Don J. Davis v. Leah M. McCurry

NUMBER 13-99-231-CV COURT OF APPEALS THIRTEENTH DISTRICT OF TEXAS CORPUS CHRISTI ___________________________________________________________________ DON J. DAVIS , Appellant, v. LEAH M. MCCURRY , Appellee. ___________________________________________________________________ On appeal from the 269th District Court of Harris County, Texas. ___________________________________________________________________ O P I N I O N Before Chief Justice Seerden and Justices Dorsey and Yañez Opinion by Justice Dorsey This is a suit on a note. Don Davis, appellant, signed a promissory note payable to Leah McCurry, appellee, in the amount of $75,000.00 plus interest. The Note was payable in four yearly installments of $10,000.00, and one final payment of the balance. Davis never made any payments. He contends that the Note is unenforceable because it is not supported by consideration. We disagree. McCurry filed suit on the Note, alleging breach of contract and seeking attorneys' fees. Davis asserted the affirmative defense of lack of consideration. McCurry moved for summary judgment, which the trial court granted on February 18, 1999. Davis appeals this judgment, contending that a genuine issue of material fact exists regarding whether he received consideration for making the Note. Standard of Review When a plaintiff moves for summary judgment, she has the burden of establishing by competent summary judgment proof that, as a matter of law, there is no genuine issue of material fact as to one or more essential elements of her cause of action. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985); Gibbs v. General Motors Corp., 450 S.W.2d 827, 828 (Tex. 1970). She must produce evidence sufficient to support an instructed verdict at trial. Al's Formal Wear v. Sun, 869 S.W.2d 442, 444 (Tex. App.--Houston [1st Dist.] 1993, writ denied). In deciding whether there is a material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true. Sysco Food Services, Inc. v. Trapnell, 890 S.W.2d 796, 800 (Tex. 1994). Also, every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor. Id. The Note at issue in this case is a negotiable instrument governed by Article 3 of the Texas Business & Commerce Code. See Tex. Bus. & Comm. Code Ann. § 3.104 (Vernon Supp. 2000). If McCurry is a not a holder in due course of the Note, her right to enforce Davis' obligation to pay the Note is subject to any defense that would be available to Davis if McCurry was enforcing a right to payment under a simple contract. See id. at § 3.305; see also Cadle Co. v. Bankston & Lobingier, 868 S.W.2d 918, 922 (Tex. App.--Fort Worth 1994, writ denied). McCurry has not alleged that she is a holder in due course. Thus, the affirmative defense of lack of consideration is available to Davis. A contract that lacks consideration lacks mutuality of obligation and is unenforceable. Federal Sign v. Texas Southern Univ., 951 S.W.2d 401, 409 (Tex. 1997). McCurry points to two types of consideration she contends supports the promissory note. First, she contends that a past obligation that Davis owed to her at the time he signed the Note constitutes valid consideration. Second, she contends that a release she executed in favor of Davis contemporaneously with signing the Note amounts to valid consideration supporting the Note. When McCurry sought summary judgment as plaintiff on her claim for breach of contract, her burden was to show (1) no genuine issue of material fact existed regarding any element of her cause of action and (2) she was entitled to judgment as a matter of law. Davis responded with an assertion of the affirmative defense of "lack of consideration." Davis' response merely needed to raise a fact issue with regard to his affirmative defense in order to prevail against McCurry's summary judgment motion. Thus, we must reverse the trial court's grant of summary judgment if we find either (1) a fact issue exists on Davis' affirmative defense of lack of consideration, or (2) McCurry has not shown entitlement to judgment as a matter of law. Affirmative Defense We first address Davis' affirmative defense of "lack of consideration." Consideration is a present exchange bargained for in return for a promise. Roark v. Stallworth Oil and Gas, Inc., 813 S.W.2d 492, 496 (Tex. 1991); Connell v. Provident Life & Accident Ins. Co., 148 Tex. 311, 314-15, 224 S.W.2d 194, 196 (1949). It consists of either a benefit to the promisor or a detriment to the promisee. Roark, 813 S.W.2d at 496. The detriment must induce the making of the promise, and the promise must induce the incurring of the detriment. Id.; see Broadnax v. Ledbetter, 100 Tex. 375, 378, 99 S.W. 1111, 1112 (1907). What constitutes consideration of a contract is a question of law. Brownwood Ross Co. v. Maverick County, 936 S.W.2d 42, 45 (Tex. App.