*1 appears judg- $826,271.00 It from the amount of this against amount of Triland ment elected indemnity agreement, that Vista the contract recov- under the it is RE- ery $76,271.00 but it also awarded was FORMED to award to Vista and $750,000.00 exemplary damages of based against and, reformed, Triland is AF- an on its fraud claim. That this im- FIRMED. by any
proper party election was raised note, however, appeal.
to this that it is in this state that one
settled law cannot exemplary damages for a cause
action based on contract. Texas National Karnes, (Tex.1986)
Bank curiam); Homes, Inc.,
(per
Jim Walter
Reed,
(Tex.1981).
Vis-
Wife,
Lee,
Nelson N. LEE and
Alice K.
to elect
ta was entitled
either
on
Towers, Inc.,
Key and Richard O.
$826,000.00 ($76,-
the contract claim or
Eid, Appellants,
$750,000.00)
000.00
on
fraud claim.
+
case,
Under the facts
this
because this
Wife,
Joseph E. O’LEARY and
Hannelore
trial
Court reversed the
court’s award for
Inc.,
O’Leary,
Hospitality,
I.
Northern
nothing judg
fraud and rendered a take
Gray, Appellees.
and William S.
Vista, nothing
ment for
hinders
now
Vista
asserting
for
its claim the contract dama
No. 07-85-0350-CV.
ges.4
v. First
Bank
See Chesshir
State
Appeals Texas,
Court of
(Tex.1981).
Morton,
sequently, hold that the
this dated June should be Court a new rendered.
vacated and
To the that the court’s extent damages
ment awards Vista amount including exempla- fraud for Triland, against it
ry damages RE- RENDERED
VERSED portions of the trial
for Triland. judgment awarding Warren
court’s plus attorneys’ Vista
000.00 fees indemnity awarding
and Triland and Vista are AF-
against Triland these amounts the trial
FIRMED. To the extent damages in judgment awards
court’s
Vista
rehearing
See Watson v.
litigation,
be considered.
cannot
Throughout
Vista has consist
this
Company,
attorneys’
Glens
Insurance
ently
fees on
Falls
a claim its
asserted
(Tex. 1974);
Deposit In
McGuire v. Federal
indemnity agreement.
While
the basis of the
(Tex.Civ.
Corporation,
ant to 378 of the Texas Rules of Civil Procedure.1 Because the before us appear appellants both as appellees, and as will be referred to name rather *3 than portions title. We affirm those attacked Lee Nelson N. (the Lees). wife Lee and Alice K. We portion a judg- sustain of the attack Towers, by Key West) (Key West Inc. (Eid) modify and Richard O. Eid extent; otherwise, to that affirm. complex
The case
a
involves
series of
transactions,
wraparound mortgage note
climaxed
a chain of
and a fore-
defaults
property
question
closure sale. The
ais
motor hotel in downtown
The
Amarillo.
here,
title,
pertinent
chain of
as
is from
Ray Berney Enterprises,
Pe-
Inc. and C.R.
(Berney/Peters)
Joseph O’Leary
ters
E.
(the
I. O’Leary
wife Hannelore
O’Lear-
ys),
from
from
and,
Key
finally,
the Lees to
from
West
Hospitality,
West
to Northern
(Northern).2
purchased
property
When
gave
O’Learys, they
note)
(the
promissory
O’Leary
note
se-
property.
cured
lien on
$1,150,-
O’Leary
note was
sum of
around,
000.00,
included, wrapped
or
which
unpaid
promissory
balance
three
by prior
liens on
*4
pretation
agree
or construction of their
Key
against
West and Eid for
Gallup
ment,
v. St.
nothing
See
more.
interest,
plus
attorney’s
702.70
costs and
Company,
Paul
Insurance
515 S.W.2d
fees.
(Tex.1974); Republic
National
250
Insurance Co. v.
LEE
Spillars,
THE
APPEAL
368 S.W.2d
Life
Developers
v.
