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Grace Creek Development, LP v. Rem-K Builders, Ltd.

Court of Appeals of Texas, Twelfth District, Tyler

May 31, 2017

GRACE CREEK DEVELOPMENT, LP AND THE CHALLENGE GOLF GROUP LIMITED, APPELLANTS
v.
REM-K BUILDERS, LTD., APPELLEE

         APPEAL FROM THE 7TH JUDICIAL DISTRICT COURT SMITH COUNTY, TEXAS

          Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.

          MEMORANDUM OPINION

          Greg Neeley Justice

         Grace Creek Development, LP and The Challenge Golf Group Limited filed a motion for rehearing of our April 28, 2017 opinion. We overrule the motion for rehearing, withdraw our opinion and judgment of April 28, 2017, and substitute the following opinion and corresponding judgment in their place.

         Grace Creek Development, LP and The Challenge Golf Group Limited appeal from a summary judgment in favor of REM-K Builders, Ltd. in the latter's suit on a note. In six issues, Appellants contend there are fact issues on their affirmative defenses and counterclaims. We affirm in part and reverse and remand in part.

         Background

         Grace Creek Development, LP is a Texas limited partnership, and The Challenge Golf Group is its general partner. David Carlile is The Challenge Golf Group's president. Appellants agreed to purchase a real estate development known as Eagle's Bluff from Ralph E. Martin and several entities he owned, including REM-K. Eagle's Bluff includes a section of single family homes and a section of townhomes known as The Villas. The sales contract was signed on November 25, 2009 and amended in December and again in January 2010. The real estate lien note in the amount of $400, 000.00 was dated December 31, 2009. Appellants were to make quarterly interest only payments through December 31, 2011, at which time the entire unpaid balance was to be paid in full. Appellants made one $20, 000.00 interest payment in November 2010. They made no additional payments on the note. REM-K filed its suit to collect the debt on April 25, 2014. In their answer, Appellants asked that the court render judgment that REM-K take nothing on its claims and, instead, award damages to Appellants due to alleged fraud in the inducement and Deceptive Trade Practices Act violations by REM-K. Appellants also asserted numerous affirmative defenses.

         REM-K filed a combined traditional and no evidence motion for summary judgment supported by numerous exhibits. REM-K asked for "damages in the sum of $998, 584.39 through April 30, 2016 with an additional $499.29 for each day thereafter until final judgment is rendered." Appellants responded, also presenting evidence, and requesting the court deny all relief requested by REM-K. The trial court granted REM-K's motion for summary judgment and ordered Appellants to pay $998, 584.39, which reflects the note balance and interest as of April 30, 2016, plus daily interest after that at $499.29 per day, attorney's fees of $60, 000.00 through trial, and additional amounts in attorney's fees in case of appeal.

         Standard of Review

         We review the trial court's decision to grant summary judgment de novo. Tex. Mun. Power Agency v. Pub. Util. Comm'n, 253 S.W.3d 184, 192 (Tex. 2007). A party moving for traditional summary judgment bears the burden of showing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. Tex.R.Civ.P. 166a(c). A plaintiff moving for summary judgment must conclusively establish all essential elements of its cause of action as a matter of law. MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex. 1986) (per curiam). Once the movant establishes its right to summary judgment as a matter of law, the burden shifts to the non-movant to present evidence raising a genuine issue of material fact. Amedisys, Inc. v. Kingwood Home Health Care, LLC, 437 S.W.3d 507, 511 (Tex. 2014). To determine if there is a fact issue, we review the evidence in the light most favorable to the non-movant, crediting evidence favorable to the non-movant if reasonable jurors could do so, and disregarding contrary evidence unless reasonable jurors could not. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). The evidence raises a genuine issue of fact if reasonable and fair minded jurors could differ in their conclusions in light of all the summary judgment evidence. Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007) (per curiam).

