition of this issue we need not address the remaining issues raised by Barbara or the cross points argued by Pat and Bramlet. We affirm the judgment.
FELIPE REYNA
Justice
Before Chief Justice Gray,
Justice Vance, and
Justice Reyna
(Chief Justice Gray joins only the discussion of the second issue and finds any further discussion unnecessary and concurs in the judgment without a separate opinion.)
Affirmed
Opinion delivered and filed July 18, 2007
[CV06]