COURT OF APPEALS

SECOND DISTRICT OF TEXAS

FORT WORTH

NO. 2-08-447-CV

JOYCE WEST, AS TRUSTEE APPELLANTS

FOR THE WEST FAMILY TRUST,

COMMERCIAL STRUCTURES

AND INTERIORS, INC., AND

LLOYD WARD

V.

NORTHSTAR FINANCIAL APPELLEES

CORPORATION D/B/A

NORTHSTAR BANK OF TEXAS,

TONY R. CLARK, EDMOND S.

BRIGHT, MYRA CROWNOVER,

ROBERT W. GENTRY, KENT W.

KEY, JOSEPH S. MULROY,

PATRICK D. O’BRIEN, RONALD

REINKE, RONALD F. SHERMAN,

AND RICHARD E. SMITH

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FROM THE 367TH DISTRICT COURT OF DENTON COUNTY

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MEMORANDUM OPINION

1

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1 See Tex. R. App. P. 47.4.
I. INTRODUCTION

In four issues, Appellants Joyce West, as Trustee for the West Family Trust,

Commercial Structures and Interiors, Inc. (“CSI”), and Lloyd Ward appeal (1) the trial

court’s order granting a motion for partial summary judgment in favor of Appellees

Northstar Financial Corporation d/b/a Northstar Bank of Texas (“Northstar”) and

Tony R. Clark, Edmond S. Bright, Myra Crownover, Robert W. Gentry, Kent W. Key,

Joseph S. Mulroy, Patrick D. O’Brien, Ronald Reinke, Ronald F. Sherman, and

Richard E. Smith (“Northstar Officers and Directors”) and (2) the trial court’s final

judgment granting in full a second motion for summary judgment and awarding

sanctions against Ward in favor of Northstar. We will affirm.

II. FACTUAL AND PROCEDURAL BACKGROUND

Joyce and John Richard West were officers, directors, or shareholders of CSI;

Southfork Land LLC (“Southfork”); Valley Business Park, Ltd. (“VBP”); JRW

Holdings, Inc. (“JRW”); and Dakota Partners Ltd.(“Dakota”) (collectively, the “West

entities”). In 2002 and 2003, CSI, JRW, and VBP acquired financing through several

loans from Northstar: CSI entered into a loan agreement with Northstar for a

revolving line of credit up to $1,000,000 and executed a promissory note payable to

Northstar in the amount of $1,000,000; JRW executed a promissory note payable

to Northstar in the amount of $704,600; and VBP executed a promissory note

payable to Northstar in the amount of $550,000.

2
Northstar secured each promissory note with multiple instruments of collateral.

To secure the CSI promissory note, CSI granted Northstar a security interest in,

among other things, its accounts receivable, rights to payment of any kind, and

proceeds; John Richard West executed a Guaranty Agreement in favor of Northstar

guaranteeing CSI’s indebtedness under the promissory note; and Dakota executed

a Guaranty Agreement in favor of Northstar guaranteeing CSI’s indebtedness. To

secure the JRW promissory note, Southfork executed a deed of trust, security

agreement, and assignment of rents, leases, incomes, and agreements in favor of

Northstar to three tracts of land, and John Richard West, Dakota, CSI, and Southfork

each executed a Guaranty Agreement in favor of Northstar guaranteeing JRW’s

indebtedness. To secure VBP’s promissory note, VBP executed a deed of trust,

security agreement, and assignment of rents, leases, incomes, and agreements in

favor of Northstar to a single tract of land; John Richard West executed a Guaranty

Agreement in favor of Northstar guaranteeing VBP’s indebtedness; and both Joyce

and John Richard West executed an “Amended and Restated Assignment of Life

Insurance Policy” assigning to Northstar an Allmerica life insurance policy in the

amount of $200,000 on the life of John Richard West. The deed of trust also

secured the JRW and CSI promissory notes, and the assignment of the Allmerica

insurance policy also secured all of the indebtedness owed by JRW and CSI to

Northstar.

3
The CSI promissory note, the JRW promissory note, and the VBP promissory

note each fell into default. Northstar had also agreed to cover several overdrafts

made by CSI in the amounts of $36,852, $341,375, and $5,758 and an overdraft

made by JRW in the amount of $152,845. As of May 27, 2004, the West entities’

indebtedness on the promissory notes, including interest on the principal

indebtedness and the secured amounts representing the overdrafts, totaled

approximately $2,396,137.

On or about May 27, 2004, Northstar entered into a “Compromise Settlement

Agreement and Mutual Release” (the “Agreement”) with the West entities.

2 Under

the Agreement, Northstar released the West entities from personal liability under the

loans for the indebtedness resulting from the CSI, JRW, and VBP promissory notes.

The Agreement provided, however, that the indebtedness and the collateral securing

the debt would “remain in full force and effect,” thus surviving the release of the West

entities from personal liability. In exchange for agreeing to not pursue the West

entities to satisfy the indebtedness, Northstar received deeds in lieu of foreclosure

conveying real estate that was the subject of the deeds of trust used as collateral to

secure the JRW and VBP promissory notes; an assignment of all of CSI’s accounts

receivable; a collateral assignment of a Transamerica life insurance policy in the

amount of $750,000 for a period of one year from May 27, 2004; and a release from

2 The West Family Trust was not a party to the Agreement.

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all past, present, and future claims by the West entities based on tort, contract, or

any other theory of recovery.

