No. 06-15-00052-CV

————————— IN THE COURT OF APPEALS FOR THE SIXTH DISTRICT OF TEXAS

AT TEXARKANA

—————————————————————————————————

TAMI DONALD, JERRY MOORE, and SUMMIT SPRING WATER CO., INC.
Appellants

v.
BRIAN RHONE, CHRIS RHONE, BMR DISTRIBUTING, INC., and RHONE WATER CO., INC.
Appellees

————————————————————————————————— On Appeal from the 336th District Court of Fannin County, Texas The Honorable Laurine J. Blake, Judge Presiding

—————————————————————————————————
APPELLANTS’ BRIEF

—————————————————————————————————
Chad M. Ruback State Bar No. 90001244 chad@appeal.pro The Ruback Law Firm 8117 Preston Road Suite 300 Dallas, Texas 75225 (214) 522-4243 (214) 522-2191 fax
ORAL ARGUMENT REQUESTED ACCEPTED 06-15-00052-CV SIXTH COURT OF APPEALS TEXARKANA, TEXAS 11/12/2015 3:01:46 PM DEBBIE AUTREY

CLERKI DENTI TY OF PARTI ES AND COUNSEL

Appel l a nts

Tam i Do n al d J erry M o o re Su m m i t Sp ri n g W at er Co ., In c.

Tri a l Co uns el fo r Appel l ants

M ary am Ho ss ei n y Herrera 4 2 3 6 W . Lo v ers Lan e Dal l as , Tex as 7 5 2 09

Pres t o n J . Du g as III 3 1 0 0 W . 7 t h St reet Su i t e 2 3 0 Fo rt W o rt h , Tex as 7 6 1 0 7

Gen a A. Ham

m 1 3 3 W . M cDerm o t t Dri v e Su i t e 2 0 0 Al l en , Tex as 7 5 0 1 3

K. Kl i n t Ry

b ick i 3 0 2 W . M ai n St reet Ro y ce Ci t y , Tex as 7 5 1 8 9

Fred eri ck C. Sh el t o n P.O. Bo x 1 3 3 5 Green v il l e, Tex as 7 5 4 03
Appel l a te Co uns el fo r Appel l a nts

Ch ad M . Ru b ack 8 1 1 7 Pres t o n Ro ad Su i t e 3 0 0 Dal l as , Tex as 7 5 2 25 Appel l ees

Bri an Rh o n e Ch ri s Rh o ne BM R Di st ri b u t i n g , In c. Rh o n e W at er Co ., In c.

Tri al /Appel l a te Co uns el fo r Appel l ees

Th om as F. Du n n 3 9 0 1 W . Pi o neer Park way Arl i n g t o n , Tex as 7 6 0 13

2TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

TABLE OF CONTENTS.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

INDEX OF AUTHORITIES.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

STATEM ENT OF THE CASE.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

ISSUES ON APPEAL.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

STATEM ENT OF FACTS.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

SUM M ARY OF THE ARGUM ENT.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1

ARGUM ENT.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3

ARGUM E NT RELATED TO ISSUE 1 : Th e tri al co u rt erro n eo u s ly g ran t ed a d i rect ed v erd i ct di sp o si n g o f al l cau s es o f act i o n as s er t e d b y t h e Pl ai n t i f f s / A p p el l an t s

. Th e t ri al co u rt ’ s d i rect ed v erd i ct w as at th e beg i n n i n g
o f t ri al an d was b as ed s o l el y o n cl a i m s m ad e b y t h e Defen d an t s / Ap p el l ees ’

co u n s el

—

u n s u p p o rt ed b y a n y t e s t i m o n y o r e v i d en ce— b efo re t h e Pl ai n t i ffs /Ap pel l an ts ev en h ad t h e o p p o rt u n i t y t o p res en t th ei r w i t n es s es an d

ev i d en ce.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3

ARGUM E NT RELATED TO ISSUE 2: T he o nl y co u n tercl ai m p l ead ed b y t h e Defen d an t s / Ap p el l ees was a s t at u t o ry cl ai m p urs u an t t o c h a p t e r n in e o f t h e Tex as Bu s in es s an d Co m m erce Co d e. Th at ch ap t er i s cap t i o n ed “ Un i f o r m Co m m erci al Co de— Secu red Tran s act i o n s ,” an d th e ch ap t er i s ap p l i cab l e o n l y t o s ecu red tran s act i on s

. Ho wev er , t h ere i s n o ev id en ce (o r in su ffi ci en t
ev i d en ce) t hat t h e t ran s act i o n at i ss u e in t h i s cas e w as a “ s ecu red tran s act i o n.” An d t he D efen d an t s/ Ap p el l ees ev en ad m i t ted t h at t he t ran s act i o n was n o t a
s ecu red t ran s act i o n

. Co ns eq u en t l y , t h e t ri al co u rt erred i n award i n g d am ag es ( a n d a t t o r n e y s ’ f

e e s s t e m m i n g f

r o m t h o s e d a m a g e s ) t o t h e Defen d an t s / Ap p el l ees

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3

3ARGUM E NT RELATED TO ISSUE 3 : T h e o n l y b as i s fo r at t o r n e ys ’ fees

p l ead ed by t h e Defe n da

nts/A ppe lle e s w a s T e xa s B us i n es s an d Co m m erce Co d e
s ect i o n 9 .6 2 5. Si m i l arl y , th e t ri al co urt ’ s ju d g m en t ex p res s l y award ed at t o rn ey s ’ fees p u rs u an t t o Tex as Bu s in es s an d Co m m erce Co d e s ect i o n 9 .6 2 5. Bu t s ect i o n 9

. 6 2 5 d oes n o t p ro v i d e fo r an award o f at t o rn ey s ’ fees

. Co n seq u en t l y , e v en i f t h e t ri al co u rt was co rrect i n award i n g dam ag es t o t h e Defen d an t s / Ap p el l ees , t h e t ri al co urt n ev ert h el es s erred i n award in g at t o rn ey s ’ fees t o t h e Defen d an t s / Ap p el lees

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5

PRAYER.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 8

CERTIFICATE OF COM PLIANCE.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 8

CERTIFICATE OF SERVICE.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 9

APPENDIX A: Fi n al J u dg m en t [CR 5 3 1 -5 3 3]

APPENDIX B: Fi n d i n gs o f Fact an d Co n cl us i o n s o f Law [CR 5 3 8 -5 4 4 ]

APPENDIX C: As s et Pu rch as e Ag reem en t (t h e co nt ract at i s s u e i n t h i s cas e)

[CR 3 4 -3 7 ]

APPENDIX D: T E X

. B U S

. & C O M

. C O D E § 9 .1 0 1

APPENDIX E: T E X

. B U S

. & C O M

. C O D E § 9 .6 2 5

4INDEX OF AUTHORI TI ES

T E X

. B U S

. & C O M

. C O D E § 9 .1 01

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3

T E X

. B U S

. & C O M

. C O D E § 9 .6 25

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 6 -3 7

Cl a xt o n v. Up

p er La ke Fo r k W a t er Co n t r o l & Imp ro vemen t

Di s t . No . 1 , 2 4 6 S.W .3 d 3 8 1 (Tex . Ap p .— T ex ark an a 2 0 0 8 , p et . d en i ed ).

. . . . . . . . . . . 2 8

Dr ew v. Ha r r i s o n Co u n t

y Ho s p . As s ’n , 2 0 S.W .3 d 2 4 4 (Tex . Ap p .— Tex ark an a 2 00 0 , n o p et .).

. . . . . . . . . . . . . . . 2 8

Fi n & Fea th er

Cl u b v. Lea n d

er , 4 1 5 S.W .3 d 5 4 8 (Tex . Ap p .— T ex ark an a 2 0 1 3 , p et . d en i ed ).

. . . . . . . . . . . 2 3

Fi r s t Ci t y Ba n k-Fa r mer

s Br a n ch v. Gu ex , 6 7 7 S.W .2 d 2 5 (Tex . 1 9 8 4 ).

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 7

Gr a ni t e Pa r tn er

s , L.P. v. Bea r S t ea r n s & Co ., In c. , 1 7 F. Su p p. 2 d 2 7 5 (S.D.N.Y. 1 9 9 8 ).

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3

Her it a g e Gu l

f Co a s t Pr o ps ., Lt d . v. S a n d al wo o d , 4 1 6 S.W .3 d 6 4 2 (Tex . Ap p .— H ou s to n [1 4 th Di s t .] 2 0 1 3, n o p et .).

. . . . . . 3 6

In r e Na l l e Pl a s t i cs Fa mi l y Lt d . P’s h i p , 4 0 6 S.W .3 d 1 6 8 (Tex . 2 0 1 3 ).

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5

Jo h n v. Ma r

s h a ll Hea l t h S er vs

. , In c. , 9 1 S.W .3 d 4 4 6 (Tex . Ap p .— Tex ark an a 2 00 2 , p et . d en i ed ).

. . . . . . . . . . . . 2 3

Na s s ar v. Hu g h es , 8 8 2 S.W .2 d 3 6 (Tex . Ap p .— Ho us t o n [1 s t Di s t .] 1 9 9 4 , wri t d en i ed ).

. . . . . 2 4

No r t h Cen t . Di

s t r ib s

. , In c. v. Mi n

ya r d Fo o d S to r es , In c. , 0 5 -1 2 -0 0 41 8 -CV, 2 0 1 4 W L 2 2 3 0 6 0 (Tex . Ap p .— Dal l as J an . 2 1 , 2 0 1 4 , n o p et .).

. . . . . . . . . . . . . . . . . . . . . . . . 3 4

5S

mi th v. Den eve , 2 8 5 S.W .3 d 9 0 4 (Tex . Ap p .— D al l as 2 00 9 , n o p et .).

. . . . . . . . . . . . . . . . . 3 6

S t a t e Of f i ce o f Ri s k Mg mt . v. Ma r t i n ez , 3 0 0 S.W .3 d 9 (Tex

. Ap p .— San An t o n i o 2 00 9 , p et . d en i ed ).

. . . . . . . . 2 3 -2 4

S t ea r n s v. Ma r t en s , 1 4 -1 3 -0 0 09 4 -CV, 2 0 1 5 W L 5 0 9 2 4 9 7 (Tex . Ap p .— Ho u s t on [1 4 t h Di s t

. ] Au g. 2 7 , 2 0 1 5, n o p et .).

. . . . . . . . . . . . 2 4

Ta n a Oi l & Ga s Co r

p . v. McCa l l , 1 0 4 S.W .3 d 8 0 (Tex . 2 0 0 3 ).

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3 -2 5

6STATEMENT OF THE CASE

Th i s was a b en ch t ri al o f a b u s i n es s d i s p u t e. [CR 8 4 -1 00 , 5 3 1 ] Th e t ri al co u rt

g ran t ed a d i rect ed v erd i ct d i s p os i n g o f a l l cau ses o f act i o n as s ert ed b y t h e

Pl ai n t i ffs / Ap pel l an ts at t h e b eg i n n i n g o f tri al (b efo re t h e Pl ai n t i ffs / Ap p el l an t s ev en

h ad th e o p p o rt u n it y t o p res en t t h ei r wi t n es s es an d ev id en ce). [CR 5 3 8 -5 39 ; RR v o l

.
8 p p

. 2 8

- 2 9 , 3 2

- 3 3 ] Pu rs u an t t o t h i s d i rect ed verd i ct , t he tri al co u rt s i g n ed a ju d g m en t t hat t h e Pl ai n t i ffs / Ap p el l an t s t ak e n o t h i n g. [CR 5 3 1-5 3 2 ] Th e tri al co urt ’ s ju d g m en t al s o p ro v i d ed t h at t h e De f e n d an t s / Ap p el l ees reco v er $ 1 ,0 00 i n d am ag es

p l u s at t o rn ey s ’ fees (o f u p t o $ 2 5 ,0 0 0 ) an d co s t s . [CR 5 31 -5 3 2 ]

Th e Pl ai n t i ffs /Ap pel l an ts fi l e d a m o ti o n fo r n ew t ri al

. [CR 6 5 0 ] In t h ei r

m o ti o n fo r n ew t ri al , t h e Pl ai n t i ffs / Ap p el l an t s arg u ed t h at t h e t ri al co u rt erred in

g ran t i n g a d i rect ed verd i ct b as ed s o l el y o n cl ai m s m ad e b y t h e Defen d an t s / Ap p el l ees ’

c o u n s e l

— u n s u p p o r t e d b y a n y t e s t i m o n y o r e v i d e n c e

— b e f o r e t h e

Pl ai n t i ffs / Ap pel l an ts e v e n had t h e o p p o rt u n i t y t o p res en t t h ei r wi t n es s es an d

ev i d en ce. [CR 6 5 1 ]

7I SSUES ON APPEAL

ISSUE 1 : Th e t ri al co urt erro n eo u s l y g ran t ed a d irect ed v erd ict d i s po s in g o f al l

cau s es o f act i o n as s ert ed by t he Pl ai n t i ffs / Ap p el l an ts

. Th e t ri al co u rt ’ s d i rect ed

v erd ict was at t h e b eg i nn i n g o f t ri al an d w as b as ed s o lel y o n cl ai m s m ad e b y t h e Defen dan t s /Ap p el l e e s ’ co u n s el —u n s u p p o rt ed b y an y t es t i m o n y o r
ev i d en ce—

b efo re t h e Pl ai n t i ffs / Ap p el l an t s ev en ha d the op p o rt un i t y t o p res en t t h ei r wi t n es s es an d ev i d en ce.

ISSUE 2 : Th e o nl y

co u n t ercl ai m p l ead ed by t h e Defen d an t s / Ap p el l ees was a
s t at u t o ry cl ai m p u rs u an t t o ch ap t er n i n e o f t h e Tex as Bu s i n es s an d Co m m erce C o d e

. Th at ch ap t er i s cap t i o n ed “ Un i fo rm Co m m erci al Co d e— Secu re d T r an s act i on s , ” an d th e ch ap ter i s ap p l i cab l e o n l y t o s ecu red t ran s act i o n s

. Ho wev er, t h ere i s n o ev i d en ce (o r i n s uffi ci en t ev i d en ce) t h at t h e t ran s act i o n at i s su e i n th i s cas e was a “ s ecu red t ran s act i on .” A n d t h e Defen d an t s / Ap p el l ees
ev en ad m i t t ed t h at t he t ran s a ct i on w as n o t a s ecu red t ran s act i o n. Co n s e q u en t l y , t h e t ri al co u rt erred i n award in g d am ag es (an d at t o rn ey s ’ fees

s t em m i n g fro m th o s e d am ag es ) t o t h e Defen d an t s / Ap pel l ees

.
ISSUE 3 : Th e o n l y b as i s fo r a t t o r n e y s ’ fees p l ead ed b y t h e Defen d an t s / Ap p el l ees was Tex as B u sine ss a n d Co m m erce Co d e sect io n 9 .6 2 5. Si m i l arl y , the tr ia l c o ur

t’ s j udgm en t ex p res s l y award ed at t o rn ey s ’ fees p u rs u an t t o T ex as Bu s i n es s an d Co m m erce Co d e s ect i o n 9 .6 2 5

. Bu t s ect i o n 9

. 6 2 5 d o es
n o t p ro v i d e fo r an award o f at t o rn ey s ’ fees

. Co n s eq u en t l y , ev en i f t h e t ri al

co u rt was co rrect i n award i n g d am ag es t o t h e Defen dan t s / Ap pel l ees , t h e t ri al

c o u r t n e v e r t h e l e s s e r r e d i n a w a r d i n g a t t o r n e y s ’ f e e s t o t h e Defen d an t s / Ap p el l ees

.

8STATEMENT OF FACTS

In 1 9 9 9 , wi t h n o cu st o m ers an d l i t t l e m o n ey , Tam i Do n al d an d h er b ro t h er

J erry M o o re es t ab l is h ed a wat er b o t tl i ng co m p an y th ey n am ed Su m

m it Sp ri n g W at er

Co m p an y

. [CR 87 , 1 33 , 1 5 5 , 1 6 2 ] Ov er t h e n ex t ei g h t y ears , t h ro u g h h ard w o rk an d

$ 3 0 0 ,0 0 0 i n m ark et i n g ex pen s es , Tam i an d J erry w ere ab l e t o d ev el o p a wat er s al es

ro u t e of 2 4 0 l o n g-t erm cu s t om ers

. [CR 1 55 -1 5 6 ; RR v o l

. 2 p

. 1 9 ] Tam i an d J erry (o r

t h ei r rep res en t at i v es ) m ad e reg u l ar d el i v eri es of t hree-g al lo n o r fi ve-g al l on b o t t l es o f

wat er t o t h es e cu s t o m ers . [RR v o l

. 2 p p . 1 3 -1 4 ]

Ad d it i on al l y , Tam i an d J erry (o r t h ei r rep res en t at i v es ) b eg an b ot t l i n g wat er fo r

t wo b ro t h ers , Ch ri s Rh o n e an d Bri an Rh on e. [CR 1 5 5 ] Ch ri s an d Bri an o wn ed t wo

b u s i n es s es , cal l ed BM R D istr ibu t i n g an d Rh o n e W at er Co m p an y , t h ro u g h wh i ch t h ey

s o l d b o t t l ed wat er b u t d i d no t b o t t l e t h ei r o w n wat er. [CR 1 5 , 1 3 8 , 1 5 5 -1 5 6 , 1 6 3,

2 1 9 ] Ev en t u al l y , on Jan u ary 1 , 2 00 7 , Tam i an d J erry en t ered i n t o an as s et p u rch as e

9ag reem en t wh ereb y t h ey s o ld wat er b o tt l i n g as set s t o Ch ri s an d Bri an

. [CR 3 4 , 1 5 6,

1 6 3 ; RR v o l . 8 p . 3 7 ] 1

Pu rs uan t t o t h e t erm s o f t h e as s et p u rch as e ag reem en t , Ch r i s an d Bri an were

t o p ay T am i an d Jerry $ 5 ,0 0 0 p er m o n t h fo r 4 8 m on t h s u n t i l t h e p urch as e p ri ce o f

$ 2 4 0 ,0 0 0 was pai d i n fu l l

. 2 [CR 3 4 ] Fo r t h e fi rs t fi v e m o nt h s

— fro m J an uary t h ro u g h

M ay o f 2 0 0 7

— Ch ri s an d Bri an m ad e t h ei r $5 ,0 0 0 -p er-m o n t h pay m en t

. [CR 8 8 , 1 5 6,

1 A t a h eari n g p ri o r t o t ri al , Ch ri s an d Bri an ’ s at t o rn ey cl ai m ed t h at t h e
s i gn at u res o f Ch ri s an d Bri an o n t h e as s et p u rch as e ag reem en t were fo rg eri es . [RR

v o l. 2 p p

. 9 , 18 ] At t h is h eari n g p ri o r t o t ri al , Ch ri s an d Bri an tes t ifi ed t h at t h e
s i gn at u res o n th e a s s e t p u rch as e ag reem en t was n o t t h ei rs

. [RR v o l. 2 p p

. 4 1 , 4 5 ] Ho wev er, p o s s ib l y b ecau s e t h e t ri al co u rt j u d ge g ran t ed a d i rect ed v erd i ct b efo re an y wi t n es s es h ad an op p o rt u n i t y t o t es t i fy at t ri al , t here was no ev i d en ce at tri al t h at t h e
s i gn at u res were fo rg eri es

. M o reo v e r , i n h er fi n d in g s o f fact , t h e ju d g e d i d n o t fi n d t h at t he s i g n at u res w ere fo rg eri es

. [CR 5 3 8 -5 4 4] To t h e co n t rary , t h e j u d g e ’s fi nd i ng s o f fact i n d i cat ed t h at t h e as s et p urch as e ag reem en t was i n fact “ en tered i n t o.” [CR 5 3 9 ]

2 Th e fi n d i ng s o f fact i n d i cat e t h at t h e tri al co urt ju d g e b el i ev ed t h at t h e as s et p u rch as e ag reem en t pro vi d ed t h at t h e p ay m en t s were t o b e p ai d t o Su m m i t S p r i n g (rat h er t h an to T am i a n d Jerry ). Sp eci fi cal l y , fi n di n g o f fact n u m b er 1 2 s t at es :

“ Pu rs u an t t o t h e As s et Pu rch as e Ag reem en t , Defen d an t s were t o p ay Pl ai n t i ff Su m m i t Sp ri n g W at er C o m

p a n y, I n c. t h e s u m o f $ 24 0 , 0 0 0 at t h e rat e of $ 5,0 0 0 p er m o n th

u n t i l p ai d i n fu l l .” [CR 5 3 9 ] Ho wev er, t h e as s et p urch as e ag reem en t s p eci fi es t h at t h e p ay m en t s were t o be m ad e t o “ Sel l er,” an d t h e as set p u rch as e ag reem en t d efi n es

“ S e ll er” as Tam i an d J erry

. [CR 3 4 ] In fact , t h e as s et p u rch as e ag reem en t d o es n ’t

ev en m en t i o n Su m

m i t Sp ri n g

. [CR 3 4 -3 7 ] Co ns eq u en t l y , Tam i an d J erry ch al l en g e fi nd i ng o f fact nu m

b er 1 2 becau s e t h ere i s n o ev i d en ce, leg al l y i n s u ffi ci en t ev i d en ce,
o r fact u al l y i n s uffi ci en t ev i d en ce t o s up p ort th i s fi nd i n g o f fact a n d b ecau s e t h e
o p p o s i t e o f t h i s fi nd i n g o f fact i s es t ab l i s h ed as a m at t er o f l aw.

101 6 3 ; RR v o l

. 2 p

. 2 3 ] Ch ri s a n d B r i a n d i d n o t m ak e an y p ay m en t i n J un e o f 2 0 0 7.

