John Frederick Fritz, D/B/A Fritz's Adventures v. International Bank

• Court: Court of Appeals of Texas
• Decided: August 29, 2003
• Docket: 13-01-00851-CV
• Status: Published

Opinion

NUMBER 13-01-851-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI - EDINBURG

JOHN FREDERICK FRITZ, D/B/A FRITZ'S ADVENTURES,

Appellant,

v.

INTER NATIONAL BANK,

Appellee.

On appeal from County Court at Law No. 1 of Hidalgo County, Texas.

MEMORANDUM OPINION

Before Justices Hinojosa, Yañez, and Garza

Opinion by Justice Garza

Appellant challenges a trial court's award of summary judgment to appellee on its claims to recover principal and interest due on a promissory note and to foreclose on its security interest in collateral securing that note. We affirm.

Background

This lawsuit arises from a loan made by Inter National Bank (the "Bank") to John Frederick Fritz d/b/a Fritz's Adventures ("Fritz"). In August 1998, Fritz executed a promissory note (the "Note") payable to the Bank in the amount of $10,000 with a maturity date in March of 1999. At the same time, the parties also executed a security agreement (the "Security Agreement") by which Fritz posted his inventory, equipment, general intangibles and rights of payment as collateral on the Note. In the months that ensued, the Bank agreed to modify the terms of the Note at least twice, first postponing its maturity date to November of 1999 and then extending it again to July of 2000. Despite these modifications, the Note became delinquent. In March of 2001, the Bank sent a written delinquency notice to Fritz and demanded payment of all accrued interest and principal due on the Note by no later than April 13, 2001. Its collection efforts were to no avail.

The Bank subsequently filed this lawsuit in May of 2001, seeking a judgment awarding all monies owed on the Note, foreclosing its security interest in Fritz's collateral, and awarding it reasonable attorney's fees and court costs. Fritz filed a written answer in which he challenged the Bank's security interest as not being certified, denied his ownership of and affiliation with Fritz's Adventures, and claimed that the trial court lacked jurisdiction over him because he no longer did business as Fritz's Adventures.

The Bank moved for summary judgment based on the following evidence: (1) the Note; (2) the Security Agreement; (3) a note renewal signed by Fritz (the "Note Renewal"); (4) two documents signed by Fritz delaying the maturity date of the Note; (5) a UCC-1 financing statement signed by Fritz and filed with the Texas Secretary of State; (6) the demand letter sent by the Bank; (7) an affidavit of Joel Vanderveer, an officer with the Bank, stating his personal knowledge of all the aforementioned documents, confirming their truth and accuracy, and establishing the amount still owed to the Bank by Fritz; and (8) an affidavit of Michael A. McGurk, an attorney for the Bank, stating that the Bank had incurred reasonable attorney fees in the amount of $3,000 in pursuing its claims against Fritz through the summary judgment hearing.

Fritz did not file a written response to the Bank's motion for summary judgment and did not appear at the hearing to defend against it. The trial court awarded summary judgment to the Bank, and Fritz did not request a new trial. He now appeals to this Court.

Jurisdiction

As a preliminary matter, Fritz argues that the trial court's order awarding summary judgment to the Bank is "false and fictitious" because he had no notice of the lawsuit. According to Fritz, "[A] clear case of want of Jurisdiction exists by virtue of defective process and abuse of process by the original Court where upon no jurisdiction in Rem or Personam did exist for want of Jurisdiction." Despite making these allegations on appeal, Fritz waived any service of process defects by answering the Bank's complaint. It is well-settled law that an appearance waives service of process, see Tex. R. Civ. P. 120, and that an answer constitutes an appearance, see Tex. R. Civ. P. 121. Thus, Fritz cannot claim lack of jurisdiction based on defective notice, and we overrule his jurisdictional challenges.

Standard of Review

We review summary judgments de novo. Natividad v. Alexsis, Inc., 875 S.W.2d 695, 699 (Tex. 1994); Michael v. Dyke, 41 S.W.3d 746, 752 (Tex. App.--Corpus Christi 2001, no pet.); Texas Commerce Bank-Rio Grande Valley, N.A. v. Correa, 28 S.W.3d 723, 726 (Tex. App.--Corpus Christi 2000, pet. denied). To prevail, the moving party has the burden of showing that there is no genuine issue of material fact and that he is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995) (per curiam); see also Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 471 (Tex. 1991); Hartman v. Urban, 946 S.W.2d 546, 548 (Tex. App.--Corpus Christi 1997, no writ). The standards for reviewing summary judgment evidence are:

(1) The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.