On July 12, 2004, CSI sued Liberty Education Ministries, Inc. d/b/a Liberty

Christian School (“Liberty”), alleging that Liberty had terminated a contract that it had

entered into with CSI after CSI had fully performed under the contract and that

Liberty had failed to pay CSI money owed. See Commercial Structures and

Interiors, Inc. v. Liberty Educ. Ministries, Inc., 192 S.W.3d 827, 829 (Tex. App.—Fort

Worth 2006, no pet.). The trial court granted Liberty’s motion for summary judgment,

dismissing CSI’s claims against Liberty and declaring that CSI had transferred all

legal rights and causes of action asserted by CSI in the litigation to Northstar and

that Northstar was the owner of the claims asserted by CSI in the litigation. Id. at

830. CSI appealed and argued in part that “the trial court erred by construing the

[Agreement] as a present transfer and assignment of CSI’s claims against [Liberty]

to [Northstar] because the [Agreement] merely evidence[d] a future intent to assign

by executing additional documents.” Id. at 832. This court agreed, reasoning in part

as follows:

We hold that the language in the [Agreement] unambiguously

evidences an intent to assign CSI’s accounts receivable to [Northstar]

in the future and does not, standing alone, effect a present transfer of

the accounts receivable to the bank. Appellees did not provide the trial

court with any evidence that the parties consummated the transactions

contemplated in the [Agreement], nor did they plead or prove an

equitable assignment; thus, there is no evidence that CSI ever

completed the assignment of its accounts receivable to [Northstar] that

it agreed to in . . . the [Agreement]. Because there is no evidence in

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the summary judgment record that the assignment was ever

consummated, the trial court erred by granting summary judgment in

favor of Liberty as to CSI’s claims against it and as to appellees’ claims

for declaratory judgment relief against CSI. We sustain CSI’s second

issue.

Id. at 834 (footnotes omitted).

John Richard West died in late April 2006. On May 24, 2006, Joyce West,

individually and as Trustee for the West Family Trust, sued Northstar and the

Northstar Officers and Directors, alleging claims for breach of contract and tortious

interference with contract based on Northstar’s alleged failure and refusal to execute

(1) a release of the 2003 collateral assignment upon the Allmerica insurance policy

and (2) a release of the Transamerica insurance policy assignment, which expired

by its own terms in May 2005. On May 31, 2006, Northstar executed a release of

the Transamerica insurance policy. In July 2006, West filed a supplemental petition

claiming that Northstar was improperly withholding CSI’s accounts receivable and

alleging claims for intentional infliction of emotional distress, fraud, conspiracy to

commit fraud, conspiracy to tortiously interfere with contract, tortious interference

with contract, and negligence.

Also in July 2006, the West entities filed a “Plea in Intervention,” alleging

claims against Northstar and the Northstar Officers and Directors for fraud,

conspiracy to tortiously interfere with business relations, conspiracy to convert

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accounts receivable, conversion, and negligent misrepresentation.

3 The Intervenors

claimed that pursuant to the Commercial Structures and Interiors, Inc. case, “the Fort

Worth Court of Appeals held that CSI’s accounts receivable were not assigned to

Northstar” and that Northstar was wrongfully holding CSI’s accounts receivable.

After filing counterclaims for breach of contract and for declaratory relief

related to the Allmerica insurance policy and CSI accounts receivable, Northstar and

the Northstar Officers and Directors filed a traditional and no-evidence motion for

partial summary judgment; Northstar and the Northstar Officers and Directors moved

for summary judgment on all of West’s and the Intervenors’ affirmative claims, and

Northstar moved for summary judgment on its claim that it is entitled to the proceeds

of the Allmerica insurance policy. After Northstar filed the motion for partial

summary judgment, West and the Intervenors filed a first amended petition. As to

the Northstar Officers and Directors, the trial court granted the motion for summary

judgment in its entirety, dismissing all claims against them. As to Northstar, the trial

court granted its motion for summary judgment on West’s and the Intervenors’

claims of negligence, gross negligence, intentional infliction of emotional distress,

and conspiracy. The trial court denied the remainder of Northstar’s motion for

summary judgment.

3 Unlike subsequent filings by the Intervenors, this filing does not name

Dakota as an intervenor.

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Northstar filed motions for rule 215, rule 13, and civil practice and remedies

code section 10 sanctions against Ward, counsel for West and the Intervenors,

which the trial court granted on October 15, 2007. West and the Intervenors filed

their second and third amended petitions before all of the Intervenors except CSI

nonsuited their claims against Northstar, and Northstar amended its counterclaims

as to the declaratory relief it sought. Northstar thereafter filed a traditional and noevidence motion for summary judgment on West’s and the Intervenors’ claims and

on Northstar's claims for breach of contract and for declaratory relief.

4 The trial court

granted the motion in full; among other things, it dismissed all of the West’s and all

of the Intervenors’ claims; declared CSI, JRW, and VBP in default of the CSI, JRW,

and VBP promissory notes; declared the Agreement valid and enforceable; declared

that the indebtedness under the promissory notes survived the Agreement’s

execution; declared that the indebtedness as of January 23, 2008, including interest

and overdrafts, was $2,912,853 and that the indebtedness as of May 27, 2004,

4 Because the motion for summary judgment contained in the record bears

a file mark that is dated after the trial court signed its order granting the motion for

summary judgment, we abated the appeal for the trial court to conduct a hearing to

determine what constitutes an accurate copy of the motion for summary judgment

filed on February 15, 2008, the date Northstar claims to have filed the motion. See

Tex. R. App. P. 34.5(e). The trial court entered a finding of fact that the copy of the

motion for summary judgment admitted as Exhibit “1” at the abatement hearing, now

included as a supplement to the record, constitutes an accurate copy of the motion

for summary judgment filed on February 15, 2008. See Nguyen v. Dallas Morning

News, L.P., No. 02-06-00298-CV, 2008 WL 2511183, at *3 (Tex. App.—Fort Worth

June 19, 2008, no pet.) (mem. op.) (“A document is ‘filed’ when it is delivered or

tendered to, or otherwise put under the custody or control of, the court’s clerk. This

is true regardless of whether the document is file-stamped.”).