[CR 8 8 ; RR v o l . 2 p . 2 3 ]

Aft er t h e d u e d at es o f t he J u n e p ay m en t an d th e J u l y p ay m en t h ad b o t h p as s ed ,
T a m i w r ot e a l et t er t o Ch ri s an d Bri an ad v i s i ng t h at t h ey were i n d efau l t o f t h ei r

co n tract ual o b li g at i o n s

. [CR 88 , 1 81 ] In res p o n s e, Bri an s en t a l et ter (1 ) co m p l ai n i n g

ab o ut so m e o f t h e as s et s wh i ch were p urch as ed an d (2 ) s t at i ng t h at fu n ds wo u l d b e

d ed uct ed “ fro m t h e p ay m en t s ch ed u le.” [CR 1 57 , 16 0 ] Bri an ’ s l et t er in d i cat ed t h at

a $ 4 ,0 0 0 ch eck wo u l d b e s en t , an d Tam i an d J erry recei v ed t h e $4 ,0 0 0 ch eck aro u n d

t h e s am e t i m e. [CR 1 5 7, 1 6 0 , 1 6 3 ; RR v o l

. 2 p

. 2 3 ] Th i s $ 4,0 0 0 ch eck was

ap p a r e n t l y al l th at Ch ri s an d Bri an p l an ned t o p ay fo r t h e m o n th s o f Ju n e an d J u l y

co m b i ned , d es pi t e t h e fact t h at t h e as s et p u rch as e ag reem en t req u i red a p ay m en t o f

$ 5 ,0 0 0 p er m o n t h (i .e., a t ot al o f $ 1 0 ,0 0 0 fo r J u n e an d J u l y ). [CR 3 4 , 1 5 7 , 1 6 0 , 16 3 ]

Fo r t h e nex t s ev eral m o n t h s , Ch ri s an d Bri an were l at e m ak i n g t h ei r m o n t h l y

p ay m en t s wh i ch , p urs u an t to t he as s et p u rch as e ag reem en t , were d u e o n t h e fi rs t o f

each m o n t h

. [CR 3 4 , 8 9 , 15 7 ] Ch ri s a n d Bri an fai l ed t o m ak e an y p ay m en t

wh at s o ev er in t he m o n th o f D e c e m b er. [CR 8 9 , 1 5 7 ] In st ead , Ch ri s an d Bri an

r e p r e s en t ed t h at t hey were g oi n g t o t ry t o t ak e ou t a l oan s o t h at t h ey co u l d s at i s f y

t h ei r m on t h l y pay m en t o b l i gat i o n s

. [CR 8 9 , 1 5 7 ; RR v o l

. 2 pp

. 23 -2 4 ] L at er, Ch ri s

11an d Bri an rep res en ted t h at t h ey were u n ab l e to g et a l o an , b u t t h at t h ey w ere t ry i n g

t o g et an i n v es to r. [CR 8 9, 1 5 7; RR v o l. 2 p . 2 4 ]

In M arch o f 20 0 8 , a few m o n t h s aft er m i s s i n g th ei r Decem b er o f 2 0 0 7

p ay m en t , Bri an s en t a let t er o fferi n g t o pay $1 ,9 4 4 p er m o n t h fo r 3 6 m o n t h s , fo r a

t o t al o f $ 7 0 ,0 0 0

. [CR 8 9 , 1 8 7 ; RR v o l

. 2 p

. 24 ] Of co u r s e, t h e $ 1,9 4 4 p er m o n th

o ffered b y Bri an was s u b s t an t ial l y l es s t h an t h e $ 5 ,0 0 0 p er m o nt h req u i red b y t h e

as s et p u rch as e ag reem en t , an d t h e $ 7 0 ,0 0 0 t ot al pay m en t offered b y B ri an was

s u b s t an t i al l y l es s t h an t h e t o t al s t i l l o wed u n d er t h e as set p u rch as e ag reem en t

. W h i l e

t h e reco rd i s n o t c l e a r a s t o ex act l y h o w m u ch of t he $ 2 40 ,0 0 0 p u rch as e p ri ce h ad

al read y b een p ai d b y Ch ri s an d Bri an , Bri an ’ s M arch of 2 0 08 l et t er i n d i cat es t h at t h e

p ay m en t s m ad e t o t al ed ei t h er $ 4 0 ,5 0 0 o r $ 4 5 , 0 0 0

. [CR 1 87 ] 3 Reg ard les s o f wh et h er

t h e pay m en t s m ad e t o t al $ 40 , 5 0 0 o r $ 4 5 ,0 0 0 (o r $ 4 4 ,0 0 0 , as a s s e r t e d by Tam i an d

J erry ), t h e pay m en t s m ad e pl u s t h e $ 7 0 ,0 0 0 o ffered i n Bri an ’ s l et t er i s s u b s t an t i al l y

l es s t h an t h e $ 2 4 0 ,0 0 0 req u i red by t h e as s et p u rch as e ag reem en t

. [CR 3 4 ] No t

3 Bri an ’ s l et t er s t at es : “ W e m ad e 9 p ay m en t s o f $ 4 5 0 0 = $ 4 5 ,0 00 .” [CR 18 7 ] Of co u rs e, 9 t i m es $ 4 ,5 0 0 eq u al s $ 4 0 ,5 0 0 rat h er t h an $ 4 5 ,0 0 0

. So , i t i s u n cl ear wh et h er Bri an w as cl ai m i n g t o h av e p ai d $ 4 0 ,5 0 0 o r $ 4 5,0 0 0 t o ward t h e t o t al $ 2 4 0 ,0 0 0 req ui red b y t h e as s et p u rch as e ag reem en t

. A t a h eari n g p ri o r to t ri al , Ch ri s t es t i fi ed t h at $ 45 ,0 00 was t h e t o t al am o u n t wh ich h a d b een p ai d. [RR v o l

. 2 p

. 5 4 ] Th e t ri al co u rt ju d g e’ s fi n d in g s o f f a c t i n d i cat ed th at $ 4 5 ,0 0 0 was t h e t o t al am o u nt wh i ch h ad been p ai d

. [CR 5 4 0 ] Tam i an d J erry co nt en d ed t h at t h e to t al am o u n t p ai d

was $ 44 ,0 0 0 . [CR 5 4 7 , 5 5 8 , 6 6 2 , 6 9 1 ; RR v ol . 1 0 Defen d an t ’ s Ex h ib i t B2 ]

12s u rp ri s i n gl y , Tam i an d J erry t u rn ed d o w n t h is o ffer. [CR 8 9, 1 57 , 5 4 0 ; RR v o l

. 2 p.

2 8 ]

Ch ri s an d Bri an h av e m ad e n o t an y p ay m en t s s i n ce No v em b er o f 2 0 0 7

. [CR

9 0 , 1 5 8 , 1 6 3 ] At a p re-t ri al h eari n g , Ch ri s i nd i cat ed t h at t h e reas o n t h at t here were

n o m o re pay m en t s b ei ng m ad e i s b ecau se h e an d Bri an weren ’ t m ak i n g an y m o n ey

. [RR v o l

. 2 p

. 5 6 ] Aft er ap p ro x i m at el y 1 1 m o n t h s w i t ho u t recei v i n g an y p ay m en t s ,
Tam i an d J erry fi led s u i t i n Oct o b er o f 2 0 0 8 . [CR 2 4 ]

Th e j u d g e gran t ed Tam i an d Jerry ’ s req ues t fo r t em p o rary res t rai ni n g o rd er,

p ro h ib i t i ng Ch ri s an d Bri an fro m tran s ferri n g an y o f t h e as set s at i s s u e. [CR 4 6 -4 8 ]

Lat er, t h e ju d g e g ran t ed T am i an d J erry ’ s req u es t fo r t em p o rary i nju nct i o n

. [CR 1 0 4

-

1 0 6 ] In d o i n g s o , t he ju d g e ex p res s l y h el d t h at “ i t i s p ro b ab le t h at , u p o n a fi n al t ri al

o n th e m eri t s , Pl ai n ti ffs [Tam i an d J erry ] w i l l p rev ai l i n t h ei r su i t ag ai n s t Defen d an t s [Ch ri s an d Bri an ] o n t h ei r cl ai m s ag ai n s t Defen d an t s [Ch ri s an d Bri an ] .” [CR 1 0 4 ]

In l i g h t o f t h is , i t i s es peci al ly cu ri o u s t h at , at t h e b eg i n ni n g o f tri al

— b efo re Tam i an d

J erry ev en h ad t h e op p o rt u n i t y t o p res en t t h ei r wi t n es s es an d ev i d en ce— t h e ju d g e

g ran t ed a d i rect ed v erd i ct di sp o si n g of al l cau s es o f act i on as s ert ed b y Tam i an d J erry

. [CR 53 8 -5 3 9 ] It i s al s o cu ri o u s t h at t h e j u d ge ap p eared t o b as e t hi s d i rect ed v erd i ct

s o l el y o n cl ai m s m ad e b y Ch ri s an d Bri an ’ s co u ns el , u n su p po rt ed b y an y t es t i m o ny

o r ev i d en ce. [RR v ol . 8 p p

. 2 4 -2 9 ]

13A. At t h e b eg in ni n g o f t ri al

— b efo re Tam i an d J erry ev e n h a d t h e
o pp o rt un i t y t o p res en t t h ei r wi t n es s es an d ev i den ce— t h e ju d g e g ran t ed

a d i rect ed v erd i ct d i s p o s i n g o f al l cau s es o f act i on as s ert ed b y Tam i an d J erry

.
Th e t ri al o f t h i s cas e b eg an q u i t e n o rm al l y

. Th e t ri al co u rt ju d g e s w o re-i n fi v e

wi t n es s es

. [RR v ol

. 8 p p

. 12 -1 3 ] Th e Pl ai n t i ffs ’ at t o rn ey (t he at t o rn ey fo r Tam i an d

J erry ) g av e an o pen i n g s t at em en t . [RR v o l. 8 p p

. 1 7 -2 0 ] Th e Defen d an t s ’ at t o rn ey (t he at t o rn ey fo r Ch ri s an d Bri an ) g av e an o p en i n g s t at em en t

. [RR v o l

. 8 p p

. 2 0 -2 3 ]

Th en , befo re t he fi rs t wi t n es s t o o k t h e s t a nd , b y ag reem en t o f t h e part i es , t h e t ri al

co u rt ju d g e ad m i t t ed t h e as set p u rch as e ag reem en t i n t o ev i d en ce. [RR v o l . 8 p

. 2 3 ]

Im m ed i at el y aft erward s , b efo re t he fi rs t wi t n es s t o ok t h e s t an d, th e Defen d an t s ’

at t o rn ey (t he at t orn ey fo r Ch ri s an d Bri an ) o ral l y m o v ed t o d i s m i s s t h e cas e. [CR

5 3 8 ; RR v o l

. 8 p p

. 2 4 -2 5 ] Al t h ou g h Ch ri s an d Bri an ’ s at t o rn ey d i d n o t u se t h e wo rd s

“ d i rect ed v erd i ct ” at th e t i m e, t h e t ri al co u rt ju dg e l at er ch aract eri zed t hi s as a m o t i o n

fo r d i rect ed v erd i ct

. 4 [CR 5 3 8]

4 Th e t ri al co u rt ju d g e h el d : “ Befo re Pl ai n t i ffs p u t o n an y wi t n es s t es ti m o n y in

s u p p ort o f t hei r cl ai m s, Defen d an t s m o v ed t h e Co u rt fo r a d i r e c t ed v erd i ct t h at Pl ai n t i ffs t ak e n o t h in g b y t h ei r l aws ui t

. ” [CR 5 38 ]

14In t h i s o ral m o t i o n, Ch ri s an d Bri an ’ s at t o rn ey arg ued t h at , b y fo rfei t i n g i t s

co rp o rat e ch art er, 5 Su m

m i t Sp ri n g l o s t i t s ri g h t t o p ro s ecu t e a cau s e o f act i o n . [CR

5 3 8 -5 3 9 ; RR vo l

. 8 p

. 2 5 ] 6 Bu t Ch ri s an d Bri an ’ s at t o rn ey fai l ed t o m en t i o n t h at ,

reg ard l es s o f wh et h er Su m m i t Sp ri n g h ad th e ri g ht t o p ro s ecu t e a cau s e o f act i o n,

Tam i an d J erry were al s o p l ai n ti ffs i n t hi s cas e an d were p ro secu t i n g t h i s cas e b as ed

o n d am ag es t h ey p ers o n al l y s u ffered (i rres p ect i v e of an y d am ag es t h at m i g h t h av e

b een s u ffered b y Su m

m i t Sp ri n g). [CR 8 4-1 0 2 ] An d Tam i an d J erry em p h as i zed t h at

t h e co n t ract at i s su e (t h e as s et p u rch as e ag reem en t ) was wi t h Tam i an d J erry , n o t wi th

Su m m i t Sp ri n g. [CR 3 4 ; RR v o l . 8 p p

. 2 6 , 3 1 ]

5 W h i l e Su m

m i t Sp ri n g was o rg a n i z e d a s a co rp o rat io n , [CR 5 7 4 ] t h e t ri al

co u rt ju dg e’ s fi n d i n g s o f fact i n d i cat e t h at t h e ju d g e erro n eo u s ly b el iev ed t h at t h i s
co rp o rat e o rg an i zat i o n w as d o n e b y Tam i an d J erry

. Sp eci fi cal l y , fi nd i n g o f fact

n u m b er 7 s t at es : “ Pl ai n t i ffs T am i Do n al d an d J erry M o o re o rg an i zed Su m m it Sp ri ng s W at er Co m

p an y , In c. as a co rp o rat i o n .” [CR 5 3 9 ] Ho wev er, t h ere was n o t es t i m o ny
o r o t h er ev id en ce o ffered at t ri al t h at t h i s co rp o rat e o rg an i zat i o n was d o n e b y Tam i

an d J erry

. In fact , Su m

m i t Sp ri n g ’ s art i cl es o f i n co rp o rat i o n l i s t t h e s o le i n co rp o rat o r
as s om eo n e n am ed Teres a Cam p b el l

. [CR 5 7 4 , 5 7 9 ] Co n s eq uen t l y , Tam i an d J erry ch al l en g e fi n di n g o f fact n u m b er 7 b ecau s e t h ere i s n o ev i d en ce, l eg al l y in su ffi ci en t
ev i d en ce, o r fact u al ly i n s u ffi ci en t ev i d en ce t o s u p p o rt t h i s fi nd i n g of fact an d b ecau s e t h e o p po s i t e o f t h is fi n d in g o f fact i s es t ab l i s h ed as a m at t er o f l aw.

6 Ch ri s an d Bri an ’ s at t o r n ey arg u ed : “ Th e p l ai n t i ff here i s Su m m it Sp ri n g W at er Co m

p an i es , In c. It i s a co rp o rat i on wh o s e ch art er h as b een fo rfei t ed un d er t h e Tex as Tax Co d e an d t h e Tex as Bu s i n es s Org an i zat i o n s Co de. It m ay n o t p u rs u e o r d efen d a cau s e o f act i o n i n t h e St at e o f Tex as i n co u rt .” [RR v o l. 8 p . 2 5 ]

15Ch ri s an d Bri an ’ s at t o rn ey cl ai m ed t h at t he as s et p urch as e “ ag reem en t s ay s

t h ey ’ re s el l i n g Su m

m i t Sp ri n g W at er Co m

p an y ’ s as s et s .” [RR v o l

. 8 p

. 3 1] Bu t , in

real it y , t he as s et p u r c h a s e ag reem en t s ay s no s u ch t h i n g

. [CR 3 4 -3 7 ] Th e as s et

p u r c h a s e ag reem en t s peci fi es t h at Tam i an d J erry are t h e sel l ers , an d t h e as s e t

p u rch as e ag reem en t n ev er ev en m en t i o ns Su m m i t Sp ri ng . [CR 3 4 -3 7 ] 7

Ch ri s an d Bri an ’ s at t orn ey al s o cl ai m ed t h at t h e as s et s bei n g “ s o l d b el o n g to

Su m m i t Sp ri n g W at er Co m

p an y ” rat h er t h an t o Tam i an d J erry

. [RR v o l

. 8 p

. 2 5 ] No

wi t n es s t es t i fi ed i n s u p p o rt o f t h i s cl ai m b y Ch ri s an d Bri an ’ s at t o rn ey , an d n o

7 Th e fi n d i n g s o f fact i n d i cat e t h at t h e t ri al co u rt ju d g e b el iev ed t h at al l o f t h e Pl ai n t i ffs (Tam i , Jerry , an d Su m m i t Sp ri n g ) s o l d th e as s et s at i ss u e. Sp ec i f i cal l y , fi nd i ng o f fact n um

b er 11 s t at es : “ Pu rs u an t t o th e As s et Pu rch as e Ag reem en t , Pl ai n t i ffs co n vey ed an d so l d t o D e fen d an t s al l o f t h e m at eri al op erat i n g as s et s o f Su m m i t Sp ri n g W at er Co m

p an y , In c.’ s b o t t l ed wat er b us i n es s .” [CR 5 3 9 ] H o wev er, t h e as s et p urch as e ag reem en t ex p res s l y d efi n ed th e “ Sel l er” as Tam i an d Jerry

. [CR 3 4 ] In fact , t h e as set p u rch as e ag reem en t d o es n ’ t ev en m en t i o n Su m m it Sp ri n g

. [CR 3 4 -3 7] Co n s eq u en tl y , Tam i an d J erry ch al l en g e fi n d in g o f fact n um b er 11 b ecau s e t h ere i s n o ev i d en ce, l eg al ly i n s u ffi ci en t ev i den ce, o r fact u al ly i n s u ffi ci en t ev i d en ce t o s u p p o rt Su m

m it Sp ri n g h av i n g s o l d an y t h in g u n der t h e as s et pu rch as e ag reem en t
an d b ecau s e t h e o p p o s i t e o f t h is i s es t ab l i s h ed as a m at t er o f l aw.
Si m i l arl y , co n cl u s i o n o f l aw n u m b er 3 refers to “ t h e co rp o rat i o n ’ s [Su m m i t Sp ri n g ’ s ]

r i g h t s u n d er t h e A s s et Pu rch as e Ag reem en t .” [CR 5 4 2] An d co n cl u si o n o f l aw
n u m b er 6 refers t o “ Su m

m i t Sp ri n g W at er Co m

p an y ’ s ri g ht u n d er th e As s et Pu rch as e A g reem en t .” [CR 5 4 3 ] Ho wev er, t h e as s et p u rch as e ag reem en t d o es n ’ t ev en m en t i o n Su m m i t Sp ri n g

. [CR 34 -3 7 ] Co n s eq u en t l y , T am i an d J erry ch al l en g e co n cl us i o n s o f l aw n u m b er 3 an d n u m

b e r 6 b ecau s e t h ere i s n o ev i d en ce, l eg al l y in su ffi ci en t
e v i den ce, o r fact u al l y i ns u ffi ci en t ev id en ce t o s u p p o rt Su m m i t Sp ri n g h av i n g an y ri gh t s u n d er t he as s et pu rch as e ag reem en t an d b ecau s e t h e o p p o s i te o f t h i s i s
es t ab l i s h ed as a m at t er o f l aw.

16e v i d e n c e was offered in s up p o rt o f t h is cl ai m b y Ch ri s an d Bri an ’ s at t o rn ey

. Ta m i

an d J erry ’ s at t orn ey res p o nd ed (1 ) t h at t h e as s et s at i ss u e h av e bel o n g ed t o Tam i an d

J erry (n o t Su m

m i t Sp ri n g) s i n ce 2 0 0 6 an d (2 ) t h at t h e 2 0 0 7 as s et p u rch as e ag reem en t

s p eci fi ed t h at t he s el l ers o f t h e as s et s were Tam i an d J erry (n o t Su m m i t Sp ri n g ). [RR

v o l

. 8 p. 2 6 ] Fu rt her, Tam i an d J erry ’ s at t orn ey s t at ed t h at wi t n es s t es t i m on y wo u ld

e s t ab l i s h t h at , p ri o r t o t h e t i m e t h at th e 20 0 7 as s et pu rch as e ag reem en t w as s i g n e d ,

t h e as s et s at i s s u e b el o n g ed to Tam i an d J erry

. [ R R v ol

. 8 p

. 2 8 ] Ho wev er, rat h er

t h an al l o wi n g Tam i an d J erry t o t es t i fy as t o t h e i r o w n e rs h i p o f t h e as s et s , t h e t ri al

co u rt ju dg e sai d t hat s h e wo u l d b e g ran t i n g t he rel i ef s ou g h t b y Ch ri s an d Bri an ’ s

l awy er. [RR v o l. 8 p p

. 2 8 -2 9 ] Al t h o u g h t h e t ri al co u rt ju d g e d i d n o t u s e t h e wo rd s

“ d i rect ed v erd i ct ” o r “ d i rect ed ju d g m en t ” at th e t i m e, s h e l a t er ch aract eri zed t h is a

“ d i rect ed ju d gm en t .” 8 [CR 5 3 9 ]

Th e t ri al co u rt ju d g e i n d i cat ed t h at th ei r cas e was o v er (b efo re i t ev en b eg an )

b u t t h at Tam i an d J erry wo ul d b e al l o wed t o p u t o n ev i d en ce so l el y fo r t h e p u rp o s e

o f m a k i ng a reco rd fo r ap p eal

. [RR v o l

. 8 p p

. 2 8 -2 9 , 3 2 -3 3 ] Th e ju d g e s t at ed t h at

t h i s w o u l d b e “ [l ] i ke a b i l l o f rev i ew.” [RR v o l

. 8 p. 3 3 ] In t hi s “ b i ll o f rev i ew,”

Tam i t es t i fi ed t h at Su m

m i t Sp ri n g h ad p rev io u s ly o w n ed t h e as s et s at i s s ue b u t t h at

8 Th e t ri al co u rt ju d g e s t at ed : “ Th e Co u rt u l t i m at el y g ran t ed t h e Defen d an t s ’

m o ti o n fo r d i rect ed ju d g m en t.” [CR 5 3 9 ]

