Opinion issued July 24, 2014
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-12-00501-CV
———————————
MSMTBR, INC. AND RUSSELL DAVID BALUSEK, Appellants
V.
MID-ATLANTIC FINANCE CO., INC., Appellee
On Appeal from the 190th District Court
Harris County, Texas
Trial Court Case No. 2011-30123
MEMORANDUM OPINION ON REHEARING
Appellee, Mid-Atlantic Finance Co., Inc. (“Mid-Atlantic”), has filed a
motion for rehearing of our March 11, 2014 opinion and judgment. We deny the
motion for rehearing, but withdraw our opinion and judgment of March 11, 2014
and issue the following opinion and a new judgment in their stead.
Appellants, MSMTBR, Inc. and Russell David Balusek (collectively,
“MSMTBR”), challenge the trial court’s rendition of summary judgment in favor
of Mid-Atlantic in its suit against MSMTBR for conversion and recovery under the
Texas Theft Liability Act (“TLA”).1 In three issues, MSMTBR contends that the
trial court erred in granting Mid-Atlantic summary judgment on its conversion and
TLA claims.
We reverse and remand.
Background
On October 30, 2009, Mid-Atlantic, a finance company in the business of
purchasing installment sales contracts from automobile dealers, entered into a Flex
Line Program Agreement (the “Agreement”) with MSMTBR to purchase certain
automobile installment sales contracts. Pursuant to the Agreement, MSMTBR,
after executing an automobile installment sales contract with a customer, would
present the contract to Mid-Atlantic for consideration. If Mid-Atlantic approved
the contract, MSMTBR and Mid-Atlantic would then agree to a purchase price,
through a “Decision Callback,” and Mid-Atlantic would buy the contract. Mid-
Atlantic would make an initial cash advance to MSMTBR and then make
1
See TEX. CIV. PRAC. & REM. CODE ANN. §§ 134.001–.005 (Vernon 2011).
2
additional payments to MSMTBR as the consumer performed on the installment
sales contract. If the consumer defaulted on the contract within six months, Mid-
Atlantic could recover its losses by repossessing and selling the automobiles or
demanding that MSMTBR repurchase the installment sales contract. If the
consumer defaulted on the contract after the sixth month, the Agreement provided
for a “Bonus Pool” to be “used to satisfy expenses” and “deficiency balances” at
Mid-Atlantic’s “discretion.”
Once Mid-Atlantic purchased an installment sales contract, “all rights under
the Contract immediately transferred to Mid-Atlantic,” and it became the “lawful
owner thereof, free and clear of all claims, liens or encumbrances whatsoever.”
And after the transaction was processed by the Texas Department of Motor
Vehicles (“DMV”), MSMTBR was obligated to deliver the original title to Mid-
Atlantic to “hold” the title.
In connection with the Agreement, MSMTBR also granted Mid-Atlantic a
“Limited Power of Attorney,” authorizing Mid-Atlantic as
our true and lawful attorneys for us and in our names, place and stead,
and for our use and benefit, to ask, demand, sue for, recover, collect
and receive all sums of money, debts, due accounts, interest, and
demands whatsoever as are now or shall hereafter become due, owing,
payable or belonging to [MSMTBR] solely with respect to the
Contracts specifically set forth in Schedule A.
And it further authorized Mid-Atlantic to
3
have, use and take all lawful ways and means in [MSMTBR’s name]
or otherwise for the recovery thereon, by attachment, distress or
otherwise, and to compromise and agree for the same, and in
[MSMTBR’s] name[] to make, seal and deliver all instruments
necessary for said premises: to bargain, contract for, agree, receive
and take possession of all security . . . .
