












 
 
 
 
 
 
                              COURT OF APPEALS
                                      SECOND
DISTRICT OF TEXAS
                                                   FORT
WORTH
 
 
                                        NO.
2-07-051-CV
 
 
RICHARD
O. MORRISON AND                                             APPELLANTS
JOY E. MORRISON                                                                               
 
                                                   V.
 
C. B. CHRISTIE, JR.                                                                APPELLEE
 
                                              ------------
 
             FROM THE 78TH
DISTRICT COURT OF WICHITA COUNTY
 
                                              ------------
 
                                             OPINION
 
                                              ------------




In four issues, Appellants Richard O. Morrison and Joy E. Morrison
appeal from the trial court=s partial grant of summary judgment to Appellee C. B. Christie,
Jr., and the denial of their request for a determination of fair market value
of property conveyed to and sold by Christie. 
Because we hold that the trial court did not err by granting a partial
summary judgment and because the Morrisons did not preserve their complaint
with respect to the jury charge, we affirm the trial court=s judgment.
Facts and Procedural History
On March 10, 2000, the Morrisons borrowed $200,000.00 from
Christie, executing a real estate lien note payable on or before June 15,
2000.  As security for the note, the
Morrisons executed a deed of trust on property that they owned in Wichita
Falls.  In the deed of trust, the
Morrisons represented that the deed of trust and note were given for the
purpose of obtaining a loan for the purchase of the Morrisons= homestead in Georgetown, Texas, on which the Morrisons already
had a contract of sale and on which they were closing contemporaneously with
the consummation of the loan.  The deed
of trust provides that the Morrisons Aexpressly state that the residence in Georgetown is now their
homestead and the [Wichita Falls property] is not their homestead.@  The record does not show
that the Morrisons ever changed their homestead designation from the Georgetown
residence to the Wichita Falls property.




On October 20, 2000, the Morrisons executed a Aconveyance in lieu of (or in addition to) foreclosure@ (Adeed-in-lieu@), conveying the Wichita Falls property to Christie.  The deed states that the conveyance was in
consideration of Christie applying the net proceeds from the property=s sale to the unpaid balance of the note and of the Morrisons agreeing
to be liable for any deficiency after the sale. 
On January 31, 2003, Christie sold the property to a third party, with
the net proceeds of $153,287.23 applied to the note. 
On June 11, 2004, Christie filed suit against the Morrisons to
recover the remaining amount due on the note. 
On August 2, 2005, Christie filed for summary judgment.  In response, the Morrisons argued that
summary judgment was not proper because Christie had presented no evidence or
insufficient evidence of (1) compliance with Texas Property Code sections
51.002 and 51.003; (2) reasonableness of the disposition of property; (3)
determination of liability of the Morrisons for deficiency pursuant to section
9.626(a)(3) and (a)(4) of the Uniform Commercial Code and section 51.003 of the
Texas Property Code; and (4) good faith and fair dealing.
The trial court granted the summary judgment motion in part,
setting the case for trial solely on the issue of whether the deed-in-lieu was
accepted by Christie in full satisfaction of the note.  The jury found that it was not.  The trial court entered final judgment for
Christie in the amount of $158,703.05, which included the costs of collection
and enforcement plus ten percent of all amount due as attorney=s fees, as provided for in the note.  The Morrisons appealed.
Standard of Review




In a summary judgment case, the issue on appeal is whether the
movant met the summary judgment burden by establishing that no genuine issue of
material fact exists and that the movant is entitled to judgment as a matter of
law.[1]  The burden of proof is on the movant, and all
doubts about the existence of a genuine issue of material fact are resolved
against the movant.[2]




