## In the Court of Ap peals Second Appel late District of Texas at Fort Worth

___________________________ No. 02

- 20

- 00286

- CV

___________________________

On Appeal from the 67th District Court Tarrant County, Texas Trial Court No. 067

- 317774

- 20

Before Sudderth, C.J.; Kerr and W omack, JJ. Opinion by Jus tice Kerr 

### B ENBROOK 

### E CONOMIC 

### D EVELOPMENT 

### C ORPORATION 

### , Appellant

V



### . T HE 

### N ATIONAL 

### B ANK OF 

### T EXAS 

### , Appellee2 OPINION
I. Introduction
A ppellant Be nbrook Economic Development Corp oration ( B EDC) is a subsequent purchaser of real pro perty
. Ap pellee The N ationa l Bank of Texas (NBT )
hold s the pro perty ’ s pr evious owner ’ s promiss or y note and deed o f trus t , bot h given by a third party, as s ecurity for an unrelated loan. 1 After the previous owner defaulted
on his loan with NBT, NBT filed for judicial foreclosure

. BEDC and NBT then filed

cross

- motions for summar y judgment on their re sp ective rights t o the property
. T h e trial cour t overruled B EDC ’ s objections to NBT ’ s summary

- judgment evi dence , granted NBT ’s motion , and denied BEDC ’ s motion

. In a single issue b riefed as multip le subissues, BEDC compl ains that the tri al court ’ s r ulings were erron eous. T o be e ntitled to judicial foreclosure via summary ju dgment , t he movant must
prove that (1) a financial ob ligation

— such as a promissory not e

— exist s and that the
movant ha s some pr iv

ity to it; (2) a l ien

— s uch as a deed o f trust

— secu res the
f inancial obligation; (3) a default on the financial obligation has occurre d ; and (4) the property subject to the lien is the sa me property on whic h the movant see ks to
enforce the lien. See D e La Garza v. B ank of N.Y. Mellon , No. 0 2

- 1 7

- 00427

- C V,
2018 WL 57 25250, at *7 (Tex. App.

— Fort Worth Nov. 1, 2018, no pet.) ( mem. op.) ; Mark v. Household Fin. Corp. III , 296 S.W.3d 838, 839 (Tex. App.

— Fort Wo rth 2009,

1 The prop erty passed through other ha nds before ultimate ly en din g up wi th B E DC.3 no pet.) ; s ee also R inard v. Bank of Am. , 349 S.W. 3d 148, 1 52 (Tex. App.

— El Pas o 2 011,
no p e t.)

. Because the record contains a fact issue about whether the deed of trust on
the property was discharged, the trial court erred by granting su mmary judgment in
NBT ’ s favo r. B ecause the record al so reflects that BED C took o wnership of t he
prop erty with co nstructive notice of all the p ropert y ’ s recorded liens and related
instru ments , summary judgment was not appropriate for BEDC either. Accordingly, w e re verse the trial cour t ’ s judgment and remand the case for
fur ther procee d ings

. 2
II. Lega l Bac kg round : Interpl ay of Texas Business and Commerce Code Chapters 3 and 9 3 with Real

- Property Law This case involves the interplay between two system s whose termin ol ogy we review up front : fir st, the UC C , w hich genera l ly applies to contra ct s, pe rsonal
proper ty, and notes , and second, real

- property law

. See D avid Z. Conoly, Foreclosure on
a Collate ral Transfer of Note & Lien , 42 St ate Bar of Tex. Prof. Dev . Program, A dv anced
Real Estate Law Co urs e 26 , 26.1 (2 020 ) (obse rv ing that when a col la t eral note it self is

2 Based on our disposi tion here, we do not reach BEDC ’ s eviden tiary sub issues

. See Tex. R. Ap p. P. 47. 1 (r equiring t he court to hand do wn a written op in ion t hat is as brief as pr ac ticable bu t that addresses every i ssu e raised and nec essar y t o final dis pos ition of th e a pp eal )

.
3 The Uniform Commercial Code (UCC) identifies its chapters as “ articles, ” while the Texas incorporation of the UCC in the Busi ness and Commerce Code uses

“ chapters. ” For consistency, we will use “ chapter ” throug hout.4 secured by real property, “ the separate worlds of real property Secured Transactions and personal property Secured Transact ions each have a role in the transactio n ” ).
T he property ’ s orig ina l buyer s, K&M Co l lision a nd its owners Micha el and
Elaine A dmire , gave the property ’ s original seller , John Franklin Campbell , 4 a p urchase

- money promi ssory n ote (the K&M note) , a negotiable instrument under
UCC Chapt er 3

. 5 To secure that note, K& M C ollision gave Campbell a vendor ’ s lie n . A purchase

- mon ey vendor ’ s lien is “a charge imposed by contract to secure payment of the purchase price of real propert y.” XTO Energy, Inc. v. EOG Res., Inc. , 554 S.W.3d 127, 138 (Te x. App.

— San Antonio 2018 , p et. gra nt ed, j u dgm ’ t va ca ted and remanded
b y a gr .) (quoting G le nn v. Luca s , 376 S.W.3d 268, 2 75 (Tex. App.

— Texarkana 2012, no pet.) ). U nder a vendor ’ s li en , “ legal ti tle does not pass to the vendee

. A ve ndee owns the equitable in teres t along with a cont rac t for the pu rchase o f land. ” F lag

- Redfern Oil
Co . v . Humble E xpl. Co

. , 744 S.W.2d 6 , 8 (Tex. 1987) ; see Disanti v. Wachovia Bank, NA , No. 2

- 08

- 330

- CV, 2 00 9 WL 137297 0, at *3 (Tex. App.

— Fort Worth May 14, 2009,

4 Ca mpbell signed various documents in various capacities

. W e will colle ctively refer to him as “ Cam pb ell ” because capacity was not argue d in the trial court

.
5 To be “ nego ti abl e ” under UCC Cha pter 3, an inst rume nt must be an
uncon di tional promise to pay a fixed amount of money on demand or at a definite time , must not c ontain add it ional undertakings by the obligor , and must be payable to b e ar er or to o rder when first i ssued

. Ada m J. Levitin, Th e Pap er Chase: Secu ritization, Foreclosure, and the Uncertainty of Mortgage Title , 63 Duke L.J. 637, 655

– 56 (2013) ; se e gene rally Tex. Bus. & Com. Code Ann. §§ 3.102(a), .104(a), .106

.5 no pet.) (mem . op.)

. “ W hen an express ve ndor ’ s lien is ret a i ned to s ec ure unpaid purchas e m oney, th e vendor holds superior title, and the vendee has a mere equitable right to acquire title by carryi ng out the ag reement. ” Dominey v. Unknown Heirs & Legal Representatives of Lokomski , 172 S.W.3d 67 , 73 (Tex. A pp.

— Fo r t Worth 2 00 5, no pet.)

. The p urc hase contr act “ is trea ted as executory b etween the vendor and vendee and those holding under th em until the purchase money [ obligation ] is fully satisfied. ”
Glenn , 376 S.W.3d at 275 ( qu oting Bunn v. Cit y o f Laredo , 245 S. W

. 426, 4 2 9 (Tex.
Comm ’ n A pp. 192 2, judgm ’ t a dopte d) )

. Al so to secure its note, K&M Collision gave C a mpbell a deed of trust

. A deed
of trust “ is a mortgage with a power to sell on default. It is a conveya nce of real property in tr u st by way of s e c urity , d ef ea sible or rede e m able a t any time p rior to t he
sale o f t he prope rty. ” 30 Tex. Jur. 3d Deeds of Trust and Mortg ages § 2 ( 20 2 2 ) (footnotes omitted) ; see Johnson v. Snell , 504 S.W.2d 397, 399 (Tex. 1973) ; s ee also Fin. Freedom Sr.
F

u nding Corp. v. H orrocks , 2 94 S.W.3d 749, 755 (Tex . App.

