Steven Jeffrey Johnson v. Michele Jean Johnson

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-10-00296-CV
STEVEN JEFFREY JOHNSON APPELLANT
V.
MICHELE JEAN JOHNSON APPELLEE
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FROM THE 342ND DISTRICT COURT OF TARRANT COUNTY
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MEMORANDUM OPINION1
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I. Introduction
In one issue, Appellant Steven Jeffrey Johnson appeals the trial court’s
summary judgment and order in favor of Appellee Michele Jean Johnson. We
affirm.
1
See Tex. R. App. P. 47.4.
II. Factual and Procedural Background
On February 3, 2010, pursuant to the parties’ ―Agreement Incident to
Divorce,‖ Steven, CEO of Cano Petroleum, Inc., executed a promissory note (the
Note) in favor of Michele in the amount of $460,000, to mature on April 13, 2010.2
At the same time, the parties executed a ―Security Agreement with Collateral
Pledge and Appointment of Escrow Agent‖ (the Security Agreement) listing
92,000 shares of Cano stock as security for the Note. 3
In May 2010, after Steven defaulted, Michele brought suit to collect on the
Note’s overdue principal. Steven answered with a general denial and asserted
two affirmative defenses: (1) excuse from payment, because the Security
Agreement ―modified, supplemented, or nullified‖ the Note; and (2) impossibility,
because at the time the Note matured, a mandatory stock-transaction blackout
period associated with Cano’s proposed merger with another firm rendered
performance impossible. On June 22, 2010, Michele filed a motion for summary
judgment. Steven responded, reiterating the affirmative defenses set out above.
After a hearing, the trial court granted Michele’s motion and issued an order
awarding Michele the principal—$460,000—plus pre- and post-judgment interest
2
Although executed in February 2010, the Note was originally drafted on
April 13, 2007, and called for quarterly interest payments on the principal
beginning on May 1, 2007.
3
The Note and Security Agreement are appended to the end of this
opinion.
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at a rate of five percent per annum computed from April 13, 2010. This appeal
followed.
III. Standard of Review
In a summary judgment case, the issue on appeal is whether the movant
met the summary judgment burden by establishing that no genuine issue of
material fact exists and that the movant is entitled to judgment as a matter of law.
Tex. R. Civ. P. 166a(c); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding,
289 S.W.3d 844, 848 (Tex. 2009). We review a summary judgment de novo.
Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010).
We take as true all evidence favorable to the nonmovant, and we indulge
every reasonable inference and resolve any doubts in the nonmovant’s favor.
20801, Inc. v. Parker, 249 S.W.3d 392, 399 (Tex. 2008); Provident Life &
Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). We consider the
evidence presented in the light most favorable to the nonmovant, crediting
evidence favorable to the nonmovant if reasonable jurors could and disregarding
evidence contrary to the nonmovant unless reasonable jurors could not. Mann
Frankfort, 289 S.W.3d at 848. We must consider whether reasonable and fair-
minded jurors could differ in their conclusions in light of all of the evidence
presented. See Wal-Mart Stores, Inc. v. Spates, 186 S.W.3d 566, 568 (Tex.
2006); City of Keller v. Wilson, 168 S.W.3d 802, 822–24 (Tex. 2005).
If the defendant wishes to assert an affirmative defense to the motion, he
must urge the defense in his response and present sufficient evidence to create
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a fact issue on each element of the defense. See Brownlee v. Brownlee, 665
S.W.2d 111, 112 (Tex. 1984); Anglo-Dutch Petroleum Int’l, Inc. v. Haskell, 193
S.W.3d 87, 95 (Tex. App.—Houston [1st Dist.] 2006, pet. denied) (citing
Beathard Joint Venture v. W. Houston Airport Corp., 72 S.W.3d 426, 434 (Tex.
App.—Texarkana 2002, no pet.); Jones v. Tex. Pac. Indem. Co., 853 S.W.2d
791, 795 (Tex. App.—Dallas 1993, no writ)). The non-movant is not required to
prove the affirmative defense as a matter of law; raising a fact issue is sufficient
to defeat summary judgment. See Anglo-Dutch Petroleum, 193 S.W.3d at 95;
see also Brownlee, 665 S.W.2d at 112.
