MBank Waco, N.A. v. Stephen Duane Patrick, Et Ux

MBank Waco v. Patrick AFFIRMED 26 JULY 1990 NO. 10-89-227-CV Trial Court # 88-3793-3 IN THE COURT OF APPEALS FOR THE TENTH DISTRICT OF TEXAS AT WACO * * * * * * * * * * * * * MBANK WACO, N.A., Appellant v. STEPHEN DUANE PATRICK, ET UX, Appellees * * * * * * * * * * * * * From 74th Judicial District Court McLennan County, Texas * * * * * * * * * * * * * O P I N I O N * * * * * * * This is an appeal by appellant MBank from the trial court's permanent injunction prohibiting foreclosure of MBank's lien against property described in a deed of trust. In 1981 Mr. Patrick was in the residential construction business. MBank was the primary lender for his construction loans. Patrick owed the bank approximately $100,000 and was delinquent on his loan obligation to the bank. Mr. and Mrs. Patrick lived in their residence in McGregor which was their homestead. They moved out of their home for 24 hours on February 12, 1981, during which time Mr. and Mrs. Patrick executed a deed of trust pledging the McGregor home to secure a described $12,600 note, "and all other indebtedness" owed to the bank or "hereafter arising". Mr. Patrick made payments on the $12,600 note; made payments on his other indebtedness to the bank; never fully paid the bank; made renewals of the notes he owed bank; and on September 30, 1987, Mr. Patrick d/b/a Steve Patrick Building signed a note for $33,794.89 payable to the bank which was a consolidation of all of his loans at MBank. MBank attempted in October 1988 to foreclose the deed of trust executed February 12, 1981. The Patricks filed this suit on October 31, 1988, to restrain the foreclosure. The bank counterclaimed for the amount owed on the $33,794 note plus attorney's fees. The court severed out the bank's counterclaim making it the subject of a separate action and proceeded to trial on the Patrick's suit to restrain the foreclosure on their homestead. After trial the court rendered judgment of permanent injunction barring the bank's foreclosure. The trial court filed findings of fact and conclusions of law summarized as follows: Findings of Fact 1. On February 12, 1981, plaintiffs executed a deed of trust in favor of bank on property in McLennan County. 2. That deed of trust is recorded in the deed records of McLennan County. 3. The indebtedness secured by the deed of trust matured on August 12, 1981. 4. Plaintiffs failed to pay the indebtedness secured by the deed of trust. 5. Plaintiffs made no payments on the indebtedness secured by the deed of trust subsequent to the maturity date thereof. 6. Subsequent to August 12, 1981, plaintiffs never acknowledged in writing the justness of the debt secured by said deed of trust. 7. Plaintiff Steve Patrick d/b/a Steve Patrick Building executed a note to defendant on September 30, 1987, for $33,794.89. 8. On or about August 12, 1981, the property covered by the deed of trust executed on February 12, 1981, became the homestead of plaintiffs and has remained their homestead at all times subsequent thereto up to and including April 24, 1989. 9. Plaintiff Cynthia Ann Patrick did not sign the note dated September 30, 1987. 10. Plaintiffs did not execute a deed of trust in favor of defendant securing the $33,794.89 note dated September 30, 1987. 11. No attempt to exercise the power of sale granted in the deed of trust dated February 12, 1981, was ever made by defendant during the 4-year period from and after the maturity date of the debt secured thereby, i.e., August 12, 1981. 12. Defendant matured and accelerated the debt evidenced by the September 30, 1987 note on June 10, 1988. 13. Defendant posted plaintiffs' property for foreclosure pursuant to the power of sale granted in the deed of trust dated February 12, 1981, on October 10, 1988. 14. The February 12, 1981 deed of trust was never renewed and extended in a writing signed by plaintiffs, acknowledged before a notary public and recorded in the County Clerk's office. 15. Plaintiff will suffer immediate irreparable harm and loss for which they have not adequate remedy at law if defendant is not enjoined from foreclosing the lien created by the February 12, 1981 deed of trust. Conclusions of Law 1. The lien created by the February 12, 1981 deed of trust was never renewed and extended by plaintiffs as provided by law. 2. The property securing the February 12, 1981 deed of trust became the homestead of plaintiffs on or about August 12, 1981, and has remained their homestead to this date. 3. The power of sale granted by plaintiffs to defendant in the February 12, 1981 deed of trust is barred by the statute of limitations. 4. The property securing the February 12, 1981 deed of trust was joint management community property of plaintiffs on that date and one party could not alone encumber such property unless both parties agreed. 