COURT OF APPEALS

SECOND DISTRICT OF TEXAS

FORT WORTH

NO. 02-10-00289-CV

WELLS FARGO BANK, N.A. F/K/A 

WELLS FARGO BANK MINNESOTA, 

N.A., AS TRUSTEE FOR THE 

REGISTERED HOLDERS OF J.P. 

MORGAN CHASE COMMERCIAL 

MORTGAGE SECURITIES CORP., 

COMMERCIAL MORTGAGES PASSTHROUGH CERTIFICATES, SERIES 

2003-PMI, ACTING BY AND THROUGH 

ORIX CAPITAL MARKETS, LLC

APPELLANT

V.

MBS - THE HILLS, LTD., 3101 W. 

NORMANDALE, L.L.C., MICHAEL B. 

SMUCK, AND EDWIN A. WHITE

APPELLEES

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FROM THE 17TH DISTRICT COURT OF TARRANT COUNTY

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MEMORANDUM OPINION

ON EN BANC CONSIDERATION1

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1See Tex. R. App. P. 47.4.
2

Appellant Wells Fargo Bank, N.A. f/k/a Wells Fargo Bank Minnesota, N.A., 

as Trustee for the Registered Holders of J.P. Morgan Chase Commercial 

Mortgage Securities Corp., Commercial Mortgages Pass-Through Certificates, 

Series 2003-PMI, acting by and through ORIX Capital Markets, LLC (collectively 

Wells Fargo) filed a motion for en banc consideration of our opinion and 

judgment issued December 8, 2011. We deny the motion, but we withdraw our 

prior opinion and judgment and substitute the following.

I. INTRODUCTION

In two issues, Wells Fargo argues that the trial court erred by interpreting a

nonrecourse indemnification agreement as an agreement only to indemnify the 

noteholder against third-party claims and erred by entering judgment that Wells 

Fargo take nothing as to its claims against Appellees Michael B. Smuck and

Edwin A. White. We will affirm.

II. BACKGROUND

White and Smuck formed MBS - The Hills, Ltd. as a special purpose entity 

to borrow funds and to purchase and hold title to an apartment property known 

as ―The Hills.‖ Smuck served as director of 3101 W. Normandale, L.L.C., the 

general partner of MBS - The Hills. MBS - The Hills borrowed $6.8 million 

through nonrecourse financing, securing the promissory note with the apartment 

property.2The note limited MBS - The Hills‘s liability to the property pledged as 

 

2

The loan was originally obtained from PNC Bank, National Association, 

but it was later assigned to Wells Fargo.
3

collateral, but the note contained nonrecourse exceptions that would establish 

both MBS - The Hills and Normandale‘s liability under certain defined 

circumstances. Additionally, the lender required Smuck and White to execute a 

nonrecourse indemnification agreement, which is the subject of this appeal.

MBS - The Hills defaulted on the note, and Wells Fargo applied to the trial 

court to appoint a receiver to manage the property. Based on the receiver‘s 

assessment of the property, Wells Fargo sued MBS - The Hills and Normandale, 

seeking to establish their liability under the note‘s nonrecourse exceptions. Wells 

Fargo also sued Smuck and White, seeking to establish their personal liability 

under the nonrecourse indemnification agreement.

During discovery, Wells Fargo served MBS - The Hills and Normandale

with requests for admissions. When MBS - The Hills and Normandale failed to 

respond to the requests for admissions, Wells Fargo moved for summary 

judgment against them based on the nonrecourse exceptions contained in the 

note, requesting that the trial court deem the requests for admissions admitted 

under rule of civil procedure 198.2.3 The trial court granted an interlocutory

summary judgment in favor of Wells Fargo and against MBS - The Hills and 

Normandale in the principal amount of $5,904,537.61 plus prejudgment interest. 

The dollar amount awarded by the interlocutory summary judgment tracked to 

the penny the principal amount due on the promissory note after the property 

 

3MBS - The Hills and Normandale were represented by counsel, but 

midway through the case, counsel withdrew. No substitute counsel appeared on 

their behalf regarding the summary judgment.
4

was foreclosed upon in December 2008, according to the affidavit of Charles 

Crouch.

