PATRICK JANIS, Appellant
v.
ASSOCIATES HOME EQUITY SERVICES, INC. F/K/A FORD CONSUMER FINANCE COMPANY, INC.,
Appellee
This appeal arises from orders granting a summary judgment in favor of Associates Home Equity Services, Inc. f/k/a Ford Consumer Finance Company, Inc. ("Associates") and denying Patrick Janis' motion for summary judgment. One order sets aside and renders void a) the cancellation of Janis' promissory note and b) a release of lien executed and delivered by Associates to Janis. The second order denies Janis' motion for summary judgment, which asserted the affirmative defense of discharge in bankruptcy.
Janis' sole issue questions whether Associates' suit was barred by his discharge in bankruptcy. Applying bankruptcy law, we conclude that Associates' effort to set aside the release is an alternative method to rectify a breach of a duty by Janis that existed prior to the bankruptcy proceeding where that breach could also be corrected through the payment of money. Consequently, Associates' suit is a claim for which Janis' liability has been discharged and is barred by a permanent federal injunction pursuant to Chapter 7 of the United States Bankruptcy Code. 11 U.S.C.A. § 524 (West 1993 & Supp. 2000). As a result, we will reverse the trial court's order granting Associates' motion for summary judgment and render judgment granting Janis' motion.
I. STATEMENT OF FACTS
Janis executed and delivered to Associates(1) a promissory note, which he secured by granting a lien on his house.(2) At some point later, Janis entered into a refinancing agreement with Associates, but the agreement never closed.(3) During this process, however, Associates executed a release of the lien and delivered the note to Janis marked "Paid in Full and Satisfied." Upon learning of this, Janis refused to recognize that the release was void and later failed to comply with the obligations of the note.
Associates filed suit (the "Original Lawsuit") against Janis in Dallas County seeking 1) a declaratory judgment that the cancellation of the Note and Release of Lien were the result of a mistake, 2) judgment on the note, 3) judicial foreclosure, and 4) attorneys' fees. Janis answered in the Original Lawsuit, filing a general denial and motion to transfer venue.
Shortly after the suit was filed, Janis filed for Chapter 7 bankruptcy which automatically stayed all proceedings in the Original Lawsuit. 11 U.S.C.A. § 362 (West 1993 & Supp. 2000). During the pendency of the bankruptcy, Associates' claim was scheduled as "disputed/unsecured." Associates filed a motion for relief from the automatic stay. Although, the motion was orally granted at a hearing, Associates failed to obtain a written order. Ten days later the bankruptcy court entered Janis' Chapter 7 discharge, and the case was closed. Thereafter, Associates tendered a written order lifting the stay to the bankruptcy judge, but the judge returned the order unsigned with the notation "moot."(4)
Six months after the bankruptcy case was closed, Associates nonsuited the Original Lawsuit and refiled it in Brazos County. In this suit, Associates sought only a declaratory judgment that the cancellation of the Note and Release of Lien were by mistake, a judicial foreclosure of the lien, and attorneys' fees.(5)
The parties agreed that the material facts were not in dispute and filed cross-motions for summary judgment. Janis' motion sought dismissal because he claimed Associates' suit was brought in violation of his discharge in bankruptcy. Associates' motion sought a declaration that the cancellation of the Note and the Release of Lien were of no force and effect because they were by mistake, an order canceling the Release of Lien, foreclosure of the Deed of Trust lien, and an order of sale. Following a hearing on both motions, the trial court denied Janis' motion and granted Associates' motion, thereby rendering a final judgment.
II. STANDARD OF REVIEW
The standards for reviewing a summary judgment are well established. Nixon v. Mr. Property Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985). The movant has the burden of showing that no genuine issue of material fact exists and that it is entitled to the summary judgment as a matter of law. Id. The reviewing court must accept all proper summary judgment evidence favorable to the non-movant as true. Id. at 548-49. Every reasonable inference must be indulged in favor of the non-movant and all doubts resolved in his favor. Id. at 549.
