Charter Nat. Bank-Houston v. Stevens

• Decision Date: 26 October 1989
• Docket Number: No. A14-88-421-CV,BANK--HOUSTO,A,A14-88-421-CV
• Citation: 781 S.W.2d 368
• Parties: CHARTER NATIONALppellant, v. Thomas H. STEVENS, Appellee. (14th Dist.)
• Court: Texas Court of Appeals

Page 368

781 S.W.2d 368

CHARTER NATIONAL BANK--HOUSTON, Appellant, v. Thomas H. STEVENS, Appellee.

No. A14-88-421-CV.

Court of Appeals of Texas Houston (14th Dist.).

Oct. 26, 1989.

Rehearing Denied Nov. 30, 1989.

Larry Huelbig, Audrey Selden, Houston, for appellant.

James M. Bright, Donald J. Dombrowski, Houston, for appellee.

Before J. CURTISS BROWN, C.J., and JUNELL and DRAUGHN, JJ.

OPINION

JUNELL, Justice.

Charter National Bank--Houston appeals from the judgment in the amount of $54,315 granted appellee Stevens upon his suit for damages from wrongful foreclosure. Appellant bank brings five points of error: (1) an improper causation element of wrongful foreclosure was submitted to the jury; (2) the appellee suffered no damages as a matter of law; (3) it was improper for trial counsel to testify on a contested fact issue; (4) there was no competent evidence that an excluded prospective bidder was ready, willing and able to purchase the property at the foreclosure sale; and, (5) there was no jury finding that a prospective purchaser stood ready, willing and able to pay the market value of the property found by the jury. We affirm.

Appellant bank made loans to appellee for the refinancing of an unimproved three acre parcel of real estate, the subsequent construction of a commercial building on the land, and working capital to conduct his business. The loans were evidenced by two promissory notes secured by first and second lien deeds of trust on the real estate. The parties stipulated that, at the date of appellant's foreclosure on the realty, the aggregate unpaid indebtedness due appellant by appellee on the two notes was $375,685.

Faced with business hardship, appellee leased certain space in the commercial building to others and attempted to sell the property. One of the tenants became interested in buying, but a price was never agreed upon. More than a year prior to foreclosure, appellee and appellant bank began negotiations to restructure the loans which were never completed. When the loans became delinquent, foreclosure notices were posted. On three occasions the foreclosure sales were aborted when appellee made payments on his debt. When appellant bank noticed the property for foreclosure a fourth time, the interested tenant contacted the bank to find out if the foreclosure sale would occur as scheduled. The tenant, Western Protek, Inc. (hereafter usually referred to as "tenant"), knew there was a pending "regular" sale which, if completed, could have obviated a foreclosure sale.

According to the tenant's president, his inquiries about the foreclosure sale began the week before its scheduled date. He told the bank's representative of his interest in attending the sale and bidding on the property. He did this in several different phone conversations prior to the date of the sale. The last of these conversations was about 3:00 p.m. on Monday, April 30, 1984, the afternoon before the first Tuesday of May, 1984, the statutory date set for such sales at the courthouse door. The tenant's Dallas attorney was in Houston on that Monday afternoon and was prepared to stay over for the sale if it was to go forward. Just before 5:00 p.m., the tenant's president again called the bank and was told by a secretary that the bank's loan officer had left for the day. The tenant's attorney testified that he had personally arranged $400,000 of interim financing with a Dallas bank to enable the tenant to bid at the foreclosure sale.

The tenant's president testified that the bank officer said in each telephone conversation that he did not know for sure if the sale would take place as scheduled but that he finally promised he would give the tenant adequate and timely notice if it was in fact going to be held the next day. On the morning of the sale the tenant's president resumed his phone calls to the bank officer without making any contact.

The sale was held on the noticed day, having been arranged the previous week with the bank's outside counsel who served as substitute trustee. The bank failed to contact the tenant as promised. The bank was the only bidder, successful at the sum of $355,000, which was approximately 95% of the indebtedness due appellant bank by appellee, and approximately 84% of the $430,000 fair market value found by the jury. After foreclosure the tenant offered to buy the property from the bank at its $355,000 successful bid price. The bank was said to have asked a minimum of $420,000. Three days after the bank's purchase it obtained fire and extended insurance coverage on the property in the amount of $425,000. The tenant filed a lis pendens as well as this suit for damages against appellant bank for negligence, fraud, and promissory estoppel, alleging tenant had been ready, willing and able to bid up to $400,000 for the property and that the tenant had plans to go higher if necessary, and to at least "match" the bank's bid. The bank sold the property "as is" a few months later for $385,000, clouded by the lis pendens.

