Hayes v. Wells Fargo Bank
(Tex.App.- Houston [1st Dist.] Oct. 18, 2007)(Radack)  
(biz law, debt,
promissory note, attorney's fees, balloon payment)


Appellant, Leroy Hayes, Jr., pro se, appeals a take-nothing judgment rendered in favor of appellee, Wells
Fargo Bank, N.A. (the bank) after a bench trial. The judgment awarded the amount of principal and
interest on a promissory note acknowledging Hayes's indebtedness to the bank and also awarded the
bank attorney's fees.

We construe Hayes's issues on appeal as follows: (1) Hayes challenges (a) the trial court's interpretation
of the note and (b) the sufficiency of the evidence to support the trial court's implied findings, (2) Hayes
contends he was entitled to a mistrial because the bank did not respond to discovery requested during the
week before trial, and (3) Hayes contends that the trial court abused its discretion by (a) denying Hayes's
request for a jury trial, (b) excusing a witness that Hayes had subpoenaed, and (c) applying the rule of
sequestration. We affirm.


Prime Bank (later purchased by Wells Fargo) loaned $100,000 to Hayes for "working capital" for his
business. On February 11, 2000, Hayes signed a "Commercial Fixed Rate Promissory Note" by which he
promised to repay all principal plus interest at the rate of 9%, with total interest charges of $24,546.20.
The note was payable "[o]n demand, but if no demand is made, then" in 59 payments of $1,608.91 each,
with a final payment, "due and payable" on February 11, 2005 for "the unpaid balance plus accrued
interest." The note recites Hayes's promise to pay "until all amounts owing under this note are paid in full."
Hayes was authorized to prepay the note, in part or in full, on or before the maturity date without penalty.

Hayes's lawsuit disputes the last, or 60th payment, due on February 11, 2006. Though his live pleadings
acknowledge the terms stated above, Hayes alleged (1) that his "understanding and intentions," when he
executed the note, were that his loan would be paid "in full" by February 11, 2006, (2) that he did not know
that the last payment due would be a "balloon payment," and (3) that he should not be required to "pay an
additional . . . $14,235.52 in interest as prescribed by the written contract." (1) Hayes sought attorney's
fees, interest, and costs, but did not assert a claim for damages.

The bank filed a general denial and a counterclaim asserting that Hayes still owed $35,272.31 on the note,
in addition to attorney's fees and costs. The bank also filed a motion for judgment on the day before trial

After a two-day trial, the trial court rendered judgment that Hayes take nothing on his claim, and that Wells
Fargo was entitled to "recover on its modified counterclaim" and also entitled to interest, costs, and
attorney's fees for trial and contingent attorney's fees for appeal. The trial court did not file findings of fact
and conclusions of law, and Hayes did not request them. Hayes timely filed a letter requesting a new trial,
which the trial court denied after an oral hearing.

Standard of Review

Because we have no findings of fact and conclusions of law by the trial court, we infer all findings
necessary to support the judgment. See BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex.
2002); Worford v. Stamper, 801 S.W.2d 108, 109 (Tex. 1990). It is axiomatic that any implied finding be
consistent with the judgment. Anderson Mill Mun. Util. Dist. v. Robbins, No. 03-04-00369-CV, 2005 WL
2170355, at *6 (Tex. App.--Austin, Sept. 8, 2005, no pet.). We presume that the trial court found all
questions of fact in support of the judgment, and we affirm if the judgment can be upheld on any legal
basis supported by the pleadings and the evidence. See Point Lookout W., Inc. v. Whorton, 742 S.W.2d
277, 278 (Tex. 1987); Worford, 801 S.W.2d at 109. When the record includes a reporter's record of the
trial, as here, the appealing party must show that the judgment of the court below cannot be sustained by
any theory raised by the evidence. See Whorton, 742 S.W.2d at 278.

