

                                                           COURT OF
APPEALS
                                                   EIGHTH DISTRICT OF
TEXAS
                                                              EL
PASO, TEXAS
 



 
 
LAWRENCE C. MATHIS,
 
                                   
  Appellant,
 
v.
 
DCR MORTGAGE III SUB I, L.L.C.,
 
                                    Appellee.
  
 


 
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                  No. 08-10-00310-CV
 
                         Appeal from
 
126th District
  Court
 
of Travis County,
  Texas
 
(TC #
  D-1-GN-09-001377)




 


 


 



                                                                  O
P I N I O N
 
            Lawrence C. Mathis executed a
promissory note on March 31, 2000 in connection with his purchase of an
approximately 20,000 square foot building in Austin, Texas.  The note was originally made payable to
Norwest Bank, N.A. and secured by a deed of trust.  DCR Mortgage III Sub I, L.L.C. later acquired
the note and deed of trust from Norwest and is the current owner and holder.  
            On April
10, 2009, DCR appointed a substitute trustee who signed a notice of a May 5,
2009 foreclosure sale. Mathis immediately filed a declaratory judgment
action requesting the court to “declare the status of, and the parties’
relative rights under” the real estate lien note.  Mathis also sought a temporary injunction to enjoin
DCR from going forward with the foreclosure sale.  On May 27, 2009, the trial court held a
hearing on Mathis’s application for temporary injunction, and on June 15, 2009,
the judge rendered judgment conditionally granting the same. 
            On June 10, 2010, a few months after
a bench trial on the matter, the trial court rendered judgment determining that
the note had been accelerated and that DCR was entitled to foreclose the deed
of trust lien.  The judgment also awarded
DCR attorney’s fees, and ordered the court clerk to pay DCR the approximately
$105,728.16 which had been deposited by Mathis into the registry of the court
pending suit.[1]  The trial judge submitted
her Findings of Fact and Conclusions of Law on June 30, 2010, and her Amended
Findings of Fact and Conclusions of Law on August 5, 2010.  
            We conclude that DCR was required to
give Mathis notice of intent to accelerate the debt and that no such notice was
given.  Therefore, we hold that any
attempted acceleration was improper, and we reverse and remand to the trial
court to determine the final computations and provide for disbursements in
accordance with this opinion.
FACTUAL
SUMMARY
            Lawrence Mathis owns and operates a
commercial laser printing and direct mail business in Austin, Texas.  On March 31, 2000, he bought an approximately
20,000 square foot building located at 2200 Tillery Street in Austin.  Mathis arranged for financing through the
Small Business Administration (SBA) 504 program.  Generally, the
agreement between Mathis and the SBA provided that Mathis would obtain
financing through an institutional lender (the first lien holder) for
approximately 50% of the purchase price; the SBA, through its affiliated entity
Cen-Tex Certified Development Corporation (CDC), would provide second lien
financing for approximately 40% of the purchase price; and Mathis would provide
the remaining 10% as a down payment.[2]  Accordingly, Mathis obtained financing for
$440,000 (approximately 50% of the total purchase price) from Norwest Bank,
N.A., and on March 31, 2000, Mathis executed a first lien note payable to
Norwest in the original principal sum of $440,000.  The note was secured by a deed of trust
signed by the same parties on the same day.[3] 
Terms
Of The Agreement
            The note
was payable in monthly installments of principal plus interest over a twenty
year term.[4]  It provided that interest would be
charged at a floating rate equal to the Wall Street Journal prime rate, and
that such rate would be adjusted annually.[5]  The monthly
installments:
 
[M]ay be adjusted from time to time by Holder to reflect
changes in the Standard Rate and for advances as provided herein, so that
payments shall at all times be not less than an amount which would fully pay
the unpaid balance of this Note, both as to principal and accrued interest, on
a twenty (20) year level amortization.
 
Finally,
the matured, unpaid principal and interest would bear
interest from maturity until paid at the maximum rate allowed by law; or, if no
such rate exists, at the “Standard Rate” (a.k.a. the applicable Wall Street
Journal prime rate) plus 5% per annum. 
            The note included an acceleration
provision that gave the holder a discretionary right to accelerate the maturity
of all debt owed by Mathis in the event that: 
[Mathis/Makers]
fail[s] to make timely any payment required by this Note or to perform timely
any other obligation owed to Holder, or if any person breaches any covenant
made in any Loan Agreement or Deed of Trust, or any other security document,
that secures payment of any of the Indebtedness, or in any guaranty agreement
by which payment of any of the Indebtedness is guaranteed. 
 
The
note also contained the following waiver of notice provision, related to
potential acceleration: 
Each of Makers, each guarantor of any of the Indebtedness,
and each person who grants any lien or security interest to secure payment of
any of the Indebtedness, (i) except as expressly provided herein, waives all
notices (including, without limitation, notice of intent to accelerate, notice
of acceleration and notice of dishonor), demands for payment, presentment,
protest and diligence in bringing suit and in the handling of any security; . .
. .
 