4

Wells Fargo proceeded to a bench trial on its remaining claims against 

Smuck and White. At trial, Wells Fargo offered ten exhibits to support its claims, 

the trial court admitted those exhibits, and Wells Fargo rested without calling any 

witnesses. The trial court entered a take-nothing judgment on Wells Fargo‘s 

claims against Smuck and White and the following findings of fact and 

conclusions of law:

5. Defendants MICHAEL B. SMUCK and EDWIN A. 

WHITE did not, by the Non-Recourse Indemnification Agreement of 

July 16, 2003, or any other instrument presented at trial, guaranty 

any liability of Defendants MBS—THE HILLS, LTD and/or 3101 W.

NORMANDALE, L.L.C. The agreement was between the defendant 

individuals and Plaintiff to indemnify Plaintiff, not the defendant 

business entities, against certain potential liabilities. The 

indemnification agreement does not operate as a guaranty of any 

obligation of the defendant business entities, which were not party to 

the agreement.

. . . .

6. At trial, Plaintiff introduced no evidence to establish any 

liability of either MICHAEL B. SMUCK or EDWIN A. WHITE. 

Therefore, Defendants MICHAEL B. SMUCK and EDWIN A. WHITE 

are not liable to Plaintiff for any damages sustained in connection 

with the note and attendant security documents.

7. Plaintiff provided no evidence at trial that the losses it 

sustained fall within any of the carve-out provisions of the 

promissory note, indemnification agreement, or other loan 

documents that would make either MICHAEL B. SMUCK or EDWIN 

 

4Crouch is the Associate Director of ORIX Capital Markets, LLC, the 

special servicer for the $6.8 million loan transaction.
5

A. WHITE liable. For that reason, MICHAEL B. SMUCK and EDWIN 

A. WHITE are not liable to it for damages that the plaintiff sustained.

Upon Wells Fargo‘s request, the trial court entered the following additional 

findings and conclusions regarding MBS -The Hills‘s and Normandale‘s liability:

1. On July 16, 2003, MBS-The Hills, Ltd. (―MBS-Hills‖ or 

―Borrower‖) executed a promissory note in favor of [Well Fargo‘s

predecessor] evidencing a $6,800,000.00 loan to purchase the Hills

Apartment Homes in Fort Worth, Texas . . . . The parties agreed 

that the Note would be non-recourse as to the Borrower except and 

unless certain defined non-recourse exceptions, set forth in 

paragraph 12 of the Note, were satisfied.

2. Borrower and Normandale are jointly and severally 

liable under the Note by reason of and through the non-recourse 

liability exceptions of Paragraph 12 of the Note. Wells Fargo is 

entitled to recover against Borrower and 3101 W. Normandale, LLC 

for their recourse liability under the Note.

III. STANDARD OF REVIEW

Findings of fact entered in a case tried to the court have the same force 

and dignity as a jury‘s answers to jury questions. Anderson v. City of Seven 

Points, 806 S.W.2d 791, 794 (Tex. 1991). The trial court‘s findings of fact are 

reviewable for legal and factual sufficiency of the evidence to support them by 

the same standards that are applied in reviewing evidence supporting a jury‘s 

answer. Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996); Catalina v. Blasdel,

881 S.W.2d 295, 297 (Tex. 1994). Conclusions of law may not be challenged for 

factual sufficiency, but they may be reviewed to determine their correctness 

based upon the facts. AMX Enters., L.L.P. v. Master Realty Corp., 283 S.W.3d 

506, 519 (Tex. App.—Fort Worth 2009, no pet.) (op. on reh‘g); Dominey v. 
6

Unknown Heirs & Legal Reps. of Lokomski, 172 S.W.3d 67, 71 (Tex. App.—Fort 

Worth 2005, no pet.).

