Opinion
NO. 03-17-00339-CV
03-14-2018
Francisco Calvillo, Appellant v. Estate of Florence Virginia Walker Bohn and John T. Parker, as Executor of the Estate of Florence Virginia Walker Bohn, Appellees
FROM THE DISTRICT COURT OF MILAM COUNTY, 20TH JUDICIAL DISTRICT
NO. CV37,715, HONORABLE JOHN YOUNGBLOOD, JUDGE PRESIDING MEMORANDUM OPINION
Francisco Calvillo appeals from the trial court's summary judgment in favor of the Estate of Florence Virginia Walker Bohn (the Estate) and John T. Parker, as Executor of the Estate of Florence Virginia Walker Bohn. Calvillo sued the Estate and Parker for wrongful foreclosure and breach of contract. For the reasons that follow, we reverse the trial court's summary judgment and remand for further proceedings.
BACKGROUND
In 2012, Calvillo purchased a 49-acre commercial real estate tract (the Property) from Florence Virginia Walker Bohn. Calvillo signed a promissory note (the Note) in the amount of $91,500.00, payable in monthly installments of $1,015.84 on the first day of each month, and a deed of trust covering the Property as security for the Note. The Note provided for a late charge of 5% or $50.79 for each payment not made within 10 days of the due date, gave Bohn the option to accelerate maturity of the Note upon default, and required Calvillo to pay Bohn's attorney's fees in the event Bohn was required to secure an attorney for collection of payment upon default. The Note also contained a provision whereby Calvillo waived notice and presentment. From 2012 through June 2013, Calvillo made timely monthly installment payments on the Note. Beginning in July 2013, Calvillo began to be late on some of his monthly installment payments. Calvillo contends, and Parker and the Estate do not dispute, that when monthly installment payments were late, Calvillo would contact Parker, and they "were able to come to an agreement to allow the payments to be paid late." Calvillo also contends that he would make only the monthly installment payments and did not pay late fees and that Parker accepted the payments without requiring late fees.
At some point not reflected in the record, Bohn died, her Estate succeeded to her interest in the Note, and Parker was appointed executor of her Estate.
On June 6, 2016, after Calvillo had not made the monthly installment payments or paid late fees for March 2016 through May 2016, Parker sent Calvillo a demand for payment and notice of intent to accelerate (Notice of Intent to Accelerate). The Notice of Intent to Accelerate stated that Calvillo had failed to make payment of amounts due and owing under the Note and was thus in default; that he must pay in full the past amounts due by 5:00 p.m. on June 26, 2016; and that failure to pay all amounts due and owing by that date would result in acceleration of the indebtedness under the Note and non-judicial foreclosure of the Property. On or about June 22, 1016, Calvillo delivered money orders to Parker totaling $4,063.42 in payment of the March 2016 through June 2016 monthly installment payments, which Parker and the Estate accepted. According to Parker and the Estate, after payment of this amount, a balance of $2,135.86 remained due and owing under the Note.
$4063.42 is roughly the amount of four monthly installment payments, which actually total $4063.36.
On June 30, 2016, Parker sent Calvillo a Notice of Acceleration and Foreclosure Sale (Notice of Acceleration and Foreclosure). The Notice of Acceleration and Foreclosure stated that Calvillo had not cured the default under the Note and deed of trust and that the maturity of the indebtedness was accelerated and immediately due and payable and demanded that Calvillo pay the entire indebtedness. The Notice of Acceleration and Foreclosure also stated that Parker had instructed the substitute trustee under the deed of trust to sell the Property at a non-judicial foreclosure sale and that if all amounts due and owing had not been paid or other arrangements made by the date and time of the foreclosure sale, as stated in an attachment, the substitute trustee would conduct the foreclosure sale.
The record reflects that Parker was named substitute trustee under the deed of trust.
