APM Enterprises, LLC, and Avtar Grewal v. National Loan Acquisitions Company ( 2014 )

In The
Court of Appeals
Sixth Appellate District of Texas at Texarkana
No. 06-14-00027-CV
APM ENTERPRISES, LLC, AND AVTAR GREWAL, Appellant
V.
NATIONAL LOAN ACQUISITIONS COMPANY, Appellee
On Appeal from the 62nd District Court
Lamar County, Texas
Trial Court No. 79950
Before Morriss, C.J., Carter and Moseley, JJ.
Memorandum Opinion by Justice Carter
MEMORANDUM OPINION
To recover past due, accelerated sums under a promissory note, National Loan
Acquisitions Company (National) sued the note’s maker, APM Enterprises, LLC, and APM’s
managing member and guarantor, Avtar Grewal. APM and Grewal appeal the trial court’s final
judgment ordering them to pay (1) the note’s principal balance, (2) accrued interest, and
(3) National’s attorney fees and court costs. On appeal, APM and Grewal argue that the trial
court erred in admitting into evidence a business records affidavit and the documents attached to
that affidavit, which were necessary to support National’s recovery under the promissory note.
Because they contend that the documents needed to support the judgment on the note were
improperly admitted, APM and Grewal argue that there is no evidence to support the judgment
on the promissory note. They also argue that National lacked standing to assert a common-law
fraud cause of action against Grewal for material misrepresentations Grewal allegedly made in
connection with obtaining the loan.
We find (1) that the trial court did not abuse its discretion in admitting the affidavit and
the attached documents and (2) that the admitted documents supported the trial court’s judgment
providing for National’s recovery under the promissory note. We also find that National lacked
standing to assert a common law fraud cause of action against Grewal. However, the claim of
fraud was made in the alternative to recovery on note, and the trial court’s superfluous finding of
fraud, while in error, does not constitute reversible error since it did not affect the judgment. See
TEX. R. APP. P. 44.1(a). Consequently, we affirm the trial court’s judgment.
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I. Factual and Procedural History
On May 23, 2006, APM executed an unsecured $200,000.00 promissory note in favor of
GT’s Investments, LLC, (GT’s) that matured on May 23, 2009. The promissory note was signed
by Grewal as managing member of APM. Payment on the promissory note was guaranteed by
Grewal, individually, and by Grewal Hotels, Inc., (the Hotel) via Grewal’s signature in his
capacity as vice president of the Hotel. GT was owned by three members—David Glass,
National, and Northwest Hospitality, LLC. Glass was present when the promissory note and
guaranty were signed by Grewal. According to Glass, Grewal affirmatively represented that he
was authorized to execute documents on the Hotel’s behalf.
The promissory note required monthly interest and principal payments beginning on
June 23, 2006. An event of default occurred under the terms of the promissory note if the
required payment was not made within ten days of the due date. In the event of a default, the
promissory note provided that the unpaid principal and interest would become immediately due
and collectible at the option of the note’s holder. On June 7, 2006, GT’s assigned the promissory
note to its member, National. An allonge demonstrating that the note was sold and assigned to
National by GT’s was made a permanent part of the promissory note. 1
The promissory note’s date of maturity passed. On June 16, 2009, National entered into a
letter agreement with Grewal, individually and as a member of APM, to modify the terms of the
promissory note, which had a principal balance of $196,158.62 on that date. The modification
1
In their answers to National’s first amended petition, APM and Grewal admitted that National was “the owner and
holder of the note and the guaranty and all right, title and interest thereto, such rights having been assigned to
Plaintiff by GT’s Investments, LLC.”
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extended the maturity date of the promissory note from May 23, 2009, to May 23, 2014, and
provided for a new payment schedule with a fixed ten-percent interest rate.
APM defaulted on the promissory note. Thereafter, National accelerated the
indebtedness and sued APM and guarantors Grewal and the Hotel. After learning from the
Hotel’s president that Grewal had no authority to sign the original promissory note on the
Hotel’s behalf, National (1) asserted—in the alternative to recovering on the note—a common-
law fraud cause of action against Grewal for his misrepresentation to GT’s that he had authority
to bind the Hotel as a guarantor on the note, and (2) nonsuited the Hotel.
