Crestview, Ltd. v. Foremost Insurance Co.

816 course,

findings payee, that he was holder in due rule money that a who has received good changed or that he had faith his mistakenly paid, has the burden when sued position in payment. reliance on the Bryan restitution, plead prove for and that he pleading had the properly burden of good changed has in position his faith establishing they these since matters were Capital reliance payment. National peculiarly knowledge. within his Central Wootton, Bank in 475 Austin v. 369 S.W.2d Martin, National Bank of v. Houston 896 1963, dism’d); (Tex.Civ.App. writ — Austin 1965, (Tex.Civ.App. 218 S.W.2d Steed, First-Wichita Bank v. 374 — Houston National dism’d); Capital writ National Bank in (Tex.Civ.App. S.W.2d 932 Worth — Fort Wootton, (Tex.Civ. v. Austin 369 S.W.2d 475 1964, writ); Central National Bank App. 1963, dism’d). writ Martin, (Tex.Civ. — Austin Houston v. 396 S.W.2d 218 1965, App. dism’d); writ 40 A.L. — Houston A bank paying cheek over a valid apply R.2d 997. The same rule should when stop payment may order utilize the subro- payee com seeks defeat the bank’s rights 4.407, gation granted in Section or it by contending mon law claim restitution may, “final,” when payment is not seek that he is in due a holder course. restitution from payee under common law. The payee who has received funds Bryan’s rehearing over- motion bank defeat bank’s com ruled. by properly pleading mon law claim establishing payee is a holder in course, good changed

due or has in faith his

position payment. in reliance Sec displaced

tion 4.407 has common law of restitution when is not

final under Section 3.418. out-of-state authorities cited payee distinguishable. They are were con- CRESTVIEW, LTD., Appellant, operation cerned with the and effect of v. Code, 4.407 of the and did not dis- Section COMPANY, FOREMOST INSURANCE cuss Section 3.418 and common law Appellee. right of restitution. No. 13461. points error, We have considered all Judgment all are overruled. Appeals Texas, Court of Civil court is trial affirmed. Austin. ON APPELLANT’S MOTION 29, July 1981. FOR REHEARING 7, Rehearing Denied Oct. Yaffe,

Bryan cites 605 Favors S.W.2d (Tex.Civ.App. [14th Dist.] — Houston Babb, e.); writ ref’d n. r. Couch v. (Tex.Civ.App. S.W.2d — Beaumont Pardi, e.); writ ref’d n. r. and Shotts v. (Tex.Civ.App. Corpus Christi — dism’d), support argument writ his presumed it will be that he was a cases,

holder due course. The cited each instrument, which was a suit on an

distinguishable. The instant case is not a on an

suit instrument. The bank seeks money mistakenly paid.

restitution consistently general

Texas has followed the Orr, McGinnis,Lochridge Despite David L. & Kil- the fact that Foremost had not Austin, gore, appellant. sale, approved knowing fact, purchased On be- Hearon, Jr., Heidrick, Robert J. R. Clarke notified of the Foremost immedi- Jr., Graves, Hearon, Dougherty, Moody & ately declared the installment debt due and Garwood, Austin, appellee. payable requested the trustee to sell property the when was not forth- POWERS, Justice. maker, coming from grant- Crestview’s appeal is taken from the trial court’s was, or. The basis for such acceleration temporary injunction. denial of a Appel- course, the “due on sale clause.” lant, Crestview, Ltd., purchased an office building by encumbered the lien of a re- County Crestview filed suit in a Travis corded deed of trust. The deed of trust sale, district court before the trustee’s promissory by secured a note made Crest- alleging unreasonably that Foremost had grantor view’s by appellee, and held Fore- approval, withheld its inequit had acted most Company.1 Insurance The deed of ably, unjustly oppressively in accelerat agreement: trust contained this debt, ing the and that the “due on sale Grantors, any “In the event owner of clause” was an unreasonable restraint on Mortgaged Premises, without first alienation of Based these obtaining (which approval of Noteholder allegations, requested Crestview the trial unreasonably shall not be with- declaratory judgment court’s that the accel held), dispose should sell or otherwise erated debt was invalid aas basis for the Premises, Mortgaged sale; and, requested temporary trustee’s thereof, at time before this Deed of permanent injunctive relief aimed at fully discharged, Trust released and preventing property the trustee’s sale of the option Noteholder shall have the to de- satisfy the debt. The trial court denied clare hereby the indebtedness secured due application temporary injunction for ” payable. . . . and from that order of denial Crestview provision We will refer this as the “due appealed Ancillary to this Court. to that 2 on sale clause.” appeal, granted temporary injunction, we a so, Though requested to do Foremost nev- application, purpose on Crestview’s for the approved er the sale of the preserving jurisdiction pending ap our did, during nego- Crestview. Foremost pellate Crestview, review. Ltd. v. Fore preceded tiations which offer to 13,451(Tex. most Company, Insurance No. approve the sale in return for either a Civ.App. Austin, February 1981). — principal change reduction in or a Having higher interlocutory interest rate to a rate than that now considered the provided promissory it appeal by note held. taken Crestview from the trial regard. No was reached in this injunction, court’s denial of Compa- ship Company 1. The maker of the note was Crestview between Crestview and Crest- ny, partnership. Company view, Crestview had Ltd. Foremost, purchased paying large part purchase price by a and The term “due on sale clause” has evolved in execution note, delivery promissory legal of its secured literature to describe such accelera- a deed of trust generally. parties lien. This note and deed of trust tion clauses The have used controversy above, those in in this suit. quoted the term to describe the clause acquiring property, plainly gives Several months after Crestview property partnership. erty, which elect to accelerate property the noteholder the Company conveyed sold and if the the installment debt Crestview, Ltd., appellant, approval. a limited is sold without his conveyance taking prop- misnomer, term is therefore somewhat Crestview, Ltd., did not “assume” the automatically payable the debt is not due and merely indebtedness owed to Foremost but property, on a sale of the but on the notehold- “subject took title to” the lien which secured er’s election that it be accelerated. organizational the debt. There relation-

819 Co., (Tex.1979); Camp 369 and dis- 576 S.W.2d the order of the trial court affirm Shannon, Tex. S.W.2d issued earlier solve the (Tex. (1961); Huey, Davis v. Court. 1978). FOR APPELLATE