A. Contract-Interpretation Challenges

Two of Hayes's issues challenge the trial court's interpretation of the loan documents and note. The
well-settled rules of contract interpretation apply to promissory notes. See EMC Mortgage Corp. v. Davis,
167 S.W.3d 406, 413 (Tex. App.--Austin 2005, pet. ref'd). The court's first priority is to determine the intent
of the parties as expressed in the instrument. DeWitt County Elec. Coop., Inc. v. Parks, 1 S.W.3d 96, 100
(Tex. 1999); EMC Mortgage Corp., 167 S.W.3d at 413 (citing J.M. Davidson, Inc. v. Webster, 128 S.W.3d
223, 229 (Tex. 2003); Nat'l Union Fire Ins. Co. v. CBI Indus., 907 S.W.2d 517, 520 (Tex. 1995)). In
determining the parties' intent, courts must consider the entire writing and give effect to all provisions of
the contract within the context of the entire agreement so that no provision is either rendered meaningless
or given dispositive effect in isolation. See Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983); EMC
Mortgage Corp., 167 S.W.3d at 413. If this analysis permits a certain or definite legal meaning or
interpretation, then there is no ambiguity, and the court will construe the contract as a matter of law. Lopez
v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 861 (Tex. 2000); Coker, 650 S.W.2d at 393; EMC
Mortgage Corp., 167 S.W.3d at 413. A contract is ambiguous only when it is reasonably susceptible to
more than one meaning. Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex. 2003). Whether a
contract is ambiguous is a question of law for the court. Coker, 650 S.W.2d at 393; EMC Mortgage Corp.,
167 S.W.3d at 413. Extraneous evidence concerning the parties' interpretations is admissible only if the
court first determines that the contract is ambiguous. National Union, 907 S.W.2d at 520; EMC Mortgage
Corp., 167 S.W.3d at 413.

In this case, the trial court's judgment recites that Hayes "have and recover nothing" from the bank on his
claims. This judgment implies that the trial court rejected Hayes's claims (1) that he expected and intended,
in executing the note, that his loan would be paid "in full" by February 11, 2005 after paying $1,608.91 per
month, (2) that he did not know that the last payment due would be "balloon payment," and (3) that he
should not be required to "pay an additional . . . $14,235.52 in interest as prescribed by the written

The face of the note defeats Hayes's first contention because paying $1,608.91 for 60 months would
repay only $96,534.60 against an undisputed $100,000 indebtedness. By rendering judgment against
Hayes, the trial court impliedly rejected this claim and Hayes's remaining claims. An agreement with a
balloon-payment provision generally calls for regular, equal payments that consist mostly of interest and
smaller amounts of principal, with a large, final payment of all remaining principal plus any accrued
interest, which fully satisfies the borrower's financial obligations to the lender. See EMC Mortgage Corp.,
167 S.W.3d at 414 (citing Parker v. Dodge, 98 S.W.3d 297, 299 (Tex. App.--Houston [1st Dist.] 2003, no
pet.); Katy Pers. Storage v. First State Bank, 968 S.W.2d 579, 580 (Tex. App.--Houston [14th Dist.] 1998,
pet. withdrawn)). Because the note and accompanying documents in this case meet these criteria, the trial
court properly concluded, as a matter of law, that the note unequivocally required a 60th, balloon payment
of unpaid principal plus interest. The trial court's stating on the record that the bank did not "adequately
impress" upon Hayes the nature of the balloon payment neither changes this result nor compels a different
interpretation of the note.

The record here shows that Hayes realized, from his own calculations, that a balloon payment was due and
complained to the bank. In response to Hayes's complaints, the bank loaned him additional funds at a
lower interest rate to enable him to pay off his balance. As the trial court recognized, Hayes was
"absolutely" not adversely affected even if he did not initially understand that he had signed a loan
committing him to a balloon payment.

Hayes counters that the bank violated the disclosure requirements of 12 C.F.R. Part 226 (Regulation Z),
adopted under the Federal Truth in Lending Act, 15 U.S.C. § 1601 et seq., because the bank did not
disclose that the loan transaction required a balloon payment. As reflected in the enactment of chapter
348 of the Finance Code, which governs installment sales of motor vehicles, Regulation Z applies to "retail
installment transactions." See Tex. Fin. Code Ann. § 348.009(a) (Vernon 2006) (emphasis added); see
also 12 C.F.R. Part 226.1(b) (stating that Regulation Z serves to "promote informed use of consumer
credit" by requiring full disclosure of terms and costs) (emphasis added). Hayes's note shows on its face
that it is a commercial, fixed rate promissory note. It is undisputed that Hayes borrowed the $100,000 as
working capital for his business and thus for a commercial, rather than a retail, purpose. As the trial court
recognized, Regulation Z does not apply to this commercial transaction. See Tex. Fin. Code Ann. §
348.009(a); 12 C.F.R. Part 226.1.