17t h o s e as set s were tran s ferred t o Tam i an d J erry i n J u l y o f 2 0 0 6 , wel l b efo re t h e 2 0 0 7

s al e o f t he as s et s t o Ch ri s an d Bri an

. [RR v o l

. 8 p . 3 5 ] 9

Tam i an d Jerry fi l ed a m o t i o n fo r n ew t ri al

. [CR 6 5 0 ] In t h ei r m o t i o n fo r n ew

t ri al , Tam i an d J erry arg u ed t hat th e t ri al co u rt erred i n g ran ti n g a d i rect ed v erd i ct

b as ed s o l e l y o n cl ai m s m ad e b y Ch ri s an d Bri an ’ s co u n sel

— u n s u p p o rt ed b y an y

t es t i m o ny o r ev id en ce—

b efo re Tam i an d J erry ev en had t h e o p p o rt u n i ty t o p res en t

9 Th e fi n d i n gs o f fact i nd i cat e t h at t h e t ri al co u rt ju d g e b el iev ed t h at Tam i an d J erry tes t i fi ed t h at t h ey

l i q u i dat ed Su m

m i t Sp ri ng an d t ran s ferred al l o f i t s as s et s to t h em s el v es

. Sp eci fi cal l y , fi n d i n g o f fact n u m b er 1 6 s t at es : “ Pl ai n ti ffs Tam i Do n al d

an d J erry M o ore t es t i fi ed an d al l eg ed th at s o m et i m e b efo re J an u ary 1 , 2 00 7 , t h ey l i qu i dat ed Su m

m i t Sp ri n g W at er Co m

p an y , In c. an d t ran s ferred al l o f i t s as s et s an d b u s i n es s t o t h em .” [CR 5 40 ] T h ere are t h ree in accu raci es i n t h is s t at em en t

. Fi rs t , n ei t h er Tam i n o r J erry tes t i fi ed t h at t h ey l iq u i d at ed an y t h i n g

. Seco n d , wh i l e Tam i t es t i fi ed i n t he “ b i l l o f rev i ew” t h at s o m e Su m m i t S p r i n g as set s were t ran sferred to h er an d J erry , [ R R v o l

. 8 p

. 35 ] n ei t h er Tam i n o r J erry tes t ifi ed t h at al l o f Su m m i t Sp ri n g ’ s as s et s were tran s ferred t o t h em

. Th i rd , w h i l e Tam i t es t i fi ed i n t h e “ b i l l o f

rev i ew” t h at s o m e Su m

m i t Sp ri n g as s et s were t ran s ferred t o h er an d J erry , [RR v o l

. 8 p

. 3 5] n ei t h er T am i n o r J erry t es t i fi ed t h at t h i s t ran s fer w as m ad e by h er. To t h e
co n trary , Tam i t es t i fi ed i n t h e “ b i l l o f rev i ew” t hat t h e t ran s fer was m ad e by J erry an d J an et , [RR v o l

. 8 p

. 3 5] J an et b ei n g J erry ’ s wi fe. [CR 5 4 5, 5 5 3 ] Co n s eq u en t l y , Tam i

an d J erry ch al len g e fi n d i n g of fact n u m b er 1 6 b ecau s e t h ere i s n o ev i d en ce, l eg al l y i n s u ffi ci en t ev i d en ce, o r fact u al l y i n s u ffi ci en t ev i d en ce t o s up p o rt t h i s fi nd i n g o f fact

.
As an as i d e , t h e t ri al co urt was al s o m i st ak en i n s t at i n g in fi n di n g o f fact n u m b er 8 t h at Tam i an d J erry were t h e o n l y d i rect o rs o f Su m m i t S p r i n g

. [CR 5 3 9 ] Su m m i t Sp ri n g ’ s art i cl es o f i nco rp o rat i o n s h o w t h at J an et was a d i rect o r o f Su m m i t Sp ri n g. [CR 5 74 , 5 7 9 ] Su m

m i t S p r in g ’ s fran ch i s e t ax rep o rt s al s o s h o w t h at J an et was a d i r e c t o r of Su m

m it Sp ri n g

. [CR 5 8 1 ] Co n s eq u en t l y , Tam i an d J erry ch al l en g e fi nd i ng o f fact n um

ber 8 b ecau s e t h ere i s n o ev id en ce, l eg al l y in s u ffi ci en t ev i d en ce,
o r fact u al l y

i n s u ffi ci en t ev i den ce t o s u pp o rt t hi s fi nd i n g o f fact

.
18t h ei r wi t n es s es an d ev i d en ce. [CR 6 5 1 , 6 5 8 ] Fu rt h er, Tam i an d Jerry arg u ed t h at (1 )

t h e as s et p u rch as e ag reem en t s peci fi es t h at T am i an d J erry are t h e s el l ers an d (2 ) t h e

as s et p u rch as e ag reem en t n ev er ev en m en t i o n s Su m m i t Sp ri ng . [CR 6 58 ]

B. Aft er gran t i n g a d i rect ed v erd i ct d is po s i ng o f al l cau s es o f act i o n
as s ert ed b y Tam i an d J erry , th e ju d g e p r o c e e d e d t o co n d u ct a t ri al o n Ch ri s an d Bri an ’ s co un t ercl ai m

.
Aft er g ran t i n g a d i rect ed v erd i ct d i s po s i ng o f al l cau s es o f act i o n as s ert ed b y

Tam i an d J erry , t h e ju d g e p ro c e e d e d t o c o n d u ct a t ri al o n Ch ri s an d Bri an ’ s

co u nt ercl ai m

. [RR v o l

. 8 p p

. 2 8 -2 9 , 3 3 , 3 5 -3 6 ] T h e o nl y co u n tercl ai m t h at Ch ri s an d

Bri an p l ead ed was a s t at ut ory cl ai m fo r d am ag es p u rs u an t t o T ex as Bu s in es s an d

Co m m erce Co d e s ect i o n 9 .6 2 5

. [CR 3 7 2 -3 7 3 ] Sp eci fi cal l y , Ch ri s an d Bri an p l ead ed

en t i t l em en t t o d am ag es p u rs u an t t o s ect i on 9 .6 2 5 (b ), (d ) fo r “ fai l u re t o co m p l y wi th

t h e p ro v i s i on s o f Tex as Bu si n es s & C o m m e r ce Co de Sect i o n s 9 .6 10 , 9 .6 1 1 , 9 .6 1 3,

9 .6 16 , 9

. 6 2 5 , 9

. 62 6 et

. s eq .” an d p l ead ed en t it l em en t t o “ l i q u i d at ed dam ag es u n d er

Tex as Bu s i n es s & Co m

m erce Co d e § 9 .6 25 (e).” [CR 3 7 2 -3 73 ]

Ch ri s an d Bri an p l ead ed t h at th es e al l eg ed fai l u res t o c om p l y wi t h t he Tex as

Bu s i nes s & Co m

m erce Co d e were rel at ed t o T a m i an d J erry “ tak i n g p o s s es s i o n o f,

c o l lect i n g an d d i s p o s i n g o f th e as s et s / co l l at eral s o l d t o an d rep o s s es s ed fro m

Co u n t er-Cl ai m an ts [Ch ri s an d Bri an ] u n d er t h e APA [as s et pu rch as e ag reem en t ] .”

19[CR 37 2 ] 1 0 Al t h o u g h Ch ri s an d Bri an ’ s p lead i ng s d i d no t g o i n t o fu rt h er d et ai l , t h e

t ri al co urt ju d g e fo u n d t h at Tam i an d J erry d i d n o t g i v e Ch ri s an d Bri an (1 ) “ an y

wri t ten n o t i ce b efo re d i s p o s i t i o n of co l lat eral as req u i red un d er T ex

. Bu s

. &

Co m m erce Co d e § §9 .6 10 et

. s eq

. ” o r (2 ) “ an y wri t t en n o t i c e o f e x p l an at i o n an d

cal cu l at io n o f d efi ci en cy as req u i red u n d er Tex

. Bu s

. & Co m m erce C o d e § 9

. 6 1 6.”
[CR 5 4 1] Th e ju d g e award ed $ 1 ,0 00 i n d am ag es t o Ch ri s an d Bri an

. [CR 5 3 2 ] Th e ju d g e i n d i cat ed t h at , p u rs u an t to s ect i o n 9 .6 2 5 (e), t h is $ 1 ,0 0 0 was fo r t wo v io l at i on s

o f t h e s t at u t e at $5 0 0 p er vi ol at i o n

. [CR 5 4 3] In ad di t i o n to t h e $ 1,0 0 0 i n d am ag es ,

t h e j u d ge al s o award ed at t o rn ey s ’ fees (o f u p t o $ 2 5 ,0 00 ) t o C h ri s an d Bri an an d

ex p r e s s l y h el d t hat t h i s award was p u rs u an t t o Tex as Bu s i n es s & Co m m erce Co d e

s ect i on 9 .6 2 5 (b ). [CR 5 3 2 ] In t eres t i n g l y , s ection 9. 625( b) doe s n’ t m en ti o n at t o rn ey s ’

fees

. No r d o es an y

o t h er p art o f s ect i o n 9 .6 2 5

.

1 0 Th e tri al co u rt ju d g e’ s fi n d i n g o f fact n u m b er 1 9 s t at es : “ Th e As s et Pu rch as e Ag reem en t p ro v i d ed t h at t h e rep o ss es s ed as s et s were t o b e s o ld b y t h e s el l er an d t h e p ri ce recei v ed cred i ted ag ai n s t an y d eb t o w ed b y Defen d an t s u n d er t h e As s et Pu rch as e Ag reem en t .” [CR 5 4 1 ] Th ere are t wo i naccu raci es i n t h i s s tat em en t

. Fi rs t , t h e as s et p u rch as e ag reem en t d o es n o t “ p ro v i d e[] t h at t h e rep o s ses s ed as s et s were to b e s ol d b y t h e s el l er.” Th e as set p u rch as e ag reem en t s i m p ly d o es n o t i n cl u d e an y p ro v is i o n req u i ri n g rep o s s es sed as s et s t o b e s o l d

. [CR 3 4

- 3 7 ] S e c o n d, th e as s et p u rch as e ag reem en t d o es no t i n cl u d e a p ro v i s i o n req u i ri n g t h e “ p ri ce recei v ed [t o b e] cred i t ed ag ai n st an y d eb t o wed .” [CR 3 4 -3 7 ] Co ns eq u en t l y , Tam i an d J erry ch al l en g e fi n di n g o f fact n u m b er 1 9 becau s e t h ere i s no ev i d en ce, l eg al l y in su ffi ci en t
ev i d en ce, o r fact u al l y

i n s u ffi ci en t ev i d en ce t o s u p p o rt t h i s fi n d i n g o f fact

.

20SUMMARY OF THE ARGUMENT

Th e t ri al co u rt erro neo u s l y g ran ted a d i rect ed v erd i ct d i s p o s i ng o f al l cau s es

o f act i on as s ert ed b y t h e Pl ai n t i ffs / Ap p el l an t s

. Th e t ri al co u rt ’ s d i rect ed v erd i ct was

at t h e b eg i n n i n g o f t ri al a n d w a s b as ed s o l el y o n cl ai m s m ad e b y t h e

Defen d an t s / Ap p el l ees ’ c ounse l— unsupport ed b y an y t es ti m o n y o r ev i d en ce— b efo re

t h e Pl ai n t i f

f s / Ap p el l an t s ev en h ad t h e o p p o rt un i ty to p res en t t h ei r wi t n es s es an d

ev i d en ce.

Th e o n l y co un tercl ai m p l ead ed b y t h e Defen d an t s / Ap p el l ees was a st at u t o ry

cl ai m p u rs u an t to ch ap ter n i n e o f t h e Tex as Bu s i n es s an d Co m m erce Co d e. T h at

ch ap ter i s cap t io n ed “ Un i fo rm Co m m erci al Co d e— Secu red T ran sact i o n s ,” an d t h e

ch ap ter i s ap p l i cab l e on l y t o s ecu red t ran s act i on s

. Ho wev er, t h ere is n o ev i den ce (o r

i n s u ff i c i en t ev i d en ce) t h at t h e t ran s act i o n at is su e i n t hi s cas e was a “ s ecu red

t ran s act io n .” An d t h e Defen d an t s / Ap p el lees ev en ad m i t t ed t h at t h e t ran s act i o n was

n o t a secu red tran s act i on

. Co n s eq u en t l y , t h e t ri al co u rt er r ed i n award i ng d am ag es (an d at t o rn ey s ’ fees s t em m i n g fro m

t ho s e d am ag es ) t o t h e Defen d an t s / Ap p el l ees

.
Th e o n l y b as i s fo r a t t o rn ey s ’ fees p l ead ed b y t h e Defen d an t s / Ap p el l ees was

T e x as Bu s i n es s an d Co m m erce Co d e s ect i o n 9 .6 2 5

. Si m i l arl y , t h e t ri al co u rt ’s
ju d g m en t ex p res s l y award ed at t o rn ey s ’ fees p u rs u an t t o Tex as Bu s in es s an d

Co m m erce Co d e s ect i o n 9 .6 2 5

. Bu t s ect i o n 9 .6 25 d o es n o t p ro vi d e fo r an award o f

21at t o rn ey s ’ fees

. Co n s eq u en tl y , ev en if t h e tr i a l c o u rt was co rrect i n award i n g

d am ag es t o t h e Defen d an t s / Ap p el l ees , th e t ri al co urt n ev ert h el es s erred i n award i n g

at t o rn ey s ’ fees t o t h e Defen d an t s / Ap p el l ees

.

22A RGUMENT

I

. ARGUMENT R ELATED TO I SSUE 1 : The tri a l co urt erro neo us ly g ra nted a di rected v erdi ct di s po s ing o f a l l ca us es o f a cti on a s serted by the Pl a i nti ffs / A ppel l a nts

. T h e tri a l co urt’s di rected v erdi ct w a s a t the beg i nni ng o f tri a l a nd w a s ba s ed s ol el y o n cl a i ms ma d e by the D efenda nts / Appel l ees ’ co uns el

— uns uppo rted by a ny tes ti m o ny o r
ev i dence— befo re the Pl a i n t i ffs / Appel l a nts ev en ha d the o ppo rtuni ty to pres ent thei r w i tnes s es a nd ev idence.

Th e t ri al co u rt g ran t ed a d i r e c t e d v e rd i ct d i s p o s in g o f al l cau s es o f act i o n

as s ert ed b y Tam i an d J erry

. Th e t ri al co u rt ’ s d i rect ed verd i ct was at t h e b eg i n n i n g o f

t ri al an d was b a s e d s o l el y o n cl ai m s m ad e b y Ch ri s an d Bri an ’ s

co u ns el

—

u n s u p p o rt ed b y an y tes t im o n y o r ev i d en ce— b efo re T am i a n d J erry ev en

h ad t h e o p po rt u ni t y

t o p res en t t h ei r wi tn es s es an d ev i d en ce.

“ A t ri al co u rt ’ s d i rect ed v erd i ct i s rev i ewed d e no v o.” Fi n & F ea t her Cl u b v.

Lea nd er , 4 1 5 S.W .3 d 5 4 8 , 5 5 1 (Tex

. Ap p .— Tex ark an a 2 0 1 3 , pet

. d en i ed ); s ee Jo h n

v. Ma r s h a l l Hea l t h S

er vs ., In c. , 9 1 S.W .3 d 4 4 6 , 4 5 0 (Tex

. Ap p

. — Tex ark an a 2 0 0 2,

p et . d en ied ) (“ W e rev i ew a t ri al co u rt ’ s d i rect ed v erd i ct d e n o v o

. ”).

Th e Tex as Su p rem e Co u rt h as h el d t hat “ a d i r e c t ed v erd i ct s h o u l d n o t b e

g ran t ed ag ai n s t a p art y b efo re t h e p art y h as h ad a fu ll o p po rt u ni t y t o p res en t i t s cas e

an d h as res t ed .” Ta n a Oi l & Ga s Co r

p

. v. McCa l l , 1 0 4 S.W

. 3 d 8 0 , 8 2 (Tex . 2 0 0 3 );

s ee St a t e Of

f i ce o f Ri s k Mg mt

. v. Ma r ti n ez , 3 0 0 S.W .3 d 9 , 1 1 (Tex

. Ap p .— San

An t on i o 2 0 0 9 , p et

. d en i ed ). Th e Su p rem e Co u rt h as reco gn i zed an ex cep t i o n t o t h i s

23ru l e w h en , i n th ei r p l ead i ng s , t h e p a r t i e s h av e “ affi rm at i vel y l i m i t ed t h ei r cl ai m to

d am ag es t h ey

co u l d n o t reco ver as a m at t er o f l aw.” Ta n a , 1 0 4 S.W .3 d at 8 2

. Th at

ex cep t i o n i s n ot ap pl icab l e t o Tam i an d J erry ’ s cl ai m s , as Tam i an d J erry ’ s p l ead i ng s

d i d n o t affi rm at i v el y

l im i t t h ei r cl ai m . [CR 8 4 -1 03 ] 1 1

Un l es s s u c h a n e xcep t i o n ap p li es , i t i s “ rev ers i b l e erro r fo r t he t ri al co u rt to

d i rect a v erd i ct w i t ho u t al l o wi n g t he p l a i n t i ff t o p res en t al l o f it s ev i d en ce.”

Ma r t i n ez , 3 0 0 S.W

. 3 d at 1 1 -1 2 ; s ee S t ea r ns v. Ma r ten s , 1 4 -1 3 -0 0 09 4 -CV, 2 0 1 5 W L

5 0 9 2 4 9 7 , at * 2 (Tex

. Ap p

. — Ho u s t o n [1 4 t h Di s t .] Au g

. 27 , 2 0 1 5 , n o p et .) (“ If a t ri al

co u rt ren ders a d i rect ed v erd i ct ag ai ns t a p art y b efo re t h at part y h as res ted i ts cas e-i n
ch i ef, t h e t ri al co u rt ’ s d i rect ed v erd i ct i s rev ers i b l e erro r ab s en t ap p l i cat i o n o f t h e

ex cep t i o n reco g n i zed b y t h e S u p rem e Co u rt o f Tex as .”); Na ss a r v. Hu g h es , 8 8 2

S.W .2 d 3 6 , 3 8 (Tex

. Ap p

. — Ho u s t o n [1 s t D i s t.] 1 99 4 , wri t d en i ed ) (“ if d o n e b efo re

t h e p l ai n t i ff h as p res en t ed al l h i s ev i d en ce, i t i s rev ers ib l e erro r”).

In l i g h t o f t h e l aw b ei ng s o cl ear, wh at p os s i b l e ex pl an at i o n co u l d t h ere b e fo r

t h e t ri al co u rt ju d g e h av i n g g ran t ed a d i rect ed v erd i ct wi t h ou t fi rs t al l o wi ng T am i an d

1 1 A r e v i e w o f Tam i an d J erry ’ s p l ead i n gs d o n o t refl ect an y l an g u ag e affi rm at i v el y l i m i t i ng t hei r cl ai m

. [CR 8 4 -1 0 3 ] Ch ri s an d Bri an n ev er cl ai m ed (at t h e t i m e t h ey t h ei r s o u g h t t h ei r d i rect ed v erd i ct o r at an y o t h er t i m e) th at T am i an d J erry ’ s p l ead i n g s affi rm at iv el y l i m i t ed t h ei r cl ai m

. M o reo v e r , th e t ri al co u rt ju d g e n ev er fo u n d (at t h e t i m e s he gran t ed t h e di rect ed v erd i ct , i n h er fi n d in g s o f fact , i n h er ju d g m en t , o r at an y o th er t i m e) t h at Tam i an d J erry ’ s p l ead i n gs affi rm at i vel y l i m i t ed t h ei r cl ai m

.
24J erry to pres en t t h ei r cas e-i n -ch i ef? At t h e t ri al i t s el f, th e t ri al co u rt ju dg e o ffered n o

ex p lan at i o n fo r d is reg ard i n g Tex as Su p rem e Co u rt p reced en t t h at “ a d irect ed v erd i ct

s h o u ld n o t b e g r a n t e d ag ai n s t a p art y b efo re t h e p art y h as h ad a fu l l o p p ort u n i t y to

p res en t i t s cas e an d h as r e s t ed

. ” Ta na Oi l & Ga s Co rp

. v. McCa l l , 10 4 S.W .3 d 8 0,

8 2 (Tex

. 2 0 03 ). Od d l y , i n h er fi n d i n g s of fact , t h e ju d g e cl ai m ed t h at s h e d i d n o t

act u al l y g ran t t h e m o t io n fo r di rect ed v erd ict u n ti l aft e r h e ari n g “ t es t i m o n y fro m

wi t n es s cal l ed b y th e Pl ai n t i ff t o refu t e t he fact t h at Su m m i t Sp ri n g W at er Co m

p an y ,
I n c

. wa s t h e tru e Pl ai n t i ff i n t h i s cas e.” [CR 5 3 9 ] Th i s cl ai m i s p ro b l em at i c fo r a

n u m b er o f reas o n s

.
Fi rs t , as t o t h e t r i a l c o u r t ju d ge’ s cl ai m t hat s h e d i d n o t g ran t t h e m o t i o n fo r

d i rect ed verd i ct u nt il aft er h eari n g t es t i m o n y fro m a “ w i t nes s cal led b y t h e Pl ai n t i ff,”
[CR 5 3 9] t h e t ri al co u rt ju dg e s ai d o n rep ort er’ s reco rd p ag es 2 8 an d 2 9 t hat s h e was

g ran t i n g t h e rel i ef (s o u g h t b y Ch ri s an d Bri an ’ s l awy er o n p ag es 2 4 an d 2 5 ), an d s h e

rei t erat ed h er d eci s io n o n pag e 3 2

. [RR v o l

. 8 p p. 2 4 -2 5 , 2 8 -2 9 , 3 2 ] Ho w ev er, Tam i

an d J erry d i d n o t cal l a wi t n es s u n t i l p ag e 3 3

. [RR v o l

. 8 p

. 3 3 ] So , t h e r e p o r t e r ’s

reco rd pl ai n l y s h ows th at t h e t ri al co u rt ju d g e g ran t ed t h e di rect ed v erd i ct b efo re

25Tam i an d J erry cal l ed t hei r fi rs t wi t n es s

. . . d es pi t e t h e t ri al co u rt ju d g e i n d i cat i n g

o t h erwi s e i n h er fi n d in g s o f fact

. 1 2

Seco n d , ev en wh en Tam i an d J erry d i d cal l a w i tn es s on pag e 3 3 , t h at w as o n l y

aft er t h e ju d g e i n d i cat ed t o Tam i an d J erry o n p ag es 3 2 an d 3 3 t h at t h ey m ay o n l y cal l

wi t n es s es fo r th e l i m i t ed p u rp o s e o f creat in g an ap pel l at e reco rd

. [RR v o l

. 8 p p

. 3 2

-
3 3 ] (“ Li k e a bi l l of rev i ew.”) An d , b ecau s e t h e j u d ge o n ly p erm i t t ed Tam i an d J erry

t o cal l wi t n es s e s f

o r t h e l i m i t ed p u rp o s e o f creat i n g an ap p el l at e reco rd , t h e ju d g e

co u ld n o t h av e b een co n s id eri n g t h e t es t i m o n y o f an y s u ch wi t n es s.

