Court Opinion

ID: 9768932
Source: CourtListenerOpinion
Date Created: 2023-08-29 13:57:28.360571+00
Date Added: 2024-06-11T07:30:50.116378
License: Public Domain

On the Merits
YOUNG, Justice.
This appeal resulted from the trial court’s denial of appellants’ application to temporarily enjoin appellees from foreclosing their first lien on Pendleton Green Apartments in Harlingen, Texas.
The facts are undisputed. Appellants obtained interim financing for the construction of the apartment complex from Rio Grande Building and Loan Association, an affiliate of appellee — Flynn Investment Company. As construction costs escalated throughout 1973, appellants determined that the project would require permanent financing in the amount of $1,400,000.
Appellants obtained permanent financing from appellee — Anchor Savings Bank by: 1) a letter of commitment, dated November 29, 1973, and amended January 4, 1974, whereby Anchor agreed to purchase a conventional first mortgage loan on the apartment complex; and 2) a purchase and sale agreement, dated March 20, 1974, whereby Anchor contracted with appellant — Texas Valley Leisure Estates, Inc. to purchase *584the $1,400,000 loan from Rio Grande Building and Loan Association. The loan purchased by Anchor is evidenced by a “First Mortgage Real Estate Note” and Deed of Trust, both dated April 16, 1974.
The November 29th letter of commitment, as amended, provided that appellee —Anchor would provide $1,400,000 in funds. And, as amended, the commitment required that appellants provide Anchor with an irrevocable letter of credit in the amount of $210,000. This letter of credit was callable by Anchor in the event that a projected “rental achievement” of $251,960 per year had not been reached by November 30, 1974.
It is undisputed that the rental achievement was not realized. It is further undisputed that no installment payments on the note were made by appellants after August, 1974.
On December 2, 1974, Anchor “drew” the $210,000. Further, Anchor sought to foreclose its lien on the apartment complex due to appellants’ failure to make the monthly installments required by the note. One attempted trustee’s sale was precluded by the issuance of a temporary restraining order by the trial court on January 6, 1975. At a subsequent evidentiary hearing, pending a trial on the merits of appellants’ declaratory judgment action against appel-lees, the trial court, by order of January 23rd, refused to temporarily enjoin appel-lees’ threatened foreclosure of their lien on the apartment complex. On January 28th, appellants perfected their appeal to this Court and sought immediate injunctive relief, under Tex.Rev.Civ.Stat.Ann. art. 1823 (1964), pending our review of the trial court’s denial of a temporary injunction. On January 30th, this Court enjoined appellees from foreclosing their lien upon the apartment complex pending our review.
The primary issue before this Court is: Has appellant shown a probable right to require that the proceeds of the $210,000 letter of credit be applied to the mortgage installment payments? Transport Co. of Texas v. Robertson Transports, Inc., 152 Tex. 551, 261 S.W.2d 549 (1953).
Appellees contend that the November 29, 1973, letter of commitment, as amended January 4, 1974; the purchase and sale agreement of March 20, 1974; the note payable to Flynn; and the deed of trust securing the note all must be read together as one contract. When all of these documents are read as one, appellees assert that the documents clearly express the intent of the parties that the $210,000 fund is applicable only to reduce the principal amount of the note.
Appellants assert that the letter of commitment of November 29, 1973, as amended January 4, 1974, and the proposed amendments to such commitment letter which Texas Valley submitted to Anchor (DX-2) were inadmissible on the ground that they contradicted the “no pre-payment” clause in the note and thus violated the parol evidence rule. We disagree.
As noted in Texas State Bank of Austin v. Sharp, 506 S.W.2d 761 (Tex.Civ.App.—Austin 1974, writ ref’d n. r. e.), “It is settled in Texas that where two or more instruments, executed contemporaneously or at different times, pertain to the same transaction, the instruments will be read together even though they do not expressly refer to each other.” (emphasis added). See also Board of Insurance Commissioners v. Great Southern Life Insurance Co., 150 Tex. 258, 239 S.W.2d 803 (1951). This rule is applicable to instruments executed in connection with the same transaction when one or more of the instruments are promissory notes. Texas State Bank of Austin v. Sharp, supra; B & B Pharmacy and Drug, Inc. v. Lake Air National Bank of Waco, 449 S.W.2d 340 (Tex.Civ.App.—Waco 1969, writ dism’d); Sides v. Knox, 203 S.W. 65 (Tex.Civ.App.—Texarkana 1918, writ ref’d); Vernon’s Tex.Bus. & Comm.Code Ann. § 3.119 (1968).
