## NO. 12

- 13

- 00379

- CV

IN THE COURT OF APPEALS

TWELFTH COURT OF APPEALS DISTRICT

TYLER, TEXAS

MARTHA N. HILL AND G ARY HILL, APPELLANT

S

V.

WINNON EARL SWORD, APPELLEE §

§

§ APPEAL FROM THE 114T H

JUDICIAL DISTRICT COURT

SMITH COUNTY, TEXAS

OPINION
In two issues, Martha N. Hill and Gary Hill appeal the trial court’s denial of their motion for summary judgment

, and its grant of Winnon Earl Sword’s motion for summary j udgment determining that his lien against their property was valid and subject to foreclosure. In two
issues, the Hills contend that the ir summary judgment evidence raised a fact issue regarding whether the property is exempt from foreclosure because of i ts homestead status. We affirm.

B ACKGROUND In 2004, the Hills execut ed a $60,000.00 promissory note in favor of Sword secured by a
deed of trust granting a lien on a 126 acre tract that they owned. 1 In 2006, they executed a $200,000.00 promissory note i n favor of Sword and secured it by a nother deed of trust granting a

lien on the property

. 2 The interest rates on the two loans were 12% and 8. 7 5%, respectively. When the Hills failed to pay the pr omissory notes, Sword filed a suit seeking a declaratory j udgment that his deed of trust liens were valid. In 2011, t he parties entered into an agreed judgment that sta ted the 2004 and 2006 deed of trust liens were “valid, perfected, and

enf orceable” against the property

. The judgment also awarded Sword $327,88 1.98 for the

1 The n ote i s dated 2003 ; the deed of trust i s dated 2004. W e will refer to both as the 2004 instruments.
2 Also in 2006, the Hills signed a $40,000.00 unsecured promissory note. That loan has been forgiven by Sword and is not part of this suit.2

principal balance of the debt, all prejudgment interest, $7,500.00 in attorney’s fees, and court

costs , to bear interest at a r ate of 6% per annum. T he Hills then executed a promissory note and

a third deed of trust explicitly to renew and ex tend the 2004 and 2006 notes and deed of trust

liens. The note stated that its principal was the judgment amount of $327,881.98 . I t also provided new payment terms and an interest rate of 6%.

Later in 2011, Martha Hill filed a voluntary Chapter 7 bankrup tcy. She claimed the 126

acre tract and related mineral interests as homestead. In February 2012, her discharge was granted. T he Hills failed to pay the 2011 promissory note, and Sword sought an order from the bankruptcy court determin ing whether his forec losure under the 2011 deed of trust would violate

the court’s discharge order. The court determined that foreclosure would not violate th at order,

and Sword posted the property for nonjudicial foreclosure.

The Hills then filed a suit seeking a declaratio n that the 2011 deed of trust lien was
invalid. They filed a traditional moti on for summary judgment seeking determination s that the
property constituted their homestead and that Sword had no valid or enforceable l ien against it

. Sword filed a traditional motion for summary judgment on various affirmative defenses and also asserted that there were no disputed fact issues relating to his claim . The trial court render ed judgment granting Sword’s motion for summary judgment and d enying the Hill s ’ motion for

s ummary judgment . The Hills filed this appeal.

V ALIDI TY AND E NFORCEABILITY OF L IEN In their first issue, the Hills contend that the trial court erred in denying their motion for summary judgment and in granting Sword’s. In their second issue, they argue that there was more than a scintilla of evidence showing the property was their homestead and not subject to

forced sale for payment of the debt to Sword.

