John Breckenridge, Shirley Breckenridge, Richard Haas and Karen Haas v. Nationsbank of Texas, N.A.

Citation: Not availableDocket: 06-01-00067-CV

Court: Court of Appeals of Texas; May 21, 2002; Texas; State Appellate Court

Original Court Document: View Document

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Nationsbank of Texas, N.A. initiated a lawsuit against John Breckenridge, Shirley Breckenridge, Richard Haas, and Karen Haas for damages due to a breach of a retail installment contract related to a mobile home, asserting claims of breach of contract against the Breckenridges and conversion against the Haases. The Breckenridges counterclaimed for violations of the Truth-in-Lending Act and the Texas Deceptive Trade Practices Act (DTPA). After a bench trial, the court ruled in favor of the Bank, awarding $68,638.39 in damages, prejudgment interest, attorney's fees, postjudgment interest, and possession of the mobile home. The court ordered the Haases to vacate the mobile home and dismissed the Breckenridges' Truth-in-Lending Act claims but ruled in their favor for $115.20 and $2,500 in attorney's fees for DTPA violations regarding forum abuse, which the Bank did not contest.

The Appellants raised three points of error: (1) denial of their motion to dissolve a writ of sequestration, (2) the trial court's judgment in favor of the Bank despite the Breckenridges proving affirmative defenses such as presentment and demand, notice of default, and waiver of timely payment, and (3) the court's finding that the Bank did not violate the Truth-in-Lending Act. The Breckenridges, who signed the contract as joint purchasers in March 1998, claimed they did not intend to make payments as the Haases were supposed to pay, although there was no formal agreement. The contract was not assumable, and no payments were made by the Breckenridges, who consistently fell behind after the first payment was due in April 1998. Despite repeated notifications from the Bank, the Appellants did not catch up on payments until September 1998, after which no further payments were made.

In November 1998, the Bank left messages regarding an overdue October payment for the Breckenridges. On December 2, 1998, the Bank notified the Breckenridges that the Haases had not responded and that arrangements needed to be made by the next day to avoid repossession. On December 5, 1998, the Breckenridges reported similar communication issues with the Haases and instructed the Bank to proceed with eviction and repossession of the mobile home, which the Haases did not vacate. Consequently, the Bank sued to recover the debt and regain possession of the mobile home.

The Appellants argued that the trial court incorrectly issued and failed to dissolve a writ of sequestration. They asserted error in the trial court’s finding that their motion to dissolve the writ was untimely. On March 11, 1999, the trial court granted the Bank’s ex parte application for the writ. In May 1999, Richard filed a pro se motion to quash the writ without requesting a hearing, and the Bank did not pursue the writ's execution. A default judgment was entered in February 2000 but a new trial was granted in March 2000. 

The Appellants formally moved to dissolve the writ on May 22, 2000, with a hearing initially set for May 31, but postponed to June 29, and later to August 23, 2000. On that date, without receiving evidence, the trial court denied the motion, ruling it was untimely since the hearing did not occur within ten days of the motion's filing, as mandated by Texas law. The court also denied a motion for reconsideration on August 25, 2000. 

The Bank contended that the Appellants could not file the May 22 motion because Richard's earlier motion to quash should bind all Appellants, although the Bank did not object to the May 22 motion, thereby waiving that argument on appeal. The trial court’s denial of the motion to dissolve was deemed proper due to the lack of a timely hearing. The Bank argued against the motion for reconsideration, claiming that any postponements needed to be documented in writing per Rule 11; however, only the June 29 postponement had a written record. Thus, the absence of a written agreement for the May 31 postponement contributed to the ruling's validity.

