COURT OF APPEALS SECOND DISTRICT OF TEXAS FORT WORTH
NO. 2-08-447-CV
JOYCE W EST, AS TRUSTEE APPELLANTS FOR THE W EST FAMILY TRUST, COMMERCIAL STRUCTURES AND INTERIORS, INC., AND LLOYD W ARD
V.
NORTHSTAR FINANCIAL APPELLEES CORPORATION D/B/A NORTHSTAR BANK OF TEXAS, TONY R. CLARK, EDMOND S. BRIGHT, MYRA CROW NOVER, ROBERT W . GENTRY, KENT W . KEY, JOSEPH S. MULROY, PATRICK D. O’BRIEN, RONALD REINKE, RONALD F. SHERMAN, AND RICHARD E. SMITH
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FROM THE 367TH DISTRICT COURT OF DENTON COUNTY
MEMORANDUM OPINION 1
1 See Tex. R. App. P. 47.4. I. INTRODUCTION
In four issues, Appellants Joyce West, as Trustee for the West Family Trust,
Commercial Structures and Interiors, Inc. (“CSI”), and Lloyd W ard appeal (1) the trial
court’s order granting a motion for partial summary judgment in favor of Appellees
Northstar Financial Corporation d/b/a Northstar Bank of Texas (“Northstar”) and
Tony R. Clark, Edmond S. Bright, Myra Crownover, Robert W . Gentry, Kent W . Key,
Joseph S. Mulroy, Patrick D. O’Brien, Ronald Reinke, Ronald F. Sherman, and
Richard E. Smith (“Northstar Officers and Directors”) and (2) the trial court’s final
judgment granting in full a second motion for summary judgment and awarding
sanctions against W ard in favor of Northstar. W e will affirm.
II. F ACTUAL AND P ROCEDURAL B ACKGROUND
Joyce and John Richard W est were officers, directors, or shareholders of CSI;
Southfork Land LLC (“Southfork”); Valley Business Park, Ltd. (“VBP”); JRW
Holdings, Inc. (“JRW ”); and Dakota Partners Ltd.(“Dakota”) (collectively, the “W est
entities”). In 2002 and 2003, CSI, JRW , and VBP acquired financing through several
loans from Northstar: CSI entered into a loan agreement with Northstar for a
revolving line of credit up to $1,000,000 and executed a promissory note payable to
Northstar in the amount of $1,000,000; JRW executed a promissory note payable
to Northstar in the amount of $704,600; and VBP executed a promissory note
payable to Northstar in the amount of $550,000.
2 Northstar secured each promissory note with multiple instruments of collateral.
To secure the CSI promissory note, CSI granted Northstar a security interest in,
among other things, its accounts receivable, rights to payment of any kind, and
proceeds; John Richard W est executed a Guaranty Agreement in favor of Northstar
guaranteeing CSI’s indebtedness under the promissory note; and Dakota executed
a Guaranty Agreement in favor of Northstar guaranteeing CSI’s indebtedness. To
secure the JRW promissory note, Southfork executed a deed of trust, security
agreement, and assignment of rents, leases, incomes, and agreements in favor of
Northstar to three tracts of land, and John Richard W est, Dakota, CSI, and Southfork
each executed a Guaranty Agreement in favor of Northstar guaranteeing JRW ’s
indebtedness. To secure VBP’s promissory note, VBP executed a deed of trust,
security agreement, and assignment of rents, leases, incomes, and agreements in
favor of Northstar to a single tract of land; John Richard W est executed a Guaranty
Agreement in favor of Northstar guaranteeing VBP’s indebtedness; and both Joyce
and John Richard W est executed an “Amended and Restated Assignment of Life
Insurance Policy” assigning to Northstar an Allmerica life insurance policy in the
amount of $200,000 on the life of John Richard W est. The deed of trust also
secured the JRW and CSI promissory notes, and the assignment of the Allmerica
insurance policy also secured all of the indebtedness owed by JRW and CSI to
Northstar.
3 The CSI promissory note, the JRW promissory note, and the VBP promissory
note each fell into default. Northstar had also agreed to cover several overdrafts
made by CSI in the amounts of $36,852, $341,375, and $5,758 and an overdraft
made by JRW in the amount of $152,845. As of May 27, 2004, the W est entities’
indebtedness on the promissory notes, including interest on the principal
indebtedness and the secured amounts representing the overdrafts, totaled
approximately $2,396,137.
On or about May 27, 2004, Northstar entered into a “Compromise Settlement
Agreement and Mutual Release” (the “Agreement”) with the W est entities. 2 Under
the Agreement, Northstar released the W est entities from personal liability under the
loans for the indebtedness resulting from the CSI, JRW , and VBP promissory notes.
The Agreement provided, however, that the indebtedness and the collateral securing
the debt would “remain in full force and effect,” thus surviving the release of the W est
entities from personal liability. In exchange for agreeing to not pursue the W est
entities to satisfy the indebtedness, Northstar received deeds in lieu of foreclosure
conveying real estate that was the subject of the deeds of trust used as collateral to
secure the JRW and VBP promissory notes; an assignment of all of CSI’s accounts
receivable; a collateral assignment of a Transamerica life insurance policy in the
amount of $750,000 for a period of one year from May 27, 2004; and a release from
2 The W est Family Trust was not a party to the Agreement.
4 all past, present, and future claims by the W est entities based on tort, contract, or
any other theory of recovery.