Finally,
the deed of trust provided, in part, the following language relating to
potential default and acceleration: 
5. If Grantor defaults on the note or fails to perform any
of Grantor’s obligations or if default occurs on a prior lien note or other
instrument, and the default continues after Beneficiary gives Grantor notice of
the default and the time within which it must be cured, as may be required by
law or by written agreement, then Beneficiary may:
 
a. declare the unpaid principal balance and earned interest
on the note immediately due.
 
Mathis’s
Performance on the Note While Owned and Held by Norwest/Wells Fargo[6]
            Mathis admitted that due to business
troubles in 2003, he started making late installment payments on the Note.  About forty-five or fifty out of
approximately seventy payments made while Norwest/Wells Fargo owned the note
were untimely.  Despite the fact Mathis’s
payments were late, all of the payments were accepted by Norwest/Wells Fargo,
and Norwest/Wells Fargo never informed Mathis that future late payments would
not be accepted.  
            On or about September 15, 2006, DCR
acquired the Mathis note and deed of trust from Norwest/Wells Fargo.  At the time, Mathis was still several months
behind on payments.[7] 
Transactions
and Communications Between DCR and Mathis From DCR’s Acquisition of the Note Through
DCR’s Notice of Foreclosure
 
1. Mathis’s First Two Installment Payments
After DCR’s Acquisition of the Note (September 2006 through January 2007)
 
            DCR accepted
and posted its first monthly payment from Mathis on September 22, 2006.  The payment was applied as the installment
due July 15, 2006.  In October 2006, DCR
sent Mathis eight payment coupons each equal to one installment payment.[8]  Mathis did not make his second installment
payment to DCR on the note until January 2007. 
In doing so, he used one of the payment coupons.  DCR accepted the payment and posted it on
January 24, 2007 as the installment payment due August 15, 2006.  
2.
Mathis’s Dealings/Communications with DCR’s Senior Vice-President and Portfolio
Manager, Lance Amano Throughout 2007
 
            According
to Mathis, DCR’s Senior Vice-President and Portfolio Manager, Lance Amano, first
contacted him in February 2007.  Amano
expressed an interest in coming to visit the Property.  That same month, Mathis made his third
installment payment to DCR.  Once again,
the payment was accompanied by one of the payment coupons.  DCR accepted the payment on February 25, 2007
and posted it as the installment due on September 15, 2006.
            In
March 2007, Amano did in fact visit the property.  Mathis testified that he spoke with Amano
about his efforts to market and sell the property and the possibility for
considerable profit.  In May 2007, Mathis
entered into a sales contract for $1.45 million.  That same month, Amano and Mathis began a series
of e-mail communications.  However, the
buyer later received an appraisal valuing the property at $1.39 million and
insisted Mathis reduce the price.  Mathis
refused and the deal collapsed. 
According to Mathis, he was unaware of any acceleration or attempted
acceleration of the note at that time. 
Had he known the note had been accelerated, he would have pursued
negotiations with the potential buyer and worked vehemently to reach an
agreement.  He also would have pursued his
options to refinance the property.
            In
June 2007, Mathis made his next four monthly installment payments accompanied
by four more payment coupons.[9]  Once again DCR accepted and posted the
payments.[10]  Two months later (in August 2007), Amano sent
Mathis the following e-mail: 
To bring your loan current we need a payment
of approximately $22,896.  Right now you
are accruing interest at a default rate of 13.25%.  Below are the terms of a Forbearance agreement
that I can offer:
 
Interest rate     Prime + 1.5%
 
Terms              12
month term
 
In
response to the e-mail, Mathis called Amano, expressed his confusion regarding
how DCR calculated the $22,896 figure as well as the 13.25% interest rate, and
requested that Amano send documentation supporting the amounts.  Mathis did not hear back from Amano until
October 2007 when Mathis received an e-mail with no heading and a blank
attachment.  Mathis again requested
documents to support DCR’s calculations, and on December 18, 2007, Mathis
received a copy of DCR’s loan ledger covering July 15, 2006 through November
30, 2007.
            According to DCR’s ledger, from July
15, 2006 until DCR acquired the note on September 15, 2006, the interest rate
charged on the principal balance was the prime rate, or 7.75%.  On September 16, 2006, the ledger bears the
notation “DEFAULT RATE STARTS,” and the ledger reflects the interest rate
charged from thereon as the applicable prime rate plus 5%.  The ledger does not bear a notation regarding
acceleration.  After reviewing the ledger,
Mathis again contacted Amano and requested information regarding the interest
rate.  Amano replied on December 20, 2007
that he would follow up with the loan-servicing department and provide the
requested information.
3. Mathis’s
Dealings/Communications with DCR’s Senior Vice-President and Portfolio Manager,
Lance Amano Throughout 2008
 
