Robert M. Warner, P.C. v. Tommy Lynn Lain and Sonja Gayle Lain

Robert M. Warner, P.C., et al v. Tommy Lynn Lain and Sonja Gayle Lain IN THE TENTH COURT OF APPEALS No. 10-99-271-CV ROBERT M. WARNER, P.C., ET AL, Appellants v. TOMMY LYNN LAIN AND SONJA GAYLE LAIN, Appellees From the 249th District Court Johnson County, Texas Trial Court # C199900345 O P I N I O N NationsCredit Home Equity Services Corporation, f/k/a Portfolio Acceptance Corporation, (“NationsCredit”) posted three tracts of land owned by Tommy Lynn and Sonja Gail Lain for a nonjudicial foreclosure sale. The Lains obtained a temporary injunction prohibiting NationsCredit or its attorney Robert M. Warner, P.C. from foreclosing on the three posted properties or any other properties owned by the Lains for a period of six months. NationsCredit and Warner (collectively, “Appellants”) claim in three points of error that the court erred by: (1) granting the temporary injunction because the Lains did not establish a probable right of recovery; (2) setting only a $1,000 bond in the injunction order; and (3) prohibiting Appellants from foreclosing upon any properties owned by the Lains which are not part of this suit. BACKGROUND The Lains executed a note for $90,000.00 payable to the First State Bank of Cleburne on February 28, 1989. The terms of the note required thirty-five monthly payments of $1,168.27 and provided that the note would reach maturity on February 28, 1992. The Lains secured the note with a deed of trust on a tract of land in the Grandbury Park Addition containing 1.1577 acres. The Lains executed a one-year extension of the note and deed of trust on October 5, 1992 in favor of First State Bank’s successor, Community Bank. The Lains executed a second one-year extension on December 17, 1993 in favor of Community Bank’s successor, Cleburne State Bank. The Lains executed a third extension on February 23, 1995 in favor of Cleburne State Bank. This extension reflects that the unpaid principal balance of $77,263.09 would be paid in 179 monthly installments of $952.58 with a maturity date of February 23, 2010. Cleburne State Bank assigned the note and lien to Portfolio Acceptance Corporation on March 3, 1995. Portfolio filed a name change with the Secretary of State on November 7, 1996 and began doing business thereafter as NationsCredit. The Lains executed a second note for $112,000.00 payable to Community Bank on December 27, 1989. The terms of the note required thirty-five monthly payments of $1,382.98 and provided that the note would reach maturity on December 27, 1992. The Lains secured the note with two deeds of trust: one on a 75.836-acre tract of land in the David King Survey and one on Lot 2, Block 624, City of Cleburne. The Lains executed a three-year extension of the note and deed of trust on May 27, 1993 in favor of Community Bank. Under the terms of this extension, the parties extended the maturity date of the note to May 27, 1996. Community Bank’s successor, Cleburne State Bank, assigned the note and lien to Portfolio on March 3, 1995. The Lains made late payments and missed payments on both notes. Apparently NationsCredit posted the 1.1577-acre tract securing the $90,000 note (“note one”) for foreclosure on July 1, 1997. However, NationsCredit canceled the foreclosure sale after the Lains made payment arrangements. On December 18, 1997, counsel for NationsCredit sent a demand letter to the Lains concerning note one, which states in pertinent part: As you know, the Note matured by its own terms on December 17, 1994. Our client’s records indicate that you are in default on the above-referenced loan. As of this date, your default consists of your failure to timely pay the Note. The total to pay this note, as of November 30, 1997, is $78,108.03. This amount includes a principal balance of $72,530.64, interest of $4020.80, and corporate advances of $1429.44. In addition, our client has incurred $119.15 in attorneys fees and title expenses as a result of your default. Demand is hereby made upon you to pay the sum of $78,108.03, plus per diem interest of $25.18 from and after November 30, 1997, on or before twenty (20) days from the date of this Notice, in order to cure your default. On March 31, 1997, NationsCredit notified the Lains by letter that their $112,000 note (“note two”) was “past due for October 27, 1996. The total amount past due, which may include late charges, [was] $10,477.38.” NationsCredit gave the Lains thirty days to cure the default to avoid acceleration of the note. On December 