The various instruments mentioned above pertain to the same transaction: ob-*585taming permanent financing for the Pen-dleton Green Apartments. The $1,400,000 note is not the entire contract. Appellants’ argument clearly demonstrates that it was not the intent of the parties that the note be the “final contract.”
In their attempts to avoid the effect of their default in paying the monthly installments on the note, appellants seek the aid of the $210,000 fund created by the letter of credit. The note contains no reference to the letter of credit and does not provide for payment of the monthly installments out of the funds available to Anchor from the letter of credit. In order to preclude appellees from asserting the terms of the letter of commitment which provided for the establishment and disposition of the $210,000 letter of credit, appellants contend that all previous negotiations are merged into the note which expresses the final agreement of the parties. But the appel-lees’ contention that all prior writings were merged into the note as based upon an alleged “merger clause” contained in a document other than the note: the purchase and sale agreement. The note does not contain a “merger clause.” It is apparent that appellants’ action is founded largely upon factors alien to the provisions stated in the note and deed of trust.
The “no pre-payment” clause in the note is clearly applicable only to appellants. When read in its entirety, the intent of the parties is evident. The clause provides:
“During a period of seven (7) years from the date of this note there shall be no prepayment option, thereafter upon payment of a penalty of five (S) percent in the eighth year, reducing one-half of one percent for each year thereafter, to a minimum of one percent for the remaining term of the loan.” (Emphasis added)
If we were to interpret the clause as applying equally to the holder and the maker of this note (as appellants argue), we would be faced with the novel situation wherein the holder of the note would be forced to pay itself a penalty, if it should for some reason not now apparent, choose to pay off the note itself. We decline to adopt that construction. As we have said: the letter of commitment, as amended; the purchase and sale agreement; the note; and the deed of trust all must be read together.
The amendment of January 4, 1974, to the letter of commitment of November 29, 1973, required that appellants furnish Anchor with a $210,000 irrevocable letter of credit, callable on or before December 30, 1974, in the event that the $251,960.00 annual rental achievement was not realized by Pendleton Green Apartments on or before November 30, 1974. The amendment states: “Proceeds from this letter of credit, if called by us as noted above, would be appli[ed] in reduction of the principal amount of the mortgage herein.” The existence of a default by appellants in paying the monthly installments as they became due would not vest Anchor with the right to “draw” on the $210,000 letter of credit. Only a failure to reach a specific “rental achievement” on or before November 30, 1974, would “trigger” Anchor’s right to “draw” the $210,000 fund. As we have noted, the parties specifically provided for the application of those funds in such event.
The express provision in the letter of commitment does not conflict with the “no pre-payment” clause found in the note. The clause prohibiting pre-payment is applicable only to appellants. For the reasons stated, it is evident that appellants have shown no probable right to have the $210,000 fund applied to the installment payments in default.
Appellants, in another contention, argue that this Court should construe the “no pre-payment” clause broadly enough to allow it to operate fairly and justly under all the conditions to which it may. apply. As we have stated, the contract entered into between the parties, particularly the “no pre-payment” clause is unambiguous *586and not subject to more than one reasonable interpretation. Therefore, it is not open to construction, even if giving effect to its literal terms will work a hardship on one of the parties. Magnolia Petroleum Co. v. Connellee, 11 S.W.2d 158 (Tex.Comm’n App.1928); Douglas v. Southwestern Life Insurance Company, 374 S.W.2d 788 (Tex.Civ.App.—Tyler 1964, writ ref’d n. r. e.); Rankin v. Rhea, 164 S.W. 1095 (Tex.Civ.App.—Amarillo 1914, no writ). See National Surety Corporation v. Western Fire & Indemnity Company, 318 F.2d 379 (Cir.Ct.App. 5th Cir. 1963).
Finally, appellants argue that the trial court erred in admitting defendants’ exhibit 5 into evidence. Appellants contend this exhibit is a compromise offer and was inadmissible. This issue is not dispos-itive of this case. If the trial court did err in this respect, it was harmless error. Tex.R.Civ.P. 434 (1967).
Because the appellants have failed to show a clear abuse of the trial court’s discretion, we overrule all their contentions.
The judgment of the trial court is affirmed.