Whalen v. Etheridge

• Decision Date: 15 May 1968
• Docket Number: No. 14660,14660
• Citation: 428 S.W.2d 824
• Parties: Michael C. WHALEN, Appellant, v. J. B. ETHERIDGE et al., Appellees. . San Antonio
• Court: Texas Court of Appeals

Page 824

428 S.W.2d 824

Michael C. WHALEN, Appellant, v. J. B. ETHERIDGE et al., Appellees.

No. 14660.

Court of Civil Appeals of Texas.

San Antonio.

May 15, 1968.

Rehearing Denied June 12, 1968.

Marvin Foster, Luther E. Jones, Jr., Corpus Christi, for appellant.

Davis, O'Connor, & Pullen, Bruce Robertson, Jr., San Antonio, for appellees.

KLINGEMAN, Justice.

Suit by appellant, Michael C. Whalen, herein called Whalen, for wrongful foreclosure under a deed of trust securing a promissory note executed by Whalen to J. B. Etheridge and wife, Pearl T. Etheridge, herein called Etheridge, to set aside the trustee's sale in said foreclosure, and for title and possession of the property covered in said deed of trust. Appellees Etheridge, by counter-claim, sought a deficiency judgment upon said promissory note and, in the alternative, for judgment for the total balance due thereon, and for judicial foreclosure of the deed of trust. Appellee C. W. Nugent, herein called Nugent, a subsequent purchaser of the property involved, by way of counter-claim against Whalen, asked that his title be quieted and, in the alternative, for a reimbursement of the mortgage installments, taxes, costs of improvements and repairs paid by him. Trial was to a jury. After Whalen rested, the trial court granted the motions for instructed verdict of Etheridge and Nugent and rendered judgment that Whalen take nothing, that Etheridge recover from Whalen a deficiency judgment in the amount of $25,067.31, and that the title of Nugent to the property in question be quieted.

Whalen asserts two points of error: '1. The trial court erred in granting the motion for instructed verdict filed by appellees J. B. Etheridge and wife and in thereby preventing appellant from seeking to obtain from the jury findings which had support in the evidence and which if returned would have required a decision that the foreclosure sale was invalid and would have insured that the only deficiency that could be adjudged against appellant was one computed after allowing to be credited on his mortgage debt the reasonable market value of appellant's equity in the property in question at the time of the foreclosure sale. 2. The trial court erred in granting the motion for instructed verdict filed by appellees J. B. Etheridge and wife and in thereby holding that the evidence was not sufficient to take to the jury appellant's ground of recovery claiming the foreclosure sale was invalid.'

Whalen under date of December 11, 1963, executed and delivered to Etheridge a promissory note in the principal sum of $86,000, and a deed of trust securing said note on certain property in Bexar County, Texas, whereon a luxury apartment complex was located. Said note was payable in San Antonio, Texas, in monthly installments of $965.65 due on or before the fourth day of each month, beginning February 4, 1964. The lien securing said note was a third lien on such property, being inferior to a lien to Massachusetts Mutual Life Insurance Company in the principal amount of $900,000, and another lien to Westinghouse Credit Corporation in the principal amount of $161,850. The record discloses that Whalen made no payment on the Etheridge note after September, 1964, and at the time of the foreclosure sale there were some nineteen of such monthly installments unpaid, aggregating a total of $18,335. At the time of foreclosure Whalen was also delinquent in payments on his note to Massachusetts Mutual Life Insurance Company, and his note to Westinghouse Credit Corporation, and there were delinquent ad valorem taxes against the property in the approximate sum of $35,000 . The deed of trust contained a provision that the debtor covenanted that he would pay, before they became delinquent, all taxes and assessments levied against said premises, and provided that in the event of failure to do so, at the option of the holder of said debt, the entire principal indebtedness may be declared due. Said deed of trust also provided that it was specially agreed that in case of any sale thereunder all prerequisites to said sale would be presumed to have been performed. During the summer of 1965, Whalen decided to sell such property and it was listed for sale as early as September, 1965. In December, 1965, Whalen prepared a letter which was signed by Etheridge, concerning a rearrangement of the terms of the note into a renewal note in the event Whalen effected a sale or refinancing arrangement of the property involved, which letter is set forth herein under Footnote 3.

