English v. Fischer

• Decision Date: 30 December 1982
• Docket Number: No. 2201,2201
• Citation: 649 S.W.2d 83
• Parties: Sarah Jane ENGLISH, Appellant, v. Jerry FISCHER, et ux, Appellees. cv.
• Court: Texas Court of Appeals

Page 83

649 S.W.2d 83

Sarah Jane ENGLISH, Appellant, v. Jerry FISCHER, et ux, Appellees.

No. 2201cv.

Court of Appeals of Texas,

Corpus Christi.

Dec. 30, 1982.

James W. Wray, Jr., Kleberg, Dyer, Redford & Weil, Corpus Christi, Wm. B. Hilgers, Mark Perlmutter, Hilgers, Watkins & Kazen, Austin, for appellant.

James R. Harris, J. Norman Thomas, Harris, Cook & Browning, Corpus Christi, for appellees.

Before NYE, C.J., and YOUNG and GONZALEZ, JJ.

OPINION

GONZALEZ, Justice.

This is a suit for damages that arose from a dispute between a mortgagor and a mortgagee over the proceeds of a fire insurance policy. Jerry and Alice Fischer, appellees, purchased a home from appellant, Sara Jane English (Rylee). Appellant was the mortgagee and appellees were mortgagors. Appellees signed a promissory note secured by a deed of trust which stipulated that they provide for fire insurance and name appellant as beneficiary of that policy. A fire severely damaged the home and the insurance company issued a check payable to both parties. Appellees wanted to rebuild the house with the money but appellant refused to endorse the check. She demanded payment for the unpaid balance on the note.

The insurance company tendered the money into the registry of the court. The money was released to appellees after they posted a bond.

Appellees filed a cross-action for damages against appellant alleging a breach of contract, breach of warranty and a cause of action under the Deceptive Trade Practices Act (DTPA). ¹ Appellant denied that she had a duty to endorse the check and asserted that she had a right to accelerate the note because the house was not fully insured.

The case was tried before a jury and the jury answered all issues in appellees' favor. The trial court gave appellant an offset for the unpaid balance of the note, awarded damages and attorney's fees to appellees but denied treble damages and prejudgment interest. Both sides appealed. We affirm in part and reverse and render in part.

The circumstances which gave rise to this suit are as follows:

In August, 1967, Robert T. Rylee, II, and his wife, Sara Jane E. Rylee, while their divorce was pending, sold their home to appellees. The purchase price was $67,500.00 and the terms were as follows: $5,000.00 in cash with the sellers (Rylee) agreeing to finance the balance at 5 1/4% interest to be paid in $300.00 monthly installments with the further condition that "purchaser agrees to carry fire and extended coverage insurance on said property in the amount of $62,500.00 in favor of the lien holder with any company of his choice ...." Appellees purchased a home owner's policy, with "inflation guard" from the Standard Fire Insurance Company. ²

Though Robert Rylee had quitclaimed the property to appellant at the time the warranty deed was signed, he was still married to her so he and his wife signed the warranty deed. This deed stipulated that the property was appellant's separate property and estate.

The deed of trust provided in pertinent part "It is agreed and stipulated that the parties of the first part herein (appellees) shall and will at their own proper cost and expense, keep the property and premises herein described ... in good repair and condition, ... and shall keep said property fully insured in some company or companies approved by the holder of said indebtedness, to whom the loss, if any, shall be payable and by whom the policies shall be kept."

During the next twelve years, the appellees timely made their monthly mortgage payments. On July 21, 1979, a fire severely damaged the house. At that time, $57,187.26 was owed on the house. However, the burnt house and the lot were worth more than the unpaid balance. The fire was a covered peril under the policy and appellees contacted the insurance company and the original builder. Shortly thereafter, since the damage to the house exceeded the policy limits, appellees received a check made payable to appellant and appellees for the policy limits which were at that time $110,000.00.

On August 1, 1979, appellees called appellant and told her that they had contacted the original builder and that he was able and ready to rebuild the house. They told her about the check. Appellees offered to put the money in an escrow account and pay the builder out of the account, but appellant replied that this was not necessary and that if they would mail her the check, she would "be happy to sign it" and return it to them. ³

Approximately two weeks passed and appellees did not hear from appellant. During this time, appellant contacted her ex-husband for advice. Because of the dramatic increase in interest rates and the wording of the deed of trust, he advised her not to sign the check and to insist that the unpaid balance on the note be paid off in full.