On August 2, 2016, Parker, as substitute trustee, conducted the foreclosure sale, at which Whiskey Hollow Ranch, LLC, purchased the Property. In September 2016, Calvillo filed suit against the Estate and Parker alleging wrongful foreclosure and breach of contract and seeking monetary damages and rescission of the foreclosure sale. Whiskey Hollow Ranch intervened, arguing that it was the legal and equitable title owner of the Property, and obtained a summary judgment, which was severed from this cause and became final. Subsequently, the Estate and Parker filed a motion for summary judgment challenging both Calvillo's wrongful foreclosure and breach of contract claims, and Calvillo filed a response. In April 2017, the trial court granted the motion without specifying a ground and dismissed Calvillo's claims. This appeal followed.
In his notice of appeal, Calvillo named Whiskey Hollow Ranch as an appellee. Whiskey Hollow Ranch filed a motion to dismiss on the ground that the appeal was untimely as to Whiskey Hollow Ranch, which Calvillo opposed. This Court granted the motion to dismiss, and Whiskey Hollow Ranch is not a party to this appeal.
STANDARD OF REVIEW
We review a trial court's summary judgment de novo. Exxon Mobil Corp. v. Rincones, 520 S.W.3d 572, 579 (Tex. 2017) (citing Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005)). We take as true all evidence favorable to the non-moving party, and we indulge every reasonable inference and resolve any doubts in the non-moving party's favor. Dorsett, 164 S.W.3d at 661. To prevail on a summary judgment motion, the movant must demonstrate that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215-16 (Tex. 2003). When the movant satisfies this initial summary judgment burden, the burden shifts to the nonmovant to produce evidence raising an issue of fact. See Tex. R. Civ. P. 166a(c); Amedisys, Inc. v. Kingwood Home Health Care, LLC, 437 S.W.3d 507, 517 (Tex. 2014). When the trial court does not specify the grounds for granting the motion, we must uphold the judgment if any of the grounds asserted in the motion and preserved for appellate review are meritorious. Knott, 128 S.W.3d at 216.
DISCUSSION
Wrongful Foreclosure
In his first issue, Calvillo complains that the trial court erred in dismissing his claim for wrongful foreclosure. He argues that Parker and the Estate waived the right to accelerate the Note for past defaults by repeatedly accepting late payments and by failing to communicate to him the overdue late charge amounts and attorney's fees incurred for collection efforts. Calvillo contends that the conduct of Parker and the Estate in accepting late payments waived the provision in the Note waiving notice and presentment and that when he delivered payment of the four delinquent monthly installment payments, he brought the note current. He further contends that Parker and the Estate could not accelerate for past defaults and were required to send notice that late payments would no longer be accepted before proceeding with acceleration based on any subsequent default.
"'Generally, "waiver" consists of the intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right.'" Paxton v. City of Dallas, 509 S.W.3d 247, 262 (Tex. 2017) (quoting In re Nationwide Ins. Co. of Am., 494 S.W.3d 708, 712 (Tex. 2016) (orig. proceeding)).
"Exercise of the power of acceleration is a harsh remedy which deserves close scrutiny." Karam v. Brown, 407 S.W.3d 464, 473 (Tex. App.—El Paso 2013, no pet.) (quoting McGowan v. Pasol, 605 S.W.2d 728, 732 (Tex. Civ. App.—Corpus Christi 1980, no writ)). Where, as here, the holder of a promissory note has the option to accelerate maturity of the note upon default, the holder generally must give notice of the intent to exercise the option. See Ogden v. Gibraltar Sav. Ass'n., 640 S.W.2d 232, 233 (Tex. 1982) ("[I]n the absence of a waiver, the holder of a delinquent installment note must present the note and demand payment for the past due monthly installment payments prior to exercising the right to accelerate.") The notice of intent to accelerate must afford the maker an opportunity to cure the default and "bring home to the mortgagor that failure to cure will result in acceleration of the note and foreclosure under the power of sale." Id. Following notice and opportunity to cure the default, if the maker fails to remedy the default, the holder may accelerate maturity and begin foreclosure. Id.
