Court Opinion

ID: 3122544
Source: CourtListenerOpinion
Date Created: 2015-10-16 14:26:31.137801+00
Date Added: 2024-06-11T09:33:11.810268
License: Public Domain

COURT OF APPEALS
                            SECOND DISTRICT OF TEXAS
                                 FORT WORTH

                                   NO. 02-10-00296-CV

STEVEN JEFFREY JOHNSON                                           APPELLANT

                                            V.

MICHELE JEAN JOHNSON                                              APPELLEE

                                        ------------

           FROM THE 342ND DISTRICT COURT OF TARRANT COUNTY

                                        ------------

                           MEMORANDUM OPINION1
                                         ----------

                              I.      Introduction

      In one issue, Appellant Steven Jeffrey Johnson appeals the trial court’s

summary judgment and order in favor of Appellee Michele Jean Johnson. We

affirm.

      1
          See Tex. R. App. P. 47.4.
                    II. Factual and Procedural Background

      On February 3, 2010, pursuant to the parties’ ―Agreement Incident to

Divorce,‖ Steven, CEO of Cano Petroleum, Inc., executed a promissory note (the

Note) in favor of Michele in the amount of $460,000, to mature on April 13, 2010.2

At the same time, the parties executed a ―Security Agreement with Collateral

Pledge and Appointment of Escrow Agent‖ (the Security Agreement) listing

92,000 shares of Cano stock as security for the Note. 3

      In May 2010, after Steven defaulted, Michele brought suit to collect on the

Note’s overdue principal. Steven answered with a general denial and asserted

two affirmative defenses:    (1) excuse from payment, because the Security

Agreement ―modified, supplemented, or nullified‖ the Note; and (2) impossibility,

because at the time the Note matured, a mandatory stock-transaction blackout

period associated with Cano’s proposed merger with another firm rendered

performance impossible. On June 22, 2010, Michele filed a motion for summary

judgment. Steven responded, reiterating the affirmative defenses set out above.

After a hearing, the trial court granted Michele’s motion and issued an order

awarding Michele the principal—$460,000—plus pre- and post-judgment interest

      2
       Although executed in February 2010, the Note was originally drafted on
April 13, 2007, and called for quarterly interest payments on the principal
beginning on May 1, 2007.
      3
       The Note and Security Agreement are appended to the end of this
opinion.

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at a rate of five percent per annum computed from April 13, 2010. This appeal

followed.

                             III. Standard of Review

      In a summary judgment case, the issue on appeal is whether the movant

met the summary judgment burden by establishing that no genuine issue of

material fact exists and that the movant is entitled to judgment as a matter of law.

Tex. R. Civ. P. 166a(c); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding,

289 S.W.3d 844, 848 (Tex. 2009). We review a summary judgment de novo.

Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010).

      We take as true all evidence favorable to the nonmovant, and we indulge

every reasonable inference and resolve any doubts in the nonmovant’s favor.

20801, Inc. v. Parker, 249 S.W.3d 392, 399 (Tex. 2008); Provident Life &

Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). We consider the

evidence presented in the light most favorable to the nonmovant, crediting

evidence favorable to the nonmovant if reasonable jurors could and disregarding

evidence contrary to the nonmovant unless reasonable jurors could not. Mann

Frankfort, 289 S.W.3d at 848. We must consider whether reasonable and fair-

minded jurors could differ in their conclusions in light of all of the evidence

presented. See Wal-Mart Stores, Inc. v. Spates, 186 S.W.3d 566, 568 (Tex.

2006); City of Keller v. Wilson, 168 S.W.3d 802, 822–24 (Tex. 2005).

      If the defendant wishes to assert an affirmative defense to the motion, he

must urge the defense in his response and present sufficient evidence to create

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a fact issue on each element of the defense. See Brownlee v. Brownlee, 665
S.W.2d 111, 112 (Tex. 1984); Anglo-Dutch Petroleum Int’l, Inc. v. Haskell, 193
S.W.3d 87, 95 (Tex. App.—Houston [1st Dist.] 2006, pet. denied) (citing

Beathard Joint Venture v. W. Houston Airport Corp., 72 S.W.3d 426, 434 (Tex.

App.—Texarkana 2002, no pet.); Jones v. Tex. Pac. Indem. Co., 853 S.W.2d
791, 795 (Tex. App.—Dallas 1993, no writ)). The non-movant is not required to

prove the affirmative defense as a matter of law; raising a fact issue is sufficient

to defeat summary judgment. See Anglo-Dutch Petroleum, 193 S.W.3d at 95;

see also Brownlee, 665 S.W.2d at 112.