On July 12, 2004, CSI sued Liberty Education Ministries, Inc. d/b/a Liberty
Christian School (“Liberty”), alleging that Liberty had terminated a contract that it had
entered into with CSI after CSI had fully performed under the contract and that
Liberty had failed to pay CSI money owed. See Commercial Structures and
Interiors, Inc. v. Liberty Educ. Ministries, Inc., 192 S.W .3d 827, 829 (Tex. App.—Fort
W orth 2006, no pet.). The trial court granted Liberty’s motion for summary judgment,
dismissing CSI’s claims against Liberty and declaring that CSI had transferred all
legal rights and causes of action asserted by CSI in the litigation to Northstar and
that Northstar was the owner of the claims asserted by CSI in the litigation. Id. at
830. CSI appealed and argued in part that “the trial court erred by construing the
[Agreement] as a present transfer and assignment of CSI’s claims against [Liberty]
to [Northstar] because the [Agreement] merely evidence[d] a future intent to assign
by executing additional documents.” Id. at 832. This court agreed, reasoning in part
as follows:
W e hold that the language in the [Agreement] unambiguously evidences an intent to assign CSI’s accounts receivable to [Northstar] in the future and does not, standing alone, effect a present transfer of the accounts receivable to the bank. Appellees did not provide the trial court with any evidence that the parties consummated the transactions contemplated in the [Agreement], nor did they plead or prove an equitable assignment; thus, there is no evidence that CSI ever completed the assignment of its accounts receivable to [Northstar] that it agreed to in . . . the [Agreement]. Because there is no evidence in
5 the summary judgment record that the assignment was ever consummated, the trial court erred by granting summary judgment in favor of Liberty as to CSI’s claims against it and as to appellees’ claims for declaratory judgment relief against CSI. W e sustain CSI’s second issue.
Id. at 834 (footnotes omitted).
John Richard W est died in late April 2006. On May 24, 2006, Joyce W est,
individually and as Trustee for the W est Family Trust, sued Northstar and the
Northstar Officers and Directors, alleging claims for breach of contract and tortious
interference with contract based on Northstar’s alleged failure and refusal to execute
(1) a release of the 2003 collateral assignment upon the Allmerica insurance policy
and (2) a release of the Transamerica insurance policy assignment, which expired
by its own terms in May 2005. On May 31, 2006, Northstar executed a release of
the Transamerica insurance policy. In July 2006, W est filed a supplemental petition
claiming that Northstar was improperly withholding CSI’s accounts receivable and
alleging claims for intentional infliction of emotional distress, fraud, conspiracy to
commit fraud, conspiracy to tortiously interfere with contract, tortious interference
with contract, and negligence.
Also in July 2006, the W est entities filed a “Plea in Intervention,” alleging
claims against Northstar and the Northstar Officers and Directors for fraud,
conspiracy to tortiously interfere with business relations, conspiracy to convert
6 accounts receivable, conversion, and negligent misrepresentation. 3 The Intervenors
claimed that pursuant to the Commercial Structures and Interiors, Inc. case, “the Fort
W orth Court of Appeals held that CSI’s accounts receivable were not assigned to
Northstar” and that Northstar was wrongfully holding CSI’s accounts receivable.
After filing counterclaims for breach of contract and for declaratory relief
related to the Allmerica insurance policy and CSI accounts receivable, Northstar and
the Northstar Officers and Directors filed a traditional and no-evidence motion for
partial summary judgment; Northstar and the Northstar Officers and Directors moved
for summary judgment on all of W est’s and the Intervenors’ affirmative claims, and
Northstar moved for summary judgment on its claim that it is entitled to the proceeds
of the Allmerica insurance policy. After Northstar filed the motion for partial
summary judgment, W est and the Intervenors filed a first amended petition. As to
the Northstar Officers and Directors, the trial court granted the motion for summary
judgment in its entirety, dismissing all claims against them. As to Northstar, the trial
court granted its motion for summary judgment on W est’s and the Intervenors’
claims of negligence, gross negligence, intentional infliction of emotional distress,
and conspiracy. The trial court denied the remainder of Northstar’s motion for
summary judgment.
3 Unlike subsequent filings by the Intervenors, this filing does not name Dakota as an intervenor.
7 Northstar filed motions for rule 215, rule 13, and civil practice and remedies
code section 10 sanctions against W ard, counsel for W est and the Intervenors,
which the trial court granted on October 15, 2007. W est and the Intervenors filed
their second and third amended petitions before all of the Intervenors except CSI
nonsuited their claims against Northstar, and Northstar amended its counterclaims
as to the declaratory relief it sought. Northstar thereafter filed a traditional and no-
evidence motion for summary judgment on W est’s and the Intervenors’ claims and
on Northstar's claims for breach of contract and for declaratory relief. 4 The trial court
granted the motion in full; among other things, it dismissed all of the W est’s and all
of the Intervenors’ claims; declared CSI, JRW , and VBP in default of the CSI, JRW ,
and VBP promissory notes; declared the Agreement valid and enforceable; declared
that the indebtedness under the promissory notes survived the Agreement’s
execution; declared that the indebtedness as of January 23, 2008, including interest
and overdrafts, was $2,912,853 and that the indebtedness as of May 27, 2004,
4 Because the motion for summary judgment contained in the record bears a file mark that is dated after the trial court signed its order granting the motion for summary judgment, we abated the appeal for the trial court to conduct a hearing to determine what constitutes an accurate copy of the motion for summary judgment filed on February 15, 2008, the date Northstar claims to have filed the motion. See Tex. R. App. P. 34.5(e). The trial court entered a finding of fact that the copy of the motion for summary judgment admitted as Exhibit “1” at the abatement hearing, now included as a supplement to the record, constitutes an accurate copy of the motion for summary judgment filed on February 15, 2008. See Nguyen v. Dallas Morning News, L.P., No. 02-06-00298-CV, 2008 W L 2511183, at *3 (Tex. App.—Fort W orth June 19, 2008, no pet.) (mem. op.) (“A document is ‘filed’ when it is delivered or tendered to, or otherwise put under the custody or control of, the court’s clerk. This is true regardless of whether the document is file-stamped.”).
