In The
Court of Appeals
Ninth District of Texas at Beaumont
________________
NO. 09-23-00085-CV ________________
FLOYD RILEY AND SONIA RILEY, Appellants v.
THE BANK OF NEW YORK MELLON F/K/A THE BANK OF NEW YORK AS TRUSTEE FOR THE BENEFIT OF THE CERTIFICATEHOLDERS OF THE CW ABS INC., ASSET-BACKED CERTIFICATES, SERIES 2004-5, CARRINGTON MORTGAGE SERVICES, LLC, AND MORTGAGE CONTRACTING SERVICES, LLC. Appellees ________________________________________________________________________
On Appeal from the 136th District Court Jefferson County, Texas Trial Cause No. D-201,456 ________________________________________________________________________
OPINION
Floyd Riley (“Floyd”) and Sonia Riley (“Sonia”) (collectively, “the Rileys”)
appeal the trial court’s denial of their motion for partial summary judgment, its
granting of summary judgment in favor of The Bank of New York Mellon f/k/a The
Bank of New York as Trustee for the Benefit of the Certificateholders of the CW
ABS Inc., Asset-Backed Certificates, Series 2004-5 (“BONYM”), Carrington
1 Mortgage Services, LLC, (“CMS”) and Mortgage Contracting Services, LLC
(“MCS”) (collectively, “Appellees”), and its granting of Appellees’ motion for
protection from discovery. 1
Because the Rileys’ motion for partial summary judgment was premised on
an affirmative defense to a claim which has since been dismissed, thereby mooting
the affirmative defense, we overrule the Rileys’ first issue without reaching its
merits. Floyd’s second issue involves Appellees’ motion for summary judgment
which asserts Floyd’s counterclaims are barred by affirmative defenses of release
and res judicata. As explained below, we agree Floyd’s counterclaims for breach of
contract and negligent misrepresentation are barred by res judicata, and we affirm
that portion of the summary judgment. However, because we conclude the remainder
of Floyd’s counterclaims are not barred either by release or by res judicata, we
reverse and remand in part. We conclude the Rileys’ third issue, challenging the trial
court’s protective order, is moot because the order has expired. Lastly, because
Sonia’s appeal includes only issues one and three, both of which are moot, we
dismiss her appeal as moot.
Background
In 2004, the Rileys took out a $104,000.00 home equity loan secured by a
deed of trust on their property in Beaumont. After the Rileys stopped making
1The Rileys are self-represented, both in the trial court and on appeal.
2 payments on the loan in 2010, BONYM’s mortgage servicer’s attorneys sent the
Rileys a notice of acceleration in 2011 and filed a Home Equity Foreclosure
Application under Rule 736 in the 58th District Court in Jefferson County, Texas, in
2013. See Tex. R. Civ. P. 736. The 58th District Court signed a Home Equity
Foreclosure Order directing the foreclosure sale to take place after November 5,
2013. No such sale took place.
In May 2014, the Rileys filed a separate proceeding in the 172nd District
Court in Jefferson County, Texas, to stop the foreclosure sale. In 2015, BONYM’s
mortgage servicer’s attorneys sent the Rileys a letter rescinding its 2011 notice of
acceleration. In 2016, the Rileys voluntarily dismissed their lawsuit in the 172nd
District Court as part of a Settlement Agreement and Release (“the Agreement”)
executed by the Rileys, BONYM and its mortgage servicers on March 24, 2016.
Under the terms of the Agreement, the Rileys received $60,000 from BONYM and
$5,000 from one of BONYM’s mortgage servicers in exchange for which the Rileys
agreed to certain terms, including consent to a nonjudicial foreclosure, waiver of all
defenses they may have to such a foreclosure, and a release of BONYM and its
affiliates.
In late 2016, BONYM again provided notice of default and intent to accelerate
and then filed an Application for Expedited Order under Rule 736 on a Home Equity
Loan in the 60th District Court in Jefferson County, Texas. Despite the terms of the
3 Agreement, the Rileys answered and asserted defenses. Nevertheless, in July 2017,
the 60th District Court signed a Home Equity Foreclosure Order allowing BONYM
and its affiliates to proceed with foreclosure unless the Rileys filed “a separate,
original proceeding… in accordance with Texas Rule of Civil Procedure 736.11.”
Although no such separate proceeding was filed, no such sale took place.
Instead, in March 2018, BONYM filed this lawsuit against the Rileys in the
136th District Court in Jefferson County, Texas. BONYM’s petition does not
mention any of the prior litigation between the parties, the Agreement, nor the 60th
District Court’s July 2017 Foreclosure Order, and simply alleges the Rileys
defaulted on their home equity loan for which BONYM prays for an order allowing
it to proceed with foreclosure. BONYM would later explain, “Unfortunately, legal
counsel for [BONYM] in the 2018 Lawsuit was not the same legal counsel that
represented [BONYM] in the previous 2014 Lawsuit. As a result, legal counsel for
[BONYM] in the 2018 Lawsuit was unaware of the prior Settlement Agreement
reached between the parties in the 2014 Lawsuit.” The Rileys moved for summary
judgment asserting BONYM’s foreclosure action was barred by limitations since it
had been over four years since BONYM sent its 2011 notice of default and intent to
accelerate. The trial court granted summary judgment in the Rileys’ favor in August
2018, signing a Final Judgment and Order which dismissed BONYM’s claims with
prejudice and ordered that BONYM’s lien was void.