The effect of acceptance of late payments on the right to accelerate depends on the language of the note. Where, as here, the note contains no provision that a failure to exercise the option to accelerate upon a default is not a waiver of the right to exercise it upon a subsequent default, acceptance of past due monthly installment payments generally waives the option to accelerate on past defaults but does not waive the option to declare the balance due for future defaults—provided the holder gives prior notification to the maker that late payments will no longer be accepted. Karam, 407 S.W.3d at 473; Price v. Bustamante, No. 01-98-00881-CV, 2001 Tex. App. LEXIS 5251, at *13-14 (Tex. App.—Houston [1st Dist.] July 26, 2001, pet. denied) (mem. op.); First Nat'l Bank of Bellaire v. David W. Showalter, P.C., No. 14-95-01532-CV, 1998 Tex. App. LEXIS 3924, at *6-7 (Tex. App.—Houston [14th Dist.] June 25, 1998, no pet.) (mem. op., not designated for publication) (stating that failure to exercise option upon default "estops the holder from accelerating for a subsequent late payment unless [the holder] has notified the maker that future late payments would result in acceleration"); Highpoint of Montgomery Corp. v. Vail, 638 S.W.2d 624, 627 (Tex. App.—Houston [1st Dist.] 1982, writ ref'd n.r.e.) (stating that where late payments have been accepted, "equity will not allow an acceleration of the note unless the holder, within a reasonable time in advance of the receipt of a late payment upon which default is relied, has unequivocally notified the obligor that no further late payments will be accepted"); McGowan, 605 S.W.2d at 732 (observing that note did not provide that holder's failure to exercise option to accelerate upon default would not constitute waiver of exercise of same right upon subsequent default and holding that holder was precluded from accelerating note for late payment without notice, prior to the late payment for which default was claimed, that late payments would not be accepted in future).
In contrast, where a note provides that failure to exercise the option to accelerate upon default is not waiver of the right to exercise the option at another time, the holder is not required to give notice that the note will be accelerated upon another default. First Nat'l Bank of Bellaire v. David W. Showalter, P.C., No. 14-95-01532-CV, 1998 Tex. App. LEXIS 3924, at *7 (Tex. App.—Houston [14th Dist.] June 25, 1998, no pet.) (mem. op., not designated for publication) ("Where a note expressly provides that a failure to exercise the option to accelerate upon a default is not a waiver of the right to exercise it upon a subsequent default, the acceptance of late payments does not create such an estoppel or otherwise evidence an intent not to enforce the contract according to its terms.").
This rule applies even when the note contains a provision whereby the maker waives notice and presentment. Bodiford v. Parker, 651 S.W.2d 338, 339-40 (Tex. App.—Fort Worth 1983, no writ) (concluding that holder's acceptance of late payments waived provision waiving notice and presentment); Highpoint, 638 S.W.2d at 627 (holding that trial court correctly found that holder waived strict compliance with terms of note by accepting late payments); McGowan, 605 S.W.2d at 732 (concluding that holder was precluded from accelerating note for late payment without prior notice that no further late payments would be accepted "[e]ven though the . . . note contained a 'waiver of notice of acceleration' provision"). In short, when the holder of the note has repeatedly accepted late payments, he may not accelerate maturity for past defaults and may not accelerate for subsequent defaults without prior notification to the maker that late payments will no longer be accepted. Price, 2001 Tex. App. LEXIS 5251, at *13-14; First Nat'l Bank, 1998 Tex. App. LEXIS 3924, at *6-7; Highpoint, 638 S.W.2d at 627; McGowan, 605 S.W.2d at 732.
We conclude that Calvillo has shown that there is a genuine issue of material fact as to his claim of waiver. The summary judgment evidence presented by Parker and the Estate included a list of Calvillo's monthly payment due dates; installment amount, late fees, and total amounts due each month; payment dates and amounts; and arrears at the end of each month (the Payment History). The Payment History included 25 late payment charges of $50.79—including 21 assessed after late monthly installment payments were accepted between July 1, 2013, and March 4, 2016—and attorney's fees of $900, which amounts total $2,169.75. The Payment History reflects that the late monthly installment payments were credited to Calvillo and the late fees were carried forward as unpaid balances. The charge for attorney's fees was added in May 2016, when Calvillo had failed to make monthly installment payments for March through May. The Payment History reflected that Calvillo tendered payment of $4063.42 on June 23, 2016, and it was accepted. Although the sum of the listed late fees and attorney's fees is $33.89 greater than the amount listed as in arrears, it appears that the default balance consisted of unpaid late fees and attorney's fees.