(Tex.1963);
Skyland
94
by
Lees attack the
Sky Harbor
586 S.W.2d
error,
points
by
they contend the
which
(Tex.Civ.App. Corpus
570
no
Christi
(1) by
failing
court erred
to credit
trial
prevail,
That rule should
whether a
on the
price
bid
at
foreclosure sale
dealing
relatively simple
court
is
with a
(2)
parties,
by
amounts owed
see,
e.g.,
purchase
personalty,
sale and
giving Key
on
Lee
West
Eid credit
Corbett,
Packing Co.,
Caviness
v.
the Lees to
note for
balance owed
S.W.2d 543
O’Leary
on the
note. The
— Amarillo
or,
n.r.e.),
here,
complex
writ ref’d
as
points
collectively,
resolved
will be
because
involving
real estate
series of
transactions
they
grounded
problem:
on
How to
are
one
al
many parties.
question,
The ultimate
deficiency judgment
wrapa-
on a
calculate
ways,
parties agree
did the
to do?
is: What
round note.
approach
by the Four
That was the
taken
Berney/Peters
foreclosed,
there
When
in
Appeals
teenth Court
Houston
unpaid
$974,382.12
was an
balance
Consol
wraparound
recent
note case
note,
O’Leary
obli-
Summers,
Special
Capital
idated
Trust v.
gation included in the
At that
Lee note.
[14th
time,
unpaid
Lee note
balance of the
1987, writ),
approach
and it is the
Dist.]
(including
O’Leary wraparound)
was
we take here.
$1,038,495.86.
Key
gave
court
trial
unpaid
and Eid credit for
balance
West
case,
the fol
In this
the Lees made
note, and,
adding
O’Leary
on the
after
agreements
lowing
on the
interest that
accrued
$9588.96
had
First,
Lees
on the debt.
the deed
$64,113.74
time,
ordered
balance
trial
West, signed
states:
by the
to
and Eid to
to the
pay
subject
conveyance is
further
“This
made
argue
The Lees
the court
Lees.
assume
herein does not
to and the Grantee
price
credited
should have
the bid
following
indebtednesses:
payment of
sale, $700,000.00,
instead
foreclosure
by a list
The statement
is followed
....”
note, $974,382.12.
O’Leary
on the
balance
proper
prior liens and debts
the award
This would have increased
including
note that
ty,
$348,084.82. We
Lee
O’Learys and
by the
to the
owed
conclude, however,
gave
and Eid note
on the
credited
credits.
the correct
Second,
note,
the Lee
the Lees.
pre
$1,125,000.00 real
lien note
estate
approach
several
ways
There are
transaction, signed by
compare
J.M.
pared
part of the
See and
problem
us.
as
Stern,
con
payable
Corp. v.
Realty Investment
(Fla.Dist.Ct.App.1974); Dau
cludes as follows:
So.2d
carry into effect
intention
The aforesaid
hereinafter
re-
endeavors to
Note,
Wraparound
parties
expressed
is an all
ferred to as
as
therein. Mau
parts
its
All
of a
supra
inclusive note which includes within
at 383.
pin Chaney,
giving
principal
unpaid principal
together,
amount the
bal-
taken
are
be
contract
in
meaning
carry
ances of all indebtednesses described
out the
as will
such
them
Warranty
the aforementioned
Deed exe-
the fullest extent.
tention of
cuted
Nelson N. Lee and
Alice
Indemnity Company
American
General
Lee,
Undersigned.
263, 339
K.
to the
Pepper, 161Tex.
principles, we
(Tex.1960). Applying those
the two instruments are construed
When
court was correct.
that the trial
conclude
be,
together,
must
Jim Walter
Schuenemann,
Homes, Inc.
It follows that we must also reject the
(Tex.1984),only one conclusion is
Lees’ contention
only
the amount bid
$1,125,000.00
possible.
note includes
at the foreclosure sale can be credited on
deed,
prior
listed in the
those
debts
the Lee note.3 That bid
immaterial,
un
responsible for
West and Eid are not
der the facts of this case and our view of
prior
due on those
debts.
