Chase Manhattan Bank v. Bowles, s. 10-01-081-C

CourtCourt of Appeals of Texas
Citation52 S.W.3d 871
Docket Number10-01-196-CV,Nos. 10-01-081-C,s. 10-01-081-C
Parties(Tex.App.-Waco 2001) CHASE MANHATTAN BANK AND BANK ONE, N.A., Appellants v. MICHAEL R. BOWLES, COURT APPOINTED RECEIVER, Appellee
Decision Date18 July 2001

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52 S.W.3d 871 (Tex.App.-Waco 2001)
CHASE MANHATTAN BANK AND BANK ONE, N.A., Appellants
v.
MICHAEL R. BOWLES, COURT APPOINTED RECEIVER, Appellee
Nos. 10-01-081-CV, 10-01-196-CV
Court of Appeals of Texas, Waco
July 18, 2001.
Rehearing Overruled August 23, 2001.

From the 249th District Court Johnson County, Texas Trial Court # D200005226

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Copyrighted Material Omitted

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Copyrighted Material Omitted

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Before Chief Justice Davis, Justice Vance, and Justice Gray

OPINION

VANCE, Justice

Robert and Joanne Berg were getting a divorce. Part of the marital estate was their residence ("the property") worth hundreds of thousands of dollars.1 After a dispute over Mr. Berg's handling of one-and-a-half million dollars of the business assets of the estate, on October 21, 1999, the trial court appointed Michael Bowles as Receiver over certain assets.

Robert and Joanne reached a Mediated Settlement Agreement for most of their assets. However, the property was not included. Because the divorce was about to be finalized, on February 24, 2000, the trial court ordered the property placed into the existing receivership, and severed the receivership proceeding and three pending motions for enforcement and for contempt from the divorce proceeding, giving the receivership proceeding a new cause number. Bowles listed the home with a realtor who advertised it for $425,000.

After the property did not sell, Bowles and two lienholders engaged in a dispute over their respective rights. These appeals are from two orders which were entered concerning that dispute.

HISTORICAL AND PROCEDURAL EVENTS

The historical and procedural events leading to these appeals are involved, but reciting them is necessary to understand the issues and their resolution.

The Banks

Chase Manhattan Bank ("Chase") and Bank One (collectively "the banks") each have a lien on the property as a result of loans they made to the Bergs. Chase is the successor-in-interest to Long Beach Mortgage Corporation ("Long Beach") by virtue of an assignment of a deed of trust on the property dated October 1998. Long Beach continued as the "servicer" of the note. The deed of trust had been assigned to Long Beach in September 1998 by the original lienholder, Assurance Mortgage Corporation of America. The original deed of trust was filed by Assurance Mortgage in Volume 2229, Page 820 of the Johnson County deed records. The original principal amount of the note was $281,250. Bank One is the second lienholder, and the original principal amount of its note was $56,250.

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The Temporary Injunction

The loans were in default, and the banks pressed to have the property sold. When that process was delayed, Bank One commenced non-judicial foreclosure under its deed of trust. Bowles responded on May 31, 2000, by seeking an injunction against Bank One and Long Beach. Presumably Bowles did not realize that Long Beach no longer was the lienholder. Bowles obtained a temporary restraining order against Bank One and Long Beach (but not Chase) which blocked Bank One's attempt to foreclose. Bank One and Long Beach (but not Chase) were served with citation and a copy of the temporary restraining order.

On June 12, 2000, Bank One sent Bowles a letter stating it "will take no further action to foreclose on said property until the receivership is dissolved or otherwise terminated." Bowles filed the letter with the clerk of the court as a Rule 11 agreement. Tex. R. Civ. P. 11. After a hearing on June 13, 2000, which neither Long Beach nor Chase attended, the trial court granted a temporary injunction against Long Beach only, "restraining and enjoining Third-party defendant, Long Beach Mortgage Company its agents, servants, and employees, from directly or indirectly foreclosing on the Deed of Trust filed for record at Volume 2229, Page 820 . . . ." This volume and page number refer to the original deed of trust filed by Assurance Mortgage. At the hearing, Bowles testified that the only remaining item of value in the receivership was the property, and it was imperative that he sell it so there would be money to pay the costs, expenses, and fees related to the receivership. Bowles claimed to have two potential purchasers of the property.

By November 2000 the property had still not been sold. Chase filed a Motion to Terminate Injunction, requesting that Chase be allowed to proceed with non-judicial foreclosure on January 2, 2001. The motion recited the history of the assignments of the deed of trust, and pointed out that Long Beach was not the owner of the note. The motion did not argue that the temporary injunction may be void as to Chase because Chase was not a named third-party defendant to the receiver's third-party action. Two weeks later Bank One filed a "copy cat" motion to terminate the injunction.