Hayes also argues that a bank officer made a "human error" in calculating amortization of Hayes's
$100,000 loan because his monthly payments should have amounted to $2,076.00, instead of $1,608.91
monthly, in order to amortize the $100,000 indebtedness over 60 months. But, Hayes's proposed
amortization would change the basic character of his note from a loan transaction that requires a final
balloon payment "of the unpaid principal balance plus accrued interest," to a loan transaction with equal
monthly payments of both principal and interest and a final payment equal to all preceding monthly
payments. Hayes's recalculation would require that the balloon payment terms of his note be disregarded
as meaningless and thus contravene the settled rule of interpretation, that all terms of the note must be
construed together, with none rendered meaningless. See Coker, 650 S.W.2d at 393. Hayes's proposed
amortization would also render the terms of the note ambiguous--by requiring a final balloon payment while
negating any final balloon payment. See EMC Mortgage Corp., 176 S.W.3d at 414 (holding that note
requiring both a final balloon payment and equal monthly payments of principal and interest was internally
inconsistent and therefore ambiguous).

Hayes's last challenge to the loan is premised on claims that the trial court erred in applying the parol
evidence rule. This is a rule of substantive law. Hubacek v. Ennis State Bank, 317 S.W.2d 30, 32 (Tex.
1958); Gonzalez v. United Bhd. of Carpenters & Joiners, 93 S.W.3d 208, 211 (Tex. App.--Houston [14th
Dist.] 2002, no pet.) When parties reduce an agreement to writing, the law of parol evidence presumes, in
the absence of fraud, accident, or mistake, that prior or contemporaneous agreements, whether oral or
written, are merged into the final, written agreement and, therefore, that any provisions not set out in the
writing were either abandoned before execution of the agreement or, alternatively, were never made and
are thus excluded from consideration in interpreting the written agreement. See Hubacek, 317 S.W.2d at
32; Smith v. Smith, 794 S.W.2d 823, 827 (Tex. App.--Dallas 1990, no writ); Muhm v. Davies, 580 S.W.2d
98, 101 (Tex. Civ. App.--Houston [1st Dist.] 1979, writ ref'd n.r.e.).

Hayes argues that application of the parol evidence rule favors him. He contends that the balloon payment
is not disclosed in the note and, therefore, no balloon payment is required, because "proper application" of
the parol evidence rule precludes any testimony by the bank's witnesses concerning oral statements
regarding a balloon payment. As addressed above, the trial court could properly have concluded as a
matter of law and from the face of the note alone, that the loan transaction required a balloon payment.
Hayes has not demonstrated with citations to the record that the trial court improperly considered parol
evidence, and nothing in the record supports his contention.

We overrule Hayes's issues (a), (b), and (c).

B. Challenges to the Factual Sufficiency of the Evidence

Hayes's issue (f) challenges the sufficiency of the evidence to support the take-nothing judgment. A
request for findings of fact and conclusions of law is not required to question the sufficiency of the
evidence. Pruet v. Coastal States Trading, Inc., 715 S.W.2d 702, 704 (Tex. App.--Houston [1st Dist.] 1986,
no writ). Accordingly, Hayes may challenge the trial court's implied findings for legal and factual sufficiency,
under the same standards that govern challenges to a jury's findings. See BMC Software, 83 S.W.3d at
795. Hayes does not argue that he proved his claims as a matter of law or that no evidence supports the
judgment in favor of the bank, but contends that the trial court improperly resolved in the bank's favor what
Hayes contends are lies and inconsistencies by the bank's witnesses. Accordingly, we construe his
arguments as contending that the great weight and preponderance of the evidence to support the trial
court's implied findings in favor of the bank and thus, as asserting a challenge to the factual sufficiency of
the evidence.

In assessing a factual sufficiency challenge, we weigh all the evidence, both supporting and conflicting,
and may set the finding aside only if it is so contrary to the overwhelming weight of the evidence as to be
clearly wrong and manifestly unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986); In re King's Estate,
244 S.W.2d 660, 661 (Tex. 1951); Comm'n of Contracts v. Arriba Ltd., 882 S.W.2d 576, 582 (Tex.
App.--Houston [1st Dist.] 1994, no writ). In an appeal from a bench trial, we may not invade the fact-finding
role of the trial court, who is the sole judge of the credibility of the witnesses and the weight to give their
testimony, and alone determines whether to accept or reject all or any part of that testimony. Nordstrom v.
Nordstrom, 965 S.W.2d 575, 580-81 (Tex. App.--Houston [1st Dist.] 1997, pet. denied).

