Court Opinion

ID: 3125439
Source: CourtListenerOpinion
Date Created: 2015-10-16 15:09:40.640507+00
Date Added: 2024-06-11T10:22:30.163138
License: Public Domain

Opinion issued January 26, 2012

In The
Court of
Appeals
For The
First District
of Texas
————————————
NO. 01-09-00986-CV
———————————
84 Lumber Company, L.P., Appellant
V.
David Powers, Appellee

 

 
On Appeal from the 149th Judicial District Court 
Brazoria County, Texas

Trial Court Case No. 48685
 

 
O P I N I O N
          This appeal is from the grant and
denial of cross-motions for summary judgment in a contract case.  84 Lumber contends that David Powers is
liable as a matter of law in his capacity as personal guarantor for the debt of
David Powers Homes, Inc.  We reverse and
render.
Background
          David Powers Homes, Inc.
applied for credit with 84 Lumber by filling out a written credit application
form.  The copy of the application form
in evidence before the trial court was partially cut off and partially
illegible.  Above the signature line,
however, was a paragraph in capital letters that reads as follows:  
[]GNING BELOW I HEREBY
CERTIFY THAT I AM THE OWNER, GENERAL PARTNER OR PRESIDENT OF THE ABOVE []ESS
AND I DO UNCONDITIONALLY AND IRREVOCABLY PERSONALLY GUARANTEE THIS CREDIT
ACCOUNT AND []ENTS OF ANY AND ALL AMOUNTS DUE BY THE ABOVE BUSINESS, AND THAT I
HAVE READ ALL OF THE TERMS AND []TIONS ON THE REVERSE SIDE OF THIS APPLICATION
AND UNDERSTAND AND AGREE TO THE SAME, AND THAT ALL INFORMATION CONTAINED IN
THIS APPLICATION IS TRUE AND CORRECT TO THE BEST OF MY KNOWLEDGE.  []ATION MUST BE FULLY AND COMPLETELY SIGNED
AND WITNESSED.[1]
          
                    __________________________________________
          Applicant                                             Date
 
          __________________________________________
          Print Name
(If Applicant is a
partnership, then general partner must sign the application.  If Applicant is a corporation, then President
must sign the application.)
 
          The application was signed
“David Powers,” with an asterisk by the name and “as officer” hand-written over
the date.  In the “Print Name” line was
hand-written “President David Powers.”
          The credit line secured by
this application became delinquent and 84 Lumber sued David Powers Homes, David
Powers and Sherry Jessup, a David Powers Homes employee and signatory to a
credit application on behalf of David Powers Homes.  84 Lumber asserted that both David Powers and
Sherry Jessup, the individual defendants, were liable as guarantors for the
debt of David Powers Homes.
          All defendants filed a
general denial but David Power Homes further denied the veracity of the sworn
account, the amount of the claims, and the crediting of all just offsets.  David Powers and Sherry Jessup, the individual
defendants, challenged the capacity in which they were sued, plead a failure of
consideration, and claimed the guarantees were ambiguous as to whether the
individuals were liable in their individual capacity.
          84 Lumber moved for
summary judgment but the record does not reflect that the motion was
granted.  Rather, the record indicates
that a post-answer default judgment was rendered against all defendants,
jointly and severally, in the amount of $150,541.94.  The subsequent motion to set aside the
default judgment and for a new trial was granted.  Thereafter, the defendants filed a
supplemental answer asserting the statute of frauds as an affirmative defense
and alleging a defect in the parties, i.e., that another David Powers entity
had actually submitted the purchase orders in question.  84 Lumber thereafter released Sherry Jessup,
leaving only David Powers and David Powers Homes as defendants.
          When 84 Lumber filed a second motion
for summary judgment against the two remaining parties, only David Powers
responded.  He also filed a cross-motion
for summary judgment against 84 Lumber based on the statute of frauds.  The trial court’s final judgment granted 84
Lumber’s motion as to David Powers Homes, denied 84 Lumber’s motion as to David
Powers individually, and granted David Powers’s cross-motion for summary
judgment against 84 Lumber.  The court
ordered that 84 Lumber recover $150,541.94 from David Powers Homes, plus pre‑
and post‑judgment interest and attorney’s fees.  The trial court specifically held that David
Powers is not liable to 84 Lumber as a guarantor.
          84 Lumber appeals this judgment to the extent that it
rendered summary judgment in favor of David Powers against 84 Lumber and denied
summary judgment against David Powers.
David Powers’s Liability as Guarantor
          In its sole issue, 84 Lumber asks this Court to reverse the
denial of summary judgment it sought and the rendition of summary judgment in
favor of David Powers on the basis that David Powers is liable as a matter of
law in his capacity of personal guarantor of the debt of David Powers Homes.
 
