Ashcraft v. Lookadoo

952 S.W.2d 907, 1997 Tex. App. LEXIS 4610, 1997 WL 528663

• Court: Court of Appeals of Texas
• Decided: August 28, 1997
• Docket: 05-95-01211-CV
• Status: Published

Opinions

OPINION

HANKINSON, Justice.

W.R. Ashcraft purchased a note deficiency from the Resolution Trust Company. The principal issue presented here is whether, when Ashcraft purchased that deficiency, he also acquired Donald E. Lookadoo’s guaranty, which secured the original note, so that he became the guaranty’s owner and could enforce it against Lookadoo. According to the contract governing this transaction, the RTC agreed to transfer to Ashcraft only the note deficiency and any supporting documents located in the asset file. Ashcraft concedes that the asset file he received from the RTC did not contain Lookadoo’s guaranty and that the RTC never expressly assigned that guaranty to him. But he argues that, after a nonjury trial, the trial court erroneously concluded from these facts that the RTC did not transfer the Lookadoo guaranty to him and that he does not own it. Instead, Ashcraft asks us to assume that when the RTC assigned him the underlying note deficiency, it also impliedly assigned him Lookadoo’s guaranty. After reviewing the parties’ contract, we conclude that the RTC did not assign the guaranty to Ashcraft. After reviewing the evidence, we further conclude that Ashcraft did not prove the RTC even held the guaranty and was therefore capable of assigning it to Ashcraft. Consequently, Ashcraft failed to prove that he was the owner and holder of the guaranty. We therefore affirm the trial court’s judgment.

BACKGROUND

In 1984, United Savings Joint Venture executed a promissory note for $1,500,000, payable to Metropolitan Savings & Loan Association. Real property located in downtown Fort Worth partially secured the note. Although the note recites that Preston M. Carter, Jr., Douglas H. Kincaid, and Lookadoo executed personal guaranties securing the note, it does not recite the guaranties’ terms. In 1985, the parties consensually modified and extended the note.

In 1990, after placing Metropolitan in receivership, the RTC declared the note to be in default, appointed a substitute trustee, and posted the property for foreclosure sale. The substitute trustee foreclosed on the property and sold it for $397,100. After crediting the foreclosure proceeds to the sum due on the note at default, $1,048,922.39 remained due.

Later, in 1992, Ashcraft successfully bid on the note deficiency at an RTC auction. Before the auction, Ashcraft, in his own words, did “due diligence” and reviewed the RTC asset file pertaining to the note deficiency. Although Ashcraft could not recall in detail the loan file’s contents, at trial he stated with certainty that it did not include a copy of Lookadoo’s guaranty. After examining the asset file and note (which referenced Looka-doo’s guaranty), Ashcraft neither asked about any guaranties nor requested a copy of them from the RTC. Instead, without ever discussing with the RTC whether any guaranties existed, he submitted the winning bid and signed a document entitled Purchase and Sale Agreement.

The Purchase and Sale Agreement governed the parties’ transaction. Under the agreement’s terms, Ashcraft received only the assets described in the asset schedule. Later, the RTC issued Ashcraft a Bill of Sale that listed the asset Ashcraft purchased as a commercial deficiency on the note and forwarded the asset file to him. This file contained the loan agreement, the note (attached as an exhibit to a lost note affidavit), the deed of trust, and the modification. The loan file contained neither the original nor a copy of Lookadoo’s guaranty.

Ashcraft turned the loan file over to his attorney for collection. Although he did not physically possess any guaranties, Ashcraft sued Carter, Kincaid, and Lookadoo, as guarantors of the note, for the deficiency. Because bankruptcy proceedings discharged Kincaid’s and Carter’s debts, Ashcraft non-suited them. Thus, at trial Ashcraft sought only to collect on Lookadoo’s guaranty. After a bench trial, the court entered a take-nothing judgment in Lookadoo’s favor, issued findings of fact and conclusions of law, and determined that because Ashcraft was not the owner of the guaranty he could not enforce it. This appeal followed.

In fifteen points of error, Ashcraft challenges certain findings of facts¹ and eonclu-sions of law² in which the trial court determined that under the terms of the sale, the RTC had not expressly or impliedly assigned the guaranty to Ashcraft; therefore, he was not the owner of the guaranty and could not enforce it. Although he does not specifically challenge the evidence supporting the trial court’s fact findings, we assume that is his intent. We will discuss together the points of error necessary to our final disposition of this appeal.