            In January 2008, Amano e-mailed
Mathis citing the last payment received by DCR and expressing the need to enter
into a forbearance agreement.  Amano
attached a copy of the note and the deed of trust to the e-mail.  Mathis responded the following day indicating
that he needed to have his attorney review the interest rates.  Approximately ten days later, Mathis again
e-mailed Amano to inform him that his attorney looked over the documents and
concluded that the 5% default surcharge on the interest rate should only be
applied to payment arrears.  Mathis’s
email also explained his attorney’s conclusion that applying the 5% interest
surcharge to the entire principal would require acceleration and notice of
acceleration.
            Shortly thereafter, in February
2008, Mathis made three payments, with each installment in the amount of
$2,601.28.  Each payment was accepted by
DCR.  Then, in April 2008, Mathis once
again made three payments to DCR ($2,601.28 each) and all three were accepted
by DCR. 
            According to Amano’s testimony, in
the third or fourth quarter of 2008, the partners of DCR decided that DCR would
no longer accept monthly installments from Mathis and that it would proceed with
foreclosure.  Amano acknowledged that he
did not tell Mathis that DCR would no longer accept monthly payments.  Amano admitted that he did not have a good
answer as to why he did not tell Mathis that DCR would no longer accept monthly
payments.  
4.
Mathis Learns From CDC That DCR Intends to Initiate Foreclosure Proceedings
(January 2009) 
 
            In January 2009, Mathis learned from
Ms. Rios Valdez that CDC had received correspondence from Amano asking CDC to
acquiesce to DCR’s initiation of foreclosure proceedings. That correspondence
included a draft of a “proposed” foreclosure notice, which CDC had provided to
Mathis.  Mathis reviewed DCR’s
correspondence to CDC and noticed its recitation that the note had been
accelerated. Mathis testified he was surprised and that after checking his
files, he remained “quite sure” he had not received a notice of acceleration.   
            On January 22, 2009, Mathis wrote to
Amano informing him that he had received a copy of a “proposed” foreclosure
notice, which Amano had sent to CDC. Disputing that the note had been
accelerated, Mathis asked for evidence of acceleration.  Amano did not reply to Mathis’s letter.[11]  
5.
Mathis’s Attempts to Bring the Note Current and DCR’s Notice to Mathis of a May
2009 Foreclosure Sale (February 2009 through April 2009)
 
