Tracy Suttles v. Thomas Bearden Co.--Appeal from 61st District Court of Harris County

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State: Texas

Court: Texas Northern District Court

Docket No: 01-02-01077-CV

Case Date: 07/22/2004

Plaintiff: Tracy Suttles

Defendant: Thomas Bearden Co.--Appeal from 61st District Court of Harris County

Preview:Tracy Suttles v. Thomas Bearden Co.--Appeal from
61st District Court of Harris County
Opinion issued February 26, 2004
In The
Court of Appeals
For The
First District of Texas
NO. 01-02-01077-CV
TRACY SUTTLES, Appellant
V.
THE THOMAS BEARDEN COMPANY, Appellee
On Appeal from the 61st District Court
Harris County, Texas
Trial Court Cause No. 0158031
O P I N I O N
This is an appeal from a summary judgment in favor of appellee, The Thomas Bearden Company ( TBC ), and against
appellant, Tracy Suttles. At issue in this case is appellant s liability on a promissory note. On appeal, appellant
contends that the trial court erred in granting summary judgment holding him individually liable on the note because
(1) he signed the note solely in a representative capacity; (2) material fact issues existed as to his liability; and (3) the
note was void as a matter of law.
We reverse and remand.
Facts & Procedural History
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On June 28, 1999, appellant signed a one-page promissory note payable to TBC in the principal amount of $250,000.
The note stated, in relevant part, as follows:
FOR GOOD AND VALUABLE CONSIDERATION, the undersigned Borrowers, jointly and severally, do hereby
promise to pay to Thomas Bearden // (Lender), the amount of $250,000, together with interest accrued at the rate of
7% percent [sic] per annual [sic]. Said amount is to be payable in 36 installments of Interest Only, the first of which is
due on or before 25th of August, and following payments to be made on the 25th of each Month. //
Appellant signed the note twice. Appellant s first signature appeared below the typed written body of the note as
follows:
Gessner Partners Ltd.___ //
TS Clare, Inc., General Partner
Tracy Suttles, President
/s/ Tracy Suttles
Borrower
In an empty space at the bottom of the page, the parties wrote a handwritten amendment to the note. Appellant again
signed below the handwritten amendment, as did Bruce Ripper, the president of TBC. The amendment and parties
signatures appeared on the note as follows:
Interest will accrue from Oct 17, 1997. A $50,000 principal payment will be due June 28, 2000.
/s/ Bruce Ripper
/s/ Tracy Suttles
On September 14, 2000, TBC gave appellant notice that the note was in default and demanded payment in the total
sum of $290,523.18. On November 9, 2001, TBC sued on the note, naming appellant, NBC Properties, Inc., TS Clare,
and Gessner as defendants. On March 8, 2002, TBC requested a partial summary judgment on its claims against both
Gessner and appellant. The trial court granted TBC s motion for partial summary judgment on July 9, 2002, after
which TBC dismissed its remaining claims, making the partial summary judgment a final judgment.
Liability on the Promissory Note
Appellant contends that the trial court erred in finding Business and Commerce Code, subsection 3.402(b)(1) did not
shield him from liability on the note. Specifically, appellant asserts that the face of the note unambiguously showed
that he signed solely in his representative capacity as the president of TS Clare; therefore, subsection 3.402(b)(1)
relieved him of liability. In response, TBC contends that subsection 3.402(b)(1) is not applicable to the subject note
because (1) TS Clare was not identified in the instrument and (2) the note was ambiguous with regard to whether
appellant signed solely in a representative capacity.
A traditional summary judgment under Rule 166a(c) is proper only when the movant establishes that there is no
genuine issue of material fact and that it is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Randall s
Food Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995). In reviewing a summary judgment, we indulge every
reasonable inference in favor of the non-movant and resolve any doubts in its favor. Johnson, 891 S.W.2d at 644;
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Lawson v. B Four Corp., 888 S.W.2d 31, 33 (Tex. App. Houston [1st Dist.] 1994, writ denied). We take all evidence
favorable to the non-movant as true. Johnson, 891 S.W.2d at 644; Lawson, 888 S.W.2d at 33. When, as here, a
summary judgment does not state the specific grounds on which it was granted, a party appealing from the judgment