When reviewing the trial court’s findings of fact and conclusions of law, the fact findings have the same force and dignity as a jury’s verdict on special issues.³ We apply the same standards in reviewing the legal or factual sufficiency of the evidence supporting the trial court’s fact findings as we do when reviewing the legal and factual sufficiency of the evidence supporting a jury’s answer to a special issue.⁴ And, we may not substitute our judgment for the fact finder’s, even though, after reviewing the evidence, we would reach a different conclusion.⁵ This is so because the trial court is the sole judge of the witnesses’ credibility and the weight to be given their testimony.⁶ In contrast, when reviewing the trial court’s legal conclusions, we evaluate them independently and thus review the legal conclusions drawn from the facts found solely to determine their correctness.⁷ Keeping these standards in mind, we now examine the evidence that supports the trial court’s fact findings and the validity of its legal conclusions.

DISCUSSION

The determinative issue raised here is whether Ashcraft owns the guaranty and thus can enforce it. At trial, and on appeal, the parties take diametrically opposed positions. Lookadoo contends that to answer this question we can look only to the terms of the Purchase and Sale Agreement that governs this transaction. Because the agreement contains express provisions describing the asset purchased from the RTC that do not mention Lookadoo’s guaranty, Lookadoo argues that we cannot imply that the RTC assigned the guaranty. In contrast, Ashcraft argues that we need neither consider nor be constrained by the terms of the parties’ agreement. Ashcraft contends that the sale terms are irrelevant and would have us sweepingly pronounce that the assignment of a note automatically operates as an assignment of any separate guaranties that secure the note regardless of whether either party knew about, or possessed, the guaranty.

No Texas court has addressed or accepted Ashcraft’s argument, and the court below refused to accept it. The trial court, adopting Lookadoo’s approach, confined its inquiry to the terms of the transaction between the RTC and Ashcraft and concluded that based on the agreement’s terms, the RTC did not assign the guaranty to Ashcraft, Ashcraft did not receive the guaranty, and he therefore failed to prove that he was the owner and holder of the guaranty. Based on our review of the evidence presented to the trial court, we conclude that the trial court properly interpreted the terms of the sale and the evidence before it to foreclose any implied assignment of the guaranty.

On appeal, Ashcraft claims that “[t]he RTC sold [him] the right to collect the deficiency amount remaining on the note” and that the deficiency is “only collectible through enforcement of the guaranties.” Accordingly, Ashcraft urges us to imply that the RTC also assigned the Lookadoo guaranty to ensure that the deficiency he purchased is not rendered valueless. But the parties here made their own contract, and we lack the power to vary those terms to protect one of them from the unforeseen consequences of their agreement.⁸

Further, “implied provisions in agreements are not favored by the law.”⁹ We permit them only when the parties so clearly contemplated the implied provision that they deemed expressing it unnecessary or when inferring a provision is necessary to effectuate the agreement’s full purpose as gathered from the written instrument.¹⁰ But “it is not enough that an implied provision is necessary to make an agreement fair or that without such provision the agreement would be improvident, unwise, or unjust; the implied provision must arise from the presumed intent of the parties as gathered from the instrument as a whole.”¹¹ And we cannot imply “terms in opposition to the express language that the parties themselves have written into the contracts.”¹²

In this case, the terms of the contract at issue (the Purchase and Sale Agreement) define what the RTC sold to Ashcraft. Initially, in the recitals, the RTC states it “is the owner of certain Assets, as defined below, and wishes to sell such Assets.” The agreement then defines “assets” as “any Charge Off, Deficiency or Judgment described on the Asset Schedule or the Final Asset Schedule” and includes any related escrow accounts. In section 2.1, the RTC agreed to sell and Ashcraft agreed to buy “the Assets described in the Asset Schedule.” Later, in section 2.3, the agreement states that “[o]nly the Assets described in the Final Asset Schedule shall be conveyed to the Buyer and the Asset Purchase Price shall be calculated only with respect to such assets.” According to section 2.2 of the agreement, the Final Asset Schedule would be attached to a Bill of Sale, which was to be delivered on the transfer date. The Bill of Sale introduced at trial contained an exhibit entitled “Detail Asset Listing for Pool” and subtitled “Commercial Deficiencies.” One asset listed on this exhibit is the $1,048,922.39 deficiency for this note. The exhibit does not mention any guaranties.