In its original petition, Mid-Atlantic alleged that after it had purchased
eighty-two automobile installment sales contracts under the Agreement and was
holding titles to the automobiles to protect its security interests, MSMTBR applied
for and received substitute titles to fifty-one of the automobiles. In regard to some
of the automobiles, MSMTBR “converted the collateral for its own benefit and use
by repossessing the collateral and reselling it.” On one contract, MSMTBR
collected “insurance proceeds from a casualty loss of the collateral.” Mid-Atlantic
demanded return of the titles, but MSMTBR refused. Mid-Atlantic further alleged
that, upon its purchase of the installment sales contracts at issue, it became “the
legal owner . . . together with all rights under the[] Contracts, including the right to
receive payments, the right to hold title, the right to be designated the lienholder on
the title, and all rights to any collateral securing payment under the Contracts.” At
the time it filed suit, Mid-Atlantic had purchased the eighty-two contracts for an
agreed price of $364,498.27, of which $234,526.94 was “paid immediately, with
the balance becoming due if the underlying Contracts performed for an agreed-
upon period.”
4
Mid-Atlantic sought damages from MSMTBR in the amount of the fair
market value of the collateral, or $294,525, for conversion and recovery under the
TLA, which provides that a person who commits theft “is liable for the damages
resulting from the theft.”2 Mid-Atlantic also sought a statutory penalty of $1,000
for each instance of theft. For those automobiles that MSMTBR did not transfer
title to a third party, Mid-Atlantic requested, in the alternative, restoration of good
title.
In its answer, MSMTBR generally denied the allegations and raised the
affirmative defenses of failure of consideration, waiver, and estoppel. MSMTBR
alleged that Mid-Atlantic had first breached the Agreement by failing to pay all the
sums due to MSMTBR.
In its summary-judgment motion, Mid-Atlantic argued that it was entitled to
summary judgment as a matter of law on its conversion and TLA claims because
there were no genuine issues of material fact. Mid-Atlantic explained that, after it
had purchased the eighty-two installment sales contracts at issue, MSMTBR
falsely certified to the DMV that MSMTBR was the “lienholder or authorized
agent of the lienholder” on fifty-one of the automobiles and the “original title
covering said vehicle[s] ha[d] been lost or destroyed.” MSMTBR knew, however,
that the titles had not been lost because it “had already sold all rights to those
2
See id. § 134.003.
5
vehicles” and had delivered the original titles to Mid-Atlantic. During the
pendency of the lawsuit, MSMTBR returned to Mid-Atlantic five of the fifty-one
contested Certificates of Title, but it refused to return the remaining forty-six or to
produce two titles it had never delivered. Of those forty-eight vehicles, MSMTBR
repossessed and resold at least twenty to third parties. Because Mid-Atlantic did
not possess good title to any of the remaining fourteen vehicles, it was prevented
from disposing of the three vehicles it had repossessed and could not deliver title to
one customer who had paid for his vehicle in full.
Mid-Atlantic attached to its summary-judgment motion the Agreement and
Limited Power of Attorney; the original title, as delivered by MSMTBR, for each
contested installment sales contract; a “Decision Call Back” form; for each of the
contested contracts, a “Guarantee of Title,” wherein MSMTBR guaranteed “to
provide [Mid-Atlantic] with a clean and marketable title to the collateral . . . within
(45) forty-five days”; the title histories from the DMV listing MSMTBR as the
holder of title for each of the fifty-one vehicles at issue; and MSMTBR’s title
applications.
Mid-Atlantic also attached the affidavit of Kimberly Yothers, a Mid-Atlantic
employee who had care, custody, and control of its records concerning its
transactions with MSMTBR. Yothers testified that MSMTBR had applied for and
obtained substitute titles for “at least fifty-one” of the eighty-two automobiles for
6
which Mid-Atlantic had purchased the installment sales contracts; in each
application, MSMTBR “certified” to the DMV that MSMTBR was the “lienholder
or authorized agent of the lienholder” and the “original title covering said
vehicle[s] has been lost or destroyed,” although MSMTBR had already transferred
title to Mid-Atlantic. Yothers explained that MSMTBR was “aware of and
familiar with the terms of” the Agreement and the Power of Attorney.