IV. CONSTRUCTION OF THE NONRECOURSE INDEMNIFICATION AGREEMENT

In its first issue, Wells Fargo argues that ―the trial court‘s construction of

the hold harmless agreement depends on characterizing the agreement as an 

agreement to indemnify Wells Fargo against third party liability rather than an 

agreement to guaranty [MBS - The Hills and Normandale‘s] personal liability 

under the Note‘s non-recourse exceptions.‖ Wells Fargo cites Joseph Thomas, 

Inc. v. Graham for the proposition that we must characterize the nonrecourse 

indemnification agreement as a guaranty because it is ―collateral and secondary 

to the principal contract that is guaranteed in the secondary contract.‖ 842 

S.W.2d 343, 346 (Tex. App.—Tyler 1992, no writ). Appellees argue that this is a 

―misreading of the case,‖ and they instead cite Graham for the proposition that 

we must characterize the nonrecourse indemnification agreement as an 

agreement to indemnify because ―a promise to protect the promisee is an 

indemnity contract.‖ White focuses exclusively on the uses and variations of the 

term ―indemnity‖ throughout the nonrecourse indemnification agreement to 

support his argument that ―a sophisticated lender and servicer of commercial real 

estate property as well as the sole drafter of all the Loan Documents‖ should 

have drafted the nonrecourse agreement to be a ―guaranty‖ if it intended the 

agreement to operate as a guaranty. Smuck contends that under Graham, the 

nonrecourse indemnification agreement does not operate as a guaranty against 
7

him and White. According to Smuck, ―Graham stands for the proposition that a 

promise to protect a third party is a guaranty, and a promise to protect the 

promisee is an indemnity contract.‖ Wells Fargo, by assignment, is the promisee

on the note.

Historically, an indemnification agreement is a promise ―to safeguard or 

hold harmless the indemnitee against existing or future loss, liability, or both.‖ 

Nat’l City Mortg. Co. v. Adams, 310 S.W.3d 139, 144 (Tex. App.—Fort Worth 

2010, no pet.) (citing Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 

505, 508 (Tex. 1993)). But ―[m]agic is not the quality of nomenclature,‖ and 

simply because a party calls himself a guarantor or an indemnitor ―does not 

inevitably make him one.‖ Wood v. Canfield Paper Co., 117 Tex. 399, 5 S.W.2d 

748, 750 (Tex. 1928) (citing Davis v. Patrick, 141 U.S. 479, 12 S. Ct. 58 (1891)). 

Instead, when construing promissory notes, we apply the rules of contract 

construction. See Fin. Freedom Senior Funding Corp. v. Horrocks, 294 S.W.3d 

749, 753 (Tex. App.—Houston [14th Dist.] 2009, no pet.) (citing EMC Mortg. 

Corp. v. Davis, 167 S.W.3d 406, 413 (Tex. App.—Austin 2005, pet. denied)).

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. 

Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005). Courts 

should examine the entire writing ―to harmonize and give effect to all the 

provisions of the contract so that none will be rendered meaningless.‖ Id. 

Contact terms are given their plain, ordinary, and generally accepted meanings 
8

unless the contract itself shows them to be used in a technical or different sense. 

Id. ―We construe contracts  ̳from a utilitarian standpoint bearing in mind the 

particular business activity sought to be served,‘ and when possible, we will avoid 

a construction that ―is unreasonable, inequitable, and oppressive.‖ Frost Nat’l 

Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 312 (Tex. 2005) (quoting Reilly v. 

Rangers Mgmt., Inc., 727 S.W.2d 527, 530 (Tex. 1987)). We must look at all of

the contract‘s parts together and be ―particularly wary of isolating from its 

surroundings or considering apart from other provisions a single phrase, 

sentence, or section of a contract.‖ State Farm Life Ins. Co. v. Beaston, 907 

S.W.2d 430, 433 (Tex. 1995). We presume that the parties to a contract intend 

every clause to have some effect. Heritage Res., Inc. v. NationsBank, 939 

S.W.2d 118, 121 (Tex. 1996).

The financing granted to MBS - The Hills by Wells Fargo‘s predecessor-ininterest was nonrecourse. Thus, MBS - The Hills‘ liability—according to the 

note—was only extended ―to the Mortgaged Property and other collateral given 

to secure the Debt, and Lender shall not enforce such liability against any other 

asset, property or funds of Borrower‖ except under six specified conditions

immediately identified in subsections (a)–(f). After listing the six exceptions, the 

note states the following:

Items (a) through (f) above are collectively the ―Non-Recourse 

Exceptions‖. To the extent Borrower is a general partnership and 

Lender is required under applicable law to pursue its remedies 

against the persons or entities constituting Borrower, each reference 

to the phrase ―(including Borrower)‖ in the Non-Recourse Exceptions 

shall be deemed to read ―(including Borrower or any person or entity 
9

constituting Borrower)‖. Borrower’s liability under the NonRecourse Exceptions . . . shall be limited to the amount of any 

losses or damages sustained by Lender in connection with 

such Non-Recourse Exceptions.