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including interest and overdrafts, was $2,396,137; declared that the value of the real

property conveyed in lieu of foreclosure was $1,205,792; declared Northstar the

owner of CSI’s accounts receivable; and declared Northstar the owner of the

proceeds to the Allmerican insurance policy. The trial court also included in the final

judgment its ruling awarding sanctions against Ward in the total amount of $68,602.

This appeal followed.

III. NORTHSTAR’S MOTION TO SHOW AUTHORITY

Before addressing Appellants’ four issues, we must address Northstar’s

motion pursuant to rule of civil procedure 12 to require Appellants’ counsel, Ward,

to show authority to prosecute this appeal. Northstar contends that Ward lacks

authority to represent West and CSI on appeal because he withdrew as counsel for

West in April 2008, because the notice of appeal is ambiguous with respect to the

identity of the parties pursuing the appeal, and because of a potential conflict of

interest between Ward and West. Northstar also requests that we dismiss the

appeal of West and CSI for want of jurisdiction. We abated the appeal to allow the

trial court to conduct a hearing on the motion. The appeal being reinstated, and

having reviewed the supplemental reporter’s record of the hearing on abatement and

relevant parts of the record, we deny Northstar’s motion requesting that the appeal

be dismissed for want of jurisdiction.

5

5 To the extent Northstar seeks further relief by way of its motion to show

authority, it is denied.

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IV. STANDARD OF REVIEW

In a summary judgment case, the issue on appeal is whether the movant met

the summary judgment burden by establishing that no genuine issue of material fact

exists and that the movant is entitled to judgment as a matter of law. Tex. R. Civ.

P. 166a(c); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844,

848 (Tex. 2009). We review a summary judgment de novo. Mann Frankfort, 289

S.W.3d 848.

We take as true all evidence favorable to the nonmovant, and we indulge

every reasonable inference and resolve any doubts in the nonmovant’s favor.

20801, Inc. v. Parker, 249 S.W.3d 392, 399 (Tex. 2008); Sw. Elec. Power Co. v.

Grant, 73 S.W.3d 211, 215 (Tex. 2002). We consider the evidence presented in the

light most favorable to the nonmovant, crediting evidence favorable to the

nonmovant if reasonable jurors could, and disregarding evidence contrary to the

nonmovant unless reasonable jurors could not. Mann Frankfort, 289 S.W.3d at 848.

We must consider whether reasonable and fair-minded jurors could differ in their

conclusions in light of all of the evidence presented. See Wal-Mart Stores, Inc. v.

Spates, 186 S.W.3d 566, 568 (Tex. 2006); City of Keller v. Wilson, 168 S.W.3d 802,

822–24 (Tex. 2005). The summary judgment will be affirmed only if the record

establishes that the movant has conclusively proved all essential elements of the

movant’s cause of action or defense as a matter of law. City of Houston v. Clear

Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979).

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V. MOTION FOR PARTIAL SUMMARY JUDGMENT—NORTHSTAR OFFICERS AND

DIRECTORS

In their first issue, Appellants argue that the trial court erred by granting the

motion for partial summary judgment in favor of the Northstar Officers and Directors

on claims that were not addressed in the motion for summary judgment.

Specifically, Appellants contend that West filed her first amended original petition

after Northstar and the Northstar Officers and Directors filed their motion for partial

summary judgment; that the amended petition asserted causes of action for fraud

in the inducement, negligent misrepresentation, tortious interference, fraud, and

fraudulent misrepresentation that were not previously pleaded in the original and

supplemental petitions; and, consequently, that the trial court granted the motion for

partial summary judgment in favor of the Northstar Officers and Directors on claims

that were not addressed by the motion for partial summary judgment.

Generally, a movant who does not amend or supplement its pending motion

for summary judgment to address newly added claims is not entitled to summary

judgment on those claims. Blancett v. Lagniappe Ventures, Inc., 177 S.W.3d 584,

592 (Tex. App.—Houston [1st Dist.] 2005, no pet.). In such a case, the portion of the

summary judgment purporting to be final must generally be reversed because the

judgment grants more relief than requested in the motion. See id. Exceptions apply

to this rule, however, when a previously filed no-evidence motion for summary

judgment already challenges an essential element of a later-added claim, when the

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movant has conclusively proved or disproved a matter that would also preclude the

unaddressed claim as a matter of law, or when the unaddressed claim is derivative

of the addressed claim and the movant proved its entitlement to summary judgment

on that addressed claim. Wilson v. Davis, No. 01-06-00424-CV, 2009 WL 2526439,

at *11 & n.13 (Tex. App.—Houston [1st Dist.] Aug. 14, 2009, no pet.); Lampasas v.

Spring Center, Inc., 988 S.W.2d 428, 436–37 (Tex. App.—Houston [14th Dist.] 1999,

no pet.); Hayes v. Vista Host, Inc., No. 03-08-00053-CV, 2009 WL 722288, at *5

(Tex. App.—Austin Mar. 20, 2009, no pet.) (mem. op.).

Here, the Northstar Officers and Directors moved for summary judgment on

“Plaintiff/Intervenors[‘]” claims for breach of contract, tortious interference, fraud,

negligence, gross negligence, negligent misrepresentation, conversion, accounting,

intentional infliction of emotional distress, and conspiracy. West, as the Trustee for

the West Family Trust, was the “Plaintiff” identified in the motion, and the West

entities were the “Intervenors” identified in the motion. According to the motion, “all

of these claims should be dismissed on summary judgment against all Defendants.”

