Cooper Machinery Corp. v. CIT Corp.

577 S.W.2d 356, 1979 Tex. App. LEXIS 3161
CourtCourt of Appeals of Texas
DecidedFebruary 1, 1979
DocketNo. 18050
StatusPublished
Cited by1 cases

This text of 577 S.W.2d 356 (Cooper Machinery Corp. v. CIT Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cooper Machinery Corp. v. CIT Corp., 577 S.W.2d 356, 1979 Tex. App. LEXIS 3161 (Tex. Ct. App. 1979).

Opinion

OPINION

SPURLOCK, Justice.

Assignor, without recourse, of a conditional sales contract personally guaranteed by two principals of the corporate purchaser under the sales contract, appeals from a judgment against it for breach of warranty. Assignor warranted the genuineness and enforceability of the sales contract and guaranty agreement, and that all signatures, names, addresses, and other facts contained in those contracts are true and correct. The trial court found breaches in several respects. The question presented on appeal is whether, in view of the parol evidence rule, there is evidence supporting the trial court’s construction of the warranty clause and findings of breaches thereof.

We reverse and render.

Appellant, Cooper Machinery Corporation, is an equipment dealer in Fort Worth and will be referred to as Machinery. Glen Cooper is Machinery’s president and will be referred to as Cooper. CIT Corporation financed the transaction out of which this action arose and will be referred to as CIT. CATCO Construction Company, Inc., is a closely held Texas corporation engaged in the construction business and will be referred to as CATCO. CATCO is the purchaser under the sales contract and is now apparently insolvent. H. E. Kearley, Jr., also known as Gene Kearley, is CATCO’s president and will be referred to as Kear-ley, Jr. H. E. Kearley, Sr., is Kearley, Jr.’s father and will be referred to as Kearley, Sr. Tommy Blankenship is one of CATCO’s principals and will be referred to as Blankenship.

This action involves the execution of three written contracts: (1) a conditional sales contract, (2) a guaranty agreement providing for the personal guaranty thereof, and (3) an agreement assigning all rights under the previous two agreements and containing the warranty which was allegedly breached. The dispute centers around the signature “H. E. Kearley” on the sales contract and guaranty agreement. The problem is that Machinery and CIT, believed that Kearley, Sr., had signed the contracts as CATCO’s president. Kearley, Jr., actually signed the contracts.

Kearley, Jr., on behalf of CATCO, negotiated with Machinery for the purchase of some paving equipment. CATCO had previously employed a subcontractor to do its paving and wanted to avoid losing profit by doing its own paving. Machinery was willing to enter into a conditional sales contract with CATCO if it could find someone to finance the sale by accepting an assignment of the sales contract. CIT had previously financed some sales for Machinery in this manner and Cooper contacted CIT inquiring if it would finance the sale to CATCO.

After checking CATCO’s credit, CIT agreed to accept the assignment on the conditions that CATCO make a down payment of ten percent of the contract price, and that two of CATCO’s principals would personally guarantee the sales contract. CIT named Kearley, Sr., and Blankenship as the CATCO principals it wanted to make the guarantee. CIT furnished Cooper with printed forms for the contracts to be executed, with the information it wanted to have included therein penciled on another set of forms as a guide. A Machinery employee prepared the documents actually executed by typing the penciled information in the appropriate blank spaces on the printed forms supplied by CIT.

The sales, guaranty, and assignment contracts were all executed without any problems being recognized. After making several payments on the sales contract, CAT-CO defaulted. With Machinery’s knowledge and assistance, CIT repossessed the equipment and sold it at a foreclosure sale. The sale resulted in a deficiency in excess of $15,000.00. CIT brought action against [359]*359CATCO, Kearley, Sr., Kearley, Jr., Blankenship, and Machinery.

CIT’s action against Kearley, Jr., was severed before trial. He has not been served with citation because his whereabouts were and continue to be unknown. The action against CATCO was severed at the end of the trial before judgment. CIT had attempted to serve CATCO by serving Kearley, Sr., who it thought was CATCO’s president. The evidence established that Kearley, Sr., is in no way connected with CATCO. Therefore, CATCO had not been properly served. The action against Kear-ley, Sr., and Blankenship is on the guaranty agreement. The action against Machinery is on an alleged breach of warranty covering the sales contract and guaranty agreement contained in its assignment contract with CIT. No theory of fraud was involved in the trial nor on appeal. Further, no question of any agency relationship between Kearley, Sr., and Kearley, Jr., has been raised.

The trial court, without a jury, rendered judgment that CIT take nothing against Kearley, Sr.; that Blankenship is liable on his guaranty of the sale contract; and that Machinery is liable for breach of warranty. Machinery is the only party appealing. The parts of the judgment concerning Kearley, Sr., and Blankenship are final and need not be noticed. Further, we find it unnecessary to fully discuss any of Machinery’s points of error except those relating to breach of warranty. However, we will make the following brief remarks about two of these other points.

Machinery claims the trial court erred in severing CATCO prior to judgment while rendering judgment jointly and severally against it and Blankenship because CATCO is the principal obligor on the sales contract. Machinery correctly states the general rule that usually a party must maintain an action against the principal obligor to be able to obtain judgment against a party secondarily liable, with certain exceptions, none of which apply. We find this rule inapplicable as to Machinery because judgment was rendered against it for breach of its warranty rather than on any theory of liability on the sales contract or guaranty agreement. CIT has never claimed that Machinery is secondarily liable on either of these contracts. Therefore, Machinery’s point of error no. 1 is without merit and is overruled.

Machinery also complains CIT failed to request or demand that it repurchase the sales contract which it claims is a condition precedent to liability for breach of warranty. The record reflects that while CIT informed Machinery it might be asked to honor its promise to repurchase, this was never actually demanded. CIT claims that filing suit against Machinery alleging breach of warranty is sufficient demand for Machinery to honor its promises. We agree. Since there was no form for the request or demand specified in the assignment contract, we believe that suit upon allegation of breach of warranty was sufficient to put Machinery on notice that CIT wanted it to repurchase the sales contract or settle with CIT on some other remedy. We therefore overrule Machinery’s point of error no. 2 on condition precedent.

Machinery attacks the trial court’s findings and conclusions pertinent to breach of warranty by numerous points of error. These complain there is no evidence or insufficient evidence to support the court’s judgment that Machinery breached its warranty. To decide this question it is necessary to review the details of the agreements of the parties and the evidence of the transaction.

The contract assigning Machinery’s right under the sales contract and guaranty agreement was without recourse as to CAT-CO’s ability to pay under the sales contract. However, it contained the following warranty:

“Assignor warrants that: the contract and any accompanying notes, guaranties, waivers and/or other instruments are [360]

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Bluebook (online)
577 S.W.2d 356, 1979 Tex. App. LEXIS 3161, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cooper-machinery-corp-v-cit-corp-texapp-1979.