Texas Causes of Action & Affirmative Defenses

Texas Causes of Action & Affirmative Defenses

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Friday, May 19, 2017

Wrongful foreclosure claim in Texas


ELEMENTS OF CAUSE OF ACTION FOR WRONGFUL FORECLOSURE 

The elements of a wrongful foreclosure claim are: (1) a defect in the foreclosure sale proceedings; (2) an inadequate selling price; and (3) a causal connection between the defect and the inadequate selling price. See Charter Nat'l Bank-Houston v. Stevens, 781 S.W.2d 368, 371 (Tex. App.-Houston [14th Dist.] 1989, writ denied).[4] We first examine the adequacy of the sales price.

THE ESTATE OF SANDRA BROUGHTON, Deceased.
GARY T. WEIMER, INDIVIDUALLY AND AS INDEPENDENT CO-EXECUTOR OF THE ESTATE OF SANDRA BROUGHTON, Deceased;
GREG WEIMER, INDIVIDUALLY AND AS INDEPENDENT CO-EXECUTOR OF THE ESTATE OF SANDRA BROUGHTON; ET AL., Appellants,
v.
FINANCIAL FREEDOM SENIOR FUNDING CORPORATION; FINANCIAL FREEDOM ACQUISITION, LLC; AND FEDERAL NATIONAL MORTGAGE ASSOCIATION A/K/A FANNIE MAE, Appellees.

No. 13-14-00091-CV.

Court of Appeals of Texas, Thirteenth District, Corpus Christi, Edinburg.
Delivered and filed May 19, 2016.

Before Chief Justice Valdez and Justices Rodriguez and Wittig.

MEMORANDUM OPINION

Memorandum Opinion by Justice DON WITTIG.[1]
This is an appeal of a summary judgment on a claim of wrongful foreclosure of a reverse mortgage.[2] Appellants include the Estate of Sandra Broughton, Deceased; Gary T. Weimer, Individually and as Independent Co-Executor of the Estate of Sandra Broughton, Deceased; Greg Weimer, Individually and as Independent Co-Executor of the Estate of Sandra Broughton, Deceased; Jere Bob Bowden; and Bonnie Zamora, (collectively "Broughtons"). Appellees are Financial Freedom Senior Funding Corporation ("FFSFC"), Financial Freedom Acquisition, LLC, ("FFA"), and Federal National Mortgage Association ("Fannie Mae").
The Broughtons argue that irregularities caused a wrongful foreclosure with resulting inadequate consideration and that the entity that foreclosed the property did not have legal authority to do so. By memorandum opinion issued on March 3, 2016, we affirmed the summary judgment in part and reversed and remanded in part. See Estate of Broughton v. Fin. Freedom Senior Funding Corp., No. 13-14-00091-CV, 2016 WL 836834, at *1 (Tex. App.-Corpus Christi Mar. 3, 2016, no. pet. h.) (mem. op.). Appellees have subsequently filed a motion for rehearing in this cause. Without changing our previous disposition, we deny the motion for rehearing, withdraw our earlier opinion and associated judgment, and issue this memorandum opinion and related judgment in their stead.
We affirm in part and reverse and remand in part.[3]

I. BACKGROUND

In 2006, Sandra and her husband Donald Broughton entered into a reverse mortgage loan on their homestead located at 190 Oakwood Trail, Leander, Williamson County, Texas with FFSFC. The original note was for $300,240.00. FFSFC, a subsidiary of Indymac Bank, was placed into FDIC receivership in July 2009. Certain assets of FFSFC presumably including the property in question were sold to FFA, including the mortgage servicing rights. However, conflicting summary judgment proof showed a prior sale of the same mortgage assets from FFA to Fannie Mae on July 23, 2007. The original Broughton note and deed of trust contained an acceleration clause requiring payment on the death of all borrowers. Sandra Broughton survived her husband, but died December 24, 2009. There was a delay in executing letters testamentary due to the loss of the original will. The letters were finally granted August 23, 2010, with Greg and Gary Weimer as co-executors of the estate.
Summary judgment proof showed that neither executor received FFA's notice letter dated January 26, 2010 because the letter was not sent to the debtor's address. Instead it was sent to the deceased Broughtons' former Oakwood Trail address. Nor had letters testamentary been issued at that time. On November 22, 2010, FFA sent a notice of foreclosure intended for Gary Weimer; the notice was again to the Oakwood Trail address, not to his mailing address. On February 15, 2011, FFA sent a notice of lien and election of preferred lien status stating that the estimated payoff for the loan was $162,095.18. On April 4, 2011, FFA (but not the lender) sent the executors a notice of substitute trustee sale. Although additional extensions were requested, they were denied. The property was listed for sale by the Weimers for the estimated value of $610,000.00. The property was foreclosed on May 3, 2011, and the underlying lawsuit for wrongful foreclosure was filed in August of 2011.

II. STANDARD OF REVIEW

Summary judgments are reviewed de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). We apply the following standards in reviewing a traditional summary judgment: (1) the movant has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law; (2) in deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true; and (3) every reasonable inference must be indulged in favor of the nonmovant and any doubts must be resolved in favor of the nonmovant. Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425 (Tex. 1997) (citing Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985)).
A no-evidence motion for summary judgment is similar to a motion for a pretrial directed verdict. See Merrell Dow Pharms, Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997). In a no-evidence summary judgment motion, the movant contends there is no evidence of one or more essential elements of the claims for which the non-movant would bear the burden of proof at trial. TEX. R. CIV. P. 166a(i); Hamilton v. Wilson, 249 S.W.3d 425, 426 (Tex. 2008). Once the motion is filed, the burden shifts to the non-movant to present evidence raising an issue of material fact as to the elements specified in the motion. See Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006). The trial court must grant the motion unless the non-movant produces more than a scintilla of evidence raising a genuine issue of material fact on the challenged elements. See Wilson, 249 S.W.3d at 426. However, the non-moving party is not required to marshal its proof; its response need only point out evidence that raises a fact issue on the challenged elements. TEX.R. CIV. P. 166a(i), Notes and Comments (1997); Wilson, 249 S.W.3d at 426. We review a no-evidence summary judgment for evidence that would enable reasonable and fair-minded jurors to differ in their conclusions. See City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). A no-evidence motion that only generally challenges the sufficiency of the non-movant's case and fails to state the specific elements that the movant contends lack supporting evidence is fundamentally defective and cannot support summary judgment as a matter of law. Jose Fuentes Co. v. Alfaro, 418 S.W.3d 280, 283 (Tex. App.-Dallas 2013, pet. denied).