The Hills have not challenge d , either in t heir briefs or at oral argument , the validity of the

20 04 and 2006 deeds of trust

, or that of the 2011 agreed judgment. Nor does Sword dispute that the property was the Hills’ homestead at the time they executed the 2011 promissory note and

deed of trust

. Thus, our resolution of the dispute between the parties turns on whether the 2011

documents constitute a refinance of a valid lien on a homestead (as Sword contends) or an extension of credit (as the Hills urge).3

Standard of Review

We review a trial court’s decision to grant summary judgment de novo. Tex. M un. Power Agency v. Click Util

. Comm’n , 253 S.W.3d 184, 192 (Tex. 2007). We review the evidence presented in the motion and response in the light most favorable to the party against

whom the summary judgment was rendered, crediting evidence favorable to t hat party if reasonable jurors could , and disregarding contrary evidence unless reasonable jurors could not. Mann Frankfort Stein & Lipp v. Fielding , 289 S.W.3d 844, 848 (Tex. 2009). To succeed in a

motion for su mmary judgment under rule 166a (c), a movan t must establish that there is no genuine issue of material fact so that the movant is entitled to judgment as a matter of law.
Western Inv., Inc. v. Urena , 162 S.W.3d 547, 550 (Tex. 2005). When both parties move for summary judgment and the trial court grants one motion and denies the other, the reviewing court should review the summary judgment evidence presented by both sides, determine all questions presented, and render the judgment the trial court should have rendered. Mid

Continent Cas. v . Global Enercom Mgmt ., 323 S.W.3d 151, 153

- 54 (Tex. 2010). Applicable Law Homestead properties are afforded special and unique protections under the Texas

Constitution. See T EX

. C ONST . art. XVI, § 50; see also Thomas v. Graham Mortg. Corp ., 408
S.W.3d 581, 588 (T ex. App.

— Austin 2013, pet. denied). The Texas Constitution protects a

homestead from forced sale for the payment of debt , with some exceptions. T EX

. C ONST

. art.
XVI, § 50(a). Payment of the refinance of a lien against a homestead is one exception. T EX

. C O NST

. art. XVI, § 50(a)(4). The Texas Property Code also allows encumbrance of a homestead for the refinance of a lien against it

. T EX

. P ROP

. C ODE A NN

. § 41.001(b)(5) (West 2014). Additionally, t he constitution includes an exception for a new extension of credit, provided the debt satisfies an extensive list of constitutionally mandate d restrictions and requirements. T EX

. C ONST

. art. XVI, § 50(a)(6 ). The test for determining whether a restructuring of an existing home equity loan is a new extension of cred it is “whether the secured obligations are those incurred under the terms of the original loan.” Sims v. Carrington Mortg

. S er vs
. , L.L.C. , 440 S.W.3d 10, 16 (Tex. 2014)

. Factors indicating that a restructuring is a new extension of credit may include satis faction and replacement of the original note

, or an advancement of

new funds

. Id. On the other hand, c apitalization of past due interest, taxes, insurance premiums

or fees is n either an advance of additional funds nor a new extensi on of credit if those amo unts4

a re among the obligations assumed by the borrower under the terms of the original loan. Id. “If the restructuring of a home equity loan does not involve a new extension of credit, the requirements of Section 50(a)(6) do not apply. ” Id. at 15.

Nature o f the 2011 Restructuring The Hills argue that the 2011 deed of trust lien is invalid and unenforceable because the property constitutes their homestead and the restructured debt secured by the lien is a new extension of credit that does not meet the requir ements of article XVI, section 50(a) (6) of the

Texas C onstitution. Sword does not dispute that the property is the Hills’ homestead, or argue
that the restructured debt meet s the requi rements of section 50(a)(6). R ather, he contends that

there was no new e xtension of credit, and his lien is enforceable as a refinance under section
50(a)(4).

1. Satisfaction and Replacement

The Hills first contend that the restructured debt constitute s a new extension of credit

because the 2004 and 2006 notes were satisfied and replaced by the 2011 note

. See Sims , 440

S.W.3d at 17. In support of their contention, they cite Krauss v. West , 123 S.W.2d 946 (Tex. Civ. App.

— El Paso 1938, writ dism’d judgm’t cor.)

. In Krauss , a secured lender had sued a borrower and obtained “a judgme nt thereon foreclosing the deed of trust lien on the property.”

T he court of appeals concluded that t he note and deed of trust lien were thereby merged into that judgment. The lender then accepted a new note and a new deed of trust, which the court of

appe als concluded “paid” the judgment. Satisfaction is the fulfillment of an obligation. B LACK ’ S L AW D ICTIONARY 1543 (10 th ed.

2014 ) ; see also Hill v. Bartlette , 181 S.W.3d 541, 549 n.2 (Tex. App.