            On February 25, 2009, Mathis mailed a
check to DCR for three installment payments.  These payments were eventually returned but
not until weeks later.  In fact, Amano
did not return the check until April 29, 2009, the day Mathis filed this suit.
            Meanwhile, Mathis tendered a payment
for $52,025.60, the total amount of installments that had not been paid as of
that date.  Payment was issued in the
form of a cashier’s check, mailed by Mathis’s attorney on April 8, 2009 via
U.S. Express Mail and received by DCR on April 9, 2009.  According to Mathis, he was completely unaware
that DCR had accelerated the note, and that through April 9, 2009, he believed
that no acceleration had occurred.  Prior
to April 10, 2009, Amano had never told him DCR would not accept late payments
or anything other than full payment of the note.
            On April 10, 2009, Amano/DCR
appointed attorney Jeffrey Walsh as the substitute trustee under the deed of
trust.  That same day, Walsh signed a
foreclosure notice stating that a foreclosure sale was to take place on May 5, 2009.  Two days later, Amano sent a letter to Mathis
and his attorney requesting, in part, that certain identified tax loans be
immediately removed and stating that such loans amounted to a failure to
preserve DCR’s priority as required by the terms of the deed of trust.  According to the letter, the note had been
accelerated by an “Acceleration Notice” sent on February 19, 2007.[12]  On April 13, 2009, Walsh sent Mathis copies of
the paperwork appointing him as substitute trustee and of the foreclosure
notice for May 5, 2009.  Mathis’s
attorney responded by e-mailing Walsh on April 14, 2009 requesting any
documentation evidencing an acceleration. 
Walsh did not respond. 
Mathis’s
Suit For Declaratory Judgment And Temporary Injunction
            On April 29, 2009, Mathis filed a declaratory
judgment action requesting the court to “declare the status of, and the parties’
relative rights under,” the note.  Mathis
also sought a temporary injunction to enjoin DCR from going forward with the foreclosure
sale.  The trial court held a hearing on
Mathis’s application for temporary injunction, and subsequently issued an order
that conditionally granted Mathis’s request.[13]
The
Hearing and The Trial Court’s Final Judgment
            On March
2, 2010, the trial court held a hearing on the matter.  That same day, judgment was entered in
favor of DCR.  The trial court determined
that the note had been accelerated and that DCR was entitled to foreclose the
deed of trust lien.  The trial court also
awarded DCR attorney’s fees and ordered the court clerk to pay to DCR some
$105,728.16 which had been deposited by Mathis into the registry of the court
pending suit.[14]  
Findings
of Fact and Conclusions of Law
            On June 30, 2010, in response to a
request by Mathis, the trial court filed Findings of Fact and Conclusions of
Law.  Subsequently, the trial court
entered amended the previous Findings of Fact and Conclusions of Law.  As amended the trial court’s findings and
conclusions read as follows: 
I.  FINDINGS
OF FACT
1. Mathis executed a
Note and Deed of Trust in favor of Norwest Bank, concerning commercial real
property at 2200 Tillery Street, Austin, Texas 78723 (the ‘Property’) on March
31, 2000.
2. DCR acquired the
Mathis Note and Deed of Trust on or about September 15, 2006 and is the current
owner and holder of the Note and Deed of Trust. 
3. The Note required
Mathis to make monthly payments on the 15th of each month until September 15,
2020.  After default, the holder of the
Note could credit payment in whatever lawful manner it chose.  Per the Note, matured, unpaid principal and
interest shall bear interest as the maximum rate allowed by law. Upon payment
or other default, the holder of the Note could accelerate the maturity of all
indebtedness owed.  Mathis waived all
notices, including, notice of intent to accelerate and notice of acceleration.
Further, the parties agreed that, no waiver by the lender shall be effective
unless made in a signed written document.
4. The Deed of Trust expressly
required Mathis to pay all taxes and assessments on the Property when due and
to preserve the lien’s priority.  The
Deed of Trust required Mathis to maintain property insurance and deliver policy
renewals to the lender at least ten days before the policy’s expiration.  Additionally, Mathis was required to obtain
life insurance and assign the policy to lender.  Mathis assigned all present and future rental
income and receipts from the Property to the lender. 
5. Pursuant to the
Addendum to the Deed of Trust and Assignment of Rents and Other Income, Mathis
agreed to indemnify the lender from any and all claims, losses, and liabilities
except for those resulting from gross negligence or willful misconduct.  Additionally, Mathis is responsible for all of
the lender’s expenses, incurred in connection with the loan. 
6. Unbeknownst to DCR,
Mathis entered into a subrogated loan to pay for property taxes on the Property
in December 2006, eliminating DCR’s first lien priority on the Property. 
7. Mathis failed to
timely make payments due under the Note starting in September 2006. 
8. In early 2007, DCR
requested that Mathis assign his life insurance policy as required by the Note.
 Mathis never responded or provided the
assignment.  Mathis failed to provide insurance
policy renewals to lender.  Mathis has
failed to convey rental and other proceeds from the Property to DCR.
9. On February 19, 2007,
although no notice was required, DCR sent Mathis a letter indicating that it
had accelerated the amount owed under the Note. 
10. Prior to February
19, 2007, several late payments had been made and accepted by the prior Note
holder and DCR.  
11. The Note was
properly accelerated.
12. In early 2007, Mathis
represented to DCR that he was attempting to sell the Property with the
proceeds used to payoff the Note. 
13. DCR representative
Lance Amano (‘Amano’), met with Mathis on or about February 2007, wherein
Amano, due to Mathis’ default, acceleration of the note, and Mathis’ requests
for time to sell the Property, demanded a forbearance agreement. 
14. Amano repeated his
demand for a forbearance agreement numerous times during 2007 and 2008, while
Mathis attempted to sell the Property.  
15. Unbeknownst to DCR,
Mathis applied for, and obtained an additional loan to pay for property taxes
on the Property, further jeopardizing DCR’s lien position. 
16. In early 2008,
Mathis defaulted multiple times on his payment obligations for the tax loans on
the Property. 
17. On January 15, 2009,
DCR notified BCL of Texas (‘BCL’), a secondary lien holder on the property, of
its intent to foreclose on the Property. BCL forwarded this letter to Mathis. 
18. Mathis colluded with
Rosa Rios Valdez with BCL of Texas to delay DCR’s attempts to foreclose on the
Property and in an attempt to negotiate a lesser sum owed under the Note.  
19. Mathis arranged for
BCL of Texas to hire an attorney to intervene in this lawsuit and assist in
attempts to enjoin foreclosure on the Property, and paid for BCL of Texas’
attorney’s fees for that representation. 
20. Mathis urged BCL of
Texas to refrain from buying-out DCR’s Note and lien position on the Property
based on a concern that Mathis would lose his attorney’s fees and DCR would
attempt to come after him for DCR’s attorney’s fees. 
21. On April 8, 2009,
with knowledge of DCR’s intent to foreclose on the Property, Mathis tendered
partial payment under the Note.  Mathis’
partial payment was returned by DCR as insufficient.
22. On April 12, 2009,
DCR via a letter, again notified Mathis of his breaches of the Note and Deed of
Trust due to the tax liens and demanded Mathis remedy the failure immediately,
and advised that the partial payment was insufficient.  Mathis failed to remedy the tax lien issue
immediately, and did not have the liens removed until the Court ordered him to
do so.
23. On April 13, 2009,
DCR gave Mathis notice of intent to conduct a Substitute Trustee’s Sale on May
5, 2009.
24. On April 29, 2009 Mathis
initiated this litigation seeking to enjoin DCR’s foreclosure of the Property. 
25. The amount due under
the Note is $444,694.25. 
26. DCR has incurred
reasonable and necessary attorney’s fees in the amount of $78,375.00, and costs
in the amount of $4,111.77 in defending its interest in the Note and Deed of
Trust in this lawsuit. 
[27.] All findings of
fact that would be more appropriately classified as conclusions of law are
hereby adopted as such.
II.  CONCLUSIONS
OF LAW
1. Venue and
jurisdiction is proper in Travis County, Texas.
2. No notice of intent
to accelerate or notice of acceleration was required under the terms of the
Note.  Waivers of notices are
enforceable. 
3. DCR accelerated the
total amount owed under the Note on February 19, 2007. 
4. By allowing Mathis
time to attempt to sell the Property, and by accepting infrequent partial
payments, DCR did not waive its rights to enforce the terms of the Note or
acceleration of same. 
5. Mathis breached the
Note and Deed of Trust, by, among other things, failure to make payments as and
when owed, obtaining priority tax liens eliminating DCR’s lien priority,
failure to pay the accelerated amount, failure to assign his life insurance
policy to DCR, failure to provide insurance policy renewals, and failure to
convey lease payments and other proceeds on the Property to DCR.
6. The Deed of Trust
from Mathis to DCR on the Property creates a lien in favor of DCR, securing
Mathis’ payment obligations under the Note.
7. DCR satisfied all
conditions precedent to foreclosing on the Property under the Deed of Trust. 
8. The Note is in
default. 
9. DCR is entitled to
foreclose on the Property pursuant to the Deed of Trust.
10. DCR is entitled to
recover reasonable and necessary attorney’s fees from Mathis, in the amount of
$78,375.00, and costs in the amount of $4,111.77 for preparation and trial;
$15,000.00 if the case is appealed to the Court of Appeals, and $10,000.00, if
the case is appealed to the Texas Supreme Court. 
11. All conclusions of
law that would be more appropriately classified as findings of fact are hereby
adopted as such. 