III. UNFAIR PRICE

The elements of a wrongful foreclosure claim are: (1) a defect in the foreclosure sale proceedings; (2) an inadequate selling price; and (3) a causal connection between the defect and the inadequate selling price. See Charter Nat'l Bank-Houston v. Stevens, 781 S.W.2d 368, 371 (Tex. App.-Houston [14th Dist.] 1989, writ denied).[4] We first examine the adequacy of the sales price.
The Broughtons contend irregularities in the foreclosure sale caused or contributed to cause the property to be sold for an inadequate or grossly inadequate price, citing as authority American Sav. & Loan Ass'n of Houston v. Musick, 531 S.W.2d 581, 587 (Tex. 1975). The property sold at foreclosure for $173,365.40, while the estimated value of the property was $610,000.00. FFA's own appraisal shortly before foreclosure placed the value at $340,000.00,[5] and the property had been listed by appellants in 2010 for $585,000.00. The Broughtons also argue that, depending on the degree of price inadequacy, there may be a presumption that an irregularity in the sale caused the low price. See Apex Fin. Corp. v. Brown, 7 S.W.3d 820, 828-29 (Tex. App.-Texarkana 1999, no pet.). "The particular facts of each case will determine whether the sale price was so grossly inadequate as to warrant the setting aside of the sheriff's sale." Id. (citing House v. Robertson, 36 S.W. 251 (Tex. 1896)Rio Delta Land Co. v. Johnson, 566 S.W.2d 710, 712 (Tex. Civ. App.-Corpus Christi 1978, writ ref'd n.r.e.)).
Appellees counter, citing Richardson v. Kent, which held that a sales price must fall so far short of the real value as to shock a correct mind (thereby raising a presumption that fraud attended the purchase). See 47 S.W.2d 420, 425 (Tex. Civ. App.-Dallas 1932, no writ). Appellees also argue that a price of more than fifty percent of property value is not grossly inadequate as a matter of law. See Terra XXI, Ltd. v. Harmon, 279 S.W.3d 781, 788 (Tex. App.-Dallas 2007, pet denied). The Terra court relied upon Kent as sole support for this proposition—and in Kent the court more accurately stated that they could find no case that held a sales price of more than fifty percent was grossly inadequate as a matter of law. Compare id. with Kent, 47 S.W.2d at 425 ("Therefore it appears that the consideration paid and to be paid by Richardson was approximately 50 per cent of the then value of the land, as found by the jury. We know of no case holding that, when property at a forced sale brings fifty per cent of its value, the consideration paid by the purchaser is decreed as a matter of law, to be grossly inadequate; hence no presumption of fraud can be indulged in respect to this sale. . . ." (emphasis added)).
We reject appellees' argument that a sale price of approximately fifty percent of the value is adequate as a matter of law. See id. In any event, and more to the point, the significant disparity between the sales price of $173,365.40 and the opinion of market value of $610,000.00, greatly exceeds fifty percent and in fact is over three hundred and fifty percent. Cf. Stevens, 781 S.W.2d at 370-75 (finding approximately eighty-four percent of $430,000.00 fair market value to be inadequate and a proper cohort of damages).
Some courts have rejected the language that a foreclosure selling price be "grossly inadequate." See id. at 371. In Stevens, the relevant jury question was whether the "fairness" of the foreclosure price was affected by the failure of the mortgagee to notify, as promised, a person interested in purchasing the property. Id. In Stevens, it should also be noted that the fair market value of the property was $430,000.00 and the sale price was $355,000.00, a difference of $54,315.00. Id. 370-71. The trial court and appellate court rejected a proposed jury question that asked whether $355,000.00 was a "grossly inadequate bid price." Id. at 371. Rather than the sometimes-used test of "grossly inadequate bid price", the correct inquiry is the inadequacy of consideration. See id. at 373-74. Furthermore, whether or not irregularities of a sale had any influence upon the consideration paid in the sale is a question of fact. Id. at 374 (citing Allen v. Pierson, 60 Tex. 604, 605-06 (1884) (stating that where the price is grossly inadequate, slight additional facts showing fraud, irregularity, or other circumstances calculated to prevent the property from bringing something like its reasonable value, might be sufficient to avoid the sale.)
Given the significant disparity between the sale price of $173,365.40, appellees' own appraisal of $340,000.00, and an appraised value of $610,000.00, we conclude appellants raised a fact issue thus preventing a summary judgment on this element. Id.; Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 756 (Tex. 2007)Apex Fin. Corp., 7 S.W.3d at 829.