IV. Applicable Law
A. Collection of a Promissory Note
To collect on a promissory note, a plaintiff must establish: (1) that the note
exists; (2) that the defendant signed the note; (3) that the plaintiff is the owner
and holder of the note; and (4) that a certain balance is due and owing on the
note. Cadle Co. v. Regency Homes, Inc., 21 S.W.3d 670, 674 (Tex. App.—
Austin 2000, pet. denied); see also Clark v. Dedina, 658 S.W.2d 293, 295–96
(Tex. App.—Houston [1st Dist.] 1983, writ dism’d).
B. Business and Commerce Code Section 3.117
Business and commerce code section 3.117, titled ―Other Agreements
Affecting Instrument,‖ states in relevant part that
the obligation of a party to an instrument to pay the instrument
may be modified, supplemented, or nullified by a separate
agreement of the obligor and a person entitled to enforce the
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instrument, if the instrument is issued or the obligation is
incurred in reliance on the agreement or as part of the same
transaction giving rise to the agreement. To the extent an
obligation is modified, supplemented, or nullified by an
agreement under this section, the agreement is a defense to
the obligation.
Tex. Bus. & Com. Code Ann. § 3.117 (West 2002). ―The separate agreement
might be a security agreement . . . that contradicts the terms of the instrument.‖
Id. § 3.117 cmt. 1 (West Supp. 2010) (emphasis added).
Additionally, where two or more instruments, executed contemporaneously
or at different times, pertain to the same transaction, the instruments will be read
together, even though they do not expressly refer to each other. Bd. of Ins.
Comm’rs v. Great S. Life Ins. Co., 150 Tex. 258, 267, 239 S.W.2d 803, 809
(1951); see also Fort Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d
831, 840 (Tex. 2000) (stating that it is ―well-established law that instruments
pertaining to the same transaction may be read together to ascertain the parties’
intent‖).
C. Impossibility of Performance
There are two general types of impossibility: (1) objective, and (2)
subjective. Walston v. Anglo-Dutch Petroleum (Tenge) L.L.C., No. 14-07-00959-
CV, 2009 WL 2176320, at *6 n.2 (Tex. App.—Houston [14th Dist.] July 23, 2009,
no pet.) (mem. op.); Janak v. FDIC, 586 S.W.2d 902, 906–07 (Tex. Civ. App.—
Houston [1st Dist.] 1979, no writ). Objective impossibility relates solely to the
nature of the promise. See Janak, 586 S.W.2d at 906–07. Something is
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objectively impossible if ―the thing cannot be done,‖ such as an inability ―to
perform the promise to settle [a] claim by entering an agreed judgment in the
lawsuit which had been dismissed‖ prior to the completion of the agreement.
See Grayson v. Grayson Armature Large Motor Div., Inc., No. 14-09-00748-CV,
2010 WL 2361432, at *5 (Tex. App.—Houston [14th Dist.] June 15, 2010, pet.
denied) (mem. op.). Subjective impossibility is due wholly to the inability of the
individual promisor. See id. Something is subjectively impossible if ―I cannot do
it,‖ such as when a promisor’s financial inability to pay makes it impossible for the
promisor to perform. See id.
Objective impossibility can serve as a defense in a breach of contract suit.
Janak, 586 S.W.2d at 906–07. However, a party cannot escape contract liability
by claiming subjective impossibility; subjective impossibility neither prevents the
formation of the contract nor discharges a duty created by a contract. See
Grayson, 2010 WL 2361432, at *5; Walston, 2009 WL 2176320, at *6 n.2; Janak,
586 S.W.2d at 906–07.
V. Analysis
Because the parties do not dispute (1) that the Note and Security
Agreement exist and are valid, (2) that Steven executed the Note in Michele’s
favor for $460,000, (3) that Michele is the Note’s owner and holder, and (4) that
Steven did not meet his obligation when the Note matured, we conclude that
Michele has met her burden under rule 166a(c). Thus, unless Steven raised a
fact issue supporting his affirmative defenses sufficient to defeat Michele’s
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motion for summary judgment, the trial court did not err by granting summary
judgment as a matter of law for Michele. See Brownlee, 665 S.W.2d at 112;
Anglo-Dutch Petroleum Int’l, Inc., 193 S.W.3d at 95.