 
The
Appeal
In
Issues One through Seven, Mathis complains that the trial court erred in
denying his request for declaratory relief. 
The majority of his contentions are challenges to the legal and factual
sufficiency of the evidence to support the trial court’s fact findings.
Standard of Review
            A trial court’s findings of fact have
the same force and dignity as a jury verdict. 
City of Clute v. City of Lake Jackson, 559 S.W.2d 391, 395
(Tex.Civ.App.--Houston [14th Dist.] 1977, writ ref’d n.r.e.).  We apply the same standards in reviewing the
legal or factual sufficiency of the evidence supporting the trial court’s fact
findings as we do when reviewing the legal or factual sufficiency of the
evidence supporting a jury’s answer to a jury question.  Ashcraft v. Lookadoo, 952 S.W.2d 907,
910 (Tex.App.--Dallas 1997), pet. denied
by 977 S.W.2d 562 (Tex. 1998); Okon v. Levy, 612 S.W.2d 938, 941 (Tex.Civ.App.--Dallas
1981, writ ref’d n.r.e.).  
            When an appellant attacks the legal
sufficiency of the evidence to support an adverse finding on an issue upon
which it did not have the burden of proof, such as an affirmative defense, the
appellant must demonstrate that there is no evidence to support the adverse
finding.  Lochinvar Corp. v. Meyers,
930 S.W.2d 182, 189 (Tex.App.--Dallas 1996, no writ).  In reviewing a “no evidence” or legal
sufficiency point, we consider only the evidence favorable to the decision of
the trier of fact and disregard all evidence and inferences to the
contrary.  Davis v. City of San
Antonio, 752 S.W.2d 518, 522 (Tex. 1988); Garza v. Alviar, 395
S.W.2d 821, 823 (Tex. 1965).  If any
evidence of probative force supports the finding, an appellate court will
uphold the trier of fact’s finding.  Juliette
Fowler Homes, Inc. v. Welch Assocs., Inc., 793 S.W.2d 660, 666 (Tex.
1990).  A no evidence point of error may
only be sustained when the record discloses one of the following:  (1) a complete absence of evidence of a vital
fact; (2) the court is barred by rules of law or evidence from giving weight to
the only evidence offered to prove a vital fact; (3) the evidence offered to
prove a vital fact is no more than a mere scintilla of evidence; or (4) the
evidence establishes conclusively the opposite of a vital fact.  Id. at 666 n.9. When we sustain a no
evidence point, it is our duty to render judgment for the appellant because
that is the judgment the trial court should have rendered.  F.D.I.C. v. F & A Equip. Leasing,
854 S.W.2d 681, 685 (Tex.App.--Dallas 1993, no writ).
            Although a trial court’s conclusions
of law may not be challenged for factual insufficiency, the trial court’s
conclusions drawn from the facts may be reviewed to determine their
correctness.  Mercer v. Bludworth,
715 S.W.2d 693, 697 (Tex.App.--Houston [1st Dist.] 1986, writ ref’d n.r.e.), overruled
on other grounds by Shumway v. Horizon Credit Corp., 801 S.W.2d 890 (Tex.
1991); see City of Dallas v. Villages of Forest Hills, 931 S.W.2d 601,
605 (Tex.App.--Dallas 1996, no writ).
ACCELERATION
            In his first four points of error,
Mathis argues the evidence was legally and/or factually insufficient to support
various findings by the trial court with respect to DCR’s acceleration of the debt.  It is clear that the holder of a note must
ordinarily give notice to the maker of the holder’s intent to accelerate the
time for payment as well as notice of acceleration.  Shumway, 801 S.W.2d at 892; Ogden
v. Gibraltar Savs. Ass’n, 640 S.W.2d 232, 233-34 (Tex. 1982); Parker v.
Frost National Bank of San Antonio, 852 S.W.2d 741, 744 (Tex.App.--Austin
1993, writ dism’d by agr.).  It is also
well settled that the maker may waive his right to notice of intent to
accelerate and notice of acceleration.  Shumway,
801 S.W.2d at 893; Phillips v. Allums, 882 S.W.2d 71, 73-74
(Tex.App.--Houston [14th Dist.] 1994, writ denied).  Such waivers are effective if they are
contained in either a note or a deed of trust.  Parker, 852 S.W.2d at 744; see also
Mercer, 715 S.W.2d at 699; Chapa v. Herbster, 653 S.W.2d 594, 601
(Tex.App.--Tyler 1983, no writ), overruled on other grounds by Shumway v.
Horizon Credit Corp., 801 S.W.2d 890 (Tex. 1991).  The reasoning behind this rule is that to
require that every instrument executed in conjunction with a promissory note
contain the necessary language would be “unnecessarily duplicative.”  See Dolci v. Askew, No.
04-95-00867-CV, 1997 WL 428560, at *2 (Tex.App.--San Antonio, July 30, 1997)(not
designated for publication), citing Parker, 852 S.W.2d at 744.
            Regardless of whether the waiver
appears in the note or the deed of trust, the waiver must be “clear and
unequivocal.”  See Dolci, 1997 WL
428560, at *2, citing Shumway, 801 S.W.2d at 893.  A waiver is clear and unequivocal if it
states specifically and separately the rights surrendered.  Shumway, 801 S.W.2d at 893. 
What
Was Required To Properly Accelerate The Note?
            Mathis claims that the trial court
erred in finding that “Mathis waived all notices, including, notice of intent
to accelerate and notice of acceleration.” 
Mathis recognizes the following waiver provision in the note is
sufficient to show a clear and unequivocal intent to waive both notice of
intent to accelerate and notice of acceleration:  
Each of Makers, each guarantor of any of the Indebtedness,
and each person who grants any lien or security interest to secure payment of
any of the Indebtedness, (i) except as expressly provided herein, waives all
notices (including, without limitation, notice of intent to accelerate, notice
of acceleration and notice of dishonor), demands for payment, presentment,
protest and diligence in bringing suit and in the handling of any security . .
. .
 