— Houst on [14th Dist.] 2009, no pet.) ( “ The purpose of a deed of trust is to secur e to a lender the repayment
of a borrower ’ s debt. ” ). “W hen a mortgagor executes a deed of tru st [,] the legal and
eq ui ta b le estates in t h e property a re severed , ” and the mortgag or re tains leg al title
whi le the mo rtgage e holds the equi table ti tle. Flag

- Redfe rn , 7 4 4 S.W.2d at 8.
Ca mpbell used t he K&M note and deed of trust as collateral to secure a l arge unrelated promissor y n ote that h e g a ve to Pinnac le Bank in exc hange for a loan

. Pin nacle lat er a ssigned its interest in the K&M no te and r elated documents to NBT as6 part of Cam pbell ’ s collateral to secure NBT ’ s even larger ( but also unrelated ) promissor y note from C amp b e ll

. Cam pbell ’ s promissor y note to NBT was a UCC Chapt er 3 negotiable instrume nt
. UCC Chap ter 3 , which appl ies only to negotiable instruments, is generally thought of as “ payment system ” law

— but it is also property law for certain payment
and d eb t instruments, i ncluding m or tgage s , “ because of t he com mon

- l aw doctrine providing that ‘ the mortgage follows the n ote, ’ meaning that a transfer of the note
effectuates a transfer of the associated se curity interest. ” Levitin, 63 Duke L.J. at 653 , 655

. U CC C hapter 3 provid es a meth o d for tra nsferr ing nego tiable instruments : if an
instrument is payable to b earer, d elivery alone wi ll suffice for negotiation ; if the
instrument is payable to the order of an identified person, then nego tiation requires

n ot onl y d elivery but also indorseme nt by the prior holder , which give s the tran sfere e all the t ra nsferor ’ s ri gh ts to enforce the instrument

. Id. at 657

– 58 (citing UCC §§ 3.201, .203

– .205).
UCC Chapter 9 , on the other hand, governs secur ity interests and contai n s a mechanism for transferri ng bot h p romissory note s and mortgage s. Id. at 676 , 690

– 91 (refe rencing UCC § 9.203(g))

. But UC C Chapter 9 says nothing about note
enforcement , leaving that to UCC Chapter 3

. 6 Id. at 699

– 700. U n der UCC C hapter 3,

6 NBT ar gue s that the UCC “ simply does not app ly to int erests in and li ens o n r ea l pro pert y . ” Bu t “ [i]s su es relating to the transfer, ownership, and enf orcement of mortg age notes ” are affec t ed by UCC Chapter 3 when the mortgage note is a
n eg otiable in str ument and by UCC Ch apter 9 when ad dre ssing trans fer o f not e7 an instrument is paid to the exte n t payme nt i s m ade by or on b ehalf of a party obliged to pay the instrumen t and to a p erson entitled to enf orce the instrument. Tex. Bus. &
Com. Code Ann. § 3.602(a). It can also be paid to a person formerly entit led to enforce the note, bu t only if at th e time o f th e p ayment, the p arty obliged to pay has

not been adequate ly not ifi ed both t hat the note has been transferred and that payment
is to be made to the transferee. See i d. § 3.60 2 (b ) . A notification is “ adeq uate ” only if it is sign ed by the tra nsfer or or th e tr a n s feree, reasonably identifies the transferred note,

a nd provi des an addre ss at which future payments are to be made. Id. Although U CC Chapter 9 ’ s scope does not generally apply to “ the creation or

tra nsf er of an interest in or lien on re al pr operty, ” o ne ex ception to th is general rule is
for “ liens on real property in Sections 9.203 and 9.308. ” Id

. § 9.109(d)(11) (A). S ect i on 9

. 203 provides that a security inter est attaches to collateral when it becomes

o wnershi p a n d the tra nsferee ’ s right , “ under certain circumstances, to record its interest in the mortgage in t he app licab le rea l e s ta t e recording offi ce. ” Permanent Editorial Bd. for the Unif. Co mmercial Code, Repo rt of the Perma nen t Editorial Boar d for th e Unifo rm C ommercial Code: Application of the Uniform Commercial Co de to Selected Issues Rela ting to Mortgage Notes 2 (20 11), h t tp s://www.ali.org/media/filer_public/ 1a/10/1a103e01

- 5bbe

- 4d2e

- a 6 5c

- c766b7b2b054/peb_r eport_

- _november _20 11.pdf ( UCC Board). C omp are Tex. Bus. & Com. Code Ann. § 9.101 cmt. 1 ( stating that UCC Chapter 9 “ pro v ides a compre hen sive scheme for the reg ulat ion of s ecurity interes ts in per sonal prop erty and fixture s ” ) , with i d. cmt. 4 .a. (stating that UCC Ch apter 9 “ also addresses expli c it ly

. . . any property (including real property) that secure s a right to p aymen t o r performance t hat is subject to a n A r ticle 9 s ec urity interest , ” an d referen cing S ections 9.203 an d 9.308) , a nd id. § 9.109(d)(11) (setting out cer tai n exceptions to t he U CC ’ s ge nera l statement that Chapter 9 “ does n o t apply to . . . the creation or tr ansfer of an inte rest in or lien on real p roperty
. . . as defined by Section 6 4.001, Property Code ” ).8 enforceable a gains t the de bt or wi th respect to the collateral , and that it is enforceable against the debtor and thi rd parties i f value has been given, t he debtor has rights i n th e collateral or the power to trans fer rights in the collateral to a secured party, and ,

am ong o ther thi ng s, th e debtor has authenticated a security agreement that describes
the collateral. Id. § 9.203(a), (b)(1)

– (3 )(A). “ The attachment of a security interest in a right to payment or performance secured by a s ecurity interest or ot her lien on
pe rsona l or rea l pr ope rty is also attachment of a secu rity interest in the security
inter est, mortgage, o r other lien

. ” Id. § 9.203(g) ; see id. § 9. 203 cmt. 9 ( “ Subsection ( g)
codifies the common

- law rule that a transfer of an obligation secure d by a secu rity
in terest o r oth er lien on per sonal or real property also transfers the security interest or lien. ” ) ; see also Con oly, 42 State Bar of Tex. P r of. Dev . Program, A dvanced R eal Estate
Law Course , at 26.5 (explain ing that foreclosure of a collat eral note u nder a collat er a l

tr ansfer is governed by the Texas Busines s and Commerce Code rather than by the
Texas Pr operty Code but also noting that when t h e collateral note is a note secured by
a deed

- of

- trust lien on real property, the underlying real p ro p e rty is the p rimary s ou r c e

o f security and the collateral note security “ is merely a means of reaching the real
pr operty ” )

. UC C Chapter 9 defines “ mortga g e ” as a “ con sens u al interest in real property, including fixtures, that secures payment or perform a nce of an o bliga tion, ” Tex. Bus.
& Com. Code Ann. § 9. 102( a )(55 ), and “ encu mbrance ” as “ a right, other than an

owners hip interest , in real property , ” including mortgages and other liens on real9 p r operty , see i d. § 9.102(a)(32)