In its response to Mid-Atlantic’s motion, MSMTBR asserted that genuine
issues of material fact precluded summary judgment. It asserted that Mid-Atlantic
had breached the Agreement first by withholding $50,000 owed to MSMTBR and,
as a result, MSMTBR began requesting lost titles from the DMV in an effort to
mitigate its damages. It also asserted that fact issues existed as to its intent.
In its reply to MSMTBR’s response, Mid-Atlantic denied first breaching the
Agreement and asserted that MSMTBR had provided no evidence that Mid-
Atlantic owed it $50,000. Mid-Atlantic argued that its summary-judgment
evidence “conclusively” established MSMTBR’s intent because it applied for
substitute titles to vehicles that it knew it had already transferred to Mid-Atlantic.
After sustaining Mid-Atlantic’s objections to MSMTBR’s summary-
judgment evidence, the trial court granted Mid-Atlantic summary judgment on its
TLA and conversion claims. It awarded Mid-Atlantic $266,875 in actual damages,
$50,000 in statutory damages on its TLA claim, and, alternatively, $266,875 in
7
damages on its conversion claim. The trial court also noted that MSMTBR had
delivered original Certificates of Title for fourteen of the vehicles at issue, and it
granted MSMTBR an $84,675 offset.
Standard of Review
To prevail on a summary-judgment motion, a movant has the burden of
proving that it is entitled to judgment as a matter of law and there is no genuine
issue of material fact. TEX. R. CIV. P. 166a(c); Cathey v. Booth, 900 S.W.2d 339,
341 (Tex. 1995). When a plaintiff moves for summary judgment on its claim, it
must establish its right to summary judgment by conclusively proving all the
elements of its cause of action as a matter of law. Rhone Poulenc, Inc. v. Steel,
997 S.W.2d 217, 223 (Tex. 1999); Anglo-Dutch Petroleum Int’l, Inc. v. Haskell,
193 S.W.3d 87, 95 (Tex. App.—Houston [1st Dist.] 2006, pet. denied). Only if the
movant meets its burden does the burden shift to the non-movant to present
evidence that would preclude summary judgment. Steel, 997 S.W.2d at 222–23.
“When reviewing a summary judgment, we take as true all evidence favorable to
the nonmovant, and we indulge every reasonable inference and resolve any doubts
in the nonmovant’s favor.” Valence Operating Co. v. Dorsett, 164 S.W.3d 656,
661 (Tex. 2005).
8
The Nature of MSMTBR’s Claims
In its first issue, MSMTBR argues that the trial court erred in awarding Mid-
Atlantic damages as a matter of law on its TLA and conversion claims, which
constitute tort claims, because the duties MSMTBR allegedly breached “are based
on contractual obligations that arise from an agreement between the parties” and,
therefore, constitute contract claims only, and do not sound in tort.
Mid-Atlantic argues that MSMTBR waived this issue because it did not raise
the argument in its response to Mid-Atlantic’s summary-judgment motion. A
movant must establish its entitlement to summary judgment on the issues expressly
presented to the trial court by conclusively proving all essential elements of its
cause of action or defense as a matter of law. City of Houston v. Clear Creek
Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979). Although, generally, a non-movant
must expressly present to the trial court any ground that would defeat the movant’s
right to summary judgment, a non-movant needs no answer or response to contend
on appeal that the grounds expressly presented to the trial court are insufficient as a
matter of law to support the judgment. Id. at 678–79; Landers v. State Farm
Lloyds, 257 S.W.3d 740, 746 (Tex. App.—Houston [1st Dist.] 2008, no pet.)
(noting that non-movant need not file response to defeat summary-judgment
motion where “deficiencies in the movant’s own proof or legal theories might
defeat the movant’s right to judgment as a matter of law”); see also Argovitz v.
9
Argovitz, No. 14-07-00206-CV, 2008 WL 5131843, at *8 (Tex. App.—Houston
[14th Dist.] Dec. 9, 2008, pet. denied) (mem. op.).