But he argues that when read together as a single
instrument, the note and the deed of trust do not demonstrate “a clear
and unequivocal waiver of the maker’s right to receive notice of the holder’s
intent to accelerate maturity of the note.” 
In support of his argument he relies on the
following provision from the deed of trust: 
5. If Grantor defaults on the note or fails to perform any
of Grantor’s obligations or if default occurs on a prior lien note or other
instrument, and the default continues after Beneficiary gives Grantor notice of
the default and the time within which it must be cured, as may be required by
law or by written agreement, then Beneficiary may:
 
a. declare the unpaid principal balance and earned interest
on the note immediately due. . . .
 
Mathis
contends that “[t]he subject note and deed of trust should of course be read
together in a single instrument and construed together,” and, that when read
together, the additional language contained in the deed of trust renders the
waiver ineffective.
            Mathis relies heavily upon the
San Antonio Court of Appeals’ decision in Dolci v. Askew, where the deed
of trust contained a provision almost identical to the one here.  See Dolci, 1997 WL 428560, at *2.  The note included the following provisions: 
If Maker defaults in the payment of this note or in the performance of any obligation in any
instrument securing or collateral to it, and the default continues after Payee
gives Maker notice of the default and the time within it must be cured, as may
be required by law or by written agreement, then Payee may declare the unpaid
principal balance due and earned interest on this note
immediately due. Maker and each surety, endorser, and guarantor waive all
demands for payment, presentations for payment, notices of intention to
accelerate maturity, notices of acceleration of maturity, protests, and notices
of protest, to the extent permitted by law.
 