Hayes's basic premise appears to be that the bank mistakenly loaned him the $100,000 through a
balloon-note transaction instead of a traditional transaction. He points to testimony by a "rookie" loan
officer who (1) denied that she made the loan, but whose initials are "all over the contract agreements"
and (2) claimed she discussed the balloon loan with Hayes. Hayes also points to testimony by the bank
president who (1) stated he did Hayes's loan and discussed the balloon payment with Hayes; (2) "lied"
about whether the loan was a ten-year loan or a seven-year loan; and (3) denied performing amortizations
"personally," but later stated that he used his calculator to perform the calculations. (2)

We decline to invade the trial court's credibility determinations or the weight, if any, that the trial court
chose to give testimony by the bank's witnesses. See id. Having nonetheless reviewed all the evidence
from the trial in accordance with Hayes's challenge, we cannot say that the evidence so greatly
preponderates against the implied findings by the trial court in favor of the bank that the judgment in favor
of the bank is clearly wrong and manifestly unjust. See Cain, 709 S.W.2d at 176; In re King's Estate, 244
S.W.2d at 661.

We overrule Hayes's issue (f).

Claimed Discovery Error

In issue (d), Hayes contends that he was entitled to a mistrial because the bank did not disclose its
witnesses or material evidence to him in response to his request. It is undisputed that Hayes did not
request discovery of the bank until less than a week before the May 8, 2000 trial. Requests for disclosure
must be made "no later than 30 days before the end of any applicable discovery period." Tex. R. Civ. P.
194.1; accord Tex. R. Civ. P. 194.3 (stating that party responding to discovery request generally has 30
days to serve a written response on the requesting party). Aggrieved parties in a discovery dispute must
obtain a ruling before trial begins in order to preserve error. Remington Arms Co. v. Caldwell, 850 S.W.2d
167, 170 (Tex. 1993). Having failed to obtain a ruling on his discovery request before trial, Hayes waived
any error. See Tex. R. App. P. 33.1.

We overrule Hayes's issue (d).

Claimed Errors in Conducting Trial

In issues (e) and (g), Hayes contends that the trial court erred by (1) denying his request for a jury trial, (2)
not allowing him to question all the witnesses he had subpoenaed, and (3) not instructing the witnesses
"not to discuss the case among themselves." Rulings related to conducting the trial are within the trial
court's broad discretion and will not be set aside on appeal unless the trial court manifestly abused its
discretion. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 239 (Tex. 2001). A trial court abuses its discretion
when it reaches a decision that is so arbitrary and unreasonable that it amounts to a clear and prejudicial
error of law, or when it clearly fails to correctly analyze or apply the law. In re Ford Motor Co., 165 S.W.3d
315, 317 (Tex. 2005) (citing Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex. 1992)). Because a trial court
has no discretion in determining what the law is, which law governs, or how to apply the law, we review
these types of discretionary rulings de novo. See In re D. Wilson Constr. Co., 196 S.W.3d 774, 781 (Tex.
2006) (citing Walker, 827 S.W.2d at 840). But when we review a ruling that results from the trial court's
having resolved underlying facts, we must defer to the trial court's factual resolutions, and any credibility
determinations that may have affected those resolutions, and we may not substitute our judgment for the
trial court's judgment in those matters. See Walker, 827 S.W.2d at 839-40; Holley v. Holley, 864 S.W.2d
703, 706 (Tex. App.--Houston [1st Dist.] 1993, writ denied).

A. Denial of Jury Trial

Hayes contends that the trial court erred by denying his request for a jury trial. Though the Texas
Constitution guarantees a right to trial by jury, Tex. Const. art. I, § 15, the Constitution further provides that
"[N]o jury shall be empaneled in any civil case unless demanded by a party to the case, and a jury fee be
paid by the party demanding a jury, for such sum, and with such exceptions as may be prescribed by the
Legislature." Tex. Const. art. V, § 10. We review
denial of a demand for a jury trial for abuse of discretion.
Monroe v. Alternatives in Motion, No. 01-05-01187-CV, 01-05-01188-CV, 2007 WL 529295, at *10 (Tex.
App.--Houston [1st Dist.] Feb. 22, 2007, no pet. h.) (citing Mercedes-Benz Credit Corp. v. Rhyne, 925
S.W.2d 664, 666 (Tex. 1996)).

A party who seeks a jury trial must request a jury and pay the jury fee at "a reasonable time before the
date set for trial of the cause on the non-jury docket, but not less than thirty days in advance." Tex. R. Civ.
P. 216. A trial court does not abuse its discretion by denying a trial by jury when there is no timely request
or payment of a jury fee. Huddle v. Huddle, 696 S.W.2d 895, 895 (Tex. 1985); Martin v. Black, 909 S.W.2d
192, 197 (Tex. App.--Houston [14th Dist.] 1995, writ denied). An untimely jury demand should be granted,
however, if granting the request will not (1) interfere with the court's docket, (2) delay the trial, or (3) injure
the opposing party. See Gen. Motors Corp. v. Gayle, 951 S.W.2d 469, 476 (Tex. 1997); Barkhausen v.
Craycom, Inc., 178 S.W.3d 413, 418 (Tex. App.--Houston [1st Dist.] 2005, pet. denied).