Here, MSMTBR asserts on appeal that Mid-Atlantic’s TLA and conversion
claims constitute deficient legal theories upon which Mid-Atlantic may not
recover. MSMTBR argues that Mid-Atlantic’s summary-judgment evidence is
insufficient as a matter of law to support the trial court’s rendition of summary
judgment on those claims. Thus, MSMTBR was not required to raise this issue in
its response to Mid-Atlantic’s motion for summary-judgment. See Clear Creek,
589 S.W.2d at 678. Accordingly, we address the issue.
“The acts of a party may breach duties in tort or contract alone or
simultaneously in both.” Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618
(Tex. 1986). To determine whether claims sound in tort or contract we examine
(1) the source of the duty allegedly breached and (2) the nature of the injury
claimed. See Sw. Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 494 (Tex. 1991).
Contractual duties are those that arise from an agreement between parties.
Farah v. Mafrige & Kormanik, P.C., 927 S.W.2d 663, 674 (Tex. App.—Houston
[1st Dist.] 1996, no writ). Tort duties are those “imposed by law—apart from and
independent of promises made [in a contract]—to avoid injury to others.”
DeLanney, 809 S.W.2d at 494. If the defendant’s conduct would give rise to
liability only because it breaches the parties’ agreement, the plaintiff’s claim
10
generally sounds in contract. Id.; Farah, 927 S.W.2d at 674. If the defendant’s
conduct would give rise to liability independent of the fact that a contract exists
between the parties, the plaintiff’s claim may also sound in tort. DeLanney, 809
S.W.2d at 494.
Next, when the only loss or damage is the subject matter of the contract, the
plaintiff’s action is ordinarily on the contract. Id.; Reed, 711 S.W.2d at 618;
Farah, 927 S.W.2d at 674. When the loss or damage is not the subject of the
contract, the plaintiff’s action is one in tort. See Farah, 927 S.W.2d at 674 (citing
Am. Nat’l Petroleum Co. v. Transcon. Gas Pipe Line Corp., 798 S.W.2d 274, 278
(Tex. 1990) (stating that commercial relations torts are not contractual even though
they seek economic damages identical to cause of action in contract)).
In DeLanney, the plaintiff sued the defendant telephone company for
negligence, alleging that it had negligently failed to perform its contract to publish
an advertisement in its telephone book. 809 S.W.2d at 493. The jury found that
the defendant was negligent in omitting the plaintiff’s advertisement and awarded
lost-profit damages. Id. at 494. The supreme court held that, because the plaintiff
sought to impose liability for the breach of a duty created under the contract, rather
than a duty imposed by law, and sought only damages for a failure to perform the
contract, the claim sounded in contract. Id. at 494–95. Because the plaintiff had
11
not asserted a breach-of-contract claim, the court reversed the jury verdict and
rendered judgment that the plaintiff take nothing. Id.
Here, both the duty allegedly breached and the nature of the injury claimed
are independent from the duties and remedies contained in the Agreement. A duty
to refrain from unlawfully or wrongfully appropriating the property of another
arises under statutory and common law. See TEX. CIV. PRAC. & REM. CODE ANN.
§§ 134.002–.003 (Vernon 2011) (stating that person who commits theft, as defined
in Texas Penal Code section 31.03 et seq., is liable for damages resulting from
theft); TEX. PENAL CODE ANN. §§.31.03–.07, 31.11–.14 (Vernon 2011 & Supp.
2013) (defining theft); Waisath v. Lack’s Stores, Inc., 474 S.W.2d 444, 447 (Tex.
