Geiselman v. Cramer Financial Group, Inc.

Citations: 965 S.W.2d 532; 1997 WL 528630Docket: 14-96-00265-CV

Court: Court of Appeals of Texas; October 30, 1997; Texas; State Appellate Court

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Grover J. Geiselman, III, and his family partnership appeal a summary judgment favoring Cramer Financial Group, Inc. Cramer initiated a lawsuit against Geiselman concerning two promissory notes originally issued to First RepublicBank Houston and later assigned to Cramer by the FDIC. Geiselman's appeal raises five points of error, asserting that the trial court incorrectly granted summary judgment due to: (1) disputed material facts regarding the ownership of the notes, (2) the inadequacy of affidavits from Kathryn G. Pappas regarding the loss of the notes, (3) the lack of personal knowledge in Roger Green's affidavit, (4) Cramer's failure to prove its status as the holder and owner of the notes, and (5) the existence of a factual issue concerning the affirmative defense of limitations. The court noted that both promissory notes, dated July 1, 1988, were for $40,000 and had a maturity date of July 1, 1993. After the bank's failure, the FDIC transferred the notes to NationsBank and subsequently back to the FDIC before they were assigned to Cramer in 1994. Cramer's motion for summary judgment cited affidavits claiming the original notes were lost or destroyed, but Geiselman contends these affidavits lack sufficient evidentiary support. The court ultimately decided to reverse and remand the case for further proceedings, emphasizing that the points of error related to ownership and the credibility of Cramer's evidence were interlinked.

The summary judgment movant must demonstrate, through competent evidence, that there is no genuine issue of material fact concerning essential elements of the plaintiff's claim, as established in Gibbs v. General Motors Corp. In contrast, when a plaintiff seeks summary judgment, they must prove their entitlement to prevail on each element of their cause of action and provide sufficient evidence to warrant an instructed verdict at trial. The standards for reviewing summary judgment evidence include: (1) the movant must show no genuine issue of fact exists and that they are entitled to judgment as a matter of law; (2) evidence favorable to the non-movant must be accepted as true; and (3) all reasonable inferences and doubts must be resolved in favor of the non-movant.

Regarding the timeliness of the appellants' response to Cramer's motion for summary judgment, it was determined that the response was timely filed. The hearing for Cramer's motion occurred on November 7, 1995, while the response was date-stamped on November 2, 1995, and mailed on October 31, 1995, which was the deadline for a timely response under Rule 4 of the Texas Rules of Civil Procedure. Cramer did not contest the timeliness of this response during the trial, thereby waiving the right to argue this point on appeal, as per Rule 166a(c). Additionally, the "mailbox" rule applies, allowing documents mailed on or before the deadline to be considered timely if received by the clerk within ten days. Consequently, the appellants' response was deemed timely under the relevant rules.

The trial court considered the appellants' response while overruling their objections to the appellee's motion for summary judgment. The court's order explicitly stated that it reviewed the pleadings and evidence before making its decision, indicating that the response was timely filed. Consequently, the presumption against considering untimely responses is not applicable in this case. 

To succeed on a promissory note claim, a plaintiff must establish: (1) the existence of the note, (2) that the defendant signed it, (3) that the plaintiff is the owner or holder of the note, and (4) the specific balance due. If a promissory note is lost, the plaintiff can recover by demonstrating its loss and the terms of the obligation. In summary judgment motions concerning notes, if the original note is unavailable, a sworn or certified copy must be submitted to provide reliable proof of ownership and to prevent potential double payment by the maker.

The appellants challenged the sufficiency of evidence regarding the subject notes, claiming they were mere copies and that the affidavit of Kathryn G. Pappas, which stated the originals were lost, was conclusory and lacked personal knowledge. The affidavit indicated that Pappas, an employee of AMRESCO Management, performed a search for the note but could not locate it, leading her to conclude it was lost, stolen, or inadvertently destroyed.

The Pappas affidavit is deemed incompetent as summary judgment evidence due to a lack of personal knowledge regarding the facts presented. Although Pappas describes her role as an AMRESCO agent, she fails to affirm that her knowledge stems from her duties. According to Texas Rule of Civil Procedure 166a(f), affidavits must be based on personal knowledge and demonstrate the affiant's competence to testify. The affidavit merely states that Pappas is over eighteen and competent, but it does not explicitly assert that it is made from personal knowledge.