When the parties have filed competing motions for summary judgment and one is granted while the other is denied, an appellate court may consider the propriety of the denial as well as the granting. Commissioners Court v. Agan, 940 S.W.2d 77, 81 (Tex. 1997); Sarandos v. Blanton, No. 10-98-364-CV, 2000 WL 1041964, at *3 (Tex. App.--Waco July 26, 2000, no pet. h.). If the pertinent facts are undisputed, the court can determine the issues presented as a matter of law. Sarandos, 2000 WL 1041964, at *3. In this situation, the court can either affirm the judgment or reverse and render the judgment the trial court should have rendered including one that denies both motions. Jones v. Strauss, 745 S.W.2d 898, 900 (Tex. 1988); Tobin v. Garcia, 159 Tex. 58, 64, 316 S.W.2d 396, 400-01 (1958); see Sosa v. Williams, 936 S.W.2d 708, 711 & n.1 (Tex. App.--Waco 1996, writ denied). However, if resolution of the issues rests on disputed facts, summary judgment is inappropriate, and the court should reverse and remand for further proceedings. See Coker v. Coker, 650 S.W.2d 391, 394-95 (Tex. 1983); Sarandos, 2000 WL 1041964, at *3.
III. DISCUSSION
Texas Courts are bound by the Supremacy Clause which makes federal statutes the law in every state and fully enforceable in state courts. Alden v. Maine, 527 U.S. 706, ___, 119 S.Ct. 2240, 2255, 144 L.Ed.2d 636 (1999). Thus, the first issue the trial court necessarily ruled on was Janis' motion for summary judgment asserting the bankruptcy discharge as a bar. Accordingly, we will first analyze Chapter 7 of the United States Bankruptcy Code to determine what protections were provided to Janis by his discharge in bankruptcy. 11 U.S.C.A. § 524. Next, we analyze the effect of his discharge on Associates' suit to determine whether it is now barred.
Janis' Discharge Protection
Janis claims that Associates' suit seeking rescission of the Release is barred by his discharge in bankruptcy. Section 524(a)(2) of the Bankruptcy Code states that a discharge operates as a bar against the commencement or continuation of an action to collect, recover, or offset any "debt as a personal liability of the debtor." 11 U.S.C.A. § 524(a)(2); Glass v. Prcin, 3 S.W.3d 135, 138 (Tex. App.--Amarillo 1999, pet. denied). In other words, it insulates the debtor from personal liability for any "debt" discharged. Id. Consequently, whether Janis' discharge affected Associates' suit depends upon whether it constituted an action on a debt as contemplated by the Code. Id. Although the meaning of the word "debt" is rather broad, Cohen v. De La Cruz, 523 U.S. 213, 218, 118 S.Ct. 1212, 1216, 140 L.Ed.2d 341, 346 (1998), Congress has defined it as a "liability on a claim." 11 U.S.C.A. § 101(12) (West 1993). In turn, it defined a "claim" as a:
11 U.S.C.A. § 101(5)(A), (B) (West 1993). By "right to payment," Congress intended "the payment of monies." In re Continental, 125 F.3d 120, 133 (3d Cir. 1997); Glass, 3 S.W.3d at 138.
Additionally, the right to payment or debt contemplated could be rather direct and simple, much like the obligation inherent in paying an unsecured promissory note. Or, it may be somewhat indirect, such as when one breaches a duty to perform and the breach may be recompensed through either equity or monetary payment. And, if the breach can be ameliorated in either way, it matters not whether the complainant merely demands equitable relief for the right pursued, it is nonetheless a debt subject to discharge.
Glass,
3 S.W.3d at 138-39 (citations omitted) (footnote omitted).
Federal courts have frequently found that a claim for an equitable remedy, as an
alternative to seeking to enforce a right to payment, will be subject to a
discharge in bankruptcy. For instance, the Third Circuit held that a monetary
payment is a viable alternative to employment seniority integration and would be
treated as a "claim" in bankruptcy. In re Continental, 125
F.3d at 136. The Second Circuit held that an EPA waste disposal order is
dischargeable if the EPA had the option of performing the disposal itself and
suing for costs, thereby converting the equitable remedy into a monetary
obligation. In re Chateaugay Corp., 944 F.2d 997, 1008 (2d Cir. 1991).
Finally, a bankruptcy court has held that an action for specific performance
which can be transformed into a claim for money is also dischargeable in
bankruptcy. In re Aslan, 65 B.R. 826, 831 (Bankr. C.D. Cal. 1986).
Accordingly, we must decide whether Associates' effort to set aside the release is an alternative method to rectify a breach of a duty by Janis where that breach could also be corrected through the payment of money.