Steven first argues that the trial court erred by granting summary judgment
because reading the contemporaneously executed Note and Security Agreement
together, as required by business and commerce code section 3.117, shows that
he relied on his ability to sell the stock to meet the terms of the Note. He further
argues that because he could not sell the Cano stock referenced in both the Note
and the Security Agreement, he should have been relieved of his obligation
under the Note. But Steven fails to point to, and we fail to find, any language in
the Security Agreement that contradicts the Note or shows that the parties
agreed that the Note’s obligation would be satisfied solely from the sale of
Steven’s Cano stock. See Tex. Bus. & Comm. Code Ann. § 3.117 cmt. 1; see
also Brownlee, 665 S.W.2d at 112 (holding that defendant’s asserting legal
conclusion that original agreement ―was modified‖ was insufficient to defeat
plaintiff’s summary judgment motion). We also find nothing extraordinary in the
language of the Note or the Security Agreement to show anything other than that
the parties agreed that Steven’s Cano stock would serve as collateral for the
underlying obligation in the same manner that collateral generally serves to
secure the performance of an outstanding obligation. In fact, the Security
Agreement provides that Steven had ―the right at any time to substitute
certificates of deposit‖ in place of the Cano stock as security for the Note, thus,
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the terms of the instrument itself directly contradict Steven’s assertion that the
parties intended that only his Cano stock be used to satisfy his obligation under
the Note. We, therefore conclude that Steven failed to raise a fact issue relative
to his section 3.117 defense sufficient to defeat Michele’s motion for summary
judgment.
Steven next argues that the trial court erred by failing to excuse his
performance because it was impossible for him to sell his Cano stock. Steven
relies on Centex Corp. v. Dalton, 840 S.W.2d 952 (Tex. 1992), to support his
argument. However, in Centex, the supreme court found that a cease-and-desist
order issued by a regulatory agency endowed with appropriate legal authority
made it illegal for Centex to perform (to pay Dalton) under the agreement. Id. at
954. Here, the stock-sale moratorium Steven claims made his performance
impossible did not make payment to Michele illegal; rather it simply temporarily
impacted Steven’s ability to sell the stock4—an asset that he could have used,
but was not required to use, to satisfy his obligation. See Huffines v. Swor Sand
& Gravel Co., Inc., 750 S.W.2d 38, 40 (Tex. App.—Fort Worth 1988, no writ)
(―Texas courts have held contractual obligations cannot be avoided simply
4
Steven implies that it was illegal for him to sell his Cano stock, but he cites
no regulatory authority in his brief and supported his assertion in the trial court
only with an internal Cano memorandum that imposed a trading moratorium on
Cano stock due to the proposed merger. Although the memorandum did not
state that trading Cano stock was illegal during this period, it required employees
desiring to trade Cano stock during the blackout period to consult with Cano’s
chief financial officer or corporate secretary and general counsel. But, even if it
was illegal for Steven to sell the Cano stock during the blackout period, it would
not change the outcome of this appeal.
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because the obligor’s performance has become more economically burdensome
than anticipated.‖). And, because we conclude above that the Cano stock was
not the exclusive method for Steven to satisfy his obligation, and because Steven
did not raise any other argument to show that his performance under the Note
was impossible, his claim of subjective impossibility does not excuse his
performance under the Note, and he has failed to raise a fact issue supporting
his affirmative defense of impossibility. See Grayson, 2010 WL 2361432, at *5–
6; Walston, 2009 WL 2176320, at *6 n.2; Janak, 586 S.W.2d at 906–07.
Accordingly, because he failed to raise a fact issue on each element of his
affirmative defenses sufficient to defeat Michele’s motion for summary judgment,
we overrule Steven’s sole issue.
VI. Conclusion
Having overruled Steven’s sole issue, we affirm the trial court’s summary
judgment and final order.
BOB MCCOY
JUSTICE
PANEL: LIVINGSTON, C.J.; MCCOY and GABRIEL, JJ.
DELIVERED: August 4, 2011
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ATTACHMENT TO 2-10-296-CV, JOHNSON V. JOHNSON
NOTE AND SECURITY AGREEMENT REFERENCED IN FOOT NOTE 2
***Please note that scanned page 18, a title page, was intentionally omitted.***
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