. “ I ssues concerning mortgag es under Chapter 9 arise in
the cont ext o f priori ty c onf licts between a security interest created under Chapter 9 and a n interest i n the same collateral c reated by a m ortgage. ” 2 Ve r non ’ s Tex. Code Forms Anno., UCC Forms § 9.102(a)(55) (4th ed. 2021 )

. The following illustrat es ho w the UCC c an ov erlap wi th r eal

- property law: Maker issued a mortgage note payable to the order of Payee. P ayee borrowed money from Funder and , to secure Paye e ’ s re p ayment obligation, Payee and Funder agreed that Funder would have a security int erest in th e note. Sim ultan eously w it h the funding of the loan , Payee gave possession of the note to Funde r. Funder ha s an attached and enforceable secur i t y interest in the no te. UCC § 9.203(b). This is the case even if Payee ’ s agreement is oral or otherwise not evid enced by an auth enticate d r e cor d. Payee is no longer a person entitled to enforce the note (bec ause Payee i s no longer in possession o f it and it has not been lost, st olen , or destroyed). UCC § 3.3 01. Funder is a person entitled to enforce the note if eith er (i) Paye e ind orsed th e n o te by blan k ind orsement or by a special i ndorsement identifying Fun der as the p erson to w hom the ind orsement makes the note payabl e (bec ause, i n such cases, Funder would be the holder of the note), or (ii) the delivery of the note f rom Paye e t o Fun der cons ti t u tes a transfer of the note under UCC § 3.203 (because , in such case, Funder would be a nonholder in possess ion of t he note with th e righ ts of a holder). UCC Board, supra n. 6 , at 10

– 11 ( footnote omitted ). 7
With these terms and the rele va nt st atutory sc h e me in mind, we turn to th e facts

.

7 Th is ex am ple does not address t he interplay b etw e en state law on agen cy and UC C Chapter 9 , the significance of which we address later

.10 II I
. Background
A. Factual His tory 8 Campb ell ’ s 2011 sale to K&M Collision. On January 1, 2011, Campbell issued a warranty deed with ven dor ’ s lien to K&M Collision and the Admire s in
exch ange for a $ 6 7 4 ,644. 1 6 promis so r y note “ secure d by a fi rst and superior vendor ’ s lie n and superior title retain ed in this deed and by a first

- lien deed of trust

. ” The deed

was recorded in the county real

- property record s on June 1, 20 11

. Campb ell was identified as K&M Collision ’ s lender in t he January 1, 2 011 de ed of trust , which
d efined “ lender ” as inc luding “ a ny mortgage servicer for Lender

. ” The deed of trust

was rec orded in the re al

- pro perty re c ords , a lso on Jun e 1, 2011

. See T ex. Prop. Code
Ann. § 13.002 (1)

. Pinn acle ’ s 2012 loan to Campbell

. A little ov er a year later, i n August 2012, Campbell used the deed of trust and other d ocument s to secu re a n u nrelated $22 5,000 lo an f rom P i nnacle

. 9 In doing so, he e xecut ed a “Collatera l Assignment of Beneficial Interest in Deed of Trust/Mortgage and Collateral Docume nts
. ” 10 The

8 T he documents and facts we discuss are all in the summ ary

- judgme nt record

.
9 Th e loan was made on behal f o f Campbell himself ; his trus t ; and his compani es Falcon 2 0 6 E xp loration S a les and Le asi ng LLC and Campbell ’ s Auto Body, Inc.

10 Wh en a note ’ s payee seeks to use the not e as colla teral or to sell t he note
ou tr ight, UCC Chap ter 9 “ g overns that tran saction a n d determines whether the
c reditor or buy er has o bt a ine d a property right in th e no te. ” UCC Board , supra n. 6 , at 8

. The sold right to payment is designated “ collateral. ” I d. a t 9. To create a “ sec urity11 collateral assignment r eferenced t he K &M note and prohib ited Ca m pbell from
modif ying any co l latera l loan

— t hat is, the K&M note

— o r col l ateral

- lo an documents
without Pinnacle ’ s prior written consent

. It also stated th a t Campbell, as pledgor, hereby c ollateral ly assigns, transfers, conveys , s ets ov er, an d pledges to [Pinn acl e ], and gra nts to [Pinn acle ] a security interest in, all Pledgor’s right, title and interest in the Collateral Loan and the Colla teral Loan Documents. This Assignment is m ade pursu ant to, and the assignments ma de herein are fur th er evi denced by, a certa in Collateral Assignment
a nd S e c urity Agreement (Promissory Notes and Collateral Documents) dated even date herewith . . . . The as signment of Pledgor’s interests to [Pinnac le ] shall remain in full force and effect, and shal l be up o n all other persons and en tities unle ss and unti l a rel ease of this Agreement has been executed and filed of record by [Pinnacle ]. The assignment also said : For purposes of clarifica tion, notwit hstanding anythin g to the contrary contained in t his Ass ignment o r t he a f ore mentioned a ssignment de scribe d in the Col lateral Documents Assignment, the assignment is not and shall not be construed as an absolut e assignm ent; rather, i t i s intende d to be a co llateral assignme nt for the purpose of granti ng L ender a security in tere s t i n the Colla teral Loan a nd the Collateral Loan Documents. Compar e Tex. Bus. & Com. Code Ann. § 3.302 (e) ( limiting recovery of holder in due

course who p osses s es only a sec urity in terest i n a negotiable instrument) , w ith id. § 9.604(a) ( s tating th a t if a sec urity agreem ent co vers b oth personal and real property,
the sec ur ed party may proceed against the personal property without prejudici ng any

inte re st ” in eit her t he note securing an obl igation or the out right sale of the n ote : (1) value mu st be g ive n; (2) the seller mus t h ave righ ts in the note or the power t o transfer rights in the note to a third party; and (3) either the seller must au thenticate a securi ty agree ment that d escribes the note or t he secured party must take possession of the n ote i n a ccordance with the se lle r ’ s security ag reement. Id.12 rights with respe ct to the real property , or a gainst both personal and real pr op erty “ in
accorda nce wi th th e ri ghts with respect to th e real property ” )

. The assignmen t was recorded o n Se ptember 11, 2012

. Pinnacle ’ s 2015 assignme nt to N BT; NBT ’ s loan to Campbell. Three years lat er, Pinnacle assigned its interests to NBT as securit y for NBT ’ s unre l ate d $ 750,000 l oan to Campbell. 11 The assign m ent s were recor ded on November 25, 2 015

. The K&M note was additionally marked , “ P ay to the o r der of the National B ank of
Texas in accordance with C ollateral Assignment of Beneficial Intere st in Deed o f
Tru st/ Mortgag e an d Collat eral Doc u ments dat ed August 17, 2012 , ” and it was signed by a Pinnacle branch presi dent. NBT t ook physi c al p ossessio n of t he promi ssory

note. The “ Assignment and Transfer of Deed of Trust and Lien, Guaranty and
Mis cellane ous Docum ents ” stated t hat Pinnacle , as “Holder of the Note, Deed of Trust and lien[,] se lls, transfers, conve ys and ass i gns th e Note, Deed of Trust, lien, Guaranties and all supporting documentation and the COLLATERA L
ASSIGNMENT OF BENEFICIAL INTERE ST IN DEE D OF TRUST/MORTGAGE AND COLLATER AL DOCUMENTS, (collectively ‘Loan Documents’) to [NBT] .”