balance
the law. The cases
cited
the Lees that
Thus,
plain language in the contract
support crediting the
price
bid
on the debt
*5
assuming pay-
excepts
grantees
the
from
of the mortgagor, Maupin v. Chaney, su
arising
pre-existing encum-
ments
under
pra; Whalen v. Etheridge,
how much West WEST—EID APPEAL prior must due on the debts be the balance judgment and Eid attack the the Lee from the balance due on
subtracted four that, points By of error. the first by by six court did subtract note. The trial of the points, attack the form note ing the balance due on ment, and incor- notes), contending ambiguous it is (which wrapped earlier around liability joint and several rectly states the accordingly. Regardless judgment entered by the O’Lear- parties sued Lee of the various called for the face amount they contend points, ys. By their final two obligation on covers the total liability to the personal Eid’s language in evidence of subsequent property, the legally factually and insufficient par Lees is clearly reveals the both instruments against him. We judgment support and Eid ac to hold ties’ intent in the order the contentions consider equity will only for the Lees’ countable deed, stated. interpreting a this Court In note. appeal presented by is: In question this given by example persuasive the We also find deficiency, adoption brought by against B C for illustrate that a suit West and Eid to inequitable: position proper computation be of C’s liabili- would the Lees’ is the what A, original ty? a tract of owner of Assume B, land, taking wrapa- a first owing back that land to to ... sells "true debt” $1,000,000.00, a Deed (B) secured lien for the dif- mortgagee round this B then sells further that Trust. Assume wraparound debt between ference wraparound mort- property to C on same ($1,000,- ($1,500,000.00) debt and the included wraparound taking debt gage, back equi- 000.00). represents actual This sum $1,500,000.00. C defaults Assume further B, mortgagee seller-wraparound ty of defaults on and that B to B its indebtedness transaction. A, posts the that A its indebtedness property context, price as the bid to allow the In this in accordance for foreclosure applicable due to C on credit of the State of and the laws Deed of Trust to B because a windfall result in debt would A at foreclosure further that Texas. Assume ($800,000.00) exceed the deficiency would a bid of bidder with is the successful ($500,000.00). debt true 000.00. judgment, Eid contend form a to conform with West and Bank form, evidence. State Nat. present pleadings
in its would allow Co., Mfg. Farah recovery: v. double 678 S.W.2d Lees, can collect then Paso writ dism'd — El Bank, City National collect an from Wenk agr.); additional jointly severally. (Tex.Civ.App. Tyler 352-53 portion dispute Also, reads if the trial errs follows: damages, computing the amount of dam IS, THEREFORE, ORDERED, ap reformed ages AD- awarded can be IT Industries, pellate court. Atlas Chemical
JUDGED AND DECREED the Court Anderson, Plaintiffs, JOSEPH E. O’LEARY wife, O’LEARY, 1974), aff'd, HANNELORE I. — Texarkana see, e.g., Brid (Tex.1975); NEL- Defendants Bernard, LEE, (Tex.Civ. well N. LEE and K. SON ALICE w.o.m.). App. FIFTY- Worth writ ref’d the sum of ONE HUNDRED — Fort FOUR HUNDRED SEVEN THOUSAND Here, support will the record ($157,- EIGHTY-NINE AND 85/100 separate awards 489.85) DOLLARS with interest thereon $157,489.85 each, against (10.0%) per percent of ten rate will, against Key Eid. We there West and Judgment, annum from the date of this fore, point through error sustain one necessary attorney’s fees reasonable and modify four and to reflect in the amount of SIX AND THOUSAND joint and several ($6,000.00) all NO/100 DOLLARS and O’Learys for Key West and Eid to the costs $157,489.85. *6 ORDERED, IT AD- IS FURTHER JUDGED AND DECREED the Court remaining two Eid utilizes Plaintiffs, that JOSEPH E. O’LEARY evidentiary points to launch an attack O’LEARY, and HANNELORE I. finding personally that he is liable Defendants, and KEY reviewing the pleadings, Lees. After TOWERS, INC. RICHARD WEST and reach have concluded that we cannot EID, jointly severally, attack, and sum of O. Rule 93 merits of his however. ONE HUNDRED FIFTY-SEVEN re the Texas Rules of Civil Procedure of THOUSAND FOUR HUNDRED a pleading party who quires a verified ($157,- liability capacity EIGHTY-NINE AND 85/100 he in which denies 489.85) DOLLARS with interest thereon party A fails to file is sued. who (10.0%) per Rule, percent spe of ten pleading required rate verified Judgment, annum from the date of this a defect cifically complaining of of necessary attorney’s fees capacity reasonable and in which denying liability or sued, may AND any complaints in the amount of SIX THOUSAND he waives he is Inc. v. ($6,000.00) DOLLARS, all Allright, NO/100 those matters. have about 515, (Tex.App.