Mark Isensee supervised this asset sale for the RTC. He testified that when a buyer purchases assets from the RTC as Ashcraft did, the buyer purchases only those items found in the asset file because the RTC sells the asset files “as is.” The agreement defines the asset file’s contents as, “to the extent they are within Seller’s possession: the note (or a lost note affidavit), the security agreement, if any; and to the extent provided by the Buyer in accordance with another section of the agreement, an assignment to the order of Buyer of any security agreement.” According to Ashcraft himself, the asset file did not contain the guaranty.

What is more, Ashcraft failed to show that the RTC even possessed Lookadoo’s guaranty at the time of the auction. Ashcraft never asked the RTC about the guaranty before the auction. If Ashcraft had determined that the RTC had the guaranty, but that it simply was not included in the asset file, section 3.01 of the agreement contractually obligated him to obtain an assignment from the RTC:

Buyer’s Preparation of Assignments. Upon execution of this Agreement, it shall be the Buyer’s responsibility to prepare the assignments of judgment for any and all judgments sold hereunder.... In the event any other assignments of Seller’s interest in any of the Assets and any collateral securing the Assets is required, it shall be Buyer’s responsibility to prepare and submit the form of the assignment it desires to use to the Seller....

Ashcraft did not fulfill this obligation.

Based on the agreement’s terms, therefore, we conclude that the agreement specifically defined the asset assigned to Ashcraft— the note deficiency. That definition did not include the guaranty. Moreover, Ashcraft agreed that if he wanted anything else assigned from the RTC, he would provide the assignment for the RTC’s approval. In the face of these contractual terns, implying that the RTC assigned Ashcraft Lookadoo’s guaranty would contradict the parties’ express contractual agreements and would thus be improper.¹³

Not only does Ashcraft ask us to ignore these terms of the Purchase and Sale Agreement to decide that the RTC assigned the Lookadoo guaranty to him, he urges that the terms of the agreement are irrelevant. Ash-craft would have us adopt and apply a broad legal principle pronouncing that in all cases the transfer of the underlying note automatically assigns any guaranties without the need of a separate written assignment regardless of whether the parties knew about, or possessed, the guaranty. To support his argument, Ashcraft relies on other states’ law;¹⁴ quotations from secondary sources;¹⁵ and factually distinguishable Texas case law.¹⁶ Faced with this ease’s facts, these authorities are not compelling.

Nevertheless, while we cannot categorically conclude that under no circumstances would we find Ashcraft’s cited authority persuasive, Ashcraft’s cited authority does not persuade us to ignore the language in the Purchase and Sale Agreement in favor of implying the guaranty’s assignment. But, even if Ashcraft had convinced us to abandon the Purchase and Sale Agreement’s terms in favor of implying the assignment to Ashcraft, we would not do so here because Ashcraft failed to show that the RTC owned the guaranty and thus that it could have been impliedly assigned.

A guaranty is a separate contract distinct from the primary obligation.¹⁷ Guaranties can therefore be modified or released like any other contractual agreement without affecting the original obligation. Consequently, that the note here continued in effect over the years’ course does not prove that Lookadoo’s guaranty remained in effect as well. And Ashcraft presented no evidence that the guaranty still existed, or that the RTC owned it, when the RTC sold the note deficiency to Ashcraft.¹⁸ He could not produce the original guaranty. Nor could he produce a copy of the guaranty that he received from the RTC at the time he purchased the note deficiency because he did not receive one then.

In fact, Ashcraft’s attorney only obtained a copy of the guaranty less than two weeks before trial. At that time, Jackson & Walker, L.L.P. (Metropolitan’s attorneys on the original loan transaction) produced a copy of a guaranty in Lookadoo’s name. Jackson & Walker copied the guaranty from a duplicate closing binder of the original 1984 loan transaction. But no witness from Jackson & Walker, or any other witness with personal knowledge of the original loan transaction, authenticated this copy of the guaranty. Instead, Ashcraft’s attorney informed the court that he went to Jackson & Walker’s office and copied this guaranty from what Jackson & Walker represented to be the closing file for the original 1984 loan. Although Looka-doo objected at trial to admitting this copy because Ashcraft failed to authenticate it properly, the trial court admitted it. On appeal, Lookadoo does not challenge the trial court’s decision to admit this copy into evidence.

Ashcraft claims that by obtaining this copy of the guaranty from “the RTC’s lawyers,” Jackson & Walker, he established that the RTC owned the guaranty when he purchased the note deficiency. Ashcraft points out that Jackson & Walker represented Metropolitan in 1984 when the original loan closed. He then correctly notes that six years later the RTC became Metropolitan’s receiver. From these two facts he summarily concludes that Jackson & Walker was also the RTC’s counsel. We disagree. Ashcraft never showed that an attorney/client relationship existed between the RTC and Jackson & Walker. In fact, Ashcraft never established that at the time the RTC became Metropolitan’s receiver, Jackson & Walker still represented Metropolitan. Given these facts, we cannot attribute Jackson & Walker’s actions to the RTC to establish that the RTC owned the guaranty in 1992 when Ash-craft purchased the note deficiency.