STANDARD BY THE TRI- OF ABUSE DISCRETION REVIEW TO AL COURT IN REFUSING initially Crestview contends A TEMPORARY INJUNC- GRANT for our review is whether it standard TION prima facie presented the trial court contends that even under entitling temporary injunction, case it to a review, we appellate ordinary standard the more standard of rather than common the trial court’s order because must reverse whether the trial court abused its discretion in that its discretion the court abused refusing such relief. Crestview bases erroneously undisput- to the applied the law proposition that this contention Crestview, so, according to ed facts. It did 4642, applies art. 4 Tex.Rev.Civ.Stat.Ann. meaning assigning erroneous by “any irreparable injury threatened to to clause,” meaning per- a which “due on sale estate,” phrase real within which approval to withhold its mitted Foremost would include a sale trustee under a light any reasonable in of basis considered We power granted in a deed of trust.3 all the circumstances. disagree interpretation with this of that statutory provision. appeal general this cites a party Each to support meaning it line of cases in 4 of Article 4642 is not am Section give on sale clause.” to the “due biguous apply in narrowly and is written circumstances, generally by Crestview only two kinds of in contrast The cases cited clause,” that a “due general the more circumstances referred state or assume statute, mortgage in- preceding provisions like all other in a to in the sections of the strument, manifesting legislative purpose protecting a that has the intention Sec unap- applied literally. security, tion 4 Brazos River noteholder’s and unless 167, Graham, posed a risk to that Authority City proved v. Tex. transfer has 163 (1961). security, right of acceleration will not 354 S.W.2d 99 The two kinds of generally specifically contemplated by be enforced. These cases hold circumstances restricted, clause is so applicable 4 are not in the that unless the Section restraint on being there no threatened sale under amounts to an unreasonable alienation; or, equity ought prevent against party writ of execution directed that having right acceleration property, any no interest in the nor enforcement of the accomplish the injury when it is not exercised to threatened Crestview’s was in- complaint injury only purpose is one of to its for which the clause threatened instrument, possession, injury mortgage in acceler- title and and not one of cluded hold, then, any being unreason- itself. ation for other reason We able, unjust, inequitable oppressive. appellate review is the ordi standard for not, however, nary court These cases do hold the clause standard of whether the trial se, per equitable either on denying tempo to be invalid abused its discretion injunction. grounds or it is a restraint on alien- rary Expo Brooks v. Chemical because provides injunctions may review on It has been held that the standard of appeal, 3. The section involving writs of issue: in cases sales under execution, tempo applicant is whether the for put title “4. Where a cloud would be rary injunction showing made such being estate an execution real sold under prima would constitute a facie trial court “as against party having no interest in such upon a trial on the merits.” Weart v. subject case to the execution at the real estate Mahone, (Tex.Civ.App.— sale, injury irreparable 176 S.W.2d to real time of the threatened, writ). personal property ir- Galveston estate or remedy respective legal at law.” point many interdependent ation. The advocates of this of view two elements of tend, bargain transparently, to make re- the entire reflected in the note and rather Another such parties sult turn on rather deed of trust. element was the status particular agreement we have named than on the terms of their contract and the clause,” by par- the “due on sale which the interpreting and en- established rules agreed concerning rights ties their and obli- forcing See, Wellenkamp contracts. e.g.’ circumstance, gations America, in a future a sale of Cal.Rptr. Bank of property by mortgagor Comment, at a time (1978); “Judicial P.2d Treat- paid. before the debt was ment of the Clause: The Case Due-On-Sale Adopting Standards of Reasonableness clause” The “due on sale is broad Unconscionability,” 27 Stan.L.Rev. 1109 ambiguous. but not There can be no rea (1975). meaning. sonable doubt of its intended Its Foremost, support very general breadth is an indication of the cases cited ity require of its intended effect—to of the trial court’s enforcement of the approval clause, noteholder’s in the case of generally uphold enforcement on a permit prema or to him to terminate theory per that it does not amount se to an deferred-payment arrangement turely the alienation, unreasonable restraint on and is if his is not obtained. The enforceable, saying therefore often in addi noteholder, which arises in the acceleration tion the clause should be enforced as approval, if the is sold without his agreed upon by competent par written and unequivocal. instance clear and ties, having power the court nor neither clauses have heretofore been enforced Such impose upon the inclination to them a dif precisely as A. R. Clark Invest written. bargain agreement. ferent deci These Green, (Tex. 425 ment Co. v. 375 S.W.2d permit sions desire to increase creditor’s 1964). rate, principal the interest or diminish his at rate, the low to serve as a basis for acceler wording singularly The of the clause is not, however, They ation. do rule out re inapt express a contractual intention that faith, lieving mortgagor from bad uncon narrowly it be limited in its effect to one inequitable partic scionable or conduct in a circumstance, is, particular that where a ular case. Mutual Federal & Loan Sav. impair threatens to owner Works, Ass’n v. Wisconsin Wire 58 Wis.2d debt, inap- security and ineffective 99, (1973); 205 762 Baker v. Loves N.W.2d plicable respect to all other sales. The with Ass’n, Savings Park & Loan 61 Ill.2d contracting parties expressly provided, and (1975); v. First Fed intended, 333 N.E.2d 1 Crockett Foremost have the therefore that Ass’n, Savings & Loan 289 N.C. eral to re-examine the deferred- contract (1976); Enforcement of Due- arrangement entirety, 224 S.E.2d 580 in its payment Clauses, Prop. Transfer 13 Real Prob. & property, On to withhold its any sale of (1978). basis, A.L. Tr. J. 891 See also Annot. 69 any to the sale on reasonable consent analysis the cases in both R.3d 713 for an if the and to accelerate the installment debt authority. lines of property owner sold the without Foremost’s interpretation is

approval. We believe this compelled by very language used in the BE TO THE MEANING TO ASSIGNED legal clause. The issue is thus narrowed THE PRESENT “DUE ON the clause should be circumscribed whether SALE CLAUSE” equitable public policy grounds not- promissory note and deed of trust at withstanding clearly the contractual intent originated in this case in Foremost’s issue expressed thereby. grantor. sale of the to Crestview’s transaction, upon by parties agreed A number of the cases relied In that that premise purchase price state an initial or as- large would be Crestview provi- bearing sumption purpose any in its while inter- that the sole deferred protect mortgage were in a instrument is to est at a rate fixed in the note. These sion

