Opinion
No. 04-05-00050-CV
Delivered and Filed: July 26, 2006.
Appeal from the 218th Judicial District Court, La Salle County, Texas, Trial Court No. 04-07-00064-Cvl, Honorable Stella Saxon, Judge Presiding.
Reversed and Rendered in Part; Remanded in Part; and Affirmed in Part.
Sitting: Catherine STONE, Justice, Karen ANGELINI, Justice, Rebecca SIMMONS, Justice.
MEMORANDUM OPINION
Appellant/Cross-Appellee, Gares Corporation ("Gares"), appeals from a declaratory judgment the trial court granted in favor of appellee/cross-appellant, SD Investments, L.L.C. ("SD"), in connection with a parcel of real property subject to a promissory note. After a bench trial, the trial court declared that the promissory note pertaining to the property had a balance of $261,931 on October 15, 1997. The court also declared that Gares is equitably estopped from disputing such payoff amount. The court further declared that SD is responsible for interest at a rate of 15% on the sum of $261,931 and determined SD presently owes to Gares the sum of $29,502.34, the outstanding balance on the note. We reverse the trial court's judgment regarding the court's declaration that the promissory note had a balance of $261,931 on October 15, 1997, the court's declaration that Gares is equitably estopped from disputing such payoff amount, and the court's declaration that SD presently owes Gares only $29,502.34. We therefore render judgment that Gares is not obligated to release its liens on the property until SD pays Gares the outstanding balance owed on the note, which must be recalculated by the trial court. Accordingly, we remand the case to the trial court for a recalculation of the amount of the note's present balance. We affirm the trial court's judgment in all other respects.
Although SD filed a notice of appeal in this case, it raises no cross issues in its appellate brief.
Background
Jesse Coe, Jr. purchased 524 acres of real property located in La Salle County, Texas from Gares in January 1996 for $316,000. When Coe purchased the property, he executed a promissory note payable to Gares. The note carried a 15% annual interest rate and was secured by a deed of trust lien and vendor's lien on the property. The note also required Coe to make 125 payments of $5,000 to Gares between the dates of February 2, 1996 and June 1, 2006.
Coe was not a party to the underlying proceeding.
After making some payments on the note, Coe could no longer satisfy his obligations to Gares. Coe was six months in arrears by September 1997, and owed to Gares approximately $30,000 in past due payments. Around that same time, SD, in partnership with Hector Farias ("the partnership"), began negotiating the purchase of the property from Coe.
Coe notified the partnership that he was six months in arrears on the note. He also informed the partnership that the interest rate on his promissory note with Gares was only 10%. Coe submitted to the partnership a copy of his note with the 15% interest rate crossed out and a 10% interest rate handwritten in its place. He also provided the partnership with a copy of an amortization schedule prepared for a $316,000 loan at a 10% annual interest rate. Coe represented to the partnership that he and Gares had agreed to change the note's annual interest rate from 15% to 10% after the note was executed.
The initials J.C. appear next to the handwritten modification to the interest rate. The record indicates that the parties were unable to ascertain who made this modification to the note.
Although Coe represented that there was an agreement to lower the interest rate on the note from 15% to 10%, the note still required Coe to make 125 payments of $5,000 to Gares between the dates of February 2, 1996 and June 1, 2006. This payment schedule is consistent with a 15% amortization, not a 10% amortization.
The partnership's attorney contacted Gares's president, Roberto Esquivel, to inform Gares of the partnership's interest in Coe's property. The attorney informed Gares that the partnership intended to bring Coe's note current and planned to obtain financing to pay the entire note by October 15, 1997. Based on the amortization schedule the partnership had received from Coe, the attorney informed Esquivel that the partnership believed the note had a payoff balance of only $261,931.28. Esquivel remained silent and did not express any objection to the payoff figure noted by the partnership.
The partnership's attorneys did not inform Esquivel about SD's participation in the purchase of the property, so Esquivel understood that only Hector Farias, a respected local businessman, was the purchaser.
Esquivel was unaware of the handwritten markings appearing on the partnership's copy of the note, as the partnership's attorney did not bring such markings to Esquivel's attention during their conversation.
Esquivel went to the partnership's attorney's office following his conversation with the attorney and secured the $30,000 arrearage payment the partnership had promised. The partnership contends that Esquivel was also given the following letter:
Dear Mr. Esquivel:
This will confirm our agreement made this afternoon by telephone that Mr. Farias, on behalf of Mr. Coe, will, not later than on Monday, October 6, 1997[,] pay in full the outstanding indebtedness owed on Mr. Coe's Note, and intend to keep the note current and retire the full amount of the note within a relatively short period of time. We anticipate that before the 15th of October we can [have] all of the financing in place to do this.