Th i rd , i n w h a t a p p ears t o b e an at t em p t to ju s t i fy t h e cu ri o u s t im i n g o f h er

d i rect ed v erd i ct ag ai n s t Tam i an d J erry , t h e ju d g e m ad e a fi n di n g o f fact (n u m b er 5 )

s u g g es t i n g t h at Su m

m it Sp ri n g was t h e o n l y

“ t ru e Pl ai n ti ff i n t h i s c a s e

. ” [CR 53 9 ]

Bu t Tam i an d J erry un d i s p u t ed l y fi l e d a p e t i t i o n i n t h e cas e, so t h at wo u l d

— by

d efi n i t i o n

— m ak e each o f t h em a “ Pl ai n t i ff i n t h i s cas e” u n l es s an d un t i l t h ei r cl ai m s

1 2 Th e t ri al co u rt ju d g e’ s fi n d in g o f fact n u m b er 5 s t at es : “ Pri or t o g ran t i n g t h e Defen d an t s ’ m o ti on fo r d i rect e d v erd i ct , th e Co u rt

. . . h eard arg u m en t s o f co u n s el

an d t es t i m on y fro m wi t n es s cal l ed b y t he Pl ai nt i ff t o r e f u t e t h e fact t h at Su m

m i t Sp ri n g W at er Co m

p an y , In c. was t h e tru e Pl ai nt i ff in t h i s cas e.” [CR 5 3 9 ] H o wev er,
as ex p l ai n ed a b o v e , t h e rep ort er’ s reco rd p l ai n ly s h o ws t h at t h e t ri al co u rt ju d g e g ran t ed th e d irect ed v erd i ct b efo re T a m i a n d Jerry cal l ed t h ei r fi rs t wi t n es s

. Co n s eq u en t l y , Tam i an d J erry ch al l en g e fi n di n g o f fact n u m b er 5 b ecau s e t here i s n o
ev i d en ce, l eg al l y i n s u ffi ci en t ev i d en ce, o r fact u al ly i n s u ffi ci en t ev i d en ce t o s u p p o rt t h i s fi n d i n g o f fact an d b ecau s e t h e o p po s i t e of t hi s fi n d i n g of fact i s es t ab l i s h ed as
a m at t er o f l aw.

26were di s po s ed o f ( e

. g ., b y s u m m ary ju dg m en t o r b y

t ri al ). [CR 8 4 , 53 9 ] T am i an d

J err y m i g h t n o t h av e b een p l ai n t i ffs aft er t h e ju d g e gran t ed a d i rect ed v erd i ct

d i s p o s i n g o f t h ei r cl ai m s , b u t Tam i an d J erry were— by d efi n i t i o n—

p l ai n ti ffs u p u n t i l

t h e m o m en t t h at t h e ju dg e g ran t ed a d i rect ed v erd i ct ag ai n s t t h em

.
Fo u rt h , t h e as set p u rch as e ag reem en t s peci fi es t h at th e s el l ers were Tam i an d

J e r r y (an d do es n ’ t ev en m en ti o n Su m m i t Sp ri n g ). [CR 3 4 -3 7 ] 1 3 Th at al o n e w o u l d

m ak e Tam i an d J erry ap p ro p ri a t e p l a i n t i ffs

. Th e fact t h at t he as s et p u rch as e

ag reem en t s p eci fi es t h at t he s el l ers were Tam i an d J erry d o es n o t n eces s ari l y d i ct at e

t h at Tam i an d J erry m

u s t wi n t h e cas e. Bu t th e fact t h at th e as s et p u rch as e ag reem en t

1 3 T h e fi n di ng s o f fact an d co ncl u s io n s o f l aw i n d i cat e t h at t h e t ri al co u rt ju d g e b el i ev ed (1 ) t h at t h e as s et p urch as e ag reem en t was en t ered i n t o o n b eh al f o f Su m m i t Sp ri n g an d (2 ) t hat Su m

m i t Sp ri n g was th e sel l er o f t h e as s et s

. Sp eci fi cal ly , fi n d i n g
o f fact nu m

b er 1 0 s t at es : “ Pl ai nt i ffs Tam i Do n al d an d J erry M o o re, i n th ei r cap aci t y
as s hareh o l d ers , d i rect o rs an d o ffi cers o f Su m m i t Sp ri n g W at er Co m

pan y , In c.
en t ered in t o t h e A s s et Pu rch as e A g reem en t o n b eh al f o f Su m m i t S p r i n g W at er Co m p an y , In c. as t h e s el ler th erei n .” [CR 5 3 9 ] Si m i larl y , co n cl u s i o n of l aw n u m b er 1 s t at es : “ Pl ai n t i ff Su m

m i t Sp ri n g W at er Co m

p an y , In c. i s t h e t ru e s el l er an d p art y in i n t eres t u n d er t h e As s et Pu rch as e A g r eem en t .” [CR 5 4 2 ] Ho wev er, t h e as s et p u rch as e ag reem en t p l ai n ly s p eci fi es t h at (1 ) i t was en tere d i n t o b y Tam i an d J erry i n t h ei r i n d i v i d u al cap aci ti es an d (2 ) t h at t h e s el l e r s were Tam i an d J erry i n t h ei r i n d i v i d u al cap aci t i es

. [CR 3 4 ] (“ Tam i D o n al d an d J erry M o o re, as in di v id u al s ”) In fact , t h e as s et p u rch as e ag reem en t d o es n ’ t ev en m en ti o n Su m m i t Sp ri n g. [CR 3 4 -3 7 ] Fu rt h erm o re, t h ere was n o t es ti m o n y at t ri al (1 ) t h at th e as s et p u rch as e ag reem en t was
en t ered in t o on b eh al f o f Su m m i t Sp ri n g o r (2 ) t h at Su m m it Sp ri n g was t h e s el l er o f t h e as s et s

. Co n s eq u en t l y , Tam i an d J erry ch al l en g e fi nd i n g o f fact n u m b er 1 0 an d

c o n cl u s i o n o f l aw n u m

b er 1 b ecau s e t h ere i s n o ev i den ce, leg al ly i n s u ffi ci e n t
ev i d en ce, o r f

a c t u a l l y i n s u ffi ci en t ev i d en ce t o s u p p o rt th i s fi nd i n g o f fact an d t h i s
co n cl u s i o n o f l aw.

27s p eci fi es t h at t h e s el l ers were T am i an d J erry wo u l d

— at t h e v ery l eas t

— co n s t i t u t e

“ s o m e ev i d en ce” t h at t h ey (rat h er th an Su m m i t Sp ri n g ) were t h e s el lers

. Th at wo u ld

b e s u ffi ci en t t o d efeat an y p ret ri al d i s p o s i t i v e m o t i o n (s u ch as a m ot i o n fo r s u m m ary ju d g m en t ) 1 4 an d w o u l d en t i t l e Tam i an d J erry t o p ut o n t h e i r cas e-i n -ch i ef as to

wh et h er o r n o t t h ey (rat her t h an Su m m i t Sp ri n g ) were t h e s el l ers

. 1 5

1 4 In t he co n tex t o f a t rad i t i on al m ot i o n fo r s u m m ary ju d g m e n t , t h e as s et p u rch as e ag reem en t sp eci fy i n g t h at t h e sel l ers w ere Tam i an d J e r r y w o u l d

— at t h e
v ery l eas t

— creat e a fact is s u e as t o wh et h er Tam i an d Jerry were t h e s el l ers

. An d t h at
wo u l d p recl u d e t h e g ran t i ng o f t rad i t i o n al s u m m ary j u d gm en t

. See Cl axt o n v. Up p er La ke Fo r k W a t er Co n t r ol & Imp r o vemen t Di s t

. No

. 1 , 2 4 6 S.W .3 d 3 81 , 3 8 3 (Tex

. Ap p .— Tex ark an a 2 0 08 , p et

. d e nie d) ( “ W e r e ve r se the sum m a r y j ud g m en t an d rem an d t h i s cas e t o t h e t ri al co u rt . . . b ecau s e fact i s s u es p recl u d e s u m m ary ju d g m en t .”).

In t h e co n t ex t o f a n o -ev id en ce m o t i o n fo r s u m m ary ju d g m en t , t h e as s et p u r ch as e ag reem en t s p eci fy in g t h at t h e s el l ers were Tam i a n d J e r r y wo u l d

— at t h e v ery l eas t —co n st i tu t e m o re th an a s ci n t i ll a of ev i d en ce t h at T am i an d J erry were t h e
s el l ers

. An d th at wo u ld p recl ud e th e g ran t i n g o f no -ev i d en ce su m m ary ju d g m en t

. S ee Dr ew v

. Ha r r i s o n Co u n t y Ho s p. As s ’n , 2 0 S.W .3 d 2 4 4, 2 4 7 (Tex

. Ap p .— Tex ark an a 2 0 0 0 , n o p et .) (“ A n o-ev i d en ce s u m m ary ju d g m en t i s im

p ro p erl y g ran t ed i f t h e n o n m o van t p res en t s m o re t han a s ci n t il l a o f p ro b at i v e ev i d en ce t o rai s e a g en ui n e i s s ue o f m at eri al fact .”).

1 5 In h i s b an k ru p t cy co u rt cas e, Bri an fi l ed a m ot i o n t o d i s m i s s Tam i an d J erry ’ s cl ai m s fo r l ack o f s t an d i n g b as ed o n Bri an ’ s al leg at i o n s t hat Su m m i t Sp ri n g
was t h e on ly p ro per p art y to b ri ng an y cl ai m s rel at ed t o t he as s et p urch as e ag reem en t

. [CR 58 7 , 5 8 9 -5 90 ] I n 2 0 1 0 , t h e b an k ru p t cy co urt ju d g e d en i ed Bri an ’ s m o t i o n to d i s m i s s Tam i an d J erry’s cl ai m s

. [CR 5 99 -6 0 0 ] Cu ri o us l y , n earl y fi v e y ears l at er, t h e t ri al co urt ju d g e i n t h i s cas e ap p eared t o ad o p t t h e v ery s am e reas on i n g reject ed b y t h e b an k ru p t cy

co u rt ju d g e.

28Fi ft h , i n t h e “ b il l o f rev iew,” Tam i t es t ifi ed t h at Su m m it Sp ri n g had prev i o u s l y

o wn ed t h e as s et s at i s s u e b u t t h at t h o s e as s et s were t ran s ferred t o Tam i an d J erry in

J u l y o f 2 0 0 6 , wel l b efo re th e 2 0 0 7 s al e o f t h e as s et s t o Ch ri s an d Bri an . [RR v o l . 8

p

. 3 5 ] If th e t ri al co urt j u d ge h ad d en i ed Ch ri s an d Bri an ’ s m o t i on fo r d i rect ed v erd i ct

an d al l o wed Tam i t o t es t i fy at t ri al

— rat h er t han m erel y m ak e a reco rd fo r ap p eal in

a “ b il l o f rev i ew”— t h e j u d ge as fact fi n d er co u l d h av e fo u n d t h at T am i was l y i n g

. 1 6

In t h at cas e, t h e j ud ge co u l d arg u ab ly h av e (1 ) h el d t h at T am i an d J erry di d n o t o wn

t h e as s et s t hey p u rp o rt ed t o s el l u n d er t h e as s et p u rch as e ag reem en t , (2 ) co ns eq u en t l y

1 6 Th e fi n d i n gs o f fact i n d i cat e th at t h e tri al co u rt ju d g e di d co n si d er t h e t es t i m o ny ab o u t t h e as s et s h av i ng b een t ran s ferred to Tam i an d J erry p ri o r to t h e 2 0 0 7

as s et p u rch as e ag reem en t , b u t t h at t h e ju d g e fo un d th at th i s t es t i m o n y w a s n o t cred i b l e. Sp eci fi cal l y , fi n d i n g o f fact n u m ber 16 s t at es : “ Pl ai n ti ffs Tam i Do n al d an d J erry M o o re t es t i fi ed an d al l eg ed t h at s o m et im e b efo re Jan u ary 1 , 2 0 0 7 , t h ey l i qu i dat ed Su m

m i t Sp ri ng W at er Co m

p an y , In c., an d t ran s ferred al l o f i t s as s et s an d b u s i n es s t o t h em

. . . . Th e Co u rt fi n d s t h i s t es t i m o n y an d al l eg ed st at e o f fact s t o b e i n cred i b l e.” [CR 5 4 0]

Ho wev er, as ex p l ai ned ab o ve, t h e rep o rt er’ s reco rd p l ai n l y s h ows t h at t he t ri al co u rt ju d g e g ran t ed t h e d irect ed v e r d i c t b efo re t h ere was an y wi tn es s t es t i m o n y

. Sp eci fi cal l y , t he t ri a l c o u r t ru l ed ag ai n s t Tam i an d Jerry on rep o rt er’ s reco rd p ag es 2 8 an d 2 9 (an d rei t erat ed h er d eci s i on o n p ag e 3 2 )

. . . bu t t h e fi rs t wi t n es s was n ot cal l ed u n t i l p ag e 3 3

. [RR v o l

. 8 p p

. 28 -2 9 , 32 -3 3 ] An d t h e o n ly t e s t i m o ny i n t h e
reco rd ab o u t t h e t ran s fer o f as s et s t o Tam i an d Jerry was d u ri ng t h e “ b il l of rev i ew” (i n wh i ch t h e ju d g e perm i t ted Tam i an d J erry t o cal l wi t n es s es fo r t he l i m it ed p u rp o s e
o f creat i n g an ap p el l at e reco rd ). [RR v o l. 8 p p

. 3 2 -3 3, 3 5 ] Becau s e t he t es t i m o n y o n t h i s to p i c was d u ri n g t h e “ b i l l o f rev i ew,” t h e ju d g e co u l d n o t h av e been co n s i d eri n g t h e tes t i m o n y of an y s u ch wi t n es s

. Co n s eq u en tl y , Tam i an d J erry ch al len g e fi n d i n g
o f fact n u m

b er 1 6 b ecau s e t h ere i s n o ev i d en ce, l eg al l y in s u ff i c i e n t ev i d en ce, o r fact ual ly i n s uffi ci en t ev i d en ce t o s u p p o rt t hi s fi nd i n g o f fact

.
29h el d t hat Tam i an d Jerry co u ld n o t h av e been d am ag ed b y an y breach o f co nt ract by

Ch ri s an d Bri an , an d (3 ) t h erefo re ren d ered a t ak e-n o t h in g ju dg m en t fo l l owi n g a fu l l

t ri al on t he m eri ts

. Bu t th e ju d g e s i m p l y d i d n o t d o t h at

. In s t ead , s h e ch o se t o g ran t

a d i rect ed verd i ct p ri o r t o al l o wi ng Tam i an d Jerry t o p r e s e n t t h ei r cas e-i n -ch i ef.

An d , p u rs u an t t o Su prem e Co u rt cas e l aw, t h at co n s t i t u t es rev ers i b l e erro r.

Si x t h, wh i l e t h e t ri al co u rt ju d g e at t em p t ed t o ju s ti fy h er d et erm i n at i o n t h at

Tam i an d J erry di d n o t o wn t he as set s t h a t t h e y p u rp ort ed t o sel l u n d er t h e as s et

p u rch as e ag reem en t wi t h al l eg ed “ j u d ici al ad m i s si o n s ” b y

Tam i an d J erry i n a t h ei r

m o ti o n fo r p art i al s um m ary ju dg m en t an d affi d av it s at tach ed t h eret o , [CR 5 4 0 ] t h i s ju s t ifi cat i o n i s fau l t y

fo r s ev eral reas o n s :

A. Th e t ri al co u rt ju d g e gran t ed Tam i an d Jerry ’ s m o ti o n t o w i t hd raw t h ei r

m o t i on fo r p art ial s u m

m ary ju d g m en t , s o th e ju d g e’ s rel i an ce o n t h e

m o t i on o r an y

at t ach m en t s t h eret o i s q u es t i o n ab l e. [CR 2 3 9]

B. In fi n d i ng o f fact 1 7 (b ), t h e ju d g e i nd i cat ed t h at t h e m o t i o n fo r p art i al

s u m m ary j u d gm en t an d t h e s u p p o rt i n g a ffi d av i t s co n s t i tu t ed “ ju d i ci al

ad m i ss i o n s ” to s u p p ort a “ co n cl u s i o n t hat i t w as Su m m it Sp ri n g W at er

Co m pan y , In c. wh o was i n fact t h e own er an d s el l er o f t he b o t t l ed wat er

b us i n es s t o D efen d an t s u n der t h e As s et P u r c h a s e ag reem en t .” [CR

305 40 ] 1 7 Bu t t h e ju d g e’ s fi n d i n g s o f fact d o n ot s p eci fy wh at l an g u ag e (o r

ev en wh at p ag e) i n t he m o ti o n an d affi d av i ts co n st i t u t ed su ch “ ju d i ci al

ad m i ss i o n s .” [CR 5 4 0 ] An d a rev i ew o f th e m ot io n an d t h e s u p p o rt i n g

affi d av i t s d o es no t rev eal an y l an g u ag e wh at s o ev er wh i ch ad m i t s t h at

Su m m i t Sp ri n g o wn ed t h e as s et s at t h e t i m e o f t h e 2 0 07 as s et p u rch as e

ag reem en t

. M o reo v er, n ot h i n g i n t h e m o t i o n o r t he s u p p ort i n g affi d av i t s

i s i n co n si s t en t wi t h Tam i ’ s t es t i m o n y (i n t h e “ b i ll o f rev iew”) t h at

Su m m i t Sp ri n g t ran s ferred t h e as s et s t o Tam i an d J erry i n 2 00 6

.
C. In fi n d i n g o f fact 1 7 (c), t h e ju d g e fo u nd t h at T am i an d J erry ’ s affi d av i t s

at t ach ed t o t h e m o t i o n fo r p art i al s u m m ary ju d g m en t “ were s i g n ed an d

s u b m i t t ed b y t hem as Pres id en t an d Vi ce Pres i d en t o f Su m m i t Sp ri n g.”
[CR 5 4 0 ] A m o n g m an y o t h er p ieces of b ack g ro u n d i n fo rm at i o n , Tam i ’ s

affi d av i t do es st at e “ I am t h e Pres i d en t o f Su m

m i t Sp ri n g,” an d J erry ’ s

affi d av i t d o es s t at e “ I a m t h e Vi ce Pres id en t o f Su m m i t Sp ri n g .” [CR

1 54 , 1 6 2] Ho wev er, i n t h ei r affi d av i t s, Tam i an d J erry n ev er st at e t h at

t h ey are s i g n i n g t he affi d av i t s i n t h ei r cap aci t y as o ff i cers o f Su m

m i t

1 7 Fi n d i n g of fact n um

b er 1 7 (b ) s t at es t h at t h e “ b ot t l ed wat er b us i n es s ” i t s el f

was s o l d “ u nd er t h e As s e t P u rch as e Ag reem en t .” [CR 5 4 0] Ho wev er, th e as s et p u rch as e ag reem en t p l ai n l y i nd icat es th at t h e t ran s act i o n was m erel y t h e s al e o f as s et s
an d n ot t h e s al e o f a “ b u s i n es s .” [CR 3 4 ] Ho wev er, as ex pl ai n ed el s ewh ere h erei n, t h i s i s n ot t h e o n l y

erro r i n t h i s fi n d i n g o f fact

.
31Sp ri n g

. M o reo v er, ev en i f Tam i an d Jerry h ad s t a t e d t h at t h ey s i g n ed

t h e affi d av it s i n t h ei r cap aci t y as o ffi cers o f Su m m i t Sp ri n g , th at wo u ld

s t i l l n ot c o n s t i t u t e a “

ju d i ci al ad m i s s i o n” as t o (1 ) wh et h er Su m m i t
Sp r i n g t ran sferred t h e as s et s t o Tam i an d J erry i n 2 0 0 6 o r (2 ) wh et h er

t h e as s et s wer e o w n e d b y Su m m i t Sp ri ng at th e ti m e o f th e 20 0 7 as s et

p urch as e ag reem en t

. 1 8
By g ran t in g a d irect ed v erd i ct d i s po s in g o f al l cau s es o f act i o n a s s ert ed by

T a m i an d J erry at t h e b eg i n ni n g o f t ri al b u t b efo re Tam i an d J erry e v e n h a d t h e

o p p o rt u ni t y t o p res en t t h ei r wi t n es s e s a n d ev i d en ce— in co n t rav en t i o n o f Tex as

Su p rem e Co u rt cas e l aw— t h e ju d g e rev ers i b l y erred i n g ran t i n g t h e di rect ed v erd i ct

.