--San Antonio 1996, no writ); Williams v. Hill, 396 S.W.2d 911, 913 (Tex. Civ. App.--Dallas 1965, no writ). Because this is a summary judgment proceeding, we assume Davis' version of the facts is accurate. See Sysco Food Services, Inc., 890 S.W.2d at 800. His rendition of the relevant facts is set forth as follows. Davis has been a real estate developer since 1970. McCurry has been his personal friend since the 1980's. Golden Gate, Inc. ("GGI") is a Texas corporation through which Davis has conducted his real estate business. In December of 1991, Davis suggested to McCurry they form a limited partnership between GGI and herself. GGI would be the general partner and McCurry would be the limited partner, with each owning 50% of the limited partnership. In early 1992, GGI and McCurry entered into the limited partnership, and named it Leah Ventures, Ltd. ("LVL"). McCurry paid an initial capital contribution of $152,500.00, and GGI made no initial capital contribution. The purpose of LVL was to invest the partnership's capital in various endeavors. The partnership agreement contained a clause stating that no partner believed that the partnership agreement amounted to any type of guarantee of "returns and profits," and that Don Davis was not personally liable for anything related to the partnership. In early 1992, the limited partnership invested over one hundred thousand dollars in a division of GGI called the "GGI Development Fund" (GGIDF). GGIDF agreed to use its "best efforts" to provide LVL an annual 10% return on its investment. In late 1996, a major GGIDF asset was sold, and LVL's return of investment was calculated. LVL's return from the investment of $112,675 was $35,046. Davis contends that he has no personal liability for the loss sustained by LVL. We note, though, that the issue of whether or not Davis may have been personally liable in any way for the actions of either GGI, GGIDF, LVL or 2100 Memorial, Ltd.,(1) is a legal question, and Davis' sworn statement to that effect is of no consequence. Nevertheless, Davis contends that despite the fact that he had no obligation to pay McCurry, he agreed to purchase McCurry's 50% interest in LVL. He paid her $55,000 for that interest. After receiving the $55,000, McCurry still faced a loss of $57,675 from her initial capital contribution to LVL. Davis agreed to give her the $57,675 in lost capital, plus interest of $17,325, for a total of $75,000 in the form of a promissory note - the one at issue in this case. To document this transaction, he entered into a bill of sale with McCurry purporting to purchase all of McCurry's interest in LVL. On the same date, he signed the $75,000 promissory note, and McCurry executed a release in favor of LVL, GGI, 2100 Memorial, Ltd. and Don Davis, personally. Davis concedes he never made a payment pursuant to the terms of that Note. The release that McCurry executed contemporaneously with the Note states: For and in consideration of Ten and No/100 Dollars and other good and valuable consideration to Releasor paid, the receipt and sufficiency of which is hereby acknowledged and confessed, Releasor does hereby . . . release, acquit and forever discharge Releasees . . . from all claims, demand, and causes of action of whatsoever nature, known or which through the exercise of reasonable diligence should be known to Releasor, whether in contract, tort, pursuant to statute, or otherwise, from personal injuries, property damages, punitive damages, trebled damages, or any other damages which have accrued or may ever accrue to Releasor . . . for or on account of any alleged actions or omissions or Releasees arising from or related to Releasor having been a limited partner in LEAH VENTURES, LTD. We hold that the release is sufficient consideration to support the promissory note. Accord Copeland v. Alsobrook, 3 S.W.3d 598, 607 (Tex. App.--San Antonio 1999, pet. denied) (holding that release executed by former wife of decedent so that proceeds of policy on which she was still erroneously named as beneficiary could be paid out without court order constituted consideration); Trantham v. Roper, 308 S.W.2d 195, 197 (Tex. Civ. App.