IV. NOTICE

On January 26, 2010, FFA sent correspondence addressed to the Estate of Broughton at 190 Oakwood Tr., Leander, Texas, 78641, stating a future threat to foreclose if any deficiencies were not cured within thirty days. Gary Weimer filed a summary judgment affidavit stating he did not receive the letter and the stated address was not his address. In his affidavit, Gary Weimer unequivocally stated he did not receive this correspondence and had not and did not reside at that address. We previously held a similar affidavit by the homeowner regarding lack of service constitutes some evidence of a defect in the foreclosure sale proceedings. Sauceda v. GMAC Mortg. Corp., 268 S.W.3d 135, 139-40 (Tex. App.-Corpus Christ 2008, no pet.). Thus, a fact issue remained as to whether the Saucedas were served with the notice that section 51.002(b)(3) of the property code required. See TEX. PROP. CODE ANN. § 51.002(b)(3), (West, Westlaw through 2015 R.S.); Sauceda, 268 S.W.3d at 140. Furthermore, appellees fail to show that the 190 Oakwood Trail address is the last known address of the "debtor," given the demise of Mrs. Broughton, the last survivor of the couple.[6]
Appellants contend impliedly that the deed of trust notice requirements trump the property code requirements. The deed of trust apparently allows notice to be sent to the property address, presumably vacant after the death of Mrs. Broughton. This contrasts with section 51.002(b)(3) & (e) requiring written notice to each debtor at the debtor's last known address.[7] Furthermore, section 51.002(d) provides:
Notwithstanding any agreement to the contrary, the mortgage servicer of the debt shall serve a debtor in default under a deed of trust or other contract lien on real property used as the debtor's residence with written notice by certified mail stating that the debtor is in default under the deed of trust or other contract lien and giving the debtor at least 20 days to cure the default before notice of sale can be given under Subsection (b). The entire calendar day on which the notice . . . is given, regardless of the time of day at which the notice is given, is included in computing the 20-day notice period . . ., and the entire calendar day on which notice of sale is given under Subsection (b) is excluded in computing the 20-day notice period.
TEX. PROP. CODE ANN. § 51.002(d) (emphasis added).
Appellants contend that there is no proper summary judgment proof as to the holder of the note and the mortgagee on the deed of trust. The deposition testimony of Gail Funkhauser, who claimed to be the person most knowledgeable of the details of the transaction, testified that Fannie Mae had purchased the note and owned it throughout the transaction. Fannie Mae was the holder of the note, and perhaps the mortgagee, but did not foreclose the note. Fannie Mae was also the purchaser and sole bidder at the foreclosure "sale."[8] Nor is the record clear that FFA had specific authority from Fannie Mae to foreclose. It appears that at one time the deed of trust was assigned from FFSFC to Mortgage Electronic Registration Systems, Inc. ("MERS") as nominee for FFA. Other proof suggests that Fannie Mae was the mortgage holder and owner of the note. Nevertheless, we agree with appellees that FFA as servicer of the deed of trust had authority to act on behalf of the lender, subject to statutory, contract, and constitutional restrictions. See Aguero v. Ramirez, 70 S.W.3d 372, 374 (Tex. App.-Corpus Christi 2002, pet. denied) (explaining that a deed of trust may be enforced by the mortgagee, regardless of whether the mortgagee also holds the note).
Appellants contend that section 51.0025 allows a mortgage servicer to foreclose on behalf of a mortgagee if the servicer and mortgagee have entered into an agreement to foreclose and the required notices under section 51.002(b) disclose that the servicer is representing the mortgagee under the servicing agreement and the name of the mortgagee. See TEX. PROP. CODE ANN. §§ 51.0025, 51.002(b)(3). Appellees argue that where there is a debt secured by a note, which is, in turn, secured by a lien, the note and lien constitute separate obligations. See Aguero, 70 S.W.3d at 374. We agree. However, appellants are correct that the FFA did not disclose that it acted under an agreement with Fannie Mae to service the note. These too are separate obligations. Appellants counter that they were the mortgagee, not the noteholder, and accordingly did not need to disclose their principals and were empowered to foreclose.
In their brief, appellees admit and argue that their notice of substitute trustee sale shows the address of FFA and stated that FFA was acting as both the mortgagee and mortgage servicer. Indeed, this notice shows FFSFC, a subsidiary of Indy Mac Bank, as the original mortgagee, and FFA as "current" mortgagee and mortgage servicer.[9] Yet the summary judgment proof is in conflict as to the mortgagee note holder. Indeed FFA conveyed multiple mortgages to Fannie Mae, presumably including the Broughton mortgage/deed of trust in question.
FFA did not disclose it was acting on behalf of Fannie Mae. No copy of the note was produced. There is no showing of a complete chain of title between FFSFC and Fannie Mae. Further, there was no showing appellees had an agreement between FFA and Fannie Mae giving FFA authority to service the note and foreclose on behalf of Fannie Mae. The notice stated FFA was acting as the mortgage servicer for FFA, not that it was the lender.
Even assuming that FFA notices were properly originated, appellants failed to give the proper notice when the loan became due.[10] Under the deed of trust, the "Lender shall notify the secretary and borrower whenever the loan becomes due and payable under Paragraph 9." While FFA (or FFSFC) was the original lender, according to some summary judgment proof, the note and mortgage were apparently sold to Fannie Mae. The Texas Constitution also required notice from the lender. Subsection 10 "does not permit the lender to commence foreclosure until the lender gives notice to the borrower. . . ." TEX. CONST. art. XLI § 50(k)(10). The lender's notice must provide that a ground for foreclosure exists, giving the borrower at least thirty[11] days to remedy the condition, pay the debt, or convey the homestead property. Id. The failure of the lender to notify is cumulative of the fact that the executors were not initially notified and did not live at the Oakwood Trail address. Furthermore, Fannie Mae did not actually bid at the "sale" which, according to Funkhauser, amounted to a paper transaction with the note and property reverting back to Fannie Mae for the amount of the debt with no other bidders.
In our de novo review of a trial court's summary judgment, we consider all the evidence in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not. Tamez, 206 S.W.3d at 582. Every reasonable inference must be indulged in favor of the nonmovant and any doubts must be resolved in favor of the nonmovant. Am. Tobacco Co., 951 S.W.2d at 425. Here, the proof does not unequivocally establish that FFA was the authorized mortgage servicer of Fannie Mae. Issues of fact foreclose the availability of summary judgment under these circumstances. We hold that there is some evidence of irregularity of the sale pertaining to required notices under the constitution, applicable statutes, and the deed of trust. There is more than ample evidence on the lack of sufficient consideration paid and some evidence of the likelihood of this causal connection between the defects and the inadequate selling price. See Sauceda, 268 S.W.3d at 139Apex Fin. Corp., 7 S.W.3d at 828-29. Furthermore, under our system, it is a question of fact to be determined from the evidence whether or not the irregularity had any influence upon the consideration for which the property sold. Prudential Corp. v. Bazaman, 512 S.W.2d 85, 90 (Tex. Civ. App.-Corpus Christi, 1974, no writ) (citing Allen v. Pierson, 60 Tex. 604 (1884) ("It is not a matter of law to be assumed by the court.")).

V. BREACH OF CONTRACT CLAIMS

Appellees point out that the Broughtons did not respond to the no-evidence motion for summary judgment on the breach of contract claims. The trial court must grant the motion unless the non-movant produces more than a scintilla of evidence raising a genuine issue of material fact on the challenged elements. See Wilson, 249 S.W.3d at 426. We accordingly affirm in part the trial court's summary judgment dealing with the breach of contract claims.

VI. CONCLUSION

The portion of the summary judgment dealing with the breach of contract claims is affirmed. The remainder of the summary judgment is reversed and remanded.
[1] Retired Fourteenth Court of Appeals Justice Don Wittig was assigned to this Court by the Chief Justice of the Supreme Court of Texas pursuant to the government code. See TEX. GOV'T CODE ANN. § 74.003 (West, Westlaw through 2015 R.S.).
[2] This case is before the Court on transfer from the Third Court of Appeals in Austin pursuant to an order issued by the Supreme Court of Texas. See TEX. GOV'T CODE ANN. § 73.001 (West, Westlaw through 2015 R.S.).
[3] Appellees recently filed a motion to set this cause for hearing by submission "on the soonest available date." We grant appellees' motion and issue this opinion accordingly.
[4] As we discuss below, various courts have used different language to reflect the price inadequacy necessary depending on the circumstances. The Stevens Court uses the term "grossly" inadequate sales price while at the same time holding that the jury question about the fairness of the price was correct. See Charter Nat'l Bank-Houston v. Stevens, 781 S.W.2d 368, 371 (Tex. App.-Houston [14th Dist.] 1989, writ denied).
[5] Appellees argue that appellants "judicially admit" a market value of $340,000 but context shows both in the underlying pleadings and their brief, appellants are referencing FAA's own estimate of value.
[6] Section 51.002(b)(3) of the property code also required notice of sale to each debtor. See TEX. PROP. CODE ANN. § 51.002(b)(3). While there is some evidence that Mrs. Broughton lived at the address during her lifetime, there is no proof anyone lived there after her death.
[7] Section (e) provides that notice by certified mail is complete when deposited in the US mail, postage prepaid and addressed to the debtor at the debtor's last known address. In any event, even if an affidavit was submitted to the effect that service was completed, such evidence is only prima facie and could be controverted as was done here.
[8] According to the testimony of Funkhauser, Fannie Mae did not actually bid at a "sale." "It's a paper transaction. If there is no third party sale, it reverts back to the note holder for the amount of the debt." Thus, another irregularity is at issue because it appears there was some evidence that there was no public sale as required under section 51.002(a). See TEX. PROP. CODE ANN. § 51.002(a) (West Westlaw through 2015 R.S.).
[9] Appellees go on to argue at page 5 of their response, FFA as mortgagee was not required to disclose it had any servicing agreement with FNMA or anyone else.
[10] Appellants note the lender to be the beneficiary under the deed of trust.