11 The record d oes not indicate whether Pinnacle was re paid out of the NBT loan proceeds , b ut Pinnacle is not a party and its interests have not been ra ised by the parties

.13 C a mpbell als o s igne d a “ Co mmercial Ple dge Agreem ent ” in con nection with
the NBT l oan transaction in which he granted NBT a security interest i n collater al to

secur e his note, agr eed that NBT would ha ve the rights stated in the agreement regardi ng the collateral, and i den tifi e d the collateral a s C a mpbell ’ s present and future rights, ti tle and i nterest in and to the following describe d investme nt property , together with any and all presen t a nd future ad ditions thereto, substitutions t herefo r, and replacement s t here o f, and fur ther tog ether wi th all income and proceeds as described herei n: ASSIGN ME NT OF NOTE REC EIVABLE DATED JANUARY 1, 2 0 11 FROM K &M COLLISIO N . . . AND [THE ADMIRES ] IN THE O RIG INAL AMOUNT OF $674,644.16.
In the pled ge agr e eme nt, Campbell w arranted to NBT that , among other
th ings , he would not sell, tr ansfer, encumber , or otherwise dispos e of a ny of his rights
in the collateral except as p rov ided b y the agreement ; that “ [ t ] o the extent the
C ollatera l con sists of promi ssory n ote s o r other ins truments, as defined b y the [UCC],
the Collateral is enforceabl e in acc ordance with its terms, is g enuine, and full y complies with all applicable laws a nd regul a tions concerning form , content a nd

man n er of prepara tion and execution ” ; and t hat NB T could fil e a UCC fina ncing

stat ement or a copy of the agreem ent to perfect its security i nterest. Campb ell also agreed to immediately deli ver to NBT all i ncome a nd p roceeds from the collateral. If Campb ell de f ault e d , NBT could (among ot her remedi e s) sell the colla teral “ at one or more public or private sales ” or “ m aintain a judicial suit for foreclosure and sale of ”

t he collateral

. In addition, t h e agreement defined “ related documents ”

— with which Campb el l also had t o comply

— to inc lude “ all pr omis sory n otes, credit agreements,14 loan agreements, . . . securit y agreeme nts, mortgages, deeds of trust, security deed s,

c ollateral mortgages, and a ll other instruments, a greements a nd docum ents, w hether

n o w or herea fter exis tin g , e xecuted in connectio n w ith the in deb tedness. ”
K&M Collision ’ s 2016 sale to JS & T A Properties. Not quite another full
year p asse d bef ore K&M Collision dec ided to sell the property to JS & TA P roperties,
LLC (JS& TA) , in a transaction ef fec ti ve June 1 6 , 2016

. Arou nd th at ti me, Campbell

o wed NBT $667 ,237.37.
B efore the property ’ s transfer to JS & TA , Britt a ney S iciliano, a n o fficer of Republic T i tle , e xchanged email s with Campbell in early June a bout t he K&M note ’ s payoff amo unt , 12 which he t old h er wo uld be $ 600, 090.6 1 , plus $3,00 0 .45 in intere st for that month, divided by 30 days, to amount to $ 100.01 per day

. 13 Republic Title

12 Under P roperty Code Section 12. 017, a title insuranc e c ompany may requ e st a

“ payoff st atement ” for a mortgage on nonr eside ntial pro pert y with an original face amount of inde b te dness of less than $ 1.5 million. Tex. Prop. Code Ann. § 12 .017(a) (5) , (b)

. A “ payoff st atement ” is a statem e nt of the a moun t of “ the un paid balance of a loan secured by a mortgage, including princip al, i nterest, and other charges properly assesse d un der the lo an docume ntation of the mortgage ; and interest on a pe r diem basis for th e unpaid balance. ” Id. § 12.017(a)( 5 ) (A )

– (B)

. A person trans mit ting a payoff statement is consid ered the “ mor tgage servicer ”

— “ the last p erso n to whom a mortgag or has been instructed by a mortga gee to sen d pa yments for the loan secured b y a mortgage ”

— f or the mo rtga ge described in the payoff
s tat ement
. Id. § 12.017(a )(3 ) ; see also id. § 51.0001(3) (defining “ mortgage servi cer ” as
“ the last person to whom a mortgagor has been instructed by the curr ent mortgagee to send payments for the debt secu red by a security instr ument ” and stating that a
m o rtg agee may be the mortg age servicer).

13 Campbell had previously e mailed Meagan K e ndrick , Siciliano ’ s sister and Republic Title coworker , in respo nse to Kendr ick ’ s May 2016 query about payoff15 business reco rds show that on M ay 25, 201 6, Siciliano had aske d a lega l assi stant to
prepare a re le ase of li en and tha t an initi al dra ft was prepared for NBT t o sign as the
current owner and holder of the debt an d lien securing the 2011 d eed of t ru st that had
been assigned to it from Pinnac le

. S iciliano later asked the le gal assista nt to revise the
rel ease of li en to reflec t release of C a m pbell ’ s

— not NBT ’ s

— interest , 14 and a new
draft was created showin g Campbell as the cu rrent owne r and hold er of the debt and
lien and o mitting any infor mation abou t or reference to Pinnac le and NBT

. Rep ublic
Tit le ’ s reco rd s showed that it knew o f the assi gn ments from C a mpbell to Pinnacle and
then to NBT , but they a ls o showed that K&M Collisi on ’ s owners had been paying Campbell on the note

. 15 S iciliano no tarized the June 16, 2016 “ g eneral w ar ranty deed
with vendor ’ s lien (2 nd vendor ’ s lien) ” from K &M Collision to JS&TA , and it was
recorded several days later

.

figures fo r the K&M Collision sale

. I n that email, he t old her, “ The payoff o n 5

- 1

- 2016 was $601,429.61 ” with daily interest of $97 per day.

14 Sicil iano ’ s June 16 email read, “ Release should be signed by John Franklin C ampbell, IV, as Trustee for the John Franklin Ca mpbell IV Living Trust. Tha t is wh o we are payin g of f

. Can you revise please? ”

15 From the record, it does not appear that K&M Collision ever knew about Camp bell ’ s ass ignme nt s . U ntil R epublic Title sen t K&M Collision the payoff statement , Campbell had appare ntl y been the “ last pers o n t o whom [K& M Co llisi on ] [ was] instructed by [C ampbell] to send payments for a debt secured by a securit y instrument , ” and thus Campb ell had arg uably been K &M Collision ’ s mortgage servicer. See Tex. Prop. Code Ann. § § 12.0 17 (a)(3) , 51.0001 (3)

.16 The June 1 7, 2016 Repu blic Tit l e seller ’ s settleme nt statement shows that out of the $74 0 , 00 0 sales price paid to K &M Collision , Campbell received $6 01,790

. 7 8 by
wire tran sfer

. Campbell execute d a “ full re lease of lien ” on Dec ember 16, 2 016 , th at

was filed on Janu ary 10, 2017. In th at re lease , Campbell represented that he was the

c urrent owner and holder of the K&M note , l ien , and dee d of trust and tha t he
released and disc h arged “ an y and all ot he r lien s a n d securi ty in terests secu ring sai d
indebtedness ” in c onsideration of the full and final payment of the note

. 16 Campbell ’ s eventu al l oan default ; JS&TA ’ s 2019 sale to BEDC

. I n November 2017, NBT renewed Campbell ’ s loa n ; Ca m p bell ’ s ass oci ated pro miss ory

n ote , no w for $6 4 9,995.48 , again liste d as coll ater al the assignment of the 2011 K &M

note

— the payoff of which Campbell had surreptitiously pocketed in 2016

— as well as a security ag reement on his priva te plane. Ca mpbell ’ s note to NB T went into defau lt by i ts te rms at maturity i n December 2018