Furthermore, this copy of Looka-doo’s guaranty by itself does not prove the guaranty was still valid and owned by the RTC when the RTC sold the note deficiency to Ashcraft. At best, this copy shows the guaranty’s terms as of 1984. But the RTC did not become Metropolitan’s receiver until 1990—six years later. And Ashcraft did not buy the deficiency until 1992—two years after the RTC became Metropolitan’s receiver. Ashcraft presented no evidence about the guaranty during the interim period from its execution in 1984 until 1992 when he purchased the note deficiency. We conclude from this evidence that Ashcraft never proved that the RTC was the holder and owner of the guaranty at the time it assigned the note to Ashcraft.¹⁹ He therefore did not establish that the RTC had the right to assign the guaranty, either expressly or impliedly.

We overrule appellant’s points of error one through three, five through eight, ten, and twelve through fourteen. Due to our disposition of these points of error, we need not reach appellant’s remaining points of error.²⁰ We affirm the trial court’s judgment.

THOMAS, C.J., and KINKEADE, OVARD, MALONEY, CHAPMAN, MORRIS, WHITTINGTON, JAMES, MOSELEY and BRIDGES, JJ., join in the majority opinion. LAGARDE, J., concurs with concurring opinion. WRIGHT, J., dissents with dissenting opinion.

1 . Ashcraft challenges the following fact findings:

4. According to its terms, the lender could look only to the guaranties and the Property secured by the Deed of Trust to satisfy the indebtedness.

10. In the Fall of 1992, W.R. Ashcraft participated in an auction held by the RTC and was the successful bidder for the Note.

13. Under the terms of the Purchase and Sale Agreement, Ashcraft had the obligation to provide separate written assignments for any judgments, collateral, or other interests in any of the Assets sold under the Purchase and Sale Agreement.

17. Ashcraft did not receive the original or a copy of the guaranties of Messrs. Carter, Kin-caid, or Lookadoo from the RTC.

26. Lookadoo had little memory of the events regarding the loan or the transactions involving the loan. He did not remember executing the Loan Agreement, the Note, the Deed of Trust and the Modification in the capacity of partner of the general partnership which served as venture manager or executing a guaranty or the Modification in an individual capacity. He could not identify the signatures on the Loan Agreement, the Note, the Deed of Trust, the Modification or the Guaranty as his because he did not remember signing the documents and because his signature has changed in the intervening ten years.

32. The Court finds that the evidence presented does not establish that-Ashcraft received the Guaranty as a part of the sale and transfer of the Note, or by a separate assignment or an express assignment.

33. The Court finds that the language in the Purchase and Sale Agreement will not support an implied assignment of the Guaranty with the Note.

2 .Ashcraft challenges the following conclusions of law:

4. Absent an express provision, a guaranty is not transferable to the buyer of a note since the buyer is not a party to the original guaranty contract.

5. The evidence presented at trial does not establish that Ashcraft received the Guaranty as part of the sale and transfer of the Note.

a. The RTC sold what was in the Asset File.

b. The Guaranty was not among the documents that Ashcraft received from the RTC after the sale.

c. No separate assignment of the Guaranty was given to Ashcraft by the RTC.

d. No express assignment of the Guaranty was given to Ashcraft by the RTC.

e. Ashcraft does not have the Guaranty.

6. The language of the Purchase and Sale Agreement will not support an implied assignment of the Guaranty with the Note.

7. Although not expressly stated, the language of the Guaranty implies that it does not automatically follow the Note to which it applies.

8. Ashcraft failed to prove an essential element of his cause of action; that he is the owner and holder of the Lookadoo Guaranty.

3 . FDIC v.F & A Equip. Leasing, 854 S.W.2d 681, 684 (Tex.App.—Dallas 1993, no writ); MJR Corp. v. B & B Vending Co., 760 S.W.2d 4, 10 (Tex.App.—Dallas 1988, writ denied).

4 . Baker v. Baker, 719 S.W.2d 672, 674-75 (Tex.App.—Fort Worth 1986, no writ); see Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986) (describing standard for factual sufficiency review); FDIC, 854 S.W.2d at 685 (describing standard for legal sufficiency review).