[11] Or at least twenty days under certain conditions not applicable here.

ORDERS ON CASES GRANTED
THE FOLLOWING PETITION FOR REVIEW IS GRANTED:
16-0485
FINANCIAL FREEDOM SENIOR FUNDING CORPORATION, FINANCIAL FREEDOM ACQUISITION LLC, AND FEDERAL NATIONAL MORTGAGE ASSOCIATION v. THE ESTATE OF SANDRA BROUGHTON, DECEASED, ET AL.; from Williamson County; 13th Court of Appeals District (13-14-00091-CV, ___ SW3d ___, 05-19-16)
 
joint motion to grant review, vacate court of appeals' judgment, and affirm trial court's judgment granted as follows:
Pursuant to Texas Rule of Appellate Procedure 56.3, without considering the merits, the Court grants the petition for review, vacates the judgment of the court of appeals, and affirms the judgment of the trial court. The parties' request that the court of appeals' opinion be vacated is denied.

Thursday, March 2, 2017

Elements of tortious interference claim in Texas


The elements of tortious interference with an existing contract are: (1) the existence of a contract subject to interference; (2) the occurrence of an act of interference that was willful and intentional; (3) the act was a proximate cause of the plaintiff's damage; and (4) actual damage or loss occurred. Baty v. ProTech Ins. Agency, 63 S.W.3d 841, 857 (Tex. App.-Houston [14th Dist.] 2001, pet. denied). "To prevail on a tortious-interference claim, a plaintiff must present evidence that the defendants interfered with a specific contract." Funes v. Villatoro, 352 S.W.3d 200, 213 (Tex. App.-Houston [14th Dist.] 2011, pet denied). In addition, to establish the element of a willful and intentional act of interference, the plaintiff must produce evidence that the defendant was a more-than-willing participant and knowingly induced one of the contracting parties to breach its obligations under the contract. Id. To do so, the plaintiff must present evidence that an obligatory provision of the contract was breached. Id.

SOURCE: FOURTEENTH COURT OF APPEALS IN HOUSTON -  No. 14-14-00945-CV. - 2/16/2017 

he elements of tortious interference with a prospective business relationship are: (1) a reasonable probability that the plaintiff would have entered into a business relationship; (2) an independently tortious or unlawful act by the defendant that prevented the relationship from occurring; (3) the defendant did such act with a conscious desire to prevent the relationship from occurring or the defendant knew the interference was certain or substantially certain to occur as a result of the conduct; and (4) the plaintiff suffered actual harm or damages as a result of the defendant's interference. Baty, 63 S.W.3d at 860. "To prevail on a claim for tortious interference with a prospective business relationship, the plaintiff must establish that the defendant intentionally prevented the formation of the business relationship." Id.

Thursday, February 23, 2017

Elements of breach-of-fiduciary-duty claim under Texas law


"The elements of a breach of fiduciary duty claim are: (1) a fiduciary relationship between the plaintiff and defendant, (2) a breach by the defendant of his fiduciary duty to the plaintiff, and (3) an injury to the plaintiff or benefit to the defendant as a result of the defendant's breach." Lundy v. Masson, 260 S.W.3d 482, 501 (Tex. App.-Houston [14th Dist.] 2008, pet. denied).

Fiduciary duties may arise from formal and informal relationships and may be created by contract. Cotten v. Weatherford Bancshares, Inc., 187 S.W.3d 687, 698 (Tex. App.-Fort Worth 2006, pet. denied) disapproved on other grounds by Ritchie v. Rupe, 443 S.W.3d 856, 866 (Tex. 2014)

Fiduciary duties arise as a matter of law in certain formal relationships, including attorney-client and trustee relationships. Meyer v. Cathey, 167 S.W.3d 327, 330-31 (Tex. 2005). But an informal fiduciary duty may arise from a moral, social, domestic, or purely personal relationship of trust and confidence, and these types of relationships are generally called a confidential relationship. Hubbard v. Shankle, 138 S.W.3d 474, 483 (Tex. App.-Fort Worth 2004, pet. denied)

A confidential relationship exists where influence has been acquired and abused and confidence has been extended and betrayed. Cotten, 187 S.W.3d at 698. The existence of a confidential relationship is ordinarily a question of fact. Id.

SOURCE: FORT WORTH COURT OF APPEALS No. 02-14-00294-CV. - 1/16/2017 

Tuesday, February 14, 2017

Doctrine of laches (not the same as statute of limitations, but similar)


LACHES DOCTRINE IS EQUITABLE IN NATURE, WHILE SOL IS STATUTORY 

Laches is an equitable remedy that prevents a plaintiff from asserting a claim due to a lapse of time. Green v. Parrack,974 S.W.2d 200, 203-04 (Tex. App.-San Antonio 1998, no pet.)Bluebonnet Sav. Bank, F.S.B. v. Grayridge Apartment Homes, Inc., 907 S.W.2d 904, 912 (Tex. App.-Houston [1st Dist.] 1995, writ denied). To prevail, the party asserting laches must show two elements: (1) there was an unreasonable delay by the other party in asserting legal or equitable rights, and (2) the party asserting laches made a good faith change in position to his detriment because of the delay. Caldwell v. Barnes, 975 S.W.2d 535, 538 (Tex. 1998)Rogers v. Ricane Enters., Inc., 772 S.W.2d 76, 80 (Tex. 1989)

SOURCE: AUSTIN COURT OF APPEALS - No. 03-14-00738-CV - 1/20/2017

Tuesday, January 10, 2017

Principles of statutory construction


When can extrinsic information be considered in construing a statute? 

The meaning of a statute is a legal question, which we review de novo to ascertain and give effect to the legislature's intent. Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 437 (Tex. 2009). When possible, we discern legislative intent from the plain meaning of the words chosen. Id. This general rule applies unless enforcing the plain language of the statute as written would produce absurd results. Id. Therefore, our practice when construing a statute is to recognize that "the words [the legislature] chooses should be the surest guide to legislative intent." Id. (quoting Fitzgerald v. Advanced Spine Fixation Sys., Inc., 996 S.W.2d 864, 866 (Tex. 1999)). Only when those words are ambiguous do we resort to rules of construction or extrinsic aids. Id.