. Shortly after ward, and for unexplained reasons, a nother release of lien on the
K&M note was recorde d , on January 9, 2019. Although not filed until that day , t his
release was dated June 1 7, 2016 , a nd signed by C ampbell

. I n the paragraph defining
the “ debt and lien ” that Campbell was the “ current owner and holder of ” and that he

was releasing, both Pinnacle ’ s and NBT ’ s interests were refer red to :

16 A differe n t r elease , which referr e d t o Pinnacle and NBT and which Campbell had apparently signed on June 1 7 , 2016, was recorded some two years later , as we note be low

.17 A f ew months later, JS&TA trans ferred t he property to BEDC throug h a
sp ecial warra n ty deed that was recorded i n April 2 019

. The bu siness re cords of WF G
National Title Com pany, the underwriter for McKnig ht Tit le, which handled th a t sale,
ident ified not on ly the r ecorded assignments to Pinnacle and to NBT, b ut also both

v ersions of C ampbell ’ s recorded release s . 17
B. P rocedural H istory
NBT initially sued the City of Benbrook an d Ca mpbell (i ndi vidua ll y and in his

t rustee statu s) , seek ing t o judicially for e close on t he property and to recove r for the unpaid princip al ba lance t hat Campbell o wed on his 2017 promissor y note
. Campbell
filed for bank ruptcy, and in its first a men ded petition , NB T dro pp e d Campbell
in dividually b ut kept hi m in the suit in hi s trustee s ta tus and amended its pleading to sue BEDC rather than the City of B enbrook. NBT late r added Re public Title as a defendant ; ad ded a request fo r a declaratory ju dgment th at Campbell ’ s December 16 ,

17 Coin cide ntally, Kendrick w as the n working at McKnight Title

.18 2016 release of lien was void ; a ll eged that there had bee n a fraud ulent closing by Republic Title ; and sou ght recovery for , a mon g other thin gs, t or tious interference with contract, breach of fiduciary d uty, and fraud by no n dis clo sure as to Re public
Title

. BEDC ans wered with a general d en i al and several affirmative defenses,
in cluding that the deed of trust had been extingu is hed by payment of the underlying obligation and that it lack ed actual o r constr uct ive notice of NBT ’ s claim s . BEDC ’ s Motion for Summary Judgme nt . BEDC filed a traditional

summa ry

- judgment motion , arguing tha t NBT ’ s judicial

- foreclosu re claim f ailed a s a

matter o f law becaus e the deed of trust had be en aut o matically ex ting u is h ed in
2 0 16 wh en K&M Colli sion pa id the K&M note in full

. Among BEDC ’ s summary

jud gment evidence w ere the documents showing that NBT had receiv ed an assign ment of only a collateral interest in the 2011 K& M note and deed of trust , Sic iliano ’ s and Cam pbell ’ s June 2016 email ex change about the payoff amount to Campbell , 18 the Republic Title seller ’ s settlement statement reflecting “ payoff loan ” to
C ampbell , an email receipt regarding the wir e trans fer of $601, 790.7 8 t o Camp bell at

18 Kendrick a nd Cam pbell ’ s May 2016 emai l e xchange about the p ayoff amount to Campbell was includ ed in NBT ’ s summary

- judgment evidence

. When both parties move fo r summ ary judgment an d the trial court grants on e mo tion and denies the other, the reviewi ng court sho uld re vi e w b oth parties’ sum mary

- jud gment evidence and determine all question s pre sented. Mann Frankfort Stein & Lipp Advisors, I nc. v. Fielding , 289 S.W. 3d 844 , 848 (Tex. 200 9). We should then

— if po s si ble

— r ender the judgment that the tr ial cou rt should ha ve ren de r ed. See Myr a d Props ., In c. v. LaSalle Bank Nat ’l Ass’n , 300 S.W.3d 7 46, 7 53 (Tex. 2009); Mann Fr ankfort , 289 S.W.3 d at 848.19 E

- Trade Bank , and C ampbell ’ s December 2016 “ F ull R elease of L ien , ” which made
no mention of Pinnacle or NBT. In its response to BED C ’ s summary

- judgment mot ion , NBT comp lain ed that
BEDC had n ot e xplai ned how Ca mpb ell had th e authori ty to e xecut e a release of
NBT ’ s lien, argu ed that an issue existe d about whether the proper pa rty was paid i n the 2016 sal es transaction, and p oint ed out a d isparity between the release of l ien that Campb ell had signed in Jun e 2016 (rec ord ed in 2 019) and the releas e he signed in
December 2016 (recorded in 201 7)

. NBT argued that BEDC was charged w ith
constructive not ice of NBT ’ s lien , that a rele a se was required from NBT , and that Republic Title had tak e n no s teps to obtain a rel ease fr o m NBT

. N BT incorpora ted by refer enc e its own summary

- judgm ent motion , discussed below, and the evidence
attached t o that motion. Replying to NBT ’ s summ ary

- judgment response , BEDC ar gue d that NBT ’ s and C a mpbel l ’ s rights to receive th e p ayoff we re exc lu sively gover ned b y the t erms o f
the K&M note , NBT ’ s collateral pledge agreement with Campbell, and NBT ’ s

r eco rded assignment of Pinnac le Ban k ’ s collateral i nterest, and that NBT had brou ght
forward no admissible e vidence to support its j udi cial

- for eclosure claim.
NB T ’ s Cr oss - Motion f or Summar y Judgm e

nt . N BT filed a cross

- motion
for summa ry jud gme nt , arguing that it was entitl ed to judgment as a matter of law on
the amount of its lien against th e pro perty and to a declarati on that Campbe ll ’ s20 purp orted De cember 1 6 , 2016 rele ase filed in J anuary 2 017 was void. 19 Although
NBT ’ s summary

- judgment evide nce was voluminous, 20 we note only th ose items pertinent to our dispos ition of this appeal on the issu e of BEDC ’ s noti ce of N BT ’ s interes t :

• A certifi ed copy of the 2011 K &M deed of tr ust.

• The A u g u s t 17, 20 12 “ Colla teral Assignment of Ben eficial Interest in Deed of Trust/ Mortgage and Collateral Do cuments ” b etween Campbell and Pinnacle , rec orded on Sep t e mber 11, 2 012

.

• The Nove mber 20, 2015 assign m ent o f l ien and 2 011 K&M deed of trus t fr o m P innac le , as “ H o lder of Note, D eed of T rust and L ien, ” to NBT , recor ded on November 25, 2015

.

• The Nove mber 2 0, 2015 “ Assignmen t a nd Transfer of D ee d of Trust and Lie n, Guaranty and M isc ellan e ous Documents ” from Pi nnacle to NBT , referencing the K&M note and deed of trust and recorded on Novem ber 25, 2015

.

• Campbe ll ’ s December 16, 2016 release of lien , r ecor ded on Jan ua ry 10 , 201 7

.