[Emphasis added.] Contrary to Appellants’ arguments, the motion sought summary

judgment on West’s claims for negligent misrepresentation, tortious interference,

and fraud.

Fraudulent inducement is a particular species of fraud that arises only in the

context of a contract, and the elements of fraud must be established as they relate

to an agreement between the parties. Haase v. Glazner, 62 S.W.3d 795, 798–99

12
(Tex. 2001). Other than the pleading argument, which we already addressed, West

does not challenge the trial court’s order granting the motion for partial summary

judgment in favor of the Northstar Officers and Directors on her claims for fraud.

Therefore, because it is undisputed that the Northstar Officers and Directors

conclusively disproved West’s fraud claims, West cannot establish her fraudulent

inducement claim as a matter of law. See id. (requiring that elements of fraud be

established in fraudulent inducement claim); Wilson, 2009 WL 2526439, at *11. The

trial court did not err by granting the Northstar Officers and Directors’ motion for

partial summary judgment on West’s claims for fraudulent inducement.

West made no distinction between her claims for fraudulent misrepresentation

and fraud; she grouped the identical claims together, alleging identical facts in

support of each claim.

6 Also, like her fraudulent inducement claim, West’s fraudulent

misrepresentation claim fails as a matter of law because it is undisputed that the

Northstar Officers and Directors conclusively disproved her fraud claims, and her

fraudulent misrepresentation claim shares elements with her fraud claim. Compare

Baribeau v. Gustafson, 107 S.W.3d 52, 58 (Tex. App.—San Antonio 2003 (Tex.

App.—San Antonio 2003, pet. denied) (listing elements of common law fraudulent

misrepresentation), cert. denied, 543 U.S. 871 (2004), with DiBello v. Charlie

Thomas Ford, Ltd., 288 S.W.3d 118, 122 (Tex. App.—Houston [1st Dist.] 2009, no

6 West asserted three “counts” of “Fraud and Fraudulent Misrepresentation”

in the first amended original petition.

13
pet.) (listing elements of common law fraud); see Wilson, 2009 WL 2526439, at *11.

The trial court did not err by granting the Northstar Officers and Directors’ motion for

partial summary judgment on West’s claims for fraudulent misrepresentation. We

overrule Appellants’ first issue.

VI. INDEBTEDNESS AND CSI ACCOUNTS RECEIVABLE

In their second issue, Appellants argue that the trial court erred by granting

Northstar’s motion for summary judgment on its requests for declarations that the

indebtedness under the promissory notes survived the Agreement’s execution and

that Northstar is the owner of CSI’s accounts receivable. Under various theories,

Appellants contend that no indebtedness resulting from the CSI, JRW, and VBP

promissory notes remained after the Agreement’s execution because the Agreement

constituted a full settlement of all claims relating to the indebtedness and because

Northstar is not the owner of the CSI accounts receivable.

A. Contract Construction

Our primary concern when construing a written contract is to ascertain the true

intentions of the parties as expressed in the instrument. Coker v. Coker, 650 S.W.2d

391, 393 (Tex. 1983). We examine and consider the entire writing in an effort to

harmonize and give effect to all provisions of the contract so that none will be

rendered meaningless. Id. We presume that the parties to the contract intend every

clause to have some effect. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118,

121 (Tex. 1996); XCO Prod. Co. v. Jamison, 194 S.W.3d 622, 627 (Tex.

14
App.—Houston [14th Dist.] 2006, pet. denied). We give terms their plain, ordinary,

and generally accepted meaning unless the contract shows that the parties used

them in a technical or different sense. Heritage Res., 939 S.W.2d at 121. In

construing a contract, we may not rewrite it nor add to its language, and we must

weigh that parties to a contract

are considered masters of their own choices. They are entitled to

select what terms and provisions to include in a contract before

executing it. And, in so choosing, each is entitled to rely upon the

words selected to demarcate their respective obligations and rights. In

short, the parties strike the deal they choose to strike and, thus,

voluntarily bind themselves in the manner they choose.

Cross Timbers Oil Co. v. Exxon Corp., 22 S.W.3d 24, 26 (Tex. App.—Amarillo 2000,

no pet.).

B. The Agreement

Relevant provisions of the Agreement provide as follows:

I.

BACKGROUND

WHEREAS, VBP executed that certain [p]romissory [n]ote dated

July 17, 2003 in the original principal amount of $550,000.00 and

payable to the order of [Northstar] . . . ;

WHEREAS, JRW executed that certain promissory note dated

January 24, 2003, in the principal amount of $704,600.00 and payable

to the order of [Northstar] . . . ;

WHEREAS, CSI executed that certain promissory note dated

December 13, 2002, in the principal amount of $1,000,000.00 and

payable to the order of [Northstar] . . . ;

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WHEREAS, the VBP Note, the JRW Note and the CSI Note

(hereinafter, the “Indebtedness”) is secured by certain real property

situated in Denton County, Texas . . . (the “Property”) . . . ;

WHEREAS, the Indebtedness is guaranteed in whole or in part

by VBP, the Wests [John Richard West and Joyce West], Dakota,

JRW, CSI, and Southfork . . . ;

. . . .

WHEREAS, the Indebtedness is in default and the Property has

been posted for foreclosure sale on June 1, 2004;

. . . .

II.

AGREEMENT

1. Conveyances to [Northstar]: The West Entities agree to convey

or cause to be conveyed to [Northstar] . . . all of the land situated in

Denton County, Texas, described in the Schedule “A,” attached hereto

. . . .

7 Further, CSI agrees to assign to [Northstar] all of its right, title

and interest in and to all of its accounts receivable and all rights to

payment of any kind.

