Western Federal Sav. and Loan Ass'n v. Atkinson Financial Corp.

• Citation: 747 S.W.2d 456
• Decision Date: 24 February 1988
• Docket Number: No. 2-87-106-CV,2-87-106-CV
• Parties: WESTERN FEDERAL SAVINGS AND LOAN ASSOCIATION, Appellant, v. ATKINSON FINANCIAL CORPORATION, Appellee.
• Court: Court of Appeals of Texas

Page 456

747 S.W.2d 456

WESTERN FEDERAL SAVINGS AND LOAN ASSOCIATION, Appellant, v. ATKINSON FINANCIAL CORPORATION, Appellee.

No. 2-87-106-CV.

Court of Appeals of Texas,

Fort Worth.

Feb. 24, 1988.

Rehearing Denied April 6, 1988.

Butler & Binion, Michael S. Forshey, Houston, for appellant.

Pullman & Schendle, Richard D. Pullman, and W. Randolph Elliott, Dallas, for appellee.

Before FENDER, C.J., and JOE SPURLOCK, II, and LATTIMORE, JJ.

OPINION

FENDER, Chief Justice.

Appellant Western Federal Savings and Loan Association, which was the plaintiff and counter-defendant below, was countersued by appellee Atkinson Financial Corporation, for a breach of contract regarding the purchase of a promissory note. The trial court entered a summary judgment for $5,348,849.19 together with interest, attorneys' fees and costs of court against appellant.

We affirm.

On April 29, 1985, Brett M. Davis and his wife executed a $22,500,000.00 promissory note (the WSA note) secured by 257.756 acres of land in Tarrant County, Texas and payable to Western Savings Association, appellant's predecessor in interest. The WSA note wrapped an $18,000,000.00 promissory note (the subject note) dated April 29, 1985, executed by Davis and payable to appellee (Atkinson Financial). The subject note wrapped a $7,586,235.00 promissory note executed by Watson and Taylor Realty Company payable to Futuro, Inc. and a $13,500,000.00 promissory note payable to Vernon Savings and Loan Association (the underlying note).

A "wrapped note" represents a total obligation which recognizes senior liens and includes the obligation to discharge the indebtedness secured by such senior liens out of the total obligation set forth in the "wrapped note" but without legally assuming the specific senior indebtedness. In other words, the new obligation is wrapped around the prior indebtedness, whether one or several, and the new indebtedness remains junior in priority to the existing lien or liens.

At the time of the execution of the WSA note and the subject note, Atkinson Financial executed an estoppel agreement with appellant (Western Federal) providing Western Federal with the right to purchase the subject note and lien securing it prior to Atkinson Financial taking any action with respect to the default thereon.

On June 2, 1986, Davis, the maker of the subject note, filed in a district court of Dallas County a suit against Atkinson Financial enjoining the foreclosure of the Tarrant County property by Atkinson Financial and asserting usury claims against Atkinson Financial. The usury claims and defenses against the subject note remained outstanding until the suit was dismissed with prejudice on October 24, 1986 in favor of Atkinson Financial.

On June 3, 1986, Western Federal filed "Plaintiff's Original Petition," cause number 141-96925-86, in the 141st Judicial District Court of Tarrant County, Texas (the Tarrant County suit), seeking to enjoin Atkinson Financial from foreclosing on the Tarrant County property and the lien securing the subject note.

On June 9, 1986, Atkinson Financial filed "Defendant's Original Answer And Counterclaim" in the Tarrant County suit. In its answer, Atkinson Financial attempted to accept what it claims was an offer by Western Federal in its original petition to purchase the subject note pursuant to the terms of the estoppel, thereby creating a contract.

On December 5, 1986, Atkinson Financial filed a first amended original counterclaim and a motion for summary judgment. The trial court signed the summary judgment in favor of Atkinson Financial on February 20, 1987. It is from this ruling of the trial court that Western Federal appeals.

In a summary judgment case, the issue on appeal is whether the movant met his burden for summary judgment by establishing that there exists no genuine issue of material fact and that he is entitled to judgment as a matter of law. City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671, 678 (Tex.1979); TEX.R.CIV.P. 166-A. The burden of proof is on the movant, and all doubts as to the existence of a genuine issue as to a material fact are resolved against him. Great American R. Ins. Co. v. San Antonio Pl. Sup. Co., 391 S.W.2d 41, 47 (Tex.1965). Therefore, we must view the evidence in the light most favorable to the non-movant. See id. In deciding whether there is a material fact issue precluding summary judgment, all conflicts in the evidence will be disregarded and the evidence favorable to the non-movant will be accepted as true. Montgomery v. Kennedy, 669 S.W.2d 309, 311 (Tex.1984); Farley v. Prudential Insurance Company, 480 S.W.2d 176, 178 (Tex.1972). The summary judgment will be affirmed only if the record establishes that the movant has conclusively proved all essential elements of his cause of action or defense as a matter of law. City of Houston, 589 S.W.2d at 678.