1. 
The Parties’ Contentions
          84 Lumber argues that Powers’s signature immediately below
the unambiguous recital that he was to “unconditionally and irrevocably
personally guarantee the credit account and []ents of any and all amounts due
by the above business” binds Powers as a matter of law.  It further reasons that, as David Powers
Homes did not appeal the judgment against it, David Powers is liable for that
amount assessed against David Powers Homes in that now-final judgment.
          David Powers counters that the credit application was
signed only in a representative capacity and thus does not bind him
individually, is ambiguous, is unenforceable pursuant to the statute of frauds,
and covers purchases made by entities other than David Powers Homes.
2. 
Standard of Review
         We review a trial court’s grant of
summary judgment de novo.  Mid-Century Ins. Co. of Tex. v. Ademaj,
243 S.W.3d 618, 621 (Tex. 2007).  When,
as here, both parties moved for summary judgment and the trial court granted
one and denied the other, we must determine all questions presented and render
the judgment the trial court should have rendered.  Id.;
Argonaut Ins. Co. v. Baker, 87 S.W.3d
526, 529 (Tex. 2002).  Summary judgment
is appropriate if there is no genuine issue of material fact and the movant
establishes that he is entitled to judgment as a matter of law on the issues
set out in the motion or response.  See Tex.
R. Civ. P. 166a(c).
3. 
Unambiguity of the Contract
         David
Powers argues that the credit application was signed in a dual capacity and is,
thus, ambiguous. 
a.  The
Law
          The
construction of an unambiguous contract is a question of law for the court.  See
Coker v. Coker, 650 S.W.2d 391, 393
(Tex. 1983).  If a written instrument is
so worded that it can be given “a certain or definite legal meaning or
interpretation,” it is not ambiguous and the reviewing court will construe it
as a matter of law.  Id.  A contract is ambiguous
only when its “meaning is uncertain and doubtful or it is reasonably
susceptible to more than one meaning.”  Id. 
If a contract is unambiguous, the courts will give effect to the
intention of the parties as expressed or as is apparent from the writing.  Gulf
& Basco Co. v. Buchanan, 707 S.W.2d 655, 658 (Tex. App.—Houston [1st
Dist.] 1986, writ ref’d n.r.e.).  The
instrument standing alone will usually be deemed to fully express the intention
of the parties, because it is the objective, not subjective, intent that
controls.  See City of Pinehurst v.
Spooner Addition Water Co., 432 S.W.2d 515, 518 (Tex. 1968).
          The El Paso Court of Appeals was presented similar contract
language in the case of Austin Hardwoods,
Inc. v. Vanden Berghe, 917 S.W.2d 320 (Tex. App.—El Paso 1995, writ
denied).  There, as here, immediately
above the signature line of the credit application was recited:  “If a corporation, the undersigned personally
guarantees the payment of this account in his individual capacity.”  Id. at
323.  The corporate officer signed the
application in his capacity as vice-president. 
Id.  Thereafter the corporation went into
bankruptcy and the creditor company made demand on the officer for payment.  Id.
at 322.
          The officer denied being a guarantor; claimed that the
agreement lacked consideration and was ambiguous; and claimed that the suit was
barred by the statute of frauds.  Id. at 322.  The trial court agreed, found the guaranty
agreement ambiguous and unenforceable, and rendered judgment in favor of the
corporate officer.  Id.
          In light of the signature under the “personal guaranty”
language, the El Paso Court of Appeals “fail[ed] to see how the above-cited
guaranty clause render[ed] the agreement susceptible to more than one
meaning.”  Id. at 323.  The Court noted,
“The language of the agreement is not unclear or indefinite.  Rather it clearly evidences application for
credit by a corporation guaranteed by the individual signing the
application.”  Id.
          That the officer signed in his corporate capacity also did
not persuade the El Paso Court.  To
create a corporate obligation, the officer necessarily had to sign in his
corporate capacity.  Id. “However, as the guaranty paragraph stipulates, in addition to
the creation of a corporate liability the signing individual further covenants
to be individually liable for the debt, again the very essence of a guaranty
agreement.”  Id.  Having found the
agreement unambiguous, the Court construed the contract as a matter of law and
found that the corporate officer was individually liable as a guarantor for his
corporation’s debt.  Id.
          The San Antonio Court of Appeals, too, held that a similar
contractual provision created liability in the corporate signatory.  See
Taylor-Made Hose, Inc. v. Wilkerson, 21 S.W.3d 484 (Tex. App.—San Antonio
2000, pet. denied).  There, the corporate
vice-president signed in her corporate capacity below the following
language:  “I, personally agree to pay
all invoices and cost of collection including, but not limited to collection
agency fees, court costs, and reasonable attorney’s fees on any amount
remaining unpaid after 90 days.”  Id. at 486.  In denying her liability, the vice-president
claimed that the contract was ambiguous. 
Id. at 487.  The creditor, however, claimed that the credit
application was unambiguous and established that the corporate officer was a
personal guarantor of the debt.  Id. at 488.
          The San Antonio Court agreed with the creditor, holding
that “[a] party’s signature renders her individually liable for the debt of
another as a matter of law if the instrument, on its face, is that of the
person who signed it.”  Id. 
By agreeing to personally pay the corporation’s delinquent account, the
corporate officer had made herself personally liable for the corporation’s
debts.  Id.
 