1 8 Tam i an d J erry ch al l en g e fi n di n g o f fact n u m b er 1 7 , i n cl u d i n g i t s s u b p art s 1 7 (b ) an d 1 7 (c), b ecau s e t h ere i s n o ev i den ce, l eg al l y i n s u f f i c i en t ev i d en ce, o r fact ual ly i n s uffi ci en t ev i d en ce t o s u p p o rt t hi s fi nd i n g o f fact

.
32I I

. ARGUMENT RELATED TO I SSUE 2 : The o nl y co untercl a i m pl ea ded by

the Defenda nts / Appel l ees w a s a sta tuto ry cl a i m purs ua nt to cha pter ni ne
o f the Tex a s Bus i nes s a nd Co m m erce Co de. Tha t cha pter i s ca pti o ned

“ Uni fo rm Co m m erci a l Co de— Secured Tra ns acti o ns ,” a nd the cha pter i s
a ppl i ca bl e o nl y to s ecured tra ns a cti o ns . Ho w ev er, there i s no ev i dence (o r i ns uffi ci ent ev i dence) tha t the t ra ns a cti o n at i s s ue i n thi s ca s e w as a

“ s ecured tra ns a cti on.” And the Defenda nts / Appel l ees ev en a dm i tted tha t the tra ns a cti o n w a s no t a s e c ured tra ns a cti o n. Co ns equentl y , the tri al

co urt erred i n a w ardi ng da m a g es (a nd atto rney s ’ fees s tem m i ng fro m tho s e da m a g es ) to the Defenda nts / Appel l ees .
Th e on l y co u n t ercl ai m Ch ri s an d Bri an p l ead ed was a st at u t o ry cl ai m p u rs u an t

t o ch ap t er n i n e o f t h e T e x a s B u s i n es s an d Co m m erce Co d e s tem m i n g fro m act i on s

t ak en b y Tam i an d J e r r y r e l at ed t o t h e as s et pu rch as e ag reem en t

. [CR 3 7 2 -3 7 3] 1 9

Ch ap t er n i n e i s c a

p t ione d “ U nif

or m C om m e r c ia l C ode

— S e c ur e d T r a ns act io ns .” T E X

.
B U S

. & C O M

. C O D E § 9

. 1 0 1 (“ Th i s ch ap t er m ay b e ci t ed as Un i fo rm Co m m erci al

Co d e— Secu red Tran s act i on s

. ”). As s u ch , a s tat u t o ry cl ai m u n d er ch ap t er n i n e o f t h e

Tex as Bu s i n es s an d Co m m erce Co d e w o u l d o n ly b e ap p li cab l e t o “ Secu red

Tran s act i o ns

. ” S

ee Gr an i t e Pa r t n er

s , L.P. v. Bea r S t ea r n s & Co
., In c. , 1 7 F. Su p p.

1 9 Ch ri s an d Bri an p l ead ed : “ Co u n t er-Cl ai m an t s s eek d am ag es fo r l o s t s u rp lu s , at t o rn ey ’ s fees an d co s t s un d er Tex as Bu s i n es s & C o m m e rce Co d e § 9 .6 2 5 (b ), (d ) ari s in g b y reas on o f Co u n t er-Defen d an t s fai l u re t o co m p ly wi th t h e p ro v i s i o n s o f t h e Tex as Bu s i n es s & Co m

m erce Co d e Sect i on s 9 .6 1 0 , 9 .6 1 1 , 9 .6 1 3 , 9 .6 1 6, 9

. 6 2 5 , 9 .6 2 6 et

. s eq

. i n t ak i n g p o s s es s i o n o f, co l lect i n g an d d is p o s i n g o f t h e as set s / co l l at eral s o ld t o an d rep o s s es s ed fro m Co un t er-Cl ai m an t s u n d er the APA [As s et Pu rch as e Ag reem en t ] .” [CR 3 7 2 ] (em p h as i s s u pp l i ed ).

332 d 2 75 , 2 9 8 (S.D.N.Y. 1 9 9 8 ) (“ Un i fo rm Co m m erci al Co d e.

. . . A r t i cl e 9 i s o n l y

ap p li cab l e t o s ecu red t ran s act i on s .”). 2 0

Ho wev er, n o t h i n g in t h e as s et p urch as e ag reem en t s t at es t h at i t co n s t i t u tes a

“ s ecu red t ran s act io n” (o r creat es a s ecu ri t y i n t eres t ). No r was th ere an y ev i d en ce at

t ri al t hat t h e part i es ev en i nt en d ed t he as s et p u rch as e a g reem en t to co n s t i t u t e a

“ s ecu red t ran s act i o n ” (o r i n t en d ed t h e as s et p u rch as e ag reem en t t o creat e a s ecu ri t y

i n t eres t ). Th ere is s i m

p l y n o ev i d en ce (o r i n s uffi ci en t ev i d en ce) t hat th e t ran s act i o n

at i s s u e i n t h i s cas e was a “ s ecu red tran s act i on .” 2 1 In fac t , p r i o r t o t ri al , Ch ri s an d

Bri an rep eat ed l y ad m i t ted t h at t h e as s et p u rch as e ag reem en t d o es no t creat e a s ecu ri t y

i n t eres t

. [CR 6 3 ] (“ no r do es t h e APA creat e a l eg al l y reco g n i zed s ecu ri t y i n t e res t

2 0 “ Art i cl e 9 o f t h e Un i fo rm Co m m erci al Co d e” i s s y n o n y m o us wi t h “ ch ap t er 9 of th e Tex as Bu s in es s an d Co m m erce Co d e.” S

ee No r t h Cen t

. Di s t r i bs
., In c. v. Mi n ya r d Fo od St o r es , In c. , 0 5 -1 2 -0 04 1 8 -CV, 2 0 1 4 W L 2 2 3 0 6 0 , at * 3 n .4 (Tex

. Ap p .— Dal l as J an

. 21 , 2 0 1 4, n o p e t .) (“ Art i cl e 9 o f t h e U CC h as b een ad o p t ed in Tex as as ch ap t er 9 o f t h e b u s i n es s an d co m m erce co d e.”).

2 1 Co n cl u si o n of l aw n u m b er 6 s t at es t h at t h e as set p u rch as e ag reem en t creat ed

“ a s ecu ri t y i n teres t i n co l l at eral an d s ecu red t ran s act i o n g o v ern ed b y Art i cl e 9 o f t h e Tex as U n i fo rm Co m

m erci al Co d e.” [CR 54 3 ] Tam i an d J erry ch al l en ge co n cl u s i o n
o f l aw n um

b er 6 b ecau s e th ere i s n o ev i d en c e, l eg al l y i n s u ffi ci en t ev i den ce, o r fact ual ly i n s u ffi ci en t ev id e n c e t o s u p p o rt t h i s co ncl u s io n o f l aw. In fact , as n o t ed ab o ve, Ch ri s an d Br i a n rep eat ed l y ad m it ted t h at t h e as s et p u rch as e ag reem en t d o es
n o t creat e a s ecu ri t y i nt eres t

. [CR 6 3] (“ no r d o es th e APA creat e a l eg al l y reco g n i zed

s ecu ri t y i n t eres t an d l i en i n t h e a s s e t s u n d er Art i cl e 9 of t h e Tex as Un i fo rm Co m m erci al Co de. ” ) ; [ R R v o l

. 2 p

. 1 0] (“ Th ere’ s n o s ecu ri t y i n t eres t u n d er t h e UCC.”); [RR v o l . 2 p . 5 9] (“ T h ere’ s n o reco g n i zab l e s ecu ri t y i nt eres t .”)

34an d l i en i n th e as set s u n d er A rt i cl e 9 o f t he Tex as Un ifo rm Co m m erci al Co d e.”); [RR

v o l

. 2 p

. 1 0 ] (“ T h ere’ s n o s ecu ri t y i n t eres t u n d er t he UCC.”); [ R R v o l

. 2 p

. 5 9 ]
(“ Th ere’ s n o reco g n i zab l e s ecu ri t y i n t eres t.”)

Becau s e t h e o n l y co u n t ercl ai m Ch ri s an d Bri an p l ead ed was a s t at u t o ry cl ai m

ap p li cab l e o n l y to s ecu red t ran s act i o n s

— an d t h ere w as n o s ecu red t ran s act i o n i n t h i s

cas e— t h e t ri al co u rt rev ers i b l y erred i n award i n g d am ag es (an d at t o rn ey s ’ fees

s t em m i n g fro m th o s e d am ag es ) t o Ch ri s an d Bri an

.
I I I

. ARGUMENT RELATED TO I SSUE 3 : The o nl y ba s i s fo r atto rney s ’ fees pl ea ded by the D efenda nts / Appel l ees w as Tex a s Bus i nes s a nd Co m m erce Co de s ecti o n 9 .6 2 5

. And the tri a l co urt’s judg m ent ex pres s l y a w a rded

a tto rney s ’ fees purs ua nt to tha t s ecti o n. But tha t s ecti o n do es no t pro v i de fo r a n a w a rd o f a tto rney s ’ fees

. Co ns equentl y , ev en i f the tri a l co urt w a s
co rrect in a w a rdi ng da m a g es to the Defenda nts / Appel l ees , the tri a l co urt

n e v e r t h e l e s s e r r e d i n a w a r d i n g a t t o r n e y s ’ f e e s t o t h e Defenda nts / Appel l ees .
Un d er Tex as l aw, ev en i f a p art y prev ai l s i n a l aws u i t, t h e p art y i s en t i t l ed to

reco v er at t o rn ey s ’ fees o nl y i f at t o rn ey s ’ fees are ex p res s ly al l o wed b y an ap p l i cab l e

s t at u to ry p ro v i s i o n o r co n t ract u al p ro v i s i o n

. S ee In r e Na l l e Pl a s t ics Fa mi l y Lt d.

P’s h i p , 4 0 6 S.W .3 d 1 6 8 , 1 7 2 (Tex

. 2 0 1 3) (“ Tex as fo l l ows t h e Am eri can Ru l e, wh i ch

p ro v id es t h at t h ere can b e n o reco v ery o f at t orn ey ’ s fees un l es s au t h o ri zed b y co n t ract

o r s t at u t e.”). Th e o n l y co n t ract at i s s u e i n th i s cas e is t h e as set p u rch as e ag reem en t ,

an d i t d o es n o t co n t ai n a p ro v i s i o n w h i ch p ro v i d es fo r reco v ery o f at t o rn ey s ’ fees

.

35[CR 3 4 -3 7 ] M oreo v er, Ch ri s an d Bri an d id n ot p l ead fo r at t o rn ey s ’ fees p u rs u an t to

an y p ro v i s i o n i n th e as s et p urch as e ag reem en t , [CR 3 68 -3 7 4 ] an d t h e t ri al co u rt d id

n o t award at t orn ey s ’ fees p u rs u an t t o an y p ro v i s io n i n t h e as s et p u rch as e ag reem en t

. [CR 5 3 1 -5 3 2 ]

Ch ri s a n d B r i an p l ead ed fo r at t o rn ey s ’ fees o nl y p u rs u an t t o Tex as Bu s i n es s

an d Co m m erce Co d e s ect io n 9 .6 2 5

. [CR 3 7 2 ] Becau s e Ch ri s an d Bri an ’ s p l ead i n g

s p eci fi ed t h e b as i s o n wh i ch t h ey were s eek i n g at t o rn ey s ’ fees ( i .e

. , sect i o n 9 .6 2 5 ),

t h ey can n o t reco v er at to rn ey s ’ fees p u rs u an t t o an y ot h er b as i s

. See Her i t a g e G u l f

Co a s t P r o p s ., Lt d. v. S

a nd al wo o d , 41 6 S.W .3 d 6 42 , 6 60 (Tex

. Ap p .— Ho u s t o n [1 4 th

Di s t

. ] 2 0 1 3, n o p et .) (“ wh en a p art y p lead s a s p eci fi c g ro un d fo r reco v ery o f

at t o rn ey ’ s fees , t h e p art y i s l i m i t ed t o t h at g ro un d an d can n o t reco ver at t o rn ey ’ s fees

o n an o t h er, u np l ead ed g ro u n d .”); Smi th v. Den eve , 2 85 S.W .3 d 9 0 4 , 9 1 6 (Tex

. Ap p .— Dal l as 2 00 9 , n o p et .) (s am e). An d Ch ri s an d Bri an can n o t reco v er at t o rn ey s ’

fees p u rs u an t t o t h e o n l y g ro u n d o n wh i ch t h ey p l ead ed fo r at to rn ey s ’ fees

— s ect i o n

9 .6 25

— b ecau s e s ect io n 9 .6 2 5 do es n o t p ro vi d e fo r reco v ery o f at t o rn ey s ’ fees

. T E X

.
B U S

. & C O M

. C O D E § 9 .6 25

.
Co n si s t en t wi t h Ch ri s an d Bri an ’ s p l ead i n g s , t h e t ri al co u rt ’ s ju d g m en t

ex p res s l y award ed at t o rn ey s ’ fees t o t h em p u rs u an t t o T ex as Bu s i n es s an d Co m m erce

Co d e s ect i o n 9

. 6 2 5 (b ). [CR 5 3 2 ] Bu t Ch ri s an d Bri an can n o t reco v er at t o rn ey s ’ fees

36p u rs u an t t o s ect io n 9 .6 2 5 (b ) b ecau s e s ect io n 9 .6 25 (b ) d o es n o t p ro v i d e fo r reco v ery

o f at t orn ey s ’ fees . T E X

. B U S

. & C O M

. C O D E § 9 .6 2 5 (b ).

Sect io n 9 .6 2 5 (b ) p ro v i d es t h at “ a p ers o n i s l i ab l e fo r d am ag es i n t h e am o u nt

o f an y l o s s cau sed b y a fai l u re t o co m p l y wi th th i s ch ap t er.” T E X

. B U S

. & C O M

. C O D E
§ 9 .6 2 5 (b ). In t h e Gu ex cas e, t h e Tex as Su p rem e Co urt co n si dered a p art y ’ s arg u m en t

t h at t h is “ an y

l o s s ” l an g uag e wo u l d ju s t i fy an award o f at to rn ey s ’ fees

. 2 2 Fi r s t Ci t y

Ba n k-Fa r mer

s Br a nch v. G u ex , 6 7 7 S.W .2 d 25 , 3 0 (Tex

. 1 9 8 4 ). T h e Su p rem e Co u rt
reject ed t h at arg um en t , h o l d i n g : “ If t h e l eg i s l at u re h ad i n te nde d r e c o ve r y o f at t o rn ey ’ s

fees u n d er t h i s s t a t u e , t h e y wo u l d n o do u b t h av e p ro v i d ed fo r i t.

. . . W e hav e s ai d

. . . t h at an award o f at t o rn ey ’ s fees m ay n o t b e s u p p l i ed b y i m p l i cat i o n b u t m

u s t b e

p ro v id ed fo r b y

t h e ex p res s t erm s o f t h e s t at u t e i n q u es t i o n .” Id

.
Becau s e t h e t ri al co u rt ex p res s l y award ed at to rn ey s ’ fees p u rs u an t t o st at u t o ry

l an g u ag e t h at t he Tex as Su p rem e Co u rt h as ex pres s l y h el d can n ot j u s ti fy an award o f

at t o rn ey s ’ fees , t h e t ri al co u rt erred i n award i n g at t o rn ey s ’ fees t o Ch ri s an d Bri an

.

2 2 Th e Gu ex cas e ad d res s ed t h i s l a n g u ag e i n fo rm er T ex as Bu s i n es s & Co m m erce Co d e s e c t i o n 9 .5 0 7

. Gu ex , 6 7 7 S.W .2 d at 3 0

. Th at sect i o n i s n o w
co d ifi ed as s ect io n 9.6 2 5. S ee T E X

. B U S

. & C O M

. C O D E § 9

. 6 2 5 c m t

. 1 ( s p eci fy i n g t h at t h e “ So u rce” o f s ect i o n 9 .6 2 5 i s “ Fo rm er Sect i o n 9 -5 0 7 ”).

37PRAYER

Ap p el l an t s res p ect fu l l y p ray t h at t h i s Co u rt rev ers e t h e t ri al co u rt ’ s ju d g m en t

an d rem an d fo r n ew t ri al

. Ap p el l an t s al s o p ray fo r t h ei r co st s an d fo r al l o t h er rel i ef

t o wh ich t h ey

m ay be en t i t l ed

.
Res pect fu l ly

s u bm i tt ed ,
/ s / Ch ad M . Ru b ack Ch ad M . Ru b ack St at e Bar No . 9 0 0 01 2 4 4 ch ad @ap p eal .p ro Th e Ru b ack Law Fi rm 8 1 1 7 Pres t o n Ro ad Su i t e 3 0 0 Dal l as , Tex as 7 5 2 2 5 (2 1 4 ) 5 2 2 -4 24 3 (2 1 4 ) 5 2 2 -2 19 1 fax

CERTI FI CATE OF COMPLI ANCE

I cert i fy t h at , acco rd i ng t o m

y wo rd p ro ces so r’ s wo rd -co u n t fu n ct i o n , i n t he

s ect i on s o f t h i s b ri ef co v ered b y TRAP 9 .4 (i )(1 ), t h ere are 7 ,7 1 9 wo rd s

.

/ s / Ch ad M . Ru b ack Ch ad M

. Ru b ack

38CERTI FI CATE OF SERVI CE

I cert i fy t hat , o n No v em

ber 1 2 , 20 1 5 , I serv ed a co p y of t h i s Ap p el l an t s ’ Bri ef t o t he fo l l o wi n g co u n s el fo r Ap p el l ees :

Th o m as F. Du nn 3 9 0 1 W . Pi o n eer Park way Arl i ng t o n , Tex as 7 60 1 3 / s / Ch ad M . Ru b ack Ch ad M

. Ru b ack

39CAUSE NO. 38803

TAMI DONALD, JERRY MOORE and
, SUMMIT SPRING WATER COMPANY, INC

.. Plaintiffs

VS

.
BRIAN RHONE , BMR DISTRIBUTlNG, INC., CHRIS RHONE , and RHONE WATER COMP ANY , INC

. d/b/a FROSTY'S WATER , Defendanls § § § § § § § § § § § §

FINAL JUDGMENT Filed 5n/2015 3 : 47:22 PM Nancy Y oung District C le rk Fann in County
, TX

Jenifer Ballard

IN THE DISTRICT COURT

FANNlN COUNTY, TEXAS

336 1 H JUDICIAL DISTRICT

On May 4, 2015, above.entitled and numbered cause was heard and tried before the Court. Plaint iffs, Tammi Donald, Jerry Moore and Summit Spring Water Company, Inc

. , appeared i n person and by and through their attorney of record
, Frederick C. Shelton. Defendants
, Brian Rhone
, C hris Rhone
, BMR Distributing

. Inc

. and Rhone Water Company, Inc. d/b / a Frosty's Water appeared in
person and by and through their attorney of record
, Thomas F

. Dunn

. The Plaintiffs and Defendant s by and through their attorney of record each announced ready for trial and no jury having been demanded, all questions of fact were submitted to the Court

.

After examining the pleadings, and hearing the evidence
, testimony of witnesses and arguments of counsel, the Court finds and is of the opinion that this Court has jurisdiction over the parties and subject matter of this cause and that no other court has continuing jurisdiction over thi s cause; that venue of this cause of action is proper in this Court; that all questions of fact and law have been submitted to the Court; that all persons entitled to citation were properly cited ; that the Plaintiffs should take nothing upon their claims by th.is suit; and that the Defendants upon their

co unter claim are entitled to recover from the Plaintiffs as set forth below in this judgment.

IT IS THEREFORE ORDERED by the Court that the Plaintiffs, Tammi Donald, Jerry Moore and Summit Spring Water Company, Inc ., jointly and severally, take nothing by this suit.

lT lS FURTHER ORDERED by the Court that Defendants
, Brian Rhone, Chris Rhone
, BMR Distributing
, Inc. and Rhone Water Company , Inc

. d/b/aFrosty's Water,jointly and severally. ha ve
FINAL JUDGMENT PAGE -1-and recover actual damages from and against Plaintiffs, Tammi Donald, Jerry Moore and Summit Spring Water Company, lnc.,jointly and severally, the sum ofSI,000

. 00.

IT IS FURTHER ORDERED by the Court that, pursuant to Texas Business & Commerce Code §9

. 625(b), Defendants, Brian Rhone, Chris Rhone, BMR Distributing, Inc. and Rhone Water Company, Inc

. d/b/a Frosty's Water, jointly and severally, have and recover from and against Plaintiffs, Tammi Donald, Jerry Moore and Summit Spring Water Company , lnc.
, jointly and severally, attorney's fees in the sum of$15,000

. 00 for services rendered through the trial of this case

. In the event of an appeal by Plaintiffs to the court of appeals, if the appeal is unsuccessful
, Defendants will be further entitled to $5,000.00 as a reasonable attorney's fee; in the event of an appeal by Plaintiffs to the Supreme Court of Texas , if the appeal is unsuccessful
, Defendants will
be entitled to an additional $5,000.00 as a reasonable attorney's fee.

IT LS FURTHER ORDERED that the total amount of the judgment here rendered will bear interest at the rate of five percent (5

. 00%) per annum from May4 , 2015 until paid

.

IT IS FURTHER ORDERED that:

AU costs of court spent or incurred in this cause by · Defendants are adjudged against Plaintiffs
, Tammi Donald, Jerry Moore and Summit Spring Water Company, Inc., jointly and severally

.

All writs and processes for the enforcement and collection of this judgment or the cost s of
court may issue as necessary.

This judgment finally disposes of all parties and claims and is appealable

.

All relief requested in this case and not expressly granted is denied

.

SIGNED on May 

# g , 2015.

FINAL JUDGMENT PAGE -2-APPROVED AS TO FORM :

# ~**~-====---...:;__~~-=~--=:::====---- --**  Thom as F. Dunn SBN 06253300 Dunn Law Group, P.C. 3901 W. Pioneer Parkway Arlington, Texas 76013 Telephone : (817) 459-0000 e-mail: tomdunn@dunnlawgroup.net Attorneys for Defendants

Frc le C

. Shelton SBN 18211300 Law Office of Frederick C. Shelton 5701 Wesley Greenville, TX 75402 Phone : (903) 454-1000 Email: fcs-attomcy@sbcglobal.net Attorneys for Plaintiffs

FINAL JUDGMENT PAGE-3-

# ~I / l ·: o'J 

### p--v

CAUSE NO. 38803

TAMI DONALD, JERRY MOORE and, § SUMMIT SPRING WATER COMPANY , § fNC., § Plaintiffs § §

vs

. 

### § § BRIAN RHONE, BMR DISTRIBUTING , § INC

. , CHRIS RHONE, and RHONE § WATER COMPANY, INC. d/b/a § FROSTY'S WATER, § Defendants §

# ~- IN THE DISTRICT COURT / ,, '], i{ 

### 'J**~** y

FANNIN COUNTY, TEXAS

336 TM JUDICIAL DISTRICT

FINDINGS OF FACT AND CONCLUSIONS OF LAW**~p ~**  r 

### 1 .I" 

### f

, -z_,p-1 The above-captioned cause came on for trial before the Court without a jury on May8, 2015.