When reviewing a summary judgment, we take as true all evidence
favorable to the nonmovant, and we indulge every reasonable inference and
resolve any doubts in the nonmovant=s favor.[3]  Evidence that favors the movant=s position will not be considered unless it is uncontroverted.[4]  If the uncontroverted evidence is from an
interested witness, it does nothing more than raise a fact issue unless it is
clear, positive and direct, otherwise credible and free from contradictions and
inconsistencies, and could have been readily controverted.[5]  We must consider whether reasonable and
fair-minded jurors could differ in their conclusions in light of all of the
evidence presented.[6]
The summary judgment will be affirmed only if the record
establishes that the movant has conclusively proved all essential elements of
the movant=s cause of action or defense as a matter of law.[7]
Analysis




In their first issue, the Morrisons state that the trial court
should not have granted summary judgment to Christie on all issues except
whether Christie accepted the deed-in-lieu in full payment of the note.  In their second issue, they argue that the
trial court should have characterized the deed-in-lieu as a mortgage or other
contract lien.  They contend that
Christie brought a deficiency action but did not establish all of the elements
of this cause of action; specifically, they argue that Christie was required
but failed to establish his compliance with Texas Property Code section
51.002.  Section 51.002 regulates
nonjudicial foreclosures, that is, the sale of real property after default by
the debtor under a power of sale conferred by deed of trust or other contract
lien.[8]  Thus, this section only applies to the sale
of the Wichita Falls property if Christie=s sale of the property was a nonjudicial foreclosure.  The Morrisons argue that the trial court
erred by not characterizing the deed-in-lieu as a mortgage or contract lien and
therefore by not applying section 51.002.
A deed-in-lieu of foreclosure is not a specific type of deed, such
as a special warranty deed or a quitclaim deed; there is no such deed as a
deed-in-lieu of foreclosure.[9]  But A[a] deed given in satisfaction of a debt may serve as a
convenient, efficient transfer of title upon default of a debt.@[10]  No specific statutory
scheme governs the format of this type of transaction, although the Texas
Legislature provides some protections against undisclosed liens or encumbrances
on the property to a holder of a debt secured by a deed of trust who accepts
such a conveyance as payment.[11] 




Here, the plain language of the deed evidences an agreement that
the Morrisons would convey the property to Christie in exchange for Christie=s agreeing to not move forward with foreclosure of the property
and to apply to the debt the net proceeds from the sale of the property.  The Morrisons correctly argue that although
an instrument of conveyance may appear on its face to be a deed absolute, parol
evidence may demonstrate that the parties actually intended the instrument to
be a mortgage.[12]  They argue that in this case the parties did
intend for the deed-in-lieu to be a mortgage, and thus, the summary judgment
was improper.  The Morrisons had the
burden of establishing this assertion,[13] and we
must therefore determine whether the Morrisons introduced sufficient summary
judgment evidence.  




Christie attached to his summary judgment motion the following
evidence:  (1) his affidavit, in which he
states that the deed-in-lieu conveyed to him the Wichita Falls property in consideration
of his applying the proceeds of the sale to the note; (2) the affidavit of
David Tate, Christie=s attorney in the transactions at issue, in which he avers that on
October 5, 2000, he had a telephone conversation with Richard Morrison in which
Mr. Morrison offered to execute the deed-in-lieu and remain liable for any
deficiency after the sale; (3) a copy of the real estate lien note and the deed
of trust on the Wichita Falls property; (4) a letter drafted by Tate and
addressed to the Morrisons demanding payment on the past‑due note; (5) a
letter drafted by Tate and addressed to the Morrisons notifying them that the
property would be sold at a trustee=s sale and informing them that he had spoken with Christie about
Richard Morrison=s offer to convey the property in payment on the note and that
Christie would accept such a conveyance provided he could reserve the right to
foreclose and provided that the Morrisons would remain liable for any
deficiency; and (6) a copy of the deed-in-lieu, which incorporates the terms
set out in Tate=s letter.  This evidence is
sufficient to establish that the parties intended that the Morrisons would
convey the Wichita Falls property as payment on the note and not to secure a
debt.