821 interest, this, performance debt or or for security. From these the noteholder’s agreement contained in covenant or transfer of title cases reason that unless the instrument which trust or other deed of security, the “due on pose will a risk to that provision stipu The same secures the debt. will not be enforced. sale clause” may not seek a that the noteholder lates ambigu If a “due on sale clause” is against the maker and deficiency judgment meaning, being found in a ous in its sole recourse shall that the noteholder’s trust, security instrument such as a deed of against property described in the deed would, indeed, justify assumption that Enterprises P v. LaGuar of trust. See R & object security parties’ for the debt was the ta, Kirk, (Tex. & 596 S.W.2d Gavrel assumption would be a purpose. This Davis, 1980); 306 S.W.2d Le Boeuf ascertaining interpretative aid in valuable 1957, writ); (Tex.Civ.App. — Amarillo parties’ particular intention in a circum Deeds Mortgages and Trust Tex.Jur.2d stance when enforcement of the clause is 207, p. 269. hand, sought the other if or resisted. On Therefore, assuming that the rather than ambiguous, as in the the clause is not insert- “due on sale clause” must have been why there is no reason it protect the trust ed in the deed of enforced, should not be between the imme security, plain it seems noteholder’s it, parties having diate and those notice of equal ignore cannot the fact that there is an according to the exact terms and conditions might have been bar- likelihood parties have use in creat chosen to purposes gained for and included for other measuring rights. their contractual example, as well. For it could have been Freeman, Murchison v. permit included so as to the noteholder to ref’d). (Tex.Civ.App. Paso writ — El as it prevent a sale of the insofar purpose The ancient and dominant obligate in force an him to continue mortgage obviously of a instrument is by rate low- obligation interest measured is, securing mortgagor’s debt. There charged time of being er a rate at the than however, illegality attaching no intrinsic mortgage loans of a similar kind. the sale mortgage agreement special other is, course, primary purpose of stipulations agreements or unrelated to the Volkmer, Application of such a clause. security. stipulations matter of debt These Alienation Doctrine to the Restraints on course, are, agreements subject or of Interests, Iowa Property Security Real public policy Mortgage provi limitations.4 747, (1973). Another reason L.Rev. prepayment sions which allow of the whole or including separate stipulation such a debt, partial-release or a of the and parties’ agreement might have been examples special provisions, are of such impairing the note’s attribute of fear of stipulations agreements. particu or In the losing the negotiability, or of us, merger, deed trust we find lar now before rule of entirely by operation of the agree special stipulations several such and of trust it be included in the deed unless onerous, Among ments. the most other document.5 We rather than in some noteholder, agree not, then, unambigu- standpoint of the is his assume that the will before us will not to enforce “due on sale clause” now ment that he seek ous merely scope any “personal necessarily only has a limited against the maker of the note security instrument. it is in corporate liability” because found case, primary public policy in this 5. We need not determine involved is that 4. The course, justifiable may under any provision such a fear is prohibits whether which which negotiable See mortgagor’s “equity” redemption; law of instruments. “clog” the modern Contempo- Bailey, Negotiable and thus, Instruments simply waive his he Contracts, raneously 14 Tex- Written Executed agree redemption to frustrate its or otherwise (1936); Tex.Bus. & as L.Rev. Property, Thompson, exercise. 9 Real 1.102(c) and the comment Ann. § Com.Code thereunder; pp. 66-68. 1.208, 3.104(a)(3), 3.104(a)(2), §§ 3.109(a)(4). 3.105(a)(3) and meaning What then is the reasonable reformation of the “due on sale clause.” It assigned as it to the “due on sale clause” rather “reform” seeks the clause indi- is written in this case? There was included rectly by prohibiting except its enforcement promissory parallel provision note a in cases security where the noteholder’s which allowed the maker to benefit threatened. We see no basis for the inter- change personal in circum- economic or here, when, position equity contract- stances, just as the could benefit noteholder ing party agreed unambiguous has to an from the “due on sale clause.” The note provision, contract of which had Crestview prepay authorized the maker to the debt in notice, allegation and there is no part, penalty, whole or in at any without wording provision of that does not accurate- future time within the term of the note. ly contracting party’s reflect the intention prepayment provision and the “due on made, at the time the contract was no mat- designed sale clause” manifestly were and may, scope, ter that it in its broad work to party intended to allow either to terminate deferred-payment arrangement when it disadvantage change in eco- his due to a so, advantageous became to do the note- nomic conditions since its execution. right being holder’s somewhat more limited province equity to “It is not because it could arise when the owner change party, re- contract of a and sought to sell the obligation fairly lieve him from an under- necessarily It that when it be- follows taken, especially after he has received advantageous party came for one to termi- consideration which induced him to as- deferred-payment arrangement, nate the compel sume it. It can execution of doing corollary his so would conclude a ad- agreements agree- but not one substitute vantage enjoyed by theretofore the other ment for another.” party, advantage which would have been Cantu, (1884). We preserved Trevino v. 61 Tex. 88 by maintaining and continued original deferred-payment hold, then, force the ar- that the trial court did not err in rangement. contracting, At the time of construing the “due on sale clause” allow doubt, party hoped, each that future Foremost to consider all of the circumstanc- circumstances action or inaction of deciding es in whether to consent to the sale advantage the other work to his Crestview. Nevertheless, disadvantage. not his these allege prove any basis for failed to provisions contractual are not rendered reformation of the contract and the trial equitable public policy voidable on properly interpreted give court the clause to grounds merely party disap- because one contracting effect to the intention pointed with the course of economic events parties, objectively as manifested and with the course of action taken unambiguous language they clear and se- party making other the election that he express intention. A. R. lected to their expressly pro- is under allowed make Green, supra. Clark v. Investment Co. very visions of the contract. These are the While with the same things the Green case deals parties about which the contracted giv- they expressly and the risk assumed in mortgage, clause in a chattel this distinc- the other a to terminate the de- tion is immaterial as com- insofar Crestview ferred-payment arrangement. City of Aus- plains of Foremost’s under the “due conduct Cotten, (Tex. 1974). tin v. 509 S.W.2d 554 complaint on sale clause.” Crestview’s Something required more is before such an the clause constitutes an unreasonable re- agreement courts, may be set aside straint on alienation is discussed infra. and to this we now turn. support the trial Did the evidence finding not un LIMITATION OF THE “DUE ON SALE court’s that Foremost was EQUITABLE CLAUSE” ON GROUNDS withholding reasonable in its ad fraud, the sale to Crestview? The evidence alleged Crestview has not mistake, any injunc- hearing accident or other basis for duced at the on it construed to allow on alienation if conflicting the extent that as to tion was installment noteholder to accelerate relied credit worthiness Foremost debt, considering following whether to a sale managerial skill in consented, It undis- basis to Crestview. which it has not approve the sale however, pur- security will be apart that before Crestview a risk that his puted, that Foremost reasonable property, impaired by it knew however chased the inter- approve the sale unless may would not that basis be. raised from rate was 9.5% 12.0%

