Naim Salem & Marwan Salem v. Wajeh Khalaf

Opinion issued May 1, 2003 In The Court of Appeals For The First District of Texas NO. 01-01-01208-CV NAIM SALEM, Appellant V. WAJEH KHALAF, Appellee On Appeal from the 165th District Court Harris County, Texas Trial Court Cause No. 1999-52685 MEMORANDUM OPINION Appellant, Naim Salem, sued appellee, Wajeh Khalaf, for wrongful foreclosure, and Khalaf counterclaimed. A jury found in favor of Salem. The trial court granted Khalaf’s motion for judgment notwithstanding the verdict as to money damages and rendered judgment that both Salem and Khalaf take nothing in damages, that the trustee’s deed be cancelled, and that title be quieted in Salem, subject to any deed of trust in Khalaf or other third party. The trial court then, on its own motion, granted a new trial on all issues except the cancellation of the trustee’s deed. In the second trial, the jury found in favor of Khalaf on his counterclaim for the balance due on the promissory note signed by Salem and secured by the property that was the subject of the first trial. The trial court rendered judgment on the verdict, and Salem filed this appeal. We reverse and remand for further proceedings. I. BACKGROUND In January 1993, Salem borrowed $255,000 from Khalaf to satisfy a lien on a shopping center owned by Salem (the Holland property) . The loan was evidenced by a promissory note bearing interest at 12% per annum and a deed of trust granting a first lien on the Holland property and a second lien on another property (the Elgin property). In June 1994, Salem borrowed an additional $50,000 and executed a new promissory note for $295,000, bearing interest at 15% and secured by a deed of trust on the same properties. In December 1994, Salem also executed an assignment of rents, giving Khalaf the authority to collect rents on the Holland property. (The deed of trust also assigned to Khalaf the rents on both the Holland property and the Elgin property.) The rents were to be applied to the monthly installments due on the promissory note. Salem then went to the Middle East, where he stayed for several years. In December 1995, about one year after Salem had left the country, Khalaf conducted a non-judicial foreclosure of both properties. In October 1999, Salem sued to set aside the foreclosure sale and for damages, and the case was tried to a jury, which found that Khalaf owed Salem $4,056.75. The trial court rendered a judgment that Salem take nothing against Khalaf and that Khalaf take nothing on his counterclaim against Salem. The trial court cancelled the trustee’s deed, quieted title to the properties in Salem, and ordered a new trial on the remaining issues. The second trial was set for the week of September 10, 2001. On August 31, Khalaf filed an amended answer and a counterclaim on the balance of the promissory note. On September 10, Salem filed an amended petition alleging conversion and violations of the DTPA and a motion for leave to file an amended petition. At a pre-trial hearing on September 12, the trial court denied the motion for leave to file the amendment. A jury trial was conducted on September 13 and 14. The jury found that Salem owed $260,080.19 on the promissory note, that a reasonable and necessary attorney’s fee for Khalaf was $31,000, and that there was no reasonable and necessary attorney’s fee for Salem. The trial court rendered judgment that Khalaf recover from Salem $260,280.19, with interest at the rate of 15%, plus $31,000 in attorney’s fees, and that Salem take nothing from Khalaf. The judgment also ordered that all monthly rental payments collected by Salem in August and September 2001 be paid directly to Khalaf to be applied against the judgment and that, beginning October 1, 2001, all monthly rental payments from the Holland and Elgin properties be paid directly to Khalaf until the judgment was satisfied. The judgment awarded attorney’s fees to Khalaf and recited the prior cancellation of the trustee’s deed and the vesting of title to the two properties in Salem. Finally, in the judgment, the trial court “finds that the original note and deed of trust dated January 29th, 1993, between the parties hereto, is revived and subject to foreclosure if the note is not timely paid.” On appeal, Salem presents four issues in which he contends that the trial court should have (1) granted his motion for continuance, (2) allowed him to amend his petition to include conversion and violations of the DTPA, (3) allowed him to impeach Khalaf with a prior felony conviction, and (4) ruled that interest did not accrue during the period of wrongful foreclosure. In a fifth issue, he also contends that the judgment is not supported by the pleadings or evidence and the jury’s finding that he is not entitled to attorney’s fees was contrary to the evidence and the law. II. DISCUSSION A. Sufficiency of Pleading and Proof In his fifth issue, Salem contends that the judgment entered by the trial court is erroneous as a mater of law and should be set aside because it awards a money judgment and also revives the note and deed of trust underlying the award, is not supported by the pleadings or evidence, and does not conform to the jury’s verdict. Salem specifically complains about the following: (1) The judgment is both a money judgment for the balance of the note and interest and a revival of the original note and deed of trust dated January 29, 1993, making the deed of trust subject to foreclosure if the note is not paid. Khalaf is not entitled to both a judgment and the revival of the note, deed of trust, and assignment of rents. (2) There was no pleading or proof to support the award of $260,218.19 to Khalaf. (3) The post-judgment interest rate should not be 15% per annum. (4) There was no pleading to support the assignment of rents to Khalaf. (5) The Elgin property is not subject to the note and deed of trust. It is well-settled that a judgment must conform to the pleadings. Tex. R. Civ. P. 301; Concrete Const. Supply, Inc. v. M.F.C., Inc., 636 S.W.2d 475, 483 (Tex. App.