(2) In deciding whether there is a material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true.

(3) Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor.

Sysco Food Servs. v. Trapnell, 890 S.W.2d 796, 800 (Tex. 1994); see also Cathey, 900 S.W.2d at 341; Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985).

When a party does not respond to a motion for summary judgment, on appeal, he may only complain that the grounds for the summary judgment are insufficient as a matter of law. Swedlund v. Banner, 970 S.W.2d 107, 109 (Tex. App.--Corpus Christi 1998, pet. denied); see also McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 343 (Tex. 1993); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979). If a trial court's order granting a motion for summary judgment does not specify the basis for its ruling, the appellate court will affirm the summary judgment if any of the theories advanced are meritorious. See Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001); State Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374, 380 (Tex. 1993); Krishnan v. Law Offices of Preston Henrichson, P.C., 83 S.W.3d 295, 303 n.4 (Tex. App.--Corpus Christi 2002, pet. denied); Boren v. Bullen, 972 S.W.2d 863, 865 (Tex. App.--Corpus Christi 1998, no pet.). In such cases, the non-movant must show on appeal that each independent ground alleged is insufficient to support the summary judgment in order to warrant reversal. See Malooly Bros., Inc. v. Napier, 461 S.W.2d 119, 121 (Tex. 1970).

Analysis

A. Conditions Precedent

The first issue regards conditions precedent. A party seeking to recover under a contract bears the burden of proving that all conditions precedent have been satisfied. Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 283 (Tex. 1998). A condition precedent is an event that must happen or be performed before a right can accrue to enforce an obligation. Centex Corp. v. Dalton, 840 S.W.2d 952, 956 (Tex. 1992). It can be a condition to the formation of a contract or a condition to an obligation to perform an existing agreement. Hohenberg Bros. Co. v. George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex. 1976); Turboff v. Gertner, Aron & Ledet Inv., 840 S.W.2d 603, 607 (Tex. App.--Corpus Christi 1992, writ denied).

Rule 54 of the Texas Rules of Civil Procedure allows a plaintiff to plead generally that all conditions precedent to its claim have been performed or have occurred, so that it need only prove those conditions specifically denied by the opposing party. See, e.g., Llanes v. Davila, No. 13-02-129-CV, 2003 Tex. App. LEXIS 392, *16 (Corpus Christi January 16, 2003 pet. denied). In this case, the Bank pled that all conditions precedent for a suit to recover on the Note and for breach of the Security Agreement (collectively the "collection suit") had been performed or had occurred. We must therefore examine Fritz's answer to determine which, if any, conditions precedent he specifically challenged. See, e.g., Cmty. Bank & Trust v. Fleck, 107 S.W.3d 541, 542 (Tex. 2002) (upholding summary judgment in favor of plaintiff where defendant failed to specifically challenge a condition precedent to plaintiff's suit in any of its pleadings).

At the outset, we note that Fritz's answer did not specifically deny any conditions precedent, as such, but it did deny certain matters. For instance, Fritz's answer denied that he owns or operates Fritz's Adventures, now or at any time. Those denials are immaterial to this collection suit. The terms of the parties' agreement govern conditions precedent. See Hohenberg Bros. Co., 537 S.W.2d at 3.

Here we have numerous contract documents signed by John Frederick Fritz and Joel Vanderveer, an officer with the Bank. Those documents state, "I [(Fritz)] understand that I must pay this note even if someone else has also agreed to pay it." From this language, it appears that Fritz would remain liable for the debt even if a third-party purchased Fritz's Adventures and assumed the business's liabilities. The contract's language confirms that interpretation by later stating that Fritz agrees to "waive any defenses . . . based on suretyship or impairment of collateral." Given these unambiguous and unequivocal expressions of personal liability for the debt, we cannot conclude that the contract gave Fritz a right to unilaterally absolve his personal liability for the disputed debt by simply selling his business to a third-party. Fritz's continued ownership or operation of Fritz's Adventures is not a condition precedent to the Bank's collection suit.

