Court Opinion

ID: 2889362
Source: CourtListenerOpinion
Date Created: 2015-09-07 20:18:51.004291+00
Date Added: 2024-06-11T11:04:51.674009
License: Public Domain

NO. 07-02-0122-CV

                                       IN THE COURT OF APPEALS

                             FOR THE SEVENTH DISTRICT OF TEXAS

                                                AT AMARILLO

                                                   PANEL E

                                           FEBRUARY 24, 2003

                                     ______________________________

                        W. L. EPPS, INDEPENDENT EXECUTOR OF THE
                         ESTATE OF PAUL C. LEDRICK, APPELLANT

                                                        V.

                          NATIONAL BANK OF COMMERCE, APPELLEE

                               _________________________________

                   FROM THE 223RD DISTRICT COURT OF GRAY COUNTY;

                        NO. 30,997; HONORABLE LEE WATERS, JUDGE

                                 _______________________________

Before JOHNSON, C.J. and REAVIS, J. and BOYD, S.J.1

                                         MEMORANDUM OPINION2

      W. L. Epps, Independent Executor of the Estate of Paul C. Ledrick, (Executor),

challenges a judgment following a trial that National Bank of Commerce recover the sum

      1
          Joh n T . Boyd, Chief Justice (Re t.), Seventh Court of A ppe als, sitting by ass ignm ent.

      2
          Te x. R. App . P. 47.1 .
of $265,341.39, plus interest and attorney’s fees against him in his capacity as

Independent Executor of the Estate of Paul Ledrick, deceased. Presenting four issues, the

Executor argues the trial court erred in (1) finding that the Bank’s insufficient knowledge

of John Kenney’s actions was a conclusion of law when the issue was really one of a

finding of fact; (2) concluding as a matter of law that there was insufficient evidence to

show that the Bank had knowledge of the misappropriation of funds under the power of

attorney; (3) concluding that there was insufficient evidence to show the Bank had

knowledge of the misappropriation of funds under the power or attorney; and (4) not finding

the Bank liable for aiding John Kenney in misappropriating funds held in trust under the

power of attorney when the evidence shows the Bank had knowledge that John Kenney

was using the funds for his personal benefit and to the detriment of Ledrick. Based upon

the rationale expressed herein, we affirm.

        On October 1, 1990, Paul C. “Mickey” Ledrick, executed a “General Power of

Attorney” by which he appointed John Kenney as his true and lawful attorney-in-fact.

Ledrick acknowledged the instrument before a notary public and after it was subscribed by

two witnesses, it was recorded in the official records of Gray County. At that time, Kenney

was living on property owned by Ledrick and was “functioning as a caretaker of both the

person and property of Ledrick.” The instrument provided that Kenney had the authority

customarily granted in a general power of attorney, including, among other special

provisions:

                                             2
      (2)(k) To borrow any sum or sums of money on such terms and with such
      security, whether real or personal property, as my attorney may think fit, and
      for that purpose to execute all promissory notes, bonds, mortgages, deeds
      of trust, security agreements, and other instruments which may be necessary
      or proper.

In addition, by paragraphs 9 and 11, Ledrick agreed

      9. CONFIRMATION OF ATTORNEYS ACTS. I hereby ratify and confirm
      that all that my attorney-in-fact or any successor shall lawfully do or cause
      to be done by virtue of this general power of attorney and the rights and
      powers granted herein.

      11. INDEMNIFICATION OF THIRD PARTIES. I hereby indemnify and hold
      harmless any third party who accepts and acts under this power of attorney
      against any and all claims, demands, losses, damages, actions and causes
      of action, including expenses, costs and reasonable attorney’s fees which
      such third party may incur in connection with his reliance on this power of
      attorney.

As of October 1, 1990, Ledrick and Kenney had conducted business with the Bank for

several years and Ledrick had maintained certificates of deposit there and Kenney had

farm loans and a checking account.

      Before Ledrick revoked the power of attorney on March 29, 1998, as material here,

the Bank made six loans to John Kenney, attorney-in-fact for Paul C. Ledrick. By its live

pleading, the Bank sought to recover on the loans against Ledrick as follows:

      a) August 5, 1997, loan no. 902433 in the original principal amount of
      $100,000;

      b) October 8, 1996, loan no. 902122 in the original principal amount of
      $35,000;

                                            3
       c) January 16, 1997, loan no. 902434 in the original principal amount of
       $23,000;

       d) August 5, 1997, loan no. 903075 in the original principal amount of
       $25,000;

       e) January 2, 1998, loan no. 903521 in the original principal amount of
       $5,000; and

       f) January 7, 1998, loan no. 186484 in the original principal amount of
       $4,439.52.

On May 29, 1998,3 the Bank filed suit to recover on the notes and foreclose its collateral

against Ledrick and Kenney.         By his pleadings, the Executor alleged failure of

consideration and other affirmative defenses or claims not material here; however,

misappropriation of funds is raised for the first time on appeal.

