NO. 07-09-00387-CV
IN THE COURT OF APPEALS
FOR THE SEVENTH DISTRICT OF TEXAS
AT AMARILLO
PANEL B
FEBRUARY 28, 2011
W. J. COLLIER, APPELLANT
v.
ROBERT EDWARD HALL TRUST
AND KATHY JEAN HALL TRUST, APPELLEES
FROM THE 39TH DISTRICT COURT OF KENT COUNTY;
NO. 1645; HONORABLE SHANE HADAWAY, JUDGE
Before QUINN, C.J., and CAMPBELL and HANCOCK, JJ.
MEMORANDUM OPINION
Appellant, W. J. Collier (Collier), appeals from the trial court’s judgment in favor
of appellees, Robert Edward Hall Trust and Kathy Jean Hall Trust (appellees). Collier
challenges the legal and factual sufficiency of the evidence to support the jury’s
answers to the controlling jury questions and the trial court’s calculation of prejudgment
interest. We affirm in part and reverse and remand in part.
Factual and Procedural Background
In 2002, the controlling stockholders in the Kent County State Bank, Bob
Hamilton and Robert G. Hall, entered into an arrangement to sell their stock to Tom
Darden, Jesse Reese, and Collier. The agreement to purchase the stock of Robert G.
Hall was eventually culminated by the payment of cash and the signing of a promissory
note by the three named individuals in favor of Robert G. Hall.1 The original amount of
the note to Hall was $94,145.00. No principal payments were ever made on this original
note.
Robert G. Hall died and the note became part of his estate. Subsequently,
Robert Edward Hall (Hall), the son of Robert G. Hall, entered into an agreement for the
execution of a new note in favor of the Robert Edward Hall Trust and the Kathy Jean
Hall Trust. In addition, there appears to have been an agreement whereby some of the
interest due on the original note was paid before the new note was executed. On June
15, 2005, a new note was executed by Collier and Reese. A signature line for Darden
appears on the new note; however, Darden never signed the note. In fact, the issue of
the lack of Darden’s signature became the focal point of the subsequent litigation. The
new note called for payment of quarterly installments, with the first installment being due
on October 10, 2005. Subsequent to the signing of the new note, Reese filed
bankruptcy. Hall sent a notice reminding Collier of the upcoming quarterly payment on
September 14, 2005. No payments of principal or interest were ever made on the note.
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Darden, Reese, and Collier also paid cash and signed a note in favor of Bob
Hamilton for Hamilton’s stock. That note and its successor note are not involved in this
litigation.
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Suit was subsequently filed to collect the principal of the note, interest, and reasonable
attorney fees.
During the trial, the evidence surrounding the execution of the note was hotly
contested, as was the factual issue of who was responsible for preparation of the note.
At the conclusion of the testimony, the jury was asked if the signature of Darden was a
condition precedent to the formation of the agreement of the parties. The jury answered
“No.” In the next question, the jury found that Collier failed to comply with the note’s
terms. The final questions dealt with the amount of damages and reasonable and
necessary attorney fees for trial of the case. After receiving the jury’s answers to the
questions, the trial court entered a judgment in favor of appellees for $94,145.00, plus
pre-judgment interest in the sum of $54,713.60, reasonable and necessary attorney
fees of $16,664.00, and post-judgment interest on the total of $166,522.60. Collier
perfected his appeal and contends that the evidence is both legally and factually
insufficient to support the jury’s answers to the questions asked. Further, Collier
contends that, because there was a lack of proper notice of acceleration of the note’s
payment terms, the trial court’s calculation of pre-judgment interest is in error. We will
affirm in part and reverse and remand in part.
Sufficiency of the Evidence
Standards of Review
Before beginning our standards of review for the challenges to the sufficiency of
the evidence that Collier has propounded, we should point out that the issue of whether
or not the signature of Tom Darden was a condition precedent to the formation of the
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agreement between the parties was pleaded as an affirmative defense by Collier. See
TEX. R. CIV. P. 94. Therefore, this issue is one that Collier bore the responsibility of
proving. See Compass Bank v. MFP Fin. Servs., 152 S.W.3d 844, 851 (Tex.App.—
Dallas 2005, pet. denied).
