Opinion
No. 05-00-02100-CV
Opinion issued June 30, 2003
On Appeal from the 160th Judicial District Court, Dallas County, Texas, Trial Court Cause No. 99-07211-H
AFFIRMED
OPINION
Rakesh Desai, Batuk Talati, Praful Bhakta, and Dipakbhai Patel (collectively, the guarantors) appeal the trial court's judgment that they each breached a guaranty agreement owned by Lakshmi Consultants, L.L.C. (Lakshmi). In two issues, guarantors complain the trial judge erred in (1) entering judgment against them because the guaranty agreements were unenforceable and (2) failing to enter judgment for them on their counterclaim. For the following reasons, we affirm.
Factual background
In March 1998, Lakshmi entered into a settlement agreement (the settlement) with Five Star Hotel Corporation (Five Star), the Money Store Investment Corporation (the Money Store), and others, in a prior suit. The guarantors were not parties to that suit; they were Five Star's shareholders who guaranteed a $125,000 promissory note payable by Five Star to Lakshmi under the settlement. The settlement also recited a $130,000 cash payment to Lakshmi. When Five Star defaulted on the $125,000 note and the guarantors refused to pay under the guaranty agreements, Lakshmi sued the guarantors in this suit. After a nonjury trial, the trial judge entered findings of fact and conclusions of law and a judgment in favor of Lakshmi. This appeal ensued.
Guaranty Agreements
In their first issue, the guarantors present three arguments to support their assertion that the trial judge erred in rendering judgment because: (1) their guaranty agreements were not legally enforceable; (2) the settlement itself was not enforceable; and (3) Lakshmi failed to perform a condition precedent.
Although not expressly stated as such, the guarantors appear to contest the sufficiency of the evidence of the findings of fact that support the conclusion of law that the guarantors "executed and delivered the unconditional guarantees called for in the [settlement]" and Lakshmi "performed all conditions precedent to the enforcement of the Real Estate Lien Note and Guarantees."
Among other things, the trial court found:
On or about May 13, 1998, Five Star executed and delivered to Lakshmi a Real Estate Lien Note dated April 1, 1998, whereby Five Star promises to pay Lakshmi the principal sum of $125,000.
Additionally, the Real Estate Lien Note provides in part as follows:
This Note and certain obligations of Maker to Lakshmi are guaranteed by the guaranty of [guarantors] according to the terms and provisions of separate Guarantys executed by each of said Guarantors to Lakshmi.
The trial court also found each of the guarantors acknowledged they were acting as guarantor of Five Star's indebtedness in the sum of $125,000, as evidenced by the execution of their respective guaranty agreements.
The trial court closed its findings of fact and conclusions of law with this paragraph:
To the extent that any findings of fact are in whole or in part deemed to be conclusions of law, the same are submitted as conclusions of law.
To the extent that any conclusions of law are in whole or in part deemed to be findings of fact, the same are submitted as findings of fact.
Findings of fact in a case tried before the court have the same force and effect as a jury's verdict on special issues. Boyd v. Diversified Fin. Sys., 1 S.W.3d 888, 890 (Tex.App.-Dallas 1999, no pet.). We review the trial court's findings of fact by the same standards that are applied in reviewing the evidence supporting a jury's answers. See id. In reviewing a no-evidence point, we consider only the evidence and inferences that support the challenged finding and disregard all contrary evidence and inferences. See id. We uphold the trial court's findings if there is more than a scintilla of evidence to support them. See id. In reviewing a factual sufficiency point, we consider all of the evidence. See id. A finding will be set aside only if the evidence is so weak or the finding is so against the great weight and preponderance of the evidence that it is wrong and manifestly unjust. See id.
We review challenges to the trial court's conclusions of law as a matter of law, not on sufficiency of the evidence grounds. See id. An erroneous conclusion of law is not binding on this Court. See id. When a party attacks conclusions of law on appeal, we have the power and the duty to independently evaluate those conclusions. See id. A trial court's application of law to facts is accorded limited deference. Id. at 890-91. A failure of the trial court to analyze or apply the law correctly is an abuse of discretion. Id. at 891.