— of 517 Burgard, costs court. 666 S.W.2d n.r.e.); 1983,writ ref’d Houston [14th Dist.] interpretation by Key agree with the D Corp. v. & Mechani Const. S Sunbelt language foregoing and Eid. cal, 415, (Tex.App. Corpus 418 668 clearly permits the to recover n.r.e.); Butler 1983, ref’d writ Christi $157,489.85. Yet, it is of separate awards 926, Inc., Shop, Joseph’s Wine Agreed that Statement obvious 1982, 929 [14th Dist.] a total only entitled were n.r.e.). ref’d writ having found court of the trial West, liable Eid are that the original Eid filed an severally. jointly amount for that September claim on to the Lees’ answer general deni included The answer Appeals power 1985. Courts of have the by Eid, denying denial re- and a verified recovery al modify the amount capacity. nullity. is a As the his individual How court said Forest ever, they Services, pleadings filed the within seven Lane Porsche Audi v. G K & days September day, (Tex.App.—Fort of the 23rd with S.W.2d Worth writ), leave of out Tex.R.Civ.Pro. “Under rule amended Thus, disregarded. pleading must be filed pleadings cannot be without leave of City Corp., days Tower Dallas v. Union court seven of the trial set- within (Tex.App.—Dallas ting.” rehearing by Key The motion for n.r.e.). 'd writ ref is West and Eid overruled. correctly pointed Eid’s out counsel us our to reconsider ask responsive pleading at trial is determining due on method of the balance required when a cross-claim served on a Pointing Lee note after foreclosure. appearance in the party who has made an three, they change our footnote various However, action. Tex.R.Civ.Pro. 92. example inequi facts in the illustrate the says also that in the absence of a re can result under some circumstanc sponsive pleading, party shall be es. resolution of the issue was not Our general pleaded deemed to have denial. balancing equities; it was based on a party any If the wants to assert interpretation the contract based on our in Rule he must do so matters listed change that parties. We cannot rule, according to Rule 92 because rehearing The Lees’ motion for contract. respects “In rules states: all other is overruled. mat
prescribed pleadings defensive applicable answers to counter ter are prop
claims and cross-claims.” Without pleading, cannot
erly filed verified appeal. capacity issue on Points
raise error five six are overruled.
The trial modified the sum
award & Brown Ron BROWN Ron Lees, Key joint- against the Associates, Appellants, interest and attor- ly severally, *7 judgment. As ney’s fees as stated modified, the is affirmed. PRACTICE OF LAW UNAUTHORIZED C.J., REYNOLDS, Before COMMITTEE, Bar of State BOYD, JJ. COUNTISS and Texas, Appellees. Rehearing On Motion No. 05-87-00223-CV. COUNTISS, Justice. Texas, Appeals of Court of have Eid and Dallas. rehearing. Key filed motions for Sept. our conclusion Eid ask us reconsider personal liabili challenge to Eid’s that their 26, 1987. Rehearing Denied Oct. it was here because litigated cannot be properly pled in the arguments, but reviewed all of their conclusion that our we remain convinced denying pleading tendered
correct. days of trial. seven
personal within Proce Rules of Civil 63 of the Texas filing specifically permits
dure “only after frame within that time
pleading obtained_” Be- judge leave obtained, pleading leave was not
cause notes were secured property. purchased property When West promisso- gave the Lees a from it (the note) by lien on ry note Lee secured Pirtle, Pirtle, & Patrick A. Nickum Lee note in the sum property. Amarillo, appellants. for $1,125,000.00, wrapped around the McGowan, Levbarg & McGow- G. Keith Also, O’Leary note. unpaid balance of an, Austin, appellees. for President of West and O’Leary note. guaranteed the REYNOLDS, C.J., and Before conveyed property Key West BOYD, then JJ. COUNTISS guaranty a note return for Northern COUNTISS, Justice. de- Subsequently, Northern agreement. faulted, back setting up a chain defaults It This note case. is a fore- statement, Berney/Peters, who instituted pursu- agreed us on an of title who are immaterial presenting Those the chain commended for 1. Counsel are by agreed It eases our burden. the case omitted. case statement. are example. hope will others follow Monritt gharthy v. proceedings bought proper- closure 293 Md. $700,000.00. Maupin (1982); at the v. Cha foreclosure sale 444 A.2d (1942); ney, 139 Tex. Thereafter, pertinent here, Habitat, McKanna, Inc. v. O’Leary O’Learys sued the Lees on — Eastland guar- on their reason, however, stray We see no then anty of the note. The Lees principles settled or create contract law the Lee note. sued Eid on simply new or artificial rules because we gave The trial relatively face a of business unusual kind Lees, Key and Eid for obligations transaction. interest, plus attor- costs and inter contract are best determined gave ney’s It then the Lees fees.