All parties and their attorneys were present. After considering the pleading s, the evidence, Lhe
argument and briefs from counsel
, the Court, in response to a request from Plaintiffs, makes its findings of fact and conclusions of law as follows:

FINDINGS OF FACT
The Court , upon the preponderance of the credible evidence and testimony adduced at trial,
finds that:

1

. After Plaintiffs counsel annou nced ready for trial, Plaintifrs counsel submitted the Asset
Purchase Agreement into evidence.
2. Before Plaintiffs put on any witness testimony in support of their claims, Defendants moved
the Court for a directed verdict th at Plaintiffs take nothing by their lawsuit.
3

. Defendants premised their motion on the certification by the Texas Secretary of State that

on or about July 24, 2009, the Secretary of State ofTexas, by reason of Summit Spring Water Company, lnc.'s failure to file franchise tax returns and public information reports as required by law
, forfeited Plaintiff Summit Spring Water Company, Inc. 's charter and

FINDINGS OF FACT ANO CONCLUSIONS OF LAW PAGE-Iauthority to conduct business in the State of Texas

. 4. As of the time of trial, Summit Spring Water Company, Inc .' s charter had not been
reinstated

. 5

. Prior to granting the Defendants' motion for clirected verdict, the Court ( i) reviewed the
Plaintiffs ' Amended Original Petition, Defendants' Amended Original Answer And
Counterclaim and the Plaintiffs' previously filed motion for partial summary judgment
, and (ii) beard arguments of counsel and tes1imony from witness called by the Plaintiff to refut e the fact that Summit Spring Water Company, Inc. was the true Plaintiff in this case

. Th e
Court ' s findings of fact on this issue are set forth below.
6

. The Court ultimately granted the Defendants' motion for directed judgment.
7

. On or about March 20, 2000 , Plaintiffs Tami Donald and Jerry Moore organized Summit Springs Water Company, Inc. as a corporation under the laws of the State of Texas.
8

. Plaintiffs Tami Donald and Jerry Moore constituted all of the shareholders
, dire c tors and
officers of Summit Springs Water Company, Inc.
9

. Over the years prior to 2007, Summit Spring Water Company, Inc

. developed and grew a successful bottled water delivery business serving commercial and residential customers in
and around Fannin County and the metropolitan DFW area. l 0. On or about January 1, 2007 , Plaintiffs Tami Donald and Jerry Moore, in their capacity as shareholders, directors and officers of Summit Spring Water Company, Inc., entered into the subject Asset Purchase Agreement on behalf of Summit Spring Water Company , Inc

. as the
seller therein, and Defendants as the purchasers therein.
11

. Pursuant to the Asset Purchase Agreement , Plaintiffs conveyed and sold to Defendants all
of the material operating assets of Summit Spring Water Company , Inc. ' s bottled water
business
, including its customer list, bottles
, racks, a fork lift, truck and good will.
12

. Pursuant to the Asset Purchase Agreement, Defendants were to pay Plaintiff Summit Spring
Water Company , Inc

. the sum of $240
, 000

. 00 at the rate of$5,000.00 per month until paid
in full.
13

. During the late spring and into July 2007 , Defendants advised Plaintiffs that the y were unsatisfied with the condition of certain equipment assets purchased and that sales t o

FINDINGS OF FACT AND CONCLUSIONS OF LAW PAGE-2-purchased customers were not generating the level of income that was represented

. l 4. Defendant s requested a modification to the purchase price to be paid under the Asset
Purchase Agreement which Plaintiffs rejected

. 15

. From January 1,2007 through November 2007, Defendants paid a total of$45
, 000

. 00 under
the Asset Purchase Agreement.
16. Plaintiffs Tami Donald and Jerry Moore testified and alleged that sometime before January
1 , 2007, they liquidated Summit Spring Water Company, Inc,

. and transferred all ofits asset s
and business to them, and that it was they, in their individual capacities, who were in fact the
seller under the Asset Purchase Agreement. The Court finds this testimony and alleged state
of facts to be incredible and unsubstantiated by any proffered evidence or documents s uch

as a directors and/or shareholders resolution
, plan of liquidation
, bill of sale or tax return s

. 17

. The Plaintiffs' liquidation argument discussed in paragraph 16 abo ve is contrary to Plaintiff s

own ju diciaJ admissions
, to wit: (a) On or about September 3, 2009, Plaintiffs filed their motion for partial summary judgment in this cause

. This motion was later
withdrawn by the Plaintiffs and was never ruled upon by the Court. (b) The facts alleged in the motion
, and supported b y the sworn affidavits of Tami Donald and Jerry Moore attached to the moti o n for partial summary judgment, clearly supports the Court's conclusions
that it was Summit Spring Water Compan y, Inc. who was in fact the

owner and seller of the bottled water business to Defendant s under
the Asset Purchase Agreement. (c) The supporting sworn to affidavits of Tami Donald and Jerry Moore

were signed and submitted by them as President and Vice Pre sident
of Summit Spring Water Company, lnc

. Nowhere in the motion for partial summary judgment is it alleged that Summit Spring Water Company had liquidated and sold/assigned its assets and busines s to
Tami Donald or Jerry Moore, individually
, at any time prior to or after January 1 , 2007

.

FINDINGS OF FACT AND CONCLUSIONS OF LAW PACE -3-(d) Likewise, the Plaintiffs Amended Original Petition filed in this case
doe5not ever aJlege any facts supporting their allegation and position
that Summit Spring Water Company, Inc. had liquidated and sold/assigned its assets and business to Tami Donald or Jerry Moore , individually, at any time prior to or after January 1 , 2007

.

18

. The Asset Purchase Agreement granted the seller the right to repossess the assets soled under
the Asset Purchase Agreement in the event of a default by Defendants thereunder.
19. The Asset Purchase Agreement provided that the repossessed assets were to be sold by the
seller and the price received credited against any debt owing by Defendants under the Asset
Purchase Agreement.
20

. During August 2008 through October 2008 , Plaintiffs did in fact repossess the sold assets
still remaining in the hands of Defendants
, including the customer list, bottles, racks
, and
bottles and racks at the residence/place of business of the customer's repossessed by
Plaintiffs.

21

. All or substantially all of the repossessed assets were then sold by Plaintiffs to a Ms

. Audrey
Cooke of Aerobic Enterprises.
22

. Plaintiffs did not give Defendants any written notice before disposition of collateral as required under Tex

. Bus

. & Commerce Code §§9.610 et. seq

.. 23

. Plaintiffs did not give Defendants any written notice of explanation and calculation of deficiency as required under Tex

. Bus. & Commerce Code §9.616.
24

. Plaintiffs offered insufficient evidence as to (i) the value of the assets they repossessed from
the Defendants, and (ii) the commercial reasonableness of the price obtained and method of
sale of the repossessed assets to Audrey Cook of Aerobic Enterprises.
25

. In their Amended Answer and Counterclaim filed in these proceedings, Defendants raised
the affirmative defenses that Plaintiff Tami Donald and Jerry Moore were not proper parties

to the lawsuit ; that Plaintiffs claims for unpaid purchase price and other damages, including
attorneys fees, under the Asset Purchase Agreement were barred under Tex

. Bus

. & Com

. Code**§9.626 ~**  and that Plaintiffs were liable to Defendants for damages
, including attorneys

FINDINGS OF FACT AND CONCLUSIONS OF LAW PAGE-4-fees
, under Tex. Bus. & Com. Code §9.625.
26

. Defendants established that they had i\ccurred reasonable and necessary attorneys fees in the
defense of this case and prosecution of their own counterclaim in the amount of $30
, 000.00 , and that in the event of an unsuccessful appeal by Plaintiffs to the Court of Appeals they
would incur an additional$ l 0,000.00 of legal fees, and that in the event of an unsuccessful appeal by Plaintiffs to the Supreme Court they would incur an additional $5
, 000

. 00 of legal

fees

. 2 7. Plaintiffs raised no objection to the amount, reasonableness or necessity of the attorneys fees proved up and requested by Defendants.
28

. The Court reduced the amount of Defendants' attorneys fees to $15
, 000.00 through trial, and $5
, 000

. 00 in the event of an unsuccessful appeal by Plaintiffs to the Court of Appeals
, and

an additional $5,000.00 in the event of an unsuccessful appeal by Plaintiffs to the Supreme
Court

. 29. The above Findings of Fact are also to be deemed conclusions oflaw to the extent necessary

to support the Court ' s judgment entered in this cause

.

CONCLUSIONS OF LAW

1. Plaintiff Summit Spring Water Company, Inc. is the true seller and party in interest under the

Asset Purchase Agreement.
2

. Plaintiffs Tami Donald and Jerry Moore are the shareholders, directors and officers of
Summit Spring Water Company, Inc

. As such, they are representatives and agents acting for
and on behalf of Summit Spring Water Company, Inc.
3

. Under the Texas Business Organizations Code and applicable Texas corporate common Jaw , Tami Donald and Jerry Moore, as shareholders, directors and officers of Summit Spring
Water Company, Inc. have no direct personal ownership interest in the assets and propertie s
of the corporation (Summit Spring Water Company, Inc), including the corporation's rights
under the Asset Purchase Agreement.
4

. By reason of the Texas Secretary of State's forfeiture of Summit Spring Water Company's

FINDINGS OF FACT AND CONCLUSIONS OF LAW PAGE-5-charter and right to do business, Summit Spring Water Company, Inc. was not permitted to

a s sert affirmative claims in a court oflaw nor defend claims or defenses against it. Tex

. Tax
Code §§ 171.252 , 253

. 5

. The directors and officers of a corporation whose charter has been forfeited are per s onally
liable for all debts of the corporation that accrue after the date of forfeiture and until the corporation's charter is revived. Tex. Tax Code §171.255

. 6. Summit Spring Water Company's right under the Asset Purchase Agreement to reclaim and

repo ss ess the assets sold to Defendants constituted a security interest in collateral and
secured transaction governed by Article 9 of the Texas Uniform Commercial Code

. 7

. Plaintiffs and Summit Spring Water Company's repossession from, and subsequent sale of
the assets sold to, Defendants under the Asset Purchase Agreement constitutes a taking

po ss ession of
, collecting and disposing of the assets/collateral governed by Section s 9.610,
9

. 611

. 9

. 613, 9

. 616, 9

. 625 , 9

. 626 et. seq. of the Texas Uniform Commercial Code.
8

. Plaintiffs failed to comply with Tex

. Bus. & Com

. Code §9.610 et. seq

.. 9

. Plaintiff s failed to comply with Tex

. Bus

. & Com

. Code §9.616.
10

. All of Plaintiffs claims under the Asset Purchase Agreement , including all of their attorne ys fees and co s ts , are deemed satisfied and are unenforceable under Te x. Bus

. & C om . C ode § 9

. 626 ( a)(3) , (4).
11

. Plaintiffs have failed to meet their burden of proof under Tex

. Bus

. & Com

. Code §9. 6 2 6 ( a)(l)
, (2).
1 2. Plaintiffs are liable to Defendants under Tex. Bus

. & Com. Cod e §9

. 6 2 5(b ) fo r th e ir

re as onable and necessary attorneys fees in the amount of $15,000

. 00 throu g h trial
, and $5
, 000

. 00 in the event of an unsuccessful appeal by Plaintiffs to the Court of App e al s, and

an additional $5,000.00 in the event of an unsuccessful appeal by Plaintiffs to the Supr e me Court.
1 3. Plaintiff s are liable for liquidated damages to Defendants in the amount of $1
, 000

. 00 ($500

. 00 per violation) under Tex. Bus. & Com

. Code §§9

. 625(e)

. 14

. Plaintiffs are liable to Defendants for costs of suit and post judgment interest at 5 % per

annum

.

FINDINGS OF FACT AND CONCLUSIONS OF LAW PAGE-6-

# · -

15

. The above Conclusions of Law are also to be deemed findings of fact to the extent necessary

to support the Court's j u dgment entered in this cause.

SIGNED this 

## J**~ay** of

__

### ~--·---**'** 2015

.

JUDGE PRESIDING

FINUINGS OF FACT AND CONCLUSIONS OF LAW PAGE -7-02 / C.S / 2007 TUE 10: 1

. B FAI FES-6-200 7 09:01**FR0/' 1:** **SPRl~1115E** WATER**A8SETPUftCHASEAG~21!M~NT** THIS ASSET PURCHASE AGREEMENT la made this 1-. day of January, 20 07. by an c between Tlilm\ Donald and Jerry Moore. 8* lndtvfduatll twreaftar ,.,_,,.ed to ae Seller. a n d B rian Rhone of BMR Dfstrtbutfng and Chrle Rhone a11 lndM<fuals he1'9tn referred to as BLJyer

. WHEREAS, Buyer daelrea to purchase from Sellar. and Seller des.Ires to s<!ll to 8uye r

. a ll Seller's rights, ttUe and lnterect, tf any, In and to certain aeeote on the terme described be l o w

. NOW, THEREFORE, the parties agree as folfowa:

1. Preamble ; PreRmlnary**~cltala .**  The preamble and preYmlnary recltala set forth above are by this ref&f"ence lncorp aretcd in and made a part of this Agreement

. 2

. Purchase of**~ta.** Subject to the provlaioms of thla Agn:tement, Buyer iagreee to purcha•e, end Selle r agr ees to sell, all Selle!'• rlghta

. title and Interest, If any, In and \o the Purc:ha.ed Assets , as defined i n this peragmph. Tha purchase price for the Purch-ed Ae9alt. shall be $240,000 ( '"Purchas-a Price

.. )

. MPurcha88d Assets" 11'\Cfude waler eaJee route with approxlmetely 240 customers , 20 00 GMC water delivery**tru~.** water bottnng equtpment, 2001 Chevrolet van, forklift
, rac k s. b ott l es

. and other m l seellanaous Inventory

.

3. Payment of Purohaa• Prlce. Buyer shall deJlver ta Seiter S5.000 par month begihntng on January 1, 2007 and payable o n the 1• 1 of every month until pureha9e price of $240,000 \s paid In full

. At the time of payoff
, tit l e to truck

. van and equipment wtll be given to buy«.**P~nt.** eheD be made to : Tami Donald, 179 St Joseph Ave, Long Beach, CA 90803 unleaa otherwise noti fie d by Sel l er

.
4. Assumption ol Llabllttl••·

At Closlng Buyer shall aaauma and agree 1D p•rform A9 appropriate onl y the follo w i ng licibilit l ei; and obllgeUona (the "Aasumed Llabllltlea"):
All obligations under bottled water cuatomar purchase orders ; P

. 1

Except fot' the Aaaumed LiabUltlaa, Buyer la not aasumlng, nor shall It I n any wa y b e liable or responsible for, any llablllti.s
, obHgaGons or debts of Seller
, whathe.- ac crued, abs olute
, co"ltlngenl or otheiwise, anslng bofons or after the Closing

. 5

. Covenants of Seller

. Seller hereby covenant'S and egreea with Buyer that :

a. Until the Closing Seller &hell uso Its beet efforts to mainta in it s cur r ent

v

......... . ' ' " • r**"" ~**  "'

..**EE~6-2007** 09: 01 FRC111 SPfUtJ ' ' <Jl.J5E loFITER**~** 

### ._

relatlonshlpe wtth suppliora, customera a

. nd others having business relations wit h Se ll e r in connection with 1he Pl.lrcha&ad Aaets

. b

. Un111 the Closing, mccept as mey b• nrat approved In wtltlng by 6uyer or ae is Olherwiae permm.d or contemplated by thle AQreement. 8e&&or shall conduct It's -bualnesa and aft tra"81lQUone wtlh Nepeet t.o ttw**~** Aaeeta. only In the usua l and ordlnary cou,... of buslnaas oonalalent wfth Seier'• peat practice..

c

. UntJl the Closlng, seller ahaU make no sale of assets other then In the ordinary courae of Selllltf'• past practice

. 6. Closing

. At the Ck:>mr\g, Sel&er •hall deliver the PuroJ,..ed AaMtta to Buyer and shall deliver the followtng dooumenta lo Buyer.

i. An Asset Purohe8e Agreement
II

. Ust of Aocounta:
fl. list of Inventory;
Ill. such other doc;um.nta aa may b& re.-onebly rGquested by Purchaser in oonneodon wtlh the**con8U~** of the tnlnsac;tlans contemplated by thla Agremment.
b

. At Cloaing Buy.r &hall deHY&r to SaRer 1h• following document.a:
I. executed c.ountarparta of the Asset Purohaae Agreement
11. auoh other dooumenta

.. may be 1'91UC>nably requested by Seller In conriec:aan with the oonaummetion of the tnsneactions. contemplated by thla AlJreament.
7. Delivery and Condttkm of the Purohased Aaeeta. P. 2

a. lmmedJatety upon oomptetlon of the CloaJng. Seier shall be deemed to have fully end complet.ly tnanafwred**to~** an hie rtghia, tfUe and interest, If •ny, in. as well as poueaaion. OU$tody and cordrnl of, the Purduned Aaete

. Sehr ehaU not be ll eble or responsible for any llablltiea or oblgadone of any kind or nature whatsoever arising out of
, under, or Niat.d lo the Purchaaed Aeaeta from and after the Closing

. b

.**Bu~r** egreee that It le**~g** and eh•ll take posaeeafon of the Purchase d As.els In their A:s IS. WHERE IS condition**and~acknowCedgee** 1hat It has previousl y been gl\lan the opportunity to encl hu conducied such lnveetlgatlons and i nspections of the Pt.rehaaed Anels •• It t\aa deemltd naoeeeary or appropriate for the purposes of this Agreement.

c. EXCEPT A:s EXPRESSLY STATED IN THIS AGR'EEMENT, SELLER DOES NOT MAKE ANY EXPRESS OR fMPLIED REPRESENTATIONS. STATEMENTS
, WARRANTIES, OR CONDmONS OF ANY KIND OR NATURE WHATSOEVER CONCERNING THE PURCHASED ASSETS, INCLUDING (WrTHOVT UMmNG THE GENERALrrY OF THE FOREGOlNG) ANY WARRANTIES REGARDING THE

2._,,TO : 12l.4638503S

OWNERSHIP

. CONDITION
, QUANTITY A.ND/OR QUALITY OF AN Y OR ALL OF TH:: PURCHASED ASSETS AND ANY AND ALL IMPLIED WARRAN TIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE ARE DISCLAIMED.

8. Conditions Precedent to Closlng.
Th e performance by Sellar and Bliyer of thaJr rupeettve obllgatlons under th is Agree me n t 1 s subject to the condltiOn te.t on the**~** o.t. no ault. adton or other proceed i ng shall be pending before any oourt or govemmentat or ntgulatory authority which eeeke to restra i n o r prohibit or to obtain damagea or other relief In connection with this Agreement or !'h e consummation of the 1ranaecUona contemplahtd by this Agreement

e

. Default

.
a. tf Buyer falls to mak• the requlntd payments as listed above or otherwise defaults under thJs Agreement, then Seller shall have the right to reclaim assets and b e relmbureed for any monies owed

. 10. I ndemnity. Buyer shall indemnify, defend and hokf SeU•r harmloea from and agelnst any and a ll l oss©s

. llablllliea, de.mag-. C08tll and Oblgatlona (or acaona or dalma In reapect thereof) (including reasonable counael t.ea), which &eller may euffer or lnour arieing out of or based upon :

a. the braach of any repreaant!ltlon, werranty, oovenant or agr ee men t of Buyer contained In thl8 Agraement;

· p

. the Aaiumed LlabllHle&; end

c. the operetion of thlt**Buaine•~** and ttee use of any of the Purchas ed Asset s afte r the Cloalng

. 11. Broker•

. Buyer and Seller each warrants to the other that It ha& nat engaged, con se n ted to. o • authorized any brour
, inv..iment banker, Ol' other third party to ect on Its behal f, d i r eotly or l nd 'ire ctfy
, aa e broker or finder Jn oonnectlon wtth th• ttanaactlona contemplat ed by thi s Agreement end no such third party la entttted to .ny f.e or**eom~aatlon** In connection wit h t hi s Agreement or th& transactfone contomplated h

. ereby by nMlaon of any acHon of It

. 12. Amendment end Modification.
T h is Agreement may be amended.**modif~** or supplemented only by writt en agreemen t of Buyer and Seller

. 13. Severablllty

. My provision of thl• Agreement that ehall be prohibited or unenforceable shall be deem erJ Ineffective to the extent of such prohlbWon or unenforceablUty without fnvalldating the r emaining pro visions he reof.

3 14J**00 '.l/OO~** 

F>. 3,. 02 / 0 e.' 2 00 7 TUB 10: 11:1 · i-

· ..Ll. FEB-6- 2007 09: 02**FROM:SPRI~** loi=tTER 91113S1;1f'M

14. Governing Law.
ThtS Agreement ahaU be governed by and canslrued In accordance Wfth the laws of the S tate of Texa s.
15. Counterparts. P .4

This Agreement may be exaouted In one or- rnc:m1 oountacpatts al of which when tak en togethef' constitute one and the .-me lnatrumente. A aigned counterpart le ea bind i n g a s an o ri gin a l
16

. Headings
, Exhibits

. The heedfngs waed In Ulla**Ag~.,..** for c;ionw..,tanoe onlY and ahaU not be used to lim it or construe the cont.ma of At'Y of the ..a8otie of 1hls Agrwnent. All lettered E x hibits are ettaohed to and by 1tde refeAilnc» ro9de a JXlrl of tt\18 Agreement..
17.**Blndl~~** EiffeGt. This Agreement ahall be btndlng upon and Inure tD the benefit of 1he partie s he r e to, th eir &UQCeSSOnl and mlgnS.
IN WITNESS WHllRl!OF
, the pmtiac handD have e>ceetdad trlls Agreement a s of the date and year flnrt above wrftl9n..