SOURCE: HOUSTON COURT OF APPEALS No. 14-15-00180-CV. - 2/11/2016

Westfield Lake and Mill Creek undisputedly held legal title at the time they filed timely applications for continuation of the exemptions establishing that they were qualifying CHDOs. Accordingly, we conclude as a matter of law that under the plain language of the statute, Westfield Lake and Mill Creek were "owners" for purposes of section 11.182.
Our holding is consistent with the supreme court's acknowledgement that the legislature wanted to encourage the development and ownership of low-income housing by CHDOs and to give CHDOs the flexibility to structure their transactions in accordance with "the realities of the commercial housing industry." See AHF-Arbors at Huntsville I, LLC v. Walker Cnty. Appraisal Dist., 410 S.W.3d 831, 837, 839 (Tex. 2012). Although the court recognized that tax exemption statutes generally are construed strictly, that does not require us to ignore the purpose of the exemptions. See id. at 837. According to the legislative history evidence submitted by the Appraisal District, the purpose of the statute was to preserve the CHDO tax exemption for "properties that might change ownership due to foreclosure." Our construction of the statute is consistent with this purpose.
We reverse the judgment of the trial court and render judgment that Westfield Lake and Mill Creek are entitled to a continuation of the ad valorem tax exemptions under section 11.182. See Tex. Tax Code § 11.182(k).

SOURCE: HOUSTON COURT OF APPEALS No. 14-15-00180-CV. - 2/11/2016

This issue involves statutory construction, which we review de novo. See CHCA Woman's Hosp., L.P. v. Lidji, 403 S.W.3d 228, 231 (Tex. 2013). In construing statutes, our primary objective is to give effect to the legislature's intent. Tex. Lottery Comm'n v. First State Bank of DeQueen, 325 S.W.3d 628, 635 (Tex. 2010) (citing Galbraith Eng'g Consultants, Inc. v. Pochucha, 290 S.W.3d 863, 867 (Tex. 2009)). We rely on the plain meaning of the text as expressing legislative intent unless a different meaning is supplied by legislative definition or is apparent from the context or the plain meaning leads to absurd results. Id. (citing City of Rockwall v. Hughes, 246 S.W.3d 621, 625-26 (Tex. 2008)). We presume that the legislature selected language in a statute with care and that every word or phrase was used with a purpose in mind. Id. (citing In re Caballero, 272 S.W.3d 595, 599 (Tex. 2008)Chastain v. Koonce, 700 S.W.2d 579, 582 (Tex. 1985)). We read statutes as a whole and interpret statutes to give effect to "every sentence, clause, and word of a statute so that no part thereof [will] be rendered superfluous." City of San Antonio v. City of Boerne, 111 S.W.3d 22, 29 (Tex. 2003)(quoting Spence v. Fenchler, 180 S.W. 597, 601 (1915)).

In addition to the general principles that guide our construction of the tax code, statutory tax exemptions are disfavored and are strictly construed against the taxpayer and in favor of the taxing authority. N. Alamo Water Supply Corp. v. Willacy Cty. Appraisal Dist.,804 S.W.2d 894, 899 (Tex. 1991). The burden of proof for showing the exemption applies lies with the claimant. See id. An exemption must affirmatively appear in the statute, and all doubts are resolved in favor of the taxing authority. See Bullock v. Nat'l Bancshares Corp., 584 S.W.2d 268, 272 (Tex. 1979).

[,,,]

Columbia Med. Ctr. of Las Colinas, Inc. v. Hogue, 271 S.W.3d 238, 256 (Tex. 2008)(stating that courts must not interpret a statute in a manner that renders any part of the statute meaningless or superfluous); Cont'l Cas. Ins. Co. v. Functional Restoration Assocs., 19 S.W.3d 393, 402 (Tex. 2000) (noting that courts give effect to all of a statute's words and, if possible, do not treat any statutory language as mere surplusage); see also Tex. Gov't Code Ann. § 311.021(2) (West 2013) (presuming that legislature intended entire statute to be effective).

SOURCE: FORT WORTH COURT OF APPEALS - No. 02-14-00188-CV. - 2/14/2016 






Res Judicata Cases


EFFECT OF RES JUDICATA WHEN PROPERLY ASSERTED AS AFFIRMATIVE DEFENSE 

Res judicata bars claims that were brought, or could have been brought, in an earlier lawsuit that resulted in a final judgment on the merits. Igal v. Brightstar Info. Tech. Grp., Inc., 250 S.W.3d 78, 86 (Tex. 2008). To prevail on the defense, a party must show that (1) in a previous action, a court of competent jurisdiction rendered a final determination on the merits of a claim, (2) the parties in the earlier action are identical to, or in privity with, the present parties, and (3) the pending claim (a) is identical to the prior claim or (b) arises out of the same subject matter as the prior claim and could have been litigated in the previous action. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010)

SOURCE:HOUSTON COURT OF APPEALS -  No. 01-12-01114-CV. - 7/11/2013

RES JUDICATA AS TO COUNTERCLAIMS - PRIVITY 

Res judicata prevents the relitigation of a finally-adjudicated claim and related matters that should have been litigated in a prior suit. Barr v. Resolution Trust Corp., 837 S.W.2d 627, 628 (Tex. 1992). Under Texas' transactional approach to res judicata, a defendant must bring as a counterclaim any claim arising out of the transaction or occurrence that is the subject matter of the opposing party's suit. State & County Mut. Fire Ins. Co. v. Miller, 52 S.W.3d 693, 696 (Tex. 2001)Barr, 837 S.W.2d at 630. It requires proof of three elements: (1) a prior final judgment on the merits by a court of competent jurisdiction, (2) identity of parties or those in privity with them, and (3) a second action based on the same claims as were raised or could have been raised in the first action. Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996).

"People can be in privity in at least three ways: (1) they can control an action even if they are not parties to it; (2) their interests can be represented by a party to the action; or (3) they can be successors in interest, deriving their claims through a party to the prior action." Id. at 652-53. Privity does not exist when persons are interested in the same question, but requires an identity of interest in the legal right actually litigated. Tex. Real Estate Comm'n v. Nagle, 767 S.W.2d 691, 694 (Tex. 1989)Pyles v. Young, No. 06-07-00066-CV, 2007 WL 4462738 (Tex. App.-Texarkana Dec. 21, 2007, no pet.) (mem. op.).

SOURCE: TEXARCANA COURT OF APPEALS - No. 06-13-00033-CV. - 9/5/2014B

Contract for Deed vs. Conveyance of Real Property


A contract for deed, unlike a mortgage, allows the seller to retain title to the property until the purchaser has paid for the property in full.

The probate court's order expressly granted Edward's one-half community interest in the property to "his rightful heirs," and Connie does not dispute that Don and Esther are his rightful heirs. At the time of Edward's death, however, Connie and Edward did not have an ownership interest in the property because Mary Rose—as the seller of the property under a contract for deed—retained title to the property. See Flores v. Millennium Interests, Ltd., 185 S.W.3d 427, 429 (Tex. 2005) ("A contract for deed, unlike a mortgage, allows the seller to retain title to the property until the purchaser has paid for the property in full."); Sluder v. Ogden, No. 03-10-00280-CV, 2011 Tex. App. LEXIS 267, at *10 (Tex. App.-Austin Jan. 13, 2011, pet. denied) (mem. op.) (noting that "contract for deed merely establishes conditions precedent to a title's transfer" (citing Graves v. Diehl, 958 S.W.2d 468, 470-71 (Tex. App.-Houston [14th Dist.] 1997, no pet.)).