Under date of March 11, 1966, F. N. Welmaker, as attorney for Etheridge, wrote a letter to Whalen stating that Etheridge had placed such note in his hands for collection, default having been made in its payment; that said note had been matured and demand is made for payment in full, and that in the event said note is not paid said property would be sold on the first Tuesday in April, 1966, in accordance with the terms of the deed of trust secured by the property. There was enclosed with said letter a copy of the notice of trustee's sale. The letter closes with this statement: 'You should take immediate action in the event you wish to avoid foreclosure and sale.' On April 5, 1966, said property was sold at trustee's sale to Etheridge on his bid of $75,000. Whalen was present at such sale. After said sale, Etheridge took possession of the property and Whalen sold to Etheridge certain items of personal property which were used in the operation of the apartments. On May 5, 1966, Etheridge conveyed said property to Nugent by general warranty deed, which conveyance was made subject to the Massachusetts Mutual Life Insurance Company lien and the Westinghouse Credit Corporation lien, and recites the execution and delivery by Nugent to Etheridge of one vendor's lien note in the principal sum of $100,000. The evidence discloses, however, that there was the sum of.$14,318.50 credited on such note for security deposits and advance rentals which had been collected by Whalen, leaving a net balance of $85,681.50. The record further discloses that there was owing on the Whalen note to Etheridge at the time of foreclosure a sum of approximately $88,663.34, without taking into consideration the 10% Attorney's fee provided for in said note, or the trustee's commission provided for in the deed of trust.

Whalen's contentions on this appeal can be summarized as follows:

(a) That Etheridge did not present said note to him for payment, either at his place of business or elsewhere, and did not otherwise give him notice of intention to accelerate the maturity of the note or make demand on Whalen to pay any delinquency, and that for this reason such foreclosure was invalid or, at least, fact issues as to its validity were raised which should have been submitted to a jury. The note in question had provisions for acceleration of maturity without notice ¹ and waiver of presentment for payment. ²

In support of this contention, Whalen cites Faulk v. Futch, 209 S.W.2d 1008 (Tex.Civ.App.--San Antonio 1948), affirmed 147 Tex. 253, 214 S.W.2d 614 (1948); Covington v. Burke, 413 S.W.2d 158 (Tex.Civ.App.--Eastland 1967, writ ref'd n.r.e.); Jernigan v. O'Brien, 303 S.W.2d 515 (Tex.Civ.App.--Austin 1957, no writ); Parker v. Mazur, 13 S.W.2d 174 (Tex.Civ.App.--San Antonio 1928, writ dism'd) . These cases are distinguishable from the case on appeal in that none of the notes involved in such cases contained the express waiver of notice of acceleration provision which the note in this case contains. Interstate Life Insurance Company v. Turner, 371 S.W .2d 913 (Tex.Civ.App.--Waco, 1963 writ ref'd n.r.e.), is more in point. It involved a proceeding to set aside a trustee's deed in foreclosure proceedings under a deed of trust in which the secured note was payable in San Antonio, Bexar County, Texas, and contained this provision: 'Each maker, surety and endorser of this note expressly waives all notices, demands for payment, presentations for payment, notices of intention to accelerate the maturity, protest and notice of protest, as to this note and as to each, every and all installments hereof.' The trial court concluded that since the acceleration clause was optional, the holder could not, without demand and presentment for payment, exercise such option and foreclose under the deed of trust since no specific place of payment is expressed in the note or deed of trust. The Court of Civil Appeals in reversing and remanding such cause stated: 'In our opinion, demand and presentment were not necessary. The note expressly provided that notice of intention to accelerate maturity, demand and presentment for payment were waived. Art. 5937, Sec. 82, Vernon's Ann.Tex.Stats. provides that presentment for payment is dispensed with by express waiver. The waiver is valid and effective. Sydnor v. Gascoigne, 11 Tex. 449, 456; Anderson v. Ladd, 131 Tex. 479, 115 S.W.2d 608, 613; Sowell v. Federal Reserve Bank of Dallas, Texas, (1925) 268 U.S. 449, 45 S.Ct. 528, 69 L.Ed. 1041; Cato v. Jeffreys, Tex.Civ.App., 50 S.W.2d 413; Linthicum v. Angelo Furn. Co., Tex.Civ.App., 60 S.W.2d 315, 316; 9 Tex.Jur.2d Sec. 185, p. 207; Brannan, Negotiable Instrument Law, Sec . 110; Jones, Mortgages Sec. 74.'

Whalen's contentions with regard to demand for payment, notice of acceleration of maturity and presentment are without merit for the following additional reasons: (1) There were no pleadings in regard to lack of presentment. (2) Whalen was in fact given an unequivocal notice of acceleration of maturity and demand for payment in a letter to him by Etheridge's attorney dated March 11, 1966, which was approximately three weeks before the date of foreclosure. (3) Whalen after receiving the letter went to Etheridge with regard to such foreclosure but made no demand for presentment of the note either at that time or any time thereafter. (4) After such letter was sent to Whalen a monthly installment came due under said note,...