Ogden v. Dickinson State Bank

• Decision Date: 05 October 1983
• Docket Number: No. C-870,C-870
• Citation: 662 S.W.2d 330
• Parties: John Wallace OGDEN et ux, Petitioners/Cross-Respondents, v. DICKINSON STATE BANK, Respondent/Cross-Petitioner.
• Court: Texas Supreme Court

Page 330

662 S.W.2d 330

John Wallace OGDEN et ux, Petitioners/Cross-Respondents, v. DICKINSON STATE BANK, Respondent/Cross-Petitioner.

No. C-870.

Supreme Court of Texas.

Oct. 5, 1983.

Rehearing Denied Jan. 18, 1984.

McConnico, Gregg & Jones, Dalton L. Jones and Dick H. Gregg, Jr., Houston, for petitioners/cross-respondents.

Krist, Gunn, Weller, Neumann & Morrison, William G. Neumann, Jr., Houston, for respondent/cross-petitioner.

ON MOTION FOR REHEARING

CAMPBELL, Justice.

The Motion for Rehearing by Dickinson State Bank is granted. The Opinion of the Court delivered January 26, 1983 is withdrawn and the following is substituted.

This is a suit by John Wallace Ogden and wife to enjoin the foreclosure of real property by Dickinson State Bank under a power of sale in a builder's and mechanic's lien contract. The Bank counterclaimed for recovery on the Ogdens' promissory note and for foreclosure of the mechanic's lien. The Ogdens then amended their petition to allege a violation of the Texas Deceptive Trade Practices Act. Tex.Bus. & Comm.Code Ann. §§ 17.41 to 17.63 (DTPA). The trial court rendered judgment for the Ogdens for treble damages and attorney's fees. The court of appeals reversed the judgment of the trial court and remanded the cause for a new trial. 624 S.W.2d 214. We reverse the judgments of the courts below.

The Ogdens contracted with Alan Thayer to build a house on a lot the Ogdens owned in Galveston County. The Ogdens and Thayer executed a builder's and mechanic's lien contract, and the Ogdens gave Thayer a Mechanic's and Materialman's Lien Note for $66,000. ¹ Thayer pledged the lien contract and the promissory note to Dickinson State Bank as security for an interim construction loan of $66,000. The Ogdens then paid Thayer $9,000 in cash and Thayer began construction.

A conflict between the Ogdens and Thayer arose over the Ogdens' inability to pay the balance of the contract price and Thayer stopped construction. At that time, Thayer had completed sixty to seventy percent of the construction and the Bank had advanced $64,400 of the interim construction loan.

The Ogdens met with the Bank shortly after Thayer stopped work. The Bank told the Ogdens it would not be responsible for completing the house, but that it would advance the money to complete the house if a new contractor were employed. Mr. Ogden testified he requested the Bank to split the loss with him. The Bank rejected this proposition, but offered to loan the additional money needed to complete the house, provided the $66,000 Note would be paid in full.

The Ogdens refused to pay the Bank any money, claiming none was due until the house was completed. In April 1979, the Bank posted the property for sale under the builder's and mechanic's lien. The Ogdens obtained an injunction enjoining the non-judicial foreclosure, and, later, amended their pleadings to add a deceptive trade practices claim. The Bank counterclaimed for recovery on the note or, alternatively, under the lien contract, and prayed for a judicial foreclosure.

The Ogdens contend that they do not owe the Bank any money until the house is completed and that the Bank does not have a lien for partial performance. The Builder's and Mechanic's Lien Note states the Note is payable "on or before one hundred twenty (120) days from date hereof subject to the completion of the contract of even date herewith." The Note further provides:

Payment of this note is secured by a Builder's, Mechanic's, Materialman's and Laborer's Lien created in a Builder's and Mechanic's Lien Contract (With Power of Sale) of even date herewith between the Makers hereof, Owners, and the Payee herein, Contractor, with JOHN F. AUSTIN, JR., named Trustee therein, and is subject to and governed by said contract, which is hereby expressly referred to, incorporated herein and made a part hereof upon the following described real property situated in Galveston County, Texas....

The Lien Contract also requires payment of the Note on or before 120 days from its date "subject to the completion of this contract." This Lien Contract additionally provides:

In the event that the improvements herein mentioned to be erected, fail for any reason to be completed, or fail to be completed according to the contract, or all of the labor and material used in erection thereof fail to be provided by Contractor, then Contractor or other owner and holder of the herein described indebtedness and note shall have a valid and subsisting lien for said contract price, less such amount as would be reasonably necessary to complete said improvements according to said plans and specifications, or in such event the owner and holder of the hereinbefore mentioned indebtedness and note, at his option, shall have the right to complete said improvements, and the liens herein given shall inure to the benefit of said owner and holder.