There was no summary judgment evidence that Calvillo was made aware at the time that Parker and the Estate had assessed attorney's fees against him.
Calvillo bases his arguments on appeal on the presumption that "the default balance is attributable to these two combined expenses," and Parker and the Estate do not dispute that presumption or otherwise explain the arrears balance on the Note stated on the Payment History.
The summary judgment evidence further showed that on June 6, 2016, Parker and the Estate sent Calvillo a Notice of Intent to Accelerate and demanded payment in full of all past due amounts. As noted, Calvillo paid the amount of $4063.42, and there was no summary judgment evidence that the late fees were not waived until June 30, 2016, when Parker and the Estate sent Calvillo the Notice of Acceleration and Foreclosure. Calvillo's summary judgment evidence included his affidavit, in which he averred that each time he fell behind on monthly installment payments, he and Parker came to an agreement allowing him to make the payments late without requiring him to pay the late fees.
In their motion for summary judgment, Parker and the Estate also alleged that Calvillo had failed to pay the ad valorem taxes on the Property, an issue we address below.
The summary judgment evidence therefore reflects that Parker and the Estate had accepted late payments on multiple occasions in the past, thus creating a fact issue as to whether they waived the right to accelerate maturity of the Note for past due amounts. See Karam, 407 S.W.3d at 473; Price, 2001 Tex. App. LEXIS 5251, at *13; Highpoint, 638 S.W.2d at 626; McGowan, 605 S.W.2d at 732. Their acceptance of late payments also created a fact issue as to their waiver of Calvillo's own waiver of the right to notice and presentment so that they were required to notify Calvillo that late payments would no longer be accepted prior to acceleration for any future defaults. See Price, 2001 Tex. App. LEXIS 5251, at *13-14; First Nat'l Bank, 1998 Tex. App. LEXIS 3924, at *6-7; Highpoint, 638 S.W.2d at 626-27; McGowan, 605 S.W.2d at 732. In addition, their acceptance of late monthly installment payments over four years without requiring payment of late fees raised a fact issue as to their waiver of the right to assert default based on Calvillo's nonpayment of past late fees. See Allen v. Hines Ranches of Tex., Inc., No. 03-03-00167-CV, 2003 Tex. App. LEXIS 10332, at *5-6, (Tex. App.—Austin 2003, no pet.) (mem. op.) (stating that in absence of unambiguous non-waiver clause, acceptance of late payments without late fees waives right to claim default for nonpayment of late fees). Consequently, there is a fact issue as to whether, when Calvillo paid the monthly installment payments for March 2016 through June 2016, his payments became current on the note and Parker and the Estate were precluded from accelerating the note for claimed default based solely on nonpayment of late fees and attorney's fees. See id. Further, because there was a fact issue as to whether Parker and the Estate waived the right to accelerate for past defaults and the right to claim default for nonpayment of late fees, there is also a fact issue as to whether Parker and the Estate had a right under the Note to assess attorney's fees for collection upon default.
Parker and the Estate argue that Bodiford, Highpoint, and McGowan, which Calvillo cites, are distinguishable because in those cases, the note holders accelerated and foreclosed without first sending notices of intent to foreclose. See Bodiford, 651 S.W.2d at 339; Highpoint, 638 S.W.2d at 626; McGowan, 605 S.W.2d at 730. However, while it is undisputed that Parker and the Estate sent a Notice of Intent to Accelerate, the issue is not whether Calvillo was given notice of intent to accelerate and opportunity to cure the claimed default prior to foreclosure. Rather, the issue here is whether Parker and the Estate waived the right to accelerate for past defaults and for past nonpayment of late fees so that they were required to inform Calvillo that no further late payments would be accepted before proceeding with acceleration only upon future defaults. See Allen, 2003 Tex. App. LEXIS 10332, at *5-6; Karam, 407 S.W.3d at 473; Price, 2001 Tex. App. LEXIS 5251, at *13-14; Highpoint, 638 S.W.2d at 626-27 ("The trial court's correct finding that the holder waived strict compliance with the terms of the note [by accepting seven consecutive late payments without notifying maker that no further late payments would be accepted], and that the appellees were not in default renders moot appellant's points of error regarding acceleration and tender."); McGowan, 605 S.W.2d at 732. The summary judgment evidence shows that after repeatedly accepting late payments without collecting late fees, Parker and the Estate did not notify Calvillo that no further late payments would be accepted; that they instead sent a Notice of Intent to Accelerate based on past defaults; that Calvillo paid $4063.42—the amount of four monthly installment payments; and that Parker and the Estate then sent a Notice of Acceleration and Foreclosure based on past unpaid late fees and attorney's fees charged for collection. On this record, we conclude that there are genuine issues of material fact as to whether Parker and the Estate waived acceleration and that the trial court erred in dismissing Calvillo's claim for wrongful foreclosure. We sustain Calvillo's first issue.