18, 1997, counsel for NationsCredit sent a letter to the Lains demanding payment in full of all sums due on the note, including principal, interest, and attorney’s fees and title expenses incurred because of their default. NationsCredit gave the Lains twenty days to cure the default. The Lains filed a chapter 13 bankruptcy petition in February 1998. They filed a bankruptcy plan the next month which required them to make a monthly payment to the bankruptcy trustee toward: • an $8,095.40 arrearage on note one; • a $10,477.38 arrearage on note two; • the total principal sum ($72,530.64) due on note one; and • the total principal amount ($87,866.81) due on note two. The parties reached an agreed order which the bankruptcy court entered in March 1999. As to note one, the order required the Lains to resume paying directly to NationsCredit the $952.28 monthly installments provided for in the 1995 extension agreement. The order confirms that note one will not mature until February 23, 2010. The order also directed the trustee to pay $12,379.64 from the sums paid under the plan from 1998 to 1999 to cure the Lains’ arrearage on this note. As to note two, the bankruptcy order recites the parties’ agreement that “this loan matured by its own terms on May 27, 1996.” The order required the Lains to pay the total amount due under this note to NationsCredit in monthly installments of $1,116.74 under the plan. The order further provided that, upon dismissal of the bankruptcy proceeding, the stay granted the Lains would be lifted immediately and they must make a final balloon payment to NationsCredit of all sums remaining unpaid on note two within thirty days. Tommy Lain testified that the bankruptcy was dismissed in May or June of 1999. He made a single payment on note one to NationsCredit in May 1999. On June 1, Warner, as counsel for NationsCredit, sent a demand letter to the Lains advising that they were then in default on note one in the amount of $8,570.52, including principal and interest. Warner informed the Lains that they had thirty days to cure the default or NationsCredit would accelerate the maturity of the note and foreclose on the property. On July 16, 1999, Warner notified the Lains by letter that note two had matured, demanded payment of all sums remaining due on the note, and advised that the two properties securing the note would be sold at a nonjudicial foreclosure sale between 1:00 and 4:00 in the afternoon on September 7. See Tex. Prop. Code Ann. § 51.002(b) (Vernon 1995). The Lains filed an application for temporary restraining order, temporary injunction and original petition on September 7. The trial court granted a restraining order that morning prohibiting NationsCredit and/or Warner from proceeding with the foreclosure sale. Warner mailed a letter to the Lains the next day concerning note one. In this letter, Warner advised that NationsCredit had accelerated the maturity of note one, demanded payment of all sums remaining due on the note, and advised that the property securing the note would be sold at a nonjudicial foreclosure sale on October 5, 1999. Id. Warner mailed a similar letter to the Lains on September 8 scheduling an October 5 nonjudicial foreclosure sale for the two properties securing note two. Id. The Lains allege in their petition that NationsCredit’s foreclosure notices are “fatally defective” because they do not identify how NationsCredit became the holder of the notes and because they do not tell the Lains how much is due on either note, depriving them of “a fair opportunity to cure the arrearages.” They also allege that NationsCredit made a usurious demand on “multiple debts not yet due.” PROPRIETY OF TEMPORARY INJUNCTION Appellants contend in their first point that the Lains are not entitled to a temporary injunction because they failed to establish a probable right of recovery at a trial on the merits. Applicable Law To obtain a temporary injunction, an applicant must establish that he has a probable right of recovery in a trial on the merits and a probable injury in the interim. Walling v. Metcalfe, 863 S.W.2d 56, 57 (Tex. 1993) (per curiam); TCA Bldg. Co. v. Northwestern Resources Co., 890 S.W.2d 175, 179 (Tex. App.—Waco 1994, no writ). We review such an order under an abuse-of-discretion standard. Walling, 863 S.W.2d at 58; TCA Bldg. Co., 890 S.W.2d at 179. A creditor charges usurious interest when it seeks “interest that exceeds the applicable maximum amount allowed by law.” Tex. Fin. Code Ann. § 301.001(4) (Vernon 1998). A written demand letter seeking unearned interest or an excessive rate of interest may constitute a charge for usurious interest. See Blasdell v. Catalina, 858 S.W.2d 653, 655 (Tex. App.