The only other allegation made in Fritz's answer that could be interpreted as arguably challenging a condition precedent is Fritz's claim that the "plaintiff failed to certify the alleged security." In his pleadings, Fritz identified no language in the Note or Security Agreement requiring certification of collateral by the Bank, and he has not raised that issue again on appeal.

As we have explained previously, the language of a contract will not be construed as creating a condition precedent if another reading of that language is possible. Powers v. Powers, 714 S.W.2d 384, 388 (Tex. App.--Corpus Christi 1986, no writ); see also Security State Bank v. Valley Wide Elec. Supply Co., 752 S.W.2d 661, 666 (Tex. App.--Corpus Christi 1988, writ denied). The Texas Supreme Court has repeatedly emphasized that "[b]ecause of their harshness in operation, conditions precedent are not favorites of the law." Sirtex Oil Indus., Inc. v. Erigan, 403 S.W.2d 784, 787 (Tex. 1966); see also Criswell v. European Crossroads Shopping Ctr., Ltd., 792 S.W.2d 945, 948 (Tex. 1990); Hohenberg Bros., 537 S.W.2d at 3. In this case, the contract language lends no support for the so-called certification of security being a condition precedent. The text just above Fritz's signature on the Security Agreement states, "I [(Fritz)] give up my rights to require you [(the Bank)] to do certain things. I will not require you to . . . obtain official certification of nonpayment (protest)." From these provisions we conclude that no certification is required for the Bank to pursue its collection suit. Furthermore, we conclude that Fritz failed to challenge any actual condition precedent applicable to the rights involved in the suit. Accordingly, the Bank had no burden to prove the existence of any such conditions.

We now turn to the specific claims asserted in this case to determine whether the Bank established its entitlement to summary judgment as a matter of law. At the outset, we note that the material facts are not disputed. According to Fritz's appellate brief:

John Frederick Fritz more than one year prior to making a personal loan with the bank divested any and all interests in Fritz's Adventures by properly disposing the business through a sale to the new owners, Martha Leticia Romo Carrillo, Priv. Jesus Reyes Heroles #103 Frac. Verssalles 2Da Secc. Aguascalientes, Mexico.

In the above quote, Fritz admits making the loan with the Bank. His position at trial and on appeal is that liability for the debt lies solely with the "new owners." According to Fritz, "the true and lawful owners of Fritz's Adventures [and its debt] . . . are Mexican citizens" residing in Mexico.

B. Negotiable Instrument

The underlying debt in this collection suit is a promissory note. Article 3 of the Uniform Commercial Code governs negotiable instruments. See Tex. Bus. & Com. Code Ann. Ch. 3 (Vernon 2002); Trueheart v. Braselton, 875 S.W.2d 412, 415 (Tex. App.--Corpus Christi 1994, no writ). For an instrument to be negotiable, it must be signed by the maker, contain an unconditional promise to pay a sum certain on demand or at a definite time, and be payable to order or to the bearer. See Tex. Bus. & Com. Code Ann. § 3.104(a) (Vernon 2002); Akin v. Dahl, 661 S.W.2d 914, 916 (Tex. 1983); Cartwright v. MBank Corpus Christi, N.A., 865 S.W.2d 546, 549 (Tex. App.--Corpus Christi 1993, writ denied). A note is considered payable at a definite time even if it states that the maker, holder or acceptor retains an option to extend the note for a further definite time. See Tex. Bus. & Com. Code Ann. § 3.108(b) (Vernon 2002). In this case, the Note is signed by its maker, contains an unconditional promise to pay on demand, and is payable to order. We conclude that it is a negotiable instrument.

To establish a right to recover on a note, a holder must establish that (1) he owns the note, (2) the person from whom he seeks to recover was a maker of the note, and (3) the note is in default. See Trueheart, 875 S.W.2d at 415; Whittenburg v. Cessna Fin. Corp., 536 S.W.2d 444, 445 (Tex. App.--Houston [14th Dist.] 1976, writ ref'd n.r.e.). Fritz submitted no favorable evidence on these issues to the trial court. The uncontroverted summary judgment evidence shows that the Bank owns the Note, that Fritz made the Note, and that the Note is in default. On that basis, we conclude that, as a matter of law, the Bank is entitled to recover from Fritz the principal and interest due on the Note in the amount awarded by the trial court.