4§ 9.101. Short Title, TX BUS & COM § 9.101

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1 Vernon's Texas Statutes and Codes Annotated Business and Commerce Code (Refs & Annos) Title 1. Uniform Commercial Code (Refs & Annos) Chapter 9. Secured Transactions (Refs & Annos) Subchapter A. Short Title, Definitions, and General Concepts
V.T.C.A., Bus. & C. § 9.101
§ 9.101. Short Title
Effective: July 1, 2001 Currentness

This chapter may be cited as Uniform Commercial Code--Secured Transactions.

Credits Acts 1967, 60th Leg., p. 2343, ch. 785, § 1. Amended by Acts 1973, 63rd Leg., p. 999, ch. 400, § 5; Acts 1999, 76th Leg., ch. 414, § 1.01, eff. July 1, 2001

.

Editors' Notes

UNIFORM COMMERCIAL CODE COMMENT
2015 Electronic Update

1. Source. This Article supersedes former Uniform Commercial Code (UCC) Article 9. As did its predecessor, it provides a comprehensive scheme for the regulation of security interests in personal property and fixtures. For the most part this Article follows the general approach and retains much of the terminology of former Article 9. In addition to describing many aspects of the operation and interpretation of this Article, these Comments explain the material changes that this Article makes to former Article 9. Former Article 9 superseded the wide variety of pre-UCC security devices. Unlike the Comments to former Article 9, however, these Comments dwell very little on the pre-UCC state of the law. For that reason, the Comments to former Article 9 will remain of substantial historical value and interest. They also will remain useful in understanding the background and general conceptual approach of this Article.

Citations to “Bankruptcy Code Section ____” in these Comments are to Title 11 of the United States Code as in effect on July 1, 2010.

2. Background and History. In 1990, the Permanent Editorial Board for the UCC with the support of its sponsors, The American Law Institute and the National Conference of Commissioners on Uniform State Laws, established a committee to study Article 9 of the UCC. The study committee issued its report as of December 1, 1992, recommending the creation of a drafting committee for the revision of Article 9 and also recommending numerous specific changes to Article 9. Organized in 1993, a drafting committee met fifteen times from 1993 to 1998. This Article was approved by its sponsors in 1998. This Article was conformed to revised Article 1 in 2001 and to amendments to Article 7 in 2003. The sponsors approved amendments to selected sections of this Article in 2010.

3. Reorganization and Renumbering; Captions; Style. This Article reflects a substantial reorganization of former Article 9 and renumbering of most sections. New Part 4 deals with several aspects of third-party rights and duties that are unrelated to§ 9.101. Short Title, TX BUS & COM § 9.101

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2 perfection and priority. Some of these were covered by Part 3 of former Article 9. Part 5 deals with filing (covered by former Part 4) and Part 6 deals with default and enforcement (covered by former Part 5). Appendix I contains conforming revisions to other articles of the UCC, and Appendix II contains model provisions for production-money priority.

This Article also includes headings for the subsections as an aid to readers. Unlike section captions, which are part of the UCC, see Section 1-107, subsection headings are not a part of the official text itself and have not been approved by the sponsors. Each jurisdiction in which this Article is introduced may consider whether to adopt the headings as a part of the statute and whether to adopt a provision clarifying the effect, if any, to be given to the headings. This Article also has been conformed to current style conventions.

4. Summary of Revisions. Following is a brief summary of some of the more significant revisions of Article 9 that are included in the 1998 revision of this Article.

a. Scope of Article 9. This Article expands the scope of Article 9 in several respects.

Deposit accounts. Section 9-109 includes within this Article's scope deposit accounts as original collateral, except in consumer transactions. Former Article 9 dealt with deposit accounts only as proceeds of other collateral.

Sales of payment intangibles and promissory notes. Section 9-109 also includes within the scope of this Article most sales of “payment intangibles” (defined in Section 9-102 as general intangibles under which an account debtor's principal obligation is monetary) and “promissory notes” (also defined in Section 9-102). Former Article 9 included sales of accounts and chattel paper, but not sales of payment intangibles or promissory notes. In its inclusion of sales of payment intangibles and promissory notes, this Article continues the drafting convention found in former Article 9; it provides that the sale of accounts, chattel paper, payment intangibles, or promissory notes creates a “security interest.” The definition of “account” in Section 9-102 also has been expanded to include various rights to payment that were general intangibles under former Article 9.

Health-care-insurance receivables. Section 9-109 narrows Article 9's exclusion of transfers of interests in insurance policies by carving out of the exclusion “health-care-insurance receivables” (defined in Section 9-102). A health-care-insurance receivable is included within the definition of “account” in Section 9-102.

Nonpossessory statutory agricultural liens. Section 9-109 also brings nonpossessory statutory agricultural liens within the scope of Article 9.

Consignments. Section 9-109 provides that “true” consignments-bailments for the purpose of sale by the bailee-are security interests covered by Article 9, with certain exceptions. See Section 9-102 (defining “consignment”). Currently, many consignments are subject to Article 9's filing requirements by operation of former Section 2-326.

Supporting obligations and property securing rights to payment. This Article also addresses explicitly (i) obligations, such as guaranties and letters of credit, that support payment or performance of collateral such as accounts, chattel paper, and payment intangibles, and (ii) any property (including real property) that secures a right to payment or performance that is subject to an Article 9 security interest. See Sections 9-203, 9-308.

Commercial tort claims. Section 9-109 expands the scope of Article 9 to include the assignment of commercial tort claims by narrowing the exclusion of tort claims generally. However, this Article continues to exclude tort claims for bodily injury and other non-business tort claims of a natural person. See Section 9-102 (defining “commercial tort claim”).

Transfers by States and governmental units of States. Section 9-109 narrows the exclusion of transfers by States and their governmental units. It excludes only transfers covered by another statute (other than a statute generally applicable to security interests) to the extent the statute governs the creation, perfection, priority, or enforcement of security interests.§ 9.101. Short Title, TX BUS & COM § 9.101

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 3 Nonassignable general intangibles, promissory notes, health-care-insurance receivables, and letter-of-credit rights. This Article enables a security interest to attach to letter-of-credit rights, health-care-insurance receivables, promissory notes, and general intangibles, including contracts, permits, licenses, and franchises, notwithstanding a contractual or statutory prohibition against or limitation on assignment. This Article explicitly protects third parties against any adverse effect of the creation or attempted enforcement of the security interest. See Sections 9-408, 9-409.

Subject to Sections 9-408 and 9-409 and two other exceptions (Sections 9-406, concerning accounts, chattel paper, and payment intangibles, and 9-407, concerning interests in leased goods), Section 9-401 establishes a baseline rule that the inclusion of transactions and collateral within the scope of Article 9 has no effect on non-Article 9 law dealing with the alienability or inalienability of property. For example, if a commercial tort claim is nonassignable under other applicable law, the fact that a security interest in the claim is within the scope of Article 9 does not override the other applicable law's effective prohibition of assignment.

b. Duties of Secured Party. This Article provides for expanded duties of secured parties.

Release of control. Section 9-208 imposes upon a secured party having control of a deposit account, investment property, or a letter-of-credit right the duty to release control when there is no secured obligation and no commitment to give value. Section 9-209 contains analogous provisions when an account debtor has been notified to pay a secured party.

Information. Section 9-210 expands a secured party's duties to provide the debtor with information concerning collateral and the obligations that it secures.

Default and enforcement. Part 6 also includes some additional duties of secured parties in connection with default and enforcement. See, e.g., Section 9-616 (duty to explain calculation of deficiency or surplus in a consumer-goods transaction).

c. Choice of Law. The choice-of-law rules for the law governing perfection, the effect of perfection or nonperfection, and priority are found in Part 3, Subpart 1 (Sections 9-301 through 9-307). See also Section 9-316.

Where to file: Location of debtor. This Article changes the choice-of-law rule governing perfection (i.e., where to file) for most collateral to the law of the jurisdiction where the debtor is located. See Section 9-301. Under former Article 9, the jurisdiction of the debtor's location governed only perfection and priority of a security interest in accounts, general intangibles, mobile goods, and, for purposes of perfection by filing, chattel paper and investment property.

Determining debtor's location. As a baseline rule, Section 9-307 follows former Section 9-103, under which the location of the debtor is the debtor's place of business (or chief executive office, if the debtor has more than one place of business). Section 9-307 contains three major exceptions. First, a “registered organization,” such as a corporation or limited liability company, is located in the State under whose law the debtor is organized, e.g., a corporate debtor's State of incorporation. Second, an individual debtor is located at his or her principal residence. Third, there are special rules for determining the location of the United States and registered organizations organized under the law of the United States.

Location of non-U.S. debtors. If, applying the foregoing rules, a debtor is located in a jurisdiction whose law does not require public notice as a condition of perfection of a nonpossessory security interest, the entity is deemed located in the District of Columbia. See Section 9-307. Thus, to the extent that this Article applies to non-U.S. debtors, perfection could be accomplished in many cases by a domestic filing.

Priority. For tangible collateral such as goods and instruments, Section 9-301 provides that the law applicable to priority and the effect of perfection or nonperfection will remain the law of the jurisdiction where the collateral is located, as under former§ 9.101. Short Title, TX BUS & COM § 9.101

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 4 Section 9-103 (but without the confusing “last event” test). For intangible collateral, such as accounts, the applicable law for priority will be that of the jurisdiction in which the debtor is located.

Possessory security interests; agricultural liens. Perfection, the effect of perfection or nonperfection, and priority of a possessory security interest or an agricultural lien are governed by the law of the jurisdiction where the collateral subject to the security interest or lien is located. See Sections 9-301, 9-302.

Goods covered by certificates of title; deposit accounts; letter-of-credit rights; investment property. This Article includes several refinements to the treatment of choice-of-law matters for goods covered by certificates of title. See Section 9-303. It also provides special choice-of-law rules, similar to those for investment property under current Articles 8 and 9, for deposit accounts (Section 9-304), investment property (Section 9-305), and letter-of-credit rights (Section 9-306).

Change in applicable law. Section 9-316 addresses perfection following a change in applicable law.

d. Perfection. The rules governing perfection of security interests and agricultural liens are found in Part 3, Subpart 2 (Sections 9-308 through 9-316).

Deposit accounts; letter-of-credit rights. With certain exceptions, this Article provides that a security interest in a deposit account or a letter-of-credit right may be perfected only by the secured party's acquiring “control” of the deposit account or letter-of-credit right. See Sections 9-312, 9-314. Under Section 9-104, a secured party has “control” of a deposit account when, with the consent of the debtor, the secured party obtains the depositary bank's agreement to act on the secured party's instructions (including when the secured party becomes the account holder) or when the secured party is itself the depositary bank. The control requirements are patterned on Section 8-106, which specifies the requirements for control of investment property. Under Section 9-107, “control” of a letter-of-credit right occurs when the issuer or nominated person consents to an assignment of proceeds under Section 5-114.

Electronic chattel paper. Section 9-102 includes a new defined term: “electronic chattel paper.” Electronic chattel paper is a record or records consisting of information stored in an electronic medium (i.e., it is not written). Perfection of a security interest in electronic chattel paper may be by control or filing. See Sections 9-105 ( sui generis definition of control of electronic chattel paper), 9-312 (perfection by filing), 9-314 (perfection by control).

Investment property. The perfection requirements for “investment property” (defined in Section 9-102), including perfection by control under Section 9-106, remain substantially unchanged. However, a new provision in Section 9-314 is designed to ensure that a secured party retains control in “repledge” transactions that are typical in the securities markets.

Instruments, agricultural liens, and commercial tort claims. This Article expands the types of collateral in which a security interest may be perfected by filing to include instruments. See Section 9-312. Agricultural liens and security interests in commercial tort claims also are perfected by filing, under this Article. See Sections 9-308, 9-310.

Sales of payment intangibles and promissory notes. Although former Article 9 covered the outright sale of accounts and chattel paper, sales of most other types of receivables also are financing transactions to which Article 9 should apply. Accordingly, Section 9-102 expands the definition of “account” to include many types of receivables (including “health-care-insurance receivables,” defined in Section 9-102) that former Article 9 classified as “general intangibles.” It thereby subjects to Article 9's filing system sales of more types of receivables than did former Article 9. Certain sales of payment intangibles-primarily bank loan participation transactions-should not be subject to the Article 9 filing rules. These transactions fall in a residual category of collateral, “payment intangibles” (general intangibles under which the account debtor's principal obligation is monetary), the sale of which is exempt from the filing requirements of Article 9. See Sections 9-102, 9-109, 9-309 (perfection upon attachment). The perfection rules for sales of promissory notes are the same as those for sales of payment intangibles.§ 9.101. Short Title, TX BUS & COM § 9.101

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 5 Possessory security interests. Several provisions of this Article address aspects of security interests involving a secured party or a third party who is in possession of the collateral. In particular, Section 9-313 resolves a number of uncertainties under former Section 9-305. It provides that a security interest in collateral in the possession of a third party is perfected when the third party acknowledges in an authenticated record that it holds for the secured party's benefit. Section 9-313 also provides that a third party need not so acknowledge and that its acknowledgment does not impose any duties on it, unless it otherwise agrees. A special rule in Section 9-313 provides that if a secured party already is in possession of collateral, its security interest remains perfected by possession if it delivers the collateral to a third party and the collateral is accompanied by instructions to hold it for the secured party or to redeliver it to the secured party. Section 9-313 also clarifies the limited circumstances under which a security interest in goods covered by a certificate of title may be perfected by the secured party's taking possession.

Automatic perfection. Section 9-309 lists various types of security interests as to which no public-notice step is required for perfection (e.g., purchase-money security interests in consumer goods other than automobiles). This automatic perfection also extends to a transfer of a health-care-insurance receivable to a health-care provider. Those transfers normally will be made by natural persons who receive health-care services; there is little value in requiring filing for perfection in that context. Automatic perfection also applies to security interests created by sales of payment intangibles and promissory notes. Section 9-308 provides that a perfected security interest in collateral supported by a “supporting obligation” (such as an account supported by a guaranty) also is a perfected security interest in the supporting obligation, and that a perfected security interest in an obligation secured by a security interest or lien on property (e.g., a real-property mortgage) also is a perfected security interest in the security interest or lien.

e. Priority; Special Rules for Banks and Deposit Accounts. The rules governing priority of security interests and agricultural liens are found in Part 3, Subpart 3 (Sections 9-317 through 9-342). This Article includes several new priority rules and some special rules relating to banks and deposit accounts (Sections 9-340 through 9-342).

Purchase-money security interests: General; consumer-goods transactions; inventory. Section 9-103 substantially rewrites the definition of purchase-money security interest (PMSI) (although the term is not formally “defined”). The substantive changes, however, apply only to non-consumer-goods transactions. (Consumer transactions and consumer-goods transactions are discussed below in Comment 4.j.) For non-consumer-goods transactions, Section 9-103 makes clear that a security interest in collateral may be (to some extent) both a PMSI as well as a non-PMSI, in accord with the “dual status” rule applied by some courts under former Article 9 (thereby rejecting the “transformation” rule). The definition provides an even broader conception of a PMSI in inventory, yielding a result that accords with private agreements entered into in response to the uncertainty under former Article 9. It also treats consignments as purchase-money security interests in inventory. Section 9-324 revises the PMSI priority rules, but for the most part without material change in substance. Section 9-324 also clarifies the priority rules for competing PMSIs in the same collateral.

Purchase-money security interests in livestock; agricultural liens. Section 9-324 provides a special PMSI priority, similar to the inventory PMSI priority rule, for livestock. Section 9-322 (which contains the baseline first-to-file-or-perfect priority rule) also recognizes special non-Article 9 priority rules for agricultural liens, which can override the baseline first-in-time rule.

Purchase-money security interests in software. Section 9-324 contains a new priority rule for a software purchase-money security interest.

Investment property. The priority rules for investment property are substantially similar to the priority rules found in former Section 9-115, which was added in conjunction with the 1994 revisions to UCC Article 8. Under Section 9-328, if a secured party has control of investment property (Sections 8-106, 9-106), its security interest is senior to a security interest perfected in another manner (e.g., by filing). Also under Section 9-328, security interests perfected by control generally rank according to the time that control is obtained or, in the case of a security entitlement or a commodity contract carried in a commodity account, the time when the control arrangement is entered into. This is a change from former Section 9-115, under which the security interests ranked equally. However, as between a securities intermediary's security interest in a security entitlement that§ 9.101. Short Title, TX BUS & COM § 9.101

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 6 it maintains for the debtor and a security interest held by another secured party, the securities intermediary's security interest is senior.

Deposit accounts. This Article's priority rules applicable to deposit accounts are found in Section 9-327. They are patterned on and are similar to those for investment property in former Section 9-115 and Section 9-328 of this Article. Under Section 9-327, if a secured party has control of a deposit account, its security interest is senior to a security interest perfected in another manner (i.e., as cash proceeds). Also under Section 9-327, security interests perfected by control rank according to the time that control is obtained, but as between a depositary bank's security interest and one held by another secured party, the depositary bank's security interest is senior. A corresponding rule in Section 9-340 makes a depositary bank's right of set-off generally senior to a security interest held by another secured party. However, if the other secured party becomes the depositary bank's customer with respect to the deposit account, then its security interest is senior to the depositary bank's security interest and right of set-off. Sections 9-327, 9-340.

Letter-of-credit rights. The priority rules for security interests in letter-of-credit rights are found in Section 9-329. They are somewhat analogous to those for deposit accounts. A security interest perfected by control has priority over one perfected in another manner (i.e., as a supporting obligation for the collateral in which a security interest is perfected). Security interests in a letter-of-credit right perfected by control rank according to the time that control is obtained. However, the rights of a transferee beneficiary or a nominated person are independent and superior to the extent provided in Section 5-114. See Section 9-109(c)(4).

Chattel paper and instruments. Section 9-330 is the successor to former Section 9-308. As under former Section 9-308, differing priority rules apply to purchasers of chattel paper who give new value and take possession (or, in the case of electronic chattel paper, obtain control) of the collateral depending on whether a conflicting security interest in the collateral is claimed merely as proceeds. The principal change relates to the role of knowledge and the effect of an indication of a previous assignment of the collateral. Section 9-330 also affords priority to purchasers of instruments who take possession in good faith and without knowledge that the purchase violates the rights of the competing secured party. In addition, to qualify for priority, purchasers of chattel paper, but not of instruments, must purchase in the ordinary course of business.

Proceeds. Section 9-322 contains new priority rules that clarify when a special priority of a security interest in collateral continues or does not continue with respect to proceeds of the collateral. Other refinements to the priority rules for proceeds are included in Sections 9-324 (purchase-money security interest priority) and 9-330 (priority of certain purchasers of chattel paper and instruments).

Miscellaneous priority provisions. This Article also includes (i) clarifications of selected good-faith-purchase and similar issues (Sections 9-317, 9-331); (ii) new priority rules to deal with the “double debtor” problem arising when a debtor creates a security interest in collateral acquired by the debtor subject to a security interest created by another person (Section 9-325); (iii) new priority rules to deal with the problems created when a change in corporate structure or the like results in a new entity that has become bound by the original debtor's after-acquired property agreement (Section 9-326); (iv) a provision enabling most transferees of funds from a deposit account or money to take free of a security interest (Section 9-332); (v) substantially rewritten and refined priority rules dealing with accessions and commingled goods (Sections 9-335, 9-336); (vi) revised priority rules for security interests in goods covered by a certificate of title (Section 9-337); and (vii) provisions designed to ensure that security interests in deposit accounts will not extend to most transferees of funds on deposit or payees from deposit accounts and will not otherwise “clog” the payments system (Sections 9-341, 9-342).

Model provisions relating to production-money security interests. Appendix II to this Article contains model definitions and priority rules relating to “production-money security interests” held by secured parties who give new value used in the production of crops. Because no consensus emerged on the wisdom of these provisions during the drafting process, the sponsors make no recommendation on whether these model provisions should be enacted.§ 9.101. Short Title, TX BUS & COM § 9.101

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 7 f. Proceeds. Section 9-102 contains an expanded definition of “proceeds” of collateral which includes additional rights and property that arise out of collateral, such as distributions on account of collateral and claims arising out of the loss or nonconformity of, defects in, or damage to collateral. The term also includes collections on account of “supporting obligations,” such as guarantees.

g. Part 4: Additional Provisions Relating to Third-Party Rights. New Part 4 contains several provisions relating to the relationships between certain third parties and the parties to secured transactions. It contains new Sections 9-401 (replacing former Section 9-311) (alienability of debtor's rights), 9-402 (replacing former Section 9-317) (secured party not obligated on debtor's contracts), 9-403 (replacing former Section 9-206) (agreement not to assert defenses against assignee), 9-404, 9-405, and 9-406 (replacing former Section 9-318) (rights acquired by assignee, modification of assigned contract, discharge of account debtor, restrictions on assignment of account, chattel paper, promissory note, or payment intangible ineffective), 9-407 (replacing some provisions of former Section 2A-303) (restrictions on creation or enforcement of security interest in leasehold interest or lessor's residual interest ineffective). It also contains new Sections 9-408 (restrictions on assignment of promissory notes, health-care-insurance receivables ineffective, and certain general intangibles ineffective) and 9-409 (restrictions on assignment of letter-of-credit rights ineffective), which are discussed above.

h. Filing. Part 5 (formerly Part 4) of Article 9 has been substantially rewritten to simplify the statutory text and to deal with numerous problems of interpretation and implementation that have arisen over the years.

Medium-neutrality. This Article is “medium-neutral”; that is, it makes clear that parties may file and otherwise communicate with a filing office by means of records communicated and stored in media other than on paper.

Identity of person who files a record; authorization. Part 5 is largely indifferent as to the person who effects a filing. Instead, it addresses whose authorization is necessary for a person to file a record with a filing office. The filing scheme does not contemplate that the identity of a “filer” will be a part of the searchable records. This approach is consistent with, and a necessary aspect of, eliminating signatures or other evidence of authorization from the system (except to the extent that filing offices may choose to employ authentication procedures in connection with electronic communications). As long as the appropriate person authorizes the filing, or, in the case of a termination statement, the debtor is entitled to the termination, it is largely insignificant whether the secured party or another person files any given record.

