Humble Community Bank, a Branch of Houston Community Bank, N.A v. Mid-Century Insurance Company

Affirmed and Memorandum Opinion filed May 5, 2005

Affirmed and Memorandum Opinion filed May 5, 2005.

In The

Fourteenth Court of Appeals

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NO. 14-04-00916-CV

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HUMBLE COMMUNITY BANK, A BRANCH OF HOUSTON COMMUNITY BANK, N.A., Appellant

V.

MID-CENTURY INSURANCE COMPANY, Appellee

On Appeal from the 165th District Court

Harris County, Texas

Trial Court Cause No. 02-58326

M E M O R A N D U M   O P I N I O N

Humble Community Bank, a Branch of Houston Community Bank, N.A., (“HCB”) appeals from a summary judgment favoring Mid-Century Insurance Company.  HCB sued Mid-Century as the surety on a receivership bond under Rule 695a of the Texas Rules of Civil Procedure.  Tex. R. Civ. P. 695a.  On appeal, HCB contends that the trial court erred in granting summary judgment because (1) HCB has standing to sue Mid-Century because HCB is the successor in interest to an obligee named in the bond; (2) the action against the surety was not required to have been brought in the same action in which the receiver was appointed; and (3) the trial court erred in granting a no-evidence summary judgment against HCB’s claim for tortious interference with a contract. We affirm.

Background

George Kheir and Zygmunt Kierewicz operated used car dealerships from a shared facility.  The exact business relationship between the two men is unclear from the record.  HCB contends that the two men merely shared business premises.  Kheir had financing and security agreements with Mountain States Capital (“MSC”). Kierewicz had financing and security agreements with HCB.  Kheir allegedly defaulted on his agreements with MSC, and MSC filed suit against Kheir, Kierewicz, and a third entity, Towne Motors, which was apparently Kheir’s alter ego.

MSC requested that a receiver be appointed to take custody of alleged collateral (including vehicles and retail installment contracts) at the premises used by Kheir and Kierewicz.  Pursuant to Rule 695a of the Texas Rules of Civil Procedure, MSC obtained a surety bond with Mid-Century related to the receivership.  Tex. R. Civ. P. 695a.^[1]  The bond states in relevant part as follows:

MSC, plaintiff, as principal and Mid-Century Ins. Co. as surety, do hereby acknowledge ourselves bound to pay to Defendants, George Benjamin Kheir, Individually and d/b/a Towne Motors, Towne Motors, and Zygmunt Kierewicz, the sum of ONE HUNDRED SEVENTY FIVE THOUSAND AND NO/100 DOLLARS ($175,000), conditioned for the payment of all damages and costs in this suit in case it should be decided that such receiver was wrongfully appointed to take charge of the property.

After the receiver was appointed, HCB joined the litigation.  According to HCB’s allegations in the present lawsuit, the receiver not only took custody of assets owned by Kheir and collateralized to MSC but also wrongfully took custody of assets owned by Kierewicz and collateralized to HCB.  Eventually, under a Rule 11 agreement, the parties agreed to have the assets in the receiver’s custody collected (the retail installment contracts) or sold (the vehicles) and the proceeds held in bank accounts pending the outcome of the litigation.  At some point, as the litigation continued, MSC filed for bankruptcy.  Ultimately, the trial court dismissed MSC’s lawsuit for want of prosecution.

HCB subsequently brought the present lawsuit against Mid-Century as the surety on the receivership bond.  HCB contends that in wrongfully taking custody of Kierewicz’s assets, the receiver caused damages to HCB by (1) permitting physical damage to be done to the vehicles; (2) causing Kierewicz to default on his obligations to HCB; and (3) confusing obligors on the retail installment contracts as to whom they were supposed to pay, resulting in numerous defaults.  In its petition, HCB also alleged tortious interference with a contract, although the factual allegations under this cause of action relate solely to conduct by MSC, which was not named as a defendant by HCB.  It is therefore clear that in its tortious interference cause of action, HCB is attempting to recover from Mid-Century only as surety on the receivership bond.

Mid-Century filed a motion for summary judgment alleging that (1) HCB cannot maintain an action on the receivership bond because the language of the bond imposed no obligation on Mid-Century in relation to HCB; (2) an action against a surety under Rule 695a has to be brought in the same action in which the receiver was appointed; and (3) HCB can produce no evidence to support its tortious interference cause of action.  The trial court granted the motion without specifying the grounds therefor.

Discussion

We utilize the normal standards for reviewing the grant of traditional and no-evidence summary judgments.  See Tex. R. Civ. P. 166a(c), (i); King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 750-51 (Tex. 2003) (no-evidence standards); Nixon v. Mr. Prop.  Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985) (traditional standards).  In its first ground for summary judgment, Mid-Century asserted that HCB could not sue to collect on the receivership bond because the language of the bond imposes no obligation on Mid-Century to pay HCB under any circumstances.  In its first issue on appeal, HCB contends that the trial court erred if it concluded that HCB did not have standing to sue on the receivership bond.