est indirect in such a case is The “restraint” $400,000 prepaid principal sum inhibiting effect only, and consists in necessarily The trial court of the debt. prospec- respect to such a clause has with conditioning ap- its found that Foremost’s owner, may who purchasers tive and the rate proval upon an increase in the interest contemplated forego a compelled either to magnitude did not prepayment or a of this arrange for immediate purchase and sale or unreasonable, render Foremost’s conduct large money, previous- payment of a sum of unjust, inequitable oppressive, “con- ly payable in installments over an extended sidering all of the facts and circumstances effect, practical the inhi- period of time. [by with the facts it as viewed Foremost] like that which results from bition is much its decision.” The had at time made any statutory or consensual the existence of being lawful as writ- “due on sale clause” sold, against property sought to be lien ten, wording permit and sufficient in its except contingency of whether the for the Foremost of whether it consideration or not. will accelerate the debt noteholder by terminating would be better served not, course, any restraint There is direct deferred-payment arrangement at the old imposed by the “due on against alienation rate, interest the evidence was insufficient part the deed of sale clause” or other unreasonable, inequitable, to establish un- “restraint” exists in trust. The asserted just oppressive conduct on the the threat of acceleration. Foremost, justify interposi- and did not the clause is an The matter of whether equity. tion of Universal C.I.T. Credit restraint on alienation in- unreasonable Daniel, Corp. v. 150 Tex. 243 S.W.2d parties to a volves not the intention (1951); Federal & Crockett First Sav. contract, justifiable expectations or their Ass’n, supra. Loan Had the course of eco- thereunder, im- but the ascertainment and turn, taken nomic events another public policies plementation of the broad complain would not have been heard to justify rule that which the common-law Crestview had determined to seize ad- ques- Without prohibits such restraints.6 vantage pre- and to of lower interest rates tion, against such restraints con- the rule note, pay penalty promissory without contrasting public policy which flicts with clearly par- it was entitled under the to do allowing to sell favors an owner agreement. ties’ property subject to such convey his impose in may as he choose to qualifications AN THE “DUE ON SALE CLAUSE” AS which purchaser, with his RESTRAINT ON UNREASONABLE clause,” as it did in include a “due on sale ALIENATION facilitate the sale. more We turn then to Crestview’s above, the various state As mentioned that the “due on difficult contention jurisdictions are divided whether a “due restraint clause” is void as an unreasonable members, living part upon operates underlying principle the social desira- 6. “The which wealth, bility facilitating throughout property the utilization of is that of the field of law desirability keep- upon part property the social of which and in ing property freedom to alienate interests exigen- responsive to the current of own is essential to the welfare one society. assumption owners.” Restate- that cies of its current beneficial The basis for the Note, Introductory requires Property, Re- freedom of alienation ment of social welfare Alienation, necessity part upon main- the of straints on 2379-80. .. . rests society primarily by taining controlled contrast, is an unreasonable restraint if restraints. if a “due on sale sale clause” following to acceleration construed allow may lawfully operate only clause” when the has with- sale from which the withholder security impaired, noteholder’s would be approval reasonable held his some should think that the result would be to ground apart from a threat to the debt’s committing deter sellers and lenders security.7 The issue is made difficult of long-term, deferred-payment to themselves primarily provi- resolution because of the arrangements except purchasers, with at Property, sions of the Restatement of dis- interest, higher higher purchase rates of cussed below. higher prices, payments, or initial cash all beginning it incon- We note in the that discourage of which would tend to the sale gruous that a “due on sale clause” of the thereby property, and alienation of real ground here in issue is attacked on the kind subverting pertinent public policies the it inhibits alienation and frustrates the sought against to be served the rule public policies favoring the free alienation unreasonable restraints. property, normally of clause arises for the course, incongruity suggests, part of an wherein the maker only by a “due on sale clause” limited payee agreed defer of a note have express implied requirement or of reasona- purchase large part of a ble conduct on the of the noteholder in order to parcel price of a perhaps not in law an unreasonable re- accomplish its alienation. Such a financial alienation, operation in its straint on arrangement operates intrinsically to facili- relationship which bears no to the evils the tate, inhibit, and not the free alienation of Mattern v. designed prevent. rule was directly real and acts to serve the Herzog, (Tex.1963); Re- public policies upon justify relied Property, comment.8 against first instance the rule unreasonable statement alienation, appear power It with the or the curtail- 7. would that an indirect restraint power slight alienation must result under both lines of au- ment of the of alienation is so thority. jurisdictions danger In those which limit en- is best in- no social arises. Who then forceability those of a “due on sale clause” to as- formed and able to cast the balance to security situations where debt’s is threat- paramount public the certain the provide interest and to transfer, uncertainty by proposed ened the implemented? It how it shall be must security dispute whether the debt’s will about public be remembered that there are numerous impaired particular pro- in fact be duces an in a case considering permissi- interests involved in inhibiting its own. It seems effect of scope of a “due on sale clause”: the stabili- ble anomalous, then, public poli- to call forth titles, contract, ty of land freedom against justification cies limiting restraints as a for so availability opportunities, preven- of credit enforceability the clause. On possible by superior tion of abuses made hand, inhibiting the other the same or a similar knowledge bargaining power, protection jurisdictions which effect must result in those resulting ownership of individual home and the enforce the clause if the noteholder claims investment, difficulty large practical withholding reasonable basis for his interest, security proving impairment of a of a transfer. so forth. case-by-case applicable A evaluation of the cir- proper province “It is submitted that the any ap- cumstances is unavoidable under dealing with clause is that of the the due-on proach, a “due on sale unless it be held that government, legislative not the branch of repugnant simple clause” is to the owner’s fee judicial, particularly since the issue is often Very per few title and is therefore void se. ‘public discussed the courts in terms of held, jurisdictions preferring have so instead policy.’ ... formulate rules or sets or circumstances which cases, history, rep- “The due-on in their brief the clause. See allow or not enforcement of legal study changing in our resent a valuable Volkmer, supra, necessity for a 752-3. The system, moving in mid- from cases decided course, case-by-case produces, of evaluation early strictly adhering to sixties and provisions seventies secondary inhibiting effect. contract, posi- regardless rule, that, general provides 8. The comment as a contracting parties, to the ultimate tions of upheld when restraints alienation will be disregard contract of contract established [and objective by imposing accomplished Enforcement of Due-On-Transfer ...” law] importance to restraint is of sufficient social Clauses, supra, at 935. outweigh the evils which flow from so interfer- “g. liability. The definitions the rules of the Re- Contractual ‘Contractual liability,’ Property help meaning within the of that statement of are of little in phrase ‘prom- as used in definition of ascertaining whether the “due on sale [the issory restraint’], exists when the effect is, law, impermissible clause” in an restraint making conveyance in violation of perti- on alienation of real person making the restraint is that the so provisions clearly nent do not fit the situa- conveyance subject such is either to dam- tion where such a clause is attacked or, case, proper ages, equitable in a to inhibiting against basis effect sales. specific by way performance relief Clauses, Enforcement of Due-On-Transfer injunction, or some combination of supra, Nevertheless, at 901. the broad lan- types these of relief. . .. Sometimes Restatement, guage coupled used only remedy may available be one for with its declaration that all restraints are damages, may only and that even be they qualifications invalid unless meet the remedy damages. for nominal If this is therein, require analyze stated that we true, course, promissory restraint clause in the framework Restate- operate significant impedi- does not as a ment. ment