Starcrest Trust v. Berry
| Citation | 926 S.W.2d 343 |
| Decision Date | 26 June 1996 |
| Docket Number | No. 03-95-00264-CV,03-95-00264-CV |
| Parties | STARCREST TRUST, Appellant, v. Sam C. BERRY, Appellee. Austin |
| Court | Texas Court of Appeals |
Ross W. Ganann, New Braunfels, for Appellant.
Charles M. Jefferson, Smith, Barshop, Stoffer & Millsap, Inc., San Antonio, for Appellee.
Before CARROLL, C.J., and ABOUSSIE and KIDD, JJ.
This is an appeal from a judgment granted in favor of appellee Sam C. Berry. Appellant Starcrest Trust ("Starcrest") brought suit against Berry, Thomas J. Smith, and the law firm of Smith, Barshop, Stoffer & Millsap to enjoin the non-judicial foreclosure of a deed of trust lien on certain property to which Starcrest held legal title in Comal Berry then filed a counterclaim against Starcrest in which he alleged that he was owed $85,000 for funds that he advanced and sought to obtain a judicial foreclosure of his lien. The trial court granted summary judgment against Starcrest's usury claim as well as in favor of the defendants, Thomas J. Smith and Smith, Barshop, Stoffer & Millsap, Inc.
County. Starcrest additionally sought both a declaratory judgment that the deed of trust lien was invalid and damages for allegedly usurious interest charged in connection with the transaction. The trial court granted a temporary injunction preventing the foreclosure sale.
On February 3, 1995, the trial court entered a final judgment awarding Berry $85,000 in damages and $30,046 in attorneys' fees and further ordering a judicial foreclosure of the property. Starcrest appeals this judgment in twelve points of error. 1 We will affirm the judgment of the trial court.
Appellee Sam Berry is the father-in-law of Ted Ballard, the trustee of appellant Starcrest. This, however, is one of the few facts that is not in dispute in this case. We will present the two distinct versions of the facts as alleged by the two parties in this case.
According to Sam Berry, Ted Ballard, who considered himself a sophisticated real estate businessman, needed money for one of his real estate ventures in late 1986. Believing that Ballard would pay him back, Berry followed Ballard's instructions and advanced $30,000 to Norman Jacobson to help Ballard save a property in Bexar County. Further, in May 1989, Berry advanced $5,000 to Ted and Barbara Ballard for family living expenses and to help pay for Ted Ballard's attorneys' fees.
In 1989, Ted Ballard came under federal indictment for making certain fraudulent statements and retained Gerald Goldstein, a well-known criminal defense attorney, to represent him. Goldstein, however, wanted a $50,000 retainer fee. Ballard already owed Berry $35,000, and the two reached an understanding that Berry would make further advances to Goldstein for the benefit of Ted Ballard. So, in June 1989, Ballard told Berry that he was preparing an $85,000 note and deed of trust on the "one piece of property that they (Ballard's creditors) can't take away from me." Barbara Ballard prepared the note and the deed of trust, and Ted Ballard signed them. Ted Ballard, in his capacity as trustee of Starcrest, had the note and deed of trust executed on behalf of Starcrest despite the fact that the money was paid for his personal benefit, and the property owned by Starcrest was pledged because it was free and clear of liens. The deed of trust was recorded, but neither the note nor the deed of trust was sent to Berry. Barbara Ballard last saw the note on her desk in the spring of 1992 and was later told that Ted had destroyed the original note and deed of trust. Thus, Berry did not have either of the original two instruments in his possession.
After the execution of the note and the deed of trust, Berry made a series of additional advances for the benefit of the Ballards in 1989 and 1990. Some of these advances were made for personal expenses, while others were made directly to Goldstein. In total, Berry advanced $86,000 for the benefit of Ted Ballard, all of which was secured by the $85,000 note and deed of trust.