The only evidence provided by the Morrisons in their response was
the affidavit of Richard Morrison and a copy of the warranty deed by which
Christie conveyed the property to a third party.  The warranty deed contains no statements respecting
the transaction between the Morrisons and Christie.  Morrison=s affidavit states that the conveyance was intended to be in full
satisfaction of the debt and that he did not ever expressly agree to remain
liable for a deficiency after the sale of the property.  He does not state or suggest anywhere in the
affidavit that by executing and delivering the deed, the Morrisons intended to
secure a loan.  This affidavit is not enough
to establish or even raise a fact issue on whether the parties intended this
deed to be a mortgage.
The Morrisons claim that their evidence includes Christie=s petition, which expressly refers to the sale of the property as
a foreclosure.  They refer to Christie=s request for attorney=s fees, in which he states that A[a]s a result of [the Morrisons=] failure to pay the note when due and failure to pay the
deficiency balance following foreclosure, [Christie] was required to employ an
attorney to prosecute this action.@  This statement is not
sufficient to establish an intention to create a mortgage, particularly where
the petition itself states elsewhere that the deed-in-lieu was executed in
consideration of the application of the net sale proceeds to the amount owed on
the note.




The Morrisons argue that there was no consideration for the deed-in-lieu
conveyance in that there was neither benefit to them nor detriment to
Christie.  We disagree.  The Morrisons avoided the negative effect on
their credit that foreclosure would have had,[14] and
Christie agreed to postpone his right to foreclose on the property and to apply
the net proceeds from the sale of the property to the outstanding debt.  Although Christie reserved the right to later
foreclose, that reservation does not prevent the transaction from being a
conveyance in payment of a debt.[15]  Furthermore, the Morrisons did not argue lack
of consideration as a defense to summary judgment in the trial court, and they
cannot raise it for the first time on appeal.[16]




The Morrisons also argue that a conveyance of real property with
the promise of the grantee to sell the property and satisfy an existing debt
with the proceeds is generally held to be a transaction in the nature of a
mortgage.  The case cited by the Morrisons,
Wilcox v. Dillard,[17] does
not support their argument.  That case
dealt with the assignment of an oil and gas lease as security for a loan; in
that transaction, the parties intended the assignment to constitute a mortgage.[18]  In this case, the evidence establishes that
the Wichita Falls property served as security for a debt before the
deed-in-lieu conveyance and that the deed-in-lieu conveyance was intended as
payment on that debt and not to secure it. 
The Morrisons also cite a Kentucky case[19] for
the proposition that a conveyance constitutes a mortgage when the conveying
instrument provides that the sales price of the property shall be deemed the
real consideration for the conveyance and that the sales price shall be
credited toward the debt owed by the grantor to the grantee.  We are not bound by Kentucky law, and the
fact that the court there held that the parties intended the transaction at
issue to be a mortgage does not alter our decision here where the evidence
shows that the conveyance was to constitute payment of a debt, not security for
a debt.




The Morrisons argue that there can be no cause of action for a
deficiency without a foreclosure sale under a security instrument, and thus if
Christie based his deficiency cause of action on the deed-in-lieu, then it
follows that he characterized the deed-in-lieu as a security instrument.  The Morrisons are incorrect that a party may
only bring a deficiency action after a foreclosure of collateral under a
security instrument.[20]  And Christie based his cause of action on the
real estate lien note, not the deed-in-lieu. 
The deed-in-lieu came about as an alternative to foreclosure under the
deed of trust securing the real estate lien note.




The Morrisons next argue that the language of the deed-in-lieu is
at odds with the terms used in typical deed-in-lieu conveyances in that
typically, a deed-in-lieu is given in full satisfaction of debt.  Although that may be the case, we have found
no law, and the Morrisons have not pointed us to any, that holds that parties
cannot agree to partial satisfaction of a debt by conveyance of property.[21]  The Morrisons next contend that if the
conveyance had been intended as payment and not to secure the note, they would
be entitled to a credit of the amount of the market value of the property as
payment at the time the deed-in-lieu was executed and delivered to Christie,
rather than after the sale of the property, and thus, the parties must have
intended for the deed-in-lieu to be a mortgage. 
Again, the Morrisons cite no law in support of this proposition.[22]  We have found no law that would prohibit
parties from agreeing to the method of payment reflected on the deed-in-lieu,
nor any evidence that would suggest an intention to create a mortgage.  Richard Morrison=s own affidavit states that the conveyance was made as payment of
the debt and says nothing about securing the existing (and already secured)
debt.
The Morrisons further argue that the deed-in-lieu contains a power
of sale.  We agree that the deed gives Christie
the right to sell the property and implies an agreement by him to do so, but we
disagree that the language of the deed creates a power of sale clause as is
typically found in security instruments.[23]  To the extent that the Morrisons argue that
the deed contains a power of sale clause and that this indicates an intent to
create a security instrument, we reject this argument.