[5]

[Emphasis added.]

The particular business activity sought to be served here is nonrecourse,

commercial financing, so we must construe the nonrecourse indemnification

agreement in a reasonable and equitable manner in accordance with that 

purpose. The borrower in this case (MBS - The Hills) was a limited partnership, 

so only the general partner‘s liability was at risk. But the general partner 

(Normandale) was a limited liability corporation, so the entity ―constituting 

Borrower‖ was another business entity with limited liability. Therefore, Wells 

Fargo‘s predecessor-in-interest had Smuck and White sign the nonrecourse

indemnification agreement, seeking indemnification from Smuck and White if the 

nonrecourse exceptions under the note were triggered. Specifically, the 

nonrecourse indemnification agreement limits Smuck‘s and White‘s personal 

liability to that ―which Borrower at any time may be personally liable pursuant to 

the non-recourse exceptions (as defined in paragraph 12 of the note).‖

Accordingly, the note limits the lender‘s recourse to the collateral used to 

secure the debt, but under six circumstances, the lender has recourse against 

MBS - The Hills and Normandale for ―the amount of any losses or damages 

sustained by Lender in connection with such Non-Recourse Exceptions.‖ 

 

5Section 12(a) mirrors this language. It provides that Wells Fargo may 

―obtain personal, recourse judgments against any person or entity . . . relating to 

any losses sustained by [Wells Fargo] in connection with any . . . waste.‖ 

[Emphasis added.]
10

[Emphasis added.] This means that Wells Fargo may obtain a judgment against 

MBS - The Hills and Normandale for damages resulting from, among other 

things, waste. The note does not give Wells Fargo full recourse against MBS -

The Hills and Normandale for the entire amount, if any, due and owing under the 

note in the event MBS - The Hills and Normandale‘s liability is established under 

one or more of the nonrecourse exceptions. In other words, waste triggers 

liability for damages resulting from waste; waste does not trigger liability for 

damages equaling amounts remaining due and owing on the note.6

Wells Fargo contended in its interlocutory motion for summary judgment 

that the following two requests for admissions were deemed admitted as a matter 

of law against MBS - The Hills and Normandale:

22. Borrower and Normandale are jointly and severally liable 

for the full principal amount due on the Note, plus any associated 

interest, cost and fees. . . .

23. Smuck and White are jointly and severally liable for the 

full principal amount due on the Note, plus any associated interest, 

cost and fees. . . . [Emphasis added.]

These requests for admissions misconstrue the terms of the note, which limits

liability to damages resulting from, among other things, waste. To the extent that 

Wells Fargo argues that it is entitled to recover the full amount due and owing 

under the note as a result of these inaccurate admissions being deemed

admitted as a matter of law, it is wrong—we fail to see how a deemed admission 

 

6We also note that all parties to this out-of-the-ordinary loan transaction 

were represented by counsel. Certainly, the parties could have identified the 

indemnification agreement as a guaranty agreement if that was their intention.
11

can unilaterally modify the terms of a bargained-for agreement, the construction 

of which is a matter of law. See Arthur J. Gallagher & Co. v. Dietrich, 270 

S.W.3d 695, 701–02 (Tex. App.—Dallas 2008, no pet.) (reasoning that contract 

modification must satisfy traditional requirements of a contract—a meeting of the 

minds supported by consideration); Boulet v. State, 189 S.W.3d 833, 838 (Tex. 

App.—Houston [1st Dist.] 2006, no pet.) (reasoning that rule regarding requests 

for admissions does not contemplate or authorize admissions to questions 

involving points of law); see also MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 

995 S.W.2d 647, 650–51 (Tex. 1999) (reasoning that construction of 

unambiguous contract is question of law for court).