The Hearing on the Sale of the Property

A hearing was held on December 14, 2000. Bowles lawyer informed the court he had a contract for sale on the house for $422,000. (The realtor testified that if the property had not been allowed to deteriorate during the pendency of the divorce, it might have sold for $500,000.) The closing was to occur December 15. The lawyer said: "And when it's all said and done at 422, to pay off the liens and all the expenses of the receivership, the funds are going to be $36,485 . . . short." Bowles introduced a balance sheet showing that $458,874.79 was needed to pay all debts, including $7,518 to Bowles for fees and $12,034.60 for his expenses, $7,226.24 to Bowles's lawyer for fees, $313,645.38 to Chase, and $59,477.76 to Bank One. The fees and expenses to Bowles and his lawyer were only for their work in relation to the property, as all other assets of the receivership had been disposed of earlier. Bowles requested that the proceeds of the sale be distributed in accordance with the hierarchy in section 64.051 of the "Receivership" statutes. Tex. Civ. Prac. & Rem. Code Ann. § 64.051 (Vernon 1997). He maintained that the statute would require that Bowles and his lawyer be paid first and the banks last. Bowles lawyer said: "At this point we would like to disburse the other funds and cut the receiver loose. Terminate the receivership and get

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[Bowles] and I out of here so we can stop running up expenses on this case." He said the matter would be completed after the sale and after the banks' liens were released by the court. The $340,000 which would be remaining after all expenses, fees, and costs were paid would be deposited into the registry of the court, and the banks would have to work out how the $340,000 would be applied to their $373,123.14 in liens.

Bank One's lawyer said: "I came here for some finality to this . . . . I'm still a little sketchy on whether or not all of these fees and costs are directly related to this asset. It sounds to me like some of them may be related to the business that Mr. Berg had and some of these other as assets that the receiver was trying to get his arms around. That's neither here nor there. I think we would be happy with something along these lines. If we're $36,000 short, Bank One could take a hit for half of that and Chase could take a hit for other half." Bowles lawyer said: "If that's the way The Court wants to go that would be fine with us just to split the costs between the two lien holders. I'm just trying to get the thing resolved."

Chase's lawyer protested that (1) Bank One was the second lien holder, and might have to pay the entire $36,000 shortfall because Chase would be entitled to have its lien satisfied first, and (2) the court had no authority to release the banks' liens.

The hearing ended with the court ordering the property sold, with the remainder after payment of fees, costs, and expenses to be deposited into the registry of the court if Chase and Bank One could not reach agreement on how much each would receive. Over Chase's continued objection, the court also ordered the liens released upon sale of the property. The next day Chase and Bank One sent a Rule 11 agreement to the court stating that from the anticipated proceeds after payment of other costs, Chase would take $303,645.38 and Bank One $32,991.93.

Subsequent Events

The sale did not go through because the buyer backed out. On January 18, 2001, Chase filed a Motion to Release Property from the Receivership's Estate. A hearing was held on January 23, 2001, on Chase's motion to terminate the injunction and motion to release the property from the receivership. Bowles alleged that Chase was attempting to avoid the receiver's being paid $30,141.64 in outstanding fees and expenses (some of which were for his attorney's fees). Bowles proposed that the receivership be dissolved so foreclosure could proceed, but that Chase be ordered to pay the $30,141.64, and also to pay the outstanding property taxes (about $28,000). Chase countered that under existing precedent, the receiver's fees and expenses did not take priority over a first lienholder's interests when the lienholder did not, as here, request the receivership. The court adjourned the hearing, instructing the parties to file briefs.

On January 30, 2001, Bowles filed a Motion to Enforce Rule 11 Agreement, alleging that Bank One breached the Rule 11 agreement of June 12, 2000, because Bank One did not "refrain from pursing foreclosure of the subject real property." The motion requested the court to "overrule [Bank One's] Motion to Terminate the receivership, maintain the Temporary Injunction in place, and award the Receiver all reasonable and necessary attorneys' fees occasioned thereby." Bowles was complaining about Bank One's "copy cat" motion to terminate the injunction. On February 1, 2001, Bowles filed a 217-page response, including forty-two exhibits and other attachments, to Chase's motion to terminate the injunction and motion to release property from the receivership estate,

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and to Bank One's motion to terminate the injunction....

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2 cases
  • Lay v. Whelan, No. 03-03-00115-CV (TX 7/1/2004), 03-03-00115-CV.
    • United States
    • Supreme Court of Texas
    • July 1, 2004
    ...may not be made enforceable just by writing "Rule 11 Agreement" across the top, signing and filing the document. But see Chase Manhattan v. Bowles, 52 S.W.3d 871, 881 (Tex. App.—Waco 2001, no pet.) (finding letter from bank unilaterally promising not to initiate foreclosure proceedings enfo......
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    • Court of Appeals of Texas
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    ...an abuse of discretion standard. Mallou v. Payne & Vendig, 750 S.W.2d 251, 254 (Tex.App.-Dallas 1988, writ denied); Chase Manhattan Bank v. Bowles, 52 S.W.3d 871, 879 (Tex.App.-Waco 2001, no pet.); Gilles v. Yarbrough, 224 S.W.2d 720, 722 (Tex.Civ.App.-Fort Worth 1949, no writ) (“The durati......

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