The Appellants argue that Rule 11 is inapplicable due to its absence at the time of the 1975 sequestration statute amendment and the 1978 promulgation of the amended sequestration rule. This assertion is refuted by the historical context of Rule 11, which has been in effect since September 1, 1941, and can be traced back to its origins in District Court Rule 28 from 1840. The rule's purpose is to ensure that agreements between counsel regarding case dispositions are documented in writing to avoid misunderstandings. Even if Rule 11 did not exist at the time of the sequestration rules' adoption, the Texas Rules of Civil Procedure govern all proceedings initiated after September 1, 1941. While the Appellants correctly note that strict adherence to Rule 11 is not always mandatory, the trial court's application of the rule is reviewed under an abuse of discretion standard. The trial court's decisions must be based on guiding principles, and the appellate court cannot override these decisions unless the trial court acted unreasonably. In this case, the trial court adhered to Rule 11, which states that it is not bound by oral agreements, and found no record of an agreement for postponement, thus not acting with abuse of discretion.

The Appellants argue that the trial court erred by not providing additional findings of fact and conclusions of law regarding their affirmative defenses, which they had timely requested. Upon review, the court agreed and directed the trial court to make these findings. After the trial court complied, the Appellants contended that the findings were against them on their affirmative defenses, asserting that the evidence was insufficient to support the court's conclusions. They presented three affirmative defenses: presentment and demand, notice of default and opportunity to cure, and waiver of timely payment, bearing the burden of proof for these defenses.

The Appellants challenged the trial court's findings either as a matter of law or based on the great weight and preponderance of the evidence, referencing specific legal standards for such challenges. They specifically disputed the trial court's conclusion that the Breckenridges waived their rights to presentment and demand by signing the retail installment contract as guarantors. Despite the contract's language indicating a waiver, the Appellants argued for a strict interpretation that limited the waiver to their role as guarantors, asserting that they could not simultaneously be makers and guarantors of the contract. They argued that because the Breckenridges were already obligated as purchasers, their role as guarantors should not affect their rights regarding presentment and demand. The Appellants cited case law to support their position that a principal obligor cannot act as their own guarantor.

The Bank initiated a lawsuit against the Breckenridges as both makers and guarantors of a note. The Breckenridges did not file a verified denial of their liability as guarantors, resulting in a waiver of their right to contest this liability on appeal, as established by Tex. R. Civ. P. 93 and the precedent set in Werner v. Colwell. In their third point of error, the Breckenridges argued that the trial court wrongly found that the Bank did not violate the Truth-in-Lending Act (TILA). They claimed the court failed to issue additional findings of fact and conclusions of law regarding TILA elements despite their timely request. The appellate court determined that the trial court should have provided these findings and abated the case for that purpose. The trial court eventually filed the requested findings and additional briefing was solicited from both parties.

The Breckenridges contended that the trial court's ruling that the transaction was exempt under TILA was erroneous because the Bank allegedly failed to plead this exemption before trial. They argued that such an exemption functions as an affirmative defense which would be waived if not properly pleaded. However, the burden of demonstrating that the transaction fell under TILA rested with the Breckenridges. To establish the Bank's liability under TILA, the Breckenridges needed to prove that the transaction was covered by the Act, as supported by case law. They failed to plead sufficient facts to demonstrate TILA's applicability. Jurisdiction hinges on whether the credit extension qualifies as a consumer transaction rather than one for business purposes. The Breckenridges cited cases indicating that the party asserting an exemption bears the burden of proof, reinforcing their argument against the Bank's exemption claim.

The excerpt addresses two distinct legal cases. The first involves the City National Bank, which examined whether a merger of two banks violated antitrust laws, specifically regarding exemptions under the Truth-in-Lending Act (TILA). The Third Circuit established that the plaintiff must demonstrate that the transaction falls under TILA's coverage. The court determined that since the amount financed exceeded $25,000 and the transaction did not pertain to real property, it qualified as an exempt transaction under Section 1603(3) of TILA. The court emphasized that TILA should be interpreted strictly in favor of consumers, referencing Inge v. Rock Financial Corp., where the court reversed a lower court's finding due to the plaintiff adequately stating a claim under Section 1605(f). The appellate court upheld the trial court's ruling on TILA without requiring the Bank to plead exemption as a defense, affirming the judgment.

The second case involves James Owen Spurlock's pro se appeal concerning the denial of his request for post-conviction DNA testing. The court clarified that the order in question only denied the appointment of counsel, which is not an appealable issue under Texas law. Consequently, the appeal was dismissed for lack of jurisdiction.