Section 9-509 collects in one place most of the rules that determine when a record may be filed. In general, the debtor's authorization is required for the filing of an initial financing statement or an amendment that adds collateral. With one further exception, a secured party of record's authorization is required for the filing of other amendments. The exception arises if a secured party has failed to provide a termination statement that is required because there is no outstanding secured obligation or commitment to give value. In that situation, a debtor is authorized to file a termination statement indicating that it has been filed by the debtor.

Financing statement formal requisites. The formal requisites for a financing statement are set out in Section 9-502. A financing statement must provide the name of the debtor and the secured party and an indication of the collateral that it covers. Sections 9-503 and 9-506 address the sufficiency of a name provided on a financing statement and clarify when a debtor's name is correct and when an incorrect name is insufficient. Section 9-504 addresses the indication of collateral covered. Under Section 9-504, a super-generic description (e.g.,“all assets” or “all personal property”) in a financing statement is a sufficient indication of the collateral. (Note, however, that a super-generic description is inadequate for purposes of a security agreement. See Sections 9-108, 9-203.) To facilitate electronic filing, this Article does not require that the debtor's signature or other authorization appear on a financing statement. Instead, it prohibits the filing of unauthorized financing statements and imposes liability upon those who violate the prohibition. See Sections 9-509, 9-626.

Filing-office operations. Part 5 contains several provisions governing filing operations. First, it prohibits the filing office from rejecting an initial financing statement or other record for a reason other than one of the few that are specified. See Sections§ 9.101. Short Title, TX BUS & COM § 9.101

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 8 9-520, 9-516. Second, the filing office is obliged to link all subsequent records (e.g., assignments, continuation statements, etc.) to the initial financing statement to which they relate. See Section 9-519. Third, the filing office may delete a financing statement and related records from the files no earlier than one year after lapse (lapse normally is five years after the filing date), and then only if a continuation statement has not been filed. See Sections 9-515, 9-519, 9-522. Thus, a financing statement and related records would be discovered by a search of the files even after the filing of a termination statement. This approach helps eliminate filing-office discretion and also eases problems associated with multiple secured parties and multiple partial assignments. Fourth, Part 5 mandates performance standards for filing offices. See Sections 9-519, 9-520, 9-523. Fifth, it provides for the promulgation of filing-office rules to deal with details best left out of the statute and requires the filing office to submit periodic reports. See Sections 9-526, 9-527.

Defaulting or missing secured parties and fraudulent filings. In some areas of the country, serious problems have arisen from fraudulent financing statements that are filed against public officials and other persons. This Article addresses the fraud problem by providing the opportunity for a debtor to file a termination statement when a secured party wrongfully refuses or fails to provide a termination statement. See Section 9-509. This opportunity also addresses the problem of secured parties that simply disappear through mergers or liquidations. In addition, Section 9-518 affords a statutory method by which a debtor who believes that a filed record is inaccurate or was wrongfully filed may indicate that fact in the files, albeit without affecting the efficacy, if any, of the challenged record.

Extended period of effectiveness for certain financing statements. Section 9-515 contains an exception to the usual rule that financing statements are effective for five years unless a continuation statement is filed to continue the effectiveness for another five years. Under that section, an initial financing statement filed in connection with a “public-finance transaction” or a “manufactured-home transaction” (terms defined in Section 9-102) is effective for 30 years.

National form of financing statement and related forms. Section 9-521 provides for uniform, national written forms of financing statements and related written records that must be accepted by a filing office that accepts written records.

i. Default and Enforcement. Part 6 of Article 9 extensively revises former Part 5. Provisions relating to enforcement of consumer-goods transactions and consumer transactions are discussed in Comment 4.j.

Debtor, secondary obligor; waiver. Section 9-602 clarifies the identity of persons who have rights and persons to whom a secured party owes specified duties under Part 6. Under that section, the rights and duties are enjoyed by and run to the “debtor,” defined in Section 9-102 to mean any person with a non-lien property interest in collateral, and to any “obligor.” However, with one exception (Section 9-616, as it relates to a consumer obligor), the rights and duties concerned affect non-debtor obligors only if they are “secondary obligors.” “Secondary obligor” is defined in Section 9-102 to include one who is secondarily obligated on the secured obligation, e.g., a guarantor, or one who has a right of recourse against the debtor or another obligor with respect to an obligation secured by collateral. However, under Section 9-628, the secured party is relieved from any duty or liability to any person unless the secured party knows that the person is a debtor or obligor. Resolving an issue on which courts disagreed under former Article 9, this Article generally prohibits waiver by a secondary obligor of its rights and a secured party's duties under Part 6. See Section 9-602. However, Section 9-624 permits a secondary obligor or debtor to waive the right to notification of disposition of collateral and, in a non-consumer transaction, the right to redeem collateral, if the secondary obligor or debtor agrees to do so after default.

Rights of collection and enforcement of collateral. Section 9-607 explains in greater detail than former 9-502 the rights of a secured party who seeks to collect or enforce collateral, including accounts, chattel paper, and payment intangibles. It also sets forth the enforcement rights of a depositary bank holding a security interest in a deposit account maintained with the depositary bank. Section 9-607 relates solely to the rights of a secured party vis-a-vis a debtor with respect to collections and enforcement. It does not affect the rights or duties of third parties, such as account debtors on collateral, which are addressed elsewhere (e.g., Section 9-406). Section 9-608 clarifies the manner in which proceeds of collection or enforcement are to be applied.§ 9.101. Short Title, TX BUS & COM § 9.101

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 9 Disposition of collateral: Warranties of title. Section 9-610 imposes on a secured party who disposes of collateral the warranties of title, quiet possession, and the like that are otherwise applicable under other law. It also provides rules for the exclusion or modification of those warranties.

Disposition of collateral: Notification, application of proceeds, surplus and deficiency, other effects. Section 9-611 requires a secured party to give notification of a disposition of collateral to other secured parties and lienholders who have filed financing statements against the debtor covering the collateral. (That duty was eliminated by the 1972 revisions to Article 9.) However, that section relieves the secured party from that duty when the secured party undertakes a search of the records and a report of the results is unreasonably delayed. Section 9-613, which applies only to non-consumer transactions, specifies the contents of a sufficient notification of disposition and provides that a notification sent 10 days or more before the earliest time for disposition is sent within a reasonable time. Section 9-615 addresses the application of proceeds of disposition, the entitlement of a debtor to any surplus, and the liability of an obligor for any deficiency. Section 9-619 clarifies the effects of a disposition by a secured party, including the rights of transferees of the collateral.

Rights and duties of secondary obligor. Section 9-618 provides that a secondary obligor obtains the rights and assumes the duties of a secured party if the secondary obligor receives an assignment of a secured obligation, agrees to assume the secured party's rights and duties upon a transfer to it of collateral, or becomes subrogated to the rights of the secured party with respect to the collateral. The assumption, transfer, or subrogation is not a disposition of collateral under Section 9-610, but it does relieve the former secured party of further duties. Former Section 9-504(5) did not address whether a secured party was relieved of its duties in this situation.

Transfer of record or legal title. Section 9-619 contains a new provision making clear that a transfer of record or legal title to a secured party is not of itself a disposition under Part 6. This rule applies regardless of the circumstances under which the transfer of title occurs.

Strict foreclosure . Section 9-620, unlike former Section 9-505, permits a secured party to accept collateral in partial satisfaction, as well as full satisfaction, of the obligations secured. This right of strict foreclosure extends to intangible as well as tangible property. Section 9-622 clarifies the effects of an acceptance of collateral on the rights of junior claimants. It rejects the approachtaken by some courts-deeming a secured party to have constructively retained collateral in satisfaction of the secured obligationsin the case of a secured party's unreasonable delay in the disposition of collateral. Instead, unreasonable delay is relevant when determining whether a disposition under Section 9-610 is commercially reasonable.

Effect of noncompliance: “Rebuttable presumption” test. Section 9-626 adopts the “rebuttable presumption” test for the failure of a secured party to proceed in accordance with certain provisions of Part 6. (As discussed in Comment 4.j., the test does not necessarily apply to consumer transactions.) Under this approach, the deficiency claim of a noncomplying secured party is calculated by crediting the obligor with the greater of the actual net proceeds of a disposition and the amount of net proceeds that would have been realized if the disposition had been conducted in accordance with Part 6 (e.g., in a commercially reasonable manner). For non-consumer transactions, Section 9-626 rejects the “absolute bar” test that some courts have imposed; that approach bars a noncomplying secured party from recovering any deficiency, regardless of the loss (if any) the debtor suffered as a consequence of the noncompliance.

“Low-price” dispositions: Calculation of deficiency and surplus. Section 9-615(f) addresses the problem of procedurally regular dispositions that fetch a low price. Subsection (f) provides a special method for calculating a deficiency if the proceeds of a disposition of collateral to a secured party, a person related to the secured party, or a secondary obligor are “significantly below the range of proceeds that a complying disposition to a person other than the secured party, a person related to the secured party, or a secondary obligor would have brought.” (“Person related to” is defined in Section 9-102.) In these situations there is reason to suspect that there may be inadequate incentives to obtain a better price. Consequently, instead of calculating a deficiency (or surplus) based on the actual net proceeds, the deficiency (or surplus) would be calculated based on the proceeds that would have been received in a disposition to person other than the secured party, a person related to the secured party, or a secondary obligor.§ 9.101. Short Title, TX BUS & COM § 9.101

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 10 j. Consumer Goods, Consumer-Goods Transactions, and Consumer Transactions. This Article (including the accompanying conforming revisions (see Appendix I)) includes several special rules for “consumer goods,” “consumer transactions,” and “consumer-goods transactions.” Each term is defined in Section 9-102.

(i) Revised Sections 2-502 and 2-716 provide a buyer of consumer goods with enhanced rights to possession of the goods, thereby accelerating the opportunity to achieve “buyer in ordinary course of business” status under Section 1-201.

(ii) Section 9-103(e) (allocation of payments for determining extent of purchase-money status), (f) (purchase-money status not affected by cross-collateralization, refinancing, restructuring, or the like), and (g) (secured party has burden of establishing extent of purchase-money status) do not apply to consumer-goods transactions. Sections 9-103 also provides that the limitationof those provisions to transactions other than consumer-goods transactions leaves to the courts the proper rules for consumergoods transactions and prohibits the courts from drawing inferences from that limitation.

(iii) Section 9-108 provides that in a consumer transaction a description of consumer goods, a security entitlement, securities account, or commodity account “only by [UCC-defined] type of collateral” is not a sufficient collateral description in a security agreement.

(iv) Sections 9-403 and 9-404 make effective the Federal Trade Commission's anti-holder-in-due-course rule (when applicable), 16 C.F.R. Part 433, even in the absence of the required legend.

(v) The 10-day safe-harbor for notification of a disposition provided by Section 9-612 does not apply in a consumer transaction.

(vi) Section 9-613 (contents and form of notice of disposition) does not apply to a consumer-goods transaction.

(vii) Section 9-614 contains special requirements for the contents of a notification of disposition and a safe-harbor, “plain English” form of notification, for consumer-goods transactions.

(viii) Section 9-616 requires a secured party in a consumer-goods transaction to provide a debtor with a notification of how it calculated a deficiency at the time it first undertakes to collect a deficiency.

(ix) Section 9-620 prohibits partial strict foreclosure with respect to consumer goods collateral and, unless the debtor agrees to waive the requirement in an authenticated record after default, in certain cases requires the secured party to dispose of consumer goods collateral which has been repossessed.

(x) Section 9-626 (“rebuttable presumption” rule) does not apply to a consumer transaction. Section 9-626 also provides that its limitation to transactions other than consumer transactions leaves to the courts the proper rules for consumer transactions and prohibits the courts from drawing inferences from that limitation.

k. Good Faith. Section 9-102 contains a new definition of “good faith” that includes not only “honesty in fact” but also “the observance of reasonable commercial standards of fair dealing.” The definition is similar to the ones adopted in connection with other, recently completed revisions of the UCC.

l. Transition Provisions. Part 7 (Sections 9-701 through 9-709) contains transition provisions. Transition from former Article 9 to this Article will be particularly challenging in view of its expanded scope, its modification of choice-of-law rules for perfection and priority, and its expansion of the methods of perfection.§ 9.101. Short Title, TX BUS & COM § 9.101

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 11 m. Conforming and Related Amendments to Other UCC Articles. Appendix I contains several proposed revisions to the provisions and Comments of other UCC articles. For the most part the revisions are explained in the Comments to the proposed revisions. Cross-references in other UCC articles to sections of Article 9 also have been revised.

Article 1. Revised Section 1-201 contains revisions to the definitions of “buyer in ordinary course of business,” “purchaser,” and “security interest.”

Articles 2 and 2A. Sections 2-210, 2-326, 2-502, 2-716, 2A-303, and 2A-307 have been revised to address the intersection between Articles 2 and 2A and Article 9.

Article 5. New Section 5-118 is patterned on Section 4-210. It provides for a security interest in documents presented under a letter of credit in favor of the issuer and a nominated person on the letter of credit.

Article 8. Revisions to Section 8-106, which deals with “control” of securities and security entitlements, conform it to Section 8-302, which deals with “delivery.” Revisions to Section 8-110, which deals with a “securities intermediary's jurisdiction,” conform it to the revised treatment of a “commodity intermediary's jurisdiction” in Section 9-305. Sections 8-301 and 8-302 have been revised for clarification. Section 8-510 has been revised to conform it to the revised priority rules of Section 9-328. Several Comments in Article 8 also have been revised.

Notes of Decisions (1)

V. T. C. A., Bus. & C. § 9.101, TX BUS & COM § 9.101 Current through the end of the 2015 Regular Session of the 84th Legislature

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.§ 9.625. Remedies for Secured Party's Failure to Comply..., TX BUS & COM § 9.625

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1 Vernon's Texas Statutes and Codes Annotated Business and Commerce Code (Refs & Annos) Title 1. Uniform Commercial Code (Refs & Annos) Chapter 9. Secured Transactions (Refs & Annos) Subchapter F. Default
V.T.C.A., Bus. & C. § 9.625

§ 9.625. Remedies for Secured Party's Failure to Comply with Chapter
Effective: July 1, 2001 Currentness

(a) If it is established that a secured party is not proceeding in accordance with this chapter, a court may order or restrain collection, enforcement, or disposition of collateral on appropriate terms and conditions.

(b) Subject to Subsections (c), (d), and (f), a person is liable for damages in the amount of any loss caused by a failure to comply with this chapter. Loss caused by a failure to comply may include loss resulting from the debtor's inability to obtain, or increased costs of, alternative financing.

(c) Except as otherwise provided in Section 9.628 :

(1) a person that, at the time of the failure, was a debtor, was an obligor, or held a security interest in or other lien on the collateral may recover damages under Subsection (b) for its loss; and

(2) if the collateral is consumer goods, a person that was a debtor or a secondary obligor at the time a secured party failed to comply with this subchapter may recover for that failure in any event an amount not less than the credit service charge plus 10 percent of the principal amount of the obligation or the time price differential plus 10 percent of the cash price.

(d) A debtor whose deficiency is eliminated under Section 9.626 may recover damages for the loss of any surplus. However, a debtor or secondary obligor whose deficiency is eliminated or reduced under Section 9.626 may not otherwise recover under Subsection (b) for noncompliance with the provisions of this subchapter relating to collection, enforcement, disposition, or acceptance.

(e) In addition to any damages recoverable under Subsection (b), the debtor, consumer obligor, or person named as a debtor in a filed record, as applicable, may recover $500 in each case from a person that:

(1) fails to comply with Section 9.208 ;

(2) fails to comply with Section 9.209 ;§ 9.625. Remedies for Secured Party's Failure to Comply..., TX BUS & COM § 9.625

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2 (3) files a record that the person is not entitled to file under Section 9.509(a) ;

(4) fails to cause the secured party of record to file or send a termination statement as required by Section 9.513(a) or (c) ;

(5) fails to comply with Section 9.616(b)(1) and whose failure is part of a pattern, or consistent with a practice, of noncompliance; or

(6) fails to comply with Section 9.616(b)(2)

.

(f) A debtor or consumer obligor may recover damages under Subsection (b) and, in addition, $500 in each case from a person that, without reasonable cause, fails to comply with a request under Section 9.210 . A recipient of a request under Section 9.210 that never claimed an interest in the collateral or obligations that are the subject of a request under that section has a reasonable excuse for failure to comply with the request within the meaning of this subsection.

(g) If a secured party fails to comply with a request regarding a list of collateral or a statement of account under Section 9.210
, the secured party may claim a security interest only as shown in the list or statement included in the request as against a person that is reasonably misled by the failure.

Credits Added by Acts 1999, 76th Leg., ch. 414, § 1.01, eff. July 1, 2001 . Amended by Acts 2001, 77th Leg., ch. 705, § 22, eff. June 13, 2001

.

Editors' Notes

UNIFORM COMMERCIAL CODE COMMENT

2011 Main Volume

1. Source. Former Section 9-507.

2. Remedies for Noncompliance; Scope. Subsections (a) and (b) provide the basic remedies afforded to those aggrieved by a secured party's failure to comply with this Article. Like all provisions that create liability, they are subject to Section 9-628, which should be read in conjunction with Section 9-605. The principal limitations under this Part on a secured party's right to enforce its security interest against collateral are the requirements that it proceed in good faith (Section 1-203), in a commercially reasonable manner (Sections 9-607 and 9-610), and, in most cases, with reasonable notification (Sections 9-611 through 9-614). Following former Section 9-507, under subsection (a) an aggrieved person may seek injunctive relief, and under subsection (b) the person may recover damages for losses caused by noncompliance. Unlike former Section 9-507, however, subsections (a) and (b) are not limited to noncompliance with provisions of this Part of Article 9. Rather, they apply to noncompliance with any provision of this Article. The change makes this section applicable to noncompliance with Sections 9-207 (duties of secured party in possession of collateral), 9-208 (duties of secured party having control over deposit account), 9-209 (duties of secured party if account debtor has been notified of an assignment), 9-210 (duty to comply with request for accounting, etc.), 9-509(a) (duty to refrain from filing unauthorized financing statement), and 9-513(a) or (c) (duty to provide termination statement). Subsection (a) also modifies the first sentence of former Section 9-507(1) by adding the references to “collection”§ 9.625. Remedies for Secured Party's Failure to Comply..., TX BUS & COM § 9.625

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 3 and “enforcement.” Subsection (c)(2), which gives a minimum damage recovery in consumer-goods transactions, applies only to noncompliance with the provisions of this Part.

3. Damages for Noncompliance with This Article. Subsection (b) sets forth the basic remedy for failure to comply with the requirements of this Article: a damage recovery in the amount of loss caused by the noncompliance. Subsection (c) identifies who may recover under subsection (b). It affords a remedy to any aggrieved person who is a debtor or obligor. However, a principal obligor who is not a debtor may recover damages only for noncompliance with Section 9-616, inasmuch as none of the other rights and duties in this Article run in favor of such a principal obligor. Such a principal obligor could not suffer any loss or damage on account of noncompliance with rights or duties of which it is not a beneficiary. Subsection (c) also affords a remedy to an aggrieved person who holds a competing security interest or other lien, regardless of whether the aggrieved person is entitled to notification under Part 6. The remedy is available even to holders of senior security interests and other liens. The exercise of this remedy is subject to the normal rules of pleading and proof. A person who has delegated the duties of a secured party but who remains obligated to perform them is liable under this subsection. The last sentence of subsection (d) eliminates the possibility of double recovery or other over-compensation arising out of a reduction or elimination of a deficiency under Section 9-626, based on noncompliance with the provisions of this Part relating to collection, enforcement, disposition, or acceptance. Assuming no double recovery, a debtor whose deficiency is eliminated under Section 9-626 may pursue a claim for a surplus. Because Section 9-626 does not apply to consumer transactions, the statute is silent as to whether a double recovery or other over-compensation is possible in a consumer transaction.

Damages for violation of the requirements of this Article, including Section 9-609, are those reasonably calculated to put an eligible claimant in the position that it would have occupied had no violation occurred. See Section 1-106. Subsection (b) supports the recovery of actual damages for committing a breach of the peace in violation of Section 9-609, and principles of tort law supplement this subsection. See Section 1-103. However, to the extent that damages in tort compensate the debtor for the same loss dealt with by this Article, the debtor should be entitled to only one recovery.

4. Minimum Damages in Consumer-Goods Transactions. Subsection (c)(2) provides a minimum, statutory, damage recovery for a debtor and secondary obligor in a consumer-goods transaction. It is patterned on former Section 9-507(1) and is designed to ensure that every noncompliance with the requirements of Part 6 in a consumer-goods transaction results in liability, regardless of any injury that may have resulted. Subsection (c)(2) leaves the treatment of statutory damages as it was under former Article 9. A secured party is not liable for statutory damages under this subsection more than once with respect to any one secured obligation (see Section 9-628(e)), nor is a secured party liable under this subsection for failure to comply with Section 9-616 (see Section 9-628(d)).

Following former Section 9-507(1), this Article does not include a definition or explanation of the terms “credit service charge,” “principal amount,” “time-price differential,” or “cash price,” as used in subsection (c)(2). It leaves their construction and application to the court, taking into account the subsection's purpose of providing a minimum recovery in consumer-goods transactions.

5. Supplemental Damages. Subsections (e) and (f) provide damages that supplement the recovery, if any, under subsection (b). Subsection (e) imposes an additional $500 liability upon a person who fails to comply with the provisions specified in that subsection, and subsection (f) imposes like damages on a person who, without reasonable excuse, fails to comply with a request for an accounting or a request regarding a list of collateral or statement of account under Section 9-210. However, under subsection (f), a person has a reasonable excuse for the failure if the person never claimed an interest in the collateral or obligations that were the subject of the request.

6. Estoppel. Subsection (g) limits the extent to which a secured party who fails to comply with a request regarding a list of collateral or statement of account may claim a security interest.§ 9.625. Remedies for Secured Party's Failure to Comply..., TX BUS & COM § 9.625

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 4 Notes of Decisions (37)

V. T. C. A., Bus. & C. § 9.625, TX BUS & COM § 9.625 Current through the end of the 2015 Regular Session of the 84th Legislature

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.