— Texarkana 2005, no pet.). Accordingly, we agree that if the e arlier notes and judgment had been “paid” by the Hills, their obligation thereunder would have been “ satisfied. ” But unlike Krauss , in which the judgment foreclosed the deed of trust lien, the judgment in the instant case merely adjudicated

the deed s of tr ust and the deed of trust liens valid and enforceable. Thus, Krauss is distinguishable, and the judgment he re was not “paid” or “satisfied and replaced ” by the 2011

note and deed of trust.

2. Capitalization of Attorney’s Fees

Next , the Hills contend that th e $7,500.00 in attorney’s fees that was capitalized in the agreed judgment and subsequent 2011 instruments was a new extension of credit. We disagree.5

Attorney’s fees that a re authorized under the original notes are not an extension of credit and may be c apitalized in any new refinancing. See Sims , 440 S.W.3d at 17. The 2004 promissory note provided as follows :

If this note or any instrument securing or collateral to it is given to an attorney for collection or enforcement, or if suit is brought for coll ection or enforcement, or if it is collected or enforced through probate, bankruptcy, or other judicial proceeding, then Maker shall p a y Payee all costs of collection and enforcement, including reasonable attorney’s fees and court costs, in addition to oth er amounts due. Reasonable attorney’s fees shall be 10% of all amounts due unless either party pleads otherwise.

The 2006 promissory note similarly pr ovided that “Borrower also promises to pay reasonable attorney’s fees and court and other costs if this n ote is placed in the hands of an attorney to

collect or enforce the note.” Thus, the attorney’s fees a re authorized in the original notes and are

not a new extension of credit. See id

. 3. Nonmonetary Obligations Finally, the Hills contend that certain nonmo netary obligations in the 2011 deed of trust

that are not found in the 2004 and 2006 deeds of trust constitute an extension of credit. The obligations cited by the Hills are (1) the obligation to give notice of any contamination or hazardous spill on the prope rty; (2) the obligation to comply with environmental laws;
(3) certi fication that there had been no contamination or hazardous spill on the property and that the Hills were in com pliance with environmental laws;

(4) a new default event in case of the Hills’ default u nde r any loan agreement with Sword;

(5) S word’s right to make reasonable entry and inspection of the property;
(6) waiver of the right to require Sword to marshal or prioritize for s ale any portion of the property;

(7) waiver of any release of obligations based on S word’s actions or c ourse of dealing under the note;

(8) waiver of the statutory defense to a suit to collect a deficiency on the note, and of the

r ight of offset against the note;

(9) the grant of a security interest in all personal property, equipment, fixtures , and farm products attached to the property ;6

(10) agreement that the deed of trust serves as a fixture filing and financi ng statement;

(11) a greement that the real and personal property may be sold as a whole;

(12) agreement that Sword may proceed as a secured party under Article 9 of the T exas Business and Commerce Code;

(13) agreement to assign Sword the rights and interests in certain items related to the property as additional security; and

(14) restriction from mining or quarrying without Sword’s written permission.

T he supreme court has defined “credit” as “ the ability to assume a debt repayable over
time, ” and an “extension of credit” as that which “affords the right to do so in a particular

situation.” Sims , 440 S.W.3d at 15

- 16. Here, the above items cited by the Hi lls do not afford

them a new right to assume a debt. T he only debt secured by the deed of trust lien on the property under the 2011 restructuring is the debt previously existing under the earlier notes and agreed judgment. Therefore, we conclude that these items do not create a new extension of

credit. See id

. The Hills also point in particular to the new default event in the 2011 deed of trust as

cre ating a new extension of credit. The provision states, “An Event of Default occurs under this

Deed of Trus t under any of the following circumstances: . . . c. Grantor defaults under any loan agreement with Beneficiary, or any supplemental agreement to the Note.” The Hills argue that this provision impermissibly renders the property security for all other debt owing to Sword. In support of this contention, they urge, as the court stated in Sims , that “a restructuring to make the homestead lien security for another indebtedness, such as the borrower’s consumer or credit card debt, would certainly be a new extensi on of credit.” Sims