          b.  Application of
the Law to the Facts
          In this case, we conclude that David Powers has made
himself personally liable for the debt of David Powers Homes.  The language of the guaranty
herein—notwithstanding the defaced version of the credit application in
evidence—is clear and unambiguous. 
Indeed, it closely mirrors the language in Austin Hardwoods.
          The
application specifically states that, by his execution of the application, Powers
certified that he was the owner, general partner, or president of David Powers
Homes and that he “unconditionally and irrevocably personally guarantee[d]” the
credit account.  As in Austin Hardwoods, David Powers’s
signature creates not only a corporate liability, but individual liability for
the debt of the corporation.  See 917 S.W.2d at 323.
          This is not a case in which “[h]ard-working and loyal
company employees” are easily being “lured into personally guaranteeing the
debts of their employer . . . despite the fact that they are signing the
document solely in their official capacity.” 
Taylor-Made Hose, 21 S.W.3d at
495 (Lopez, J., dissenting).  Rather,
this is the company president securing credit for his own business.  We conclude that a president of the
corporation is liable for the credit his company received by means of his
personal guaranty of his own company’s debts.
 
 
4. 
Statutes of Frauds
          David Powers argues further that the guaranty is deficient
because it does not meet all the requirements of the statute of frauds.  According to Powers, the lack of a personal
signature precludes the guaranty’s enforcement.
          a.  The Law
          A guaranty agreement is subject to the statute of frauds, Tex. Bus. & Com. Code Ann. §
26.01(b)(2) (West 2009) (including “a promise by one person to answer for the
debt, default, or miscarriage of another person”), and enforcement thereunder
requires that it be in writing and signed by the person to be charged.  Tex.
Bus. & Com. Code Ann. § 26.01(a) (West 2009).
          That a signature is followed by a corporate designation
does not necessarily serve to relieve the signatory of individual
liability.  See Material P’ships, Inc. v. Ventura, 102 S.W.3d 252, 259 (Tex.
App.—Houston [14th Dist.] 2003, pet. denied); Buchanan, 707 S.W.2d at 657–58. 
“A signature followed by corporate office will result in personal
liability where the individual is clearly designated within the instrument as
personal surety for the principal.”  Material P’ships, 102 S.W.3d at 259
(quoting Buchanan, 707 S.W.2d at 657);
see also Am. Petrofina Co. of Tex. v. Bryan, 519 S.W.2d 484, 487 (Tex. Civ.
App.—El Paso 1975, no writ) (“The fact that a person is under an agency
relation to another which is disclosed does not prevent him from becoming
personally liable where the terms of the contract clearly establish the
personal obligation.”).  The addition of
the corporate office by the signature may be construed as descriptio personae of the signator rather than an indication of
the capacity in which he signs.  Material P’Ships, 102 S.W.3d at 259
(quoting Buchanan, 707 S.W.2d at 657).
          b.  Application of
the Law to the Facts
          The
guaranty language in this case specifically designates David Powers as an
individual when it recites: “I am the . . . president . . . and I do
unconditionally and irrevocably personally guarantee this credit account.”  Under similar facts, the El Paso Court of
Appeals held that a signature of a person in his corporate capacity created
liability on behalf of the individual as well as the corporation.  Austin
Hardwoods, 917 S.W.2d at 323.  The corporate
title after the signature was held to be descriptio
personae, not a “limit [to] the capacity in which the person can be held
liable.”  Id.  Accordingly, we conclude
that David Powers’s signature on the credit application met the requirements of
the statute of frauds.
          c.  Rebuttal
          As his primary support for the proposition that a signature
with a corporate designation on a guaranty does not meet the requirements of
the statute of frauds to bind the individual, David Powers cites to the 1961
New York case of Salzman Sign Co. v. Beck,
176 N.E.2d 74, 76 (N.Y. 1961), and an unreported case from the United States
District Court for the Northern District of Texas, Lincoln General Insurance Co. v. US Auto Insurance  Services, Inc., 2009 WL 1174641, at *9
(N.D. Tex. Apr. 29, 2009).  Both are
distinguishable.