must show that each of the independent arguments alleged in the motion is insufficient to support the judgment. Smith
v. Houston Lighting & Power Co., 7 S.W.3d 287, 290 (Tex. App. Houston [1st Dist.] 1999, no pet.).
To prevail on a motion for summary judgment to enforce a promissory note, a plaintiff must establish that (1) a note
exists; (2) the plaintiff is the legal owner and holder of the note; (3) the defendant is the maker of the note; and (4) a
certain balance remains due and owing on the note. Blakenship v. Robins, 899 S.W.2d 236, 238 (Tex. App. Houston
[14th Dist.] 1994, no writ). To prove that the defendant is the maker of the note, the plaintiff must present summary
judgment evidence indicating that the defendant s signature appears on the note or that a representative of the
defendant signed the note on the defendant s behalf. //
Even if it is shown that a defendant signed as the maker of a note, the defendant may nevertheless escape liability if
the signature was made in a representative capacity. Tex. Bus. & Com. Code Ann. 3.402 (Vernon 2002). Indeed, if
Business and Commerce Code, subsection 3.402(b)(1) applies to a note, the signatory is not liable as a matter of law. //
Id. 3.402(b)(1). Subsection 3.402(b)(1) provides as follows:
(b) If a representative signs the name of the representative to an instrument and the signature is an authorized signature
of the represented person, the following rules apply:
(1)If the form of the signature shows unambiguously that the signature is made on behalf of the represented person
who is identified in the instrument, the representative is not liable on the instrument.
Id. (emphasis added).
Applicability of Subsection 3.402(b)(1)
To determine the applicability of subsection 3.402(b)(1), we primarily consider the words used in the statute itself. See
Cities of Austin, Dallas, Fort Worth, and Hereford v. Southwestern Bell Tel. Co., 92 S.W.3d 434, 442 (Tex. 2002).
However, we may also consider the object to be attained by the statute, the circumstances surrounding the statute s
enactment, legislative history, former statutory and common law, and the consequences of a particular construction. Id.
The words used in an enactment shall be interpreted in their ordinary sense, unless they are given a specific statutory
definition. Osterberg v. Peca, 12 S.W.3d 31, 38 (Tex. 2000). We will also presume that the legislature used every word
of a statute for a purpose. Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535, 540 (Tex. 1981). We avoid construing a
statutory provision in isolation from the rest of the statute, considering the act as a whole and not just single phrases,
clauses, or sentences. Morrison v. Chan, 699 S.W.2d 205, 208 (Tex. 1985).
In the instant case, as president of the corporation, appellant was a representative of TS Clare. Relatedly, the parties do
not dispute appellant s authority to bind TS Clare to the note. The note, itself, shows that TS Clare was identified in the
signature block of the instrument. Also, the signature block identified appellant as president of TS Clare. We conclude
that, when appellant signed the note s signature block, he did so as an authorized representative of TS Clare. We
further conclude that TS Clare was identified in the instrument and that the form of the signature block showed
unambiguously that appellant s signature was made on behalf of TS Clare.
We disagree with TBC s contention that the represented person (i.e., TS Clare) was not identified in the note. Although
TS Clare was never mentioned in the body of the note, it was identified in the signature block in which appellant
signed. Subsection 3.402(b)(1) merely requires that the principal be identified in the instrument. Tex. Bus. & Com.
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Code Ann. 3.402(b)(1). There is no requirement that the principal be identified in the body of the note. // See id. We
conclude that the identification of TS Clare within the note s signature block was sufficient identification under section
3.402(b)(1).
We also disagree with TBC s contention that the form of appellant s signature failed to show unambiguously that the
signature was made solely on behalf of TS Clare. We find the three ambiguities identified by TBC to be unpersuasive.
First, TBC directs this Court s attention to the body of the note, which refers to multiple borrowers and provides for
joint and several liability among such borrowers. This, TBC contends, is inconsistent with the notion that only Gessner
and thus TS Clare as its general partner was meant to be liable on the note, thereby creating ambiguity as to the
