Fein v. R.P.H., Inc., 14-99-00927-CV.

• Court: Court of Appeals of Texas
• Writing for the Court: John S. Anderson
• Citation: 68 S.W.3d 260
• Parties: Steven A. FEIN, M.D., Appellant, v. R.P.H., INC., Trustee, Appellee.
• Docket Number: No. 14-99-00927-CV.,14-99-00927-CV.
• Decision Date: 07 February 2002

68 S.W.3d 260 Steven A. FEIN, M.D., Appellant,
v.
R.P.H., INC., Trustee, Appellee. No. 14-99-00927-CV. Court of Appeals of Texas, Houston (14th Dist.). February 7, 2002. Rehearing Overruled February 28, 2002.

[68 S.W.3d 263]

Christine Kirchner, Houston, Steven Jon Knight, Kingwood, for appellant.

Eric G. Carter, Tammy Danberg-Farney, Houston, for appellee.

Panel consists of Justices ANDERSON, HUDSON, and SEYMORE.

OPINION

JOHN S. ANDERSON, Justice.

This is an appeal from a judgment against the maker of a nonrecourse promissory note. Appellant, Steven A. Fein, M.D., appeals the trial court's judgment in favor of appellee, R.P.H., Inc., Trustee, ("R.P.H.") on its action to collect on an unpaid nonrecourse promissory note. Because we hold Fein had no personal liability under the note, we reverse the trial court's judgment and render judgment that R.P.H. take nothing on its claims against Fein.

I. BACKGROUND

On August 9, 1994, Fein, a gastroenterologist practicing in Pasadena, Texas, signed a promissory note in the amount of $125,000 in favor of "R.P.H., Inc., Trustee" in exchange for a five percent interest in Surgical Care Centers of Texas, L.C. ("Surgicare"). The note states in its entirety:

FOR VALUE RECEIVED, after date, without grace, in the manner, on the dates, and in the amounts so herein stipulated, the undersigned, Steven A. Fein, M.D., an Individual, without lability [sic], warranty or obligation;

PROMISE[S] TO PAY TO R.P.H., Inc., Trustee, of 3534 Vista, Pasadena, Texas 77504 the sum of:

ONE HUNDRED TWENTY FIVE THOUSAND DOLLARS AND NO/100 CENTS ($125,000.00)

in lawful money of the United States of America, which shall be legal tender, in payment of all debts and dues, public and private, at the time of payment, and to pay interest thereon from date until maturity at EIGHT percent per annum (8%), payable as stipulated herein.

THE ENTIRE PRINCIPAL AND INTEREST AMOUNT IS, IF NOT SOONER PAID, SHALL BE DUE AND PAYABLE ON OR BEFORE THE 5TH DAY OF AUGUST 2004 OR UPON SALE OF THE COLLATERAL, 5% Interest in Surgical Care Centers of TX L.C. as collateral of this note.

There is no personal guaranty of Steven A. Fein, M.D. or any guaranty of Pasadena Gastroenterology Associates, P.A. of this promissory note or indebtedness.¹

The uncontroverted evidence at trial established that Fein never received the certificate of stock evidencing his ownership in Surgicare, but, instead, R.P.H. held the certificate in its possession.

In 1995, R.P.H. was planning to merge Surgicare with Amedisys, Inc. On June 23, 1995, R.P.H. informed Fein that in order to close the merger between Surgicare and Amedisys, Fein's "[percentage] of stock to be exchanged by shares of [Amedisys] ha[d] to be free and clear." R.P.H. stated that it would accept a percentage of Fein's shares in Surgicare equal to the amount of the debt. On June 27, 1995, Fein's attorney responded to R.P.H.'s request for payment by (1) requesting that Fein's certificate evidencing his interest in Surgicare be forwarded to him, (2) stating that Fein would exchange his five percent interest in Surgicare for 50,000 shares of Amedisys

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stock, and (3) explaining that because Fein had no reason to pay off or refinance the note, he "does not intend to pay this note at present." R.P.H., which held Fein's Surgicare stock, made no further demand on Fein for payment of the note.

Effective June 30, 1995, Fein and the other owners of Surgicare exchanged their respective interests in Surgicare for shares in Amedisys common stock. Fein received 50,000 restricted shares of Amedisys common stock, as was evidenced by a certificate which he received in August 1995.

On July 3, 1997, R.P.H. made written demand on Fein for the surrender of the Surgicare stock under the note, even though Fein never had possession of the Surgicare stock and that stock had been exchanged for the Amedisys stock:

This letter is written on behalf of my client R.P.H., Inc., Trustee to make immediate demand for the surrender of the shares of stock which you hold in Surgical Care Centers of Texas L.C. This stock is security for the above promissory note; however, unless my client [R.P.H.] has possession of the stock, its security interest is not perfected. Please forward your stock certificate to my office immediately. Alternatively, if you wish to sell the stock, we will hold it in escrow until the sale and credit the proceeds to the balance on the note. Any excess from the sale will be paid to you.