          In Salzman Sign,
the contract’s guaranty language, in an enumerated paragraph within the body of
the contract, read: “Where the Purchaser is a corporation, in consideration of
extending credit to it, the officer or officers signing on behalf of such
corporation, hereby personally guarantee the payments hereinabove provided
for.”  Salzman, 176 N.E.2d at 75. 
There is no indication that the guaranty language was directly above the
signature of the corporate officer.  Id. 
In fact, the New York Court of Appeals indicated that the language was
buried in a long contract.  Id. at 76 (stating “There is great
danger in allowing a single sentence in a long contract to bind individually a
person who signs only as a corporate officer.”).  Moreover, the language itself is not in the first
person and does not personally indicate the intent on the signor’s part to bind
himself as guarantor.
          The Northern District case, too, is distinguishable.  In Lincoln
General, the contract, between US Auto and Lincoln General, signed by Doug
Maxwell on behalf of US Auto, recited: “The parties agree that all premium,
return commission, profit commission and loss adjustment expense obligations
under this Agreement shall be secured by the Agent [US Auto] and its affiliated
companies, Gamma Group, Inc., CSI Agency Services, Inc. and Alpha Partners,
Ltd.”  Lincoln Gen., 2009 WL 1174641 at *9.  Lincoln General argued that, as Doug Maxwell
was allegedly authorized to sign for the three corporate entities, his
signature bound all the three.  Id. 
   The court held, however, that
“each party serving as a guarantor must be a signatory on the document.”  Id.  Even though Maxwell may have had authority to
sign for each company, there was no evidence that he did so, and the federal
court was unwilling to hold the other named companies liable as
guarantors.  Id.
          We need not, however, look to either foreign jurisdictions
or distinguishable federal cases. 
Rather, we rely upon recent Texas authority on point with this
case.  See Taylor-Made Hose, 21 S.W.3d at 488; Austin Hardwoods, 917 S.W.2d at 323.
          Our sister court, the Fourteenth Court of Appeals, came to
a similar conclusion the issue in Material
Partnerships, in which Sacos, a bag manufacturing company, was delinquent
in paying its invoices to Material Partnerships, Inc. (MPI).  Material
P’Ships, 102 S.W.2d at 255.  The
owner of MPI asked Lopez, the owner and general manager of Sacos, to personally
guarantee the company debts.  Id. 
Lopez provided MPI a letter reciting: 
“I . . . want to certify you [sic] that I, personally, guaranty all
outstandings [sic] and liabilities of Sacos Tubulares with Material
Partnerships as well as future shipments.” 
Id. at 256.  Lopez signed the letter over the designation,
“JORGE LOPEZ VENTURA, GENERAL MANAGER.”  Id.
          When called upon to make good on his guaranty, Lopez
claimed that he intended to sign, and did sign, the September 25 letter in his
capacity as general manager of Sacos.  Id. 
He testified that he gave MPI a corporate guaranty, making the promise
on the company’s behalf.  Id. 
Based on the holding in Taylor-Made
Hose, however, the trial court found that Lopez’s letter unambiguously
indicated Lopez’s personal guaranty.  Id. at 260 (citing Taylor-Made Hose, 215 S.W.3d at 488).
          Justice Frost’s concurrence to this case and her reasoning
therein are illustrative: “If this court adopted Lopez’s construction of the
September 25th letter, the agreement would be meaningless.  It simply makes no sense for Sacos to be both the account debtor and the ‘corporate guarantor’ because a
guarantor is one who stands for the debt of another.”  Material
P’Ships, 102 S.W.3d at 263 (Frost, J., concurring).  Holding that Lopez had signed in his
individual capacity was the only construction that gave the letter
meaning.  Id.at 263–64.
          The same logic pertains here.  As in Material
Partnerships, the language of the guaranty herein states, “I do unconditionally
and irrevocably personally guarantee this credit account.”  The only construction that makes sense is
that David Powers personally guaranteed the loan for his company, David Powers
Homes.
          We conclude that David Powers’s signature on the credit application
was sufficient to meet the requirements of the statute of frauds.
5. 
The Scope of the Guaranty          
          Finally,
David Powers challenges the applicability of the guaranty to certain purchases