4 BONYM appealed to this Court. We would eventually reverse the summary
judgment on the basis a genuine issue of material fact existed regarding whether
BONYM timely rescinded its notice of acceleration pursuant to Texas Civil Practice
and Remedies Code section 16.038. See Bank of N.Y. Mellon v. Riley, No. 09-18-
00403-CV, 2019 Tex. App. LEXIS 9014, at *17 (Tex. App.—Beaumont Oct. 10,
2019, no pet.); Tex. Civ. Prac. & Rem. Code Ann. § 16.038. But in the meantime,
on January 9, 2019, while the appeal was still pending in this Court, BONYM’s
mortgage servicer, CMS, allegedly sent its property preservation contractor, MCS,
to enter the Property for the purpose of securing and winterizing it. MCS’s alleged
conduct on that date would subsequently lead to Floyd’s filing counterclaims against
BONYM and third-party actions bringing CMS and MCS into the case. The trial
court’s summary judgment disposition of those claims is now one of the issues
before us in this appeal.
On March 7, 2019, the Rileys filed in the Jefferson County Clerk’s Office’s
official public records a Release of Lien that had been signed by the judge of the
136th District Court on August 14, 2018, declaring BONYM’s deed of trust invalid
and void.
In June 2019, while the first appeal was still pending in this Court, BONYM
filed a separate lawsuit against the Rileys in the United States District Court for the
Eastern District of Texas, Beaumont Division, alleging the Rileys breached the terms
5 of the Agreement by “(1) asserting false rights to the Property, (2) claiming
[BONYM’s] lien interest is invalid, and (3) otherwise engaging in vexatious
litigation aimed at denying [BONYM] the benefit of its bargain as obtained through
the Settlement Agreement.”
In October 2019, shortly after we issued our ruling and remanded the state
court case back to the 136th District Court, Floyd filed his Original Counterclaims
against BONYM, alleging BONYM’s agents (including CMS and MCS) forcibly
entered his property on January 9, 2019, after the deed of trust had become void, and
“invaded his privacy, sorted through his personal mail and closets, took interior
photographs, post[ed] embarrassing notices visible to the public, publicly revealed
private information [to his neighbors] and change[d] the locks.” 2 See Bank of N.Y.
Mellon, 2019 Tex. App. LEXIS 9014, at *17. Floyd’s Counterclaim asserts BONYM
is liable for trespass, invasion of privacy (both by intrusion upon seclusion and by
revealing private facts), intentional infliction of emotional distress through abuse of
process and malicious prosecution, negligence, gross negligence, negligence per se
(by harassment, trespass, criminal mischief and threat), and negligent hiring or
2There is no indication in the record that Sonia ever joined in Floyd’s counterclaims or third-party actions. 6 supervision.3 Based on the same allegations, Floyd obtained leave of court and
joined CMS and MCS as third-party defendants.
In January 2021, the Rileys moved for partial summary judgment in state court
asserting BONYM’s foreclosure action was barred by limitations because Texas
Civil Practice and Remedies Code section 16.038, which tolls limitations upon a
rescission of a notice of acceleration, is unconstitutional, either facially or as a
retroactively applied. The trial court’s denial of that motion is now one of the issues
in this appeal.
In March 2021, the federal district court granted summary judgment in favor
of BONYM, holding the Rileys “breached the Agreement when they first challenged
BONYM’s 2016 application for a foreclosure order.” Bank of N.Y. Mellon v. Riley,
No. 1:19-CV-00279, 2021 U.S. Dist. LEXIS 129416, at *8 (E.D. Tex. Mar. 23,
2021). The summary judgment concludes with language that “this judgment serves
as an order authorizing [BONYM] to judicially foreclose its lien in compliance with
Texas Constitution [article] XVI, [section] 50(a)(6), the Loan Agreement and [Texas
Property Code section] 51.002.” Id. at *11. In July 2021, the 136th District Court
abated further proceedings in this case pending the outcome of the Rileys’ appeal to
3The pleading was subsequently amended to add claims for alleged violations
of the Texas Debt Collection Act, trespass to try title, breach of contract, negligent misrepresentation, and civil conspiracy, and a request that the court declare Texas Civil Practice and Remedies Code section 16.038 unconstitutional. 7 the Fifth Circuit. In June 2022, the Fifth Circuit affirmed the summary judgment for
BONYM. See Bank of N.Y. Mellon v. Riley, No. 21-40383, 2022 U.S. App. LEXIS
15042 (5th Cir. June 1, 2022).
In July 2022, the 136th District Court lifted the abatement, and in August
2022, Appellees filed a Motion for Protection which the trial court granted in
September 2022, protecting Appellees from any further discovery until the court had
ruled on a motion for summary judgment to be filed by Appellees. Whether the trial
court erred in entering the protective order is one of the issues now on appeal.
In October 2022, Appellees moved for summary judgment seeking dismissal
of the counterclaims and third-party claims contained in the Floyd’s Fourth
Amended Counterclaim and Third-Party Claims, arguing all such claims were barred
by res judicata upon resolution of the federal court case and, alternatively, had been
released under the terms of the Agreement. Attached as evidence to Appellees’
motion for summary judgment were several exhibits, including an affidavit, a copy
of the Agreement, certain pleadings and orders from the federal litigation, and a copy
of the Fifth Circuit’s opinion. After Floyd filed his Fifth Amended Counterclaims
and Third-Party Claims, Appellees amended their motion for summary judgment,
reasserting their arguments that all such claims are barred by the defenses of res
judicata and release. Although the amended motion for summary judgment
references the same exhibits that were attached to the original motion, additional
8 copies of those exhibits are not attached to the amended motion. Whether the trial
court properly considered the exhibits is one of the issues now on appeal.