Legal Sufficiency
According to City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005), “‘No
evidence’ points must, and may only, be sustained when the record discloses one of the
following situations: (a) a complete absence of evidence of a vital fact; (b) the court is
barred by rules of law or of evidence from giving weight to the only evidence offered to
prove a vital fact; (c) the evidence offered to prove a vital fact is no more than a mere
scintilla; [or] (d) the evidence establishes conclusively the opposite of the vital fact.”
When reviewing an attack on the legal sufficiency on an issue that the appellant has the
burden of proof, we review the evidence supporting the jury’s finding to determine
whether all facts are established for the contrary position as a matter of law. Dow
Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001) (citing Sterner v. Marathon Oil
Co., 767 S.W.2d 686, 690 (Tex. 1989)). Our review consists of our viewing the
evidence in the light most favorable to the verdict, crediting favorable evidence if
reasonable jurors could, and disregarding all contrary evidence unless reasonable
jurors could not. City of Keller, 168 S.W.3d at 820. Finally, we may not substitute our
judgment for that of the trier of fact as long as the evidence would allow reasonable and
fair-minded people to differ in their conclusions. Id. at 822. This is but another way of
saying that as long as there is at least a scintilla of evidence to support the jury’s
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answer to the fact question at issue; the legal sufficiency challenge must fail. Tarrant
Reg’l Water Dist. v. Gragg, 151 S.W.3d 546, 552 (Tex. 2004).
Factual Sufficiency
In a factual sufficiency review, we consider all of the evidence both supporting
and contrary to the jury’s answer to the fact question at issue. Plas-Tex, Inc. v U.S.
Steel Corp., 772 S.W.2d 442, 445 (Tex. 1989). Because the jury question involved in
our analysis was one that Collier bore the burden of proof, we will only reverse if we find
that the jury’s answer is against the great weight and preponderance of the evidence.
Dow Chem. Co., 46 S.W.3d at 242. In order to reverse on a factual sufficiency point,
we will have to be convinced that the jury’s answer to the question at issue was clearly
wrong and manifestly unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986).
Evidence
Collier’s contention is that Darden’s signature was a condition precedent to the
formation of any agreement represented by the note of June 15, 2005. The evidence
before the jury regarding the events when the note was signed consisted of the
testimony of Hall, Hamilton, and Collier. Hall testified that the note signed on June 15,
2005, was furnished by Collier. He did not know who prepared the note but affirmatively
testified that he did not prepare it and that Collier brought the note to him. Further, Hall
testified that it was never a condition for payment of the note that he obtain Darden’s
signature on the note. In fact, during direct examination, Hall raised the question of why
he would trade a good note, meaning the old note, for one that was conditioned as
suggested by Collier. Hamilton, one of the original stockholders, also executed a new
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note in 2005 that contained the same terms as the note at issue. Hamilton testified that,
when he signed the 2005 note, Collier brought the note to the meeting. Further,
Hamilton testified that there was no discussion with Collier that Darden was required to
sign the new note before it became enforceable. When Collier testified about the
drafting of the note at issue and whether he or Hall furnished the note, the following
testimony was heard:
Q. Do you remember if either you drafted it or somebody drafted it at
your instruction?
A. I don’t remember that, no, sir.
Q. Okay. You’re not saying that didn’t happen. You’re just saying you
don’t remember.
A. Correct.
Collier also testified that it was his understanding that Hall would mail the note to
Darden in an attempt to obtain Darden’s signature. Finally, Collier testified that it was
his intent that all three of the original debtors sign the note.