Associates' Alternatives
Here, Janis executed and delivered to Associates a promissory note secured by a lien on his house. Janis then entered into a refinancing agreement with Associates which never closed. During this process, however, Associates executed a release of the lien and recorded it in the Brazos County land records. Janis thereafter refused to recognize that the release was void and considered his remaining obligations completed.
"Equity regards and treats that as done which in good conscience ought to be done." Collier Mfg. & Supply, Inc. v. Interfirst Bank Austin, N.A., 749 S.W.2d 560, 567 (Tex. App.--Austin 1988, no writ). This maxim relates to the equitable rights and duties existing between two parties. Id. In equity, a right held by one party creates a corresponding duty by the other to do a particular act. See id.
Rescission is an equitable remedy that operates to set aside a contract that is legally valid but is marred by fraud, mistake, or some other reason which requires that it be set aside to avoid unjust enrichment. Humphrey v. Camelot Retirement Community, 893 S.W.2d 55, 59 (Tex. App.--Corpus Christi 1994, no writ); Country Cupboard, Inc. v. Texstar Corp., 570 S.W.2d 70, 73 (Tex. Civ. App.--Dallas 1978, writ ref'd n.r.e.). Alternatively, an action for unjust enrichment is based upon the equitable principle that a person receiving a benefit which was unjust for him to retain ought to make restitution. Bransom v. Standard Hardware, Inc., 874 S.W.2d 919, 927 (Tex. App.--Fort Worth 1994, writ denied).
As a result, Associates' had a right to relief from the effects of the release based on the fundamental principles of equity. Humphrey, 893 S.W.2d at 59. This in turn, gave rise to Janis' duty to agree to cancel the Release and reinstate the Note or to disgorge the benefits which he received from Associates' mistake. See Collier Mfg. & Supply, 749 S.W.2d at 567. Consequently, when Janis breached his duty to recognize Associates' equitable right, Associates had the choice of seeking to have the release rescinded or to sue Janis for unjust enrichment.
IV. CONCLUSION
Although Associates had the right to remedy this breach by seeking to have the release rescinded, it could also have sued Janis for unjust enrichment. If a breach may be recompensed through either an equitable remedy or monetary payment, it matters not whether the complainant merely demands equitable relief for the right pursued, it is nonetheless a "debt" subject to discharge. Glass, 3 S.W.3d at 138-39. Consequently, we conclude that Associates had an option to set aside the release or seek to enforce its right to payment of money. This constitutes a "claim" pursuant to Section 101(5)(A) of the Bankruptcy Code. 11 U.S.C.A. § 101(5)(A); In re Continental, 125 F.3d at 133.
Because Associates' suit satisfied the elements of a "claim" we conclude, as a matter of law, that the demand also constituted a "debt" within the category discharged by the bankruptcy court. Glass, 3 S.W.3d at 139; see In re Aslan, 65 B.R. at 831. Consequently, Associates' claim has been discharged and its suit is barred by a permanent federal injunction pursuant to Chapter 7 of the United States Bankruptcy Code. 11 U.S.C.A. § 524. We reverse the trial court's order granting Associates' motion for summary judgment, grant Janis' motion for summary judgment, and render judgment that Associates take nothing by this suit.
BILL VANCE, Justice
Before Chief Justice Davis, Justice
Vance, and Justice Gray
Reversed and rendered
Opinion delivered and filed August 30, 2000
Publish
NOTES
1. On December 3, 1997, Ford Consumer Finance Company, Inc., ("FCF") became known as Associates Home Equity Service, Inc. (the "Associates") and Associates succeeded to FCF's rights by the terms of the Note. We refer to FCF as Associates throughout the opinion for ease in comprehension.
2. Janis' wife did not join either instrument.
3. It is disputed as to who canceled the refinancing agreement, although it is irrelevant to the issue presented on appeal.
4. Janis was discharged ten days after Associates was orally granted relief from the automatic stay. However, Associates had yet to tender a written order to the bankruptcy judge for her signature. As a result, Judge Clark put the notation "Moot per #19, 20" with her initials on the unsigned order. According to the bankruptcy court's docket sheet #19 is the Order Discharging Janis and #20 is the Final Decree.
5. Associates did not seek judgment on the note.