In January 2023, the trial court granted Appellees’ Amended Joint Motion for
Summary Judgment and dismissed with prejudice all claims asserted by the Rileys’
against Appellees. After BONYM announced it was voluntarily dismissing its
claims against the Rileys, the trial court entered final judgment in February 2023,
and the Rileys timely appealed. Whether the trial court erred in granting the
summary judgment is one of the issues now on appeal.
Analysis
1. The Rileys’ Motion for Partial Summary Judgment
In their first issue, the Rileys argue the trial court erred when it denied their
Traditional Motion for Partial Summary Judgment on the Affirmative Defense of
Limitations. The motion asserts that because BONYM brought its foreclosure action
more than four years after issuing its December 28, 2011, notice of default and
acceleration, the deed of trust became void on December 28, 2015. Tex. Civ. Prac.
& Rem. Code Ann. § 16.035(b); Holy Cross Church of God in Christ v. Wolf, 44
S.W.3d 562, 567 (Tex. 2001) (“When this four-year period expires, the real-property
lien and the power of sale to enforce the lien become void.”). The Rileys further
argue BONYM did not effectively rescind its notice of acceleration, and the tolling
provision contained in Texas Civil Practice and Remedies Code section 16.038 is
9 unconstitutional. In response, Appellees argue the Rileys’ complaint about the trial
court’s denial of their motion for partial summary judgment was made moot when
BONYM dismissed its claim for judicial foreclosure. We agree with Appellees.
The Rileys assertions that BONYM’s claims are barred by limitations and that
section 16.038 is unconstitutional are defensive in nature because they seek only to
bar BONYM’s claims and do not seek affirmative relief. The Final Judgment orders
that BONYM’s “claims against the Rileys are DISMISSED WITHOUT
PREJUDICE.” A nonsuit extinguishes the dismissed claim, making the merits of the
claim moot. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). “Any
ruling on the merits of a moot issue constitutes an advisory opinion, which we lack
jurisdiction to issue.” In the Int. of J.J.R.S., 627 S.W.3d 211, 225 (Tex. 2021) (citing
Tex. Const. art. II, § 1). We have no jurisdiction to issue an advisory opinion on the
merits of a claim that is no longer being asserted, including whether it may have
been barred by an affirmative defense. See Baker v. Limestone Cnty., No. 10-19-
00219-CV, 2021 Tex. App. LEXIS 827, at *6-7 (Tex. App.—Waco Feb. 3, 2021,
pet. denied) (mem. op.) (County’s nonsuit of claim for delinquent taxes mooted
entire controversy, including taxpayers’ defenses and arguments which were not
affirmative claims for relief.).
Therefore, we do not reach the merits of the arguments made in the Rileys’
motion. Although the issues of whether BONYM effectively rescinded its notice of
10 acceleration, whether section 16.038 is unconstitutional, and whether the deed of
trust is void may or may not be moot in the context of Floyd’s counterclaims on
remand, the trial court’s denial of the Rileys’ motion based on the affirmative
defense of limitations is moot because BONYM’s foreclosure claim has been
dismissed. The Rileys’ first issue is overruled.
2. Appellees’ Motion for Summary Judgment
Floyd presents alternative arguments in support of his second issue in which
he asserts the trial court erred in granting summary judgment in favor of Appellees.
First, Floyd argues summary judgment was improper because exhibits that were
attached to Appellees’ original motion for summary judgment were not also attached
to their amended motion. Secondly, Floyd asserts that even if the exhibits were
properly considered by the trial court, genuine issues of material fact exist regarding
whether his counterclaims were released in the Agreement and whether they are
barred by res judicata.
a. Evidentiary Issues
Texas Rule of Civil Procedure 166a(c) permits a trial court to consider various
forms of summary judgment evidence, including affidavits and authenticated records
“on file at the time of the hearing[.]” Tex. R. Civ. P. 166a(c); see also AmeriGas
Propane, L.P. v. Aboytes-Muñiz, No. 09-18-00122-CV, 2019 Tex. App. LEXIS
3992, at *11 (Tex. App.—Beaumont May 16, 2019, pet. denied) (mem. op.) (“The
11 trial court may consider all competent evidence on file at the time of the summary
judgment hearing.”). The rule does not require summary judgment evidence to be
physically attached to the motion. See Kastner v. Jenkens & Gilchrist, P.C., 231
S.W.3d 571, 581 (Tex. App.—Dallas 2007, no pet.). A trial court is not required to
sift through voluminous exhibits in search of evidence not specifically referenced in
a summary judgment motion or response. See Costanzo v. Tex. Advantage Cmty.
Bank N.A., No. 09-21-00345-CV, 2022 Tex. App. LEXIS 7249, at *8 (Tex. App.—
Beaumont Sep. 29, 2022, no pet.) (mem. op.). It is not error, however, for a trial
court to consider exhibits that are both on file with the court and properly referenced
in the motion or response. See Lance v. Robinson, 543 S.W.3d 723, 733 (Tex. 2018)
(trial court properly considered evidence admitted during earlier temporary
injunction hearing and specifically referenced in motion for summary judgment);
R.I.O. Sys. v. Union Carbide Corp., 780 S.W.2d 489, 492 (Tex. App.—Corpus
Christi 1989, writ denied) (trial court properly considered exhibits attached to
previous motion for summary judgment and referenced in motion currently before
the court).