8 including interest and overdrafts, was $2,396,137; declared that the value of the real
property conveyed in lieu of foreclosure was $1,205,792; declared Northstar the
owner of CSI’s accounts receivable; and declared Northstar the owner of the
proceeds to the Allmerican insurance policy. The trial court also included in the final
judgment its ruling awarding sanctions against W ard in the total amount of $68,602.
This appeal followed.
III. N ORTHSTAR’S M OTION TO S HOW AUTHORITY
Before addressing Appellants’ four issues, we must address Northstar’s
motion pursuant to rule of civil procedure 12 to require Appellants’ counsel, W ard,
to show authority to prosecute this appeal. Northstar contends that W ard lacks
authority to represent W est and CSI on appeal because he withdrew as counsel for
W est in April 2008, because the notice of appeal is ambiguous with respect to the
identity of the parties pursuing the appeal, and because of a potential conflict of
interest between W ard and W est. Northstar also requests that we dismiss the
appeal of West and CSI for want of jurisdiction. W e abated the appeal to allow the
trial court to conduct a hearing on the motion. The appeal being reinstated, and
having reviewed the supplemental reporter’s record of the hearing on abatement and
relevant parts of the record, we deny Northstar’s motion requesting that the appeal
be dismissed for want of jurisdiction. 5
5 To the extent Northstar seeks further relief by way of its motion to show authority, it is denied.
9 IV. S TANDARD OF R EVIEW
In a summary judgment case, the issue on appeal is whether the movant met
the summary judgment burden by establishing that no genuine issue of material fact
exists and that the movant is entitled to judgment as a matter of law. Tex. R. Civ.
P. 166a(c); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W .3d 844,
848 (Tex. 2009). W e review a summary judgment de novo. Mann Frankfort, 289
S.W .3d 848.
W e take as true all evidence favorable to the nonmovant, and we indulge
every reasonable inference and resolve any doubts in the nonmovant’s favor.
20801, Inc. v. Parker, 249 S.W .3d 392, 399 (Tex. 2008); Sw. Elec. Power Co. v.
Grant, 73 S.W .3d 211, 215 (Tex. 2002). W e consider the evidence presented in the
light most favorable to the nonmovant, crediting evidence favorable to the
nonmovant if reasonable jurors could, and disregarding evidence contrary to the
nonmovant unless reasonable jurors could not. Mann Frankfort, 289 S.W .3d at 848.
W e must consider whether reasonable and fair-minded jurors could differ in their
conclusions in light of all of the evidence presented. See Wal-Mart Stores, Inc. v.
Spates, 186 S.W .3d 566, 568 (Tex. 2006); City of Keller v. Wilson, 168 S.W .3d 802,
822–24 (Tex. 2005). The summary judgment will be affirmed only if the record
establishes that the movant has conclusively proved all essential elements of the
movant’s cause of action or defense as a matter of law. City of Houston v. Clear
Creek Basin Auth., 589 S.W .2d 671, 678 (Tex. 1979).
10 V. M OTION FOR P ARTIAL S UMMARY J UDGMENT—N ORTHSTAR O FFICERS AND D IRECTORS
In their first issue, Appellants argue that the trial court erred by granting the
motion for partial summary judgment in favor of the Northstar Officers and Directors
on claims that were not addressed in the motion for summary judgment.
Specifically, Appellants contend that W est filed her first amended original petition
after Northstar and the Northstar Officers and Directors filed their motion for partial
summary judgment; that the amended petition asserted causes of action for fraud
in the inducement, negligent misrepresentation, tortious interference, fraud, and
fraudulent misrepresentation that were not previously pleaded in the original and
supplemental petitions; and, consequently, that the trial court granted the motion for
partial summary judgment in favor of the Northstar Officers and Directors on claims
that were not addressed by the motion for partial summary judgment.
Generally, a movant who does not amend or supplement its pending motion
for summary judgment to address newly added claims is not entitled to summary
judgment on those claims. Blancett v. Lagniappe Ventures, Inc., 177 S.W .3d 584,
592 (Tex. App.—Houston [1st Dist.] 2005, no pet.). In such a case, the portion of the
summary judgment purporting to be final must generally be reversed because the
judgment grants more relief than requested in the motion. See id. Exceptions apply
to this rule, however, when a previously filed no-evidence motion for summary
judgment already challenges an essential element of a later-added claim, when the
11 movant has conclusively proved or disproved a matter that would also preclude the
unaddressed claim as a matter of law, or when the unaddressed claim is derivative
of the addressed claim and the movant proved its entitlement to summary judgment
on that addressed claim. Wilson v. Davis, No. 01-06-00424-CV, 2009 W L 2526439,
at *11 & n.13 (Tex. App.—Houston [1st Dist.] Aug. 14, 2009, no pet.); Lampasas v.
Spring Center, Inc., 988 S.W .2d 428, 436–37 (Tex. App.—Houston [14th Dist.] 1999,
no pet.); Hayes v. Vista Host, Inc., No. 03-08-00053-CV, 2009 W L 722288, at *5
(Tex. App.—Austin Mar. 20, 2009, no pet.) (mem. op.).
Here, the Northstar Officers and Directors moved for summary judgment on
“Plaintiff/Intervenors[‘]” claims for breach of contract, tortious interference, fraud,
negligence, gross negligence, negligent misrepresentation, conversion, accounting,
intentional infliction of emotional distress, and conspiracy. W est, as the Trustee for
the W est Family Trust, was the “Plaintiff” identified in the motion, and the W est
entities were the “Intervenors” identified in the motion. According to the motion, “all
of these claims should be dismissed on summary judgment against all Defendants.”