The evidence established that Connie and Edward had not fully performed under the terms of the contract for deed at the time of Edward's death. Under an executory contract to convey land, such as a contract for deed, the buyer does not acquire title but an "equitable right to make payments on the property and to receive a deed and legal title when [the buyer] complete[s] the payments." See Gaona v. Gonzales, 997 S.W.2d 784, 786-87 (Tex. App.-Austin 1999, no pet.) (citing Johnson v. Wood, 157 S.W.2d 146, 148 (Tex. 1941) and Texas Am. Bank/Levelland v. Resendez, 706 S.W.2d 343, 345 (Tex. App.-Amarillo 1986, no writ)); see also Southern Vanguard Ins. Co. v. Silberstein, No. 14-09-00472-CV, 2010 Tex. App. LEXIS 6202, at *9-12 (Tex. App.-Houston [14th Dist.] Aug. 3, 2010, no pet.) (mem. op.) (concluding that purchaser did not obtain equitable title when entered into contract for deed and explaining differences between contract for deed and mortgage).

SOURCE: AUSTIN COURT OF APPEALS - No. 03-12-00146-CV. - 8/26/2014 

ALL PAYMENTS MUST BE MADE OR CONTRACT MAY BE CANCELLED

A contract for deed is an executory contract constituting an agreement by a seller to deliver a deed to property once certain conditions have been met. See Graves v. Diehl, 958 S.W.2d 468, 470 (Tex. App.-Houston [14th Dist.] 1997, no pet.). Until the executory contract is fully performed, the owner retains legal title to the property, but holds that title subject to the purchaser's equitable right to complete the contract, i.e., to make payments and receive a deed once payments are completed. See Gaona v. Gonzalez, 997 S.W.2d 784, 786-87 (Tex. App.-Austin 1999, no pet.)Graves, 958 S.W.2d at 471. The seller is not obligated to deliver legal title to the property until the purchaser pays the purchase price in full. See Salinas v. Beaudrie, 960 S.W.2d 314, 319 (Tex. App.-Corpus Christi 1997, no pet.). Under a contract for deed, the purchase price is usually paid in installments over a course of years. Id. In the present case, there was undisputed evidence that Ware did not make the payments required by the December 15, 2005 document she contends is a contract for deed. According to that document, Ware was to make eighty monthly payments of $500 to pay the $40,000 purchase price. Assuming her first payment was made in November 2005, Ware was required to pay $500 per month until June 2012. It is undisputed that Ware stopped making payments in the fall of 2008 and made no further payments required by the December 15, 2005 document.[6] Thus, even though Ware was not obligated to make the payments set forth in the contract for deed, Ware's failure to make those payments meant that title to the Property remained with the seller. See Graves, 958 S.W.2d at 471 (purchaser's equitable right does not ripen into equitable title to property until he has fully performed under the contract, i.e., paid the full purchase price). The trial court was therefore correct in its conclusion that the Estate owned the Property. We overrule Ware's sixth appellate issue.[7]

SOURCE: HOUSTON COURT OF APPEALS - No. 03-14-00083-CV. - 12/22/2015 

RIGHT TO POSSESSION UNDER CONTRACT FOR DEED VS. OWNERSHIP (TITLE) 

A contract for deed is a form of real-property conveyance in which the purchaser obtains an immediate right to possession, but the seller retains legal title and has no obligation to transfer it unless and until the purchaser finishes paying the full purchase price (and, often, interest, fees, or other related obligations), which is typically done in installments over several years. See Flores v. Millennium Interests, Ltd., 185 S.W.3d 427, 429 (Tex. 2005) ("[E]xecutory contracts [are] also known as contracts for deed. 

A contract for deed, unlike a mortgage, allows the seller to retain title to the property until the purchaser has paid for the property in full."); Reeder v. Curry, 294 S.W.3d 851, 856 (Tex. App.-Dallas 2009, pet. denied) ("In an executory contract for the sale of land, such as the contract for deed in this case, the superior title remains with the seller until the purchaser fulfills its part of the contract" and "[i]f the purchaser defaults under the contract, the seller is entitled to possession of the property."); Ward v. Malone, 115 S.W.3d 267, 270-71 (Tex. App.-Corpus Christi 2003, pet. denied) (stating that a "contract for deed is an agreement by a seller to deliver a deed to property once certain conditions have been met and that it entitled the buyer to immediate possession, that the seller retains title until the purchase price is fully paid, and that the price is typically paid in installments over several years). 

A contract for deed differs from a conventional contract for sale of realty, in which the seller and purchaser mutually agree to complete payment and title transfer on a date certain (the "closing date"). See Flores, 185 S.W.3d at 429. Unlike a contract for deed, under which the buyer has an equitable right, but not obligation, to complete the purchase, Gaona v. Gonzales, 997 S.W.2d 784, 786-87 (Tex. App.-Austin 1999, no pet.), the buyer under a typical real-estate contract is contractually obligated to complete the purchase and may be liable for breach upon failure to pay the seller. Carroll v. Wied, 572 S.W.2d 93, 95 (Tex. Civ. App.-Corpus Christi 1978, no writ)("In a contract of sale, one party is obligated to sell and the other to purchase.").

Based on the foregoing case law and the facts in this case, we disagree with Tran's assertion that the underlying contract is an executory contract. Specifically, the record reflects that Luu signed and conveyed a warranty deed on the day of closing with no vestige of title to the property, even though Tran is still making payments on the note. See, e.g., Brown v. De La Cruz, 156 S.W.3d 560, 566 (Tex. 2004) ("Since 1995, the Texas Property Code has required that sellers by executory contract (or `contract for deed') of certain residential property in Texas must record and transfer a deed within thirty days of final payment."). Indeed, there is no evidence in the record demonstrating that Luu withheld transfer of title or refused to sign the deed subject to Tran completing all installment payments associated with the purchase of the property.

SOURCE: WACO COURT OF APPEALS - No. 10-13-00308-CV. - 4/10/2014 



Mediation privilege bars testimony about what was said or happened in mediation


STATUTORY MEDIATION PRIVILEGE 

Section 154.053(c) of the Texas Civil Practice and Remedies Code provides that "Unless the parties agree otherwise, all matters . . . during the settlement process are confidential and may never be disclosed to anyone, including the appointing court." TEX. CIV. PRAC. & REM. CODE ANN. § 154.053(c) (West 2011); see also § 154.073(a)-(b) (West 2011) (explaining communications and any records made during mediation are confidential and may not be used as evidence in a judicial proceeding). 

