Amistad, Inc. v. Frates Communities, Inc., 6184

• Decision Date: 20 November 1980
• Docket Number: No. 6184,6184
• Citation: 611 S.W.2d 121
• Parties: AMISTAD, INC., Appellant, v. FRATES COMMUNITIES, INC., Appellee.
• Court: Texas Court of Appeals

Page 121

611 S.W.2d 121

AMISTAD, INC., Appellant, v. FRATES COMMUNITIES, INC., Appellee.

No. 6184.

Court of Civil Appeals of Texas, Waco.

Nov. 20, 1980.

Rehearing Denied Jan. 8, 1981.

John R. Foster, John C. Hampton, Lowrey, Foster & Hodge, Del Rio, for appellant.

Sol E. Arledge, Arturo C. Gonzalez, Del Rio, for appellee.

OPINION

JAMES, Justice.

This dispute arises out of a real estate transaction wherein the grantor, Defendant-Appellant Amistad, Inc., agreed to release parcels of land proportional to the amount of debt paid in installments by the grantee, Plaintiff-Appellee Frates Communities, Inc. Plaintiff-Appellee Frates brought this suit seeking, inter alia, rescission of the entire transaction, alleging that Amistad had breached its agreement to execute partial releases. Defendant-Appellant Amistad counterclaimed, alleging that Frates had defaulted on the notes given in payment for the land and that Amistad was therefore entitled to possession of the land pursuant to a fee simple determinable provision in the deed to Frates, or alternatively that Amistad was entitled to foreclosure of its liens against the land. Trial was had to a jury, after which the trial court rendered judgment denying Amistad's claims, granting the rescission sought by Frates, and awarding Frates a money judgment against Amistad for $982,389.20, said amount being the difference between the consideration paid by Frates and the rental value of the land for the period of time that Frates was in possession of the land. We reverse this judgment and remand the cause to the trial court for retrial.

On November 27, 1973, Frates entered into a contract with Amistad to purchase 8,671 acres of land located in Val Verde County, Texas, at a total purchase price of $2,384,525.00, $450,000.00 of which was to be paid in cash at closing, and the remainder to be paid by Frates executing a Vendor's Lien Note in the principal amount of the unpaid balance, bearing interest at 8% per annum and payable in twenty semi-annual installments due on April 1 and October 1 of each succeeding year, commencing on April 1, 1974. The sale was closed on May 9, 1974. At closing Frates made a cash down payment, executed a Vendor's Lien Note in the principal amount of $1,258,764.64 for the remainder of the purchase price (after adjustments made at closing), executed a Deed of Trust securing the note, made the first installment payment on the note (which under the terms of the note had been due on April 1, 1974), and took possession of the property. The Deed of Trust executed to secure the Vendor's Lien Note contained an agreement for partial releases, which, in its pertinent parts, provided that:

"The Beneficiary and the Trustee each hereby irrevocably agree with the Grantor that they will at any time and from time to time execute and deliver to the Grantor partial releases of the lien of this deed of trust and the vendor's lien retained by the deed of even date from beneficiary to Grantor, or the entire lien of this deed of trust and the vendor's lien, as the case may be, upon the following conditions:

"1. All plats, surveys, releases and other documents necessary to effect releases shall be prepared at the expense of the Grantor. Releases shall begin along and parallel to the northern boundary line of the property described in the Deed of Trust ... and run the entire width of the property from Highway 277 on the east to west boundary line. (Emphasis supplied). Each release shall be 10 acres or more. Each subsequent release shall adjoin acreage previously released and must permit access to all unreleased tracts. In addition no release shall cause any unreleased tract to be separated from the main body of land remaining unreleased.

"2. The release price shall be $343.75 per are and any partial acre released shall be prorated at the same rate.... "... Each time the Grantor requests a partial release of the lien, the Grantor shall submit to the Beneficiary a survey plat and metes and bounds description of the parcel of land from which said release is requested, together with a form of partial release of said lien which shall contain language to the effect that the giving of such partial release shall not affect or impair the lien with respect to the property not being released."

In return Amistad delivered to Frates a deed conveying title to the property, but the deed contained the following "reversionary clause":

"Except as provided below for payments in accordance with the promissory note from Grantee to Grantor herein, this conveyance shall remain in force and effect so long as the terms and conditions of said promissory note and deed of trust and vendor's liens securing the same have not remained in default for a period of fifteen (15) days after receipt of written notice, by certified or registered mail, return receipt requested, from the holder of said note specifying the nature of said default and the steps necessary to cure such default, and if not corrected within the time provided above, then this conveyance shall terminate as to that portion of the land which has not been released from the lien securing its payment and title to that portion of such land shall, ipso facto, revert to and revest in Grantor, its successors or assigns. In the event that Grantee, his successors or assigns, fails or refuses to pay any installment by the due date therefor as established in the promissory note from Grantee to Grantor herein, or Grantee fails or refuses to pay any installment within ten days after date of notice by Grantor to Grantee, whichever occurs last, then this conveyance shall terminate as to that portion of land which has not been released from the liens securing its payment and title to that portion of such land shall, ipso facto, revert to and revest in Grantor, its successors or assigns, provided that, not more than thirty (30) days prior to the due date of any such installment, Grantor has given written notice to Grantee, by certified or registered mail, return receipt requested, that such installment was coming due."

Frates timely made payments on the note in October 1974, April 1975, and October 1975, but no releases were requested during this time. On March 17, 1976 Frates made its first written request for a partial release from Amistad. The request was not received by Hal Rachal, President of Amistad, until March 22, 1976. On March 26, Max Naegler, Vice-President and General Counsel of Frates, delivered to Mr. Rachal the abstract to the land in question and inquired about the execution of the release. Mr. Rachal responded that he "would have to consider the matter further before telling (Naegler) whether (he) would execute a release." By letter dated March 29, Mr. Naegler informed Mr. Rachal that if Amistad had not executed the requested release and informed Frates of such execution by noon on March 31, that Frates would file suit for specific performance and would not make the April 1, 1976 payment on the Vendor's Lien Note until the matter had been resolved. The release was not executed.

On April 1, 1976, Frates did in fact fail to make the installment payment due on the note and no further...