Here, Appellees’ exhibits were on file with the court by virtue of having been
attached to the original motion for summary judgment. These same exhibits,
although not physically attached to the amended motion, were referenced in that
motion and each exhibit was specifically cited as support for the various grounds
12 and arguments therein. Moreover, the trial court’s Final Judgment includes findings
that Appellees’ exhibits were “properly before the Court” and that “the evidence
cited in the Amended Joint Motion for Summary Judgment was the same as the
evidence attached to the Joint Motion for Summary Judgment.” Because the exhibits
were both on file and specifically referenced in the amended motion, we conclude it
was not error for the trial court to consider them. We overrule the first subpart of
Floyd’s second issue.
b. Substantive Issues
Next, we consider Floyd’s arguments that summary judgment was improper
because genuine issues of fact remain with respect to Appellees’ affirmative
defenses of release and res judicata. A party seeking a traditional summary judgment
under Rule 166a(c) may either conclusively negate at least one element of each of
the other party’s claims or conclusively establish each element of an affirmative
defense with respect to each of the other party’s claims. Frost Nat’l Bank v.
Fernandez, 315 S.W.3d 494, 508 (Tex. 2010); Tex. R. Civ. P. 166a(c). Appellees’
amended motion does not attempt to negate Floyd’s counterclaims; instead, it asserts
the summary judgment evidence conclusively establishes at least one of two
affirmative defenses: release or res judicata. Because the trial court’s order does not
specify the grounds upon which summary judgment was granted, we must affirm if
13 either ground is meritorious. FM Props. Operating Co. v. City of Austin, 22 S.W.3d
868, 872-73 (Tex. 2000).
i. Release
Appellees’ amended motion for summary judgment asserts Floyd’s
counterclaims are barred by the release contained in the Agreement. The parties
disagree about the scope of the release, which reads as follows:
Plaintiffs’ Release. For consideration of the Payments, the receipt, and sufficiency of which are hereby expressly acknowledged, the Plaintiffs for themselves and each of their present and former heirs, executors, administrators, partners, co-obligors, co-guarantors, guarantors, sureties, family members, spouses, attorneys, insurers, agents, representatives, predecessors, successors, assigns and all those who claim through them or could claim through them (collectively “Releasors”) unconditionally and irrevocably remise, waive, satisfy, release, acquit, and forever discharge Defendants BANA, Ditech, and BONY and each of their present, former and future parents, predecessors, successors, assigns, assignees, affiliates, subsidiaries, divisions, departments, subdivisions, owners, partners, principals, trustees, creditors, shareholders, members, joint ventures, co-venturers, officers and directors (whether acting in such capacity or individually), attorneys, vendors, accountants, nominees, agents (alleged, apparent or actual), representatives, employees, managers, administrators, and/or each person or entity acting or purporting to act for them or on their behalf, as well as any past, present or future person or any entity that held or holds any interest in the Loan, including the underlying Note and Deed of Trust, including but not limited to Bank of America Corporation and all of its subsidiaries and affiliates (collectively the “Releasees”), and each of them respectively, from and against any and all past and present claims, counterclaims, actions, defenses, affirmative defenses, suits, rights, causes of action, lawsuits, set-offs, costs, losses, controversies, agreements, promises and demands, or liabilities, of whatever kind or character, direct or indirect, whether known or unknown or capable of being known, whether existing now or to come into existence in the future, arising at law or in equity, by 14 right of action or otherwise, including, but not limited to, suits, debts, accounts, bills, damages, judgments, executions, warranties, attorneys’ fees, costs of litigation, expenses, claims and demands whatsoever that the Releasors, or their attorneys, agents, representatives, predecessors, successors and assigns, have or may have against the Releasees, for, upon, or by reason of any matter, cause or thing, whatsoever, in law or equity, including, without limitation, the claims made or which could have been made by the Plaintiffs arising from the origination or servicing of the Loan (in any manner) as well as in any way related to the underlying Property, Note, and/or Deed of Trust any servicing act or omission thereon as well as any claim or issue which was or could have been brought in the Litigation as of the date of this Agreement (collectively “Released Matters”).
The question before the trial court and now before us is whether the release
applies only to past and present claims as of the date the release was signed on March
24, 2016, or whether it also includes future claims, specifically those arising out of
Appellees’ alleged conduct in January 2019. For a claim to be released, the claim
must be mentioned in the release. Victoria Bank & Tr. Co. v. Brady, 811 S.W.2d
931, 938 (Tex. 1991). “[A]ny claims not clearly within the subject matter of the
release are not discharged. Furthermore, general categorical release clauses are
narrowly construed.” Id. (internal citations omitted). “A settlement agreement is a
contract, and its construction is governed by legal principles applicable to contracts
generally.” Austin Tr. Co. v. Houren, 664 S.W.3d 35, 42 (Tex. 2023). “When a
contract’s meaning is disputed, our primary objective is to ascertain and give effect
to the parties’ intent as expressed in the instrument.” URI, Inc. v. Kleberg Cnty., 543
S.W.3d 755, 763 (Tex. 2018). “We give terms their plain, ordinary, and generally
15 accepted meaning unless the instrument shows that the parties used them in a
technical or different sense.” Heritage Res., Inc. v. NationsBank, Co., 939 S.W.2d
118, 121 (Tex. 1996). “To determine a term’s common, ordinary meaning, we
typically look first to dictionary definitions and then consider the term’s usage in
other authorities.” Anadarko Petroleum Corp. v. Hous. Cas. Co., 573 S.W.3d 187,
192 (Tex. 2019). “Both the presence of ambiguity and interpretation of an
unambiguous contract are questions of law we review de novo using well-settled
contract-construction principles.” URI, 543 S.W.3d at 763.
