Lairsen v. Slutzky

• Decision Date: 31 May 2002
• Docket Number: No. 03-01-00270-CV.,03-01-00270-CV.
• Citation: 80 S.W.3d 121
• Parties: J.M. LAIRSEN, Jr./Stanley Slutzky, Trustee for the Longitudinal Trust, Appellant, v. Stanley SLUTZKY, Trustee for the Longitudinal Trust/J. M. Lairsen, Jr., Appellees.
• Court: Texas Court of Appeals

80 S.W.3d 121

J.M. LAIRSEN, Jr./Stanley Slutzky, Trustee for the Longitudinal Trust, Appellant, v. Stanley SLUTZKY, Trustee for the Longitudinal Trust/J. M. Lairsen, Jr., Appellees.

No. 03-01-00270-CV.

Court of Appeals of Texas, Austin.

May 31, 2002.

Rehearing Overruled July 26, 2002.

Samuel Downing McDaniel, Austin, for Appellant.

T. Mark Rogstad, Wright & Greenhill, P.C., Austin, for Appellee/Cross-Appellant.

Before Chief Justice ABOUSSIE, Justices KIDD and YEAKEL.

MARILYN ABOUSSIE, Chief Justice,

The Longitudinal Trust (the "Trust") commenced this fraud and breach of contract action against J.M. Lairsen, Jr., following the Trust's foreclosure and sale of property it financed and sold to Lairsen. Following a jury trial, both parties appeal. Lairsen contends that (1) the court erred by failing to impose usury penalties; (2) the judgment did not conform to the jury's verdict, and the court erred in determining the deficiency due under the terms of the real estate lien note at issue as well as Lairsen's portion of personal liability; (3) the court erred in awarding attorney's fees to the Trust; and (4) the court erred in failing to award Lairsen his attorney's fees. The Trust also perfected an appeal and contends that there was insufficient evidence to support the jury's finding that $510,000 was the fair market value of the property on the date of the foreclosure, and that the court erred in determining the amount of the deficiency due under the terms of the real estate lien note.

Factual and Procedural Background

This lawsuit arises from a dispute between neighbors. Lairsen owns property with a view of Lake Travis. The Trust. owned property across the street from Lairsen. When Lairsen began building a two-story house on his property, the Trust sued him and sought an injunction. The Trust contended that Lairsen's construction would violate the subdivision's restrictive covenants, which prohibit two-story houses. The district court temporarily enjoined Lairsen from continuing construction on the house. After negotiating, Lairsen and the Trust resolved the dispute and executed an agreement that provided Lairsen would purchase the Trust's property. Based on their agreement, the Trust moved to dismiss the lawsuit, and on February 24, 1997, the court dismissed the Trust's lawsuit with prejudice. On March 14, 1997, the parties executed an "agreement of sale and purchase and settlement agreement." Their agreement provided that the closing of the sale of the property to Lairsen would occur 120 days after the signing of the agreement and the dismissal with prejudice of the lawsuit. Rather than wait 120 days, the parties agreed to an earlier closing date. On April 15, 1997, Lairsen paid the Trust $2000, the parties executed a deed of trust, and Lairsen, individually, signed a real estate lien note (the "Note") in the principal amount of $598,000 payable to the Trust. The Note, prepared by Lairsen's attorney, provided for interest of eight percent per annum on the unpaid principal balance. The terms of payment were set forth on the first page of the Note:

Terms of Payment (principal and interest):

The principal of this Note is due and payable on or before April 15, 2002, and interest only is payable monthly as it accrues on or before the 15th of every month beginning May 15, 1997.

Further, the Note provided that if the Note were given to an attorney for collection or enforcement, or if it were collected or enforced through any judicial proceeding, then Lairsen would pay the Trust's costs including reasonable attorney's fees and court costs. The Note also contained a clause limiting Lairsen's personal liability, which provided the following, "[N]otwithstanding any provision in this Note to the contrary, LairsenCLairsenI shall have personal only for the top twenty-five (25%) percent of the declining balance of the Note."

Lairsen made no payments. On July 8, the Trust sent Lairsen a letter stating, You are delinquent in making payments on the your [sic] promissory note dated April 15, 1997. At this time you have made no payments. This letter constitutes a demand for payment and a placing in default. Should you fail to make proper payment within twenty (20) days, the Longitudinal Trust will take all action required to enforce all of its rights under the note and Deed of Trust.

On July 24, Lairsen responded with a letter to the trustee, stating,

[Lairsen was] shocked to read that [the Note], in fact, provide[d] for monthly interest only payments commencing on May 15, 1997.

