Texas Community Bank, N.A. v. Witte Investment Group, Ltd., No. 09-05-054 CV (Tex. App. 2/15/2007)
| Decision Date | 15 February 2007 |
| Docket Number | No. 09-05-054 CV.,09-05-054 CV. |
| Parties | TEXAS COMMUNITY BANK, N.A., SCOTT A. CARLISLE and DOCK HI, L.L.C., Appellants, v. WITTE INVESTMENT GROUP, LTD., Appellee. |
| Court | Court of Appeals of Texas |
On Appeal from the 221st District Court, Montgomery County, Texas, Trial Cause No. 03-03-02052-CV.
Affirmed.
Before McKEITHEN, C.J., GAULTNEY and KREGER, JJ.
This appeal involves four parties and a 24.267-acre tract of land located in Montgomery County, Texas.1 Appellants Scott A. Carlisle and Dock Hi, L.L.C. ("Dock Hi") appeal a final judgment from a bench trial, incorporating a partial summary judgment, rendered in favor of appellee Witte Investment Groups, Ltd. ("Witte"). The partial summary judgment and the final judgment found Carlisle and Dock Hi jointly and severally liable for the balance owed on a wraparound promissory note ("Carlisle note") relating to the purchase and sale of 24.267 acres of land. Carlisle and Dock Hi contend Dock Hi did not assume liability on the Carlisle note, and Witte is not entitled to judgment on the note because the note and deed of trust lien were properly discharged and released. Appellant Texas Community Bank, N.A. ("TCB") appeals the trial court's final judgment which declared Witte's vendor's lien superior to TCB's deed of trust lien. TCB asserts the status of the real property records did not put it on inquiry notice and as a result, TCB obtained its lien as a bona fide mortgagee. The three appellants further challenge the trial court's judgment finding them jointly and severally liable to Witte for attorney's fees.
We hold the evidence is legally and factually sufficient to support the trial court's judgment that found Carlisle and Dock Hi were jointly and severally liable to Witte for the Carlisle note; a recorded release of Witte's vendor's lien was invalid; TCB was not a bona fide purchaser; and Carlisle, Dock Hi, and TCB were liable for attorney's fees. The judgment is affirmed.
The material facts of this case are not in dispute; thus, this case turns on the legal consequences of these facts. In June 1999, Witte sold Carlisle 24.267 acres of land in exchange for the Carlisle note, a wraparound promissory note in the principal sum of $179,000, and secured by a vendor's lien and deed of trust.2 With this wraparound financing arrangement, the Carlisle note wrapped an outstanding first lien mortgage in favor of OmniBank, N.A. There were no other liens on the property when Witte sold the property to Carlisle.
In July 2000, Carlisle conveyed the property to his company, Dock Hi, by executing a warranty deed. The warranty deed provides that Dock Hi "does not assume payment of the note or liability under any instrument securing it." Royce Witte, the president and general partner of Witte Investment Group, Ltd., expressly approved of the conveyance by signing the warranty deed. Witte Investment Group, Ltd. was the holder of a vendor's lien. Contemporaneously with the conveyance of the property, Dock Hi executed a deed of trust to secure assumption in favor of Carlisle. The deed of trust to secure assumption provides, "Beneficiary [Carlisle] conveyed the property to Grantor, [Dock Hi] who as part of the consideration promised to pay the [Carlisle] note assumed and to be bound by the deed of trust assumed."
Witte owed Lincoln Feed & Fertilizer Service, Inc. ("Lincoln") a debt unrelated to the transactions in this case. On March 27, 2001, Witte assigned the Carlisle note and transferred the vendor's lien to Lincoln by two instruments, and Lincoln recorded the assignment and transfer on May 1, 2001. On April 6, 2001, after the Lincoln assignment but before it was recorded, Witte collaterally assigned the same Carlisle note and vendor's lien to OmniBank to secure another debt unrelated to the outstanding first lien mortgage, and OmniBank recorded this assignment on April 17, 2001. Witte eventually satisfied both of the unrelated debts to Lincoln and OmniBank. Lincoln executed a "Release of Judgment Lien,"recorded in December 2001, that acknowledged Witte's full and final payment of its debt. However, Witte did not obtain an express reassignment of the Carlisle lien and note from Lincoln.
