Reversed, Rendered in Part and Remanded =
in Part,=20
and Memorandum Opinion filed July 3, 2008.
In The
Fourteenth=20
Court of Appeals
____________
NO. 14-06-00671-CV
____________
WMC MORTGAGE=20
CORP., EMMANUEL D. GAINES, AND
DARRELL=20
TURNER,=20
Appellants
V.
JAMES ADAMS=20
AND DOROTHY ADAMS, =
Appellees
On Appeal from the =
127th District Court
Harris County, =
Texas
Trial Court Cause =
No. 2003-00430
M E M O R=20
A N D U M O P I N I O N
Appellants=20
WMC Mortgage Corp., Emmanuel D. Gaines, and Darrell Turner appeal =
from the=20
trial court=3Ds judgment=20
awarding appellees James Adams and Dorothy Adams $111,000 in =
damages=20
against Gaines and creating an equitable lien against =
Turner=3Ds=20
property, which he purchased with loans through WMC. =
Appellants=20
claim the Adamses are not entitled to damages or a lien because =
there was=20
no liability finding against any defendant and because the Adamses =
breached the contract first. They also argue that there is =
legally=20
insufficient evidence to support the trial court=3Ds damages=20
findings. We conclude there is no evidence to support the =
trial=20
court=3Ds damages=20
award. Thus, we reverse, render a take nothing judgment =
against the=20
Adamses, and remand for further proceedings to remove the =
lien.
=
; =
&=
nbsp; =20
I. =20
Background
In 1998,=20
the Adamses bought a piece of property in a residential =
neighborhood=20
outside of Houston in Porter, Texas for $19,850, which they =
financed with=20
a loan. They wanted to build a home there, but because of =
their poor=20
credit, they were not eligible for a construction loan, although =
they were=20
eligible for permanent financing. They often drove to visit =
the=20
property on weekends, and during one such visit, they met Robert=20
Rone. Rone, who is a builder, owned a lot across the =
street. =20
Rone and the Adamses eventually began discussing the option of =
Rone=20
building their house, and Rone put the Adamses in touch with =
appellant=20
Gaines, who Rone believed could help the Adamses obtain =
construction=20
financing. For a $15,000 fee, the Adamses agreed to convey =
the=20
property to Gaines so he could obtain a construction loan, and =
after the=20
home was built, the Adamses would use their permanent financing to =
repurchase the house from Gaines, who would pay off the =
construction=20
loan. The Adamses hired an attorney to prepare a deed and=20
construction contract to reflect their agreement. These =
documents=20
were signed and given to Rone, who lost both before he could file =
the=20
deed.
Everything=20
proceeded without incident until it was time for the Adamses to =
purchase=20
the property from Gaines. Even though the construction loan =
was for=20
nearly $289,000, which included building costs, Gaines=3Ds fee, and=20
the cost to pay off the Adamses=3D =
land=20
loan, the Adamses refused to pay more than $230,000. The =
Adamses=20
insisted that the agreement had been for a flat rate price of =
$230,000,=20
regardless of the actual construction costs, and that this =
$230,000=20
included Gaines=3Ds fee and=20
the payoff for the land purchase loan.
After=20
Gaines and Rone refused to accept only $230,000 for the property, =
the=20
Adamses sued them, along with Rone=3Ds company,=20
Tri City Turnkey Services, for, among other things, fraud, breach =
of=20
contract, negligent misrepresentation, violations of the Deceptive =
Trade=20
Practices Act, and a declaratory judgment that the deed from the =
Adams to=20
Gaines was void. Meanwhile, interest charges on the =
construction=20
loan were mounting, and Gaines and Rone began to look for another=20
buyer. The house appraised for $400,000, and appellant =
Darrell=20
Turner agreed to purchase the house for that amount, with =
appellant WMC=20
providing 100% financing through two loans. The Adamses then =
added=20
WMC and Turner to the lawsuit, alleging civil conspiracy, =
requesting=20
cancellation of the deed from Gaines to Turner, and seeking a =
declaratory=20
judgment that neither Turner nor WMC have any right, title, or =
interest in=20
or to the property.
During the=20
pendency of this lawsuit, Tri City declared bankruptcy and many =
claims=20
were disposed, so that by the time the case went to the jury, the =
only=20
remaining claims were declaratory judgment against WMC, =
declaratory=20
judgment and conspiracy against Turner, and fraud, conspiracy, and =
declaratory judgment against Gaines and Rone. The jury found =
that a=20
valid lost deed existed conveying the property from the Adamses to =
Gaines=20
and the parties agreed that the Adamses would pay $230,000 for the =
house=20
in addition to $15,000 for Gaines and another $15,000 to pay off =
the debt=20
on the land. The jury also found against the Adamses on all=20
remaining claims and awarded zero damages.