[Emphasis added.] Contrary to Appellants’ arguments, the motion sought summary
judgment on W est’s claims for negligent misrepresentation, tortious interference,
and fraud.
Fraudulent inducement is a particular species of fraud that arises only in the
context of a contract, and the elements of fraud must be established as they relate
to an agreement between the parties. Haase v. Glazner, 62 S.W .3d 795, 798–99
12 (Tex. 2001). Other than the pleading argument, which we already addressed, W est
does not challenge the trial court’s order granting the motion for partial summary
judgment in favor of the Northstar Officers and Directors on her claims for fraud.
Therefore, because it is undisputed that the Northstar Officers and Directors
conclusively disproved W est’s fraud claims, W est cannot establish her fraudulent
inducement claim as a matter of law. See id. (requiring that elements of fraud be
established in fraudulent inducement claim); Wilson, 2009 W L 2526439, at *11. The
trial court did not err by granting the Northstar Officers and Directors’ motion for
partial summary judgment on W est’s claims for fraudulent inducement.
W est made no distinction between her claims for fraudulent misrepresentation
and fraud; she grouped the identical claims together, alleging identical facts in
support of each claim.6 Also, like her fraudulent inducement claim, W est’s fraudulent
misrepresentation claim fails as a matter of law because it is undisputed that the
Northstar Officers and Directors conclusively disproved her fraud claims, and her
fraudulent misrepresentation claim shares elements with her fraud claim. Compare
Baribeau v. Gustafson, 107 S.W .3d 52, 58 (Tex. App.—San Antonio 2003 (Tex.
App.—San Antonio 2003, pet. denied) (listing elements of common law fraudulent
misrepresentation), cert. denied, 543 U.S. 871 (2004), with DiBello v. Charlie
Thomas Ford, Ltd., 288 S.W .3d 118, 122 (Tex. App.—Houston [1st Dist.] 2009, no
6 W est asserted three “counts” of “Fraud and Fraudulent Misrepresentation” in the first amended original petition.
13 pet.) (listing elements of common law fraud); see Wilson, 2009 W L 2526439, at *11.
The trial court did not err by granting the Northstar Officers and Directors’ motion for
partial summary judgment on W est’s claims for fraudulent misrepresentation. W e
overrule Appellants’ first issue.
VI. INDEBTEDNESS AND CSI ACCOUNTS R ECEIVABLE
In their second issue, Appellants argue that the trial court erred by granting
Northstar’s motion for summary judgment on its requests for declarations that the
indebtedness under the promissory notes survived the Agreement’s execution and
that Northstar is the owner of CSI’s accounts receivable. Under various theories,
Appellants contend that no indebtedness resulting from the CSI, JRW , and VBP
promissory notes remained after the Agreement’s execution because the Agreement
constituted a full settlement of all claims relating to the indebtedness and because
Northstar is not the owner of the CSI accounts receivable.
A. Contract Construction
Our primary concern when construing a written contract is to ascertain the true
intentions of the parties as expressed in the instrument. Coker v. Coker, 650 S.W .2d
391, 393 (Tex. 1983). W e examine and consider the entire writing in an effort to
harmonize and give effect to all provisions of the contract so that none will be
rendered meaningless. Id. W e presume that the parties to the contract intend every
clause to have some effect. Heritage Res., Inc. v. NationsBank, 939 S.W .2d 118,
121 (Tex. 1996); XCO Prod. Co. v. Jamison, 194 S.W .3d 622, 627 (Tex.
14 App.—Houston [14th Dist.] 2006, pet. denied). W e give terms their plain, ordinary,
and generally accepted meaning unless the contract shows that the parties used
them in a technical or different sense. Heritage Res., 939 S.W .2d at 121. In
construing a contract, we may not rewrite it nor add to its language, and we must
weigh that parties to a contract
are considered masters of their own choices. They are entitled to select what terms and provisions to include in a contract before executing it. And, in so choosing, each is entitled to rely upon the words selected to demarcate their respective obligations and rights. In short, the parties strike the deal they choose to strike and, thus, voluntarily bind themselves in the manner they choose.
Cross Timbers Oil Co. v. Exxon Corp., 22 S.W .3d 24, 26 (Tex. App.—Amarillo 2000,
no pet.).
B. The Agreement
Relevant provisions of the Agreement provide as follows:
I. BACKGROUND
W HEREAS, VBP executed that certain [p]romissory [n]ote dated July 17, 2003 in the original principal amount of $550,000.00 and payable to the order of [Northstar] . . . ;
W HEREAS, JRW executed that certain promissory note dated January 24, 2003, in the principal amount of $704,600.00 and payable to the order of [Northstar] . . . ;
W HEREAS, CSI executed that certain promissory note dated December 13, 2002, in the principal amount of $1,000,000.00 and payable to the order of [Northstar] . . . ;
15 W HEREAS, the VBP Note, the JRW Note and the CSI Note (hereinafter, the “Indebtedness”) is secured by certain real property situated in Denton County, Texas . . . (the “Property”) . . . ;
W HEREAS, the Indebtedness is guaranteed in whole or in part by VBP, the W ests [John Richard W est and Joyce W est], Dakota, JRW , CSI, and Southfork . . . ;
....
W HEREAS, the Indebtedness is in default and the Property has been posted for foreclosure sale on June 1, 2004;
II. AGREEMENT
1. Conveyances to [Northstar]: The West Entities agree to convey or cause to be conveyed to [Northstar] . . . all of the land situated in Denton County, Texas, described in the Schedule “A,” attached hereto . . . .7 Further, CSI agrees to assign to [Northstar] all of its right, title and interest in and to all of its accounts receivable and all rights to payment of any kind.