capacity in which appellant signed. However, under subsection 3.402(b)(1), we do not look to the note as a whole to
discern whether representative capacity was ambiguous; we look only to the form of the signature to insure that the
signature, itself, unambiguously shows representative capacity. See id. This analysis is more limited than that provided
for under former section 3.403 which directed courts to look to the instrument to determine representative capacity but
is required to give effect to the changed language of the statute. // Compare Act of September 1, 1967, 60th Leg., R.S.,
ch. 785, 3.403, 1967 Tex. Gen. Laws 2343, 2423 (amended 1995) with Tex. Bus. & Com. Code Ann. 3.402(b)(1).
Second, TBC contends that the signature block does not unambiguously show that appellant signed in a representative
capacity because although [appellant] is identified as President, his signature does not indicate that he is signing for TS
Clare, Inc. This could easily have been done by including the word by in front of his signature. The comments to
section 3.402 indicate that the revisions made to former section 3.403 were for the purpose of providing further
protection to agents who sign negotiable instruments in their representative capacity. Tex. Bus. & Com. Code Ann.
3.402, cm 2. Thus, in drafting the new provision, the legislature moved away from case law under the former provision
which interpreted section 3.403 to require an obsequious adherence to a specific signature form. Id. As the drafters
state in the comments to the new provision:
The approach followed by former Section 3-403 was to specify the form of signature that imposed or avoided liability.
This approach was unsatisfactory. There are many ways in which there can be ambiguity about a signature. It is better
to state a general rule. Subsection (b)(1) states that if the form of the signature unambiguously shows that it is made on
behalf of an identified represented person (for example, P, by A, Treasurer ) the agent is not liable. This is a workable
standard for a court to apply.
Id. We conclude that, under revised section 3.402, a preposition was not required to show appellant s representative
capacity; it was enough that the signature identify TS Clare, appellant, and the capacity in which appellant signed on
behalf of TS Clare.
Finally, TBC contends that the handwritten interlineations on the note are consistent with an interpretation of
individual liability in that there is no indication of representative capacity whatsoever. However, the signatures below
the handwritten amendment to the note are neither consistent nor inconsistent with any theory of representative
capacity.
Normally, a signature and any accompanying words are considered an indorsement unless the accompanying words,
terms of the instrument, place of the signature, or other circumstances unambiguously indicate that the signature was
made for a purpose other than indorsement. Tex. Bus. & Com. Code Ann. 3.204(a) (Vernon 2002).
In the instant case, both the placement of the signatures as well as the words accompanying them suggest that the
signatures were merely an attempt by the parties to indicate on the face of the note that the handwritten portion thereof
was an authorized amendment to the original terms of the note. They do not suggest that either appellant or Bruce
Ripper meant to become liable on the note as indorsers by means of such signatures. Given the limited purpose for
which the parties signed, we conclude that appellant s failure to indicate his representative capacity when signing
below the handwritten amendment neither made him individually liable on the note nor created ambiguity with regard
to his signature on behalf of TS Clare.
We conclude that TBC has failed to show either that TS Clare was not identified in the note or that the form of
appellant s signature was ambiguous as to appellant s representative capacity.
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We hold that, because appellant was not individually liable on the subject note as a matter of law, pursuant to Business
and Commerce Code, subsection 3.402(b)(1), the trial court erred in granting summary judgment against appellant.
Conclusion
Having determined that the trial court erred in granting summary judgment because appellant was not individually
liable on the subject note as a matter of law, we need not consider appellant s remaining arguments on appeal. We
reverse the trial court s judgment and remand for further proceedings.
Laura Carter Higley
Justice
Panel consists of Chief Justice Radack and Justices Jennings and Higley.
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