After=20
various post-verdict motions and substantial briefing, the trial =
court=20
entered a final judgment, finding:
$ =
; =20
The lost=20
deed and construction agreement are to be construed together, and=20
therefore the Adamses=3D conveyance to =
Gaines was=20
subject to the terms of the construction agreement.
$ =
; =20
The=20
Adamses defaulted by refusing to pay the purchase price as found =
by the=20
jury.
$ =
; =20
Gaines=20
had a right to sell the property to satisfy the construction loan, =
but the=20
Adamses had the right to the excess proceeds from the =
sale.
$ =
; =20
Turner=20
was not an innocent purchaser because the Adamses had filed a =
valid lis=20
pendens on the property at the time Turner purchased =
it.
The trial=20
court concluded itAmust apply=20
common law principles to determine the rights [of the parties] =
after a=20
default@ =
because=20
they had not agreed to such terms. The trial court awarded =
the=20
Adamses $111,000 in Aexcess=20
proceeds@ =
against=20
Gaines, which is presumably the difference between the $400,000 =
sales=20
price and the $289,000 construction loan. The trial court =
then=20
awarded the Adamses a lien on the property, giving it priority =
over=20
WMC=3Ds two=20
deeds of trust from its loans to Turner.
Gaines,=20
Turner, and WMC brought this appeal=20
and raise four issues: (1) the trial court erred in awarding =
any=20
damages to the Adamses because there was no liability finding =
against any=20
defendant upon which to base a damages award, and alternatively, =
no=20
evidence supports the trial court=3Ds $111,000=20
award; (2) the trial court erred in awarding the Adamses a lien =
and in=20
giving it priority over WMC=3Ds=20
interest; (3) the trial court erred in awarding damages pursuant =
to the=20
construction agreement because it was an illegal contract and =
therefore=20
void; and (4) the trial court erred in awarding the Adamses =
appellate=20
attorney=3Ds=20
fees. Because we determine no evidence supported the trial=20
court=3Ds damages=20
award, we need not decide the merits of the remaining issues, =
which all=20
depend on the Adamses=3D =
damages.
=
; =
&=
nbsp; &n=
bsp; =20
II. =20
Analysis
In a legal=20
sufficiency or no-evidence review, we determine whether the =
evidence would=20
enable reasonable and fair‑minded people to reach the =
finding under=20
review. See City of Keller v. Wilson, 168 S.W.3d 802, =
827=20
(Tex. 2005). In conducting this review, we credit favorable =
evidence=20
if reasonable factfinders could credit it and disregard contrary =
evidence=20
unless reasonable factfinders could not disregard it. See =
id. We must consider the evidence in the light most =
favorable to=20
the finding under review and indulge every reasonable inference =
that would=20
support it. See id. at 822. We must sustain =
no-evidence=20
points only when either (a) the record reveals a complete absence =
of=20
evidence of a vital fact, (b) the court is barred by rules of law =
or of=20
evidence from giving weight to the only evidence offered to prove =
a vital=20
fact, (c) the evidence offered to prove a vital fact is no more =
than a=20
mere scintilla, or (d) the evidence establishes conclusively the =
opposite=20
of the vital fact. Id. at 810.
In their=20
first issue, appellants=20
argue that awarding any damages to the Adamses was improper as a =
matter of=20
law because with no liability finding against any defendant, the =
jury=20
correctly awarded zero damages and, alternatively, that no =
evidence=20
supports the trial court=3Ds award of=20
$111,000 to the Adamses as so-called Aexcess=20
proceeds.@ The=20
parties sharply disagree as to whether the trial court found that =
Gaines=20
breached the contract by selling the property without first =
seeking=20
a judicial foreclosure, thus providing a basis for the trial=20
court=3Ds damages=20
award. Appellants argue that the trial court erred in =
imposing=20
foreclosure requirements in this case and further contend the =
trial court=20
never found that Gaines breached the contract because the=20
court=3Ds ultimate=20
conclusion, as expressed in the final judgment, was that Gaines =
had the=20
right to sell the property. We need not determine whether =
the trial=20
court=3Ds=20
foreclosure theory was correctly applied or supported by the =
evidence or=20
whether the trial court actually made a liability finding against =
Gaines=20
because we determine there is no evidence to support the damages=20
award.