property.” to alienation of case, purposes present For the of the liability” This definition of “contractual has Restatement defines a “restraint on aliena- drastically circumscribing the effect of attempt (the tion” as an by contract “due alienation,” definition of “restraint on here) on sale impose clause” a “contrac- component part. which it is a Unless the liability” upon tual contracting party who subject may damages, specific owner be conveys real property in “breach of an performance, injunction or a combination of agreement” not do so. Restatement of relief, these forms of there exists no “re- Property, 404. Section 404 § characterizes straint on alienation” as that term is this kind of “promissory restraint as a re- defined and used the Restatement of straint,” upon proposition appar- based Property. light of the deed of trust as a ently, that it arises grantor’s qual- from the promissory whole and the note involved in unqualified promise ified or convey not to we do not find that the owner is property, coupled inhibiting with the combination, subject any, or a effect of liability whatever the contract im- specified forms of relief in the event he poses upon him for a agree- breach of that conveys without the ment. As an illustration “promissory of a interpretation noteholder. Our is restraint,” the Restatement cites a lessee’s following. based assign not to the leasehold with- “damages” manifestly The word used out the consent of the lessor who owns the g ordinary Comment in the sense of simple land in fee “promis- absolute. Such money damages, recoverable for a harm sory (1) only restraints” are valid if “the because sustained of another’s breach of qualified restraint is permit so as to aliena- duty. damages In the context though possible tion to some not all alien- “non-performance recoverable ees,” (2) “the restraint is reasonable duty perform- contractual of immediate under the circumstances ...” Id. 406. § Contracts, ance.” Restatement of § To determine whether a “restraint on See also Id. 327. In the context of §§ instance, alienation” exists in the first restraints, promissory “duty” arises key believe that the consideration is wheth- promise convey from the owner’s his liability” er a imposed “contractual property without the consent of the other upon the conveys owner who his contracting party. Proper- Restatement of without the consent of the noteholder not- ty, illustrations 4. Because the withstanding a “due on sale clause” in the duty apt violation of such a to amount to form of the one in issue in this nothing case. Sec- more than the violation of a bare tion 404 of the legal right, real, Restatement defines “con- practical without liability” g, tractual measurement, Comment as follows: substantial harm of certain so that there is no such possible restraint g of 404 cautions Section Comment Because we find the damages in such cases Id. 418. recoverable result. § nominal impediment operate significant a this case to be not as clause” in do “due on sale event, “damages” any the In necessity to alienation. for unambiguous, there exists no g to those spoken in refers however, Comment part; if interpretation on our such a harm that because of sums recoverable existed, necessity we believe the any such contracting party as a to the other occurs interpretation of the clause to be reasonable qualified a owner’s breach of result of the what we have stated above with consonant convey his promise not unqualified or duty on the of the there existed no not refer without consent. It does prop- conveying the owner to refrain through a trustee's sale recovered to sums noteholder, approval of the erty without the note. promissory on the or a suit subject for is not to a suit the owner injunction or damages, specific performance clause” Turning the “due on sale now to course, does, that assume plain it is so.9 He in the if he does might to the effect acceler- promise is not one owner’s risk that the noteholder approv- the noteholder’s he will obtain event but the in such ate the indebtedness property. Cf. Id. conveying any al before liable for harm not be maker would 4; g, illustrations conveyance. Comment unapproved § occasioned fact, nothing with 413(1). promises In he § hold, then, the “due on sale We and he is free regard conduct to his future is not a “re- in this case clause” involved not, approval or de- to obtain owner’s holding base our We straint on alienation.” to as- preceding his decision pending clause now in proposition that on the of acceleration. sume or not the risk written, result not, will if enforced issue selling the legal consequence of his only restraints against rule such any in evil the approval is to create property without such v. Her- prevent. Mattern designed to corollary right to elect a in the noteholder addition, it is based on the zog, supra. note, right and not a to accelerate liability” that no “contractual proposition injunction specific per- damages, or sue for clause, such a imposed, under may be not, a under such A court formance. conveys who without against the owner this, compel owner to choose clause as consent; hence, there exists no noteholder’s other, has for he of action or one course Prop- Restatement of significant restraint. to the exclusion promised not one opinion on express We erty, 404. § express terms of the under the other and provision in penalty prepayment whether clause, Under the he is free to do either. a “con- note would constitute promissory assuming some reasoning, and same simi- liability” the same or a under tractual by an the noteholder is occasioned harm provi- penalty such There is no lar clause. conveyance, the owner is unapproved case. involved in this sion has a damages doing what he in liable contract, he can to do under in issue did constitute the clause If duty such a case. breach no in alienation, neverthe- we would restraint case it in this required to enforce less be Restate- To conclude our discussion by the re- expressly qualified it is because promissory Property, as it bears ment of conduct quirement of reasonable alienation, that we we note restraints on noteholder, implies that which part of the of a prefer a construction are instructed to p. supra. or deed of trust. See deed of Crest- in mind that the It must be borne view, having conveyance “subject fact, taken to” prohibits, particular in case trust in trust, expo- the lien of the deed of has no deficiency judg- obtaining a the noteholder’s performance money damages, specific any damages claim sure to other kind of or in ment against event, note, having because it has not the maker of the any duty the note- proceeds at all in favor of agreed of a trus- assumed to look holder, any promise its own to the event the mak- nor made tee’s sale for satisfaction perform pay other noteholder. the note er failed covenant or promissory note permitted though 4642, 4, alienation is to some not Article supra, rather than wheth- § possible addition, all alienees. Id. 406. In er the trial court abused its discretion we find the restraint reasonable in the cir- refusing temporary injunction; to issue a cumstances, large (2) which consisted of a de- that the trial court erred in its conclu- purchase ferred price in a may sion that the “due on be sale clause” commercial involving pur- when, transaction the enforced undisputed under the evi- chase and building, dence, sale of an office the there exists no threat to the note- purchase price being payable over (3) fifteen security; holder’s and the trial years, penalty early with no payment, in court erred in its conclusionthat Crestview part. whole or in Id. Comment i. will irreparable injury not suffer an in the temporary injunction. absence of a We reply We will to the matters contained in have discussed heretofore the first two dissenting the opinion. opinion That recites points of error. We do not reach the third verbatim lengthy Crestview’s statement of holding because of our on the second. the nature the of as set forth in its brief in this Court. undigested From this purpose For the of our discussion of the information, the dissenting opinion draws error, point second we assumed as true temporary injunction conclusion that a Crestview’scontention that Foremost refus- granted should have by been the trial court approve ed to the sale for the exclusive preserve quo pending jury status purpose coercing an increase in the inter- however, trial. Inexplicably, opinion debt, est rate or a reduction in the and that does not precisely why illuminate Crestview posed the sale no risk to the security. note’s is extraordinary entitled to this relief under These are the facts says that Crestview govern grant rules which or denial undisputed. theory, Under its these facts temporary injunctions. merely It con- constitute, law, as a matter of cludes that Crestview should have such re- unreasonable basis for refusing Foremost’s lief, apparently in the mistaken belief that approve Moreover, the sale. Foremost’s there is a dispute relevant factual requiring consequent acceleration of the installment jury. resolution This mistake results law, debt would aas matter of under this from confusion as to the limited nature of theory, unfair, inequitable constitute appeal Crestview’s to this Court. oppressive justify injunc- conduct so as to relief, tive being the acceleration appealed