As noted above, in their motion for summary judgment, Parker and the Estate also alleged that Calvillo had failed to pay the ad valorem taxes on the Property. The only summary judgment evidence relating to property taxes offered by Parker and the Estate was the unsworn Notice of Acceleration and Foreclosure, in which the attorney for Parker and the Estate asserted that the ad valorem taxes on the Property had not been paid and that a collection suit had been filed and demanded that all taxes be brought current. In his summary judgment affidavit, Calvillo averred that he paid property taxes annually on the Property from 2012 to 2014, entered into a payment plan for property taxes with the Milam County taxing authority in 2015, and informed Parker and the Estate of the payment plan who "seemed to accept that [he] was making payments under the plan" and "never indicated in any way that foreclosure was a consideration." On this record, we conclude that the summary judgment evidence did not establish as a matter of law that there was an arrearage on the property taxes.
Breach of Contract
In his second issue, Calvillo argues that the trial court erred in dismissing his breach of contract claim. Parker and the Estate contend that Calvillo cannot recover for breach of contract because he is a breaching party under the Note and deed of trust. We agree that, as a general rule, a plaintiff may not recover for breach of a contract unless he has performed under the contract. See e.g., Parker Drilling Co. v. Romfor Supply Co., 316 S.W.3d 68, 72 (Tex. App.—Houston [14th Dist.] 2010, pet. denied) (listing elements of breach of contract, including that "plaintiff performed or tendered performance"); Nova Info. Sys. v. Nidhi & Roneil, Inc., No. 14-05-00845-CV, 2007 Tex. App. LEXIS 2405, at *11 (Tex. App.—Houston [14th Dist.] Mar. 29, 2007, no pet.) (mem. op.) ("[W]hen a party to a contract fails to perform its obligations under that contract, it may not thereafter enforce the remaining terms of the contract against the other party.") However, we have already concluded that there are fact issues as to whether Calvillo brought the Note current when he paid the March through June 2016 monthly installment payments. Accordingly, we conclude that there is likewise are genuine issues of material fact as to whether Calvillo was a breaching party and that the trial court erred in dismissing Calvillo's claim for breach of contract. We sustain Calvillo's second issue.
Other Grounds for Summary Judgment
Parker and the Estate also urge that the trial court's summary judgment should be affirmed on a procedural ground. Parker and the Estate contend that because Calvillo failed to challenge all of the independent grounds for summary judgment asserted in their motion for summary judgment, Calvillo has waived the unchallenged grounds, which are presumed to be valid. According to Parker and the Estate, they asserted six independent grounds for summary judgment, and Calvillo did not address grounds one through four in either his response to their motion or on appeal. Consequently, Parker and the Estate argue, because the trial court did not specify the basis of its ruling and could have granted summary judgment on one of these four un-addressed grounds, we must affirm the trial court's judgment.