Id. 
The trial
court found that “Dolci’s attempted foreclosure was improper because Dolci was
required to give Askew notice and an opportunity to cure any alleged default
prior to acceleration and foreclosure.”  Id.
at *3 n.1.  On appeal, Dolci argued that
the waiver language in the note
alone was sufficient to relieve him of his duty to give notice and an
opportunity to cure.[15]  Id.
At *2.

            The San Antonio court affirmed,
acknowledging that:
Although
it is clear that the presence of waiver language in the Note would ordinarily
be sufficient even though it was not contained in the Deed of Trust, and though
the waiver clause in the Note, when read in a vacuum, is sufficiently clear,
when the Note is read as a whole, we cannot agree that the waiver is clear and
unequivocal. 
 
Id.
at *3.  Focusing on a reading of the
note, “as a whole,” the court reasoned that: 
Reading
the waiver clause contained in the note in conjunction with the sentence it
follows, it is not difficult to imagine how confusion could arise as to whether
Askew actually waived his right to notice of default and an opportunity to
cure.  The sentence immediately preceding
the waiver language states that Dolci may accelerate the note only if Askew
defaults in payment of the note ‘and the default continues after [Dolci] gives
[Askew] notice of the default and the time within which it must be cured, as
may be required by law or written agreement.’  While Dolci argues that the ‘as may be
required by law’ language in this clause resolves any inconsistencies in the
two sentences because the law allows makers to waive their right to notice, we
cannot agree that this language eliminates all ambiguity regarding waiver in
this case. 
 
Id.  The court then reiterated the general rule
that, “[i]f a reasonable doubt exists as to the meaning of terms used in an
acceleration clause, preference should be given to that construction which will
avoid forfeiture and prevent acceleration of maturity.”  Id. (internal quotations omitted), quoting
Prunell v. Follett, 555 S.W.2d 761, 764 (Tex.Civ.App.--Houston [14th Dist.]
1977, no writ).  Thus, the waiver was
ineffective because it was not clear and unequivocal.  Id. 
            Here, the note and the deed of trust
must be construed together because they were executed by the same parties on
the same day, they pertain to the same real property, each document references
the other, and the deed of trust is identified as the security for the note. Adams
v. First National Bank of Bells/Savoy, 154 S.W.3d 859, 868
(Tex.App.--Dallas 2005, no pet.), citing The Cadle Co. v. Butler, 951
S.W.2d 901, 909 (Tex.App.--Corpus Christi 1997, no pet.).  The rules of interpretation that apply to
contracts also apply to notes and deeds of trust.  Starcrest Trust v. Berry, 926 S.W.2d
343, 352 (Tex.App.--Austin 1996, no writ); see also Sonny Arnold,
Inc. v. Sentry Savings Assoc., 633 S.W.2d 811, 815 (Tex. 1982)(a mortgage
is governed by the same rules of interpretation that apply to contracts); Edlund
v. Bounds, 842 S.W.2d 719, 726 (Tex.App.--Dallas 1992, writ denied)(“It is
well established in Texas that the rules of construction governing contracts
are applicable to notes, and a note must be constructed as a whole.”).  A court’s primary duty in construing a note
and deed of trust, as when construing a contract, is to ascertain the parties’
intent from the instrument’s language.  See
Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983).  In ascertaining the drafter’s intent, the
court must examine the document as a whole and strive to give every part of it
effect.  See id.; Forbau v.
Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex. 1994).  Words should be given their plain meaning
based on the way they are used, unless it appears that doing so would defeat
the intention of the parties.  See
Reilly v. Rangers Management, Inc., 727 S.W.2d 527, 529 (Tex. 1987), citing
Fox v. Thoreson, 398 S.W.2d 88, 92 (Tex. 1966).
            Under the Supreme Court’s holding in
Shumway, the waiver language in
the note would be considered a “clear and unequivocal” waiver of
both notice of intent to accelerate and notice of acceleration.  If the deed of trust were silent on the issue,
the waiver would be valid and enforceable. 
But the deed of trust is not silent.  Acceleration is not favored in the law.  Mastin v. Mastin, 70 S.W.3d 148, 154
(Tex.App.--San Antonio 2001, no pet.); see also Burns v. Stanton, 286
S.W.3d 657, 661 (Tex.App.--Texarkana 2009, pet. denied)(noting that “[B]ecause
acceleration of a debt is viewed as a harsh remedy, . . . any such clause will
be strictly construed”).  In fact, under
Texas law, we apply strict scrutiny to acceleration provisions, and if any
reasonable doubt exists as to the parties’ intent, we resolve such doubt
against acceleration. 
            The deed of trust creates a
reasonable doubt as to whether the parties clearly and unequivocally intended
to waive notice of default and time to cure, which amounts to notice of intent
to accelerate. It is undisputed that there was no notice of intent to
accelerate and time to cure.  Because
there was not an effective waiver of notice of intent to accelerate,
acceleration was void as a matter of law.[16]  We sustain Issues One, Two, Three, and
Four.  It is unnecessary that we consider
the remainder.
CONCLUSION
            Since DCR did not
give proper notice
of its intent to accelerate the
debt, we hold that any attempted acceleration was
ineffective.  See Ogden, 640 S.W.2d at 234. 
We reverse and remand the cause to the trial court to determine the
final computations, provide for disbursements, and render the entry of a
judgment in accordance with this opinion. 