1971) (defining conversion). Although the rights and obligations under the
Agreement may serve as a defense to a claim of wrongful conversion or theft,
nothing in the Agreement contemplates complete immunity from unlawful or
wrongful appropriation. MSMTBR’s alleged conduct, if proven, may give rise to
liability because it breaches the Agreement. See DeLanney, 809 S.W.2d at 494;
Farah, 927 S.W.2d at 674. But it also, if proven, may give rise to liability for
conversion and theft if Mid-Atlantic proves it was the true owner and MSMTBR’s
actions were not justified under the Agreement or under any applicable defensive
theory. See DeLanney, 809 S.W.2d at 494–95. Thus, Mid-Atlantic’s claims can
sound in tort.
12
Furthermore, Mid-Atlantic sought, and the trial court awarded, the value of
the collateral and statutory penalties under the TLA. These damages, which arise
from statute and common law, are independent of any benefit-of-the-bargain
damages under the Agreement. See TEX. CIV. PRAC. & REM. CODE ANN. § 134.005
(Vernon 2011) (specifying recovery); United Mobile Networks L.P. v. Deaton, 939
S.W.2d 146, 147–48 (Tex. 1997) (stating generally appropriate measure of
damages for conversion is fair market value of property at time and place of
conversion). When, as here, the loss or damage is not the subject of the contract,
the plaintiff’s action is one in tort. See Farah, 927 S.W.2d at 674.
In support of its argument, Mid-Atlantic relies on Cass v. Stephens, 156
S.W.3d 38 (Tex. App.—El Paso 2004, pet. denied), cert. denied 552 U.S. 819, 128
S. Ct. 115 (2007). In Cass, the plaintiff sued the defendants for breach of a joint
operating agreement concerning oil service equipment and for conversion, alleging
that the defendants had wrongfully appropriated jointly owned equipment for their
own use. Id. at 47–50. The defendant argued that the conversion claim was barred
as a matter of law because it sounded only in contract. Id. at 68–69. In concluding
that the plaintiff’s claim sounded in tort, the court reasoned that, notwithstanding
the parties’ agreement, the defendants breached a duty imposed by law not to
appropriate the jointly owned equipment for their own use. Id. at 69. Such
13
conduct breached an obligation that existed outside the contract and therefore
sounded in tort. Id.
Here, similar to Cass, MSMTBR was subject to a duty imposed by the TLA,
the Texas Penal Code, and common law not to unlawfully or wrongfully
appropriate Mid-Atlantic’s property for its own benefit. See id.; see also
DeLanney, 809 S.W.2d at 494. Further, the trial court issued statutory penalties
and awarded damages based on the fair market value of the collateral, rather than
on any measure of damages under the Agreement. See Farah, 927 S.W.2d at 674.
Accordingly, we hold that Mid-Atlantic’s TLA and conversion claims may
sound in tort independent of a contractual duty, and we overrule MSMTBR’s first
issue.
Texas Theft Liability Act
In its second issue, MSMTBR argues that the trial court erred in granting
Mid-Atlantic summary judgment on its TLA claim because there are genuine
issues of material fact regarding MSMTBR’s intent to deprive Mid-Atlantic of its
property as MSMTBR was “not prohibited from protecting its own interests.”
A person who commits theft, as defined under the Texas Penal Code, “is
liable for the damages resulting from the theft.” TEX. CIV. PRAC. & REM. CODE
ANN. §§.134.002–.003; TEX. PENAL CODE ANN. §§.31.03–.07, 31.11–.14. A
person commits the offense of theft if he “unlawfully appropriates property with
14
intent to deprive the owner of property” without the owner’s “effective consent.”
TEX. PENAL CODE ANN. § 31.03(a)–(b). “Appropriate” is defined as “to bring
about a transfer or purported transfer of title to or other nonpossessory interest in
property, whether to the actor or another” or “to acquire or otherwise exercise
control over property other than real property.” Id. §.31.01(4). “A person acts
intentionally, or with intent, with respect to the nature of his conduct or to a result
of his conduct when it is his conscious objective or desire to engage in the conduct
or cause the result.” TEX. PENAL CODE ANN. §.6.03(a) (Vernon 2011). An
“owner” is “a person who . . . has title to the property, possession of the property,
whether lawful or not, or a greater right to possession of the property than the
actor[.]” Byrd v. State, 336 S.W.3d 242, 251 (Tex. Crim. App. 2011) (citing TEX.