On August 16, 1981, appellees received a copy of the letter which appellant wrote the insurance company in which she refused to endorse the check and demanded that she be sent a check for the outstanding balance on her note. Appellees called appellant and asked her about the matter. Appellant advised appellees to talk to her ex-husband who was authorized to speak for her. Appellees called Rylee and told him that the builder had started reconstruction but that they could not continue without the insurance money. They also told him that conventional financing was not available and that they needed the money for the repairs. Rylee said that he was sorry about the house, but that when they bought the house it was a good deal for them and that now it was a good deal for appellant. He also said that appellant had a right to full payment based on his interpretation of the deed of trust.

Because of the dispute, on January, 1980, the insurance company paid the funds into the registry of the court and filed an interpleader suit, joining appellant and appellees as defendants. In September, 1980, the money was released to appellees after they posted a bond. This suit followed and the parties were realigned for trial with the appellees as plaintiffs and appellant as defendant.

The jury found: 1) that appellant refused to endorse the check after first having agreed to sign it; 2) that appellant breached an implied warranty of good faith and fair dealing; 3) that appellant was not entitled under the deed of trust to accelerate the debt; 4) that appellant represented to appellees that the deed of trust, promissory note and/or the insurance policy conferred or involved rights or obligations which she did not have or which were prohibited by law; 5) that appellant's promise to endorse the check was supported by consideration.

For each of these issues, the jury found that they were a proximate cause of damages to appellees in the amount of $127,616.00.

Following the trial, appellees received a $71,359.36 judgment over and above the $110,000.00 previously released to them. This amount is part of the $127,616.00 in damages found by the jury less a $56,256.44 credit for the unpaid balance of the note. Regarding this unpaid balance, the trial court entered a judgment in this amount in appellant's favor against the principal and sureties on the bond. The trial court also awarded the appellees attorney's fees but denied their claims for treble damages under the DTPA and for pre-judgment interest. Both sides have appealed.

Appellant, in no evidence and insufficient evidence points of error argue that there is no liability to appellees because:

1. Appellant had no duty to sign the check;

2. There is no consideration for appellant's promise to sign the check;

3. They had a right to accelerate the note because the home was not fully insured;

4. There is no evidence or insufficient evidence to support the damage issue; and

5. Appellees do not have a cause of action under the DTPA because they were not consumers under the act and the alleged deceptive act was not a producing cause of the damages.

On the other hand, appellees allege that the court erred:

1) In denying treble damages under the DTPA;

2) In refusing to grant pre-judgment interest; and

3) In allowing appellant a credit for the unpaid balance on the note by way of a judgment for appellant against the principal and sureties on the bond.

The main issues, then, are whether appellant had a right to accelerate the note, whether appellant had a duty to sign the check, and whether the appellees are entitled to relief under the DTPA. We will first consider whether appellant had a right to accelerate the note.

RIGHT TO ACCELERATE THE NOTE

In cross-points of error one through four, appellees contend that the trial court committed error in granting judgment to appellant for the unpaid balance of the note and in entering judgment against the principal and sureties of the bond because they were not parties to the suit and there was no pleadings or proof to support a judgment against the principal and sureties.

It is undisputed that the cost to rebuild the house is greater than the amount of the insurance policy. Because of this fact, appellant contends that the house was not "fully insured" as required by the deed of trust and, therefore, appellees were in default thereby giving appellant the right to accelerate the note. First of all, if appellee had been in default, appellant's remedy under the deed of trust would have been for a foreclosure sale. Appellant did not exercise this option. She merely refused to sign the check and demanded full payment of the unpaid balance of the note.

The real estate contract obligated appellees to carry fire and extended coverage on the property in the amount of $62,500.00 in favor of the lien holder (appellant). The deed of trust also provided that appellees shall keep the property fully insured and that the loss, if any, be payable to appellant. If two or more written instruments make up a single transaction, all of them must be construed together to ascertain and give effect, whenever possible, to the real intention...