Resolution Trust Corp. v. Cook

• Decision Date: 31 August 1992
• Docket Number: No. 07-91-0092-CV,07-91-0092-CV
• Parties: RESOLUTION TRUST CORPORATION, as Receiver for Southwest Savings Association and as Conservator for Southwest Federal Savings Association, and Briercroft Service Corporation, Appellants, v. William D. COOK and Regina Cook, Appellees.
• Court: Texas Court of Appeals

Page 42

840 S.W.2d 42

RESOLUTION TRUST CORPORATION, as Receiver for Southwest Savings Association and as Conservator for Southwest Federal Savings Association and Briercroft Service Corporation, Appellants, v. William D. COOK and Regina Cook, Appellees.

No. 07-91-0092-CV.

Court of Appeals of Texas Amarillo.

Aug. 31, 1992.

Rehearing Denied Sept. 29, 1992.

Curry, Curry & Robinson P.C., Charles B. Frye, Lubbock, for appellant.

L. Van Williamson, Amarillo, for appellee.

Before REYNOLDS, C.J., and BOYD and POFF, JJ.

REYNOLDS, Chief Justice.

The Resolution Trust Corporation, as receiver for Southwest Savings Association and Conservator for Southwest Federal Savings Association, and Briercroft Service Corporation challenge those parts of the trial court's judgment decreeing the savings associations, for which the Resolution Trust Corporation is receiver and conservator, liable for payments made on a voided promissory note, and decreeing Briercroft Service Corporation monetarily liable for infliction of emotional distress on a maker of the note. On the rationale expressed, we will affirm in part and reverse and remand in part.

In 1984, William D. Cook and wife, Regina Cook, contracted with Ronald Cates d/b/a Ronald Cates Construction Company for home improvements. The Cooks obtained a $17,500 National Housing Act home improvement loan from Briercroft Service Corporation, a wholly owned subsidiary of Briercroft Savings Association, to finance their contract. Repayment of the loan was secured by the contract and a deed of trust on the Cooks' home. Claiming that Cates failed to complete the contract, the Cooks initiated an action against Cates and Briercroft Service Corporation, alleging violations of the Deceptive Trade Practices-Consumer Protection Act (DTPA). Tex.Bus. & Com.Code Ann. § 17.41 et seq. (Vernon 1987; Vernon Supp.1992). These defendants answered and denied liability.

After the action filed, Federal Savings and Loan Insurance Corporation (FSLIC) was appointed as receiver for Briercroft Savings Association and its wholly-owned subsidiary Briercroft Service Corporation (Briercroft). FSLIC transferred the assets of Briercroft, including appellees' note and lien securing the home improvement loan, to Southwest Savings Association (Southwest Savings). The Cooks amended their pleadings to add as a defendant Southwest Savings, which answered and denied liability.

On the day of trial, 21 May 1990, a jury was sworn and impaneled, but before evidence was adduced, Southwest Savings and Briercroft moved the trial court to, and the court did, take judicial notice that the Office of Thrift Supervision closed Southwest Savings on 18 May 1990 and placed it under the jurisdiction of the Resolution Trust Corporation (RTC). They also moved for a trial amendment or, alternatively, for a continuance, in order to amend their pleadings and assert common law and statutory defenses. The court allowed the amendment, which alleged that evidence extraneous to the loan records was not admissible against them. ¹

At the conclusion of the Cooks' case-in-chief, Southwest Savings and Briercroft moved the court for a directed verdict on the Cooks' DTPA cause of action. Granting the motion, the court noted its ruling possibly left alive the Cooks' common law and equity actions against Briercroft and Southwest Savings, and instructed the Cooks to prepare a trial amendment stating their actions.

The Cooks proposed their trial amendment, asserting causes of action under several theories, two of which were "the FTC rule" and "the negligence of mental distress." Briercroft and Southwest Savings objected to the proposed amendment because, among other objections, mental distress was a new cause of action and they were surprised, but the court permitted the amendment "regarding the FTC rule regarding the negligent affliction (sic) of emotional distress and none other." Briercroft and Southwest then moved the court to grant them a short continuance on the ground of surprise. ² The court denied the motion.

Later, pursuant to the court's order, the Cooks filed their trial amendment, alleging these two causes of action:

Plaintiffs would show that as holder of said note, Defendant Southwest Savings Association is liable for the misconduct of Defendant Ronald Cates d/b/a Ronald Cates Construction Co. pursuant to the Federal Trade Commission Rule, 16 C.F.R. 433.2 and the notice that appeared on the contract executed by Plaintiffs and Defendant Ronald Cates d/b/a Ronald Cates Construction Co., which read:

Notice. Any holder of this consumer credit contract is subject to all claims and defenses which the debtor could assert against the seller of goods or services obtained pursuant hereto or with the proceeds hereof. Recovery hereunder by the debtor shall not exceed amounts paid by the debtor hereunder.