Considering the nonrecourse indemnification agreement‘s limiting of

Smuck and White‘s personal liability to that ―which Borrower at any time may be 

personally liable pursuant to the non-recourse exceptions,‖ the nonrecourse 

indemnification agreement therefore gives Wells Fargo recourse against Smuck 

and White for ―the amount of any losses or damages sustained by the lender in 

connection with such Non-Recourse Exceptions.‖ [Emphasis added.] As with 

MBS - The Hills under the note, the nonrecourse indemnification agreement does 

not give Wells Fargo full recourse against Smuck and White for the entire 

amount, if any, due and owing under the note in the event MBS - The Hills and 

Normandale‘s liability is triggered under one or more of the nonrecourse 

exceptions.
12

We hold that the evidence supports the trial court‘s ―finding‖ that the 

nonrecourse indemnification agreement did not operate as a guaranty of any 

obligation of MBS - The Hills and Normandale. We overrule Wells Fargo‘s first 

issue.

V. PERSONAL LIABILITY OF SMUCK AND WHITE

In its second issue, Wells Fargo argues that Smuck and White‘s personal 

liability is conditioned on the liability of MBS - The Hills and Normandale, so by 

establishing MBS - The Hills and Normandale‘s liability via the interlocutory 

motion for summary judgment, Wells Fargo established Smuck and White‘s 

personal liability. Because Smuck and White‘s personal liability is commensurate 

with the liability of MBS - The Hills and Normandale under the nonrecourse 

exceptions, we must review Wells Fargo‘s motion for interlocutory summary 

judgment to determine whether it indeed sought to establish MBS - The Hills and 

Normandale‘s liability under one or more of the note‘s nonrecourse exceptions.

Wells Fargo made the following relevant statements in its motion for 

interlocutory summary judgment against MBS - The Hills and Normandale:

•―This Motion establishes as a matter of law that the Defendants are jointly and 

severally liable for the balance due on a promissory note . . . .‖ [Emphasis 

added.]

•―The Defendants‘ failure to respond to Wells Fargo‘s Requests for Admissions 

results in those matters being deemed admitted as a matter of law.

•―Wells Fargo has satisfied all the elements for recovery on the Note.‖ [Emphasis 

added.]

•―Although Wells Fargo meets the elements for recovery under a promissory note

as detailed above, the obligations of MBS-Hills and Normandale are generally 
13

non-recourse unless certain exceptions exist. Exceptions do exist[, including 

waste and impairment of Plaintiff‘s right to foreclose on the property.]‖ [Emphasis 

added.]

•―The Defendants‘ commission of waste on the Property triggers full recourse 

liability.‖ [Emphasis added.]

• ―The Defendants‘ allowing liens to remain on the Property impaired Wells 

Fargo‘s right to foreclose and triggers [full] recourse liability.‖ [Emphasis added.]

Additionally, Wells Fargo attached the affidavit of Charles Crouch to the motion. 

In the affidavit, Crouch testified that ―[t]he property was foreclosed upon on 

December 2, 2008, leaving a deficiency amount in excess of $5,904,537.61.‖ 

Wells Fargo did not attach to the motion any evidence of damages for waste or 

for impairment of its right to foreclose the property. The trial court awarded Wells 

Fargo $5,904,537.61, an amount identical to the deficiency owed on the note, 

excluding interest, as of the December 2008 foreclosure. At the final trial on 

Wells Fargo‘s claims against Smuck and White, Wells Fargo offered several

exhibits into evidence, including the note and the nonrecourse indemnification 

agreement, and rested. It did not offer any testimony or evidence of any 

amounts of damages resulting from waste.

A review of the entire motion for interlocutory summary judgment thus 

reveals that Wells Fargo did not move for summary judgment to recover 

damages for waste or for impairment of its right to foreclose on the property. 

Instead, Wells Fargo (inconsistent with the terms of the note) argued that

because MBS - The Hills and Normandale had committed waste or impaired 

Wells Fargo‘s right to foreclose on the property, it was therefore entitled to 
14

recover the full balance due on the note. Those are two separate grounds for 

summary judgment—the former seeks to recover damages for waste or 

foreclosure impairment while the latter relies upon waste or foreclosure 

impairment to justify recovering the balance due on the note. The difference is

significant because the former implicates White and Smuck‘s personal liability

under the nonrecourse indemnification agreement, but the latter does not.