The Ogdens contend these two provisions in the lien contract conflict, and that the payment clause, being typewritten, should control over the printed partial recovery clause. The Ogdens argue the insertion of the words "subject to the completion of this contract," prevents the Bank from recovering any money due prior to completion of the contract. We disagree.

When the provisions of a contract appear to conflict, they should be harmonized if possible to reflect the intentions of the parties. Harris v. Rowe, 593 S.W.2d 303 (Tex.1979). Generally, the parties to a contract intend every clause to have some effect and the Court will not strike down any portion of the contract unless there is an irreconcilable conflict. Woods v. Sims, 154 Tex. 59, 273 S.W.2d 617 (1954).

The provisions of the Lien Contract and Note do not conflict. They provide the contract price is payable on or before 120 days from the date of the contract; if the house is not completed within 120 days, then the contract price is due upon completion. However, if work is stopped for any reason, the holder of the note has a lien for the contract price less the amount required to complete the contract. The two provisions serve different purposes. The "subject to completion" clause is included for the benefit of the owner. It prevents him from being liable for the contract price before the house is completed. The "partial recovery" clause is included for the benefit of the contractor or other holder of the Note and Lien. This clause provides a lien for recovery if, for some reason, the home is not completed.

This is a contract lien and parties can contract as they choose. The Ogdens agreed to a lien for partial performance--"a valid and subsisting lien for said contract price, less such amount as would be reasonable to complete said contract...." The proper construction of the "subject to completion" clause is that the full contract price will be paid if the house is completed according to the contract within 120 days. If, however, the construction period is more than 120 days, then the contract price is payable when the house is completed. The partial completion clause provides for a lien and a method to determine the amount secured by the lien if the work is stopped short of completion. Thus, the two provisions do not conflict but provide a complete contract.

The Ogdens contend the Bank began foreclosure of the lien at a time it did not have the right to do so and this Act was a violation of section 17.46(b)(12) of the Deceptive Trade Practice Act. However, as shown above, the Bank had the right under the contract lien to start foreclosure proceedings for the amount due under the partial performance lien provision. Therefore, there is no DTPA violation for commencing foreclosure.

The Ogdens also contend that the Bank violated the DTPA by attempting to collect $66,000, plus interest and attorney's fees under the note and contract when it was not due.

The bank officers were asked at trial whether the Bank ever agreed to reduce the $66,000 Note by the amount it would cost to complete the house. That question is immaterial to any issue in this lawsuit. The Mechanic's and Materialman's Lien provides that on partial completion the Bank shall have a lien for the contract price, less the cost to complete. The court of appeals held the true contract price was $89,380 and reformed the lien contract to that extent. A bank officer, Mr. Fitzpatrick, testified that the Bank already had $66,000 involved in this loan. The only question involved in this case is how much of the money advanced by the Bank is secured by the Mechanic's and Materialman's lien on the property as authorized by the partial construction clause. If the amount secured by the lien is less than the amount owed on the Note, the Ogdens may still be personally liable for the amount owed on the Note. Continental National Bank of Fort Worth v. Conner, 147 Tex. 218, 214 S.W.2d 928 (1948). Therefore, any demand for the amount of the Note cannot be a deceptive trade practice.

The jury found that the cost to complete the house when work was stopped to be $38,000. The court reformed the contract to the true contract price of $89,380. The difference in the contract price and the cost to complete is $51,380. However, the Ogdens have paid $9000 to Thayer; therefore, the Bank's lien is for $42,380, for which it is entitled to foreclosure.

The former opinion and judgment of this Court are withdrawn and the Motion for Rehearing is granted. The Motion for Rehearing by John Wallace Ogden et ux. is overruled. The judgments of the courts below are reversed and the cause is remanded to the trial court for entry of judgment consistent with this opinion.

Dissenting Opinion by SPEARS, J., in which RAY, ROBERTSON and KILGARLIN, JJ., join.

SPEARS, Justice, dissenting.

I respectfully dissent.

The majority in this case has ordered that the Ogdens, who committed absolutely no wrongdoing in their dealings with the Bank and Thayer, must not only give up the "dream home" (testimony of John Ogden, Tr. 445) for...