PENAL CODE ANN. § 1.07(a)(35)(A) (Vernon Supp. 2013)).
Mid-Atlantic first asserts that MSMTBR appropriated the automobiles that
were serving as collateral for the installment sales contracts at issue by acquiring
substitute titles to the automobiles and then repossessing and reselling them—all
with the intent to deprive Mid-Atlantic of its property, i.e., its security interest. As
its evidence of MSMTBR’s intent, Mid-Atlantic points to the testimony of
Kimberly Yothers. Yothers explained that “[f]or eighty of the[] contracts,
MSMTBR delivered original titles to [Mid-Atlantic] for the vehicles which secured
payment of the underlying consumer installment obligations”; Mid-Atlantic
15
“possessed, and continues to possess, the original titles for each of these vehicles”;
and MSMTBR then “applied for and obtained substitute titles for at least fifty-one
of the vehicles” by “falsely certifying to the DMV” that it was the “lienholder or
authorized agent of the lienholder” and the original titles had been “lost or
destroyed.” MSMTBR then repossessed and resold some of the vehicles. Mid-
Atlantic argues that this evidence conclusively establishes MSMTBR’s intent to
deprive Mid-Atlantic of its property because it shows MSMTBR’s “conscious
objective or desire . . . to engage in the conduct or cause the result.” See TEX.
PENAL CODE ANN. §.6.03(a).
MSMTBR responds, noting that nothing in the Agreement or Limited Power
of Attorney made Mid-Atlantic the owner of the vehicles or allowed Mid-Atlantic
to repossess the vehicles for its own account.3 MSMTBR further notes that
nothing prohibited it from acting to protect its own security interests. Moreover, it
is undisputed that MSMTBR remained the lienholder of record.
Mid-Atlantic next asserts that it “never claimed it owned the vehicles,” but
only that it “owned the security interests in the Contracts, and possessed sole rights
to deal with the collateral.” And “[a]lthough the titles themselves continued to list
3
Although the trial court struck MSMTBR’s evidence attached to its summary-
judgment response and, thus, MSMTBR presented no evidence, MSMTBR did not
have a burden to raise a fact issue unless Mid-Atlantic first met its burden to
conclusively demonstrate its right to summary judgment. See TEX. R. CIV. P.
166a(c); Rhone Poulenc, Inc. v. Steel, 997 S.W.2d 217, 222–23 (Tex. 1999).
16
MSMTBR as the denominated lienholder,” the Agreement and Limited Power of
Attorney “necessarily conferred exclusive ownership rights over the vehicles, as
security, on Mid-Atlantic.”
Specifically, Mid-Atlantic notes that, with respect to each installment sales
contract, the Agreement provides that Mid-Atlantic was the first lien holder:
Section I: Purchase of Contracts
....
Seller Obligations
(a) With respect to each Contract [MSMTBR] hereby
represents, warrants and covenants unto [Mid-Atlantic] as
follows:
....
8. [MSMTBR] or its predecessor-in-interest, or their
agents or affiliated agents[,] registered all vehicles
described in the [consumer contract] in compliance
with the vehicle laws of the state in which the
respective Customer resides, showing the Customer as
registered owner and [Mid-Atlantic] as first perfected
lienholder (secured party);
....
20. Notwithstanding any other provisions hereof,
[MSMTBR] warrants that each [consumer contract] is
secured by a valid and legal perfected first lien on the
collateral.
Thus, under paragraph eight, MSMTBR warranted that it had registered each
automobile, showing the customer as the registered owner and Mid-Atlantic as the
“first perfected lienholder.” Paragraph twenty, however, indicates that MSMTBR
17
warranted that, notwithstanding any other provision, it had generally perfected a
first lien.