Crestview based to this Court upon an unreasonable approve basis of refusal to says undisputed. evidence that it is here, Having the sale. It raises concluded that Foremost court, as in the trial this law, question was not forbidden as a matter of under of law: Is the “due on sale clause” language enforceable, meaning of the “due on undisputed in such circum- clause,” stances, to base its decision on the in the face against of the rule circumstances, totality of including restraints on appli- alienation and under the differential, interest-rate the trial court principles equity? cable question found that Foremost had not acted unrea- law appeal. is the basis of Crestview’s And sonably, unfairly, inequitably oppressive- dissenting because the opinion implies the ly. injunction It then temporary denied the contrary, implies temporary that a in- requested by Crestview. junction may merely upon issue the basis of some policy unarticulated or a court’s sur- Though thought unnecessary, it intuition, mise or compelled we are expand we will our discussion of the rules lengthen opinion by a more detailed applicable appellate review of a trial discussion. tempo application court’s decision on an brought points

Crestview only rary injunction, they three bear on this case. (1) error for our proper temporary injunction review: The function of a obviously preserve standard for our review should whether quo, the status or the presented “last, actual, peaceable, in the trial court a noncontested status prima injunctive facie preceded case for pending controversy.” relief under which posed by solely question on the one of law temporary

While that is the function of whether the “due on sale injunction, of the status Crestview: preservation undisputed quo per for its issuance. It clause” is enforceable when is not se a basis security of this kind on a the noteholder’s is not threat- issue cases inju- showing by applicant probable of a The case before us is not ened the sale. probable right to recover after ry involving and a an attack the sufficien- one hearing. arts. hearing final Tex.Rev.Civ.Stat.Ann. cy of the evidence adduced 4663; Transport of Texas v. Rob- Co. disputed how Transports, ertson 152 Tex. 261 S.W.2d complicated question may bear on a facts (1953); Bell Tel. State v. Southwestern Rather, point in law. as stated Crestview’s Co., (Tex.1975). The trial 526 S.W.2d 526 error, question before us is whether was, initially presented court in this trial court abused its discretion in de- “the question key with the of whether Crestview temporary injunction because it nying the probable right permanent showed a a legal apply proper standards refused hearing, injunction after which de- facts, final undisputed (emphasis sup- to the pended solely its upon the correctness of plied).” theory that a “due on sale clause” court’s mayWe reverse the trial decision law, is, in as a matter of kind here issue clearly its only when that court has abused only prevent impairment enforceable abuse when discretion. There is no such security. solitary of the noteholder’s The on conflict the trial court bases its decision injunc- permanent temporary basis for Huey, v. 571 evidence. Davis S.W.2d alleged origi- tive relief Crestview in its (Tex.1978). cit Each of the four cases 859 petition interpretation of the nal was this dissenting opinion this ed in the fall under sought nei- “due on sale clause.” Crestview contrast, appeal In where the raises rule. permanent injunc- temporary ther a nor a only question applicable a of law to conced ground. tion on other Our discussion facts, undisputed as Crestview con ed question of this of law constitutes here, required to tends is the case we are dissenting opinion. in the “frills” referred to determine whether the trial court erred excused, however, point mayWe be if we did, making question on that the decision it out that it is also a reasoned discussion of If we find that the trial court did of law. appellate parties’ respective the law and the apply erroneously, law its error in that alleged as to the sole contentions basis requisite abuse of respect constitutes the temporary injunctive holding relief. Our justify discretion to reversal. Southland scope that the clause is not so limited in its Egan, v. 126 Tex. Life Ins. Co. the trial court’s conclusion to the validates App.—1935, (Tex.Comm’n pi S.W.2d ni o dissenting opinion same effect. The does Shannon, Camp v. 162 Tex. adopted); complain, imply suggest that we (1961). the other On question erroneously have ruled on this hand, not err in its if the trial court did ground law —the in the record law, under con question on that decision could which the trial court or this Court facts, there is no abuse undisputed ceded or proba- base conclusion that Crestview will a we not reverse of discretion and bly prevail on the merits. Casenote, 40 court. order of the trial See cases, dissenting opinion cites four all (1962). Texas L.Rev. 409 of which the trial court’s exercise of affirm discretion does not oc An abuse of issuing temporary injunction, discretion in a temporary injunction is refused cur if a present case where the in contrast proba applicant fails to show because the writ. trial court declined to issue hearing. recover after final ble cases, hearing on those four Shannon, supra. We hold in Camp v. the existence of revealed “com- to make such that Crestview failed disputes, case factual plicated” or “substantial” undisputed, showing, even if the facts law. disputes questions well as about permissible theory as to the its appeal, parties join issue because In the is, guarantors large depend- had a net worth scope of the “due on sale clause” in our view, wrong. upon highly-mortgaged ent in the real main Schmidt, prospective property; if one of the Moreover, may not find an abuse of $400,000 guarantors, attempted to borrow if exists for the trial discretion “some basis” strength his financial state- solely on the application for tem- court’s decision would, opinion, unable to ment he in his porary injunction. Huey, supra. Davis loan; negotia- get such a at the time of the could, We have held that Foremost under approval of the tions for Foremost’s question, reasonably the clause base payments in arrears and the note were apart refusal on reason from whether the difficulty there had been chronic in its ob- posed security. a risk to We the debt’s taining payment prompt of the install- find in the record sufficient evidence to ments; Crestview, and, seller to in the support finding the trial court’s that Fore- sale wherein Foremost’s reasonably totality most acted circumstances, sought, accept had refused to Crestview’s which included the matter of $400,000, compared promissoiy approximately note for the interest-rate differential unpaid unexpired balance and the term to be secured a lien on the hand, Foremost’s, of the note. On the other even if we inferior to apply theory were to Crestview’s as to the purchase price and to enable Crestview permissible scope limited of the “due on sale principal to reduce the sum of the note held clause,” find, contrary we to contention the by Foremost. Crestview, that the facts are not undis- evidence, conflicting Where there is puted posed as to whether the sale a risk to the trial court does not abuse its discretion is, fact, security.

the noteholder’s There in refusing grant temporary injunction, in to respect. a conflict in the evidence in that Nevertheless, for there is then “some basis” for the from the conflict there Huey, supra. refusal. Davis v. emerges support court’s sufficient evidence to the finding trial court’s that Foremost acted exists, however, There another ba reasonably refusing approve in the sale. grant sis for the trial court’s refusal to Schmidt, example, For Mr. Crestview’s own temporary in this ease. It witness, following: established the Crest- knew, undisputed that Crestview before it partnership, view was a Doerring limited & purchased property, the that Foremost had Associates, Inc., corporation, a California approved might the sale and accelerate being general partner; Doerring’s the busi- plain right the indebtedness under the primarily ness managing apart- consisted had to do so under the “due on sale clause.” projects brokering ment real estate testimony Mr. Schmidt’s establishes without investors; exchanges Doerring’s sales or question intentionally that Crestview took brokerage large sporadic; fees were but legal might theory the risk that its Doerring gen- conducted its business as the wrong. knowledge Its of the facts was partner partnerships eral in limited in about Crestview, enough to cause if it were to act ventures, two-thirds of its and as a tenant prudence, with reasonable to decline the one-third; remaining in in common the bring purchase, to an action to determine Doerring had actual cash investment in scope validity the of the “due on sale partnership the limited known as Crest- consummating Ltd.; clause” before the view, Doerring experience had no in protect otherwise to act to itself from the management buildings; of office Doer- by irreparable harm averred it as a basis for ring’s corporate financial statement was injunction. noth temporary Crestview did pursuant never furnished to Foremost regard, preferring in that instead to therefor, request the latter’s instead Fore- then seek consummate the transaction and most was furnished the financial state- preserve equitable relief from the courts Doerring’s ments of several of shareholders in position in the face of the events it set expected guarantee payment who its Foremost; prejudicial situation that prospective note held these motion and 830 buyer and not to authorize it to alter sustain an is to