According to the testimony of Ted Ballard and the convoluted facts as set forth in his brief, Berry loaned $30,000 to Country Enterprises, Inc., a corporation jointly owned by Ted and Barbara Ballard. In exchange for this $30,000, the Ballards set up a note and deed of trust in the amount of $348,000 "because it was not anticipated as to how much additional funding that company may need." Thus, even though the face of the note was $348,000, the amount actually advanced was $30,000. In July 1986, Country Enterprises, Inc. conveyed the property that was encumbered by the $348,000 deed of trust to Starcrest by warranty deed. Starcrest In Starcrest's attempt to sell this encumbered property to Lash Publications, it became necessary to obtain a release of lien from Berry because the bank was not willing to fund enough money to clear a $348,000 mortgage in addition to a previous lien that was on the property. 2 On June 1, 1989, the release of lien was executed and served to extinguish all indebtedness related to the original $348,000 deed of trust. In obtaining the release of lien, Ted Ballard told Berry that he would execute a second interim deed of trust that could be recorded if the closing on the property did not occur or if for some reason Berry was not paid. Ballard further told Berry that he would attempt to have Lash Publications execute a new note and a new deed of trust so that Berry would be in the same position he was in before. Lash did in fact execute a new note and new deed of trust payable to Berry in the amount of $40,000, which according to Ballard, included the original $30,000 that Berry funded to Country Enterprises plus accrued interest. Ballard contends that the new note and deed of trust from Lash constituted a novation which extinguished the original $30,000 obligation. Lash Publications failed to pay Berry, but instead of foreclosing on the building, Ballard contends that Berry wrote the entire $40,000 off on his 1989 or 1990 tax return. Ballard contends that Berry, in his counterclaim, improperly asserts his rights to $85,000 under this second interim deed of trust.
took title to the property subject to the indebtedness but without assuming it.
According to Ballard, the second interim deed of trust in the amount of $85,000 was executed for the sole purpose of providing additional security for the payment of the indebtedness. The release of lien extinguished all indebtedness related to the $348,000 deed of trust. Ballard contends that there was no funding, new or old, to Starcrest, nor was there delivery to Berry of any note related to this second deed of trust. Thus, because there was no indebtedness related to this second $85,000 deed of trust which is the subject of this suit, it was of no force and effect.
In its first point of error, Starcrest asserts that the trial court erred in granting judgment in favor of Berry because the pleadings were not supported by the proof. Starcrest points out that Berry's counterclaim alleged that "Berry loaned $85,000 to Starcrest Trust." In his testimony at trial, however, Berry denied loaning Starcrest the $85,000 or any other amount of money, and Berry's attorney stipulated to the same. In fact, Berry specifically testified that he loaned $86,000 for the benefit of Ted Ballard with the expectation that Ballard would pay him back.
Pleadings are sufficient if they give fair and adequate notice to the opposing party. Acevedo v. Droemer, 791 S.W.2d 668, 669 (Tex.App.--San Antonio 1990, no writ). A variance between the pleadings and proof is fatal only if the divergence is substantial, misleading, and prejudicial. Fortner v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 687 S.W.2d 8, 11 (Tex.App.--Dallas 1984, writ ref'd n.r.e.). In the absence of special exceptions, a petition will be liberally construed in favor of the pleader. Acevedo, 791 S.W.2d at 670.
There is no actual variance between the pleadings and the proof. The evidence at trial clearly indicated that Berry advanced $86,000 directly to, or for the benefit of, Ted Ballard, the trustee of Starcrest. The evidence further shows that, in exchange for this funding, an $85,000 note and deed of trust was prepared by Barbara Ballard at the direction of Ted Ballard and then signed by Ted Ballard in the name of Starcrest.
If a person acting, or purporting to act, as a representative signs an instrument by signing either the name of the represented person or the name of the signer, the represented person is bound by the signature to the same extent the represented Tex.Bus. & Com.Code Ann. § 3.402(a) (Tex.UCC) (West Supp.1996). 3 Even if there is a technical variance between the pleadings and the proof, the pleadings gave fair and adequate notice to Starcrest and to Ted Ballard. Further, the variance was in no way substantial, misleading, or prejudicial. Accordingly, point of error one is overruled.
person would be bound if the signature were on a simple contract.
In its second point of error, Starcrest contends that the trial court erred in ruling that there was a lost note because Berry failed to prove the elements of a note as required by statute.
The owner of an instrument which is lost, whether by destruction, theft or otherwise, may maintain an action in his own name and recover from any party liable thereon upon due proof of his ownership, the facts which prevent his production of the instrument and its terms. The court may require security indemnifying the defendant against loss by reason of further claims on the instrument.
Act of June 14, 1967, 60th Leg., R.S., ch. 785, § 1, 1967 Tex.Gen.Laws 2343, 2440 (). The terms that must be proved in order to recover on an instrument include: (1) the note in question; (2) the party sued signed the note; (3) the...
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