Mid-Atlantic further asserts that the Limited Power of Attorney granted it
the power to act in “complete substitution” for MSMTBR. In support of its
argument, Mid-Atlantic cites Nelson v. Consumers County Mutual Insurance
Company, 326 S.W.2d 535 (Tex. Civ. App.—San Antonio 1959, writ dism’d). In
Nelson, however, the language in the power of attorney provided that any loss was
payable to the finance company and allowed the finance company to proceed in its
own name and receive the full proceeds for its own account. Id. at 537–38.
Here, MSMTBR’s Limited Power of Attorney expressly limits Mid-Atlantic
to acting “in [MSMTBR’s] name[], place and stead, and for [MSMTBR’s] use and
benefit.” Thus, unlike in Nelson, Mid-Atlantic was not granted general power to
proceed in its own name or for its own account. See id.
The Limited Power of Attorney does recite that it grants a power coupled
with an interest. However, considering this language in light of the entire writing,
which authorizes Mid-Atlantic to act only for MSMTBR’s account, and indulging
every reasonable inference and resolving any doubts in non-movant MSMTBR’s
favor, as we must, we conclude that the interest granted is in the proceeds, and not
the automobiles.
18
That Mid-Atlantic was granted only an interest in receiving payment is
supported by other provisions of the Agreement and the Decision Callback form,
which together reflect that Mid-Atlantic was to pay MSMTBR only an upfront fee
for each consumer contract.4 And, as each consumer performed on its Contract by
making payments to Mid-Atlantic, Mid-Atlantic was to make payments to
MSMTBR. Thus, the Agreement contemplated sums owed to MSMTBR even
after the sale of each Contract.
Further, in its petition, Mid-Atlantic asserted that for the installment sales
contracts it purchased under the Agreement, it agreed to pay $364,498.27, of which
it “immediately paid” $234,526.94, “with the balance becoming due if the
underlying Contract[s] performed for an agreed upon period.” (Emphasis added.)
Thus, a defaulting consumer may render both Mid-Atlantic and MSMTBR unpaid.
The Agreement reflects that Mid-Atlantic’s right to payment was at all times
protected by provisions that required MSMTBR to repurchase a Contract in the
4
For example, a Decision Callback dated October 28, 2010 covered three of the
installment sales contracts with a principal value of approximately $21,400, of
which MSMTBR would receive an Advance to Seller of approximately $8,400.
An additional $11,700 would be set aside in the Special Reserve and the Bonus
Pool, and Mid-Atlantic received an upfront discount of $1,300. Assuming the
installment sales contracts performed as agreed, Mid-Atlantic would receive the
discount and all interest, and MSMTBR would receive the remaining funds from
the Bonus Pool and Special Reserve.
19
event of a default by a consumer.5 Mid-Atlantic does not direct us to any
summary-judgment evidence conclusively showing that its purchase of an
installment sales contract meant that MSMTBR was “no longer entitled to exercise
any rights as a lienholder.”
Taking as true all evidence favorable to MSMTBR and indulging every
reasonable inference and resolving any doubts in its favor, as we must, we
conclude that Mid-Atlantic’s summary-judgment evidence does not conclusively
show that Mid-Atlantic had a superior right to possession of the automobiles or
that MSMTBR was prohibited from acting to protect its own interests. See
Dorsett, 164 S.W.3d at 661. We therefore conclude that Mid-Atlantic’s summary-
judgment evidence does not conclusively establish that MSMTBR acted with the
intent to deprive Mid-Atlantic of its property. See TEX. CIV. PRAC. & REM. CODE
ANN. § 134.003; TEX. PENAL CODE ANN. § 31.03(a). We hold that Mid-Atlantic
did not meet its burden to conclusively establish its entitlement to summary
judgment as a matter of law on its TLA claim. See TEX. R. CIV. P. 166a(c); Steel,
997 S.W.2d at 223; Siegler, 899 S.W.2d at 197.
Accordingly, we sustain MSMTBR’s second issue.