19 NBT ’ s motion did n o t state any specifi c summary

- judgment gro unds

. A lthough it is funda men tal that a summary

- judgment motion must s tan d or fall on the grou n ds it spec ifically an d expressly set s forth and r eliance may not be placed on summary

- judgmen t evidence for suc h grounds , see McConnell v. Southside ISD , 858 S.W .2d 337, 339 , 3 41 (Te x. 19 93) , BEDC did not brief this subissue on a p p eal

.
20 Among other things, NBT attached e xc erpts fro m the February 11, 2020 depositi on s o f S icilia no and Kendrick an d from Cam pbell ’ s Februa ry 28, 2020 s w orn statement
. B eca us e w e d o not reach BEDC ’ s complaints about S iciliano ’ s and Kendrick ’ s d e position s , see supr a n.2, we mention only that both S iciliano and Kendrick testified that they recalle d no thing abou t t he 2016 Republic Title tr an s action

. L i ke wise, because we do not reach BEDC ’ s objection to Cam pbell ’ s sworn statement, we do not go into hi s testim ony except to sa y that he c laimed to have relied on Republic Titl e t o tell him what was needed f or the 2016 t ransa ction.21 • Campbel l ’ s June 17, 2016 relea se of lien , recorded on January 9, 2019

. 21
B EDC filed a response to NBT ’ s motio n in which it incor porated its summary

j ud gment m ot ion by referenc e , as well as all a dm issible su mmary

- judgmen t evidence
in the reco rd

. It argue d that the payment to Campbell extin g uished the de ed

- of

- trust lien , barring NBT ’ s judicial

- forecl osure claim as a matter of l aw . In a reply bri ef , NBT argued tha t BEDC had f aile d to identif y any e v idenc e to

s how that Campbel l ’ s December 2016 rel ease of lien was not voi d or to show that
Ca mpbell wa s NBT ’ s agent for payoff or any oth er pur pose
. 22 N BT asser ted that the

e vidence showed tha t at th e tim e of the 2016 payoff , i t o wned a deed of trus t and a

v endor ’ s lien on t he property and had physical possession o f the K&M note and that

21 NBT also atta che d a title search of all grantees on the pro perty ’ s current deed ru n by R epublic Title on May 1 7, 2016

. Th ose records s howed the tran sfer of a war ranty deed from Campbell to K&M Coll ision and Campb ell ’ s Aut o Body Benbro o k o n June 1, 2011; the t ran sfer o f “ COLL ASG/TFR ” f ro m Campbell (as well as F alcon 206 and Campbell ’ s Auto Body Inc. ) to Pin nacl e Bank on Se pt ember 11, 201 2 ; and K&M Collisio n ’ s owne rs, K &M Collision , and Pinnacle Ba nk ’ s transfers of “ ASGMT L IEN ” to NBT o n No vember 25, 2015

.
22 A tri al court cann ot grant summar y judgme nt on grounds not presented in the summary

- judgment motion. See Tex. R . Civ. P. 166a(c); G & H To wing Co. v. Magee , 347 S.W.3d 293, 29 7 (Te x. 2011) ; se e also State Farm Lloyds v. Pag e , 315 S.W.3d 525, 53 2 ( Tex. 2010) (st ating th at a “[s]ummary judgment may not be affirmed on appeal
o n a ground not presented to the tri al cour t in the motion”). New g r ou nds for summary judgmen t asserted by a mov ant in a rep ly brief are not properly c o nsi dered on appeal. Atmo s E nergy Corp. v. Paul , 5 98 S. W.3d 431, 467 (Tex. App

. — Fort Worth 2020, no pet.) ; see Yeske v. Piazza Del A rte, Inc. , 513 S .W.3d 652, 677 (Te x. Ap p
. — H oust on [14th Dist.] 201 6, no pet.) ( statin g that a sum mary

- judgment movant may
no t us e its reply brief to ame nd its motion or to ra ise n ew and ind ependent summ ary

judgment grounds ).22 the chain of title put BEDC on both cons tructive notice to inquire about the rights of other part ies in the proper ty bei n g c onveyed and actu al n otice th rough McKnigh t Title ’ s acting as WF G ’ s agent in the 201 9 JS&TA /BEDC transaction

. Tr ial Court ’ s Order s

. The trial court denied BEDC ’ s motion and granted
NBT ’ s , stating that Camp bel l owed NBT $789,7 21. 9 4 a s of Marc h 26, 2 020 ; declar i ng void the December 16, 2016 rel ease of lien recorded on January 10, 2 017 ; an d granting NB T ’ s re quest for ju dicial foreclo sure on the property. The trial co urt severed NBT ’ s cla ims against BEDC to m ake th e summary

- judgme nt order fin al a nd
appe al a bl e. I V . Discussion
B EDC compla i ns th at the trial court er r ed by granting su mmary judgment for
NBT , claiming th at its evidence show s that the deed of trust held b y NBT wa s extinguish ed as a ma t te r of law. NBT di sagrees, contendi ng th at t he deed of trust was

not ex tingui shed and that B EDC pu r c hased the proper ty with n otice

. We begin with
the question of n otice.
A. BED C h ad n ot ice
. Under P roperty Code S e ct ion 13.001, a conveyance o f real pro perty o r a mortgag e or dee d of trust is void as to a subse que nt purch a ser for va l u able
considerati on who l acks notice of it “ unless [i t] has been a cknowledged , sworn to, or
prov ed and f iled f or record as required by la w. ” Tex. Prop. C ode Ann. § 1 3.001;
Bro adway N at ’ l Bank, Tr. of M ary Frances Evers Tr. v. Yates E nergy Corp. , 631 S.W.3 d 16,23 26 (Tex. 202 1)

. An instrument that is properly r ecorded in th e proper county is not ice to all perso ns of the inst rume nt ’s existen ce . T ex. Prop. Code Ann. § 13.0 02( 1) ; Ban k of
Am. v. Babu , 340 S.W. 3d 917, 923 (Tex. App.

— Dallas 20 11, pet. den i ed) ( “ A p a rty has

construct ive notice of instruments properly r ecorded in the proper county. ” ) ; 3 Aloysi us A . Leopold, T ex a s Prac tice Ser i es

: La nd Titles A nd Tit le Examination § 8.3 (3d
ed. 2021 ) ( “ The primary purpose of the recording statutes , which r equ ire the registration of deeds and other instruments affecting in terests in land, [] is to give
notice of the c ontents [] of th e reco rded ins t rument s. ” ).
A bona fid e p urcha ser is one who ac quires property in good faith, for va lue,
and with o ut noti ce

— construct ive or act ual

— of any third

- party claim o r int erest
. Broadway Nat ’ l Bank , 631 S.W.3 d at 26. Constructi ve notice may cre ate an irrebu t table
presump tio n of actual noti ce in some c ircumstanc es, and recorded instruments in a
gra ntee ’ s chain o f title generally e stabli sh a n irrebut table presumption of notic e. Trinity
Fin. Ser v

s . , LLC v. Mahana y , No. 02

- 21

- 00027

- CV, 2022 WL 24743 3, at *3

– 4 , *6 n.3 (Tex. App.