Appellee Stevens intervened in the lawsuit about a year after it was filed, claiming wrongful foreclosure and seeking actual and exemplary damages.

The bank officer testified that he knew the tenant was interested in buying the property and wanted to attend the foreclosure sale, but he denied having made any promise to call back. On direct examination the bank officer explained that he had been reluctant to talk with the tenant about the foreclosure sale, claiming a duty of confidence to the bank's mortgagor-client, appellee Stevens. Upon being cross-examined, the following happened:

Q. Okay. Now, both Mr. Stevens and the bank, you've got a duty to both of them?

A. Yes, sir.

Q. All right. Okay. Wouldn't your duty to the bank have been best served by getting as many bidders at as high a price as you could for the property?

A. Yes, sir.

Q. And wouldn't your duty to Mr. Stevens have been best served by getting as many bidders at the highest price that you could for that property?

A. Yes, sir.

The jury made the following findings pertinent to this appeal:

1. Allan Boss, a loan officer at the bank, did promise to call Cecil Brandon, president of Western Protek, Inc. before the end of the day on April 30, 1984, if Charter Bank intended to proceed with the sale scheduled for May 1, 1984.

2. Allan Boss should have foreseen that Cecil Brandon would rely upon his promise.

3. Western Protek, Inc. did substantially rely on Allan Boss' promise to its detriment.

4. (1) the promise was material to Western Protek, Inc.;

(2) the promise was false;

(3) Allan Boss knew it was false when made or he made it with reckless disregard of the rights of Western Protek, Inc.; and,

(4) Western Protek, Inc. did rely upon the promise to its detriment.

5. Western Protek, Inc. was ready, willing and able to pay to the bank cash up to the sum of $400,000.00 on May 1, 1984.

6. The failure of Western Protek, Inc. to attend the foreclosure sale affected the fairness of the sale of the property owned by Stevens.

7. The fair market value of the property as of May 1, 1984, was $430,000.00.

The jury answered in the negative the issue inquiring whether Boss's promise to call Brandon was made with the intent that the tenant, Western Protek, Inc., would rely thereon.

Judgment was rendered for appellee in the amount of $54,315, being the difference between the fair market value as found by the jury and the stipulated indebtedness due appellant bank of $375,685. Judgment also was rendered denying the tenant any recovery against the bank. The tenant, Western Protek, Inc., is not a party to this appeal.

In its first point of error appellant points out that the special issue presented to the jury asked for a finding on the "fairness" of the foreclosure sale but failed to ask whether any "unfairness," if found, proximately caused a gross inadequacy of selling price. The special issue which was actually submitted to the jury had this phrasing:

Do you find that the failure of Western Protek, Inc. to attend the foreclosure sale affected the fairness of the sale of the property owned by Thomas H. Stevens?

Appellant bank requested the two following special issues and one instruction, all of which were refused:

Do you find that the price bid by (appellant bank) at the May 1, 1984, foreclosure upon the subject property, namely the sum of $355,000.00 was a "grossly inadequate bid price?"

[You are hereby instructed that the term "grossly inadequate bid price" means a bid price so far short of the real value of the property as to shock a correct mind, and thereby raise a presumption that fraud attended the purchase.]

Do you find that the representation by (appellant bank) to (tenant), ..., was the proximate cause of the grossly inadequate bid price?

Appellant bank urges us to find that the charge to the jury should have included questions on three elements of wrongful foreclosure: (1) a defect in the foreclosure sale proceedings; (2) a grossly inadequate selling price; and (3) a causal connection between the defect and the grossly inadequate selling price.

We have traced the threads of Texas law on wrongful foreclosure back through more than one hundred years. Texas law conforms with the general rule found in other jurisdictions that mere irregularities in the conduct of the foreclosure sale will not vitiate the sale unless the irregularities result in injury to the mortgagor. 59 C.J.S. Mortgages § 572 (1949). In the development of Texas law, however, a universal need for the plaintiff to prove a grossly inadequate selling price may have inadvertently crept into the picture as to all lawsuits for wrongful foreclosure. We believe this to be an erroneous portrayal. It never was intended that there should be an automatic need to prove a grossly inadequate selling price in a situation where the bidding at a non-judicial foreclosure sale was deliberately "chilled" by the affirmative acts of a mortgagee and the...