5
The Agreement provides that if a consumer defaulted on the installment sales
contract in the first six months, Mid-Atlantic could recover its losses by
demanding that MSMTBR repurchase the installment sales contracts or by
repossessing and selling the vehicles, and applying the proceeds to MSMTBR’s
benefit. If the consumer defaulted after the sixth month, the Agreement provides
for a “Seller Bonus Pool” to offset any deficiency to Mid-Atlantic.
20
Conversion Claim
In its third issue, MSMTBR argues that the trial court erred in granting Mid-
Atlantic summary judgment on its conversion claim because there are genuine
issues of material fact regarding MSMTBR’s intent to wrongfully “exercise[]
dominion over the vehicles.”
Conversion is the unauthorized and wrongful assumption and exercise of
dominion and control over the personal property of another, to the exclusion of or
inconsistent with the owner’s rights. Waisath, 474 S.W.2d at 447. Conversion
may be committed against one who has legal possession regardless of the question
of title. Robinson v. Nat’l Autotech, Inc., 117 S.W.3d 37, 39 (Tex. App.—Dallas
2003, pet. denied). A conversion defendant must intend to assert some right in the
property. Id. at 40.
To prevail on its conversion claim on summary judgment, Mid-Atlantic had
to conclusively prove all of the elements of conversion, which are that (1) it
owned, had legal possession, or was entitled to possession of the property, (2)
MSMTBR assumed and exercised dominion and control over the property in an
unlawful and unauthorized manner, to the exclusion of and inconsistent with Mid-
Atlantic’s rights, and (3) MSMTBR refused Mid-Atlantic’s demand for return of
the property. See Automek, Inc. v. Orandy, 105 S.W.3d 60, 63 (Tex. App.—
Houston [1st Dist.] 2003, no pet.).
21
To support the element of intent in its summary-judgment motion on its
conversion claim, Mid-Atlantic directs us to Yothers’s testimony, again asserting
that Mid-Atlantic “is the owner of the installment sales contracts and all rights to
the collateral securing the underlying retail installment loans,” and, “by
fraudulently applying for Certified copies of Title, and in most cases, repossessing
and reselling the collateral, MSMTBR has exercised dominion and control over the
personal property of another, unlawfully and without authorization, and to the
exclusion of, or inconsistent with, [Mid-Atlantic’s] rights.”
Again, we must take as true all evidence favorable to the nonmovant and
indulge every reasonable inference and resolve any doubts in the nonmovant’s
favor. See Dorsett, 164 S.W.3d at 661. As discussed under Mid-Atlantic’s TLA
claim, it is undisputed that the structure of the Agreement was for Mid-Atlantic to
make an initial payment to MSMTBR for each installment sales contract, “with the
balance becoming due if the underlying Contract[s] performed for an agreed upon
period.” (Emphasis added.) Mid-Atlantic does not direct us to any provision of the
Agreement that expressly prohibited MSMTBR from acting to protect its own
interests. The Limited Power of Attorney expressly provides authorization for
Mid-Atlantic to act on behalf of MSMTBR.
We conclude that Mid-Atlantic has not conclusively established that
MSMTBR acted with the intent to assume and exercise dominion and control over
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Mid-Atlantic’s property in an unlawful and unauthorized manner. See Orandy,
105 S.W.3d at 63. We hold that Mid-Atlantic did not meet its burden to
conclusively establish its entitlement to summary judgment as a matter of law on
its conversion claim. See TEX. R. CIV. P. 166a(c); Steel, 997 S.W.2d at 223;
Siegler, 899 S.W.2d at 197.
Accordingly, we sustain MSMTBR’s third issue.
Conclusion
We reverse the judgment of the trial court on Mid-Atlantic’s TLA and
conversion claims and remand the case to the trial court for further proceedings.
Terry Jennings
Justice
Panel consists of Justices Jennings, Bland, and Massengale.
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