 
 
October 10, 2012                                _______________________________________________
ANN CRAWFORD
McCLURE, Chief Justice
 
 
Before McClure, C.J., Rivera, and Antcliff, JJ.




[1] The money deposited into the
court’s registry was comprised primarily installment payments to have become
due on the note and paid monthly into the registry by Mathis.


[2] CDC
and Norwest entered into a “Certification by Third Party Lender” and an “Inter-creditor
Agreement.”  In part, these agreements
obligated Norwest to provide written notice to CDC and SBA within thirty days
of any default upon which Norwest intended to take action and sixty days prior
to any foreclosure sale.


[3] Mathis
also executed a second lien note payable to CDC in the original principal sum
of $365,000 (approximately 40% of the original purchase price).  This second lien note was also secured by the
deed of trust.  


[4] Specifically, the note provided
that the “principal and interest, evidenced by this Note (the “Indebtedness”)”
should be paid as follows: 
Accrued
interest only shall be due and payable monthly as it accrues, beginning April
15, 2000 and continuing regularly thereafter until September 15, 2000, when
principal and accrued interest shall be due and payable in monthly installments
of $4,173.49 or more each, beginning on October 15, 2000 and continuing
regularly thereafter until September 15, 2020, when the entire balance hereof,
principal and accrued interest remaining unpaid, shall be then due and
payable.  The payments required herein
may be adjusted from time to time by Holder to reflect changes in the Standard
Rate and for advances as provided herein, so that payments shall at all times
be not less than an amount which would fully pay the unpaid balance of this
Note, both as to principal and accrued interest, on a twenty (20) year level
amortization beginning September 15, 2000, with the amortization basis
declining by one (1) year for each year expiring thereafter during the term of
this Note, with any unpaid balance of this Note being due and payable as
provided herein.


[5] Wall Street Journal prime rates
at the annual adjustment rates relevant to the Note have been as follows:
                March
31, 2001                   8.00
                March
31, 2002                   4.75
                March
31, 2003                   4.25
                March
31, 2004                   4.00
                March
31, 2005                   5.75
                March
31, 2006                   7.75
                March
31, 2007                   8.25
                March
31, 2008                   5.25
                March
31, 2009                   3.25


[6] Sometime shortly after execution
of the note, Norwest Bank merged into Wells Fargo and Wells Fargo became the note
holder and owner.  


[7] Prior to purchasing the note,
Wells Fargo provided DCR with a professional appraisal of the property (dated July
24, 2006) which showed the property’s fair market value to be $1,235,000.


[8] Originally,
the monthly installments of principal and interest were $4,173.49.  However, at some point prior to DCR acquiring
the note, the monthly payments were reduced to $2,601.28. 


[9] In June 2007, Mathis obtained an
additional loan from CDC for $250,000. 
This loan was secured by a third lien. 
Mathis remained current on both CDC loans at all times.  


[10] The four June 2007 payments were
posted as those due on October 15, 2006, November 15, 2006, December 15, 2006,
and January 15, 2007.  


[11] CDC also sent an e-mail to Amano
on February 12, 2009 informing him that Mathis was unaware of any
acceleration.  Amano did not reply to the
e-mail.  


[12] The April 12 letter also
referenced an attached copy of the February 19, 2007 notice as well as a copy
of a “Loan Statement.”  However, no
documents were attached to either Mathis’s version or his attorney’s
version.  


[13] The
trial court’s temporary injunction ordered that Mathis pay the tax loans.  However, it did condition the continued
effectiveness of the temporary injunction after August 3, 2009 upon the tax
loans’ being paid on or before that date. The tax loans were paid and the liens
securing them released before August 3, 2009. 



[14] The $105,728.16 was primarily
comprised of installment payments which had become due on the note.


[15] The court provided the following
summary of Dolci’s argument: 
He
contends that the Note and Deed of Trust should be read together and that, when read together,
the two documents require notice and an opportunity to cure only when required
by law or written agreement. Dolci concludes that notice was not required in
this case because applicable law only requires notice in the absence of an
effective waiver, there was no written agreement between
the parties regarding notice, and Askew expressly waived his right to notice in
the Note.
Dolci, 1997 WL 428560, at *2.


[16] Just as did the court in Ogden, we too “do not
decide whether, after proper notice of intent
to accelerate, a notice of trustee’s sale is sufficient
to give notice that the debt has
been accelerated.” 
See Ogden, 640 S.W.2d at 234.