now exists. If Crestview circumstances, injury mortgage by raising injury in these terms Equity ap- will not be will as a condition of be self-inflicted. interest rate thereon who so intentional interposed to relieve one see Conti- proval. For a similar conclusion by consummating trans ly such takes risks Association Savings & Loan nental Federal pertinent knowing that his actions while Fetter, (Okl.1977). P.2d 1013 v. 564 dispute. in Wortham v. legal rights are controlling point in brings This us to (Tex. 1059 Thompson, 81 Tex. 16 S.W. is whether the trial court this case which Steffens, 594, 343 1981); 161 Tex. Pollard injunc- denying abused its discretion (Tex.1961). In these circum S.W.2d that it did. tion. I would hold stances, properly rele the trial court could pertinent facts are as follows. remedy it gate to whatever Carpenter v. might have at law. Southern involves the attempted foreclosure Inc., (Tex.Civ.App. Properties, S.W. building office located sale in 1979 Neel, ref’d); writ Turner v. —Dallas Austin, Texas, Michigan corporation, by a (Tex.Civ.App. Antonio (appellee), — San Company Foremost Insurance e.). writ ref’d n. r. Compa- partnership, Crestview a California partner managing general of which ny, the basis” for the we have found “some Since Feirman, subsequent and a grant is Robert I. trial court’s refusal to disputed or to an unrelated injunction, whether the facts be in 1980 Crestview, not, partnership, the trial court not hold limited California affirm general partner its discretion. We therefore (appellant), abused Ltd. Associates, Inc., a Cali- Doerring order. & which is Diego corporation with offices San fornia PHILLIPS, Justice, dissenting. Chief attempting to and Austin. owned now foreclose on respectfully dissent. I Crestview, Ltd., a “due-on-sale” under judgment, divested of my In Ltd., Crestview, trust. clause in a deed of frills, question whether a presents the of not entitled to fore- that Foremost is claims provision sale” by a “due on lender fortified unreasonably with- Foremost close because agreement enforce mortgage can in the the and seeks to its consent sale held subsequent solely agreement in a this issue is determined enjoin the sale until higher securing a inter- purpose for the of at the trial on the merits. rate, change having not a of rate est such mortgage contract. provided three-story for been at issue a The seven-acre tract building located on a office impres- This, of first apparently, is a case purchased the I.H. 35. Foremost on South Texas; however, with similar a case sion in building in 1972 and constructed the land by the New recently been decided facts has which was in the one of its subsidiaries Appeals, v. Rochester of Silver York Court home loans for servicing mobile business of Bank, 424 N.Y.S.2d Savings 73 A.D.2d subsidiary The mobile home dealers. (1980). in 1975 doing in Austin stopped business Silver, clause due-on-sale where the In for near- building vacant and the remained approval of provision that the contained a hired a local year. Foremost then ly a unreasonably mortgage not be the would Company, to act company, Parker-Bienvenu withheld, normal held that the the court manage the leasing agent and as to be from the due-on-sale inference drawn to vari- building. building The was leased about the lender is concerned clause is that when Foremost de- until 1978 ous tenants mortgage upon the security the of building the market. place cided to It ownership of the transfer of into entered Foremost October parties intended the concluded that property for agreement sell only the grant clause to to the bank with the $1,000,000 I. Feirman to Robert ability financial approve the charter and understanding attorney Doerring Associates, Inc., title be taken in would & the name partnership attaching then undisclosed wrote a letter to Foremost copy general agreement of which Feirman would requesting be and Foremost partner. February The sale “estoppel was closed on to execute the standard letter” 16,1979, required and title was taken in the name of advising under the Company, partner- Crestview a California Foremost that if it needed further informa- ship. $160,000 Company paid purchaser tion about the transaction or the please cash to Foremost and no-liability attorney executed a contact or Fred $840,000 Schmidt, promissory note for payable Doerring over Vice President of & As- sociates, years estoppel at 9.5% Inc. The attached interest. Foremost felt letter building advised adequate security Foremost would general partnership be sold to a limited or that a 9.5% rate of interest was a sound Doerring of which & investment. The Associates note was secured general partner. deed of trust of which Foremost was the beneficiary. Foremost insisted that a due- 12, 1980, September On re- on-sale clause be included in the deed of sponded requesting with a letter financial trust require which would Feirman to ob- proposed purchasers information on the in- any tain Foremost’s consent to future sale. cluding financial statements from the con- agreed Feirman to the inclusion of the due- trolling corporation, shareholders of the on-sale clause on the condition that Associates, Inc., Doerring & and informa- provide be modified to that Foremost shall management experi- tion relative to their unreasonably withhold its consent. The expertise. ence and The letter concluded: agreed upon appears clause paragraph you aware, “As are no doubt Section 28 in the deed of trust provides that: of the Renewal Deed of Trust dated Feb- Grantors, “In the any event owner ruary requires approval Mortgaged Premises, without first the note holder before sale or other obtaining approval (which of Noteholder disposition mortgaged premises unreasonably shall not be with- grantors. Upon completion of a thor- held), should dispose sell or otherwise ough requested review of the informa- Mortgaged Premises, any part tion, you I will advise further of Fore- thereof, at time before this Deed of position most’s in this matter.” fully Trust discharged, released and purpose paragraph admitted of that Noteholder option shall have the to de- put Doerring the letter was to & Associates clare the hereby indebtedness secured due on notice that Foremost intended to use the ” payable. (Emphasis added). and . . . leverage it had as a result of the due-on- Crestview Company employed Parker sale clause. -Bienvenu to leasing continue managing and responded Fred Schmidt to Foremost’s Two of the tenants subse by sending September letter to Foremost on quently building moved from the and Crest- 23, 1980, company profile Doerring a & Company experienced view difficulty in Associates, Inc., history which set out the of making monthly payments on the note. company, the market research and sta- requested Feirman that grant Foremost a analysis tistical acquiring prop- makes in interest-only six-month moratorium on the erties, holdings the fact that its included portion monthly payments so that properties Odessa, Abilene, Brownwood, vacancy problem solved, could be but Antonio, Angelo, San Austin and San Foremost refused to make concessions. properties well as in California and Colora- August Company do, regarding qualifica- and information entered into an with James T. experience exper- tions and real estate and Hoover, Executive Vice key personnel. President of Doer- tise of its Detailed financial ring Associates, Inc., & to sell the controlling statements of the three share- $1,250,000. 21, August On provided holders were also which revealed 16,1980, By letter dated October Schmidt excess of worth in they a total net