It is our understanding that there are presently six installments of $5,000.00 each that are presently matured, and that the October installment is due on 10/15/97. We also understand that the present indebtedness owed on the entire note, as of 9/15/97 is $294,725.24, and that upon payment of the $30,000.00 in arrears, the balance as of 10/15/97 will be $261,931.00. We believe these numbers are reflected in the amortization that was produced to us by Mr. Coe. If you have a disagreement with
this understanding, kindly let us know immediately so that we may resolve this matter as quickly as we can.
Unless I hear from you otherwise, I will presume that the numbers quoted, and the amounts paid are correct and that you accept them. Please let me know if this is not your understanding of our agreement.
The letter included a place for Esquivel's signature to acknowledge receipt of the arrearage payment and the letter. Esquivel, however, did not sign the letter before leaving the attorney's office. Indeed, Esquivel denied ever receiving the letter.
When Esquivel did not complain to the partnership about the figures referenced in the letter, the partnership consummated its deal with Coe.
The partnership purchased the property from Coe on December 16, 1997. The record indicates SD required Coe to execute a document entitled "Receipt and Release" before the sale was consummated to acknowledge Coe's representations that the note carried a 10% interest rate and had a $261,931 payoff balance. The document provides:
I further represent to you that all payments due and owing under said note, as of 10/15/97 have been paid to Gares Corp. and that said note is current and not in delinquency as of this date. The present unpaid balance on the Coe-Gares Note, as of this date is $261,931.28 before the 11/15/97 payment is made. I also declare to you that although there is a discrepancy in the interest rate actually paid and the interest rate called for under the Coe-Gares Note, but that all amortizations of said Note, and all payments made by me and accepted by Gares Corp. have been at the rate of 10% per annum as reflected in the Amortization Schedule provided to you and that Mr. Robert Esquivel, of Gares Corp. has acknowledged to me that the interest rate is 10% per annum and that all payments heretofore made have been correctly paid in the proper amounts and that the note is not delinquent.
The record further indicates that SD and Coe executed a contract for deed at the time of the sale. The contract for deed required SD to make payments to Gares "in the same manner as set forth in th[e] Promissory Note . . . between Gares Corporation . . . and Jesse David Coe, Jr" and acknowledged that the final maturity date on the note was June 1, 2006, the date when SD would "pay, in full, all accrued and unpaid principal and interest" to Gares.
Although the partnership represented to Gares that it would pay the entire note by October 15, 1997, the partnership did not pay off the note by this date. Instead, the partnership decided to carry the note due to a change in SD's circumstances. The partnership made regular monthly payments to Gares, pursuant to the terms of the note, until September 2003, when the partnership stopped making payments to Gares. The partnership, relying on the $261,931 payoff amount it allegedly discussed with Esquivel and the 10% amortization schedule it had received from Coe, determined the note had been paid in full with its August 2003 payment. Gares, however, disagreed with the partnership's position. Gares claimed the balance on the note after the August 2003 payment was $138,510.80 because Gares never entered any agreement with Coe to lower the note's interest rate from 15% to 10%. Gares thus maintained the partnership was obligated under the terms of the note to continue paying Gares $5,000 per month until June 1, 2006.
SD subsequently brought suit against Gares seeking declaratory and injunctive relief when Gares refused to release its liens on the property. SD sought a declaratory judgment that it "ha[d] fully and finally paid all amounts due and owing under the Contract for Deed, and in doing so has satisfied all of the obligations of the . . . Note originally entered into by and between Jesse David Coe, Jr. and Gares Corp., thus entitling SD to clear title to the Property without the cloud of the Deed of Trust, Security Agreement and Financing Statement." Gares answered and counterclaimed for a declaratory judgment that SD lacked standing or was "estopped to seek a declaration of what is owed or not owed under the terms of the note and deed of trust."
At the bench trial, Esquivel testified that he has been the president of Gares since the company was founded 14 years ago. Esquivel stated this was the first time Gares owner-financed a property sale. Although he lacked experience with owner-financing arrangements, he recognized the fact that a creditor must give a borrower accurate information with respect to the balance due on a loan.
With respect to the handwritten markings appearing on Coe's note, Esquivel stated he never agreed or represented to Coe that the interest rate on the note was 10%. Esquivel testified he never prepared an amortization schedule for the note nor kept a running balance regarding the amount Coe owed to Gares. He stated he never attempted to compute a payoff balance on the note because he knew Coe had to pay on the note until June 1, 2006. Esquivel further testified that Gares had lost the original note.