2. Consideration. Subject to the satisfaction by the West Entities

of the conditions contained herein, [Northstar] agrees to accept the

conveyance of the Properties in full, final and complete settlement of

any and all claims relating to personal liability of the West Entities with

respect to the Indebtedness. The West Entities agree to convey the

Properties to [Northstar] in consideration of such accord and

satisfaction. The West Entities jointly and severally represent that each

of them has made an independent determination of the fair market

value of the Properties and as a result thereof, each of them has

concluded that: (a) the amount of the Indebtedness substantially

exceeds the fair market value of the Properties; (b) the Properties are

unable to generate sufficient income to repay the Indebtedness in

7 The properties identified in Schedule “A” include several tracts of real

estate that were the subject of the deeds of trust used as collateral to secure the

JRW and VBP promissory notes.

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accordance with the terms of the Loan Documents; and (c) the

consideration to be received by the West Entities pursuant to this

agreement represents the payment by [Northstar] of full, fair and

adequate consideration to the West Entities.

3. Closing Date. The transactions contemplated by this agreement

will be consummated on or before 5:00 P.M. on Thursday, May 27,

2004 (the “Closing Date”) . . . .

4. Conveyance Documents. On the Closing Date, the West Entities

will deliver or cause to be delivered to [Northstar] the following

items . . . : (a) Special Warranty Deed-in-Lieu of Foreclosure for the

Properties . . . ; (b) an Assignment of the Life Insurance Policies,

specifically, the Transamerica Life Insurance Company Policy No.

4178765 in the amount of $750,000.00 on the life of John Richard West

for a period of one (1) year from the date hereof . . . ; (c) the Notice

Letter to the account debtors of CSI attached hereto as Schedule

“F” . . . .

5. Nonrecourse Liability of Indebtedness. The West Entities are

hereby released from all personal liability under the Indebtedness to the

extent such release does not operate to invalidate the liens created of

the Deed of Trust in the collateral described therein. It is the intent of

the Parties that the Indebtedness shall remain in full force and effect

and fully secured by the collateral identified in the Loan Documents. . . .

6. Release of [Northstar]. Effective on the Closing Date and only if

the transactions contemplated by this agreement are consummated,

the West Entities . . . shall completely and generally release . . . and

forever discharge [Northstar] . . . of and from any and all past, present,

and future claims, [and] . . . causes of actions . . . whatsoever based on

tort, contract, or any other theory of recovery . . . which any West

[Entities] ever jointly or individually had, . . . or [will] have against

[Northstar] . . . .

. . . .

11. Representation of Comprehension of Documents: In entering

into this Agreement, each Party represents that it has relied upon the

legal advice of an attorney who is the attorney of his or its own choice,

and that the terms of the Agreement have been completely read by the

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Party, and that the Party fully understands and voluntarily accepts the

terms of this Agreement. . . .

. . . .

15. Entire Agreement: This Agreement contains the entire

agreement between [Northstar] and the West Entities with regard to the

matters set forth in this Agreement.

a. THERE ARE NO OTHER PROMISES, UNDERSTANDINGS,

REPRESENTATIONS, WARRANTIES, COVENANTS, OR

AGREEMENTS, VERBAL OR OTHERWISE, IN RELATION

THERETO BETWEEN THE BANK AND THE WEST ENTITIES,

EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT.

[Emphasis added.]

C. Indebtedness

The plain and unambiguous language of the Agreement demonstrates that in

exchange for deeds in lieu of foreclosure, an assignment of all of CSI’s accounts

receivable, a collateral assignment of the Transamerica life insurance policy, and a

release from all claims by the West entities, Northstar agreed to release the West

entities from personal liability under the loans for the indebtedness. Contrary to

Appellants’ interpretation of the Agreement, Northstar’s release of the West entities

from personal liability for the indebtedness did not extinguish or release the entirety

of the indebtedness under the promissory notes because (1) that is not what the

Agreement states and (2) the parties to the Agreement specifically intended that the

indebtedness “remain in full force and effect and fully secured by the collateral.” By

releasing the West entities from only personal liability for the indebtedness, Northstar

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agreed that, with the exception of the assets conveyed in the Agreement, it could not

reach any of the West entities’ assets to satisfy the indebtedness, which remained

in full force and effect and fully secured by the collateral. In other words, by agreeing

to not pursue the West entities to satisfy the indebtedness (“Nonrecourse Liability”),

Northstar limited the indebtedness remaining after accepting the assets conveyed

in the Agreement to the value of the collateral securing the debt. Accordingly, the

Agreement did not constitute a full and final settlement of the entirety of the

indebtedness under the CSI, JRW, and VBP promissory notes. Rather, under the

terms of the Agreement, the indebtedness resulting from the promissory notes

survived the Agreement’s execution.

To the extent Appellants mean to argue that no indebtedness remained after

the Agreement’s execution because the value of the properties conveyed in lieu of

foreclosure exceeded the total indebtedness (thus challenging the declaration that

the value of the properties conveyed in lieu of foreclosure was $1,205,792), this

argument was not asserted by Appellants in response to Northstar’s motion for

summary judgment as an issue expressly precluding summary judgment.

8 Thus,

Appellants may not raise this argument for the first time on appeal as a reason to

reverse the summary judgment. See Tex. R. Civ. P. 166a(c) (providing that issues

not expressly presented to the trial court by written motion, answer, or other

8 Appellants only argued that the Agreement “was a complete release of all

indebtedness of the Plaintiff and Intervenors from any allegations of debt owed to the

Bank.”

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response shall not be considered on appeal as grounds for reversal); Tex. R. App.

P. 33.1 (requiring that as a prerequisite for presenting a complaint for appellate

review, record must show that the complaint was made to trial court by timely

request, objection, or motion); McConnell v. Southside ISD, 858 S.W.2d 337, 341

(Tex. 1993); City of Houston, 589 S.W.2d at 677–78.

