Kenneth Eubanks and Irene Eubanks v. Dyck-O'Neal, Inc.

• Court: Court of Appeals of Texas
• Decided: June 29, 1994
• Docket: 03-93-00164-CV
• Status: Published

Opinion

Eubanks v. Dyck-O'Neal, Inc. IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,

AT AUSTIN



NO. 3-93-164-CV

KENNETH EUBANKS AND IRENE EUBANKS,

APPELLANTS

vs.

DYCK-O'NEAL, INC.,

APPELLEE

FROM THE COUNTY COURT AT LAW NO. 2 OF TRAVIS COUNTY

NO. 212,598, HONORABLE J. DAVID PHILLIPS, JUDGE PRESIDING

Appellee, Dyck-O'Neal, Inc., brought suit against appellants, Kenneth and Irene Eubanks, to collect the balance due on a note. The suit was tried to the court, which rendered final judgment in favor of Dyck-O'Neal. The Eubanks appeal. We will affirm the judgment of the trial court.

BACKGROUND

On April 30, 1986, the Eubanks executed a promissory note for $54,000.00, payable to Mullis Mortgage Investments, Inc. Payments on the note were due on the first of each month, with May 1, 2016 as the maturity date of the note. Concurrent with the execution of the note, the Eubanks executed a deed of trust that secured the debt with property described in the note.

On December 1, 1987, the Eubanks ceased making monthly payments on the note. The Eubanks received written notice dated June 13, 1988, warning that if their payments were not brought current, the note would be accelerated. The Eubanks did not make their late payments, and the maturity date on the note was accelerated on August 12, 1988.

On April 30, 1992, Dyck-O'Neal filed suit to recover the unpaid balance on the note. Dyck-O'Neal claimed to be the legal owner of the note by assignment, but was able to produce only a copy of the note, not the original. The fact that the original note was lost forms the crux of most of the Eubanks' points of error on appeal. After a bench trial, the trial court rendered judgment for Dyck-O'Neal.

The Eubanks appeal, raising eight points of error. In points of error one through three, the Eubanks challenge several evidentiary rulings. In points of error four through seven, the Eubanks raise legal and factual sufficiency challenges to the trial court's implied findings that Dyck-O'Neal was assigned an interest in the note and was the legal owner of the note. In point of error eight, the Eubanks contend that the trial court erred by failing to find that the applicable statute of limitations barred Dyck-O'Neal's suit on the note.

DISCUSSION

In points of error four through seven, the Eubanks contend there is legally and factually insufficient evidence that Dyck-O'Neal was assigned any interest in the note or was the legal owner of the note. The Eubanks claim that Dyck-O'Neal cannot be an owner of the note because Dyck-O'Neal was not a holder in due course and was assigned an interest in only the deed of trust, not the note.

Because this was a bench trial, and no findings of fact or conclusions of law were requested, we will infer that the trial court made all the necessary findings to support its judgment. Holt Atherton Indus. v. Heine, 835 S.W.2d 80, 83 (Tex. 1992) (quoting Burnet v. Motyka, 610 S.W.2d 735, 736 (Tex. 1980)). Because the record contains a statement of facts, the trial court's implied findings may be challenged by factual or legal sufficiency points. Holt, 835 S.W.2d at 84; Burnett, 610 S.W.2d at 736. In deciding a no evidence point, we must consider only the evidence and inferences tending to support the finding of the trier of fact and disregard all evidence and inferences to the contrary. Alm v. Aluminum Co. of Am., 717 S.W.2d 588, 593 (Tex. 1986), cert. denied, 498 U.S. 847 (1990); Garza v. Alviar, 395 S.W.2d 821, 823 (Tex. 1965). In deciding a factual sufficiency point, we must consider and weigh all the evidence and should set aside the judgment only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986); In re King's Estate, 244 S.W.2d 660, 661 (Tex. 1951); see also Pool v. Ford Motor Co., 715 S.W.2d 629 (Tex. 1986).

The statement of facts reveals that the trial court relied upon a provision of the Texas version of the Uniform Commercial Code (UCC) in reaching its decision. Tex. Bus. & Com. Code Ann. § 3.804 (West 1968). Therefore, as a threshold issue, we must determine whether the UCC applies.

Section 3.103(a) of the Business and Commerce Code states, "This chapter does not apply to money, documents of title or investment securities." Tex. Bus. & Com. Code Ann. § 3.103(a) (West 1968). The official comment for the section elaborates on the scope of the chapter: "This Article is restricted to commercial paper--that is to say, to drafts, checks, certificates of deposits and notes as defined in Section 3-104(2)." Tex. Bus. & Com. Code Ann. § 3.103-1 cmt. (West 1968) (emphasis added). Section 3.104 defines a "note" as "a promise other than a certificate of deposit" that meets the requirements of a negotiable instrument. A negotiable instrument must:

(1) be signed by the maker or drawer; and

(2) contain an unconditional promise or order to pay a sum certain in money and no other promise, order, obligation or power given by the maker or drawer except as authorized by this chapter; and

(3) be payable on demand or at a definite time; and

(4) be payable to order or bearer.

Tex. Bus. & Com. Code Ann. § 3.104(a) (West 1968).

The note in the instant case qualifies as a negotiable instrument under section 3.104. Accordingly, because section 3.103(a) includes such notes within the scope of the chapter, we conclude that chapter 3 of the Business and Commerce Code governs this case.