5. Stephen Patrick did not have authority to acknowledge the justness of the debt secured by the February 12, 1981 deed of trust on behalf of Cynthia Ann Patrick without her consent and agreement. 6. Plaintiffs are entitled to injunctive relief to enjoin defendant from foreclosing the lien created by the February 12, 1981 deed of trust. Defendant bank appeals on 4 points. Point 1 asserts "the trial court erred in concluding that the property subject to the deed of trust was joint management community property and that Stephen Patrick was without authority to encumber the property or to acknowledge the justness of the debt". Texas Family Code Section 5.81 provides: Whether the homestead is the separate property of either spouse or community property, neither spouse may sell, convey, or encumber it without the joinder of the other spouse except as provided in this subchapter or by other rules of law. Also the homestead interest in property which is solely in the name of one spouse clearly falls within the rules governing joint management property. Williams v. Saxon, CCA (San Antonio) NRE, 521 S.W.2d 88. Under the above authorities, even though the McGregor property was separate property of Mr. Patrick, when it became the homestead of Mr. and Mrs. Patrick, Mrs. Patrick's joinder was required to further encumber the property or to acknowledge the justness of existing debts. Point 1 is overruled. Point 2 asserts "the trial court erred in finding that defendant bank's foreclosure of the Patricks' property was barred by a statute of limitations". The evidence shows that all debts Mr. Patrick owed to the bank on February 12, 1981, matured within 12 months from that date. Any new loans or renewals made by Mr. Patrick without Mrs. Patrick's joinder would not attach to the homestead property. The total debt owed by Mr. Patrick to the bank was reduced from $112,600 to $33,794.89 between February 12, 1981, and September 30, 1987. Since Mrs. Patrick did not sign any new notes or renewal notes after August 12, 1981, and Mr. Patrick did not have the authority to encumber the homestead without her joinder or to acknowledge the justness of existing debts, the bank's cause of action accrued at the latest on February 12, 1982, and was barred on February 12, 1986. The bank's attempt to foreclose did not occur until October 1988. The trial court did not err in finding that the bank's attempted foreclosure was barred by limitations. Point 2 is overruled. Point 3 asserts "the trial court erred in finding that the only debt secured by the deed of trust matured on August 12, 1981". The $12,600 note the February 12, 1981 deed of trust was given to secure matured on August 12, 1981; and the evidence was that all other notes owed by Mr. Patrick matured in 6 months. Thus at the latest all debts Patrick owed the bank matured by February 12, 1982. The McGregor property became the homestead of the Patricks again on August 12, 1981. Once the property became homestead Mr. Patrick could not encumber it without Mrs. Patrick's joinder. Tex. Fam. Code Sec. 5.81. Thus more than 4 years elapsed from August 12, 1981, or from February 12, 1982, before the bank attempted to exercise the power of sale under the deed of trust. Moreover, before the renewals and new notes could be included in the drag-net clause of the deed of trust, such later indebtedness must be found to have been "reasonably within the contemplation of the parties to the mortgage at the time it was made". Moss v. Hipp, S.Ct., 387 S.W.2d 656; Airline Commerce Bank v. Com'l Cred. Corp., CCA (Houston 14) NRE, 531 S.W.2d 171. We think the record is clear that the Patricks never intended to secure future business loans to Mr. Patrick (which the renewals were for) with a lien on their homestead. The Patricks reestablished their homestead at the McGregor property 24 hours after they gave the deed of trust to the bank. Point 3 is without merit and is overruled. Point 4 asserts "the trial court erred in concluding that the Patricks are entitled to injunctive relief enjoining the bank from foreclosing the lien created by the deed of trust". Pursuant to Section 5.81 of the Texas Family Code, the real estate subject to the deed of trust is joint management property. The deed of trust was intended to cover only debt owed to the bank on February 12, 1981. It was not contemplated by the parties that future advances and renewals for Mr. Patrick's business would be secured by the deed of trust. The debt secured by the deed of trust matured on or before February 12, 1982, at which time the bank's cause of action accrued. The bank did not exercise the power of sale in the deed of trust until October 10, 1988, at which time it was barred by limitations. Point 4 is overruled. AFFIRMED FRANK G. McDONALD DO NOT PUBLISHChief Justice (Retired) [Participating: Chief Justice Thomas, Justices Hall and Means and Chief Justice Frank G. McDonald (Retired)]