National filed a motion for entry of summary judgment on the promissory note. The
motion was supported by the affidavit of National’s custodian of records, Paul W. Peerboom,
who averred that the promissory note was in default and was matured by acceleration. See APM
Enters., LLC v. Nat’l Loan Acquisitions Co., 357 S.W.3d 405, 406 (Tex. App.—Texarkana 2012,
no pet.). The trial court granted National’s summary judgment motion, and APM and Grewal
appealed that decision to this Court. Id. In that appeal, APM and Grewal maintained that they
had received neither notice of National’s intent to accelerate nor notice of acceleration relating to
either the original or the modified notes. Id. Although National had sent several letters and
emails to APM and Grewal informing them of past due loan payments and late charges and
threatening to refer the account to counsel for legal action, we determined (1) that acceleration
under the loan requires clear notice of intent to exercise acceleration rights followed by a clear
notice of actual acceleration, (2) that National’s letters and e-mails did not satisfy these notice
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requirements, and therefore, (3) that National was not entitled to summary judgment on the
accelerated loan amount. Id. at 408–09.
After our previous opinion issued, National, on January 16, 2012, sent the following
letter to APM and Grewal:
As you know, APM Enterprises LLC has failed to pay certain installments
of the indebtedness evidenced by the note. As a result, you are in default under
the terms of the note. This letter is [National’s] demand on you for payment of all
sums (unpaid past due principal and unpaid accrued interest) now owing on the
note . . . .
If payment is not received from you on all sums now due and owing on
the note on or before February 17, 2012, [National] will exercise its right to
accelerate the entire unpaid balance of the note, whereupon all sums (outstanding
principal, unpaid interest accrued on such outstanding principal, and other
amounts including attorney fees) will be fully and immediately due and payable
and [National] will proceed to exercise and pursue its various rights and remedies.
This letter is also notice to Avtar S. Grewal . . . as guarantor[] of the note
of [National’s] demand set forth above. Demand is also made on each guarantor
individually for payment in full of all sums now due on the note in accordance
with the terms and provision[s] of that certain Guaranty also dated May 23, 2006.
This notice of intent to accelerate was sent by Federal Express overnight delivery, and proof of
delivery demonstrated that the letters were delivered on January 17, 2012. On February 20,
2012, National sent this notice of acceleration to APM and Grewal:
Pursuant to the aforesaid letter of January 16, 2012, the payments due and
owing under the terms of the promissory note were to be made to [National] on or
before February 17, 2012. You have failed to make these payments within the
time required and this letter is to notify you that [National], the owner and holder
of the note, has accelerated the outstanding principal balance of the note and all
sums, including outstanding principal, unpaid interest accrued on such
outstanding principal and all other amounts, including, without limitation,
attorneys’ fees owing on and under the note are fully and immediately due and
payable . . . .
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This letter is also notice to Atvar [sic] S. Grewal . . . as guarantor[] of the
notice of [National’s] acceleration as set forth above.
The notice of acceleration was sent certified mail, return receipt. To establish APM’s receipt of
the letter, National filed the return receipt confirming delivery to APM’s address on February 25,
2012, which was signed by Justin Heroux. Although a copy of the letter was also mailed to
Grewal, it was returned unclaimed.
On October 25, 2012, National filed Peerboom’s business records affidavit with the trial
court. The affidavit set forth the proper predicate required by Rule 803(6) of the Texas Rules of
Evidence and attached the following documents: (1) the June 16, 2009, letter modification to the
promissory note; (2) the allonge to the promissory note evidencing the note’s assignment to
National; (3) the January 16, 2012, notice of intent to accelerate the debt; (4) the Federal Express
tracking and delivery confirmation of the January 16 letter; (5) the February 20, 2012, notice of
acceleration; (6) the return receipt signed by Heroux on February 25, 2012; (7) the returned,
unclaimed envelopes addressed to Grewal demonstrating that the February 20 letter was not
delivered to him; and (8) a spreadsheet showing the payment history and remaining balances for
the note.
During a February 13, 2014, bench trial, the court considered Peerboom’s affidavit and
the records attached thereto over Grewal’s objection. At trial, the Hotel’s president, Iquval
Grewal, confirmed that Grewal had no authority to sign the guaranty on the Hotel’s behalf.
Glass testified that he relied on Grewal’s representations that he could bind the Hotel when GT’s
agreed to service the loan. Glass, who was familiar with the loan history, testified that the
principal balance on the loan was $190,730.08 and that the accrued interest was $80,477.49. As
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additional exhibits, National introduced the May 23, 2006, promissory note, the guaranty, the
allonge, and the June 7, 2006, letter informing APM of the assignment of the loan to National.
Grewal did not testify.