—Dallas 1982, no writ). 1. Money Judgment and Revival of the Note Salem complains that the judgment erroneously awards a money judgment and a revival of the promissory note and deed of trust. The judgment does not make such a double award. The judgment awards Khalaf $260,280.19 as the balance of the note and “finds” that the note and deed of trust are revived. However, the trial court’s “finding” is not binding because it is not a rendition of judgment. It is generally improper for a trial court to make findings of fact following a jury trial, and such findings are not binding. Rathwell v. Morrison, 732 S.W.2d 6, 16 (Tex. App.—Houston [14th Dist.] 1987, no writ). The logical result of the cancellation of the trustee’s deed and quieting of title in Salem—the judgment in the first trial—was the revival of the promissory note and deed of trust. Khalaf’s counterclaim requesting the award of the balance on the promissory note was, in effect, an acceleration of the revived note. See Smith v. Davis, 453 S.W.2d 340, 346 (Tex. Civ. App.—Fort Worth 1970, writ ref’d n.r.e) (recognizing that mere filing of suit on note to collect entire debt is exercise of option to accelerate note). The final judgment reduces that note to a money judgment. See Emmert v. Drake, 224 F.2d 299, 303 (5th Cir. 1955) (noting that plaintiff’s suit in state court reduced note to judgment). The trial court’s “finding” that the promissory note and deed of trust were revived and were subject to foreclosure if the note was not timely paid was not a rendition of judgment, although it strongly implied that both forms of relief exist simultaneously. In this case, the finding was not only improper, it was incorrect, because the note was merged into the judgment. We overrule Salem’s challenge to the award of both money damages and revival of the note. 2. Excessive Award Salem also contends that there was no pleading or proof to support the excessive award to Khalaf of $260,218.19. In Khalaf’s counterclaim, he prayed for $255,483.56 “as of August 1st, 2001 . . . .” Khalaf did not request leave to file a trial amendment to increase the amount that he sought. Therefore, the trial court was limited to rendering judgment on the amount pleaded. See Concrete Const., 636 S.W.2d at 483-84. We sustain Salem’s complaint regarding excessive damages. 3. Post-Judgment Interest Salem complains that Khalaf is not entitled to post-judgment interest at the rate of 15%, as awarded in the judgment. The rate of post-judgment interest is governed by section 304.003 of the Texas Finance Code. See Tex. Fin. Code Ann. § 304.003 (Vernon Supp. 2003). The post-judgment interest rate for September 2001 was 10%. 26 Tex. Reg. 6755 (2001). We sustain Salem’s challenge to the rate of post-judgment interest. 4. Assignment of Rents Salem complains that there was no pleading to support the assignment of rents from the properties to Khalaf. We agree. In his counterclaim, Khalaf requested only a money judgment and attorney’s fees, not an assignment of rents. He was therefore not entitled to the assignment of the rental income. See Concrete Const., 636 S.W.2d at 483-84. We sustain Salem’s challenge to the assignment of rents. 5. Elgin Property Salem contends that the Elgin property is not subject to the note and deed of trust. However, Salem admits that he signed a “new promissory note” on December 4, 1994 and that the note was secured by a deed of trust “on the same properties.” The deed of trust dated January 29, 1993 also granted liens against both the Holland property and the Elgin property. Furthermore, we view Salem’s assertion that the second note was secured by a deed of trust on the same properties as a judicial admission. See Jansen v. Fitzpatrick, 14 S.W.3d 426, 431 (Tex. App.—Houston [14th Dist.] 2000, no pet.). We overrule Salem’s complaint concerning the Elgin property. We sustain sub-issues two, three, and four of Salem’s fifth issue and overrule sub-issues one and five. B. Accrual of Interest In his fourth issue, Salem contends that the trial court erred in its ruling that interest continues to accrue on a debt after the real property securing the debt has been wrongfully foreclosed upon and converted to the creditor’s use to the exclusion of the debtor. Salem argues that, after Khalaf foreclosed on the property, Khalaf “personally held and enjoyed the rents and revenues from the property” for six years and, therefore, Salem should not be required to pay the interest during those years. Shearer v. Allied Live Oak Bank, 758 S.W.2d 940, 942-43 (Tex. App.