WHEREFORE PREMISES CONSIDERED, Plaintiffs pray for refund of the $4,025.46 paid on Note No. 13047-4400000545798 dated March 17, 1985 and for cancellation of said note.

* * * * * *

Plaintiffs would further show that Defendant Briercroft Service Corporation's actions, including but not limited to making outrageous and harassing phone calls, caused damages to Plaintiff Regina Cook and constituted the negligent infliction of emotional distress on Plaintiff Regina Cook.

The cause of action for negligent infliction of emotional distress alleged against Briercroft was submitted to the jury, together with the DTPA cause of action against Cates. On 25 May 1990, the jury answered the submitted questions favorably to the Cooks and, on 19 November 1990, they moved for judgment on the verdict.

In the interim, the Office of Thrift Supervision placed Southwest Savings into receivership and RTC was appointed receiver. A new federal institution, Southwest Federal Savings Association, was chartered, the assets of Southwest Savings were transferred to it, and RTC was appointed conservator for the institution.

By its order dated 31 December 1990, the court added RTC, as conservator for Southwest Federal Savings Association, as a party defendant. The style of the case was changed to align the proper defendants--Ronald Cates d/b/a Cates Construction Company, RTC, as receiver for Southwest Savings Association and as conservator for Southwest Federal Savings Association, and Briercroft Service Corporation.

On the same day, the court, adhering to the jury's verdict, rendered judgment. The court decreed that the Cooks recover from Cates the amounts of $35,000 in actual damages, $2,000 statutory damages, $10,000 in additional damages, and $30,000 in attorney's fees, together with pre- and post-judgment interest. The court additionally decreed that the Cooks recover from Briercroft the sum of $27,500 for the emotional distress the jury found Regina Cook suffered, with pre- and post-judgment interest.

By its judgment, the court also decreed that the Cooks recover their payments on the note in the stipulated sum of $4,025.46 from "Southwest Savings Association, Resolution Trust Corporation, as Receiver for Southwest Savings Association, Southwest Federal Savings Association, and Resolution Trust Corporation, as Conservator for Southwest Federal Savings Association." Further, the court effectively voided the Cooks' note by ordering that the holder of it was prohibited and estopped from collecting any unpaid balance by any judicial or non-judicial procedure, and judicially released the lien securing the payment of the note.

After their motion for new trial was overruled by operation of law, RTC, acting in its representative capacities, and Briercroft perfected this appeal. Since Cates did not perfect an appeal, the judgment against him became final, Turner, Collie & Braden v. Brookhollow, Inc., 642 S.W.2d 160, 166 (Tex.1982), and the Cooks are entitled to have it affirmed.

With the first of their twelve points of error, RTC and Briercroft contend the trial court erred in granting the Cooks' trial amendment on the negligent infliction of emotional distress cause of action. By their third point, they contend the court erred in overruling their motion for continuance after granting the trial amendment. The points will be addressed conjointly.

At the outset, it is to be recognized that under our procedural rules, a party may amend his pleadings at such time as not to operate as a surprise to the opposing party. If during the trial any defect, fault or omission in a pleading, either of form or substance, is called to the attention of the court, the court may allow the pleadings to be amended, and shall do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the allowance of such amendment would prejudice him in maintaining his action or defense upon the merits. The court may grant a postponement to enable the objecting party to meet such evidence. Tex.R.Civ.P. 63, 66.

By the operation of these rules, a trial court has no discretion to refuse an amendment unless the opposing party presents evidence of surprise or prejudice, or the amendment contains the assertion of a new cause of action or defense and, thus, is prejudicial on its face, and the opposing party objects to the amendment. The burden of showing prejudice or surprise rests on the party resisting the amendment. Greenhalgh v. Service Lloyds Ins. Co., 787 S.W.2d 938, 939 (Tex.1990). A motion for continuance based upon the ground of surprise or prejudice is essential before the filing of a trial amendment will constitute reversible error. Hardage v. Rouly, 349 S.W.2d 616, 618 (Tex.Civ.App.--Beaumont 1961, writ ref'd n.r.e.).

The discretion vested by the rules in a trial court to allow or disallow trial amendments and to grant or deny motions for continuance is broad. Therefore, the trial court's ruling will not be disturbed unless the record shows a clear abuse of discretion. Yowell v. Piper Aircraft Corp., 703...