Based on the evidence presented, the trial court entered judgment on the note against
APM and Grewal, jointly and severally, for $190,730.08 in principal, $80,447.49 in accrued
interest, and $10,000.00 in attorney fees and court costs. The trial court also stated that,
“liability [im]posed on Avtar Grewal is both based on his liability as a guarantor on the note and
[National]’s common law fraud claim.” APM and Grewal appeal from this judgment.
II. No Abuse of Discretion in Admitting Peerboom’s Affidavit and Attached Records
At trial, National asked the court to take “judicial notice” of the existence of Peerboom’s
affidavit and the records attached to that affidavit. 2 On appeal, APM and Grewal argue (1) that,
because the phrase “judicial notice” was used, the trial court improperly took judicial notice of
the adjudicative facts contained within Peerboom’s affidavit and the records attached thereto
and, thus, (2) that there is no evidence to support the trial court’s finding that “[National] gave
APM and Grewal notice of intent to accelerate and notice of acceleration with respect to the
note.” 3 First, APM and Grewal did not make this specific objection at trial. Second, the trial
court never stated that it took judicial notice of the affidavit and its attached documentation;
rather, the court merely overruled APM and Grewal’s authentication objection and admitted the
documents into evidence.
2
As explained below, the trial court did not take judicial notice of any facts in this case.
3
A trial court’s decision to admit or exclude evidence is reviewed for abuse of discretion. Good v. Baker, 339
S.W.3d 260, 270 (Tex. App.—Texarkana 2011, pet. denied) (citing Interstate Northborough P’ship v. State, 66
S.W.3d 213, 220 (Tex. 2001)).
7
Peerboom’s affidavit and the attached records were admitted into evidence in accordance
with Rule 902(10) of the Texas Rules of Evidence, which provides,
Any record or set of records or photographically reproduced copies of such
records, which would be admissible [as a business record] under Rule 803(6) . . .
shall be admissible in evidence in any court in this state upon the affidavit of the
person who would otherwise provide the prerequisites of Rule 803(6) . . . , that
such records attached to such affidavit were in fact so kept as required by Rule
803(6) . . . , provided further, that such record or records along with such affidavit
are filed with the clerk of the court for inclusion with the papers in the cause in
which the record or records are sought to be used as evidence at least fourteen
days prior to the day upon which trial of said cause commences, and provided the
other parties to said cause are given prompt notice by the party filing same of the
filing of such record or records and affidavit, which notice shall identify the name
and employer, if any, of the person making the affidavit and such records shall be
made available to the counsel for other parties to the action or litigation for
inspection and copying.
TEX. R. EVID. 902(10). Pursuant to a standing order issued by the district courts and county
court at law of Lamar County, Texas, “[A]ll business and medical records attached to affidavits
or notices in accordance with Rule 902(10) Texas Rules of Evidence shall be filed with the
District Clerk as an exhibit and not as a portion of the permanent file.”
Pursuant to Rule 902(10) and the standing order referenced above, National asked the
trial court to consider Peerboom’s affidavit and attachments, which it had filed months before
trial, as trial exhibits. In the letter asking the district clerk to file Peerboom’s affidavit and
attachments, National informed the clerk that a copy of all of the documents, including the notice
of intent to accelerate and notice of acceleration, had been served on APM and Grewal’s counsel,
Jesse Nickerson, on October 24, 2012.
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At trial, APM and Grewal complained that Peerboom’s affidavit and attachments were
not properly authenticated under Rule 902(10) of the Texas Rules of Evidence. Specifically,
they argued,
Now, what I got was a copy of a letter simply to Ms. Patterson saying here are
some records to file in the Court papers and that’s it. So, even if this letter was to
be considered a notice, it doesn’t comply with the requirements of 903.10 in that
it does not state -- identify the name and employer, if any, of the person making
the affidavit. 4
National responded,
[Counsel for APM and Grewal] acknowledges that he received it, and that is
notice. The name of the person giving notice was the cover letter, me. The --
also, the name and the employment of the person making the affidavit is in the
affidavit itself. And the rule does not state exactly how the notice is to be given.
It doesn’t give any kind of special or magic formula as to how it’s to be done, just
that it’s to be done. I’m not aware of any case law that says that there’s some
kind of special compliance that has to be followed.