         The party moving for summary judgment in opposition to a counterclaim is in the position of a defendant opposing a plaintiff's motion for summary judgment. Adams v. Tri-Continental Leasing Corp., 713 S.W.2d 152, 153 (Tex. App.-Dallas 1986, no writ). In order to defeat such a counterclaim by a summary judgment, the counter-defendant must show that no issue of material fact exists as to at least one element of the counter-plaintiff's cause of action, or establish each element of an affirmative defense, and that the counter-defendant is entitled to judgment as a matter of law. Ryland Group, Inc. v. Hood, 924 S.W.2d 120, 121 (Tex. 1996) (per curiam); Adams, 713 S.W.2d at 153.

         Damages Calculation

         In their first issue, Appellants assert that REM-K erroneously determined the amount due on the real estate lien note, which specifies an 18% rate per annum. Specifically, they contend that through its calculations, REM-K erroneously compounded interest at 18% per quarter, resulting in the usurious rate of 19.25%. They argue they are entitled to a proper calculation of the amount they owe on the note.

         The Note

         Pursuant to the real estate lien note, Appellants were to pay interest only, in quarterly payments, for two years. The entire unpaid balance of both principal and accrued interest was to be paid in full on December 31, 2011. The note also provided that "[a]ll past due principal and interest shall bear interest from date of maturity until paid at the lesser of (a) eighteen percent (18%) per annum, or (b) at the highest interest rate allowed under applicable law."

         In a case involving a note containing language very similar to this provision, the Austin Court of Appeals determined that, by use of this language, the parties expressly agreed to compound interest. Bair Chase Prop. Co., LLC v. S & K Dev. Co., 260 S.W.3d 133, 142 (Tex. App.-Austin 2008, pet. denied) (held that language in note stating that "past due principal and/or interest shall bear interest from and after maturity" constitutes an express agreement to compound interest). Likewise, the note at issue here calls for compound interest, "per annum." The parties agree that 18% is the highest interest rate allowed by law.

         Usury

         Appellants assert that the problem arose because REM-K, when it calculated amounts currently owed under the note, compounded interest on a quarterly basis, rather than annually, resulting in a usurious rate. However, Appellants admit that the contract does not call for payment of usurious interest.

         "Usurious interest" means interest that exceeds the applicable maximum amount allowed by law. Tex. Fin. Code Ann. § 301.002(a)(17) (West 2016). The purpose of the usury statute is to punish those who intentionally charge usurious interest. C & K Invs. v. Fiesta Group, Inc., 248 S.W.3d 234, 241 (Tex. App.-Houston [1st Dist.] 2007, no pet.). Thus, a creditor who contracts for or receives interest that is greater than the amount authorized by statute in connection with a commercial transaction is subject to penalties. Tex. Fin. Code Ann. § 305.001(a-1) (West 2016).

         We conclude that Appellants' asserted complaint, although referred to as usury, is not usury and arose during litigation at the time REM-K calculated the amount urged as owed. Therefore, under these circumstances, REM-K is not subject to a penalty under the finance code See George A Fuller Co of Tex, Inc v Carpet Servs, Inc, 823 S.W.2d 603, 606 (Tex 1992) (Mauzy, J, concurring) (explaining that the usury statute does not apply to claims made solely in the context of judicial proceedings).

         Erroneous Damages Calculation

         The crux of Appellants' complaint is that REM-K erroneously calculated the amount of damages it is entitled to under the terms of the note. As movant, REM-K was required to establish the amount due on the note. See Tex. R. Civ. P. 166a(c); Bailey, Vaught, Robertson & Co. v. Remington Invs., Inc., 888 S.W.2d 860, 866 (Tex. App.-Dallas 1994, no writ).

         In its motion for summary judgment, REM-K asserted that Appellants owe principal and interest in the amount of $998, 584.39 as of April 30, 2016, and an additional $499.29 for each day thereafter until final judgment is rendered. REM-K relied on the unsworn declaration of Ty Beard, the trustee of a trust that owns REM-K.[1] Beard specified the exact amount owed, but provided no explanation or calculation showing how he reached that amount. In REM-K's response to interrogatories, it asserted the specific amount that Appellants allegedly owed on each January first from 2011 through 2016, as follows:

1/1/11 $402, 129.00
1/1/12 $465, 524.00
1/1/13 $555, ...

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