that had information to additional Sie- provided such million. $2.4 $30,000-$40,000 bers, including: that later, called Fore- days Schmidt A few upgrade and to renovate allocated Snedegar, Ken to and talked most’s office operating re- substantial building; that a charge of real president vice Foremost’s which would would be established serve Frain, Rigas, corpo- estate, John a and Tom Foremost; security to provide additional what asked them attorney. rate Schmidt would relocate Doerring Associates & that going be on the position was Foremost’s building company to management its they wanted Snedegar replied that sale and 3,500 feet of the leasing square thereby from 9.5% rate increased the interest manage- space providing on-site why vacant explained the reasons 12.0%. Schmidt ment; the real estate values of appropri- that an increase was not believe he did get financial statements Snedegar holdings he would back on the said shown ate and Snedegar more twice investments or called actual cash him. Schmidt based on were still Snedegar Foremost time said to be sold currently and each in escrow or on values rate. At the end interest future, validity wanted a 12.0% in the immediate conversation, asked Sne- Schmidt contacting the third verified values could be those request response to the degar for a written the financial appraisers; that M.A.I. two that Jack Snedegar said for consent and Inc., Associates, Doerring & capability of at- Siebers, president vice Foremost contacting financial verified could be stating that letter torney, preparing company profile; provided references objected the sale because Foremost ex- inventory properties its current and lack credit worthiness concerns about million of and over $11 million ceeds $40 con- experience. These management escrow; manage- property was any of the mentioned in had not been cerns experience; extensive personnel had ment prior conversations. consent Foremost again requested that 30, 1980, why reasons provide specific September sale “or letter of to the Sieber’s security for approve Company’s was unable Insurance that Foremost Foremost stated to, concluded if not sub- equal had not be Foremost loan will the sale because their others, reasons, capi- among acquisition, following by our stantially “for the increased manage- a sub- proposed purchasers and on-site improvements tal risk: investment stantial ment.” indicate statements The financial response to his let- he had had When real estate invest- heavy reliance on told ter, and Siebers called Siebers Schmidt specu- of which are ments the values would consent him that mortgaged. heavily lative and $400,000 paid as a were if Foremost statements submitted financial

2. The the note. principal reduction substantial existence of indicate he proposal; at that was shocked Schmidt proposed for each liabilities demanding a of a lender heard had never purchasers. price of as the a note pay-down on 50% failed the de- have confirmed proposed purchasers Siebers giving 3. The consent. of ex- day. evidence Schmidt provide sufficient the same to in a letter mand manage- building partners and his pertise in office with the matter discussed were sincere ment.” that if Foremost they decided risk,” of “investment its concerns about that, you pro- “Should letter concluded offer partners would his two and Schmidt with date future Foremost at some vide repayment personally guarantee infor- business and/or financial additional Parker-Bienvenu retain the and to note purchaser proposed to the mation relative managing the build- continue Company to present Foremost’s overcome sufficient told Schmidt Snedegar previously had ing. willing to re- concerns, would Foremost Parker- with satisfied position at that time.” that Foremost its consider management Bienvenu’s of the building, 19, 1981, ary and findings and of fact and con- personal Schmidt knew the offer of three signed 3, clusions of law were on March guarantees improve would substantially Crestview, Ltd., 1981. perfected appeal this security existing Foremost’s since the note by filing deposit its in lieu of cost bond on no-liability was a note. Schmidt thus be- 25, 1981, February day and on the same lieved that his offers would eliminate filed with this Court motion for leave to might sincere concerns Foremost have had. petition injunction file pending for writ of spelled Schmidt out his offers in a letter to appeal. hearing This Court conducted a on 27, Siebers dated October 1980. Siebers 27, February 1981, granted the motion and replied by 31, 1980, letter dated October injunction issued enjoining an foreclosure saying that Foremost ap- still would not pending disposition final of the merits of prove the sale and that future corre- appeal. spondence should be directed to the strong arguments Two in favor of the owner of the granting court’s an emerge from Schmidt did not believe that Foremost the facts listed above. The first is the fact validly could enforce the due-on-sale clause original under the building, sale of the circumstances, under these so he and his Foremost, appellee lender, looked partners go decided to ahead and close the solely building security as the 14, sale. The sale was closed on November personal vendee’s avoided liability on the 1980, and Company conveyed an second, mortgage. The is that the subse- undivided Crestview, 83.05% interest quent purchasers that, agreed in addition to Ltd., and an undivided to Doerring 16.95% security itself, building afforded Associates, & Inc. In simultaneous transac- they personal themselves would assure lia- tions, Doerring conveyed & Associates bility Moreover, on the note. the subse- 16.95% interest partners to the limited are, Crestview, quent purchasers Ltd., apparently, financial- and the partners limited ly sound, conveyed Crestview, personally those both Ltd., corporate interests and as Crestview, so Ltd., acquired entities. a 100% interest building and seven acres on Although appellate courts are loathe which it was situated. Since the discretion, to find trial courts in abuse of Crestview, Ltd., has tendered monthly the rule must not all-encompass- become so payments every month to Foremost. deny appellant his to a 15, 1980, On December gave Foremost thorough full and review of a denial of a notice that it was accelerating the note injunction. temporary Telephone General under the pur- due-on-sale clause and would City 238, Co. v. Wellington, 156 Tex. Crestview, sue its Ltd., remedies. filed suit (1956). S.W.2d 385 22,1980, seeking December a declaratory Additionally, I would hold that the status

judgment temporary and permanent quo preserved should have been until injunctions enjoining Foremost from accel- questions presented finally herein can be erating the note foreclosing under the determined at the trial on the merits. De- due-on-sale clause of the deed of trust. On liberate action is essential for the accurate 5, February 1981, posted Foremost notice legal rights determination of oc- it intended to sell the at a casion only by this can be secured issuing a trustee’s sale to be held on March protecting quo. decree a status temporary injunction A hearing was held Research, Jones, Southwest Weather Inc. February 17 and 1981. At the con- (1959). 160 Tex. 327 S.W.2d 417 clusion of hearing, judge the trial an- the. principle applied has been in foreclosure nounced that he deny injunction, though even cases where the courts if he held that when sub- were the President of Foremost, questions presented, proper he would stantial not do what it is attempting denying to do. The to reserve questions by order decision of those a, signed was temporary injunction Febru- issuance of until the developed at a fully and law trial

facts Vial, 555

on the merits. Smith v. S.W.2d writ); (Tex.Civ.App.1977, Irving no Corp., Co. v. Land

Bank & Trust Second (Tex.Civ.App.1976, writ ref’d n. Short, e.); Branham v. 526 S.W.2d 639

r.

(Tex.Civ.App.1975, writ).

Appellee authority to Foremost has no judge of its unreasonableness.

sole own give jury laws of this

The State

authority ultimately to decide whether unreasonably withheld its con- ques- jury

sent. Until can decide

tion, Foremost should not be allowed to

foreclose. KOON, Appellant, E.

Dale KOON, Appellee.

Anna Mae No. 5618. Prater, appellant. Temple, E. Carol Texas, Appeals Court of Civil Mikeska, Jr., Mikeska & Fran- R. C. Joe Eastland. cis, Temple, appellee. 28,

Aug. 1981. DICKENSON, Justice. Rehearing Aug. 1981. Denied post-divorce proceeding in which This is portion the ex-wife seeks a ex-hus- military benefits which band’s retirement decree. Af- were not divided in the divorce trial, nonjury judgment rendered ter ex-wife, Koon, Anna Mae recover Koon, ex-husband, Dale E. from the $10,287.75 of the mili- as her share sum which he received tary retirement benefits 1972, through March December judgment also awarded Anna in Dale Koon a interest E. Mae 26.875% “if, as, military retirement benefits Koon’s received.” and when such benefits are Dale appeals. and render. E. Koon We reverse specifi judgment While the does not cally dispose of counter the ex-husband’s claim, judgment appealable it is an final

Case Details

Case Name: Crestview, Ltd. v. Foremost Insurance Co.

Court Name: Court of Appeals of Texas

Date Published: Jul 29, 1981

Citation: 621 S.W.2d 816

Docket Number: 13461

Court Abbreviation: Tex. App.