       Following rendition of the judgment that the Bank recover on the notes against the

Executor, in addition to other findings of fact, the trial court made the following findings:

       •      Ledrick executed the general power of attorney to Kenney.

       •      The power of attorney was prepared by Ledrick’s attorney.

       •      Beginning on August 18, 1992, the Bank commenced making loans
              to Kenney, POA for Ledrick, and eventually the six loans set out
              above were made to John Kenney, POA for Paul C. Ledrick.

       •      All of the loans were in default and the Bank had given proper notice
              to Kenney and Ledrick.

       3
         Ledrick died on January 14, 2000, and the Executor was substituted at the time of
trial. After a judgment against Kenney was signed, that judgment was severed into another
proceeding and the case against the Executor proceeded to trial.

                                              4
       •      The Bank was the owner and holder of the six notes.

       •      Ledrick revoked the general power of attorney on March 29, 1998.

       •      As of the date of trial, the total principal and accrued interest on the
              notes was $265,341.39.

Where, as here, these findings are not challenged, this Court is bound by them unless the

contrary is established as a matter of law or there is no evidence to support the findings.

McGalliard v. Kuhlmann, 722 S.W.2d 694, 696 (Tex. 1986); see also Northwest Park

Homeowners Ass’n, Inc. v. Brundrett, 970 S.W.2d 700, 704 (Tex.App.–Amarillo 1998, pet.

denied).

       We will consider the Executor’s issues in a logical rather than sequential order.

Issues two and four are directed at misappropriation of funds; thus, we will consider them

together. By his second issue, the Executor argues the trial court erred in concluding as

a matter of law that there was insufficient evidence to show that the Bank had knowledge

of the misappropriation of the funds under the power of attorney. By his fourth issue, he

contends the trial court erred in not finding the Bank liable for aiding Kenney in

misappropriating funds held in trust under the power of attorney when the evidence

showed that the Bank had knowledge that Kenney was using the funds for his personal

benefit and to the detriment of Ledrick.

       In reply to these issues, the Bank contends that because the affirmative defense

of misappropriation was not alleged in the trial court it is waived. We agree. The office of

                                             5
pleadings is to define issues at trial. Murray v. O & A Express, Inc., 630 S.W.2d 633, 636

(Tex. 1982). Also, in Sandridge v. Merritt, 581 S.W.2d 247, 249 (Tex.Civ.App.--Amarillo

1979, no writ), we held that defensive theories not presented in the trial court may not be

raised as a new theory for the first time on appeal. See Scurlock Permian Corp. v. Brazos

County, 869 S.W.2d 478,483 (Tex.App.–Houston [1st Dist.] 1993, writ denied). Issues not

raised in the trial court may not be raised for the first time on appeal. See City of San

Antonio v. Schautteet, 706 S.W.2d 103, 104 (Tex. 1986).

       Moreover, by paragraph 9 of the power of attorney, Ledrick ratified all acts of the

attorney and then by paragraph 11, Ledrick agreed to indemnify and hold the Bank, a third

party, harmless against any claim or demand arising in connection with its reliance on the

power of attorney. Accordingly, even assuming that Kenney commingled loan proceeds,

because of Ledrick’s ratification and indemnification and, where, as here, as between two

innocent parties, the loss should be placed on the party that mistakenly created the

situation and was in the best position to have avoided it. Because the Bank’s loans were

extended in reliance on the power of attorney which Ledrick executed, the Executor’s

second and fourth issues are overruled. Holden Business Etc. v. Columbia Med. Etc., 83
S.W.3d 274, 278 (Tex.App.--Fort Worth 2002, no pet.).

       By his first issue, the Executor argues the trial court erred in finding that the Bank’s

insufficient knowledge of Kenney’s actions was a conclusion of law when the issue was

really one of a finding of fact. Then, by his third issue, he argues the trial court erred in

                                              6
concluding that there was insufficient evidence to show the Bank had knowledge of

misappropriation of funds under the power of attorney. Because these two issues also

concern misappropriation of funds, our disposition of the second and fourth issues

pretermits our consideration of these two issues.

       Although the Executor alleged fraud and failure of consideration in the trial court,

on appeal he does not challenge the findings of fact or the failure of the trial court to make

findings regarding his fraud or failure of consideration defenses. Also, he does not contend

that the promissory notes were not signed, that the Bank was not the holder and owner of

the notes, nor that they remained unpaid. Because the signatures on the promissory notes

were established, production of the instruments entitled the Bank to recover thereon in the

the absence of defenses being established by the Executor. See Tex. Bus. & Com. Code

Ann. § 3.307(b) (Vernon 2002); Sharp v. Brock, 626 S.W.2d 166, 169 (Tex.Civ.App.--Fort

Worth 1981, no writ). Issues one and three are overruled.

       Accordingly, the judgment of the trial court is affirmed.

                                                  Don H. Reavis
                                                    Justice

                                              7