—Corpus Christi 1988, writ denied), which is cited by Salem, does not support his argument. In Shearer, the appellants argued that, although the foreclosure sale of their property was voided, the wrongful foreclosure extinguished their debt. Id. at 942. The court of appeals disagreed, stating, At the time of trial, the Shearers allegedly owed approximately $38,763.17 in principal plus $14,468.14 in interest on the note secured by the deed of trust. Because the foreclosure sale was void, this debt is revived and considered outstanding. We find that . . . the debt secured by the deed of trust is valid, not paid, and not extinguished. Id. at 942-43. Thus, the court of appeals included the interest, as well as the principal, in its determination that “this debt” was revived. Henke v. First S. Props., Inc., 586 S.W.2d 617 (Tex. Civ. App.—Waco 1979, writ ref’d n.r.e.), also cited by Salem, is distinguishable on its facts. In Henke, the trial court did not award the interest of each installment payment occurring pendente lite to the appellee because the appellee never demanded payment and because, when the appellants tendered payments, the appellee’s subrogors refused the tenders. Id. at 619. The court of appeals overruled the appellee’s cross-points on this issue, without citation to any authority, as “without merit.” Id. at 621. We hold that, when the trustee’s deed was cancelled, Salem’s debt, including the interest that had accrued during the time Khalaf was in possession of the properties, was revived. We overrule Salem’s fourth issue. C. Impeaching Khalaf In his third issue, Salem contends that the trial court abused its discretion in refusing to allow him to impeach the credibility of Khalaf by questioning him regarding his prior felony conviction for mail fraud. At the pretrial hearing, the trial court granted Khalaf’s motion in limine requiring Salem to seek permission outside the presence of the jury to use Khalaf’s conviction for purposes of impeachment. On appeal, Salem does not direct us to, and we are unable to find, any request by Salem, during Khalaf’s testimony, to impeach Khalaf with the conviction. A motion in limine does not preserve a complaint for appellate review. Texas Capital Secs., Inc. v. Sandefer, 58 S.W.3d 760, 770 (Tex. App.—Houston [1st Dist.] 2001, pet. denied). Accordingly, we overrule Salem’s third issue. D. Attorney’s Fees In his sixth issue, Salem contends that the jury’s finding that he was not entitled to attorney’s fees was contrary to the evidence and law. Salem also argues that the jury’s award of attorney’s fees to Khalaf was against the great weight and preponderance of the evidence and that Khalaf was not entitled to attorney’s fees as a matter of law. Salem does not cite any authority for either contention. Furthermore, he does not refer to the reporter’s record to support his argument that the findings were not supported by the evidence. Therefore, Salem has waived his complaint regarding attorney’s fees. See RE/MAX of Texas, Inc. v. Katar Corp., 961 S.W.2d 324, 328 (Tex. App.—Houston [1st Dist.] 1997, pet. denied). We overrule Salem’s sixth issue. E. Motion for Continuance In his first issue, Salem contends that the trial court should have granted his motion for continuance. The motion was not supported by an affidavit. Rule 251 provides that a continuance shall not be granted “except for sufficient cause supported by affidavit, or by consent of the parties, or by operation of law.” Tex. R. Civ. P. 251. General allegations in the motion are not sufficient; the motion or the affidavit must state specific reasons for the request. See Blake v. Lewis, 886 S.W.2d 404, 409 (Tex. App.—Houston [1st Dist.] 1994, no writ). Granting or denying a motion for continuance is within the sound discretion of the trial court. Id. If a motion for continuance is not verified or supported by affidavit, the appellate court will presume that the trial court did not abuse its discretion in denying the motion. Southwest Country Enters., Inc. v. Lucky Lady Oil Co., 991 S.W.2d 490, 493 (Tex. App.—Fort Worth 1999, pet. denied). In this case, Salem did not support his motion for continuance with an affidavit. Therefore, we presume that the trial court did not abuse its discretion in denying the motion. We overrule Salem’s first issue. F. Amended Petition In his second issue, Salem contends that the trial court abused its discretion in refusing to allow him to amend his petition to include causes of action for conversion and violations of the DTPA. Rule 63 provides that pleadings offered for filing less than seven days from the date of trial may be filed only with leave of court and that such leave shall be granted unless there is a showing of surprise by the opposing party. See Tex. R. Civ. P. 63. However, an amendment of a pleading that asserts a new cause of action is prejudicial on its face. Greenhalgh v. Serv. Lloyds Ins. Co., 787 S.W.2d 938, 939 (Tex. 1990) (citing Hardin v. Hardin, 597 S.W.2d 347 (Tex. 1980)). We review the trial court’s ruling for abuse of discretion. See Id. In this case, Salem attempted to amend his petition to add two new causes of action on the date of the trial setting and two days before the case was actually called to trial. The trial court did not abuse its discretion in denying Salem’s motion for leave to file the amended petition. We overrule Salem’s second issue. III. CONCLUSION Having sustained Salem’s complaints regarding the award of a sum of damages greater than that pleaded, the award of post-judgment interest at the rate of 15%, and the assignment of rents, we reverse the judgment of the trial court and remand the cause for entry of judgment consistent with this opinion. Sam Nuchia Justice Panel consists of Chief Justice Radack and Justices Nuchia and Hanks.