Your failure to comply with this demand will be considered a default under the note. I will then be forced to take whatever measures are necessary in order to enforce my client's rights.

On July 28, 1997, R.P.H. filed this lawsuit against Fein for failure to either surrender the Surgicare stock certificate or to repay the note. R.P.H. further alleged, in light of the exchange of Surgicare and Amedisys stock, the Amedisys stock should be surrendered to R.P.H. to serve as collateral for the note, but Fein had likewise failed to surrender that stock. In July 1997, Fein sold his 50,000 shares of Amedisys stock for $250,000. Fein kept the proceeds from the sale of the Amedisys stock and did not repay the note. R.P.H. amended its petition alleging Fein had breached the terms of the note by failing to turn over his Amedisys stock, selling the Amedisys stock, and failing to repay the note from the proceeds of the sale of the Amedisys stock.

Both Fein and R.P.H. moved for summary judgment on Fein's liability under the note. The trial court denied both motions for summary judgment and the case proceeded to trial. Fein also filed a motion for directed verdict, which was denied. The jury awarded R.P.H. $125,000 in damages for Fein's failure to repay the note.² The jury, however, failed to include accrued interest under the note and to award R.P.H. attorney's fees. R.P.H. filed a motion for judgment notwithstanding the verdict and to disregard the jury findings on the jury's failure to include accrued interest under the note and to award attorney's fees. The trial court granted R.P.H.'s motion and entered judgment in favor of R.P.H. for damages under the note in the amount of $153,931.50, prejudgment interest in the amount of $17,260.27, and reasonable and necessary attorney's fees in the amount of $14,718.13.

II. STANDARDS OF REVIEW

As part of his first issue, Fein contends the trial court erred in denying his motion

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for directed verdict and his motion for judgment notwithstanding the verdict and to disregard jury findings.³ Fein contends there is no evidence to support a finding that he ever had any personal obligation to pay the promissory note because the note is nonrecourse as a matter of law. Because these motions, if erroneously denied, are dispositive of this appeal, we will address them in the context of Fein's complaint regarding the judgment holding him personally liable on the nonrecourse note.

An appeal from the denial of a motion for directed verdict is essentially a challenge to the legal sufficiency of the evidence. Kershner v. State Bar of Tex., 879 S.W.2d 343, 346 (Tex.App.-Houston [14th Dist.] 1994, writ denied). Therefore, we must review the denial of a directed verdict by considering all the evidence in the light most favorable to the nonmovant, disregarding all evidence to the contrary, and resolving all reasonable inferences in favor of the nonmovant. Russell v. City of Bryan, 919 S.W.2d 698, 705 (Tex.App.-Houston [14th Dist.] 1996, writ denied). To reverse the denial of a motion for directed verdict, the appellant must show the evidence conclusively proves a fact that establishes appellant's right to judgment as a matter of law and there is no evidence to the contrary. Weidner v. Sanchez, 14 S.W.3d 353, 373 (Tex.App.-Houston [14th Dist.] 2000, no pet.).

A motion for judgment notwithstanding the verdict is based on the same grounds that has or could have been urged in a motion for directed verdict. Tex.R. Civ. P. 301. Similarly, a complaint that the trial court erred in refusing to grant judgment notwithstanding the verdict raises on appeal a challenge to the legal sufficiency of the evidence. Insurance Co. of N. Am. v. Morris, 928 S.W.2d 133, 152 (Tex. App-Houston [14th Dist.] 1996), aff'd in part and rev'd in part on other grounds, 981 S.W.2d 667 (Tex.1998). We review the evidence in the light most favorable to the finding, considering only the evidence and inferences supporting the finding, while rejecting the evidence and inferences to the contrary. Gregorcyk v. Al Hogan Builder, Inc., 884 S.W.2d 523, 525 (Tex.App.-Corpus Christi 1994, writ denied). The jury's finding will be upheld if there is more than a scintilla of evidence to support the finding. Mancorp, Inc. v. Culpepper, 802 S.W.2d 226, 228 (Tex.1990).

III. NONRECOURSE NOTE

In his first issue, Fein contends the trial court erred in holding him personally liable for failure to repay the note because the unambiguous language of the note provides he is to have no liability for nonpayment of the note and R.P.H.'s sole remedy is enforcement of its security interest in the collateral.

Whether a contract is ambiguous is a question of law. Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex.1996). If the contract is subject to two or more reasonable...