In construing a written contract, including a guaranty agreement, the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument. See Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983); Preston Ridge Fin. Servs. Corp. v. Tyler, 796 S.W.2d 772, 777-78 (Tex.App.-Dallas 1990, writ denied) (applying rules of contract construction to guaranty agreement). To achieve this objective, courts examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless. Coker, 650 S.W.2d at 393. If the written instrument is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and the court will construe the contract as a matter of law. Id.
Here, each of the guarantors executed independent, identical, unambiguous guaranty agreements, none of which expressly or impliedly required conditions precedent on Lakshmi's part. Nowhere in these writings do the guarantors directly or indirectly express their intent that their respective guarantees were based on the condition that Lakshmi tender its deed without warranty and release of lien to Five Star. Instead, the documents address the guarantors' "absolute, unconditional and continuing obligation" to Lakshmi to pay the $125,000 note in case of default or bankruptcy by Five Star. Moreover, although the guarantors argue that there is no controverting evidence that their guaranty agreements were conditionally tendered, the cross-examination of Desai indicates otherwise:
ATTORNEY:
And do you understand what unconditionally means?
DESAI:
To the extent that I'm aware of the judgment that was given in this case in which conditions were already set forth, so it was my assumption that whatever it states in the guaranty, it states unconditional, would not account for those things that were already agreed upon in the judgment.
ATTORNEY:
Well, do you see in [the guaranty agreement], hereby unconditionally, other than as set forth in the judgment? There's no reference to the judgment, is there?
DESAI:
No, there is not, no. In making its findings of fact, the trial court was entitled to believe all, part, or none of Desai's testimony. See Morgan v. Chandler, 906 S.W.2d 584, 586 (Tex.App.-Amarillo 1995, writ denied). It was certainly within the province of the trial judge as the fact finder to believe Desai entered into an agreement that expressly stated it was unconditional and disbelieve Desai's testimony that he entered into the guaranty agreement relying upon the complained-of condition precedent.
Furthermore, the settlement, as dictated in the record, provided in part as follows:
The $130,000 cash payment is to be placed in the trust account of Lively and Padfield, by March 20, 1998, with all monies and documents I guess to be funded upon execution of all the closing documents March 20th, is the contemplated closing date.
Arguably, the settlement indicates that only the $130,000 cash payment was to be subject to the complained-of condition precedent. The record reflects more than a scintilla of evidence to support the challenged findings of fact.
The parties stipulated that neither Five Star nor the guarantors ever paid any money towards the $125,000 note. Instead, the record shows that Lakshmi did not receive full payment of the $130,000 cash obligation; it only received $112,000, with the additional $18,000 repeatedly being returned to Lakshmi for insufficient funds. And Lakshmi did not deliver the requested deed without warranty and release of lien documents when it received the $112,000 partial payment.
In reviewing the factual sufficiency, we consider all the evidence, comparing the evidence tending to prove and disprove the complained-of findings of fact.
In a May 13, 1998 letter to attorney Robert Lively, which included various checks, the $125,000 promissory note, and the guaranty agreements, Roland Love, Five Star's attorney, stated in part:
You are to hold the documents pending receipt and transmittal to me of a deed without warranty and release of lien from Lakshmi Consultants, L.L.C. and approval of the Judgment. It is my understanding that you will proceed with negotiating and depositing the checks and will hold those monies until all documents have been agreed and exchanged.
However, Love's understanding of the transaction one week after the guarantors executed the unconditional guaranty agreements and two months after the parties agreed upon the terms of the settlement does not negate the guarantors' intent expressed in the terms of the guaranty agreements.
When comparing all the evidence, the evidence was not so weak, or the findings were not so against the great weight and preponderance of the evidence, that the findings of fact were wrong and manifestly unjust. Thus, any factual insufficiency argument fails. Furthermore, based on the fact findings and the unambiguous language of the guaranty agreements, the trial court did not err in concluding that the guaranty agreements were unconditional and enforceable as a matter of law.