which he alleges were not made by David Powers Homes, but were instead made by
David Powers Homes S.T., Ltd. or David Powers Homes W.O., Ltd.  According to David Powers, the records 84
Lumber offered into evidence, which identify David Powers Homes, Inc. as the
customer, are not sufficient to establish purchases by David Powers Homes.  84 Lumber maintains that the liability of
David Powers Homes was “quantified when the trial court entered summary
judgment against the corporate defendant.” 
Accordingly, “David Powers, individually owes what is owed by David
Powers Homes.”
          a.  The Law
          In
construing a guaranty contract, the primary concern of the reviewing court is
to ascertain the intent of the parties.  Coker, 650 S.W.2d at 393.  If there is uncertainty about the meaning of
a guaranty contract and two reasonable constructions may be made, the reviewing
court will apply the construction most favorable to the guarantor.  Clark
v. Walker-Kurth Lumber Co., 689 S.W.2d 275, 278 (Tex. App.—Houston [1st
Dist.] 1985, writ ref’d n.r.e.).  The
rule of strictissimi juris is applied
to prevent the extension of the guarantor’s obligation by implication beyond
the written terms of the agreement.[2]  Id.
          Unless the
guaranty agreement itself sets forth a more extensive or more limited
liability, the guarantor’s liability on a debt is measured by the principal’s
liability.  W. Bank-Downtown v. Carline, 757 S.W.2d 111, 113 (Tex. App.—Houston
[1st Dist.] 1988, writ denied).  “[A] judgment
against the principal obligor conclusively establishes the extent of the
principal’s liability with respect to a guarantor, if that judgment is obtained
in a suit of which the guarantor had full knowledge and an opportunity to
defend . . . .”  Mayfield v. Hicks, 575 S.W.2d 571, 574 (Tex. Civ. App.—Dallas 1978,
writ ref’d n.r.e.).
          Mayfield makes
clear that, unless the guarantor could actually assert the defenses of its
principal in the underlying case, this general rule does not apply.  Id.  “This is true because the guarantor may have
had no authority to answer in the principal’s behalf or to defend in the name
of his principal.”  Id.  Instead, as also
contemplated by Mayfield, “the
opportunity to defend must be such that the guarantor can actually control the
suit with respect to any defenses including those available to the primary
obligee.”  Id.
          b.  Application of
the Law to the Facts
          David
Powers, the guarantor, was party to the underlying suit, as was David Powers
Homes, the company he serves as president. 
Both he and his company were fully aware of the suit.  Both he and his company had an opportunity to
defend against the summary judgment that was rendered against David Powers
Homes.  Both David Powers and David
Powers Homes were represented by the same attorneys in the underlying
litigation.  Indeed, David Powers Homes
could neither have entered into the contract with 84 Lumber nor defended itself
in the litigation without the active participation of David Powers, its
president.  See In re Merrill Lynch Trust
Co. FSB, 235 S.W.3d 185, 188 (Tex. 2007) (corporations can only act through
their human agents).
          We hold that the judgment against David Powers Homes
conclusively establishes the extent of the liability of David Powers Homes with
respect to David Powers, its guarantor.

 
Conclusion
          We sustain
84 Lumber’s sole issue, reverse the portion of the trial court’s judgment that
denied summary judgment on 84 Lumber’s claims against David Powers individually
and that granted David Powers’s cross-motion for summary judgment against 84
Lumber, and we render judgment that David Powers is liable as guarantor for the
full amount of the judgment against David Powers Homes.
 
 
 
                                                                      Jim
Sharp
                                                                      Justice

 
Panel
consists of Justices Keyes, Sharp, and Massengale.

[1]         []
indicates where the left margin was cut off of the copy before the Court.

[2]         “A
guarantor is entitled to have his agreement strictly construed so that it is
limited to his undertakings, and it will not be extended by construction or
implication.  Where uncertainty exists as
to the meaning of a contract of guaranty, its terms should be given a
construction which is most favorable to the guarantor.”  Coker
v. Coker, 650 S.W.2d 391, 394, n.1. (Tex. 1983) (citations omitted).