Although Floyd does not assert the Agreement is ambiguous, he argues the
Agreement means one thing while Appellees argue it unambiguously means another.
We may conclude that a contract is ambiguous even when neither party asserts that
it is. Sage St. Assocs. v. Northdale Constr. Co., 863 S.W.2d 438, 445 (Tex. 1993).
On the other hand, “[a] contract is not ambiguous simply because the parties disagree
over its meaning.” Dynegy Midstream Servs. v. Apache Corp., 294 S.W.3d 164, 168
(Tex. 2009). A contract is ambiguous “when its meaning is uncertain and doubtful”
or if it “is subject to two or more reasonable interpretations after applying the
pertinent rules of construction[.]” Coker v. Coker, 650 S.W.2d 391, 394 (Tex. 1983);
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003).
16 Here, the release initially describes “Released Matters” as “any and all past
and present claims...” 4 The words “past and present” immediately preceding the
word “claims,” reduces the universal set of “claims” to two smaller sets: “past
claims” and “present claims.” In this context, “past” and “present” are adjectives
describing the noun “claims.” The word “past” means “having happened or existed
before now[.]” See “past” Cambridge Online Dictionary.
https://dictionary.cambridge.org/us/dictionary/english (last visited Mar. 11, 2025)
The word “present” means “happening or existing now.” See “present” Id.
Later in the sentence, various alternative conditions are listed, sometimes
using the word “whether” and sometimes implying its use. The word “whether” in
this context, is a conjunction meaning “it is not important if.” See “whether” Id.
These phrases clarify the parties’ intent that “Released Matters” means “any and all
past and present claims” and that “it is not important if” any of the alternative
conditions exist. For example, we are told “Released Matters” means “any and all
past and present claims… whether known or unknown.” The latter phrase neither
increases nor decreases the number of claims included within the earlier descriptive
4We acknowledge this part of the description of “Released Matters” also
includes “counterclaims, actions, defenses, affirmative defenses, suits, rights, causes of action, lawsuits, set-offs, costs, losses, controversies, agreements, promises and demands, or liabilities,” but because there is no disagreement about the meaning of this language, we use the word “claims” as an abbreviated reference to the full description contained in the release. 17 phrase. Indeed, that is the point of the various phrases beginning with “whether.”
Stated another way, the two sets, “past claims” and “present claims,” combined,
contain the exact same claims as the four subsets, “past known claims,” “past
unknown claims,” “present known claims,” and “present unknown claims.”
Applying this same interpretive tool to the phrase, “whether existing now or
to come into existence in the future,” we observe that the two subsets, “past claims”
and “present claims,” combined, still contain exactly the same claims as the four
subsets, “past claims… existing now,” “present claims… existing now,” “past
claims… to come into existence in the future” and “present claims… to come into
existence in the future.” Neither party asserts that when the Agreement was signed,
Floyd’s claims for conduct occurring almost three years later would qualify as “past
claims… existing now” or “present claims… existing now.” Rather, Appellees
seemingly argue the claims should be considered “past claims… to come into
existence in the future” or “present claims… to come into existence in the future.”
But neither a “past claim,” (that is, a claim that “happened or existed before now”)
nor a “present claim” (that is, a claim that is “happening or existing now”) can “come
into existence in the future.” Just as the phrase “all whole numbers between one and
ten, whether less than eleven or greater than eleven” includes only the whole
numbers one through ten, the phrase “all past and present claims… whether existing
now or to come into existence in the future” includes only past and present claims.
18 We conclude Floyd’s interpretation of the release – that it applies only to past and
present claims as of the date it was signed – is reasonable.
Appellees argue on appeal, “This clause clearly released all claims, including
past claims, present claims, and claims ‘to come into existence in the future[.]’” But
that is not what the release says. “The parties’ intent is governed by what they said
in the [] contract, not by what one side or the other alleges they intended to say but
did not.” Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d
118, 127 (Tex. 2010). Appellees’ argument deletes the word “whether” inserts the
word “including,” replaces “or” with “and” and demotes the words “past” and
“present” by moving them out of the primary descriptive phrase and into the
secondary list of supposedly “included” claims. But even if the release could be
grammatically interpreted as Appellees assert, our inquiry does not stop there,
because we must determine whether such an interpretation is reasonable. For if both
Floyd’s and Appellees’ interpretations are reasonable, the release is ambiguous and
its meaning is a question for a jury, whereas if only Floyd’s interpretation is
reasonable the release can be construed as a matter of law. See Bd. of Regents of the
Univ. of Tex. Sys. v. Idexx Labs., Inc., 691 S.W.3d 438, 445 (Tex. 2024) (“A limited
examination may yield reasonable, conflicting interpretations, but only when one
interpretation does not clearly emerge as correct after a full examination is a contract
ambiguous and the determination of its meaning left to a jury.”).