In its first point of error, Western Federal generally contends the trial court erred in granting the summary judgment and specifically sets forth eight bases for its contention.

Western Federal's argument that it is not a real party in interest has no substance. Plaintiff's original petition was filed by Western Savings Association against Atkinson Land Company, Inc., and defendant's original answer and counterclaim was filed by Atkinson Land Company, Inc. In a first amended original counterclaim, Atkinson Land Company restated its cause of action under its new and present name Atkinson Financial Corporation. Under its new name Atkinson Financial then filed its motion for summary judgment against Western Federal Savings and Loan Association alleging it to be the successor in interest to Western Savings Association. Five days later, on December 10, 1986, Western Federal caused an agreed order to be entered which stated that, "Western Federal Savings and Loan Association ("Western Federal") moved the Court to substitute Western Federal as the real party interest in place of Plaintiff/Counter Defendant Western Savings Association ("WSA") and to dismiss WSA from this action." By its own admissions Western Federal's motion established itself as the real party in interest with respect to the instant case.

Western Federal's first three arguments for attacking the summary judgment are directed at the lack of essential elements of a contract. Western Federal claims there are genuine issues of material facts as to whether: (1) there was a complete tender by Western Federal; (2) there was an offer by Western Federal; and (3) the offer, if one existed, was bilateral.

As previously stated, Western Federal and Atkinson Financial entered into an estoppel agreement at the time the WSA note and subject note were executed. The estoppel agreement in relevant part reads:

5. Western Savings Association shall have the right to purchase our said note and liens prior to our taking any action pursuant to default therein. The Undersigned will further sell and negotiate the note and liens to Western Savings Association at any time upon the request of Western Savings Association for the remaining unpaid principal and interest thereon and costs secured thereby. This right is irrevocable and in the event of such purchase we or the holder thereof will properly endorse the note and transfer the lien to the reasonable satisfaction of Western Savings Association.

The estoppel agreement created an irrevocable right, in essence an option, in favor of Western Federal, optionee, to purchase the note and liens prior to any default action taken by Atkinson Financial. An option is a mere offer which binds the optionee to nothing and which he may or may not accept at his election. Hankey v. Employer's Casualty Co., 176 S.W.2d 357, 362 (Tex.Civ.App.--Galveston 1943, no writ) (opinion on reh'g). Until so accepted by the optionee it is not a completed contract. Id. We believe Western Federal accepted the option to purchase the note and liens in its original petition.

In response to Atkinson Financial's attempt to foreclose on the subject note, Western Federal filed its original petition to persuade the court to enjoin the scheduled foreclosure. The petition reads in relevant part:

Specifically, Plaintiff avers that it has and does hereby tender sufficient sums to pay off and purchase Defendant's Note as required under the the Estoppel Agreement.

....

... Plaintiff has performed all conditions precedent and is ready, willing, and able to perform each and every obligation imposed by the note and deed of trust and to perform such equitable acts as the Court deems necessary.

We construe Western Federal's statement that there was "no offer" to mean Western Federal never intended to exercise its option. However, Western Federal's argument must fail in light of the clear language of plaintiff's original petition. The language found in paragraph IV of plaintiff's original petition further supports the fact that Western Federal intended to exercise its option by stating, "ATKINSON LAND COMPANY, INC., has failed to accept a payoff of its loan as required int [sic] the above referenced Estoppel agreement...."

It is immaterial that Western Federal's original petition did not include an actual tender of money. Unless the option contains provisions to the contrary, all that is required of the optionee is that he notify the optionor, prior to the expiration of the option, of his decision to exercise the option. Odum v. Sims, 609 S.W.2d 881, 882 (Tex.Civ.App.--San Antonio 1980, no writ); San Antonio Joint Stock Land Bank v. Malcher, 164 S.W.2d 197, 200 (Tex.Civ.App.--San Antonio 1942, writ ref'd w.o.m.). Optionee thereafter has a reasonable time within which to complete the deal. Id.

Western Federal's allegation that its acceptance of the option is unilateral in nature is incorrect. It is true that until the option is exercised in accordance with the contract, the contract is said to be unilateral in nature. Tye v. Apperson, 689 S.W.2d 320, 323 (Tex.App.--Fort...