The=20
property sold for $400,000, and the construction loan was for=20
$289,000. The trial court awarded the $111,000 difference =
between to=20
these two amounts as excess proceeds of the sale to the Adamses =
against=20
Gaines. Appellants argue no evidence supports the trial=20
court=3Ds finding=20
that there was actually $111,000 in excess proceeds. We =
agree. =20
At the closing on the sale to Turner, much of the $111,000 was =
disbursed=20
for purposes such as closing costs and to fund additional repairs =
and=20
improvements on the property. After the closing, the only =
money=20
remaining from the $111,000 was $22,048.99, which was given to =
Gaines by=20
check. Gaines signed that check over to Rone to reimburse =
him for=20
interest payments he had made on the construction loan before the =
sale and=20
for additional work he had performed in the house.
The=20
Adamses argue that $65,000 of the money went to paying a =
fraudulent=20
invoice to Imani Enterprises for work that was never performed and =
that=20
Turner received a $50,000 Akickback@ =
from=20
Imani. The record actually shows that somehow, $50,000 of =
the=20
$65,000 given to Imani went back to Turner for improvements on the =
property and that it was not a kickback but a portion of the =
$400,000=20
loan, on which he is fully liable to WMC.
In any=20
event, even if every dollar of the $111,000 cannot be accounted =
for, it is=20
undisputed that much of this money went toward paying legitimate =
expenses=20
and, therefore, should not have been considered in calculating =
excess=20
proceeds. See Adams v. First Nat=3Dl Bank of=20
Bells/Savoy, 154=20
S.W.3d 859, 874 (Tex. App.CDallas=20
2005, no pet.) (holding in foreclosure sale that unpaid expenses =
should be=20
deducted before calculating surplus proceeds); Harris v. =
Harbour Title=20
Co., No. 14-99-00034-CV, 2001 WL 1249730, at *2 (Tex. =
App.CHouston=20
[14th Dist.] Oct. 18, 2001, no pet.) (not designated for =
publication)=20
(noting that surplus proceeds from foreclosure sale did not =
include costs,=20
interest, or fees); Conversion Props., L.L.C. v. Kessler, =
994=20
S.W.2d 810, 813 (Tex. App.CDallas=20
1999, pet. denied) (calculating surplus proceeds from foreclosure =
sale=20
after deducting for expenses and fees); cf. Woodside =
Assurance,=20
Inc. v. N.K. Res., Inc., 175 S.W.3d 421, 424 (Tex. =
App.CHouston=20
[1st Dist.] 2005, no pet.) (noting in tax lien foreclosure, excess =
proceeds are determined after accounting for costs, fees, and=20
commissions).
Furthermore,=20
it is undisputed that Gaines, against whom the trial court =
assessed the=20
$111,000 judgment, retained nothing other than his $15,000 fee, =
which was=20
included in the construction loan, not the remaining $111,000 at=20
issue. Thus, even assuming that an excess proceeds =
calculation is a=20
proper measure of damages in this case, no evidence supports the =
trial=20
court=3Ds=20
conclusion that there are $111,000 in excess proceeds in this case =
or that=20
Gaines retained any excess proceeds whatsoever.
Accordingly,=20
we sustain appellants=3D =
first=20
issue and render judgment that the Adamses take nothing on their =
claims=20
against appellants. Further, because there is no longer a =
damages=20
award in favor of the Adamses, there is no basis for imposing an =
equitable=20
lien on the property to secure the judgment. We therefore =
sustain=20
appellants=3D =
second=20
issue, in which they argue that the lien was inappropriate. =
Because=20
we determine that no evidence supports the trial court=3Ds damages=20
award, we need not reach appellants=3D =
third and=20
fourth issues regarding the legality of the contract and=20
attorney=3Ds=20
fees. We reverse the trial court=3Ds=20
judgment, render judgment that the Adamses take nothing on their =
claims=20
against appellants, and remand for all further proceedings =
necessary to=20
remove the lien against the property.
/s/ =20
Leslie B. Yates
Justice
Judgment=20
rendered and Memorandum Opinion filed July 3, 2008.
Panel=20
consists of Justices Yates, Guzman, and Sears.
The Adamses also filed a notice =
of appeal,=20
but they did not file a cross-appellant=3Ds brief or otherwise brief any =
cross-issues, and=20
therefore we dismiss their cross appeal.
The Adamses argue that =
Turner and WMC=20
have no standing to challenge the damages award against Gaines and =
that=20
because Gaines did not file an appellant=3Ds brief, we have no basis for reviewing =
the=20
damages award. However, as Turner and WMC point out in their =
reply=20
brief, Gaines filed a letter joining their brief, which he is =
permitted to=20
do under Texas Rule of Appellate Procedure 9.7. Thus, we may =
review=20
the trial court=3Ds damages award.
Senior Justice Ross A. Sears =
sitting by=20
=
assignment. |