Section 3.804, entitled "Lost, Destroyed or Stolen Instruments," reads as follows:

The owner of an instrument which is lost, whether by destruction, theft or otherwise, may maintain an action in his own name and recover from any party liable thereon upon due proof of his ownership, the facts which prevent his production of the instrument and its terms. The court may require security indemnifying the defendant against loss by reason of further claims on the instrument.

Tex. Bus. & Com. Code Ann. § 3.804 (West 1968).

Dyck-O'Neal presented the following evidence to establish its ownership of the note. Dyck-O'Neal called as a witness its vice president and custodian of records, who testified that the note was assigned first from Mullis Mortgage Investments, Inc.--the original note holder--to Residential Mortgage Corporation, then from Residential to Federal National Mortgage Association (Fannie Mae), then from Fannie Mae to Dyck-O'Neal. Dyck-O'Neal also presented a "lost note affidavit," signed by a Fannie Mae vice president, stating that Fannie Mae was the legal owner and holder of the note until it was assigned to Dyck-O'Neal, that Fannie Mae had lost the original copy of the note prior to assignment, and that the note was not in the possession of any person having any lawful claim to it. A "true and correct copy" of the note was attached to the affidavit.

Finally, Dyck-O'Neal produced two documents entitled "Corporation Assignment of Deed of Trust," which, together with the above evidence, demonstrate a clear chain of title from the original note holder to Dyck-O'Neal. The first of these documents reflects that the first note holder, Mullis Mortgage Investments, Inc., assigned its interest in the deed of trust "together with the note or notes therein described" to Residential Mortgage Corporation. The second document indicates a similar assignment from Residential to Fannie Mae. The Eubanks presented no evidence that Dyck-O'Neal was not the owner. We conclude that this evidence is both legally and factually sufficient to support the trial court's implied findings that Dyck-O'Neal was assigned an interest in the note and was the legal owner of the note under section 3.804. Points of error four through seven are overruled.

In points of error one through three, the Eubanks challenge several evidentiary rulings. In point of error one, the Eubanks contend that the trial court erred in overruling their objection to the admission of plaintiff's exhibit one, a copy of the promissory note, which they argued was not relevant. The admission or exclusion of evidence rests within the sound discretion of the trial court. Tracy v. Annie's Attic, Inc. 840 S.W.2d 527, 531 (Tex. App.--Tyler 1992, writ denied); Luvual v. Henke & Pillot, 366 S.W.2d 831, 838 (Tex. Civ. App.--Houston [1st Dist.] 1963, writ ref'd n.r.e.). Given that this was a suit on a note, and the original note was lost, the trial judge did not err by determining that a copy of the lost note was relevant to the suit, and accordingly admitting the copy into evidence. Point of error one is overruled.

In points of error two and three, the Eubanks contend that the trial court erred in overruling their objections to the admission of plaintiff's exhibits two and three, arguing they also were not relevant. A review of the record reveals, however, that the Eubanks did not object to the admission of either exhibit. Having made no objection at trial, the Eubanks have not preserved their complaint for appellate review. Tex. R. App. P. 52(a). Accordingly, points of error two and three are overruled.

In their eighth point of error, the Eubanks contend that the trial court erred by failing to find that the four-year statute of limitations, which applies to suits on notes, barred Dyck-O'Neal's suit. See Tex. Civ. Prac. & Rem. Code Ann. § 16.004 (West 1986). The Eubanks claim that because they waived their right of presentment, the note holder's right to sue to collect the balance of the note automatically accrued when they were first in default. Therefore, the Eubanks argue, the statute of limitations began running on December 1, 1987, when the Eubanks ceased making payments on the note, and would have run on December 1, 1991, before Dyck-O'Neal filed suit.

Courts have expressly rejected the above argument. When the note holder has the option to declare the entire amount of a note due upon default in the payment of an installment, and the note states that acceleration is at the option of the holder, the running of the statute of limitations begins not at the default in payment of the installment, but when the holder exercises its option to accelerate. Curtis v. Speck, 130 S.W.2d 348, 351 (Tex. Civ. App.--Galveston 1939, writ ref'd); Kehoe v. Lambert, 633 S.W.2d 576, 578 (Tex. App.--Houston [14th Dist.] 1982, writ ref'd n.r.e.). The same rule applies when the parties have waived notice. Kehoe, 633 S.W.2d at 578.

Line 6(C) of the note, with the heading "Notice of Default," provides:

If I am in default, the Note Holder may send me a written notice telling me that if I do no pay the overdue amount by a certain date, the Note Holder may require me to pay immediately the full amount of principal which has not been paid and all the interest that I owe on that amount.

(Emphasis added). We read the above provision as leaving the option to accelerate with the note holder. A suit on a note is governed by the four-year statute of limitations. See Tex. Civ. Prac. & Rem. Code Ann. § 16.004 (West 1986). The note was accelerated on August 12, 1988. Dyck-O'Neal filed suit to recover the balance due on the note on April 30, 1992. Therefore, Dyck-O'Neal's suit was brought within the four-year period. Point of error eight is overruled.

The judgment of the trial court is affirmed.

Mack Kidd, Justice

Before Chief Justice Carroll, Justices Kidd and B. A. Smith

Affirmed

Filed: June 29, 1994

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