, 440 S.W.3d at 15

- 16. We do not agree that the deed of trust provision here makes the property security for another indebtedness. First, no particular indebtedness is describ ed, and thus might not now or ever exist. Second, the 2006

dee d of trust provides that it “secures payment of any debt that Grantor may subsequently owe to

Lender.” Therefore, even if the deed of trust makes the property security for another
indebtedness, th is is not a new obligation and not a new extension of credit

.7

4. The 2011 Note and Deed of Trust Sword argues that his lien is valid and enforceable notwithstanding the evidence of the property’s homestead status because the debt it falls within the exception in Texas C onstitution
article XVI, section 50(a)(4)

— t he refinance of a lien against a homestead. In examining this argument, w e consider the 2011 note along with the 2011 deed of trust.

See Jones v. Kelley , 614 S.W.2d 95, 98 (Tex. 1981) (“The general rule is that separate

instrument s or contracts executed a t the same time, for the same purpose, and in the course of the
same transaction are to be considered as one instrument, and are to be read and construed together.”); see also Robinson v. Saxon Mort g . Serv., Inc ., 240 S.W.3d 311, 313 (Tex. App.

— Austin 2007 , no pet.). (“A deed of trust is construed along with the note it is intended to secure.”) The 2011 deed of trust states as follows :

15. Grantor represents that this deed of trust and the Note are given for the following purposes: a) in renewal and e xtension of the sum left owing and unpaid by Grantor upon that one certain promissory note in the original principal sum of $60,000.00, dated August 3, 2003, executed by Grantor and payable to the order of W. E. Sword; b) in renewal and extension of the

su m left owing and unpaid by Grantor upon that one certain promissory note in the original principal sum of $200,000.00, dated October 4, 2006, executed by Grantor and payable to the order of W.E. Sword; and c) in renewal and extension of the balance owed to Beneficiary under the terms of an agreed judgment entered in the case styled W. E. Sword vs. Gary R. Hill and Martha N. Hill, Cause No. 11

- 0023

- B, in the 114th Judicial District Court of Smith County, Texas.

Similar language for renewing and extending pr omissory notes has been approved by the Texas Supreme Court

. See McGeorge v. Van M eter , 358 S.W.2d 580, 581 (Tex. 1962). W e see no reason to construe the language in this case differently.

5. Conclusion We conclude that the 2011 promissory note is a renewal and extension of the 2004 and 2006 notes, and does not satisfy and replace them such that the 2011 restructuring constitutes a

new extension of credit. We further conclude that the restructuring of the Hills’ loan through the

2011 promissory note and deed of trust was a refinance of a valid indebtedness secured by valid liens on the property

. T herefore

, even if the property constituted the Hills’ homestead at the time of the restructuring

, Sword is not constitutionally prohibited from foreclosing under the 2011

deed of trust. The Hills’ first and second issues are overruled.8 D ISPOSITION Having overruled the Hills ’ two issues, we affirm the judgment of the trial court

.

J AMES T. W ORTHEN Chief Justice

Opinion delivered January 7, 2015

. Panel consisted o

f Worthen, C.J., Griffith, J., and Hoyle, J.

( PUBLISH )

## COURT OF APPEALS

TWELFTH COURT OF APPEALS DISTRICT OF TEXAS

JUDGMENT

JANUARY 7 , 201 5

NO. 12

- 13

- 00379

- CV

MARTHA N. HILL AND G ARY HILL,

Appellant s V. WINNON EA RL SWORD,

Appellee

Appeal from the 114th District Court of Smith County, Texas (Tr.Ct.No. 12

- 2467

- C/B)

THIS CAUSE came to be heard on the oral arguments, appellate record and briefs filed herein, and the same being considered, it is the opinion of this c ourt that there was no error in the judgment.

It is therefore ORDERED, ADJUDGED and DECREED that the judgment

of the court below be in all things affirmed , and that all costs of this appeal are hereby adjudged against the appellant s , MARTHA N. HILL AND G AR Y HILL, for which execution may issue,

and that this decision be certified to the court below for observance.

James T. Worthen , Chief Justice

. Panel consisted of Worthen, C. J., Griffith, J., and Hoyle, J.