The note was presented to the jury and is in the record before this Court. Upon
examination, the following observations can be made. First, all three names appear as
makers of the note in the body of the note. Second, after the naming of the three
makers of the note, there is a parenthetical notation in the plural (Borrowers). Third, all
other references to the borrowers are by the singular (borrower). Fourth, there is a
blank signature line for Darden’s signature. Finally, there are no instructions to obtain
the signature of all parties before the note will become enforceable. Likewise, there are
no limitations on the signature of Reese and Collier regarding the enforceability of the
note without Darden’s signature.
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As the last bit of evidence, each side offered expert testimony from a banker
regarding the status of the note at issue. Swenson, the expert for appellees, testified
that, if there were conditions to the issuance of the note, those conditions should be
stated on the note. Further, Swenson opined that he did not find any conditions that
would operate to invalidate the note. Collier’s expert, Crouse, testified that if, in fact, the
obtaining of Darden’s signature was a condition placed on the promissory note and the
signature was not obtained, the note would be null and void. However, Crouse never
affirmatively testified that Darden’s signature was a condition placed on the note.
Analysis
Legal Sufficiency
Reviewing the above evidence in the light most favorable to the answer of the
jury to the question, as we must in this review, see City of Keller, 168 S.W.3d at 820, we
find that there is more than a scintilla of evidence to support the jury’s answer. See
Tarrant Reg’l Water Dist., 151 S.W.3d at 552. Collier’s position on the issue is not
established as a matter of law. See Dow Chem. Co., 46 S.W.3d at 241. Accordingly,
Collier’s issue regarding the legal sufficiency of the evidence to support the jury’s
answer to question number one is overruled.
Factual Sufficiency
Remembering that we are required to view all of the evidence when conducting a
factual sufficiency review, Plas-Tex, Inc., 772 S.W.2d at 445, we must determine
whether the jury’s answer is so against the great weight and preponderance of the
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evidence, Dow Chem. Co., 46 S.W.3d at 242, so as to make the jury’s answer to
question number one manifestly wrong and unjust. See Cain, 709 S.W.2d at 176.
Our review of the evidence leads us to conclude that the jury was faced with
competing evidence at almost every turn. Hall and Hamilton testified that Collier
furnished the note in question. Collier testified that he did not personally prepare the
note; however, as to whether he might have furnished the note, Collier’s testimony was
more equivocal. He said he did not remember. As to the issue of conversations about
Darden’s signature being required as a condition for the creation of the note, Hall and
Hamilton testified that there was no such discussion. Further, each testified that there
was no discussion of their needing to obtain Darden’s signature on the note. Collier, on
the other hand, testified it was his “understanding” that Hall and Hamilton would obtain
Darden’s signature. Appellees’ expert said that if there was a condition to the validity of
the note, the same should be evidenced on the face of the note and that he found none.
Interestingly, Collier’s expert testified that, if, in fact, obtaining Darden’s signature was a
condition of the note, then a note without the signature would be a nullity. Clearly, the
jury could have accepted the testimony of both experts and still validly answered
question number one, “No.” This is so because the answer given by Collier’s expert
simply identifies the effect that a condition on the note would have, but nowhere does
he testify that there was a condition on the note in question. The note was introduced
and, from our view, does not seem to contain any specific condition or limitation
regarding the execution and validity of the note. Finally, it is up to the jury to resolve
conflicts in the testimony and determine the weight and value to assign to the testimony
they hear. See Leyva v. Pacheco, 163 Tex. 638, 358 S.W.2d 547, 549 (1962).
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Accordingly, we find that there was factually sufficient evidence to support the jury’s
answer to question number one and, accordingly, we overrule Collier’s factual
sufficiency issue.
Prejudgment Interest
Collier’s last issue contends that the trial court abused its discretion by its
incorrect calculation of prejudgment interest. The substance of Collier’s issue is that
there was no valid acceleration of the installments not yet due on the note in question.
Standard of Review
An appellate court reviews a trial court’s award of prejudgment interest under an
abuse of discretion standard of review. See Mfrs. Auto Leasing, Inc. v. Autoflex
Leasing, Inc., 139 S.W.3d 342, 348 (Tex.App.—Fort Worth 2004, pet. denied). A trial
court abuses its discretion when it acts without reference to any guiding rules or
principles. See Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex.