Because we hold that the deed-in-lieu was not intended as a
mortgage or deed of trust, we further hold that Christie was not required to
comply with section 51.002 of the property code in his sale of the Wichita
Falls property.  We overrule the
Morrisons= first and second issues. 
In the Morrisons= third issue, they argue that under property code section 51.003,
they have a right to contest the amount of deficiency and a right to a credit
of the full fair market value of the property. 
That section applies to a deficiency judgment action brought after property
is sold at a foreclosure sale under section 51.002;[24]
section 51.002 by its own terms applies to the Asale of real property under a power of sale conferred by a deed of
trust or other contract lien.@[25]  Because the sale of the
real property in this case was not a sale under a power of sale in a deed of
trust or other contract lien and was therefore not a foreclosure sale under
section 51.002, this section does not apply. 
We overrule their third issue.




In their fourth issue, the Morrisons contend that if the
deed-in-lieu is not a mortgage but was intended as a payment on the real estate
lien note, then they were entitled to a trial for the determination of the fair
market value of the property under section 51.003 of the property code.  As stated above, this section applies only to
foreclosures and therefore has no relevance to a consideration of whether
Christie was entitled to a deficiency judgment. 





The Morrisons further argue that their plea of partial payment by
mode of conveyance of real property should have been submitted to the
jury.  We cannot tell from their argument
whether they contend that the jury should have determined whether the agreement
to apply net proceeds shows an intention to secure a debt or whether they
contend that the jury should have determined whether the conveyance was in
partial payment on the note.  If they
mean the latter, the jury trial was on the issue of whether the conveyance was
in full satisfaction of the debt, and because we do not have the reporter=s record, we cannot determine whether the trial court prevented
the Morrisons from introducing evidence on the issue or whether the Morrisons
preserved their complaint on the matter.[26]  While the clerk=s record shows that Christie filed a motion to exclude at trial
parol evidence that would supplement or contradict the terms of the
deed-in-lieu, the record does not include the trial court=s order on the motion.  If
they mean the former, the Morrisons had the burden to show that the
deed-in-lieu was intended as a mortgage, and the record on appeal contains no
evidence supporting their claim.  What we
do have is evidence that the parties expressly agreed that the Morrisons would
be credited, not the fair market value of the property, but the net proceeds of
the sale of the property.  We have found
no law that would override this express provision, and the Morrisons have
pointed us to none.  The only case cited
by the Morrisons, Dameris v. Homestead Bank,[27] held
that the appellant debtor had raised a fact issue as to whether he had assigned
his interest in some oil and gas leases in either full or partial satisfaction
of his debt to the appellee bank and that the trial court had therefore erred
by granting summary judgment for the bank and by finding that the appellant had
defaulted on a promissory note he had executed in favor of the bank.  Here, the issue of whether the deed-in-lieu
had been given in full satisfaction of the debt was submitted to the jury, so Dameris
does not apply.  We overrule the
Morrisons= fourth issue.
Conclusion
Having disposed of the Morrisons= four issues, we affirm the trial court=s judgment.
 
LEE ANN
DAUPHINOT




JUSTICE
PANEL:  CAYCE, C.J.;
DAUPHINOT and GARDNER, JJ.
DELIVERED: August 21, 2008




[1]Tex. R. Civ. P. 166a(c); Sw. Elec. Power Co. v. Grant, 73
S.W.3d 211, 215 (Tex. 2002); City of Houston v. Clear Creek Basin Auth.,
589 S.W.2d 671, 678 (Tex. 1979).