Even if Appellants had raised this argument in the trial court, it fails. First, the

parties expressly agreed that “the amount of the Indebtedness substantially exceeds

the fair market value of the Properties [the land conveyed in lieu of foreclosure].”

Thus, Appellants’ argument is foreclosed by the unambiguous terms of the

Agreement. Further, Northstar included as part of its summary judgment evidence

the affidavits of Judy Leveridge, Northstar’s Executive Vice President and Chief Risk

Officer, and Ross Helbing, a qualified appraiser of improved and unimproved

commercial property. Helbing opined in his affidavit that as of May 27, 2004, the fair

market value of the properties transferred to Northstar in lieu of foreclosure totaled

$3,432,000. Leveridge stated in her affidavit that “[t]wo of the properties subject to

the deeds in lieu of foreclosure had first liens which Northstar was required to pay

off.”

9 These amounts were $2,051,389 and $174,819. The total equity Northstar

received from the properties transferred in lieu of foreclosure thus totaled $1,205,792

9 Northstar confirmed at oral argument that it had paid off the liens.

20
(fair market value less liens). Applied to the indebtedness as of May 27, 2004

($2,396,137), debt in the amount of $1,190,345 remained.

10

Appellants additionally argue that the Agreement eliminated the indebtedness

and that there are no amounts due and owing because a 1099 issued to VBP for tax

year 2004 shows figures inconsistent with those in the final judgment, property code

section 51.006 somehow applies to their benefit, and the doctrine of “merger”

operated to eliminate the indebtedness. Like the previous argument, none of these

arguments were asserted in Appellants’ response to Northstar’s motion for summary

judgment.

11 Accordingly, they may not be urged for the first time on appeal as

grounds to reverse the summary judgment. See Tex. R. Civ. P. 166a(c); Tex. R.

App. P. 33.1; McConnell, 858 S.W.2d at 341. We overrule this part of Appellants’

second issue.

D. CSI’s Accounts Receivable

In Commercial Structures and Interiors, this court held that the Agreement

evidenced an intent to assign CSI’s accounts receivable to Northstar but that the

10 The deficiency is even higher when applying the figures to the

indebtedness as of January 23, 2008, which was $2,912,853.

11 As candidly pointed out by Northstar, Appellants mentioned in their

response to Northstar’s motion for summary judgment that Northstar had

“acknowledged receiving value in excess of the sums indicated in the recitals to the

agreement as evidenced by a IRS form 1099,” but this statement was made in the

context of addressing the consideration given in the Agreement, and Appellants did

not argue, as they do here on appeal, that the value of the properties exceeded the

indebtedness.

21
summary judgment record did not demonstrate that the assignment of CSI’s

accounts receivable was ever consummated. 192 S.W.3d at 834. In addition to the

plain language of the Agreement, the court arrived at this conclusion primarily by

observing that the portion of the Agreement entitled “Conveyance Documents”

required the West entities to deliver a notice letter to CSI’s account debtors

evidencing the CSI accounts receivable “conveyance,” and the court stated in a

footnote immediately following this observation that “[t]he [Agreement] states that the

form of the letter is attached as [Schedule] F, but the copy of the [Agreement] in the

record does not contain such an exhibit or letter form as an attachment.” Id. Thus,

there was no evidence that CSI had completed the assignment of its accounts

receivable to Northstar.

Unlike the summary judgment record in Commercial Structures and Interiors

that was missing the evidence that CSI had assigned its accounts receivable to

Northstar, the summary judgment record in this appeal does contain the notice letter

intended for CSI’s account debtors that is attached to the Agreement as Schedule

F. The letter is signed by John Richard West and states as follows:

This letter is to inform you that Commercial Structures and Interiors,

Inc. has transferred all of its right, title and interest in and to all

accounts receivable and future payments due to Commercial Structures

and Interiors, Inc. by your company to Northstar Bank of Texas[.]

Accordingly, you are hereby directed to forward all future payments due

to Commercial Structures and Interiors, Inc. under our contract with

you, directly to Northstar Bank of Texas, at the address provided below.

[Emphasis added.]

22
Accordingly, in light of (a) the Agreement’s unambiguous language providing that

“CSI agrees to assign to [Northstar] all of its right, title and interest in and to all of its

accounts receivable and all rights to payment of any kind” and (b) the letter attached

to the Agreement as Schedule F providing that “Commercial Structures and Interiors,

Inc. has transferred all of its right, title and interest in and to all accounts receivable

and future payments due to Commercial Structures and Interiors, Inc. by your

company to Northstar,” Northstar met its summary judgment burden to show that it

is the owner of CSI’s accounts receivable. [Emphasis added.]

Appellants argue that Northstar is not the owner of CSI’s accounts receivable

because this court’s ruling in Commercial Structures and Interiors is the “Law of the

Case” and because Northstar’s desire to enforce CSI’s conveyance of the accounts

receivable constitutes a collateral attack upon this court’s opinion in Commercial

Structures and Interiors. These arguments were not asserted in Appellants’

response to Northstar’s motion for summary judgment; therefore, they are waived.

See Tex. R. Civ. P. 166a(c); Tex. R. App. P. 33.1; McConnell, 858 S.W.2d at 341.

Even if the arguments were not waived, for the reasons set forth above, they are

unpersuasive. We overrule the remainder of Appellants’ second issue.

VII. ALLMERICA LIFE INSURANCE POLICY

In their third issue, Appellants argue that the trial court erred by declaring

Northstar the owner of all right, title, and interest to the proceeds of the Allmerica life

23
insurance policy.