                                IV. Applicable Law

A. Collection of a Promissory Note

      To collect on a promissory note, a plaintiff must establish: (1) that the note

exists; (2) that the defendant signed the note; (3) that the plaintiff is the owner

and holder of the note; and (4) that a certain balance is due and owing on the

note. Cadle Co. v. Regency Homes, Inc., 21 S.W.3d 670, 674 (Tex. App.—

Austin 2000, pet. denied); see also Clark v. Dedina, 658 S.W.2d 293, 295–96

(Tex. App.—Houston [1st Dist.] 1983, writ dism’d).

B. Business and Commerce Code Section 3.117

      Business and commerce code section 3.117, titled ―Other Agreements

Affecting Instrument,‖ states in relevant part that

             the obligation of a party to an instrument to pay the instrument
             may be modified, supplemented, or nullified by a separate
             agreement of the obligor and a person entitled to enforce the

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            instrument, if the instrument is issued or the obligation is
            incurred in reliance on the agreement or as part of the same
            transaction giving rise to the agreement. To the extent an
            obligation is modified, supplemented, or nullified by an
            agreement under this section, the agreement is a defense to
            the obligation.

Tex. Bus. & Com. Code Ann. § 3.117 (West 2002). ―The separate agreement

might be a security agreement . . . that contradicts the terms of the instrument.‖

Id. § 3.117 cmt. 1 (West Supp. 2010) (emphasis added).

       Additionally, where two or more instruments, executed contemporaneously

or at different times, pertain to the same transaction, the instruments will be read

together, even though they do not expressly refer to each other. Bd. of Ins.

Comm’rs v. Great S. Life Ins. Co., 150 Tex. 258, 267, 239 S.W.2d 803, 809

(1951); see also Fort Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d
831, 840 (Tex. 2000) (stating that it is ―well-established law that instruments

pertaining to the same transaction may be read together to ascertain the parties’

intent‖).

C. Impossibility of Performance

       There are two general types of impossibility:        (1) objective, and (2)

subjective. Walston v. Anglo-Dutch Petroleum (Tenge) L.L.C., No. 14-07-00959-

CV, 2009 WL 2176320, at *6 n.2 (Tex. App.—Houston [14th Dist.] July 23, 2009,

no pet.) (mem. op.); Janak v. FDIC, 586 S.W.2d 902, 906–07 (Tex. Civ. App.—

Houston [1st Dist.] 1979, no writ). Objective impossibility relates solely to the

nature of the promise.     See Janak, 586 S.W.2d at 906–07.          Something is

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objectively impossible if ―the thing cannot be done,‖ such as an inability ―to

perform the promise to settle [a] claim by entering an agreed judgment in the

lawsuit which had been dismissed‖ prior to the completion of the agreement.

See Grayson v. Grayson Armature Large Motor Div., Inc., No. 14-09-00748-CV,

2010 WL 2361432, at *5 (Tex. App.—Houston [14th Dist.] June 15, 2010, pet.

denied) (mem. op.). Subjective impossibility is due wholly to the inability of the

individual promisor. See id. Something is subjectively impossible if ―I cannot do

it,‖ such as when a promisor’s financial inability to pay makes it impossible for the

promisor to perform. See id.

      Objective impossibility can serve as a defense in a breach of contract suit.

Janak, 586 S.W.2d at 906–07. However, a party cannot escape contract liability

by claiming subjective impossibility; subjective impossibility neither prevents the

formation of the contract nor discharges a duty created by a contract.          See

Grayson, 2010 WL 2361432, at *5; Walston, 2009 WL 2176320, at *6 n.2; Janak,
586 S.W.2d at 906–07.

                                   V. Analysis

      Because the parties do not dispute (1) that the Note and Security

Agreement exist and are valid, (2) that Steven executed the Note in Michele’s

favor for $460,000, (3) that Michele is the Note’s owner and holder, and (4) that

Steven did not meet his obligation when the Note matured, we conclude that

Michele has met her burden under rule 166a(c). Thus, unless Steven raised a

fact issue supporting his affirmative defenses sufficient to defeat Michele’s

                                     6
motion for summary judgment, the trial court did not err by granting summary

judgment as a matter of law for Michele. See Brownlee, 665 S.W.2d at 112;

Anglo-Dutch Petroleum Int’l, Inc., 193 S.W.3d at 95.