2. Consideration. Subject to the satisfaction by the West Entities of the conditions contained herein, [Northstar] agrees to accept the conveyance of the Properties in full, final and complete settlement of any and all claims relating to personal liability of the West Entities with respect to the Indebtedness. The W est Entities agree to convey the Properties to [Northstar] in consideration of such accord and satisfaction. The W est Entities jointly and severally represent that each of them has made an independent determination of the fair market value of the Properties and as a result thereof, each of them has concluded that: (a) the amount of the Indebtedness substantially exceeds the fair market value of the Properties; (b) the Properties are unable to generate sufficient income to repay the Indebtedness in
7 The properties identified in Schedule “A” include several tracts of real estate that were the subject of the deeds of trust used as collateral to secure the JRW and VBP promissory notes.
16 accordance with the terms of the Loan Documents; and (c) the consideration to be received by the W est Entities pursuant to this agreement represents the payment by [Northstar] of full, fair and adequate consideration to the W est Entities.
3. Closing Date. The transactions contemplated by this agreement will be consummated on or before 5:00 P.M. on Thursday, May 27, 2004 (the “Closing Date”) . . . .
4. Conveyance Documents. On the Closing Date, the W est Entities will deliver or cause to be delivered to [Northstar] the following items . . . : (a) Special Warranty Deed-in-Lieu of Foreclosure for the Properties . . . ; (b) an Assignment of the Life Insurance Policies, specifically, the Transamerica Life Insurance Company Policy No. 4178765 in the amount of $750,000.00 on the life of John Richard West for a period of one (1) year from the date hereof . . . ; (c) the Notice Letter to the account debtors of CSI attached hereto as Schedule “F” . . . .
5. Nonrecourse Liability of Indebtedness. The West Entities are hereby released from all personal liability under the Indebtedness to the extent such release does not operate to invalidate the liens created of the Deed of Trust in the collateral described therein. It is the intent of the Parties that the Indebtedness shall remain in full force and effect and fully secured by the collateral identified in the Loan Documents. . . .
6. Release of [Northstar]. Effective on the Closing Date and only if the transactions contemplated by this agreement are consummated, the W est Entities . . . shall completely and generally release . . . and forever discharge [Northstar] . . . of and from any and all past, present, and future claims, [and] . . . causes of actions . . . whatsoever based on tort, contract, or any other theory of recovery . . . which any W est [Entities] ever jointly or individually had, . . . or [will] have against [Northstar] . . . .
.... 11. Representation of Comprehension of Documents: In entering into this Agreement, each Party represents that it has relied upon the legal advice of an attorney who is the attorney of his or its own choice, and that the terms of the Agreement have been completely read by the
17 Party, and that the Party fully understands and voluntarily accepts the terms of this Agreement. . . .
15. Entire Agreement: This Agreement contains the entire agreement between [Northstar] and the W est Entities with regard to the matters set forth in this Agreement.
a. THERE ARE NO OTHER PROMISES, UNDERSTANDINGS, REPRESENTATIONS, WARRANTIES, COVENANTS, OR AGREEMENTS, VERBAL OR OTHERWISE, IN RELATION THERETO BETWEEN THE BANK AND THE WEST ENTITIES, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT.
[Emphasis added.]
C. Indebtedness
The plain and unambiguous language of the Agreement demonstrates that in
exchange for deeds in lieu of foreclosure, an assignment of all of CSI’s accounts
receivable, a collateral assignment of the Transamerica life insurance policy, and a
release from all claims by the W est entities, Northstar agreed to release the W est
entities from personal liability under the loans for the indebtedness. Contrary to
Appellants’ interpretation of the Agreement, Northstar’s release of the W est entities
from personal liability for the indebtedness did not extinguish or release the entirety
of the indebtedness under the promissory notes because (1) that is not what the
Agreement states and (2) the parties to the Agreement specifically intended that the
indebtedness “remain in full force and effect and fully secured by the collateral.” By
releasing the West entities from only personal liability for the indebtedness, Northstar
18 agreed that, with the exception of the assets conveyed in the Agreement, it could not
reach any of the W est entities’ assets to satisfy the indebtedness, which remained
in full force and effect and fully secured by the collateral. In other words, by agreeing
to not pursue the W est entities to satisfy the indebtedness (“Nonrecourse Liability”),
Northstar limited the indebtedness remaining after accepting the assets conveyed
in the Agreement to the value of the collateral securing the debt. Accordingly, the
Agreement did not constitute a full and final settlement of the entirety of the
indebtedness under the CSI, JRW , and VBP promissory notes. Rather, under the
terms of the Agreement, the indebtedness resulting from the promissory notes
survived the Agreement’s execution.
To the extent Appellants mean to argue that no indebtedness remained after
the Agreement’s execution because the value of the properties conveyed in lieu of
foreclosure exceeded the total indebtedness (thus challenging the declaration that
the value of the properties conveyed in lieu of foreclosure was $1,205,792), this
argument was not asserted by Appellants in response to Northstar’s motion for
summary judgment as an issue expressly precluding summary judgment. 8 Thus,
Appellants may not raise this argument for the first time on appeal as a reason to
reverse the summary judgment. See Tex. R. Civ. P. 166a(c) (providing that issues
not expressly presented to the trial court by written motion, answer, or other
8 Appellants only argued that the Agreement “was a complete release of all indebtedness of the Plaintiff and Intervenors from any allegations of debt owed to the Bank.”
19 response shall not be considered on appeal as grounds for reversal); Tex. R. App.
P. 33.1 (requiring that as a prerequisite for presenting a complaint for appellate
review, record must show that the complaint was made to trial court by timely
request, objection, or motion); McConnell v. Southside ISD, 858 S.W .2d 337, 341
(Tex. 1993); City of Houston, 589 S.W .2d at 677–78.