"When the trial court does not specify the basis for its summary judgment, the appealing party must show it is error to base it on any ground asserted in the motion." Star-Telegram, Inc. v. Doe, 915 S.W.2d 471, 473 (Tex. 1995). When an appellant fails to challenge possible grounds on which summary judgment could have been granted, we must uphold the summary judgment on an unchallenged ground. See id.; Malooly Bros., Inc. v. Napier, 461 S.W.2d 119, 121 (Tex. 1970) ("The judgment must stand, since it may have been based on a ground not specifically challenged by the plaintiff and since there was no general assignment that the trial court erred in granting summary judgment."); Young v. JP Morgan Chase Bank, N.A., No. 03-15-00261-CV, 2016 Tex. App. LEXIS 7974, at *7-8 (Tex. App.—Austin July 28, 2016, pet. denied) (mem. op.) (affirming summary judgment based on unchallenged ground).
Here, however, we do not agree that Calvillo failed to address any independent ground for summary judgment asserted in Parker's and the Estate's motion for summary judgment. In addition to the grounds attacking Calvillo's waiver and breach of contract claims, which it is undisputed Calvillo has challenged, Parker and the Estate asserted the following:
1. The August 2, 2016 foreclosure sale of the Property was proper as a matter of law based on the uncontroverted facts in the Substitute Trustee's Deed;
2. The Demand for Payment and Notice of Intent to Accelerate complied with Texas law and the Deed of Trust. Contrary to Mr. Calvillo's claims, Mr. Parker was not required under Texas law to provide Mr. Calvillo with a breakdown of the past due amounts. The Demand for Payment only had to provide notice of Mr. Calvillo's default under the Note and the opportunity to cure the default prior to exercising the option to accelerate;These purported additional "independent grounds," however, are merely arguments that the foreclosure was proper and that Calvillo failed to perform under the contract—arguments that are subsumed in the challenged grounds concerning whether Parker and the Estate waived acceleration and whether Calvillo was a breaching party. They are not separate bases that independently support the trial court's summary judgment. Cf. Next Generation Tech., Inc. v. Tech Plan, Inc., No. 02-16-00415-CV, 2017 Tex. App. LEXIS 10545, at *5 (Tex. App.—Fort Worth Nov. 9, 2017, pet. filed) (mem. op.) (affirming summary judgment on unchallenged grounds of impossibility and statute of limitations); Agarwal v. Villavaso, No. 03-16-00800-CV, 2017 Tex. App. LEXIS 6404, at *11 (Tex. App.—Austin July 13, 2017, no pet.) (mem. op.) (upholding summary judgment on unchallenged grounds of waiver and quasi-estoppel); Young, 2016 Tex. App. LEXIS 7974, at *7-8 (affirming summary judgment on unchallenged ground of breach of note and security agreement); Berger v. Flores, No. 03-12-00415-CV, 2015 Tex. App. LEXIS 5969, at *12 (Tex. App.—Austin June 12, 2015, no pet.) (mem. op.) (affirming summary judgment based on unchallenged ground of damages element of claim for breach of note and security instrument). We conclude that Calvillo has not failed to challenge any independent ground on which the trial court could have based its determination to grant summary judgment.
3. Mr. Calvillo cannot rescind the foreclosure sale, an equitable remedy, because Mr. Calvillo did not tender payment of the amounts due and owing under the Note prior to the sale as required by Texas law;
4. Mr. Calvillo cannot rescind the foreclosure sale, an equitable remedy, because his claim is untimely and barred by laches. Mr. Calvillo received the Notice of Acceleration dated June 30, 2016 and had ample opportunity to respond prior to the foreclosure sale on August 2, 2016. Mr. Calvillo did not file his lawsuit until after the Property was sold to Whiskey Hollow Ranch[.]
We also observe that any summary judgment "ground" concerning rescission of the foreclosure goes only to Calvillo's available remedies—rescission and damages—should he be successful—and is not an independent ground for summary judgment. Morton v. Nguyen, 412 S.W.3d 506, 510 (Tex. 2013) (stating that rescission is common name for composite remedy of rescission and restitution and that rescission is "generally available as a remedy . . . and is accompanied by restitution of any partial performance").
CONCLUSION
Having sustained Calvillo's issues, we reverse the trial court's judgment and remand for further proceedings consistent with this opinion.
/s/_________
Melissa Goodwin, Justice Before Chief Justice Rose, Justices Pemberton and Goodwin Reversed and Remanded Filed: March 14, 2018