19 Our rules of construction instruct us to avoid construing a contract in a way
that is “unreasonable, inequitable, and oppressive.” Reilly v. Rangers Mgmt., Inc.,
727 S.W.2d 527, 530 (Tex. 1987). “We also avoid constructions of contract language
that would lead to absurd results.” Rosetta Res. Operating, LP v. Martin, 645 S.W.3d
212, 219 (Tex. 2022). “If a contract is susceptible to more than one construction and
one of those makes the contract fair, customary, and such as prudent people would
naturally execute, while the other would make it inequitable, unusual, or such as
reasonable people likely would not execute, we will adopt the rational and probable
interpretation.” Ill. Tool Works, Inc. v. Harris, 194 S.W.3d 529, 533 (Tex. App.—
Houston [14th Dist.] 2006, no pet.).
We note that Floyd’s counterclaims fall into four categories: intentional torts,
negligence, gross negligence and breach of contract. The Texas Supreme Court has
held that pre-injury waivers of future liability for harm resulting from gross
negligence, recklessness, intentional conduct and breach of contract are
unenforceable because they are contrary to public policy. See Zachry Constr. Corp.
v. Port of Hous. Auth., 449 S.W.3d 98, 116 (Tex. 2014). The Texas Supreme Court
has also held that to release a party from liability for future negligence, the release
must satisfy “the fair notice requirements of conspicuousness and the express
negligence doctrine[.]” Dresser Indus. v. Page Petroleum, 853 S.W.2d 505, 508
(Tex. 1993) (citing Ethyl Corp. v. Daniel Constr. Co., 725 S.W.2d 705, 708 (Tex.
20 1987)); see also Littlefield v. Schaefer, 955 S.W.2d 272, 274-75 (Tex. 1997). “The
express negligence doctrine requires that the parties’ intent to release [one of the
parties] from liability for its own future negligence ‘must be expressed in
unambiguous terms within the four corners of the release.’” Silsbee Hosp., Inc. v.
George, 163 S.W.3d 284, 289 (Tex. App.—Beaumont 2005, pet. denied). For a
contractual provision to be considered conspicuous, “something must appear on the
face of the [contract] to attract the attention of a reasonable person when he looks at
it.” Ling & Co. v. Trinity Sav. & Loan Ass’n, 482 S.W.2d 841, 843 (Tex. 1972). The
language of the release in this case does not satisfy these requirements.
We conclude it would be unreasonable to construe the release in this case as
a release of liability for future negligence, gross negligence, intentional torts or
breach of contract, because to do so would render the release unenforceable on
grounds of public policy as expressed by the Texas Supreme Court in Zachary,
Dresser and Littlefield. After a full examination of the release, only one
interpretation – Floyd’s – clearly emerges as correct. See Bd. of Regents, 691 S.W.3d
at 445. Because the release has only one reasonable interpretation, it is unambiguous
and applies only to claims existing on or before the date it was signed.
Appellees did not carry their burden to conclusively establish their affirmative
defense that Floyd’s counterclaims were released in the Agreement Floyd signed
almost three years before Appellees allegedly engaged in the conduct on which the
21 counterclaims are based. Therefore, summary judgment was improper unless
Appellees conclusively established their other affirmative defense – res judicata.
ii. Res Judicata
Appellees’ amended motion for summary judgment asserts Floyd’s
counterclaims are barred by res judicata. More specifically, Appellees argue Floyd
was required to bring his claims as compulsory counterclaims in the federal district
court where Appellees sued the Rileys for breaching the terms of the Agreement by
opposing Appellees’ foreclosure efforts. In response, Floyd argues his counterclaims
are permissive, not compulsory.
When a party asserts a state court claim is barred by an earlier federal court
judgment, “federal law controls whether the principles of res judicata will bar a later
state court proceeding.” Daic v. Nauru Phosphate Royalties, Inc., 27 S.W.3d 695,
699 (Tex. App.—Beaumont 2000, pet. denied). The Fifth Circuit Court of Appeals
has explained,
Claim preclusion, or res judicata, bars the litigation of claims that either have been litigated or should have been raised in an earlier suit. The test for res judicata has four elements: (1) the parties are identical or in privity; (2) the judgment in the prior action was rendered by a court of competent jurisdiction; (3) the prior action was concluded by a final judgment on the merits; and (4) the same claim or cause of action was involved in both actions.
Test Masters Educ. Servs. v. Singh, 428 F.3d 559, 571 (5th Cir. 2005) (citations
omitted). Floyd asserts the fourth element is lacking.
22 Whether the fourth element is satisfied depends on the application of the
compulsory counterclaim rule. See Dillard v. Sec. Pac. Brokers, Inc., 835 F.2d 607,
609 (5th Cir. 1988). Federal Rule of Civil Procedure 13(a) states the following,
A pleading must state as a counterclaim any claim that—at the time of its service—the pleader has against an opposing party if the claim: (A) arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim; and (B) does not require adding another party over whom the court cannot acquire jurisdiction.
Fed. R. Civ. P. 13(a). “To determine whether two claims constitute the same claim
or cause of action, we apply the ‘transactional test.’ The critical question in applying
the transactional test is ‘whether the two actions were based on the same nucleus of
operative facts.’ This means we evaluate the ‘factual predicate of the claims asserted,
not the legal theories upon which the plaintiff relies.’” Bank of N.Y. Mellon, 2022
U.S. App. LEXIS 15042, at *9 (citations omitted).