[2]Sw. Elec. Power Co., 73 S.W.3d at 215.


[3]Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005).


[4]Great Am. Reserve Ins. Co. v. San Antonio Plumbing
Supply Co., 391 S.W.2d 41, 47 (Tex.
1965).


[5]Tex. R. Civ. P. 166a(c); Trico Techs. Corp. v. Montiel, 949
S.W.2d 308, 310 (Tex. 1997).


[6]See Wal-Mart Stores, Inc. v. Spates, 186 S.W.3d 566, 568 (Tex. 2006); City of Keller
v. Wilson, 168 S.W.3d 802, 822B24 (Tex. 2005).


[7]Clear Creek Basin, 589 S.W.2d at 678.


[8]Tex.
Prop. Code Ann. ' 51.002 (Vernon Supp.
2008).


[9]Flag‑Redfern Oil
Co. v. Humble Exploration, Inc., 744 S.W.2d 6, 8 (Tex. 1987).


[10]Id.


[11]See Tex.
Prop. Code Ann. ' 51.006.


[12]See Johnson v. Cherry, 726 S.W.2d 4, 6 (Tex.
1987). 


[13]See Fulbright v.
Culbertson,
429 S.W.2d 179, 185 (Tex. Civ. App.CFort Worth 1968, writ ref=d n.r.e.) (stating that Aobtain[ing] a finding
that a deed was intended as a mortgage is the burden of him who so asserts@).


[14]See Sandra Block, Foreclosure
Hurts Long After Home=s Gone, So Cut A Deal While You Can, USA Today, Mar. 23, 2007,
http://www.usatoday.com/money/economy/housing/2007‑03‑23‑mym‑foreclose‑usat_N.htm.


[15]See Tex. Prop.
Code Ann. ' 51.006 (providing that a holder of a debt under
a deed of trust who accepts from the debtor a deed conveying real property
subject to the deed of trust in satisfaction of the debt may foreclose as
provided in the deed of trust).


[16]See Banda v. Garcia, 955 S.W.2d
270, 272 (Tex. 1997) (holding that the complaint on appeal must be the same as
the complaint presented to the trial court).


[17]3 S.W.2d 507 (Tex. Civ.
App.CAmarillo 1927, writ ref=d).


[18]Id. at 508.


[19]Horn v. Bates, 114 S.W. 763 (Ky. Ct.
App. 1908).


[20]See, e.g., Hudspeth v.
Investor Collection Serv. Ltd. P=ship, 985 S.W.2d 477, 479 (Tex. App.CSan Antonio 1998, no
pet.) (stating that to recover for a deficiency on a note, the plaintiff has to
establish (1) the notes in question, (2) that the defendant signed the notes,
(3) that the plaintiff was the legal owner and holder of the notes, and (4)
that a certain balance was due and owing under the notes).


[21]See, e.g., Harlan v. Tate, No. 05‑95‑01346‑CV,
1996 WL 743772, at *2 (Tex. App.CDallas Dec. 30, 1996, no writ) (not designated
for publication) (reciting that debtor conveyed real property to his creditor
for credit towards an existing note).


[22]See Tex. R. App. P. 38.1(h) (requiring
arguments on appeal to include appropriate citations to authorities).


[23]See Black=s
Law Dictionary
1210 (8th ed. 2004) (defining a Apower of sale clause@ as a Aprovision in a mortgage
or deed of trust permitting the mortgagee or trustee to sell the property
without court authority if the payments are not made@).


[24]See Tex.
Prop. Code Ann.
' 51.003.


[25]Tex.
Prop. Code Ann.
' 51.002.


[26]See Tex. R. App. P.
33.1.


[27]495 S.W.2d 52, 54B56 (Tex. Civ. App.CHouston [1st Dist.] 1973,
no writ).