1985).
Law
Prejudgment interest is the compensation allowed by law as additional damages
for lost use of the money due as damages during the lapse of time between accrual of
the claim and the date of judgment. See Brainard v. Trinity Universal Ins. Co., 216
S.W.3d 809, 812 (Tex. 2006). Accrual, as used in our factual situation, would mean that
the interest did not run on the unpaid installments until acceleration occurred. See
Varner v. Cardenas, 218 S.W.3d 68, 70 (Tex. 2007) (holding that, since the note in
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question did not waive notices regarding acceleration, interest ran on the unpaid
installments only after acceleration occurred.)
Analysis
The trial record reflects that no notice of acceleration was sent by appellees to
Collier until June 29, 2006. This notice was sent by a law firm employed by Hall.
Subsequently, on October 5, 2006, the Robert Edward Hall Trust sent a demand letter
that was styled “Final Demand Before Suit.” In this demand letter, the trust demands
the payment of the full principal balance plus accrued interest through the day of the
letter or suit will be filed.
Appellees contend that the notice of payment due, sent by Hall on September 14,
2005, constituted notice of default and acceleration. However, this contention is not
supported by the letter in question. All the letter of September 14, 2005, does is remind
Collier that a payment was due on October 10, 2005. Since the letter was sent out
before the payment was due, it could not have been a notice of default, intent to
accelerate, or notice of actual acceleration because the event of default, installment
being due, had not even occurred.
Next, appellees contend that the note in question provides for automatic waiver
of notice of acceleration in the event of default. Thus, according to appellees’ analysis,
the trial court did not act without reference to guiding rules or principles and,
accordingly, did not abuse its discretion. Downer, 701 S.W.2d at 241-42. The problem
with appellees’ analysis of the note’s language regarding waiver is that it is, by its own
terms, conditional. The note clearly states that, in the event of default in the payment of
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principal and interest after demand is made, the unpaid balance shall, at the option of
the holder, become immediately due. As reflected in the discussion in the preceding
paragraph, the record reflects that demand was not made until, at the earliest, the letter
of June 29, 2006. Accordingly, appellees’ contention that acceleration was automatic
and notice was waived is not correct.
Appellees also contend that Collier is precluded from asserting the affirmative
defense of lack of notice of acceleration because it was not affirmatively pled pursuant
to rule 94 of the Texas Rules of Civil Procedure. See TEX. R. CIV. P. 94. To support this
proposition, appellees cite the Court to Espinoza v. Victoria Bank & Trust Co., 572
S.W.2d 816 (Tex.App.—Corpus Christi 1978, writ ref’d n.r.e.). However, this Court has
held, in Cardenas v. Varner, 182 S.W.3d 380, 385 (Tex.App.—Amarillo 2005), modified
on other grounds, 218 S.W.3d 68 (Tex. 2007), that, to lawfully accelerate a promissory
note, the creditor must afford the debtor notice of its intent to accelerate and actual
acceleration. This holding was based upon the Texas Supreme Court’s holding in Holy
Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 566-67 (Tex. 2001). Our
analysis indicates that Cardenas is a proper statement of the law on this issue. This is
so because, when the holder of a promissory note has the option to accelerate maturity
of the note upon default by the maker, equity demands notice be given of the intent to
exercise that option. See Ogden v. Gibraltar Savs. Ass’n, 640 S.W.2d 232, 233 (Tex.
1982). For these reasons, we decline to follow the Espinoza case, as proffered by
appellees.
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We find that the trial court’s award of prejudgment interest is an abuse of
discretion. Accordingly, we sustain Collier’s issue regarding prejudgment interest.
Conclusion
We affirm the judgment of the trial court as to the underlying note and reverse the
trial court’s determination of prejudgment interest. The case is remanded to the trial
court to properly calculate prejudgment interest in conformity with this opinion.
Mackey K. Hancock
Justice
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