This case is unique in that BONYM brought two separate lawsuits that were
pending at the same time against the Rileys, and Floyd filed his counterclaims only
in the first lawsuit. The Fifth Circuit, rejecting the Rileys’ assertion that BONYM
had engaged in claim-splitting by filing two lawsuits, observed, “The central
transaction in the first suit [in the 136th District Court] was related to the Rileys’
deed of trust and [BONYM’s] efforts to enforce that deed of trust and foreclose on
the Beaumont property. The second action [in federal district court], on the other
hand, involved a different transaction, as it focused on a settlement agreement
23 between the parties and the Rileys’ subsequent breach of that agreement.” Bank of
N.Y. Mellon, 2022 U.S. App. LEXIS 15042, at *10-11. Given the different
transactions central to the two separate lawsuits, we must determine whether Floyd’s
counterclaims involve the same nucleus of operative facts as the federal case arising
out of the Agreement rather than those involved in BONYM’s efforts to enforce the
deed of trust and foreclose on the Property, which is the subject of the state court
case currently before us.
Appellees argue on appeal, “Specifically at issue in the [federal district court
case], as observed by the Fifth Circuit, was BONYM’s right to possession of real
property, under a settlement agreement, with the court stating, ‘the contract
stipulated that the Rileys were to turn over the property to [BONYM].’” The Fifth
Circuit in that section of the opinion is referring to the Rileys’ obligation under the
Agreement to turn over title to, rather than possession of, the Property through
consent foreclosure, ultimately concluding the amount in controversy exceeded the
$75,000 threshold for diversity jurisdiction as measured by the value of the Property
BONYM should have received under the Agreement. Bank of N.Y. Mellon, 2022
U.S. App. LEXIS 15042, at *8 (“the value of the property captures the expected
value of the contract”). The opinion never mentions possession, and we note that “a
foreclosure sale ‘transfers title from the debtor to another party, but it does not put
the new owner in possession; it gives him a right to possession… To remove a tenant
24 by sufferance, the new owner must file a forcible detainer suit.’” Coinmach Corp. v.
Aspenwood Apartment Corp., 417 S.W.3d 909, 918 (Tex. 2013) (quoting Lighthouse
Church v. Tex. Bank, 889 S.W.2d 595, 603 (Tex. App.—Houston [14th Dist.] 1994,
writ denied)); see also Cody v. Bank of N.Y., No. A-15-CV-00332-LY-ML, 2015
U.S. Dist. LEXIS 137407, at *17-18 (W.D. Tex. Oct. 8, 2015). Although BONYM’s
lawsuit in federal district court involved issues of whether the Rileys breached the
Agreement by opposing BONYM’s efforts to obtain title to the Property through
uncontested foreclosure, it did not involve issues regarding possession nor whether
BONYM or its contractors had any right to enter and secure the Property in January
2019.
Appellees also argue, “The common nucleus of operative facts in both the
Settlement Agreement Litigation and the present lawsuit is the Settlement
Agreement and the rights of the parties under the Settlement Agreement.” With
respect to Floyd’s claims for breach of contract and negligent misrepresentation, we
agree. According to Floyd’s live pleading, Appellees breached the Agreement’s
confidentiality provision by disclosing its terms without prior notice and without
redacting confidential information. Floyd also alleges Appellees negligently
misrepresented, in the Agreement, that they would provide Floyd advance notice and
an opportunity to protect confidential information. The pleading makes clear that
these two claims are based on the parties’ alleged rights and duties arising out of the
25 Agreement. Because BONYM sued in federal court alleging the Rileys breached the
Agreement, Floyd was required by Federal Rule 13(a) to assert these claims as
counterclaims in the federal case, and because the federal litigation has concluded in
a final judgment, these claims are barred by res judicata.
Next, we consider Floyd’s remaining claims for trespass, invasion of privacy
(both by intrusion upon seclusion and by revealing private facts), intentional
infliction of emotional distress through abuse of process and malicious prosecution,
negligence, gross negligence, negligence per se (by harassment, trespass, criminal
mischief and threat), and negligent hiring or supervision, violation of the Texas Debt
Collection Act, and trespass to try title and civil conspiracy. Continuing their
argument that the Agreement is the common nucleus of operational fact in both the
federal and state court litigation, Appellees assert, “The Settlement Agreement
provide[d] that the Rileys would abandon the property at issue and permitted
Appellee BONYM and its agents to access the property for securitization and
winterization.” Our review of the Agreement, however, reveals no such language.
The Agreement contains a provision requiring the Rileys to maintain the
Property “[d]uring the time [the Rileys] and any other current occupants continue to
occupy the Property before 11:59 p.m. on June 9, 2016 (the ‘Departure Date’),” but
no provision requires the Rileys to end their occupancy or depart by the “Departure
Date” or any other date. Similarly, although the Agreement requires the Rileys to
26 take certain steps (including turning over their keys and removing all trash, pets and
personal possessions) “[u]pon vacating the Property,” nothing in the Agreement says
the Rileys are required to vacate the Property. More importantly for our analysis, the
Agreement does not contain any provision giving BONYM or any of its affiliates
the right to enter the Property, change the locks, drain the pipes, or the like.
Despite Appellees’ argument on appeal that Floyd’s counterclaims “revolve
around… whether Appellees had the right to enter the Property in and around
January 2019 under the terms of the [A]greement,” Floyd’s live pleading does not
allege that his claims are based on any rights or duties under the Agreement.