--Texarkana 1957, writ ref'd n.r.e.) (forebearance to sue is sufficient consideration to support a contract). A valuable and sufficient consideration for a contract may consist of either a benefit to the promisor or a loss or detriment to the promisee. In other words, sufficient consideration for the agreement may consist of some right, interest, profit, or benefit that accrues to one party, or, alternatively, of some forbearance, loss, or responsibility that is undertaken or incurred by the other party. Accordingly, it is not necessary that the promisor receive a benefit under the agreement. On the contrary, if the promisee parts with some legal right or sustains some legal injury as the inducement for the agreement, this will be sufficient. Solomon v. Greenblatt, 812 S.W.2d 7, 15 (Tex. App.--Dallas 1991, no writ). Specifically, it is well settled that a forebearance to institute legal proceedings constitutes valid consideration to support a contract. Leonard v. Texaco, Inc., 422 S.W.2d 160, 165 (Tex. 1967); Executive Condominiums, Inc. v. State, 764 S.W.2d 899, 903 (Tex. App.--Corpus Christi 1989, writ denied). Likewise, postponement of enforcement of a debt has been held to be sufficient consideration, Swofford v. Tri-State Chemicals, Inc., 764 S.W.2d 24, 26 (Tex. App.--El Paso 1989, writ denied), as has a mere agreement to continue doing business with a party. Gooch v. American Sling Co., Inc., 902 S.W.2d 181, 185 (Tex. App.--Fort Worth 1995, no writ). Even an extension of time in which to pay a debt is adequate consideration for a contract. Bonner Oil Co. v. Gaines, 191 S.W. 552 (Tex. 1917); Victoria Bank & Trust Co. v. Brady, 779 S.W.2d 893, 903 (Tex. App.--Corpus Christi 1989), rev'd in part on other grounds, 811 S.W.2d 931 (Tex. 1991). Regardless of Davis' beliefs regarding his individual liability, he received a benefit from the release signed by McCurry. McCurry released Davis individually, along with all the other entities through which he was conducting his real estate business from any and all claims which might arise on her behalf resulting from her involvement in LVL. The merits of any such suit are indeterminable at this point, but that does not diminish the fact that the release constituted a detriment to McCurry and a benefit to Davis. By signing the release, McCurry gave up any possible chance of seeking legal recompense for her loss sustained during her involvement with LVL. Once he obtained the signed release, Davis was able to continue doing business free from potential liability or legal fees related to defending against a suit by McCurry related to LVL. We find that McCurry's forebearance from instituting legal proceedings, as evidenced by the release, constitutes valid consideration for the $75,000.00 promissory note as a matter of law. Because we find the release constitutes valid consideration supporting the Note, we do not address the arguments regarding whether McCurry's initial capital contribution constituted valid consideration for the Note. Entitlement to Judgment as a Matter of Law In order to sustain the trial court's granting of summary judgment, we still must find that McCurry has shown entitlement to judgment as a matter of law on her cause of action. Summary judgment is appropriate in a suit seeking recovery on a promissory note when the plaintiff establishes: (1) the existence of the note in question; (2) that the defendant executed the note; (3) that the plaintiff is the legal holder of the note; and (4) a certain balance due and owing on the note. Stucki v. Noble, 963 S.W.2d 776, 782 (Tex. App.--San Antonio 1998, pet. denied); Bean v. Bluebonnet Savings Bank FSB, 884 S.W.2d 520, 522 (Tex. App.--Dallas 1994, no writ); Clark v. Dedina, 658 S.W.2d 293, 295 (Tex. App.--Houston [1st Dist.] 1983, writ dism'd). Again, Davis' own summary judgment proof provides undisputed evidence of all the elements necessary to establish McCurry's entitlement to judgment on the Note. He admitted to each of those elements in his sworn affidavit attached to his summary judgment response. We AFFIRM the judgment of the trial court. ______________________________ J. BONNER DORSEY, Justice Do not publish . Tex. R. App. P. 47.3(b). Opinion delivered and filed this 4th day of May, 2000. 1. "2100 Memorial, Ltd." is the name of the principal asset of the GGIDF which was sold at a loss to LVL.