"A cloak of confidentiality surrounds mediation, and the cloak should be breached only sparingly." Allison v. Fire Ins. Exch., 98 S.W.3d 227, 260 (Tex. App.-Austin 2002, pet. granted, judgm't vacated w.r.m.). 

SOURCE: DALLAS COURT OF APPEALS - No. 05-11-01536-CV. - 5/7/2013

We begin by determining whether HSI was required to obtain a written ruling on its objection asserting the mediation privilege. Generally, a summary judgment ruling on evidence must be reduced to writing, signed by the trial court, and entered of record. S & I Mgmt., Inc. v. Sungju Choi, 331 S.W.3d 849, 855 (Tex. App.-Dallas 2011, no pet.). However, there is a distinction between summary judgment evidence that is a defect in form and a defect in substance. A defect is substantive if the evidence is incompetent, and it is formal if the evidence is competent but inadmissible. Coleman v. Woolf, 129 S.W.3d 744, 748 (Tex. App.-Fort Worth 2004, no pet.)Mathis v. Bocell, 982 S.W.2d 52, 60 (Tex. App.-Houston [1st Dist.] 1998, no pet.). Formal defects may be waived by failure to object, and if waived, the evidence is considered. Mathis, 982 S.W.2d at 52. Substantive defects are never waived because the evidence is incompetent and cannot be considered under any circumstances. Id.

The parties have not cited to any case law holding that the failure to obtain a ruling on an objection pertaining to the mediation privilege is a substantive defect. However, section 154.053(c) of the Texas Civil Practice and Remedies Code provides that "Unless the parties agree otherwise, all matters . . . during the settlement process are confidential and may never be disclosed to anyone, including the appointing court." TEX. CIV. PRAC. & REM. CODE ANN. § 154.053(c) (West 2011); see also § 154.073(a)-(b) (West 2011) (explaining communications and any records made during mediation are confidential and may not be used as evidence in a judicial proceeding). Because these statutes indicate such privileged information cannot be disclosed or considered, it therefore follows it is a substantive defect that cannot be waived by failing to obtain a ruling from the trial court. See, e.g., St. Luke's Episcopal Hosp. v. Garcia, 928 S.W.2d 307, 310 (Tex. App.-Houston [14th Dist.] 1996, orig. proceeding) (noting relator's primary objections to discovery "are substantive objections relating to privilege"). Accordingly, we shall address HSI's argument that the mediation privilege bars consideration of the evidence submitted by HTI to raise a fact issue as to ownership.

Section 154.073 of the Texas Civil Practice and Remedies Code provides the following regarding "Confidentiality of Certain Records and Communications" involved in alternative dispute resolution:
(a) Except as provided by Subsections (c), (d), (e), and (f), a communication relating to the subject matter of any civil or criminal dispute made by a participant in an alternative dispute resolution procedure, whether before or after the institution of formal judicial proceedings, is confidential, is not subject to disclosure, and may not be used as evidence against the participant in any judicial or administrative proceeding.
(b) Any record made at an alternative dispute resolution procedure is confidential, and the participants or the third party facilitating the procedure may not be required to testify in any proceedings relating to or arising out of the matter in dispute or be subject to process requiring disclosure of confidential information or data relating to or arising out of the matter in dispute.
(c) An oral communication or written material used in or made a part of an alternative dispute resolution procedure is admissible or discoverable if it is admissible or discoverable independent of the procedure.
TEX. CIV. PRAC. & REM. CODE ANN. § 154.073(a)-(c) (West 2011).
Further, "[u]nless the parties agree otherwise, all matters, including the conduct and demeanor of the parties and their counsel during the settlement process, are confidential and may never be disclosed to anyone, including the appointing court." Id. § 154.053(c).

Both parties cite to two different cases from this Court to support their position as to why the mediation privilege should or should not apply to these facts. HTI relies on Avary v. Bank of America, N.A., 72 S.W.3d 779 (Tex. App.-Dallas 2002, pet. denied) and HSI relies on In re Empire Pipeline Corporation, 323 S.W.3d 308 (Tex. App.-Dallas 2010, orig. proceeding).

We begin our discussion with Avary. In that case, Avary, as guardian of the estates of minors, brought suit against the fiduciary bank based on the bank's actions during the mediation of an underlying wrongful death suit. Avary, 72 S.W.3d at 785. Specifically, Avary alleged the bank's rejection of a $450,000 settlement offer and the acceptance of a much smaller allocation was a breach of the bank's fiduciary duty as executor of the estate. Id. As part of discovery, Avary sought to obtain information from the mediation, most of which the trial court denied. The trial court granted the bank's summary judgment because Avary presented no evidence of breach of fiduciary duty, negligence, or conspiracy to defraud, as each cause of action arose "out of confidential and inadmissible statements purportedly made at Mediation." Id. at 786.

We noted "[t]here is no question that confidentiality of communications is an important part of the statutory scheme of alternative dispute resolution" and that "proponents of mediation stress that confidentiality is critical to the success of the process." Id. at 798. We concluded the mediation privilege did not apply because Avary sought to prove a "new and independent tort" that allegedly occurred between her and her fiduciary during mediation. Id. at 798. She was not trying to discover evidence to obtain additional funds or establish any further liability against the parties that had peaceably resolved the underlying dispute. Thus, the information she sought through discovery would not disturb the underlying settlement agreement. Id. at 800. "It is one thing to order discovery from a party alleged to have committed a tort during the mediation process; it is another to reach across the mediation table to parties who have settled the claims against them." Id. at 801. We ultimately held that
[O]n "the facts before us, . . . [w]e conclude only that where a claim is based upon a new and independent tort committed in the course of the mediation proceedings, and that tort encompasses a duty to disclose, section 154.073 does not bar discovery of the claim where the trial judge finds in light of the "facts, circumstances, and context," disclosure is warranted.
Id. at 803.

HSI relies on In re Empire Pipeline Corporation to support its position that HTI's attempts to use evidence from the mediation is barred. In Empire Pipeline, the underlying cause of action involved a breach of contract relating to oil and gas exploration, which the parties settled through mediation. Id. at 309. Two months after the agreement, Gunter sought to vacate the agreement; however, the trial court entered the settlement agreement and dismissed his claims. Id. Gunter later filed a declaratory judgment action asserting Empire Pipeline was not complying with the settlement agreement. Id.
As part of the declaratory judgment action, Gunter sought discovery of documents related to the prior mediation. Id. at 310. Gunter described the scope of his discovery in a motion to compel. "Plaintiff is not seeking the work product of counsel, nor his trial strategy, but rather information going to the very heart of the issue: was an agreement actually reached at the mediation, and if so, what were its terms?" Id. The trial court granted, in part, and denied, in part, the motion to compel. Id.
Empire Pipeline sought mandamus relief arguing the documents and testimony ordered by the trial court were, among other things, protected by the ADR privilege. Gunter responded the mediation privilege was not absolute and did not apply to his circumstances. Id. at 311. He further contended that "Avary provides a roadmap for resolution of the issues presented."