On appeal, APM and Grewal do not argue that the trial court erred in admitting the
affidavit and attachments under Rule 902(10). They have abandoned that argument, raised at
trial, in favor of a new argument complaining that the trial court took judicial notice of the truth
of the facts contained within the admitted records. 5 We find that the trial court (1) merely
overruled APM and Grewal’s objection to the introduction of Peerboom’s affidavit and the
attached records, (2) determined that the filing was made in accordance with Rule 902(10),
4
When National asked the trial court “to take judicial notice of the business records affidavit that was filed by
[National] on October 25 of 2012,” APM and Grewal stated, “Our objection to that, Your Honor, would be that it
does not comply with 902.10, which is the provision of the Evidence Code that he’s talking about.”
5
“‘It is well-settled that an objection at trial that does not comport with the complaint raised on appeal preserves
nothing for appellate review.’” In re S.A.G., 403 S.W.3d 907, 913 (Tex. App.—Texarkana 2013, pet. filed) (quoting
Martin v. Parris, No. 06–10–00037–CV, 2011 WL 766653, at *7 (Tex. App.—Texarkana Mar. 4, 2011, no. pet.)
(mem. op.)).
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thereby obviating the need to re-authenticate the affidavit and attachments at trial and the need to
duplicate them in the reporter’s record when they were already included in the clerk’s record,
and (3) properly admitted this evidence under its local standing order and Rule 902(10). See
TEX. R. EVID. 902(10). Further, we find that APM and Grewal’s new argument suggesting that
the trial court took judicial notice of the facts contained within the admitted records is meritless.
Finally, we find that the authentication argument made by APM and Grewal at trial was
abandoned on appeal and that the trial court did not abuse its discretion in admitting the
evidence. Therefore, we overrule APM and Grewal’s first point of error.
Next, APM and Grewal’s argument related to the legal sufficiency of the evidence to
support the trial court’s judgment is as follows:
Business records in this case are crucial to Appellee because it is through that
portal that Appellee seeks to prove it gave “notice of intent to accelerate” . . . and
“notice of acceleration” . . . . If business records were admitted in error, the
Appellee has no evidence that “notice of intent to accelerate” or “notice of
acceleration” was given.
Because we have determined that no error in admission of the required notices was shown, we
overrule APM and Grewal’s second point of error.
III. Trial Court’s Implied Finding that National Had Standing to Sue Grewal on GT’s
Behalf for Common-Law Fraud was Harmless
The trial court issued the following findings of fact:
In connection with the signing of the note and the guaranty, Grewal represented to
[National] and to GT’s Investments, LLC[,] that he was Vice President of Grewal
Hotels, Inc.[,] and that he had authority to sign the guaranty on behalf of Grewal
Hotels, Inc.
The representation . . . was: material, false and made by Grewal knowing that it
was false. Grewal intended that [National] and GT’s Investments, LLC[,] rely on
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such representation and act on it. [National] and GT’s Investments, LLC[,]
reasonably relied on such representation.
GT’s was not a party to this lawsuit. A plaintiff has standing to sue when it is personally
aggrieved by the alleged wrong. Nootsie, Ltd. v. Williamson Cnty. Appraisal Dist., 925 S.W.2d
659, 661 (Tex. 1996). APM and Grewal argue that National lacked standing to assert common-
law fraud because the misrepresentations were made to GT’s, GT’s was the only aggrieved party,
and National was not a party to the promissory note at the time Grewal’s misrepresentations
were made. 6 Standing is a component of subject-matter jurisdiction. Tex. Ass’n of Bus. v. Tex.
Air Control Bd., 852 S.W.2d 440, 445–46 (Tex. 1993). “A court has no jurisdiction over a claim
made by a plaintiff who lacks standing to assert it.” Heckman v. Williamson Cnty., 369 S.W.3d
137, 150 (Tex. 2012).
Whether a party has standing to pursue a cause of action is a question of law subject to
de novo review. Id. at 150–51. “The assignability of a cause of action is generally freely
permitted.” Sw. Bell Telephone Co. v. Marketing on Hold, Inc., 308 S.W.3d 909, 916 (Tex.
2010). To recover on an assigned cause of action, the party claiming the assigned rights must
prove (1) that a cause of action existed that was assignable and (2) that the cause was in fact
assigned to the party seeking recovery. Magill v. Watson, 409 S.W.3d 673, 678 (Tex. App.—
Houston [1st Dist.] 2013, no pet.).
6
The court’s finding is based solely on the representations made by Grewal when he signed the original guaranty on
the Hotel’s behalf. We note that National’s June 16, 2009, loan modification was addressed only to APM and was
acknowledged and agreed to only by APM and Grewal in his individual capacity. Our appellate record in this cause
indicates that the Hotel was not a party to the loan modification. We also note that the notices of intent to accelerate
and of acceleration were addressed to Grewal, Inc., and not to the Hotel.