Even if Appellants had raised this argument in the trial court, it fails. First, the
parties expressly agreed that “the amount of the Indebtedness substantially exceeds
the fair market value of the Properties [the land conveyed in lieu of foreclosure].”
Thus, Appellants’ argument is foreclosed by the unambiguous terms of the
Agreement. Further, Northstar included as part of its summary judgment evidence
the affidavits of Judy Leveridge, Northstar’s Executive Vice President and Chief Risk
Officer, and Ross Helbing, a qualified appraiser of improved and unimproved
commercial property. Helbing opined in his affidavit that as of May 27, 2004, the fair
market value of the properties transferred to Northstar in lieu of foreclosure totaled
$3,432,000. Leveridge stated in her affidavit that “[t]wo of the properties subject to
the deeds in lieu of foreclosure had first liens which Northstar was required to pay
off.” 9 These amounts were $2,051,389 and $174,819. The total equity Northstar
received from the properties transferred in lieu of foreclosure thus totaled $1,205,792
9 Northstar confirmed at oral argument that it had paid off the liens.
20 (fair market value less liens). Applied to the indebtedness as of May 27, 2004
($2,396,137), debt in the amount of $1,190,345 remained. 10
Appellants additionally argue that the Agreement eliminated the indebtedness
and that there are no amounts due and owing because a 1099 issued to VBP for tax
year 2004 shows figures inconsistent with those in the final judgment, property code
section 51.006 somehow applies to their benefit, and the doctrine of “merger”
operated to eliminate the indebtedness. Like the previous argument, none of these
arguments were asserted in Appellants’ response to Northstar’s motion for summary
judgment.11 Accordingly, they may not be urged for the first time on appeal as
grounds to reverse the summary judgment. See Tex. R. Civ. P. 166a(c); Tex. R.
App. P. 33.1; McConnell, 858 S.W .2d at 341. W e overrule this part of Appellants’
second issue.
D. CSI’s Accounts Receivable
In Commercial Structures and Interiors, this court held that the Agreement
evidenced an intent to assign CSI’s accounts receivable to Northstar but that the
10 The deficiency is even higher when applying the figures to the indebtedness as of January 23, 2008, which was $2,912,853. 11 As candidly pointed out by Northstar, Appellants mentioned in their response to Northstar’s motion for summary judgment that Northstar had “acknowledged receiving value in excess of the sums indicated in the recitals to the agreement as evidenced by a IRS form 1099,” but this statement was made in the context of addressing the consideration given in the Agreement, and Appellants did not argue, as they do here on appeal, that the value of the properties exceeded the indebtedness.
21 summary judgment record did not demonstrate that the assignment of CSI’s
accounts receivable was ever consummated. 192 S.W .3d at 834. In addition to the
plain language of the Agreement, the court arrived at this conclusion primarily by
observing that the portion of the Agreement entitled “Conveyance Documents”
required the W est entities to deliver a notice letter to CSI’s account debtors
evidencing the CSI accounts receivable “conveyance,” and the court stated in a
footnote immediately following this observation that “[t]he [Agreement] states that the
form of the letter is attached as [Schedule] F, but the copy of the [Agreement] in the
record does not contain such an exhibit or letter form as an attachment.” Id. Thus,
there was no evidence that CSI had completed the assignment of its accounts
receivable to Northstar.
Unlike the summary judgment record in Commercial Structures and Interiors
that was missing the evidence that CSI had assigned its accounts receivable to
Northstar, the summary judgment record in this appeal does contain the notice letter
intended for CSI’s account debtors that is attached to the Agreement as Schedule
F. The letter is signed by John Richard W est and states as follows:
This letter is to inform you that Commercial Structures and Interiors, Inc. has transferred all of its right, title and interest in and to all accounts receivable and future payments due to Commercial Structures and Interiors, Inc. by your company to Northstar Bank of Texas[.] Accordingly, you are hereby directed to forward all future payments due to Commercial Structures and Interiors, Inc. under our contract with you, directly to Northstar Bank of Texas, at the address provided below. [Emphasis added.]
22 Accordingly, in light of (a) the Agreement’s unambiguous language providing that
“CSI agrees to assign to [Northstar] all of its right, title and interest in and to all of its
accounts receivable and all rights to payment of any kind” and (b) the letter attached
to the Agreement as Schedule F providing that “Commercial Structures and Interiors,
Inc. has transferred all of its right, title and interest in and to all accounts receivable
and future payments due to Commercial Structures and Interiors, Inc. by your
company to Northstar,” Northstar met its summary judgment burden to show that it
is the owner of CSI’s accounts receivable. [Emphasis added.]
Appellants argue that Northstar is not the owner of CSI’s accounts receivable
because this court’s ruling in Commercial Structures and Interiors is the “Law of the
Case” and because Northstar’s desire to enforce CSI’s conveyance of the accounts
receivable constitutes a collateral attack upon this court’s opinion in Commercial
Structures and Interiors. These arguments were not asserted in Appellants’
response to Northstar’s motion for summary judgment; therefore, they are waived.
See Tex. R. Civ. P. 166a(c); Tex. R. App. P. 33.1; McConnell, 858 S.W .2d at 341.
Even if the arguments were not waived, for the reasons set forth above, they are
unpersuasive. W e overrule the remainder of Appellants’ second issue.