We disagreed and distinguished the facts from Avary. We noted the discovery in that case involved information to support a new and independent tort, "the pursuit of which would not disturb the settlement reached at the mediation proceeding." Id. at 313 (citing Avary, 72 S.W.3d at 800)). Gunter's attempt to discover evidence from mediation went to the heart of his lawsuit, which was seeking a declaration regarding the terms of the mediated settlement agreement. He was not seeking evidence to support a new and independent tort that occurred outside of mediation discussions, but rather, wanted to reach across the mediation table and potentially disturb the prior settlement reached between the parties. We concluded all such discovery was barred by Texas Civil Practice & Remedies Code sections 154.073(a) and (b).

Based on the present facts, we conclude the Empire Pipeline reasoning applies. In attempting to use evidence from the mediation, HTI is trying to determine what the parties agreed to in regards to the preferred stock. This is exactly what we have previously held is not allowed. See Empire Pipeline Corp., 323 S.W.3d at 314. While HTI argues Empire Pipeline "only addresses the narrow issue of whether a party can discover another party's communications in mediation in order to avoid enforcement of the settlement agreement in a suit between the same parties to enforce the settlement," we do not interpret its holding so narrowly.

This is not a situation similar to Avary where HTI is trying to use evidence from mediation to support a new and independent tort. Rather, HTI is trying to obtain evidence to potentially change the settlement agreement. We agree with HTI that the word "change" does not appear in reference to the settlement agreement in Empire Pipeline. Rather, the holding discusses a party's attempt to avoid enforcement of a settlement agreement but as previously stated, we refuse to construe the application of the mediation privilege so narrowly.

"A cloak of confidentiality surrounds mediation, and the cloak should be breached only sparingly." Allison v. Fire Ins. Exch., 98 S.W.3d 227, 260 (Tex. App.-Austin 2002, pet. granted, judgm't vacated w.r.m.). Under these facts, to allow HTI to use alleged discussions from the mediation regarding the stock would undermine the very purpose of confidentiality in the mediation process. Parties must not be allowed to use evidence from mediation to dispute terms of a settlement agreement, particularly years later, as is the case here. To do so would chill the overall purpose of mediation, which is to allow parties to come to the table knowing they can speak freely about their dispute and have confidence what they say will be confidential. To conclude otherwise defeats section 154.073 and section 154.053(c) of the Texas Civil Practice and Remedies Code. Accordingly, HTI may not rely on evidence from the 2001 mediation to create a fact issue as to ownership of the stock because such information is protected by the mediation privilege.

In addition to the mediation privilege, HSI also asserts the parol evidence rule bars use of any evidence presented by HTI to contradict the consent judgment and Memorandum of Settlement. HTI responds the Memorandum of Settlement is an ambiguous, incomplete document; therefore, the parol evidence rule does not apply. However, HSI responds HTI cannot collaterally attack the consent judgment. We agree with HSI.

We begin by discussing the law as applied to consent or agreed judgments. An agreed judgment must be interpreted as if it were a contract between the parties, and the interpretation of the judgment is governed by the laws relating to contracts. Miller v. Miller, 700 S.W.2d 941, 951 (Tex. App.-Dallas 1985, writ ref'd n.r.e.) (on rehearing). In construing a written contract, the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument. Id. If the intention expressed on the face of the contract is doubtful, resort may be had to parol evidence of the situation and the surroundings of the parties to resolve the doubt. Id.

The parol evidence rule functions to make the instrument sued on the sole repository of the legal transaction. Lawrence Gen. Corp. v. Anchor Post Prod. of Tex., Inc., No. 05-95-01771-CV, 1997 WL 78913 at *2 (Tex. App.-Dallas Feb. 26, 1997, no writ) (not designated for publication). In other words, the terms of the transaction must be derived from the writing alone. Where the instrument sued on is a professedly partial or incomplete agreement, however, the rule excluding parol evidence does not apply. Id.; see also Garner v. Redeaux, 678 S.W.2d 124, 128 (Tex. App.-Houston [14th Dist.] 1984, writ ref'd n.r.e.). An instrument is incomplete when it refers to terms or understandings not embraced in its provisions. Lawrence Gen. Corp., 1997 WL 78913 at *2.

It is undisputed the Memorandum of Settlement entered into between HTI and Whitehall after the 2001 mediation makes no mention of HSI's 818,182 shares of preferred stock, much less any agreement to transfer the stock back to HTI. However, part of the Memorandum of Settlement attached to the consent judgment states "The parties will more fully memorialize the provisions of their agreement in further instruments to be prepared by counsel." Thus, on its face, the document is incomplete because it refers to potential terms and conditions not embraced within its four corners. See id. (finding a letter of intent incomplete when it specifically stated terms and conditions of the transaction were undetermined). Accordingly, HTI's parol evidence that is not protected by the mediation privilege could be admissible to create a fact issue.[3] However, under these facts, we conclude it is not.

To establish a fact issue as to the underlying settlement agreement, we would have to allow HTI to attack the final consent judgment. This we cannot allow. A collateral attack is "an attempt to avoid the binding force of a judgment in a proceeding not instituted for the purpose of correcting, modifying, or vacating the judgment, but in order to obtain some specific relief which the judgment currently stands as a bar." Browning v. Prostok, 165 S.W.3d 336, 346 (Tex. 2005). While HTI vehemently argues it is not trying to avoid the force of the underlying judgment against Whitehall and it is not asserting any new, subsequent claims against Whitehall that would affect the underlying judgment, we do not agree. If this court were to conclude a fact issue existed and remanded the issue of stock ownership back to the trial court, the end result would be HTI offering evidence to change the underlying 2001 settlement agreement, which has already been entered as a final judgment of the court and representing the final agreement between the parties. See Liberty Mut. Fire Ins. Co. v. Crane, 898 S.W.2d 944, 948 (Tex. App.-Beaumont 1995, no writ) (noting a settlement agreement incorporated into an agreed judgment "has the same degree of finality and binding force as one rendered by a court at the conclusion of adversary proceedings").

The proper vehicle for challenging the consent judgment was through a bill of review. "[A] bill of review is the exclusive remedy since the time for an appeal from the consent judgment has expired." Middleton v. Murff, 689 S.W.2d 212, 213 (Tex. 1985)In re A.L.H.C., 49 S.W.3d 911, 917 (Tex. App.-Dallas 2001, pet. denied). HTI has never filed a bill of review and any such pleading would now be untimely, as the residual four-year statute of limitations applies. See Caldwell v. Barnes, 975 S.W.2d 535, 538 (Tex. 1998)(citing TEX. CIV. PRAC. & REM. CODE ANN. § 16.051 (West 2008)).

SOURCE: DALLAS COURT OF APPEALS - No. 05-11-01536-CV. - 5/7/2013