12 To the extent any of the Appellants have an interest in the

disposition of the proceeds,

13

the summary judgment record demonstrates that

Joyce and John Richard West executed an “Amended and Restated Assignment of

Life Insurance Policy” that assigned to Northstar the Allmerica life insurance policy

in the amount of $200,000 on the life of John Richard West. The policy was one of

the numerous instruments that secured the indebtedness from the JRW, CSI, and

VBP promissory notes, which all fell into default.

14 The assignment states in part,

“Assignor [Joyce and John Richard West] hereby assigns, transfers and sets

over to Lender [Northstar] . . . the Policy and all claims, options, privileges, rights,

title and interest therein and thereunder . . . .” (emphasis in original). The

assignment further states,

It is expressly agreed that, without detracting from the generality

of the foregoing, the following specific rights are included in this

Assignment and pass to [Northstar] by virtue hereof:

a. The sole right to collect from Insurer the net proceeds of

the Policy when it becomes a claim by death or maturity.

12 The trial court had ordered that the proceeds be paid into the court’s

registry.

13 The assignment indicates that Joyce and John Richard West are the only

assignors of the policy, but neither Joyce West, individually, nor John Richard West’s

estate are appellants to this appeal.

14 In a July 28, 2003 letter addressed to Northstar, Allmerica acknowledged

its receipt of the assignment.

24
John Richard West died in late April 2006. Northstar met its summary judgment

burden to show its entitlement to the Allmerica life insurance policy proceeds.

Appellants argue that Northstar is not entitled to collect the Allmerica

insurance proceeds because it does not have an insurable interest and because

under the insurance code, the insurance policy is a “credit life insurance” policy and

the assignment a part of a “credit transaction.” None of these arguments were

asserted in Appellants’ response to Northstar’s motion for summary judgment.

Therefore, they cannot be raised on appeal as reasons to reverse the summary

judgment. See Tex. R. Civ. P. 166a(c); Tex. R. App. P. 33.1; McConnell, 858

S.W.2d at 341. Appellants also argue that Northstar is not entitled to the proceeds

because, as argued under the second issue, Northstar has not shown that there is

an amount of money due and owing on the promissory notes in excess of the

$200,000 insurance policy. Our reasoning in Appellants’ second issue regarding the

indebtedness remains unchanged in the context of the third issue. We overrule

Appellants’ third issue.

VIII. SANCTIONS

In the fourth issue, Ward argues that the trial court erred by awarding

sanctions against him because he did not receive proper notice of the hearings on

the motions for sanctions, the motions did not seek sanctions against him

individually, and the order awarding sanctions was not entered until the final

judgment was signed.

25
We review a trial court’s ruling on a motion for sanctions for an abuse of

discretion. Cire v. Cummings, 134 S.W.3d 835, 838 (Tex. 2004). A trial court

abuses its discretion when it acts in an arbitrary or unreasonable manner or when

it acts without reference to any guiding rules or principles. Downer v. Aquamarine

Operators, Inc., 701 S.W.2d 238, 241–42 (Tex. 1985), cert. denied, 476 U.S. 1159

(1986).

The trial court may impose an appropriate sanction for abuse of the discovery

process. Tex. R. Civ. P. 215.3. Chapters 9 and 10 of the civil practice and remedies

code and rule 13 of the rules of civil procedure allow a trial court to sanction an

attorney or a party for filing motions or pleadings that lack a reasonable basis in fact

or law. Low v. Henry, 221 S.W.3d 609, 614 (Tex. 2007). It is an abuse of discretion

for the trial court to impose sanctions, however, when the sanctioned party has

inadequate notice of the sanctions hearing. See Tex. R. Civ. P. 13 (requiring notice

and a hearing), 215.3 (permitting imposition of sanctions after notice and hearing);

Tex. Civ. Prac. & Rem. Code Ann. § 10.003 (Vernon 2002) (requiring notice of

allegations and a reasonable opportunity to respond); In re Acceptance Ins. Co., 33

S.W.3d 443, 451 (Tex. App.—Fort Worth 2000, orig. proceeding) (reasoning that

proceedings for sanctions must comport with due process, affording a party an

adequate opportunity to be heard).

But lack of notice is an issue that can be waived. See Low, 221 S.W.3d at

618–19. The proper method to preserve a notice complaint is to bring the lack of

26
adequate notice to the attention of the trial court at the hearing and object to the

hearing going forward or move for a continuance. Id.; Dunavin v. Meador, No. 02-

07-00230-CV, 2008 WL 2780782, at *3 (Tex. App.—Fort Worth July 17, 2008, no

pet.) (mem. op.) (holding argument regarding inadequate notice of sanctions hearing

waived); see Page v. Sartin, No. 05-01-01710-CV, 2002 WL 1634478, at *2 (Tex.

App.—Dallas July 24, 2002, no pet.) (not designated for publication) (holding

argument regarding inadequate notice of sanctions hearing waived) (citing Prade v.

Helm, 725 S.W.2d 525, 526–27 (Tex. App.—Dallas 1987, no writ)); see also Scott

Bader, Inc. v. Sandstone Prods., Inc., 248 S.W.3d 802, 817–18 (Tex.

App.—Houston [1st Dist.] 2008, no pet.) (holding sanctions arguments waived);

Clark v. Bres, 217 S.W.3d 501, 514 (Tex. App.—Houston [14th Dist.] 2006, pet.

denied) (holding that appellant waived arguments regarding deficiencies in notice of

sanctions because appellant rejected trial court’s offer of a continuance).