Esquivel testified he retained all of the bank deposit statements arising from the payments he received from Coe and admitted that he could use these bank statements to calculate the note's actual payoff balance at any given time.
Esquivel stated he spoke with one of the partnership's attorney's, Luciano Rodriguez, regarding the arrearage amount Coe owed on the note. Esquivel denied that he and Rodriguez ever discussed the amount of the note's payoff balance during their conversation. He did state, however, that he and Rodriguez did discuss whether Gares would lower the annual interest rate on the note from 15% to 10%, which Gares would not do.
Esquivel further testified that Rodriguez paid Gares the $30,000 Coe owed on the note. Esquivel admitted that he went to Rodriguez's office following their conversation and picked up the arrearage payment from Rodriguez and deposited the payment into Gares's account. Although he admitted receiving the arrearage payment from Rodriguez when he went to the attorney's office, Esquivel denied receiving the confirmation letter Rodriguez drafted concerning the note's purported payoff balance.
Rodriguez, the partnership's attorney, testified he contacted Esquivel to confirm the payoff balance on the note. He stated the partnership wanted to confirm with Gares the figure Coe had quoted as the payoff balance to ensure that there were no problems related to the note. Rodriguez testified he told Esquivel he needed to confirm the note's payoff balance because his clients were interested in purchasing the property subject to the note.
Rodriguez testified he told Esquivel he believed the balance due on the note was $261,931 based on the amortization schedule SD had received from Coe. According to Rodriguez, Esquivel did not say anything in response to either his reliance on Coe's amortization schedule or his understanding that $261,931 was the note's payoff balance. Rodriguez testified he assumed Esquivel prepared the amortization schedule SD had received from Coe because Esquivel did not object when he referenced the schedule and it was customary for the creditor to prepare such a document.
Rodriguez further testified that his only concern during his conversation with Esquivel was the amount of the payoff balance, which was the crucial figure for his clients. He claimed the future interest rate on the note was unimportant because his clients planned to pay the note off immediately. Rodriguez denied discussing the note's particular interest rate or asking Esquivel to lower the interest rate on the note. Lastly, Rodriguez noted the confirmation letter he drafted for Gares was stapled to SD's $30,000 arrearage payment. He stated he was not at his office when Esquivel picked up the arrearage payment, so he was unable to secure Esquivel's signature on the bottom of the confirmation letter as he intended.
Finally, Doug Bacon, a representative for SD, testified SD relied on the conversation Rodriguez had with Esquivel concerning the note's payoff balance when it entered the transaction with Coe. Bacon noted he believes a mortgage-holder is the only reliable source when it comes to determining the actual payoff balance on a note. He testified SD relied on Gares, as the mortgage-holder, for the information it needed in this case.
Bacon stated SD originally intended to pay the note off immediately, but decided to carry the note due to a change in its circumstances. He testified that the interest rate on the note was irrelevant to him at the time of the transaction with Coe because SD intended to pay the note off immediately. Rather, SD's only concern at the time of the transaction with Coe was the amount of the note's payoff balance. Bacon further testified he was not concerned about the handwritten markings appearing on Coe's note due to Rodriguez's conversation with Esquivel and Gares's acceptance of the $30,000 arrearage payment.
After hearing the evidence and arguments of counsel, the trial court declared as follows: (1) Coe's note with Gares had a balance of $261,931 as of October 15, 1997 (after the application of the $30,000 arrearage payment); (2) Gares is estopped from asserting a balance due on the note greater than $261,931 as of October 15, 1997; (3) SD is responsible for interest at the rate of 15% on the sum of $261,931; and (4) SD presently owes to Gares the sum of $29,502.34. The trial court subsequently entered findings of fact and conclusions of law in support of its judgment.
Standard of Review
Findings of fact in a case tried to the trial court have the same force and effect as a jury's verdict upon jury questions. Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex. 1991). When, as here, a complete reporter's record of the trial appears in the record, the trial court's findings of fact are not conclusive, but are subject to the same well-settled standards that govern legal and factual sufficiency challenges to jury findings. Tucker v. Tucker, 908 S.W.2d 530, 532 (Tex.App.-San Antonio 1995, writ denied). An appellate court does not review a trial court's conclusions of law for factual sufficiency. Apex Fin. Corp. v. Garza, 155 S.W.3d 230, 234 (Tex.App.-Dallas 2004, pet. denied). "Rather, we evaluate the conclusions independently, determining whether the trial court correctly drew the legal conclusions from the facts." Id. Conclusions of law will be upheld on appeal if the judgment can be sustained on any legal theory supported by the evidence. In re Moers, 104 S.W.3d 609, 611 (Tex.App.-Houston [1st Dist.] 2003, no pet.).
