Oyster Creek Financ. v. Richwood Invest. II

• Decision Date: 12 August 2004
• Docket Number: No. 01-02-00788-CV.,01-02-00788-CV.
• Citation: 176 S.W.3d 307
• Parties: OYSTER CREEK FINANCIAL CORP. and Alfred J. Antonini, Trustee, Appellants, v. RICHWOOD INVESTMENTS II, INC., Appellee. Richwood Investments II, Inc., Appellant, v. Oyster Creek Financial Corp. and Alfred J. Antonini, Trustee, Appellees.
• Court: Texas Supreme Court

176 S.W.3d 307

OYSTER CREEK FINANCIAL CORP. and Alfred J. Antonini, Trustee, Appellants, v. RICHWOOD INVESTMENTS II, INC., Appellee.

Richwood Investments II, Inc., Appellant, v. Oyster Creek Financial Corp. and Alfred J. Antonini, Trustee, Appellees.

No. 01-02-00788-CV.

Court of Appeals of Texas, Houston (1st Dist.).

August 12, 2004.

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Gary L. McConnell, Horseshoe Bay, TX, for Appellant.

Barry Allan Brown, Houston, TX, for Appellee.

Panel consists of Chief Justice RADACK and Justices ALCALA and BLAND.

OPINION

JANE BLAND, Justice.

The Oyster Creek Financial Corporation (Oyster Creek) and Alfred J. Antonini, Trustee (Antonini), appellants and cross-appellees, appeal the jury's verdict in favor of Richwood Investments II, Inc. (Richwood), appellee and cross-appellant, in a suit on a note, a usury counterclaim, and mutual claims for attorney's fees. The parties tried the case once with a verdict also favoring Richwood, but the Amarillo Court of Appeals reversed and remanded. On retrial, after applying a $750,000 settlement credit and computing pre-judgment interest, the trial court rendered judgment to Richwood for $176,263.83, together with post-judgment interest in the amount of $86.92 per day.

We conclude that (1) the trial court did not abuse its discretion in the admission of evidence; (2) legally and factually sufficient evidence supports the jury's findings in favor of Richwood; (3) the jury's failure to find in favor of Oyster Creek and Antonini on their claims is not against the great weight and preponderance of the evidence; (4) the jury's answers are not irreconcilable; (5) the trial court did not err in calculating pre-judgment interest, based upon the findings Richwood obtained; (6) the trial court did not err in applying a settlement credit to the jury's verdict; and (7) the trial court correctly rendered judgment against Antonini in his capacity as trustee. We therefore affirm.

The Facts

Antonini borrowed $900,000 in a promissory note dated June 17, 1988. Richwood is a subsequent holder of the note. Oyster Creek is a company owned, at least in part, by Antonini. At issue in this case is the amount of interest and attorney's fees owed on the note, and the manner in which Richwood should calculate such costs.¹ Antonini borrowed the $900,000.00 from the Columbia Savings & Loan Association (Columbia), for the purchase and renovation of a 256 unit apartment complex in Brazoria County, Texas. In connection with the loan, Antonini executed a deed of trust and a security agreement covering the apartments. The note provides for the payment of interest at a variable rate, and for quarterly "interest only" payments for the first two years. Beginning July 16, 1990, the note's principal and interest became payable in monthly installments on the 16th day of each month until June 16, 1993, when the entire amount then unpaid became due.

Before Antonini paid the note in full, Columbia failed. Following its demise, the Resolution Trust Corporation assigned the note and deed of trust to the Bank of America National Trust & Savings Association (Bank of America). In October 1991, Antonini ceased making payments on the note, placing it in default. Antonini remained in default for over two years. In February 1994, Bank of America engaged BEI Management, Inc. (BEI), to act as a debt servicer for the note. In March 1994, BEI's asset manager, Anthony Felker, inquired into the note's payment status, repayment prospects, and the condition of the apartments — the collateral on the note. In response to Felker's inquiries, and to improve his prospects of purchasing back his note at a deep discount, in April 1994, Antonini informed Felker that the apartments were in bad condition, the taxes had not been paid, and that he was broke and near judgment-proof.

Previously, in March 1993, Elaine Knight, Richwood's president, had offered to buy the apartments from Antonini for $1.6 million, but he refused to sell. In early 1994, however, Knight learned the apartments were subject to foreclosure, and she contacted Felker to explore whether Richwood could acquire the apartments by purchasing the note and deed of trust. In March 1994, Felker offered to sell the note to Richwood for $1.17 million. Richwood declined to purchase it at that time.

