Ogden v. Gibraltar Sav. Ass'n

• Decision Date: 14 July 1982
• Docket Number: No. C-769,C-769
• Citation: 640 S.W.2d 232
• Parties: Claude W. OGDEN, Jr., Petitioner, v. GIBRALTAR SAVINGS ASSOCIATION, Respondent.
• Court: Texas Supreme Court

Page 232

640 S.W.2d 232

Claude W. OGDEN, Jr., Petitioner, v.GIBRALTAR SAVINGS ASSOCIATION, Respondent.

No. C-769.

Supreme Court of Texas.

July 14, 1982.

Rehearing Denied Nov. 10, 1982.

Nathaniel G. Rhodes, Corpus Christi, for petitioner.

Mahoney, Shaffer, Hatch & Layton, Lee Mahoney, Corpus Christi, for respondent.

McGEE, Justice.

Claude W. Ogden, Jr. sued Gibraltar Savings Association to recover damages for wrongful foreclosure under a deed of trust.After trial to a jury, the court rendered judgment that Ogden take nothing.The court of civil appeals affirmed.620 S.W.2d 926.We reverse the court of civil appeals' judgment and render judgment that Ogden recover his damages established at trial.

Ogden owned a house and land located at 418 Indiana, Corpus Christi, Texas.On May 1, 1963, he executed a promissory note in the amount of $12,000.00, payable in monthly installments, together with a deed of trust covering the property.The deed of trust contains an acceleration clause which provides upon default, the balance due on the note "shall at the option of the holder or holders thereof, immediately become due and payable...."Gibraltar was the holder of the note and deed of trust lien.

It is undisputed Ogden was in default on his note payments.Gibraltar sent a letter to Ogden, dated August 17, 1978, which notified Ogden of the following:

"(1) You have breached the covenant to pay sums due under your promissory note.

(2) To cure such breach you must pay to Gibraltar $1,315.08 no later than September 16, 1978.A late charge of $3.68 will be due after August 16, 1978.In addition, beginning September 1, 1978, the September regular monthly payment will also be due.

(3) Your failure to cure such breach on or before said date may result in acceleration of the sums secured by the Deed of Trust and sale of the property standing as security thereunder.

Further, you are notified of your right to reinstate after acceleration and the right to bring a court action to assert the nonexistence of a default or any other defense you may have to acceleration and sale."

On November 13, 1978, Gibraltar posted a notice of trustee's sale, and the property was sold at such sale to a third party on December 5, 1978.

The sole question with which we are concerned is whether Gibraltar gave proper notice of acceleration prior to foreclosing under the deed of trust.

Where the holder of a promissory note has the option to accelerate maturity of the note upon the maker's default, equity demands notice be given of the intent to exercise the option.Brown v. Hewitt, 143 S.W.2d 223(Tex.Civ.App.--Galveston1940, writ ref'd).Thus, in the absence of a waiver, the holder of a delinquent installment note must present the note and demand payment of the past due installments prior to exercising his right to accelerate.Allen Sales & Servicenter, Inc. v. Ryan, 525 S.W.2d 863(Tex.1975).In the case of a mortgage secured by a deed of trust, such notice must afford an opportunity to cure the default and bring home to the mortgagor that failure to cure will result in acceleration of the note and foreclosure under the power of sale.Lockwood v. Lisby, 476 S.W.2d 871(Tex.Civ.App.--Fort Worth1972, writ ref'd n.r.e.);Jernigan v. O'Brien, 303 S.W.2d 515(Tex.Civ.App.--Austin 1957, no writ);Parker v. Mazur, 13 S.W.2d 174(Tex.Civ.App.--San Antonio1928, writ dism'd).If, after such notice, the mortgagor fails to remedy the breach, then the mortgagee is authorized to accelerate maturity and begin foreclosure proceedings under the deed of trust.SeeNatali v. Witthaus, 134 Tex. 513, 135 S.W.2d 969(1940).

Ogden contends the August 17 letter was insufficient notice of acceleration because it failed to give unequivocal notice that his failure to tender the amounts in default would result in acceleration.The letter states that "failure to cure such breach on or before [September 16, 1978] may result in acceleration of the sums secured by the Deed of Trust and sale of the property ..."(emphasis added).Gibraltar contends the letter, in connection with the notice of trustee's sale, was sufficient notice of acceleration.It contends the letter made a demand for payment and provided an opportunity to cure, and that the notice of trustee's sale gave notice that the entire debt had been accelerated.

The term "notice of acceleration" is used by the parties to express different concepts.Ogden refers to notice of intent to accelerate; Gibraltar refers to notice that the debt has been accelerated.Although the cases do not always clearly distinguish between the two, both types of notices are required.Notice of intent to accelerate is necessary in order to provide the debtor an opportunity to cure his default prior to harsh consequences of acceleration and foreclosure.Proper notice that the debt has been accelerated, in the absence of a contrary agreement or waiver, cuts off the debtor's right to cure his default...