      Steven first argues that the trial court erred by granting summary judgment

because reading the contemporaneously executed Note and Security Agreement

together, as required by business and commerce code section 3.117, shows that

he relied on his ability to sell the stock to meet the terms of the Note. He further

argues that because he could not sell the Cano stock referenced in both the Note

and the Security Agreement, he should have been relieved of his obligation

under the Note. But Steven fails to point to, and we fail to find, any language in

the Security Agreement that contradicts the Note or shows that the parties

agreed that the Note’s obligation would be satisfied solely from the sale of

Steven’s Cano stock. See Tex. Bus. & Comm. Code Ann. § 3.117 cmt. 1; see

also Brownlee, 665 S.W.2d at 112 (holding that defendant’s asserting legal

conclusion that original agreement ―was modified‖ was insufficient to defeat

plaintiff’s summary judgment motion). We also find nothing extraordinary in the

language of the Note or the Security Agreement to show anything other than that

the parties agreed that Steven’s Cano stock would serve as collateral for the

underlying obligation in the same manner that collateral generally serves to

secure the performance of an outstanding obligation.         In fact, the Security

Agreement provides that Steven had ―the right at any time to substitute

certificates of deposit‖ in place of the Cano stock as security for the Note, thus,

                                     7
the terms of the instrument itself directly contradict Steven’s assertion that the

parties intended that only his Cano stock be used to satisfy his obligation under

the Note. We, therefore conclude that Steven failed to raise a fact issue relative

to his section 3.117 defense sufficient to defeat Michele’s motion for summary

judgment.

       Steven next argues that the trial court erred by failing to excuse his

performance because it was impossible for him to sell his Cano stock. Steven

relies on Centex Corp. v. Dalton, 840 S.W.2d 952 (Tex. 1992), to support his

argument. However, in Centex, the supreme court found that a cease-and-desist

order issued by a regulatory agency endowed with appropriate legal authority

made it illegal for Centex to perform (to pay Dalton) under the agreement. Id. at

954.   Here, the stock-sale moratorium Steven claims made his performance

impossible did not make payment to Michele illegal; rather it simply temporarily

impacted Steven’s ability to sell the stock4—an asset that he could have used,

but was not required to use, to satisfy his obligation. See Huffines v. Swor Sand

& Gravel Co., Inc., 750 S.W.2d 38, 40 (Tex. App.—Fort Worth 1988, no writ)

(―Texas courts have held contractual obligations cannot be avoided simply

       4
        Steven implies that it was illegal for him to sell his Cano stock, but he cites
no regulatory authority in his brief and supported his assertion in the trial court
only with an internal Cano memorandum that imposed a trading moratorium on
Cano stock due to the proposed merger. Although the memorandum did not
state that trading Cano stock was illegal during this period, it required employees
desiring to trade Cano stock during the blackout period to consult with Cano’s
chief financial officer or corporate secretary and general counsel. But, even if it
was illegal for Steven to sell the Cano stock during the blackout period, it would
not change the outcome of this appeal.

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because the obligor’s performance has become more economically burdensome

than anticipated.‖). And, because we conclude above that the Cano stock was

not the exclusive method for Steven to satisfy his obligation, and because Steven

did not raise any other argument to show that his performance under the Note

was impossible, his claim of subjective impossibility does not excuse his

performance under the Note, and he has failed to raise a fact issue supporting

his affirmative defense of impossibility. See Grayson, 2010 WL 2361432, at *5–

6; Walston, 2009 WL 2176320, at *6 n.2; Janak, 586 S.W.2d at 906–07.

      Accordingly, because he failed to raise a fact issue on each element of his

affirmative defenses sufficient to defeat Michele’s motion for summary judgment,

we overrule Steven’s sole issue.

                                   VI. Conclusion

      Having overruled Steven’s sole issue, we affirm the trial court’s summary

judgment and final order.

                                                    BOB MCCOY
                                                    JUSTICE

PANEL: LIVINGSTON, C.J.; MCCOY and GABRIEL, JJ.

DELIVERED: August 4, 2011

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         ATTACHMENT TO 2-10-296-CV, JOHNSON V. JOHNSON

  NOTE AND SECURITY AGREEMENT REFERENCED IN FOOT NOTE 2

***Please note that scanned page 18, a title page, was intentionally omitted.***

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