A plaintiff has standing when it is personally aggrieved by an alleged wrong. Nootsie, Ltd. v. Williamson County Appraisal Dist., 925 S.W.2d 659, 661-62 (Tex. 1996); Metro. Transit Auth. Harris County, Tex. v. Graham 105 S.W.3d 754, 760 (Tex. App.—Houston [14th Dist.] 2003, pet denied).  The general test for standing is whether there is a real controversy between the parties that will be determined by the judicial declaration sought.  Nootsie Ltd., 925 S.W.2d at 662.  Here, the question is not whether HCB was injured by the alleged wrongful appointment of the receiver or by the receiver’s actions (as HCB has named neither MSC nor the receiver in the present action); instead, the question is whether HCB was injured by Mid-Century’s refusal to pay on the receivership bond.  In Texas, surety agreements are interpreted under the doctrine of strictissimi juris (“of the strictest right or law”) in order to refrain from extending the surety’s obligation by implication beyond the written terms of the agreement. Vastine v. Bank of Dallas, 808 S.W.2d 463, 464 (Tex. 1991); Augusta Court Co‑Owners’ Ass’n v. Levin, Roth & Kasner, 971 S.W.2d 119, 123 (Tex. App.—Houston [14th Dist.] 1998, pet. denied).

HCB specifically argues that it has standing to sue on the bond because it is a successor in interest to Kierewicz, who was a named obligee in the bond.  In support of its contention, HCB cites to the following paragraph in the security agreements between itself and Kierewicz:

Authority of Secured Party to Make Advances and Perform for Debtor.

. . . .

If I fail to perform any of my duties under this security agreement, or any mortgage, deed of trust, lien or other security interest, you may without notice to me perform the duties or cause them to be performed. I understand that this authorization includes, but is not limited to permission to:  (1) prepare, file, and sign my name to any necessary reports or accountings; (2) notify any account debtor of your interest in this property and tell the account debtor to make the payments to you or someone else you name, rather than me; (3) place on any chattel paper a note indicating your interest in the property; (4) in my name, demand, collect, receive and give a receipt for, compromise, settle, and handle any suits or other proceedings involving the collateral; (5) take any action you feel is necessary in order to realize on the collateral, including performing any part of a contract or endorsing it in my name . . . .

According to Black’s Law Dictionary, a “successor” is “[a] person who succeeds to the office, rights, responsibilities, or place of another; one who replaces or follows another.”  Black’s Law Dictionary 1446 (7th ed. 1999).  A “successor in interest” is “[o]ne who follows another in ownership or control of property.”  Id. In keeping with these definitions, Texas law acknowledges that a successor in interest “steps into the shoes” of another, assuming both their rights and obligations in respect to the property or position.  See  Augusta Court, 971 S.W.2d at 126 (citing Thompson v. N. Tex. Nat’l Bank, 37 S.W.2d 735, 739 (Tex. Comm’n App. 1931, holding app’d)); Enchanted Estates Cmty. Ass’n v. Timberlake Improvement Dist., 832 S.W.2d 800, 802 (Tex. App.—Houston [1st Dist.] 1992, no writ).            Under the paragraph highlighted by HCB, upon Kierewicz’s default, HCB was entitled to perform any of his “duties” under the agreement.  It appears to be completely HCB’s option as to which of the duties it chooses to perform or whether it chooses to perform any of them.  Further, it does not require HCB to take on any of Kierewicz’s obligations regarding the collateralized assets, whether in regard to the security agreement or in relation to any third parties.  Not only does this agreement not constitute proof that HCB became Kierewicz’s successor, its optional nature negates such a conclusion. We also note that the record contains no evidence HCB foreclosed on any of Kierewicz’s assets or otherwise came into ownership of those assets.  In other words, HCB did not replace or follow Kierewicz as owner of the property.^[2]

Thus, we find that HCB’s assertion that it had standing to sue on the receivership bond as the successor in interest to Kierewicz is without merit.  HCB makes no other arguments regarding standing.  We therefore find that the trial court did not err in granting summary judgment favoring Mid-Century.  See Tex. R. Civ. P. 166a; Nootsie Ltd., 925 S.W.2d at 662;   Augusta Court, 971 S.W.2d at 126.  Because we affirm the grant of summary judgment on the standing ground, we need not address HCB’s second and third issues.  These issues are dismissed as moot.^[3]

The trial court’s judgment is affirmed.

/s/      Adele Hedges

Chief Justice

Judgment rendered and Memorandum Opinion filed May 5, 2005.

Panel consists of Chief Justice Hedges and Justices Fowler and Frost.

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^[1]  Rule 695a provides that no receiver may be appointed to take charge of property involved in litigation without the party requesting the receivership filing a bond payable to the defendants and conditioned for the payment of all damages and costs should it be held that the receiver was wrongfully appointed.  Tex. R. Civ. P. 695a.

^[2]  Indeed, in its brief, HCB refers to the property as “Kierewicz’s property” and HCB’s “collateral.”

^[3]  As mentioned above, HCB raised its tortious interference cause of action only as a method of collecting on the receivership bond. Because HCB was without standing to sue on the bond, its third issue attacking the no-evidence ground is rendered moot.