Equitable Estoppel
Gares asserts SD failed to prove the elements necessary to invoke the doctrine of equitable estoppel. In order to invoke the doctrine of equitable estoppel, SD had to prove there was: (1) a false representation or concealment of material facts; (2) made with knowledge, actual or constructive, of those facts; (3) with the intention that it should be acted on; (4) to a party without knowledge or means of obtaining knowledge of the facts; (5) who detrimentally relies on the representations. Johnson Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 515-16 (Tex. 1998). Gares contends SD failed to present evidence in support of elements one, three, and four at trial.
A. The trial court's findings and conclusions
In this case, the trial court found that Rodriguez, as part of his due diligence on behalf of SD and Farias, contacted Gares on September 30, 1997 to confirm the payoff amount due on the note. During Rodriguez's conversation with Gares (Esquivel), Gares made a false representation when it "verbally affirmed" to Rodriguez "that, if the $30,000 past due amount was paid, the balance due (payoff amount) on the Note as of October 15, 1997, after the October 1997 payment, would be $261,931.00." The court also found that Rodriguez delivered to Gares a letter confirming Gares's representation that $261,931 was the balance due on the note as of October 15, 1997. The court further found Gares never contacted Rodriguez to dispute the information Rodriguez provided in his confirmation letter.
The court also determined Gares was aware that Rodriguez was representing a third party in an effort to purchase the property subject to the note. According to the court, SD relied on Gares's representations to Rodriguez about the note's payoff balance when it purchased the property from Coe. At the time of its representations to Rodriguez, the court determined Gares had actual or constructive knowledge of the note's true payoff balance. The court further found that SD did not have means of obtaining knowledge of the note's true payoff balance other than by obtaining such information from Gares. From these findings, the trial court concluded "Gares is estopped from asserting . . . that as of October 15, 1997, after payment of $30,000 and after application of the October 1997 payment, $261,931.28 was the payoff amount on the Note."
B. Gares's false representation
Gares contends there is no evidence to support the trial court's finding that Gares made a false representation to SD when it "verbally affirmed" to Rodriguez that the note, as of October 15, 1997, had a payoff balance of $261,931. We have reviewed the record in search of evidence that supports this finding and have found no supporting evidence.
The record indicates the only evidence of a discussion between the parties concerning the note's payoff balance came from Rodriguez. Rodriguez testified he had a conversation with Gares's representative, Esquivel, after SD became interested in purchasing the property subject to the note. According to Rodriguez, he spoke with Esquivel regarding the payoff balance and told Esquivel he believed the balance due on the note was $261,931 based on the amortization schedule SD had received from Coe. Rodriguez indicated Esquivel did not say anything in response to either his reliance on Coe's amortization schedule or his understanding that $261,931 was the note's payoff balance.
The only other witness to testify about whether a discussion occurred between Gares and SD was Esquivel. Esquivel testified he spoke with Rodriguez strictly about the arrearage amount Coe owed on the note. Esquivel emphatically denied that he and Rodriguez ever discussed the amount of the note's payoff balance during their conversation.
Rodriguez's testimony, however, shows that Esquivel made no affirmations or representations to Rodriguez concerning the note's payoff balance during their conversation. Rodriguez's testimony requires one to surmise that Esquivel said anything affirmative about the payoff amount. As such, Rodriguez's testimony is no evidence of a verbal confirmation of the payoff amount. See Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983) ("When the evidence offered to prove a vital fact is so weak as to do no more than create a mere surmise or suspicion of its existence, the evidence is no more than a scintilla and, in legal effect, is no evidence.").
We believe Rodriguez's testimony still constitutes no evidence even if it is construed together with Rodriguez's September 1997 confirmation letter to Esquivel. As previously mentioned, Rodriguez's confirmation letter provides as follows:
Dear Mr. Esquivel:
This will confirm our agreement made this afternoon by telephone that Mr. Farias, on behalf of Mr. Coe, will, not later than on Monday, October 6, 1997[,] pay in full the outstanding indebtedness owed on Mr. Coe's Note, and intend to keep the note current and retire the full amount of the note within a relatively short period of time. We anticipate that before the 15th of October we can [have] all of the financing in place to do this.
It is our understanding that there are presently six installments of $5,000.00 each that are presently matured, and that the October installment is due on 10/15/97. We also understand that the present indebtedness owed on the entire note, as of 9/15/97 is $294,725.24, and that upon payment of the $30,000.00 in arrears, the balance as of 10/15/97 will be $261,931.00. We believe these numbers are reflected in the amortization that was produced to us by Mr. Coe. If you have a disagreement with this understanding, kindly let us know immediately so that we may resolve this matter as quickly as we can.