Additionally, the phrase "to the best of my knowledge" in the affidavit indicates uncertainty and does not satisfy the evidentiary requirements. The affidavit also fails to address the loss of the original note, which is necessary for a claim under the former section 3.804 of the Texas Business and Commerce Code. This section allows an owner of a lost instrument to maintain an action by proving ownership and the facts preventing the instrument's production. The requirement to produce the original instrument ensures it has not been transferred or assigned to another party. Overall, the Pappas affidavit lacks the necessary foundations and constitutes no evidence regarding the matters it addresses.

The affidavit of Roger Green, Vice President of Cramer, is deemed incompetent as evidence for summary judgment. Green asserts that the Plaintiff is the legal owner of the notes but fails to provide testimony regarding the loss or destruction of the original notes. He acknowledges the absence of the original notes while claiming possession of relevant bank and FDIC files, which were not presented at trial. His conclusions that Cramer owns the notes and that the originals were lost, stolen, or destroyed lack evidentiary support, as conclusions alone cannot substantiate summary judgment per Hidalgo v. Surety Savings and Loan Association.

Green claims personal knowledge of the facts based on participation and record reviews, yet he does not specify which predecessor bank maintained the records or provide evidence of the transfer of notes from First RepublicBank to the FDIC-Receiver. The allonge attached to photocopies does not demonstrate a valid transfer from First RepublicBank. Without the necessary documentation from predecessors, the notes do not qualify as admissible business records under the hearsay exception. Green's assertion that the photocopies are true and correct copies does not meet the requirement for verification from personal knowledge, particularly since he stated that Cramer has no original notes and that they were lost or destroyed as indicated in the Pappas affidavits. His testimony is inconsistent, lacking affirmation of how he knows the photocopies are accurate, as he has never compared them to the originals.

The FDIC was appointed as receiver for First RepublicBank, which led to the assertion that it became the legal owner of the notes in question. Testimony by Green indicated he lacked personal knowledge of the notes being assets of the bank at the time of its receivership and did not explain how he concluded the FDIC's ownership. Cramer has failed to prove ownership of the notes, lacking conclusive evidence. The bank president's affidavit was inadequate to establish ownership without facts demonstrating the vice president's knowledge of the notes' status during the bank's failure. Cramer is not considered a "holder" as they do not possess the original notes, as established in previous case law. A recent case affirmed that a payee bank could not recover for a lost note without possession prior to the loss. The court emphasized that negotiation of a note requires endorsement, and a transferee cannot claim ownership without prior possession. There was no evidence presented showing Cramer possessed the original notes before their alleged loss, and the affidavits submitted were deemed incompetent for summary judgment. Consequently, genuine material fact issues remain regarding Cramer's ownership of the notes, leading to the sustained points of error for the appellants.

Appellants assert a statute of limitations defense, claiming the trial court erred in disregarding their evidence, including Grover J. Geiselman, III's affidavit, which indicated they received notice of default and acceleration in June 1991. They argue that the four-year Texas statute of limitations requires suit to be filed by the end of June 1995. In contrast, appellees maintain that the notes matured on July 1, 1993, and that appellants did not sufficiently prove acceleration, labeling the affidavit as conclusory. They raised these objections late, failing to respond to the appellants' evidence in a timely manner, thus waiving their claims regarding the affidavit's defects. 

Furthermore, appellants contend that the six-year statute of limitations under FIRREA does not apply because the FDIC-Corporate reacquired the notes after the receivership concluded and the notes were not in default during the FDIC-Receiver's initial transfer in 1988. FIRREA states that the six-year period applies only if the notes were in default while the FDIC owned them. The FDIC reacquired the notes in November 1991 and transferred them again in July 1994, indicating that the FDIC owned the notes during the alleged default period. Appellants also argue that the FDIC's second acquisition of the notes from NationsBank was in its corporate capacity, thus disqualifying the six-year period from FIRREA. The court found this argument unpersuasive, affirming the applicability of the six-year limitation.

12 U.S.C. 1823(d)(3)(a) grants the FDIC corporate the same rights and powers as an FDIC receiver under sections 1821 and 1825(b), which includes the six-year statute of limitations specified in 1821(d)(14). This is affirmed by the case Federal Deposit Ins. Corp. v. Howse, 736 F.Supp. 1437 (S.D.Tex.1990). The court has overruled the appellants' fifth point of error and has reversed and remanded the case for trial, with Judge O'Neill concurring only in the result. Additionally, there is an indorsement from FDIC-Corporate to Cramer Financial Group, Inc., stating the asset is transferred without recourse or warranties, except as outlined in an unprovided "Loan Sale Agreement." The absence of this agreement makes it impossible to ascertain if it limited the assignment and the right to the six-year federal statute of limitations, referencing a similar case, Cadle Co. v. Estate of Weaver.