Although the Agreement is mentioned in the factual background regarding
intentional infliction of emotional distress through abuse of process and malicious
prosecution, the factual nucleus for those claims is that “BONYM intentionally and
recklessly chose to harass and cause [Floyd] severe emotional distress for four years
with multiple lawsuits or legal actions [culminating] in its 2019 lawsuit to
compensate for its and its prior legal counsel[‘s] failure to timely, adequately and
lawfully foreclose.” We conclude that although the Agreement plays a role in the
long history of this dispute, the pleadings do not indicate it is the factual nucleus of
Floyd’s claims for intentional infliction of emotional distress.
The Agreement is not mentioned as a factual basis for Floyd’s other
counterclaims which are based on assertions that Appellees entered the Property and
27 committed various torts in the process. The answers filed by Appellees in response
to Floyd’s counterclaims do not assert their actions were authorized by the
Agreement. The only answer to mention the Agreement is MCS’s and it does so only
for the purpose of asserting Floyd’s claims are barred by the release contained in the
Agreement. But because the issue of whether the release bars Floyd’s claims is a
question of law (addressed above) rather than fact, MCS’s assertion of release based
on the Agreement does not inject operative facts which overlap with the operative
facts of the federal court case.
Without mentioning the Agreement, CMS’s answer pleads justification,
asserting it was exercising its own legal rights or acting in a good-faith belief
concerning its rights. But when asked in an interrogatory to “[l]ist all documents,
used by CMS that granted authorization to enter the property grounds and interior of
the [Property] on 1/09/2019 without the property owner[s’] consent,” CMS referred
the Rileys to the deed of trust, not the Agreement. Unlike the Agreement, the deed
of trust provides that upon the Rileys’ failure to perform, BONYM has the right to
do whatever is reasonable to secure the property, including but not limited to
“entering the Property to make repairs, change locks, replace or board up doors and
windows, drain water from pipes, eliminate building or other code violations or
dangerous conditions, and have the utilities turned on or off.”
28 It is unclear how Floyd’s counterclaims can be said to “revolve around”
Appellees’ rights under the Agreement at issue in the federal court case when the
Agreement does not mention any such rights and when the pleadings do not point to
the Agreement either as authorizing or prohibiting Appellees’ alleged conduct in
January 2019. Conversely, Floyd’s live pleading asserts that because BONYM did
not supersede the trial court’s August 2018 summary judgment wherein the deed of
trust was declared void, “BONYM, their loan servicer (CMS), agents or contractors
(MCS) unlawfully entered [Floyd’s] property and homestead without permission or
consent nearly six (6) months after a Court voided BONYM’s [deed of trust] lien.”
Based on the record before us, the counterclaims appear, at least to some extent, to
“revolve around” whether Appellees’ conduct in January 2019 was authorized by a
deed of trust which Floyd claims was void and which was the very basis of
BONYM’s foreclosure action that was pending in the 136th District Court when and
where the counterclaims were filed.
The Fifth Circuit held, and we agree, the state and federal court cases were
based on two different transactions, a deed of trust and a settlement agreement. Bank
of N.Y. Mellon, 2022 U.S. App. LEXIS 15042, at *11 (“[T]wo claims have the same
identity only where the same transaction is the source of the claim in both suits.”).
To the extent Floyd’s counterclaims are affected by either transaction, we conclude
the nucleus of operative facts upon which the counterclaims are based is more
29 closely aligned with the parties’ rights and duties under the deed of trust, which the
Fifth Circuit described as the “central transaction” of the state court case, rather than
the parties’ rights and duties under the Agreement, which was the focus of the federal
court case. Because Floyd’s claims (other than breach of contract and negligent
misrepresentation) are not based on the same nucleus of operative facts as
BONYM’s federal court claims, they were not compulsory counterclaims in that
case and are not barred by res judicata in this case. We sustain Floyd’s second issue
with respect to all counterclaims other than breach of contract and negligent
misrepresentation.
3. Protective Order
Finally, the Rileys argue the trial court abused its discretion by granting the
Appellees’ motion for protection, prohibiting the parties from conducting discovery
“until this Court enters a ruling on Plaintiff/Counter-Defendant BONYM and Third-
Party Defendants Carrington and MCS’s Joint Motion for Summary Judgment.” By
its own terms, the order’s prohibition on discovery has expired because the trial court
entered a ruling on Appellees’ motion for summary judgment. Therefore, we
conclude the Rileys’ third issue is moot.
Conclusion
Because Floyd’s claims for breach of contract and negligent misrepresentation
were compulsory counterclaims in the federal court case, we affirm that portion of
30 the trial court’s summary judgment disposing of those claims. Because the remainder
of Floyd’s claims are not barred either by release or res judicata, we reverse that
portion of the trial court’s summary judgment which disposes of those counterclaims
and third-party claims, and we remand that portion of this case to the trial court for
further proceedings. Lastly, we note that although Sonia is a party to this appeal, the
rulings she challenges are moot, BONYM’s claims against her have been dismissed,
and she is not a party to the counterclaims and third-party claims being remanded to
the trial court. Therefore, Sonia’s appeal is dismissed as moot.
DISMISSED AS MOOT IN PART; AFFIRMED IN PART; REVERSED
AND REMANDED IN PART.
KENT CHAMBERS Justice
Submitted on October 15, 2024 Opinion Delivered March 27, 2025
Before Johnson, Wright and Chambers, JJ.