Meanwhile, in December 1993, Antonini sold the apartments to a third party for $3.7 million. In May 1994, the apartments were sold for $3.72 million to Oyster Creek. In March 1994, unbeknownst to BEI and the Bank of America, Antonini and Oyster Creek borrowed $5 million from the Southeast Texas Housing Finance Authority, and secured it with a second lien on the apartments. The Service Title Company withheld $1,040,000 of the loan amount in escrow for the first lienholder, the Bank of America, but did not remit the funds to the Bank of America at that time.

In a letter dated July 11, 1994, attorneys for Bank of America notified Antonini of his default, and announced a private foreclosure sale under the deed of trust. The notice advised Antonini that as of March 31, 1994, he owed a balance of $1,233,270.08, including $890,841.14 in principal and $342,428.94 in unpaid interest, accruing at a per diem of $358.81. On July 14, 1994, before the scheduled date of foreclosure, BEI sold the note and deed of trust to Richwood for $1.17 million.

Richwood's asset sale agreement provided that it acquired "any and all claims able to be assigned" by Bank of America. Richwood thereafter entered into a 25% contingency fee agreement with legal counsel to enforce the note and foreclose on the apartments. In a July 25, 1994 letter, Richwood's counsel notified Antonini that Richwood had purchased the note, and planned to proceed with the previously noticed private foreclosure on August 2, 1994.

On August 1, 1994, one day before the scheduled private foreclosure, Antonini met with Knight and Barry Brown, Richwood's attorney. At the meeting, Antonini offered to purchase the note for $25,000.00 over Richwood's cost, but Richwood rejected his offer. Instead, Brown presented Antonini with an unitemized written demand for $1,637,015.00 ("the August 1 demand letter"). Antonini pointed out that Richwood's demand exceeded the amount Bank of America had demanded. According to Antonini, Brown responded that BEI and Bank of America used the wrong post-maturity interest rate to calculate the amount owed on the note. Brown did not present any interest calculations, however, and Antonini declined to tender the new amount claimed to be due.

Oyster Creek, Antonini, and U.S. Trust Company of Texas (U.S.Trust) as trustee, then filed two separate lawsuits seeking a temporary restraining order to avoid the imminent foreclosure under the deed of trust. Service Title Company, which had held the $1,040,000.00 in escrow to protect Bank of America as the first lienholder, tendered a check into the court's registry, payable to Richwood, in the amount of $1,040,000.00. On August 2, 1994, the trial court entered a temporary restraining order, prohibiting Richwood from conducting the private foreclosure. The parties later agreed to extend the temporary restraining order, via an agreed injunction, pending trial on the merits.

The trial court consolidated the two actions. In the consolidated suit, Antonini alleged that Richwood had made an "excessive demand," and had charged him usurious interest, thus excusing portions of the interest and all the attorney's fees Richwood claimed to be owed on the note. In particular, Antonini claimed that Richwood charged usurious interest by disguising interest as attorney's fees. In response, Richwood counterclaimed against Oyster Creek, Antonini, and U.S. Trust for principal, interest, and collection related attorney's fees due under the note, and added claims in tort. Richwood also sued Service Title Company, and the United General Title Insurance Company (United General). United General had insured title as to U.S. Trust's second lien on the $5,000,000 note Antonini had obtained from the Southeast Texas Housing Financing Authority. Richwood and United General disputed which lien had priority. In an amended pretrial order, the trial court severed all parties except Antonini, Oyster Creek, Richwood, its attorney, and its substitute trustee, appointed to conduct the private foreclosure.

Four days before the first trial, Antonini and Oyster Creek subpoenaed Brown, Richwood's attorney, to compel him to produce the principal, interest, and attorney's fees calculations that formed the basis of Richwood's August 1 demand letter. Richwood asserted an attorney work product privilege. The trial court agreed, and granted Richwood's motion to quash. The first jury favored Richwood on its claims, and the trial court awarded it $567,477.15, plus post-judgment interest. The Amarillo Court of Appeals reversed, however, concluding that Richwood's attorney's handwritten calculations of principal and interest did not constitute attorney work product, and that the error was harmful. Oyster Creek, 957 S.W.2d at 648. The court of appeals remanded the case for a new trial.²

The jury in the second trial found Antonini liable for $890,841.14 in principal. In addition, it awarded: (1) $198,824.17 in accrued interest; (2) a per diem of $537.369 in daily interest; and (3) $327,630.97 in attorney's fees. The jury further found that Richwood did not charge usurious interest or unreasonable attorney's fees. Finally, the jury found that Richwood did not make an excessive payment demand to Antonini. In post-verdict proceedings, Antonini contended that the judgment should reflect a settlement credit based on agreements between Richwood and United General. The trial court agreed, and after applying a settlement credit of $750,000 and the $1,040,000 tendered to the court registry, it rendered judgment that Richwood recover...