Unless I hear from you otherwise, I will presume that the numbers quoted, and the amounts paid are correct and that you accept them. Please let me know if this is not your understanding of our agreement.
Although the first paragraph of the letter refers to "our agreement," the agreement to which the letter speaks concerns only the partnership's promise to Gares to: (1) pay the $30,000 arrearage amount owed by Coe by October 6, 1997; (2) keep Coe's note current; and (3) retire the entire amount of Coe's debt by October 15, 1997. The first paragraph simply does not refer to any verbal agreement as to the note's payoff balance. The remainder of the letter likewise does not furnish a basis for the fact finder to conclude that Gares made a verbal affirmation to SD as to the note's payoff balance. The second paragraph of the letter concerns the partnership's unilateral understanding that: (1) six installments of $5,000 each are past due on the note; (2) an additional installment payment is due October 15, 1997; (3) the balance due as of September 15, 1997 was $294,725.24; and (4) the balance due after payment of $30,000 arrears as of October 15, 1997 would be $261,931. This paragraph concerning SD's alleged "understanding" of the payoff amount cannot supply evidence that Gares verbally affirmed any particular payoff figure because one would have to surmise that Gares said anything affirmative about the payoff amount to SD during the earlier conversation. Similarly, the third paragraph of the letter makes no mention of an agreement pertaining to the amount of the note's payoff balance, and thus is not evidence of a verbal affirmation on the part of Gares. We therefore conclude there is legally insufficient evidence to support the trial court's finding that Gares made a false representation to SD by verbally affirming to Rodriguez that the note, as of October 15, 1997, had a payoff balance of $261,931.
SD, however, maintains that even if we determine Gares made no verbal affirmations to SD regarding the note's payoff balance, the doctrine of estoppel by silence precludes Gares from claiming a payoff amount greater than $261,931. According to SD, the doctrine of estoppel by silence applies in this instance because Gares did not speak or act to correct SD's mistaken belief regarding the amount of the payoff balance when Gares had an affirmative duty to disclose the correct payoff figure to SD. We disagree.
The doctrine of estoppel by silence arises "only if a person is under a duty to speak, but refrains from doing so and thereby leads another to act in reliance on a mistaken understanding of the facts." Casa El Sol-Acapulco, S.A. v. Fontenot, 919 S.W.2d 709, 718 (Tex.App.-Houston [14th Dist.] 1996, writ dism'd by agr.). According to SD, a duty to speak generally arises in four situations: (1) when a confidential or fiduciary relationship exists between the parties; (2) when one voluntarily discloses information, the whole truth must be disclosed; (3) when one discovers new information that makes an earlier representation misleading or untrue; and (4) when one makes a partial disclosure that conveys a false impression. See Hoggett v. Brown, 971 S.W.2d 472, 487 (Tex.App.-Houston [14th Dist.] 1997, pet. denied). SD claims Gares had a duty to speak in this case because Gares disclosed some information to SD concerning the note and Gares's partial disclosure created a false impression with SD.
SD's argument, however, ignores the fact that Gares had no knowledge of the modification to the interest rate appearing on SD's copy of the note. The record indicates that SD's attorney never referred to the handwritten markings appearing on SD's copy of the note during his conversation with Esquivel. As a result, Gares was unaware that the information it did provide to SD could create any false impressions with the company. Because any disclosures Gares made to SD were made in good faith, we are unpersuaded by SD's contention. See generally Schroeder v. Tex. Iron Works, Inc., 813 S.W.2d 483, 489 (Tex. 1991) (recognizing statements made in good faith may negate claim of equitable estoppel).
Conclusion
Having determined there is legally insufficient evidence to support the trial court's finding that Gares made a false representation to SD by verbally affirming to Rodriguez the note's payoff balance, we reverse the trial court's judgment regarding the court's declaration that the promissory note had a balance of $261,931 on October 15, 1997, reverse the court's declaration that Gares is equitably estopped from disputing such payoff amount, and reverse the court's declaration that SD presently owes Gares only $29,502.34. We therefore render judgment that Gares is not obligated to release its liens on the property until SD pays Gares the outstanding balance owed on the note, which must be recalculated by the trial court. Accordingly, we remand the case to the trial court for a recalculation of the amount of the note's present balance. We affirm the trial court's judgment in all other respects.
As our resolution of Gares's first issue is all that is necessary to dispose of this appeal, we will not address the other issues raised. See Tex.R.App.P. 47.1.