The record shows that Northstar filed a motion for rule 215 sanctions on

March 29, 2007. The motion contained a certificate of service indicating that the

motion had been hand delivered to Ward and a fiat that a hearing on the motion had

been set for April 5, 2007. Northstar also included a letter specifically stating that a

hearing had been set for April 5, 2007. The hearing that had been set for April 5,

2007, was reset to May 18, 2007. Northstar advised Ward of the resetting in a letter

dated April 11, 2007. According to the affidavit of Northstar’s attorney, the parties,

including Ward, appeared before the trial court on May 18, 2007, but the trial court

27
passed the cause and suggested that the remaining matters, including sanctions, be

reset for June 11, 2007. Each attorney, including Ward, affirmed that he could

attend the hearing on June 11, 2007. At a deposition on June 6, 2007, Northstar

served Ward’s associate, Frank Gannon, with another motion that Northstar had filed

seeking sanctions under rule of civil procedure 13 and civil practice and remedies

code section 10. Northstar’s counsel sent an email to Ward advising him that the

motion served on June 6, 2007, was also set for hearing on June 11, 2007.

15

Ward did not appear at the June 11, 2007 hearing on Northstar’s motions for

sanctions. Instead, another attorney, Aden Vickers, appeared. At the beginning of

the hearing, the following exchange occurred:

Mr. Vickers: May it please the court. I’m A.L. Vickers. Mr. Ward is in

court in Greenville today, cannot be here. I’ll appear for the

respondents to the motions on the sanctions.

The Court: Okay. So you are ready to proceed on that. All right.

Northstar detailed the bases of its motions for sanctions, and Vickers responded.

The trial court continued the hearing for June 19, 2007. On June 19, 2007, Vickers

once again appeared, stating, “May it please the court. I believe I actually was

replying at the time, and we ran out of time. I have just a few more remarks I would

like to make.” Vickers cross-examined Northstar’s attorneys and offered further

15 The June 6, 2007 notice states in relevant part, “As we discussed last

Friday, the motion to compel/motion to strike/motion for sanctions served on Frank

Gannon at the deposition today has been set and will be heard by Judge Gabriel at

the hearing set for June 11 at 9:30 am in Judge Gabriel’s court room.”

28
argument. On October 15, 2009, the trial court announced its ruling via email,

awarding sanctions against Ward.

As the record demonstrates, at no point during the June 11 or June 19, 2007

hearings did Vickers, who appeared in Ward’s stead, bring to the trial court’s

attention the lack of adequate notice that Ward now complains of and object to the

hearings going forward or move for a continuance. Rather, Vickers appeared and

argued against the imposition of sanctions. Ward complained of the lack of notice

in a motion for new trial, but that complaint was untimely. See Low, 221 S.W.3d at

618. We hold that Ward waived any complaint regarding the alleged lack of

adequate notice of the hearings on Northstar’s motions for sanctions. See id.; see

also Tex. R. App. P. 33.1(a)(1). We overrule this part of the fourth issue.

Ward argues that the trial court abused its discretion by awarding sanctions

against him because the motions did not seek sanctions against him as Appellants’

attorney. Northstar moved for sanctions in part pursuant to rule 13 and civil practice

and remedies code section 10. Rule 13 allows the trial court to impose an

appropriate sanction upon the person who signed the complained-of pleading. Tex.

R. Civ. P. 13. Similarly, rule 10 allows the trial court to impose a sanction on the

person who signed the pleading or motion in violation of section 10.001. Tex. Civ.

Prac. & Rem. Code Ann. § 10.004(a) (Vernon 2002). The trial court sanctioned

Ward because he filed claims in bad faith, made groundless allegations, and filed

29
frivolous motions.

16 See Tex. R. Civ. P. 13; Tex. Civ. Prac. & Rem. Code Ann.

§ 10.001 (Vernon 2002). Because Ward is the person who violated rule 13 and

section 10 by filing claims in bad faith and making groundless allegations, the trial

court was permitted to impose sanctions upon him as West’s attorney, as expressly

permitted by rule 13 and section 10. See generally Low v. State, No. 02-03-00347-

CV, 2005 WL 1120013, at *2 (Tex. App.—Fort Worth May 12, 2005, no pet.)

(mem. op.) (holding that the trial court did not abuse its discretion by assessing

sanctions against attorney even though motion did not expressly seek sanctions

against him). Further, as with Ward’s notice argument, no objection was asserted

at the hearings that the motions sought only sanctions against Ward’s clients and

not against Ward as attorney. See Tex. R. App. P. 33.1(a)(1). We overrule this part

of the fourth issue.

Ward argues that the trial court abused its discretion by awarding sanctions

against him because the order awarding sanctions was not entered until the final

judgment was signed. He supports this contention with a citation to caselaw

reasoning that sanctions for alleged violations known to movants before trial are

waived if a hearing and ruling are not secured before trial. See Finlay v. Olive, 77

16 The motions clearly complain of Ward’s conduct during the litigation, and

the June 11 and 19, 2007 hearings on the motions concerned Ward’s conduct.

Indeed, Northstar’s counsel began his lengthy presentation on June 11 by stating,

“May it please the court. Your Honor, I have something that is very difficult for me

to do today. I’m here asking the court to impose very, very serious sanctions against

the lawyers for the plaintiffs in this case.” [Emphasis added.]

30
S.W.3d 520, 525 (Tex. App.—Houston [1st Dist.] 2002, no pet.). In this case, the

trial court conducted hearings on the motions for sanctions and advised the parties

of its ruling months in advance of Northstar’s filing its motion for summary judgment.

We overrule the remainder of the fourth issue.

17

IX. CONCLUSION

Having overruled all four of Appellants’ issues, we affirm the trial court’s

judgment.

BILL MEIER

JUSTICE

PANEL: LIVINGSTON, MCCOY, and MEIER, JJ.

DELIVERED: March 11, 2010

17 To the extent Ward asserts other arguments in this issue, those

inadequately briefed arguments are waived. See Tex. R. App. P. 38.1(i).

31