Court Opinion

ID: 9643023
Source: CourtListenerOpinion
Date Created: 2023-08-22 18:15:39.763568+00
Date Added: 2024-06-11T18:10:56.587111
License: Public Domain

CULVER, Justice
(dissenting).
The Court has decided that the plaintiffs are entitled to accelerate their notes aggregating more than a million dollars, on the ground that the personal property of Western Hills Hotel was sold by Clark to Weissberg without obtaining the written consent of the plaintiffs, Green and his associates, as provided for in the chattel mortgage given by Clark to the plaintiffs, and that findings by the trial court of consent, waiver and estoppel on the part of the plaintiffs have no support in the evidence. During the time of the negotiations between Clark and the plaintiffs, looking to the sale of the hotel to Weissberg, there was never any indication or suggestion on the part of the plaintiffs that they would insist on the payment in full of their notes if the sale was made of the furniture and other personal property. In fact, as pointed out in this Court’s opinion, after the plaintiffs had read the terms of the proposed sales contract they wrote to Clark in part as follows:
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“We do not wish to exercise our option to purchase; therefore, under the 30-day time allowance we wish to officially notify you that you may proceed to sell Western Hills Hotel, subject to the following conditions:
“1. We are not willing to waive any of the restrictions outlined in sections 24 and 25 of your proposed contract of sale.
“2. Also, we wish to emphasize that all contracts, letter agreements, etc. that were entered into between you, your various companies, and us at the time of the sale of Western Hills Hotel to you, are to be made a part of your proposed sale to any purchaser *
By that letter the plaintiffs agreed that Clark might sell the hotel subject to the two conditions specified in the letter.
Section 24 did not refer to the contract between the plaintiffs and Clark Investment Company, nor to the Loan Agreement, but only to a letter from Clark and Clark Investment Company to H. S. and William T. Green, dated April 8, 1959, wherein Clark agreed for a period of ten years that Green would advise and counsel in connection with the operation of Western Hills Hotel and would be paid a salary of $100.00 per week for these services so long as Clark or the Investment Company owned the Western Hills Hotel. Obviously the plaintiffs had no standing to insist that Weissberg assume *440that obligation. Section 25 referred to the obligation of Weissberg to perform all of the obligations incumbent upon seller under the loan agreement. As pointed out below, all of those obligations are imposed upon Weissberg by the judgment of the trial court and the Court of Civil Appeals. The plaintiffs further say that in order for condition 2 to be fulfilled the contract of sale necessarily would have required Weissberg to assume liability on plaintiffs’ notes. This obligation, under the terms of the Loan Agreement or the contract between plaintiffs and Clark, the plaintiffs had no legal obligation to require.
Subsequently a contract of sale providing that the purchaser took subject to, instead of assuming payment of the notes, was executed between Clark and Weissberg. Upon receipt of a copy of that contract the petitioners then wrote to Clark advising him that they did not desire to execute their prior right to purchase.
The plaintiffs take the position that they were not aware until after the Clark-Weiss-berg contract was executed, that under the terms of the chattel mortgage they had the right to accelerate the payment of their notes. This chattel mortgage was prepared by their own lawyer on a printed form and placed of record. They are charged with their lawyers’ knowledge and should not be heard to plead ignorance of that provision.
Findings of fact made by the trial court are in part as follows:
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“Plaintiffs learned that the sales contract between the Clark Investment Company and Weissberg Corporation had been entered into shortly after April 4, 1961. For several months thereafter they made no protest of the sale of the personalty, during which time the Weissberg Corporation paid out $500,000.00 in cash to the Clark Investment Company; made monthly payments of $11,403.40 on the first lien to the Prudential Life Insurance Company; paid $4,000.00 a month, plus interest, to the Clark Investment Company; paid $1193.00 a month to each of the four (4) plaintiffs, and spent substantial sums in bettering the hotel. The Weissberg Corporation bought the personalty subject to the plaintiffs’ lien and not in derogation of their superior claim to it as collateral.
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“Knowing in March, 1961, that Clark Investment Company was negotiating a sale to Weissberg Corporation of the entire hotel facility, including the personalty covered by the chattel mortgage, these plaintiffs all authorized H. S. Green to write to and to cause to be delivered to A. R. Clark, president of A. R. Clark Investment Company, Plaintiffs’ Ex. 23, wherein they advised Clark as follows: ‘You may proceed to sell Western Hills Hotel.’
“I construe this to be a consent in writing for Clark Investment Company to sell this personalty covered by the chattel mortgage.
“I conclude that all plaintiffs are charged with constructive knowledge of all the contents of the deed of trust and chattel mortgage in question, which their attorney drew for them.
“Plaintiffs on March 13, 1961, received a copy of the final contract of sale (Plaintiffs’ Ex. 25) between Clark Investment Company and the Weissberg Corporation. They knew all the terms of this sale and that Clark Investment Company was conveying to Weissberg Corporation all the personalty connected with the hotel. Knowing these facts they then wrote to Clark Plaintiffs’ Ex. 27 and raised no objection to the transfer of this personalty by Clark Investment Company. The Clark Investment Company and the Weissberg Corporation thereafter substantially changed their position.