VII. ALLMERICA L IFE INSURANCE P OLICY
In their third issue, Appellants argue that the trial court erred by declaring
Northstar the owner of all right, title, and interest to the proceeds of the Allmerica life
23 insurance policy.12 To the extent any of the Appellants have an interest in the
disposition of the proceeds, 13 the summary judgment record demonstrates that
Joyce and John Richard W est executed an “Amended and Restated Assignment of
Life Insurance Policy” that assigned to Northstar the Allmerica life insurance policy
in the amount of $200,000 on the life of John Richard West. The policy was one of
the numerous instruments that secured the indebtedness from the JRW , CSI, and
VBP promissory notes, which all fell into default. 14 The assignment states in part,
“Assignor [Joyce and John Richard W est] hereby assigns, transfers and sets
over to Lender [Northstar] . . . the Policy and all claims, options, privileges, rights,
title and interest therein and thereunder . . . .” (emphasis in original). The
assignment further states,
It is expressly agreed that, without detracting from the generality of the foregoing, the following specific rights are included in this Assignment and pass to [Northstar] by virtue hereof:
a. The sole right to collect from Insurer the net proceeds of the Policy when it becomes a claim by death or maturity.
12 The trial court had ordered that the proceeds be paid into the court’s registry. 13 The assignment indicates that Joyce and John Richard W est are the only assignors of the policy, but neither Joyce W est, individually, nor John Richard W est’s estate are appellants to this appeal. 14 In a July 28, 2003 letter addressed to Northstar, Allmerica acknowledged its receipt of the assignment.
24 John Richard W est died in late April 2006. Northstar met its summary judgment
burden to show its entitlement to the Allmerica life insurance policy proceeds.
Appellants argue that Northstar is not entitled to collect the Allmerica
insurance proceeds because it does not have an insurable interest and because
under the insurance code, the insurance policy is a “credit life insurance” policy and
the assignment a part of a “credit transaction.” None of these arguments were
asserted in Appellants’ response to Northstar’s motion for summary judgment.
Therefore, they cannot be raised on appeal as reasons to reverse the summary
judgment. See Tex. R. Civ. P. 166a(c); Tex. R. App. P. 33.1; McConnell, 858
S.W .2d at 341. Appellants also argue that Northstar is not entitled to the proceeds
because, as argued under the second issue, Northstar has not shown that there is
an amount of money due and owing on the promissory notes in excess of the
$200,000 insurance policy. Our reasoning in Appellants’ second issue regarding the
indebtedness remains unchanged in the context of the third issue. W e overrule
Appellants’ third issue.
VIII. S ANCTIONS
In the fourth issue, W ard argues that the trial court erred by awarding
sanctions against him because he did not receive proper notice of the hearings on
the motions for sanctions, the motions did not seek sanctions against him
individually, and the order awarding sanctions was not entered until the final
judgment was signed.
25 W e review a trial court’s ruling on a motion for sanctions for an abuse of
discretion. Cire v. Cummings, 134 S.W .3d 835, 838 (Tex. 2004). A trial court
abuses its discretion when it acts in an arbitrary or unreasonable manner or when
it acts without reference to any guiding rules or principles. Downer v. Aquamarine
Operators, Inc., 701 S.W .2d 238, 241–42 (Tex. 1985), cert. denied, 476 U.S. 1159
(1986).
The trial court may impose an appropriate sanction for abuse of the discovery
process. Tex. R. Civ. P. 215.3. Chapters 9 and 10 of the civil practice and remedies
code and rule 13 of the rules of civil procedure allow a trial court to sanction an
attorney or a party for filing motions or pleadings that lack a reasonable basis in fact
or law. Low v. Henry, 221 S.W .3d 609, 614 (Tex. 2007). It is an abuse of discretion
for the trial court to impose sanctions, however, when the sanctioned party has
inadequate notice of the sanctions hearing. See Tex. R. Civ. P. 13 (requiring notice
and a hearing), 215.3 (permitting imposition of sanctions after notice and hearing);
Tex. Civ. Prac. & Rem. Code Ann. § 10.003 (Vernon 2002) (requiring notice of
allegations and a reasonable opportunity to respond); In re Acceptance Ins. Co., 33
S.W .3d 443, 451 (Tex. App.—Fort W orth 2000, orig. proceeding) (reasoning that
proceedings for sanctions must comport with due process, affording a party an
adequate opportunity to be heard).
But lack of notice is an issue that can be waived. See Low, 221 S.W .3d at
618–19. The proper method to preserve a notice complaint is to bring the lack of
26 adequate notice to the attention of the trial court at the hearing and object to the
hearing going forward or move for a continuance. Id.; Dunavin v. Meador, No. 02-
07-00230-CV, 2008 W L 2780782, at *3 (Tex. App.—Fort W orth July 17, 2008, no
pet.) (mem. op.) (holding argument regarding inadequate notice of sanctions hearing
waived); see Page v. Sartin, No. 05-01-01710-CV, 2002 W L 1634478, at *2 (Tex.
App.—Dallas July 24, 2002, no pet.) (not designated for publication) (holding
argument regarding inadequate notice of sanctions hearing waived) (citing Prade v.
Helm, 725 S.W .2d 525, 526–27 (Tex. App.—Dallas 1987, no writ)); see also Scott
Bader, Inc. v. Sandstone Prods., Inc., 248 S.W .3d 802, 817–18 (Tex.
App.—Houston [1st Dist.] 2008, no pet.) (holding sanctions arguments waived);
Clark v. Bres, 217 S.W .3d 501, 514 (Tex. App.—Houston [14th Dist.] 2006, pet.
denied) (holding that appellant waived arguments regarding deficiencies in notice of
sanctions because appellant rejected trial court’s offer of a continuance).