After OmniBank threatened to foreclose its first lien on the property, Dock Hi sought financing from a third party, First Bank of Conroe, to buy out OmniBank's first lien position. To facilitate the closing on the loan and to issue a title insurance policy, the title company prepared a "Release of Lien," and in September 2002, Lincoln executed the "Release of Lien," which stated that Lincoln, as the "legal and equitable owner and holder" of the Carlisle note, "for and in consideration of full and final payment of the aforesaid [Carlisle] note, has released and discharged, and by these presents does hereby release and discharge the . . . property [i.e. the 24.267 acres] from all liens and security interests held by the undersigned securing said indebtedness." In October 2002, after receiving full payment on the debts owed by Witte from the closing with First Bank of Conroe, OmniBank executed two documents: (1) a "Reassignment of Note and Lien" which reassigned the Carlisle note, the vendor's lien retained in the deed, and the deed of trust to Witte; and (2) a "Release of Vendor's Lien and Deed of Trust" which released OmniBank's first lien mortgage on the property. All three closing documents were recorded in the real property records of Montgomery County.
Carlisle, acting as a Dock Hi representative, sought a loan from TCB to finance a development project on the subject property. TCB retained the services of a title company that provided TCB with a title commitment regarding the property at issue. Ultimately, TCB loaned Dock Hi $360,000 and obtained a deed of trust lien on the property. TCB, Carlisle, and Dock Hi contend TCB's deed of trust lien is the first lien on the property.
On or about December 26, 2002, Dock Hi made a payment to Witte, but after receiving assurances from the first title company that Lincoln's release terminated any liability of Carlisle or Dock Hi to Witte on the Carlisle note, Dock Hi stopped payment on the check and informed Witte of the Release of Lien. Thereafter, Witte filed this action seeking, inter alia, a declaratory judgment that Lincoln's release of the Carlisle note was void ab initio; that Witte retains a priority lien on the property; and TCB's lien on the property was void or subordinate to Witte's lien. Witte also sought a declaration that Carlisle remained obligated on the Carlisle note and had defaulted on the note. Witte also sued Carlisle and Dock Hi for breach of contract and sought to recover the remaining principal balance on the note, accrued interest, and attorney's fees.
Witte filed a motion for partial summary judgment in which he sought judgment on the promissory note against Carlisle and Dock Hi, jointly and severally. Witte's evidence included the warranty deed with vendor's lien, which was executed when Carlisle purchased the land from Witte; the deed of trust; the Carlisle note; the warranty deed conveying the property from Carlise to Dock Hi; and the deed of trust to secure assumption that Dock Hi executed in favor of Carlisle. Witte submitted Carlisle's deposition, in which Carlisle testified that he remained liable on the note and the note had not been fully paid. Witte also presented Royce Witte's affidavit detailing payments received from Carlisle and Dock Hi, the remaining balance due on the note, and accrued interest. The trial court granted partial summary judgment ordering Carlisle and Dock Hi to pay Witte the remaining balance on the note together with post-default interest.
The case proceeded to a bench trial to determine the validity of the Carlisle note in light of the Lincoln release and the priority of liens as between Witte and TCB. The trial court rendered a final judgment incorporating its partial summary judgment and issued findings of fact and conclusions of law. In the final judgment, the trial court ordered that, inter alia, (1) Carlisle remained liable on the Carlisle note because the note was not validly released; (2) Carlisle and Dock Hi were jointly and severally liable to Witte for the remaining principal balance on the Carlisle note, together with post-default interest; (3) Carlisle, Dock Hi, and TCB were jointly and severally liable to Witte for attorney's fees; (4) Witte retained a valid lien on the property and held the primary lien position; and (5) TCB's lien was subordinate to Witte's lien. Carlisle, Dock Hi, and TCB appeal the trial court's final judgment.
In an appeal from a bench trial, a trial court's findings of fact have the same force as a jury's verdict upon jury questions. Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex. 1991). When the trial court acts as a fact finder, we review its findings of fact under legal and factual sufficiency standards. Id. If an appellant challenges the legal sufficiency of the evidence on an issue on which he did not have the burden of proof, the appellant must demonstrate there is no evidence to support the adverse finding. See Croucher v. Croucher, 660 S.W.2d 55, 58 (Tex. 1983). We must consider evidence favorable to the finding if a reasonable fact finder could, and disregard evidence contrary to the finding unless a reasonable fact finder could not. City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). Anything more than a scintilla of evidence is legally sufficient to support the finding. Cont'l Coffee Prods. Co. v. Cazarez, 937 S.W.2d 444, 450 (Tex. 1996). More than a scintilla of evidence exists if the evidence furnishes some reasonable basis for differing conclusions by reasonable minds about the existence of a vital fact. Rocor Int'l, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 77...
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