Hayes stated on the record in this case that he believed he requested a jury trial and paid the jury fee
when he filed suit, but he could not produce a receipt showing that he had paid the jury fee. Counsel for
the bank stated that he never received a written request for jury trial. After learning from the court
coordinator that no jury fee had been paid, Hayes paid the fee on the Friday before the Monday that trial

When the trial court ruled that no jury would be empaneled because Hayes did not timely pay the fee,
Hayes did not attempt to demonstrate that granting the request for jury trial would not interfere with the
court's docket, delay the trial, or injure the opposing party. The trial court, however, specified that, "it
would certainly interrupt the Court's docket to try and put this case now on a jury docket." Accordingly, we
hold that the trial court did not abuse its discretion by denying Hayes's request for a jury trial. See Gen.
Motors Corp., 951 S.W.2d at 476; Barkhausen, 178 S.W.3d at 418.

We overrule the portion of Hayes's issue (e) that challenges denial of a jury trial.

Questioning Subpoenaed Witnesses

In another portion of issue (e), Hayes contends that the trial court erred by not permitting Hayes to
question all the witnesses he had subpoenaed. We construe this complaint as contending that the trial
court erred by not permitting one of Hayes's two subpoenaed witnesses to testify. Admission or exclusion
of evidence is generally a matter within the trial court's discretion. In re J.P.B., 180 S.W.3d 570, 575 (Tex.
2005) (citing State v. Bristol Hotel Asset Co., 65 S.W.3d 638, 647 (Tex. 2001)). The record of this case
establishes that Hayes personally excused the witness and thus has no complaint. The following transpired
at the end of the first day of trial:

THE COURT: Now, sometime back you told me that you were getting your financial advice from other
people and I don't remember if these are the two people or not, but I explained to you that the Court
doesn't take lay witnesses to [tell] me what the law is. It would appear to me that more than likely you have
these two witnesses on the hook here under subpoena because you want them to tell me what they think
the law is or maybe what they told you the law is or something like that. If you want to ask them any
questions like that, they will not be allowed to answer. Are you sure you want these two witnesses back in
the morning?

HAYES: I would like to have Mr. Eugene Williams back on tomorrow morning. Mr. Barrick, I can excuse him.
(Emphasis added)]

Because it is apparent that Hayes chose to abandon his request to have Barrick testify, we hold that Hayes
waived his complaint.

We overrule the remaining portion of Hayes's issue (e).

C. Invoking "The Rule"

In issue (g), Hayes argues that the trial court did not properly place the witnesses under the exclusionary
rule by instructing them "not to discuss the case among themselves." See Tex. R. Evid. 614; Tex. R. Civ. P.
267. Once "the rule" is invoked, the trial court must exclude witnesses from the courtroom and admonish
witnesses "not to converse with each other or with any other person about the case other than the
attorneys in the case, except by permission of the court." Drilex Sys., Inc. v. Flores, 1 S.W.3d 112, 117
(Tex. 1999).

Hayes must demonstrate on appeal that the trial court erred, and that a violation of the rule occurred. See
id. Yet, Hayes offers no record citations to support his contention, and the record does not disclose that he
brought any violation of the rule to the trial court's attention or asked that a witness be excluded or held in
contempt for violating the rule. See id. To the contrary, the record establishes that the court conformed to
the rule. The witnesses were sworn and instructed to wait in the attorney-ready rooms, and the trial court
instructed them to not discuss the case while waiting to be called. Hayes offered no evidence that a
violation occurred, and we find none.

Accordingly, Hayes has not established that the trial court abused its discretion.

We overrule Hayes's issue (g).


We affirm the judgment of the trial court.

Sherry Radack

Chief Justice

Panel consists of Chief Justice Radack and Justices Alcala and Bland.

1. Hayes's pleadings also allege that he was "extorted, strong armed, and coerced" into a second loan agreement by which
the bank advanced him funds to repay the balance due on the original loan, but Hayes does not challenge the trial court's
having rejected those claims.

2. Hayes contends that the witnesses were motivated to lie to "cover up" having negotiated a balloon-payment loan to
Hayes, when he did not intend that type of transaction, but Hayes offers no citations from the record that substantiate his