— Fo rt Wo rth Jan. 27 , 202 2, no p et. h.) ( m em . op.) (expressly declining t o hold that a lien ’ s validi ty factors i nto wh et he r there is constructive notice
of i t). 23

23 We recently dis cussed dee ds of trust in Mahanay , in which a pro p er ty o wner took out a loan and s igned a prom issory note and deed of t rust, whic h wer e then assigned to other financ ial institutions

— f irst to Credit Uni on of Texa s (CUTX) and then to Companion Property and C asualty Insurance ( CPCI)

— and recorded in the
coun t y rea l

- property records

. 2022 WL 247433, at *1

. When the owner sold t he property, t h e titl e com mitment specifically id enti fied that th e pro perty was24 The party clai m ing bona

- fide

- pur chaser status has t he bu rden to pro v e t he
defense , and it i s we ll settl ed that a p urcha ser is bound by e very recital, reference, and

res ervat ion contained in or f airly disc lo sed by any instrument that forms an esse ntial
link in the chain o f title under whi ch he claims. Id. a t *3

– 4. Any descr ipt ion , re cital of fact, or re feren ce to other docu ments i n an instr ument puts the purchaser on inqu iry,
and h e is boun d to fo llow up th is inqui ry, s tep by step, from one discovery to another
and from o n e instrument to a nother, until the w hole series of ti tle de eds is exhausted
and a c omple te kno wledg e of all mat ters refer red to and affecting the estate is
ob tained. Id. at *4.
T h e record r ef lects tha t BEDC had constructive

— if not actual

— notice of
NBT ’ s i nterest in the p r operty , including th e recording of Pinn acl e ’ s assignment to
NBT an d the tw o uniden tical releas e s of lien pur porting to relin quish Campbell ’ s interest s

— with the sec ond re leas e rec orde d jus t four mo nths before BEDC bought

t he p roperty and e xplicitly referring to both the Pinnacle and NBT ass i gnme nts
. See
encumbered b y a lien as refle cted in the county real

- pr operty records. Id

. The own er told th e buyers ’ titl e a gen t that the n ote and lien ha d been paid off in 2009 , provided the title agent wi th CUT X ’ s contact information , and encouraged th e buyer s to verify the st at us of the note and lien. Id. CUTX confirmed t o the buyer s ’ titl e agent t hat the seller had paid t he no t e ’ s full amount in 2009 an d that it sh ould have r e corded a rele ase of lien at that t i m e , and it filed a relea se of lien in Jul y 2014

. Id. When Trinity came into possession of the note and deed of tr ust , it attempted to forecl ose on the property in 2 0 19

. I d

. We held that whether the lien had be en extinguis hed was irrel evant to the bu yers ’ b ona

- fide

- purchaser defe n se (which failed be cause the y were on notice d ue to the real pr operty records) and that t he buyers were “ fr ee to pro ve th [e] vital fact [of e xt ing u ishment] regar dless of the bona fide p urchaser def ense ” on rema nd. Id. at * 6

– 7

.25 B roadway Nat ’ l Ban k , 631 S.W.3d at 2 6 ( def inin g a bona fide purchaser as o ne who acquired p roperty in good faith, f or value , an d “ without not ic e of any third

- party claim

or inte rest ” ( emphas i s add ed) )

. Accordi ngly , we must now consider whether a
g enu ine , material fact is sue exists with r e g ard to NBT ’ s interest that might preclud e summary judgment in it s favor

. B. NBT ’ s lien migh t have been exting uished. Campbell issued a warr anty deed with ve ndor ’s lien to K&M Collision in exchange for the K&M note

— a note secured both by the vendor ’s lien a nd b y a deed
of trust

. 24 Ca mpbell then used the K&M note and deed of t rust to se cu re unrelat ed
loans , first from Pinnacle and then fr om NBT. NBT argues that the 201 2 and
2015 assignments plainly indicate that it he ld the deed

- of

- trust lie n , a nd we agree. But

n ot hing in t he summary

- judgment record sh ows that Pinnacle or NBT was ev er iden tified as K& M Collision ’ s loan servic er o n the note th at t he deed of trust secured

. Instead, t h e record tangent i al ly reflects through R epu blic Title email s th at Campb ell
had co ntin ued to collect loan payments on t he K&M note from K&M Collision ’ s

owners. P a yoff of th e K&M note exti nguish ed th e ve n dor ’ s lien a nd t he deed of trust

. S outhland Life Ins

. Co. v. Barret t , 17 2 S.W.2d 997, 1000 (T ex. App.

— Fort Worth 1943,

24 U n der UCC Chapter 3, K&M C o ll ision , the not e ’ s maker, was oblig ed to pay the amount of the note to the person entitled to enforce the note and such payment would resu l t in a discharge of K&M Collision ’ s obligati on on the no te. See Tex. Bus. & Com. Cod e Ann. §§ 3. 1 03(b), . 203, .301, .4 12, .6 02; UCC Board, su p ra n. 6 , at 4.26 writ ref ’d w.o.m

. ) ; see Caress v. Lira , 3 30 S.W.3d 363, 366 (Tex. App.

— San Antonio 2010, pet. de nied) ( “ A li en is usually e xtin guished upon paym ent o f the indebt edness
that it was crea t ed to secure

. ” ) ; se e als o Jarvis v. K & E Re One , LLC , 390 S. W.3d 631,
642 (Tex. A pp.

— Dallas 2012, no pet.) ( “ When Stewart Title forwarde d the loan payoff funds to NAC , the Jarv is es’ agent with authorit y to acc e pt the fu nds, the lien

on the property was extinguishe d and the [d eed of trust] was discha rge d.” ) ; Am. Fir st
N at ’ l Bank v. Jorda n
- Lewis Dev. , L.P

. , No. 01

- 09

- 00990

- CV, 2 011 WL 2732779 , at

* 5 (Tex. App.

— Houston [1 st Dist.] Ju ly 14, 2011, no pet.) (m em. op.)

. Th is is because

“ [a] mort gage can have no legal effect apart fro m [ the] debt or obligati on it is designed

to se cure , and the mortgag e thus ce ases to exist on pa yment of the underlying deb t. ”
1 W. M ike Baggett a nd Bria n T ho mpson Mor ris, Tex as P rac tice G uide : Rea l Estate Litig. § 4:89 (20 2 2 ) ; see 2 James N. Johnson, Tex a s P rac tice Guide : Real T ran s. § 10:94 (2021) ( “ The lien of a mortgag e or trust deed is extinguish ed o r disch a rged when s atisfaction
of the note ev idencing t he debt sec ured by the mortgage occurs. ” )

. But see Russell & Seisfe ld v. Kirkbride , 62 Tex. 455, 456

– 57 (1 88 4) (noting that if a p roperty ’ s seller has

tra nsferred notes gi ven to secure purchase money, he c ould n o t be pe rmitted “ to destroy the securi ty whic h may constitu te the s ole or chief value of th e note or notes transfer red ” ) ; Myers v. Crenshaw , 116 S.W .2d 1125, 1129 ( Tex. App

. — T exarkana 1938) ( sta ting that purchas e

- money note ’ s assignee has no right to r escission ; rather h i s so le right is to hav e the l and s old and proceeds applied to satisf y his p urchase

- money note) , aff ’ d

, 137 S.W.2d 7 ( Tex. [ Comm ’ n Ap p. ] 1940)

.27 Further , u nle ss otherwise displaced by U CC p rovisions, agency law supplements the UCC

. Aquaduct, L.L. C . v. McElhenie , 116 S.W.3d 438, 4 43 (Tex

. App

. — Ho uston [14th Dist. ] 2003, no pet.)

. An d u n de r the UCC, a final payment to an authorized agent i s d ee med pa yment to the pri ncipal

. Id. ; see Metro

. Ins. & A nnuity
Co. v. Pea chtree Settlement Funding , LLC , 500 S.W. 3 d 5, 17 (Tex. App.

— Houston [1 st Dist .] 20 16, no pet.) (ci ting J a rvis , 390 S.W.3d a t 640 )

. This is true even if the agent misappropriates th e m oney. Jarvis , 390 S.W .3d at 640. Under such circumst ance s, the principal bears the loss because , as the party who trust ed the wrongdoer, the pr incipal

was in t he best posi tion to avoid the loss

. G usma P rop s . , L.P. v. Travelers Lloyds Ins. Co. , 514 S.W.3 d 3 19, 323 (Tex. App.

— Ho ust on [14th Dist.] 2016, no pet .)