—Houston [14th Dist.] 1993), rev’d on other grounds, 881 S.W.2d 295 (Tex. 1994); Dryden v. City Nat’l Bank, 666 S.W.2d 213, 221 (Tex. App.—San Antonio 1984, writ ref’d n.r.e.). A letter demanding only the unpaid principal balance and unpaid interest accrued thereto does not violate the usury statute. Rent America, Inc. v. Amarillo Nat’l Bank, 785 S.W.2d 190, 195 (Tex. App.—Amarillo 1990, writ denied); Greenland Vistas, Inc. v. Plantation Place Assocs., 746 S.W.2d 923, 927 (Tex. App.—Fort Worth 1988, writ denied); accord Tanner Dev. Co. v. Ferguson, 561 S.W.2d 777, 788-89 (Tex. 1977). Analysis With respect to note one, the Lains claim that the demand letter mailed to them by NationsCredit on December 18, 1997 constitutes a charge for usurious interest. On its face however, this demand letter sought only the unpaid principal balance plus interest which had accrued on the unpaid principal to the date of the demand letter. The letter did not demand any unearned interest. Thus, it does not violate the usury statute. See Rent America, 785 S.W.2d at 195; Greenland Vistas, 746 S.W.2d at 927; see also Tanner Dev. Co., 561 S.W.2d at 788-89. The Lains claim with respect to both notes that NationsCredit did not provide the notices required as a prerequisite to a nonjudicial foreclosure sale, and that NationsCredit failed to offer any evidence that it is the current holder of the notes. They assert with respect to note two that the parties orally renewed the note. Section 51.002 requires only that a creditor provide the debtor notice of a nonjudicial foreclosure sale when the debt is secured by property other than the debtor’s residence. See Tex. Pen. Code Ann. § 51.002(b), (d) (Vernon 1995). The deeds of trust relative to notes one and two do not require any additional notice. The parties agree that none of the properties involved in this litigation serve as the Lains’ residence. Therefore, the foreclosure notices mailed to the Lains by NationsCredit on June 1, 1999 with respect to note one and July 16, 1999 with respect to note two (and the subsequent notices mailed on September 8), provided them all the notice to which they were entitled. NationsCredit offered in evidence written assignments of both notes from the bank to Portfolio, which were duly recorded in the official public records of Johnson County. It offered in evidence a certified copy of records from the Office of the Secretary of State documenting that on November 7, 1996 Portfolio began doing business in Texas under the name of NationsCredit. It also offered in evidence the Lains’ chapter 13 bankruptcy plan, which they both signed, and an agreed bankruptcy order, both of which identify NationsCredit as the holder of the notes. We conclude that this evidence sufficiently establishes NationsCredit’s status as the holder of the notes. The burden of proof lies with the applicant in an injunction hearing. See Walling, 863 S.W.2d at 57; TCA Bldg. Co., 890 S.W.2d at 179. Thus, the Lains bore the burden of proving that the parties had extended note two beyond its 1996 maturity date. Tommy Lain testified that there was “talk of renewing the note,” but nothing was ever formalized. In addition, the agreed bankruptcy order entered in the Lains’ case recites that this note “matured by its own terms on May 27, 1996.” Accordingly, we conclude that the Lains failed to meet their burden of showing an extension of the note. The Lains failed to show a probable right of recovery with respect to either note. Accordingly, the trial court abused its discretion by enjoining NationsCredit and/or Warner from proceeding with the scheduled foreclosure sale. See Walling, 863 S.W.2d at 58; TCA Bldg. Co., 890 S.W.2d at 179. Therefore, we sustain Appellants’ first point. Because we have sustained Appellants’ first point and will dissolve the injunction, we need not address their remaining points. We reverse the judgment and dissolve the injunction order. See InterFirst Bank San Felipe v. Paz Constr. Co., 715 S.W.2d 640, 641 (Tex. 1986); Brittingham v. Ayala, 995 S.W.2d 199, 201 (Tex. App.—San Antonio 1999, pet. denied); Dyer v. Weedon, 769 S.W.2d 711, 715 (Tex. App.—Waco 1989, no writ). REX D. DAVIS Chief Justice Before Chief Justice Davis Justice Vance and Justice Gray Judgment reversed, injunction dissolved Opinion delivered and filed January 19, 2000 Do not publish