In their second argument, the guarantors assert the settlement was unenforceable because it consisted of mutually-dependent promises that were not fulfilled. Because the guarantors were not parties to the settlement in the prior suit, they cannot challenge its validity in this appeal. Further, we have already held the trial judge did not err in concluding the guaranty agreements were unconditional and enforceable without reference to the settlement agreement.
In their third argument, the guarantors rely on sections 3.105 and 3.306 of the business and commerce code to argue that Lakshmi's failure to perform a condition precedent is a defense to the enforcement of the guaranty agreements as negotiable instruments. However, such reliance is misplaced. Chapter Three of the business and commerce code applies only to negotiable instruments. See Tex. Bus. Comm. Code Ann. § 3.102(a) (Vernon Supp. 2002); Vaughn v. DAP Fin. Servs., Inc., 982 S.W.2d 1, 6 (Tex.App.-Houston [1st Dist.] 1997, no pet.). Where, as here, a guaranty agreement is not payable upon demand or at a definite time, but is instead triggered upon the default of the borrower, that guaranty agreement is not a negotiable instrument and is not governed by provisions of chapter three of the business and commerce code. See Vaughn, 982 S.W.2d at 6; Dann v. Team Bank, 788 S.W.2d 182, 186 (Tex.App.-Dallas 1990, no writ). We add that the cases cited in the guarantors' brief do not involve a guaranty agreement; they involve only a promissory note, which is a negotiable instrument under business and commerce code section 3.104(b)(4). See McPherson v. Longview United Pentecostal Church, Inc., 540 S.W.2d 424, 425, 426 (Tex.Civ.App.-Tyler 1976, writ ref'd n.r.e.) (church executed $138,000 promissory note to builder); Shepherd v. Erickson, 416 S.W.2d 450, 451 (Tex.Civ.App.-Houston 1967, writ ref'd n.r.e.) (Erickson executed $50,000 promissory note to Shepherd). We resolve this argument against the guarantors.
We resolve the first issue against the guarantors.
Guarantors' Counterclaim
In their second issue, the guarantors assert the trial judge erred in failing to render judgment for them on their counterclaim for breach of contract and declaratory judgment and failed to award them attorneys' fees. Specifically, they argue their guaranty agreements were not legally enforceable because Lakshmi failed to perform a condition precedent. They also state in a conclusory fashion that their attorneys' fees were undisputed and supported in the record.
With regard to their counterclaim, because the guarantors provide no authority for their argument and because we have already decided the guaranty agreements were enforceable, we need not address the merits of this issue. See Tex.R.App.P. 38.1(h), 47.1.
With regard to attorneys' fees, the guarantors provide no authority or argument for their assertion that they were entitled to them. See Tex.R.App.P. 38.1(h). Even if they had, the trial court did not err in not awarding them attorneys' fees. In their counterclaim, they requested attorneys' fees under chapter 38 of the Texas Civil Practice and Remedies Code and the declaratory judgment statute. Under section 38.001, the statute provides for recovery in a suit brought on a contract "in addition to the amount of a valid claim." See Tex. Civ. Prac. Rem. Code Ann. § 38.001 (Vernon 2002) (emphasis added); Hartford Cas. Ins. Co. v. Budget Rent-A-Car Sys. Inc., 796 S.W.2d 763, 770 (Tex.App.-Dallas 1990, writ denied). Inasmuch as we have found the trial judge correctly decided the guarantors' contract claim was not valid, they were not entitled to attorneys' fees under section 38.001. See Hartford Cas., 796 S.W.2d at 770.
Under the declaratory judgment act, "the court may award costs and reasonable and necessary attorney's fees as are equitable and just." See Tex. Civ. Prac. Rem. Code Ann. § 37.009 (Vernon 2002). Whether to award attorneys' fees under section 37.009 is largely within the trial court's discretion, and its decision will not be reversed absent an abuse of that discretion. See Oake v. Collin County, 692 S.W.2d 454, 455 (Tex. 1985). Because the guarantors have not established an abuse of discretion, we affirm the trial court's denial of the guarantors' attorneys' fees under the declaratory judgment statute. We resolve the second issue against the guarantors.
Having resolved all issues against the guarantors, we affirm the trial court's judgment.