5 . FDIC, 854 S.W.2d at 684-85; Essex Crane Rental Corp. v. Striland Constr. Co., 753 S.W.2d 751, 755-56 (Tex.App.—Dallas 1988, writ denied).

6 . FDIC, 854 S.W.2d at 684; Clancy v. Zale Corp., 705 S.W.2d 820, 826 (Tex.App.—Dallas 1986, writ ref'd n.r.e.).

7 . Dallas Morning News v. Board of Trustees, 861 S.W.2d 532, 536 (Tex.App.—Dallas 1993, writ denied); Mercer v. Bludworth, 715 S.W.2d 693, 697 (Tex.App.—Houston [1st Dist.] 1986, writ ref’d n.r.e.), overruled on other grounds hy Shumway v. Horizon Credit Corp., 801 S.W.2d 890, 894 (Tex.1991).

8 . See Provident Fire Ins. Co. v. Ashy, 139 Tex. 334, 339-40, 162 S.W.2d 684, 687 (1942).

9 . Thornton v. D.F.W. Christian Television, Inc., 925 S.W.2d 17, 24 (Tex.App.—Dallas 1995) (citing Sumrall v. Russell, 255 S.W. 239, 240 (Tex.Civ.App.—El Paso 1923, writ dism’d w.o.j.)), rev'd on other grounds, 933 S.W.2d 488 (Tex.1996).

10 . Id. (citing Danciger Oil & Ref. Co. v. Powell, 137 Tex. 484, 490, 154 S.W.2d 632, 635 (1941)).

11 . Id.; see El Paso County Sheriffs Deputies’ Ass'n v. Samaniego, 802 S.W.2d 727, 729 (Tex.App.—El Paso 1990, writ denied) ("Courts cannot by implication import something into a written instrument merely because it might seem that the agreement may appear to operate unjustly.”).

12 . Rogers v. Ricane Enters., Inc., 772 S.W.2d 76, 79 (Tex.1989); Exxon Corp. v. Atlantic Richfield Co., 678 S.W.2d 944, 947 (Tex.1984).

13 . See Exxon, 678 S.W.2d at 947.

14 . See Ampex Credit Corp. v. Bateman, 554 F.2d 750, 753 (5th Cir.1977) (applying Georgia law); Thorpe v. Story, 10 Cal.2d 104, 73 P.2d 1194, 1202 (1937); Hazel v. Thaipe & Brooks, Inc., 159 Ga.App. 415, 283 S.E.2d 653, 654 (1981); Sinclair Mktg., Inc. v. Siepert, 107 Idaho 1000, 695 P.2d 385, 388 (1985).

15 . See 38 Am.Jur2d Guaranty § 36 (1968); 6 Am Jur.2d Assignments § 121 (1963); 11 Am.Jur.2d Bills and Notes § 379 (1963); 8 Tex. Jur.3d Sure-tyship and Guaranty § 184(1994).

16 .See, e.g., McAllen State Bank v. Texas Bank & Trust Co., 433 S.W.2d 167 (Tex.1968); East Tex. Fire Ins. Co. v. Coffee, 61 Tex. 287 (1884); Lawson v. Gibbs, 591 S.W.2d 292 (Tex.Civ.App.— Houston [14th Dist.] 1979, writ ref’d n.r.e.); Pridgen v. Denson, 220 S.W.2d 194 (Tex.Civ.App.—Austin 1949, writ dism’d); Howard v. Stahl, 211 S.W. 826 (Tex.Civ.App.—Amarillo 1919, no writ); Intertype Corp. v. Sentinel Publishing Co., 206 S.W. 548 (Tex.Civ.App.—San Antonio 1918, no writ); T.W. Marse & Co. v. Flockinger, 189 S.W. 1017 (Tex.Civ.App.—Austin 1916, no writ).

17 . See Sunbelt Sav., FSB v. Barr, 824 S.W.2d 600, 602 (Tex.App.—Dallas 1991) (citing Fourticq v. Fireman's Fund Ins. Co., 679 S.W.2d 562, 564 (Tex.App.—Dallas 1984, no writ)), rev'd on other grounds, 837 S.W.2d 627 (Tex.1992).

18 . See Wiman v. Tomaszewicz, 877 S.W.2d 1, 8 (Tex.App.—Dallas 1994, no writ) (plaintiff must prove he is owner of guaranty to recover).

19 . See Wiman, 877 S.W.2d at 8.

20 . See Tex.R.App. P. 90(a).