“I conclude that plaintiffs have waived any right they might have had to fore*441close on the grounds that this chattel mortgage provision was breached and also that by virtue of the facts outlined here and in the findings of fact that they are now estopped from trying to foreclose the notes on that ground.”
I concur in these findings and conclusions reached by the trial court and the Court of Civil Appeals on this point.
This Court has held that in this case, as a matter of law, there was no waiver of the right to accelerate. Regardless of constructive knowledge that must he imputed to the plaintiff, they did know on April 6, 1961, that this right was given by the terms of the chattel mortgage in the event of a sale without their consent. It was not until more than four months later, namely, August 17, 1961, after the contract of sale was executed, that a letter was written to Clark and Weissberg by W. T. Green notifying them that he, W. T. Green, had elected to accelerate the maturity of the promissory note payable to him and it was not until September 8, 1961, that the plaintiffs made Weissberg a party defendant to this suit and sought to accelerate the payment of their notes. In its opinion this Court says that “this delay must be viewed in the light of all of the circumstances.” Of course the findings of the trial court are to be upheld, if evidence viewed most favorably, will support those findings. The Court may draw such inferences from the words and conduct of the parties as may be justified.
The contract between Green and Clark Investment Company clearly shows that all parties contemplated that a sale of the hotel properties by Clark or Clark Investment Company was possible, if not probable. In that contract the plaintiffs made but one requirement and that was their prior right to purchase upon the same terms offered to any other prospective purchaser. The right to accelerate their notes in the event of a sale of the mortgaged personal property without their written consent would effectively block any sale that Clark might negotiate. That possibility was never mentioned or remotely referred to prior to the completion of the sale to Weissberg. Aside from the fact that Weissberg paid to Clark $500,000.00 cash consideration and executed its note to the Investment Company for $148,000.00, upon which monthly installments of $4,000.00 have been paid, it has also paid to the Prudential Insurance Company, the holder of the first lien, $11,000.00 each month since April, 1961; has paid to the plaintiffs, Green and others, the sum of $4,700.00 each month; spent approximately $35,000.00 on improvements to the hotel property, and assumed and paid a $40,000.00 debt owed by the hotel to the Fort Worth National Bank. It can hardly be said that as a matter of law Weissberg had not relied to its prejudice on the delay of the plaintiffs to accelerate under the provisions of the chattel mortgage and declared their notes due and payable. In my opinion there is evidence in the record to justify the findings of waiver and estoppel.
The plaintiffs raised two other points which they say entitle them to accelerate and to a judgment foreclosing the liens secured by those notes as follows:
1. That the distribution of assets of the Clark Investment Company to A. R. Clark was a breach of paragraph (b) of the Loan Agreement which provided that while the plaintiffs’ notes were unpaid, the total compensation by way of dividends, salaries, expenses or otherwise, that should be paid to Clark or to any other person in the ownership of Western Hills Hotel should be limited to $25,000.00 per year or not to exceed $50,000.00 per year, if the hotel is being maintained in a first class condition.
2. That the distribution of assets of Clark Investment Company to Clark was a breach of paragraph (e) of the Loan Agreement which provided:
“Company [A. R. Clark Investment Company] shall make no change in its capital structure without the prior written consent of sellers; provided, however, Company may distribute to Clark *442all of its assets subject to its debts; ⅝ * * »
In respect to the first point, the trial court imposed upon Weissberg the duty to limit total withdrawals by it, or by its successors or assigns, from the operation of the hotel in conformity with the obliga-tioris imposed upon Clark by paragraph (b) of the Loan Agreement. The plaintiffs complained that since Weissberg had many stockholders, complete relief would require that these stockholders be included as persons also restricted from withdrawals along with Weissberg. The Court of Civil Appeals sustained that contention and reformed the judgment of the trial court to include all stockholders of Weissberg.
The complaint now is that the distribution to Clark by Clark Investment Company of the $500,000.00 received by Weissberg in consideration of the sale was such a breach of paragraph (b) of the loan agreement as would justify a judgment for the petitioners in the full amount of their notes and for foreclosure of their liens. I do not follow this reasoning. Paragraph (b) clearly referred to the net income and profits derived from the operation of the hotel and not to any profit that might have been received by Clark or Clark Investment Company by way of sale. This profit came not out of Western Hills, but was paid out of the assets of the Weissberg Corporation.
In my opinion the second point has no merit. The Clark Investment Company at all times was a corporation with a capital paid-in stock of only $1,000.00. What possible change in its capital structure would be detrimental to plaintiffs, especially so since the Court of Civil Appeals charged Clark with personal liability to the extent of $327,000.00, the amount of profits derived from the sale less the amount paid to the government as income tax and has placed an equitable lien on those funds in the plaintiff’s favor. Thus, they not only have all of the security for the payment of these notes that they possessed prior to the sale from Clark' to Weissberg, but additionally are secured by the equitable hen on funds which represent practically one-third of the total amount of the notes.
I would uphold the findings and conclusions of the trial court and deny the right of acceleration.
GRIFFIN, NORVELL and STEAK-LEY, JJ., join in this dissent.