This court has recently issued two other opinions involving White and 

similar notes and nonrecourse indemnification agreements. In White v. MLMT 

2004-BPC1 Carlyle Crossing, LLC, the appellee sued MBS - Carlyle Crossing, 

Smuck, and White under a $5.5 million promissory note and a nonrecourse 

indemnification agreement. No. 02-10-00233-CV, 2011 WL 3672022, at *1 (Tex. 

App.—Fort Worth Aug. 18, 2011, pet. denied) (mem. op.). The trial court 

rendered a judgment in favor of MLMT for $1,766,355.52 for damages resulting 

from waste, and this court reviewed the legal and factual sufficiency of the 

evidence to support that award. Id. at *1–6. The noteholder there presented 

evidence and proved damages attributable to waste. Id. at *4.

In White v. JPMC 2004-C3 Trails Apartments LLC, JPMC sued MBS - The 

Trails, Smuck, White, and White‘s wife under a $3.7 million promissory note and 

a nonrecourse indemnification agreement for waste to an apartment complex 

property. No. 02-12-00164-CV, 2012 WL 6632776, at *1 (Tex. App.—Fort Worth 

Dec. 21, 2012, no pet.) (mem. op.). The trial court rendered judgment against 

MBS - The Trails, Smuck, and White for $1,507,506.59, and White appealed. Id. 
15

In addressing White‘s argument involving the express negligence rule, this court 

observed that ―White did not challenge any of the findings concerning waste and 

the damages related thereto. Because the record contains evidence to support 

all of these unchallenged findings, they are binding on this court.‖ Id. at *2.

Thus, in both MLMT and JPMC, the appellees presented evidence and 

proved damages attributable to waste. Unlike in this case, neither appellee in 

those cases relied upon the borrowing entity‘s commission of waste to justify 

recovering the remaining balance of principal and interest due on the note.

In yet another recent case involving Wells Fargo, Smuck, White, and a 

similar financing arrangement, Wells Fargo obtained an interlocutory summary 

judgment against the borrowers but failed to prevail on its claims against Smuck 

and White under the indemnification agreement. See Wells Fargo Bank, N.A. v. 

Smuck, No. 14-12-00574-CV, 2013 WL 3422888, at *1–2 (Tex. App.—Houston 

[14th Dist.] July 9, 2013, no pet. h.). Although the court of appeals reversed the 

trial court‘s take-nothing judgment and rendered judgment in favor of Wells 

Fargo, it contrasted the facts of its case with those in our previous opinion issued 

in this cause. Id. at *10. The court specifically pointed out that unlike in our 

cause, the interlocutory summary judgment that Wells Fargo obtained in its case 

was for damages sustained in connection with the nonrecourse waste exception. 

Id. at *10–11. Thus, in making that observation, the court of appeals implicitly 

acknowledged that Wells Fargo would not have been entitled to recover under 

the indemnification agreement had the interlocutory summary judgment that it 
16

obtained against the borrowers not sought to establish damages sustained in 

connection with the borrowers‘ waste. That is the precise point that we are 

attempting to convey here: Wells Fargo did not seek—and therefore did not 

obtain—a summary judgment on the ground that MBS - The Hills and

Normandale were liable under one or more of the note‘s nonrecourse exceptions

because Wells Fargo made absolutely no attempt to prove that it sustained 

damages in connection with waste. Wells Fargo instead proved that it sustained 

damages in connection with MBS - The Hills and Normandale‘s breach of the 

note. 

We reject each of the dissent‘s contentions.

Accordingly, because Wells Fargo did not obtain an interlocutory summary 

judgment establishing that it had sustained damages in connection with the 

nonrecourse exceptions—specifically, for waste or for foreclosure impairment—

Wells Fargo failed to demonstrate White and Smuck‘s personal liability. We 

overrule Wells Fargo‘s second issue.
17

VI. CONCLUSION

Having overruled both of Wells Fargo‘s issues, we affirm the trial court‘s 

judgment.

BILL MEIER

JUSTICE

PANEL: LIVINGSTON, C.J.; MEIER and GABRIEL, JJ.

GABRIEL, J. filed a dissenting opinion.

DELIVERED: August 8, 2013