. Circ umstantial

e vidence can establish an agenc y relationship and determin e the scope of the ag ent ’s

aut hority , but the q uestion of a gency is usually one of fact

. Jarvi s, 3 90 S.W.3d at 639 , 641 ; Aquaduct , L .L.C. , 116 S.W.3d at 442

. An agent cannot create the aut hority to bind

t he principal; actual or app a rent authority is created on l y by the princ ip al ’s words or conduct. Col eman v. Otese Ltd

. , No. 0 2

- 19

- 00015

- CV, 2020 WL 370577, at *6 (Tex. App.

— For t Wort h J an. 23, 2020, no pet. ) ( mem. op.).
We have f ound two cas es involving un f aithful loan servicers who
mis appr o priated payoff funds. See Ja rvis , 39 0 S.W.3d at 640 ; Aquaduct, L .L.C. , 116 S.W.3d at 443

. I n J arvis , the debtor signed a note and deed of trust na min g her
lenders as bene fic iaries “c /o ” the lo an servic er a t who se office s he made monthly
payments
. 390 S.W. 3 d at 635. When the debtor d ecided to s ell the pr oper ty, t he loan28 serv icer provided the p a yoff amount and wiring instruct ions to its account to the
bu yer ’s title company

. Id. at 635

– 36. Th e loan se rvice r re ceived the loan payoff funds
but did not disburse t he m to the lenders; instead , it sent t he lenders mon thly checks
purpo rting to be note pa y ment s and then stopped making t hose payments

. Id. When
th e l enders l earned a year la ter that the property had be en s old , they inform ed the
loan servicer that it was “ n o longer authorized to act as a serv ic ing agent on [ their ]
behal f. ” I d. At trial, the l e nder s denied that they had give n the loan servicer the au tho rity to accept loan p ayo ffs on their behalf

. Id. at 640

. O ther evidence , however, showed that
of the lender s ’ ten loans with th is particular loa n s er vicer, thr ee

— including the one at issue

— had bee n paid off , and i n the first two , the loan servicer had r ece ived the payoff funds an d then disbursed the funds to the lender s , w ho did not asser t either
time that the loan s ervicer had lacked authorit y to r eceive the fu nds on their beha lf. Id.

a t 637 , 641

. The trial court found

— and the appellate co urt agreed tha t m ore than a

sc intil la of evidence support ed

— that through the l end er s ’ and loan servic er ’s course
of co n duct , they had established a usual, custom ar y, and aut hor ized procedu re by
which the loa n ser v

icer directly received payoff funds and the n disbursed th em to the
lenders and th at the loan servicer had the implied actual auth ority to accept a n d receive the loan payoff o n the note at i ssue on the le n d e rs ’ behalf

. Id. at 637 , 640

– 4 1

. W he n the title company forwarded the loan

- payo ff f unds to th e l oan servicer, the29 len der s ’ agent with authority to accept the fu nds, “the lien on th e property was

ex t inguish ed and the [deed of trust ] was disc harged. ” Id. at 6 42.
Likewi se, i n Aquaduct , wh e n a l oan servicer converted a note ’s payoff amou nt during a lo an refinance , the trial cou rt found

— and the appellate court agreed

— that
the evidence su fficed to show th a t the loan servicer had implied actual aut hority to

ac cep t full payme nt of the note on t h e lie n holder ’s behalf

. 116 S.W.3d at 442

– 43.
Whe n the lienhold er had acquired the note an d deed of trust , it failed to make a
wri tten agreement defin ing the sco pe of t he loan servicer ’s auth ority , and the
lien holder ’s pre sid en t testifie d tha t the loan ser v

icer had had the auth ority , among other things, to conduct the da y
- to

- day business of han dling the notes and to issue payoff stat emen ts
. Id. at 442. The loan servi cer ’ s letter to the lienhol der ’s newly acquire d debtors me rel y informed t hem t hat servicing o f the note had been
transferred to it and direct ed them to sen d t heir payments to it ; the letter did not
mention the new lienhold er ’s name, and the n ew lienholder nev e r had any
communicat ion with its debtors. Id. The l ien hol de r did not tell its loan servi c er th at it could not accept full payments of not es until two y ear s after the loan serv ice r had accepted the full payoff at issue in t he case

. Id. at 44 2

– 4 3.
H e re, a lthough NBT argues that BEDC provided no evid ence to show tha t Campbell h ad a right to enforce t he K&M note even before he assigned the n ote and
liens t o P inn acle , the K&M note ’s terms require pay m ent to “ Lender, ” who was identified i n the note as Campbell , at h is address “or any other place tha t Len der may30 desi gnate in writi ng , ” and the deed of trust define d “ Lender ” to incl ude “ any mortgage servic er for Lender. ” There is no ev iden ce that P innacle , o r NBT u p on its

a cquiring the note and deed of trust , instructed K&M Collisio n to stop ma ki ng note
paym ents to Cam p bell and instead to make payments to Pinnacle and , later , t o NBT

. To the con tra r y, the summary

- judgment evide nce tend s to show that K&M
Collision ’s owners were still making payments to Campbell in May an d June 2016 ,

w hen Campbell gave Republic Title payo ff info rmation for the K&M note , and no record evidence s how s that K&M Collision ’ s o wners were ever notif ied to pa y anyone else

. See Tex. Prop. Code Ann. § 12.017(a) (3) (defining “ mortgag e servicer ” as t he last
person t o whom a mortgagor has been instru cte d by a mortga gee to send payments for a loan secured by a mo rtgage) , § 51.0001(3) (s ame)

. A ccor dingly, a genuine issue
of mate ria l fact remains concerning Campbell ’ s status as NBT ’ s loan servicer and payof f agent
. I f , as this record implies and a s viewed i n t he l ight most favorabl e to BEDC as the nonmovant, Camp bel l had authority to ac cep t the p ayo f f

— as he had been accepting K&M Collision ’ s mo nthly payments

— then Republic Title ’ s paymen t discharged N B T ’ s lie n and BEDC t ook the property f ree of NBT ’ s interes t , even though Ca mpbell continu ed to use the no

- longer

- val id liens to secure a loa n e xtensio n fr om NBT. See Tex. Bus. & Com. Code Ann. § 3.602 (expla ining that an instrument is
conside r ed paid to t h e exten t payment i s made by or on behalf of the p arty oblig ed to
p ay it an d to a person entitled to e nforce it or to a person form erly e ntit l ed to enf orce it if , at the time o f payment, the o b li g or has not r eceived adequate notification that the31 note has b een t ra n sferred an d that payment is to be made to the trans fe r ee ) ; see als o i d

. § 9.308 cmt. 6 (explaining that atta chm ent and perfectio n of a securit y in terest in a
secured right to payment do not of thems e lves affect the obligation to pay a nd that
UCC C h apter 9 does no t d et ermine who has the power to r elease a m or tgage of record, whic h is d etermined by real

- property l aw )

. Because there rema i ns a genu ine issue of material fact regarding the status of
the lien , t he trial court erred by granti ng a su mmary j udgment of judi cia l fore closure
in N BT ’ s f avor. Se e D e La G arz a , 20 18 WL 5725250, at *7

. W e sustain this portion of
BED C ’ s sole issue.
V. C o nc lusio n Hav ing sus ta ined the dispositive portion of B EDC ’ s sole issue , we rev erse the

tr ial court ’ s judgment and remand t he case f o r further proceedings

.

/s/ Elizabeth Kerr Eliza bet h Kerr Jus ti ce D eliver ed: April 7, 2022