HERMAN COOLS AND LONDON SQUARE, LTD.FROM A DISTRICT COURT APPELLANTS, v. OF RENIER NEVELS AND HENRIETTE NEVELS-RAMAKER APPELLEES.COLLI

COURT OF APPEALS
FIFTH DISTRICT OF TEXAS
AT DALLAS
NO. 05-88-01441-CV
HERMAN COOLS AND LONDON SQUARE, LTD.FROM A DISTRICT COURT
 
APPELLANTS,
 
V. OF
 
RENIER NEVELS AND HENRIETTE NEVELS-RAMAKER
 
APPELLEES.COLLIN COUNTY,TEXAS
 
 
_________________________________________________________________
 
BEFORE CHIEF JUSTICE ENOCH
AND JUSTICES WILLIAMS FN:1 AND STEPHENS FN:2
OPINION BY CHIEF JUSTICE ENOCH
AUGUST 22, 1989
        This is an appeal from an order dismissing an equitable bill of review filed by Herman Cools and London Square, Ltd. (jointly referred to as Cools) of a default judgment entered in favor of Renier Nevels and Henriette Nevels-Ramaker (the Nevels). In two points of error, Cools contends that the trial court erred in dismissing the equitable bill of review for lack of a meritorious defense because (1) they established a prima facie defense to the action in which the default judgment was entered against them and (2), in the alternative, since they never received notice of the default judgment, the requirement of a meritorious defense was a violation of his due process rights under the United States Constitution. We agree that a prima facie defense was established by Cools. Therefore, we reverse the judgment of the trial court and remand for further proceedings.
        The original suit underlying this bill of review was filed by the Nevels against Cools. The Nevels alleged that Cools had defaulted on a note between the parties. Although Cools does not remember being served with citation in the case, the sheriff's return indicates that Cools was served, both individually and on behalf of London Square. On November 11, 1986, the trial court entered judgment by default against Cools in the amount of $745, 000, plus interest and attorney's fees, and granted a permanent injunction preventing Cools from transferring his individual interest in London Square. Cools filed a petition for equitable bill of review on February 6, 1987. On October 11, 1987, the district court held a pre-trial hearing to determine if there was prima facie evidence of a meritorious defense to the Nevels' cause of action in the underlying suit. The court then dismissed the bill of review finding that no meritorious defense was established.
        Cools argues that the trial court erred in finding that a meritorious defense was not established. He submits that the proof in this case establishes that he has at least five meritorious defenses to the original lawsuit: (1) the note was wrongfully accelerated; (2) the note is usurious on its face; (3) the original suit involved violations of the local rules of practice; (4) a permanent injunction was not supported by the evidence; and (5) failure of consideration.
        A prima facie meritorious defense is made out when it is determined that the complainant's defense is not barred as a matter of law and that he will be entitled to a judgment on retrial if no evidence to the contrary is offered. Baker v. Goldsmith, 582 S.W.2d 404, 409 (Tex. 1979). The bill of review defendant may respond with proof showing that the defense is barred as a matter of law, but factual disputes are resolved in favor of the complainant for the purposes of the pretrial determination of a meritorious defense. Id.
        In the case at bar, all that is required under Baker, supra is that Cools demonstrate that one of his alleged defenses is a meritorious defense. Regarding his obligation under the note, Cools admits to signing the note and that he failed to make any principal payments on the note. He does not dispute that the Nevels properly notified him of his resulting default on the note or that the Nevels gave him proper notice that the note was accelerated. The only complaint Cools raises is that the Nevels did not give him proper notice of their intent to accelerate the note. The Nevels respond that while the words "intent to accelerate" were never used, the intent was clear in the communications between the Nevels and Cools.
        It is settled that where the holder of a promissory note has the option to accelerate maturity of the note upon the maker's default, equity demands notice be given of the intent to exercise the option. Ogden v. Gibraltar Savings Association, 640 S.W.2d 232 (Tex. 1982). Conversely, in the absence of a waiver, the holder cannot exercise this option unless he first presents the note, demands past due installments and advises that the note will be accelerated if the delinquency is not cured. Faulk v. Faulk, 147 Tex. 253, 257, 214 S.W.2d 614, 616 (1948); Allen Sales & Servicenter, Inc. v. Ryan, 525 S.W.2d 863, 865-66 (Tex. 1975); Ogden, 640 S.W.2d at 233. Further, notice that a debt has been accelerated is ineffective unless preceded by proper notice of the intent to accelerate. Williamsburg v. Dunlap, 693 S.W.2d 373 (Tex. 1985); Ogden, 640 S.W.2d 232 (Tex. 1982).
        It is undisputed that there is no letter notifying Cools of the Nevels' intent to accelerate the note. Rather the Nevels' assert that there are two letters which, when read together, constitute notice of intent to accelerate. The first letter on April 7, 1986 from the Nevels to Cools stated:
            In the fullest confidence to get my money back A.S.A.P. I want to ask you herewith, no matter how difficult it is, to send me the first payment for 1986 (even a partial payment).
The second letter dated July 21, 1989 stated:
            "Herman, still as your friend, I request (very urgently though) to repay all the monies 700,000$ plus back interest, within a reasonable period of thirty days. I am entitled to that, per the promissory note of 14 December 1984. You must understand Herman that this has never been my way of working with you, but by handling this way, you force me to take action if this continues. FN:3
(Emphasis added.) The Nevels argue that the above emphasized section, taken in context with the April 7 reminder of past due payment, was a demand for the past due installments, and a grant of thirty days' time in which to bring the payments current "per the promissory note" before the Nevels were "force[d] to take action if this continues" by demanding payment of the entire note. This is to say, notice of intent to accelerate.
        While there is no requirement that the words "intent to accelerate" be used, the notice must, in substance, make demand upon the maker for past due installments and give the maker an "opportunity ... to pay the late installments before the entire debt is accelerated." Joy Corp. v. Nob Hill North Properties, Ltd., 542 S.W.2d 691, 695 (Tex. Civ. App. -Tyler 1976, no writ). The first letter only asked that the past installment be paid. The second letter, asking for the full $700,000 plus past interest, shows that the Nevels had exercised their option to accelerate. Assuming that a notice of the intent to accelerate the note can be pulled from the words in the July 21st letter, the notice of the intent to accelerate and the notice of acceleration cannot be given at the same time. The purpose of the notice of intent to accelerate is to give the debtor the opportunity to cure his default before the note has been actually accelerated. Ogden, 640 S.W.2d at 234. No notice of the intent to accelerate was given. Consequently, the note between the parties was not properly accelerated. Since we conclude that Cools has raised a meritorious defense, we do not reach the constitutional question.
        The judgment of the trial court is REVERSED and the cause is REMANDED for trial on the remaining elements of the bill of review.         August 22, 1989.
 
         ______________________________
                                                          CRAIG TRIVELY ENOCH
CHIEF JUSTICE DO NOT PUBLISH TEX. R. APP. P. 90
 
 
88-01441.F
 
FN:1 The Honorable Claude Williams, Chief Justice, retired, Court of Appeals, Fifth District of Texas at Dallas. sitting by assignment.
FN:2 The Honorable Bill J. Stephens, Justice, retired, Court of Appeals, Fifth District of Texas at Dallas, sitting by assignment.
FN:3 Both letters have been translated from Dutch.
File Date[08-24-89]
File Name[881441F]