C. Security Agreement

We must next consider whether the Bank presented the trial court with legally sufficient grounds for enforcing its security agreement against Fritz. A security agreement is not enforceable and does not attach to collateral unless (1) value has been given, (2) the debtor has rights in the collateral, and (3) the collateral is in the secured party's possession or the debtor has signed a security agreement which contains a description of the collateral. Unicut, Inc. v. Tex. Commerce Bank-Chemical, 704 S.W.2d 442, 444 (Tex. App.--Corpus Christi 1986, writ ref'd n.r.e.). Again, the record is devoid of any evidence favorable to Fritz. The Bank gave value by advancing Fritz $10,000, and Fritz signed not only the Security Agreement, which described the collateral posted, but also a UCC-1 financing statement, which similarly identified the collateral. Those facts are uncontested.

Presumably, if Fritz had fully developed his argument on appeal, he would have had us conclude that the county records attached to his answer create a genuine issue of material fact on the second element regarding his rights in the collateral. Those documents are fully enumerated and briefly described in the margin. ⁽¹⁾ They raise no fact issues, as they simply track the official registration of "Fritz's Adventures" until October 30, 1998. Beyond that point in time, Fritz's evidence is silent. We are left to presume that "the true and lawful owners of Fritz's Adventures," as Fritz describes them, transferred ownership of Fritz's Adventures to "N/A" in October of 1998 and subsequently extinguished its debt to the Bank by filing a notice with the Hidalgo County Clerk declaring to do just that. Even if ownership of "Fritz's Adventures" could be transferred to "N/A," whatever that means, the question before us is not who the registered owner of Fritz's Adventures is according to the Hidalgo County Clerk, but whether the uncontroverted summary judgment evidence establishes that Fritz has rights in the collateral subject to the Security Agreement, which he admits having executed. In reviewing the various uncontested documents submitted in evidence, we find the Note Renewal dispositive. It bears Fritz's signature and the date April 13, 1999. Like the Security Agreement, the Note Renewal describes the collateral. In both, Fritz attests to the collateral as follows: "I represent that I own all of the Property."

The record contains no evidence showing that the collateral changed ownership after the declaration made by Fritz in April of 1999. Fritz's evidence shows that he sold Fritz's Adventures to Mexican nationals who subsequently dissolved the enterprise in October of 1998. Approximately half a year later, however, Fritz declared ownership of both the collateral and Fritz's Adventures in the Note Renewal, which was signed by both parties. As such, the Note Renewal constitutes the last word in the record regarding ownership of the collateral. On that basis, we conclude that the summary judgment evidence establishes Fritz's rights in the collateral as a matter of law.

In sum, we conclude that the trial court's award of summary judgment was proper and that appellant has established no reversible error. The judgment of the trial court is AFFIRMED, and all of appellant's arguments are OVERRULED.

______

_______________________________

DORI CONTRERAS GARZA,

Justice

Opinion delivered and filed this

the 29^th day of August, 2003.

1.

¹ Fritz attached the following documents to his answer: (1) an "assumed name certificate" signed by Fritz and the Hidalgo County Clerk and dated April 26, 1994, which identifies Fritz's Adventures as Fritz's sole proprietorship; (2) a "certificate of withdrawal from business operating under assumed name" also issued by the Hidalgo County Clerk, which certifies that as of September 5, 1995, John Fritz disposed of his interest in Fritz's Adventures to Martha Leticia Romo Carrillo and that "he is no wise [sic] liable for any debts of the said business"; (3) an "assumed name certificate" signed by Martha Leticia Romo Carrillo and the Hidalgo County Clerk and dated September 5, 1994, which identifies Fritz's Adventures as Carrillo's sole proprietorship; and (4) a "certificate of withdrawal from business operating under assumed name" issued by the Hidalgo County Clerk, which certifies that as of October 30, 1998, Martha Leticia Romo Carrillo disposed of "his" [sic] interest in Fritz's Adventures to "n/a."