Court Opinion

ID: 2986207
Source: CourtListenerOpinion
Date Created: 2015-09-23 00:27:59.699346+00
Date Added: 2024-06-11T11:38:13.572640
License: Public Domain

Appellee’s Motion for Rehearing Overruled; Reversed and Rendered; and
Supplemental Opinion on Rehearing filed August 15, 2013.

                                In The

                 Fourteenth Court of Appeals

                         NO. 14-12-00574-CV

WELLS FARGO BANK, N.A. FKA WELLS FARGO BANK MINNESOTA,
     N.A., AS TRUSTEE FOR THE REGISTERED HOLDERS OF J.P.
     MORGAN CHASE COMMERCIAL MORTGAGE SECURITIES
   CORP., COMMERCIAL PASS THROUGH CERTIFICATES, SERIES
      2003-PMI, ACTING THROUGH SERVICER ORIX CAPITAL
                    MARKETS, LLC, Appellant
                                  V.
       MICHAEL B. SMUCK AND EDWIN A. WHITE, Appellees

                On Appeal from the 165th District Court
                        Harris County, Texas
                  Trial Court Cause No. 2010-71304

       SUPPLEMENTAL OPINION ON REHEARING
       Appellee, Edwin A. White, has filed a motion for rehearing. We overrule
the motion but issue this supplemental opinion to respond to points raised in the
motion.

       White contends we departed from two cases involving the same non-
recourse financing arrangement as the present case: the borrower “MBS” entity
signed a Note providing its liability was limited to the circumstances under the
Non-Recourse Exceptions; and appellees signed an Indemnification Agreement,
assuming liability for any liability of the borrower under the Non-Recourse
Exceptions. See White v. JPMC 2004-C3 Trails Apartments LLC, No. 02-12-
00164-CV, 2012 WL 6632776 (Tex. App.—Fort Worth Dec. 21, 2012, no pet.)
(mem. op.) (“Trails”); White v. MLMT 2004-BPC1 Carlyle Crossing, LLC, No. 02-
10-00233-CV, 2011 WL 3672022 (Tex. App.—Fort Worth Aug. 18, 2011, pet.
denied) (mem. op.) (“Carlyle Crossing”).1

       White suggests those cases are authority that Wells Fargo was required to
establish a Non-Recourse Exception in the present case to recover against White
under the Indemnification Agreement—a proposition which we rejected in the
original opinion. We held Wells Fargo was required to (1) prove it had obtained a
judgment against MBS-The Falls based on a Non-Recourse Exception, or (2)
absent such a judgment, establish a Non-Recourse Exception in the present case.
After analyzing the pleadings and contents of the Tarrant County judgment against
MBS-The Falls, we held the judgment was based on two Non-Recourse
Exceptions.2 We concluded that requiring Wells Fargo to also establish a Non-

       1
         In our original opinion, we cited these cases only to negate a separate argument raised
solely by appellee, Michael B. Smuck, regarding the extent of appellees’ obligations under the
Indemnification Agreement.
       2
        In his motion for rehearing, White reiterates his contention that the Tarrant County
judgment was merely a judgment for the deficiency on the note after foreclosure, and not based
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Recourse Exception in the present case would amount to an impermissible
collateral attack on the Tarrant County judgment.

      The cases cited by White in his motion for rehearing do not alter our
conclusion. In both cases, the trial courts rendered judgment for the lender’s
assignee against the borrower under the Non-Recourse Exceptions and against
White under the Indemnification Agreement. See Trails, 2012 WL 6632776, at *1
& n.2; Carlyle Crossing, 2011 WL 3672022, at *1. The trial court issued findings
that the borrower committed waste, thereby supporting liability against White
under the Indemnification Agreement. The appellate courts upheld the judgments.
Trails, 2012 WL 6632776, at *2–3; Carlyle Crossing, 2011 WL 3672022, at *1–7.
According to White, those cases therefore demonstrate there must necessarily be
such findings in the present case to support imposing liability against White under
the Indemnification Agreement.

      However, those cases are distinguishable from the present case. In Trails,
White attacked the judgment against him by arguing any waste was caused by the
negligence of the lender/assignee; thus, White contended that the express-
negligence rule barred recovery against White under the Indemnification
Agreement. 2012 WL 6632776, at *1–3. When rejecting this argument, the court
noted White did not challenge the trial court’s findings that the borrower caused
the waste, thereby negating any contention that the waste was caused by the
lender’s negligence. Id. at *2. The court cited these findings to reject the one
narrow argument raised by White on appeal. Id. at *2–3. In Carlyle Crossing,
White raised an additional issue by challenging the sufficiency of the evidence to
support the finding of waste. 2011 WL 3672022, at *1. The court held the

on the Non-Recourse Exceptions. We thoroughly analyzed and rejected this contention in the
original opinion and will not further address it.
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evidence was sufficient and thus also rejected an argument the damage was caused
by the lender’s negligence. See id. at *1–6.

      Significantly, in those cases, there is no indication an issue was raised
regarding any preclusive effect of the judgment against the borrower under the
Non-Recourse Exceptions on the claims against White under the Indemnification
Agreement. See generally Trails, 2012 WL 6632776; Carlyle Crossing, 2011 WL
3672022.     The courts never expressly stated the lender was required to
independently establish a Non-Recourse Exception to recover against White under
the Indemnification Agreement, even if the lender obtained an unchallenged
judgment against the borrower under a Non-Recourse Exception. See generally
Trails, 2012 WL 6632776; Carlyle Crossing, 2011 WL 3672022. Similarly, the
courts did not address the ramifications if the evidence had been insufficient to
support the findings of waste; i.e., whether the courts could still uphold the
judgment against White because the judgment against the borrower was
unchallenged. See generally Trails, 2012 WL 6632776; Carlyle Crossing, 2011
WL 3672022. Accordingly, those cases are not persuasive.

      As we stated in the original opinion, if the summary-judgment evidence was
insufficient to prove a Non-Recourse Exception in the Tarrant County case, as
suggested by White, that was an issue for MBS-The Falls to raise in a direct appeal
of that judgment. However, MBS-The Falls failed to do so, and the Tarrant
County judgment stands as a judgment on the merits against MBS-The Falls under
the Non-Recourse Exceptions.       Consequently, Wells Fargo proved appellees’
liability under the Indemnification Agreement has been triggered.

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      In summary, we reject the arguments raised by White in his motion for
rehearing and overrule the motion.

                                     /s/       John Donovan
                                               Justice

Panel consists of Chief Justice Hedges and Justices Boyce and Donovan.

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