The record shows that Northstar filed a motion for rule 215 sanctions on
March 29, 2007. The motion contained a certificate of service indicating that the
motion had been hand delivered to W ard and a fiat that a hearing on the motion had
been set for April 5, 2007. Northstar also included a letter specifically stating that a
hearing had been set for April 5, 2007. The hearing that had been set for April 5,
2007, was reset to May 18, 2007. Northstar advised W ard of the resetting in a letter
dated April 11, 2007. According to the affidavit of Northstar’s attorney, the parties,
including W ard, appeared before the trial court on May 18, 2007, but the trial court
27 passed the cause and suggested that the remaining matters, including sanctions, be
reset for June 11, 2007. Each attorney, including W ard, affirmed that he could
attend the hearing on June 11, 2007. At a deposition on June 6, 2007, Northstar
served W ard’s associate, Frank Gannon, with another motion that Northstar had filed
seeking sanctions under rule of civil procedure 13 and civil practice and remedies
code section 10. Northstar’s counsel sent an email to W ard advising him that the
motion served on June 6, 2007, was also set for hearing on June 11, 2007. 15
W ard did not appear at the June 11, 2007 hearing on Northstar’s motions for
sanctions. Instead, another attorney, Aden Vickers, appeared. At the beginning of
the hearing, the following exchange occurred:
Mr. Vickers: May it please the court. I’m A.L. Vickers. Mr. W ard is in court in Greenville today, cannot be here. I’ll appear for the respondents to the motions on the sanctions.
The Court: Okay. So you are ready to proceed on that. All right.
Northstar detailed the bases of its motions for sanctions, and Vickers responded.
The trial court continued the hearing for June 19, 2007. On June 19, 2007, Vickers
once again appeared, stating, “May it please the court. I believe I actually was
replying at the time, and we ran out of time. I have just a few more remarks I would
like to make.” Vickers cross-examined Northstar’s attorneys and offered further
15 The June 6, 2007 notice states in relevant part, “As we discussed last Friday, the motion to compel/motion to strike/motion for sanctions served on Frank Gannon at the deposition today has been set and will be heard by Judge Gabriel at the hearing set for June 11 at 9:30 am in Judge Gabriel’s court room.”
28 argument. On October 15, 2009, the trial court announced its ruling via email,
awarding sanctions against W ard.
As the record demonstrates, at no point during the June 11 or June 19, 2007
hearings did Vickers, who appeared in W ard’s stead, bring to the trial court’s
attention the lack of adequate notice that W ard now complains of and object to the
hearings going forward or move for a continuance. Rather, Vickers appeared and
argued against the imposition of sanctions. W ard complained of the lack of notice
in a motion for new trial, but that complaint was untimely. See Low, 221 S.W .3d at
618. W e hold that W ard waived any complaint regarding the alleged lack of
adequate notice of the hearings on Northstar’s motions for sanctions. See id.; see
also Tex. R. App. P. 33.1(a)(1). W e overrule this part of the fourth issue.
W ard argues that the trial court abused its discretion by awarding sanctions
against him because the motions did not seek sanctions against him as Appellants’
attorney. Northstar moved for sanctions in part pursuant to rule 13 and civil practice
and remedies code section 10. Rule 13 allows the trial court to impose an
appropriate sanction upon the person who signed the complained-of pleading. Tex.
R. Civ. P. 13. Similarly, rule 10 allows the trial court to impose a sanction on the
person who signed the pleading or motion in violation of section 10.001. Tex. Civ.
Prac. & Rem. Code Ann. § 10.004(a) (Vernon 2002). The trial court sanctioned
W ard because he filed claims in bad faith, made groundless allegations, and filed
29 frivolous motions. 16 See Tex. R. Civ. P. 13; Tex. Civ. Prac. & Rem. Code Ann.
§ 10.001 (Vernon 2002). Because W ard is the person who violated rule 13 and
section 10 by filing claims in bad faith and making groundless allegations, the trial
court was permitted to impose sanctions upon him as W est’s attorney, as expressly
permitted by rule 13 and section 10. See generally Low v. State, No. 02-03-00347-
CV, 2005 W L 1120013, at *2 (Tex. App.—Fort W orth May 12, 2005, no pet.)
(mem. op.) (holding that the trial court did not abuse its discretion by assessing
sanctions against attorney even though motion did not expressly seek sanctions
against him). Further, as with W ard’s notice argument, no objection was asserted
at the hearings that the motions sought only sanctions against W ard’s clients and
not against W ard as attorney. See Tex. R. App. P. 33.1(a)(1). W e overrule this part
of the fourth issue.
W ard argues that the trial court abused its discretion by awarding sanctions
against him because the order awarding sanctions was not entered until the final
judgment was signed. He supports this contention with a citation to caselaw
reasoning that sanctions for alleged violations known to movants before trial are
waived if a hearing and ruling are not secured before trial. See Finlay v. Olive, 77
16 The motions clearly complain of W ard’s conduct during the litigation, and the June 11 and 19, 2007 hearings on the motions concerned W ard’s conduct. Indeed, Northstar’s counsel began his lengthy presentation on June 11 by stating, “May it please the court. Your Honor, I have something that is very difficult for me to do today. I’m here asking the court to impose very, very serious sanctions against the lawyers for the plaintiffs in this case.” [Emphasis added.]
30 S.W .3d 520, 525 (Tex. App.—Houston [1st Dist.] 2002, no pet.). In this case, the
trial court conducted hearings on the motions for sanctions and advised the parties
of its ruling months in advance of Northstar’s filing its motion for summary judgment.
W e overrule the remainder of the fourth issue. 17
IX. C ONCLUSION
Having overruled all four of Appellants’ issues, we affirm the trial court’s
judgment.
BILL MEIER JUSTICE
PANEL: LIVINGSTON, MCCOY, and MEIER, JJ.
DELIVERED: March 11, 2010
17 To the extent W ard asserts other arguments in this issue, those inadequately briefed arguments are waived. See Tex. R. App. P. 38.1(i).