As you will recall, at the mediation which occurred in February of 1997, it was agreed that the lawsuit would be settled and dismissed and a purchase contract would be executed with a closing deferred 120 days after both the lawsuit would be dismissed and the Agreement of Sale and Purchase and Settlement Agreement was signed. The Agreement was signed on March 19, 1997. The lawsuit was dismissed on March 28, 1997.¹

The purpose for the 120 day deferred closing was to give me time to develop a re-use plan for the property. When the closing was moved up by Agreement to April 15, 1997, the Note was to have been changed to allow for it to be interest free for the first 120 days and thereafter monthly interest only payments were to commence. That is what I thought our agreement was; that is what I thought I signed. Obviously, it is not. What the lawyers did with our mediated agreement, I do not know. I am prepared to honor the Agreement you and I had which would commence interest only payments on August 15, 1997, and payment of principal upon maturity on April 15, 2002.

If this is not acceptable to you, I am willing to rescind the Purchase Contract and reconvey the property to you. I will also agree to pay your closing costs in connection with the April 15, 1997 closing.

Lairsen never made any payments. When Lairsen did not make an August payment, the Trust on September 16, 1997, sent Lairsen a Notice of Acceleration, accelerated the Note, and demanded full payment of the Note. After hearing nothing from Lairsen, the Trust bought the property at foreclosure on November 4 for $420,000.

On December 19, 1997, the Trust sent Lairsen a demand letter instructing him to contact the Trust's attorney for the amount owing after foreclosure. Lairsen did not respond to the letter and did not pay anything. On February 4, 1998, the Trust commenced this lawsuit against Lairsen. The Trust alleged that Lairsen breached his promise to pay the Trust under the terms of the Note, defaulted in his obligations under the Note, failed to make any payments on the Note, and failed to cure his default. The Trust contended that because he breached the terms of the Note, the Trust was entitled to recover the outstanding balance of the Note, including principal and interest, plus taxes and other damages. In its petition, the Trust acknowledged that Lairsen was personally liable under the terms of the Note only for the top twenty-five percent of the declining balance and because he failed to make any payments on the Note he was personally liable for $150,000. Additionally, the Trust alleged that Lairsen's personal liability on the Note should not be reduced by the foreclosure sale proceeds. Alternatively, the Trust claimed that the personal liability limitation provision in the Note was ambiguous, but the provision should be construed against Lairsen since his attorney drafted the Note. Further, the Trust contended that, because it demanded payment and Lairsen refused to pay as well as failed to make an offer to pay any amount, it was entitled to recover its attorney's fees from Lairsen pursuant to the Texas Civil Practice and Remedies Code sections 38.001-.005. See TEX. CIV. PRAC. & Rem.Code Ann. §§ 38.001-.005 (West 1997). Additionally, the Trust alleged a cause of action for fraud in a real estate transaction. Specifically, the Trust contended that Lairsen made material, false representations when he agreed to make payments on the Note because he never intended to fulfill his obligation to pay under the terms of the Note. See Tex. Bus. & Com.Code Ann. art. 27.01(a) (West 1987). Finally, the Trust sought exemplary damages based on the fraud allegation.

Lairsen responded and generally denied the Trust's claims. Additionally, Lairsen contended that the fair market value of the property exceeded the amount the property sold for at the foreclosure sale, and that he was, therefore, entitled to a statutory offset. See Tex. Prop.Code Ann. § 51.003 (West 1995). Lairsen also pleaded the affirmative defense of usury. Lairsen's usury contention was that because the Trust claimed he was not entitled to a credit for the $420,000 received at the foreclosure sale, the Trust was seeking to recover from him "amounts far in excess of the legal rate of interest allowable in" the State. Finally, Lairsen sought to recover his attorney's fees.

The trial court submitted eight questions to the jury, which determined the following: (1) the fair market value of the property as of the foreclosure date of November 4, 1997, was $510,000; (2) the parties to the Note intended that Lairsen's personal liability would be reduced by the proceeds of a foreclosure sale; (3) Lairsen did not commit fraud against the Trust; (4) $79,086, would fairly compensate the Trust for any damages that related to the amount due and owing on the Note after reduction by the foreclosure proceeds, $8247 was the reasonable cost incurred by the Trust in selling the property to Lairsen, and the Trust incurred $26,650 in selling the property to the buyer after foreclosure; (5) the Trust's reasonable attorney's fees were $34,562 for preparation and trial, $5000 for an appeal, and $5000 for a petition to the Texas Supreme Court; and finally, (6) Lairsen's reasonable attorney's fees, were $47,165² for preparation and trial, $5000 for an appeal, and $5000 for a petition to the Texas Supreme Court.

The Trust moved to disregard...