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APM and Grewal acknowledge that GT’s could have asserted a claim for common-law
fraud. A plaintiff has standing by assignment of a cause of action unless the assignment is
invalid as against public policy. See State Farm Fire & Cas. Co. v. Gandy, 925 S.W.2d 696,
706–07 (Tex. 1996). Texas courts recognize five instances in which the assignment of a cause of
action is invalid as against public policy, including: (1) the assignment of an interest in an estate
if used to contest a will, (2) the assignment of a plaintiff’s claim to a tortfeasor in settlement
when that tortfeasor asserts the plaintiff’s cause of action against another joint tortfeasor,
(3) “Mary Carter” agreements, (4) the assignment of a client’s legal malpractice claim arising out
of litigation, and (5) under certain circumstances, the assignment of a defendant’s claims against
his insurer to the plaintiff. Magill, 409 S.W.3d at 677–78 (citing Gandy, 925 S.W.2d at 705);
Trevino v. Turcotte, 564 S.W.2d 682, 690 (Tex. 1978); Int’l Proteins Corp. v. Ralston–Purina
Co., 744 S.W.2d 932, 934 (Tex. 1988); Elbaor v. Smith, 845 S.W.2d 240, 250 (Tex. 1992);
Zuniga v. Groce, Locke, & Hebdon, 878 S.W.2d 313, 318 (Tex. App.—San Antonio 1994, writ
ref’d)). APM and Grewal do not contend that the assignment in this case falls within one of
these prohibited categories. Thus, the cause of action was assignable. 7
However, because the appellate record does not contain the language of GT’s assignment
to National, nothing demonstrates that GT’s common-law fraud cause of action was in fact
assigned to National. National argues that it had standing to assert fraud on GT’s behalf because
it was a member of GT’s at the time Grewal’s misrepresentations were made. We disagree. “A
7
With respect to enforcing a promissory note, “[a]n assignee of a promissory note stands in the shoes of the assignor
and obtains the rights, title, and interest that the assignor had at the time of the assignment.” Lavender v. Bush, 216
S.W.3d 548, 552 (Tex. App.—Texarkana 2007, no pet.) (citing Thweatt v. Jackson, 838 S.W.2d 725, 727 (Tex.
App.—Austin 1992), aff’d, 883 S.W.2d 171 (Tex. 1994)).
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member of a limited liability company lacks standing to assert claims individually where the
cause of action belongs to the company.” Barrera v. Cherer, No. 04-13-00612-CV, 2014 WL
1713522, at *2 (Tex. App.—San Antonio Apr. 30, 2014, no pet.) (mem. op.) (citing Nauslar v.
Coors Brewing Co., 170 S.W.3d 242, 250–51 (Tex. App.—Dallas 2005, no pet.); Wingate v.
Hajdik, 795 S.W.2d 717, 719 (Tex. 1990) (“A corporate stockholder cannot recover damages
personally for a wrong done solely to the corporation, even though he may be injured by that
wrong.”)); see Haut v. Green Cafe Mgmt., Inc., 376 S.W.3d 171, 177 (Tex. App.—Houston
[14th Dist.] 2012, no pet.) (“It is the nature of the wrong, whether directed against the [company]
only or against the [member] personally, not the existence of injury, which determines who may
sue.”).
There is no evidence that GT’s assigned its rights to assert common-law fraud causes of
action to National. Thus, National did not have standing to assert the fraud claim against
Grewal. Nevertheless, Rule 44.1(a)(1) of the Texas Rules of Appellate Procedure states, “No
judgment may be reversed on appeal on the ground that the trial court made an error of law
unless the court of appeals concludes that the error complained of: (1) probably caused the
rendition of an improper judgment. . . .” TEX. R. APP. P. 44.1(a)(1). The fraud cause of action
was pled in the alternative to recovery on the note. Grewal, as a guarantor on the note, and APM
were jointly and severally liable for nonpayment of the note. The proper judgment and the
amount of damages awarded on the promissory note are unaffected by the trial court’s
superfluous findings on the fraud claim. Therefore, the trial court’s implied finding that National
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had standing to assert GT’s fraud claim was harmless as it did not cause the rendition of an
improper judgment.
IV. Conclusion
We affirm the trial court’s judgment.
Jack Carter
Justice
Date Submitted: September 3, 2014
Date Decided: October 17, 2014
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