Court Opinion

ID: 3081517
Source: CourtListenerOpinion
Date Created: 2015-10-16 01:58:29.645697+00
Date Added: 2024-06-11T11:50:32.581521
License: Public Domain

COURT OF APPEALS
                         SECOND DISTRICT OF TEXAS
                              FORT WORTH

                              NO. 02-13-00184-CV

DAN DEES                                                            APPELLANT

                                        V.

SARAH MARIE DEES AND DAVID                                          APPELLEES
VERNON DEES

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          FROM THE 231ST DISTRICT COURT OF TARRANT COUNTY

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                        MEMORANDUM OPINION1

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                                I. INTRODUCTION

      Equitable subrogation cases normally turn on their own facts. See First

Nat’l Bank of Kerrville v. O’Dell, 856 S.W.2d 410, 416 (Tex. 1993). This case is

no different. After considering and balancing the facts and equities involved, the

      1
       See Tex. R. App. P. 47.4.
trial court denied Appellant Dan Dees’s claim for equitable subrogation. He now

appeals. We will affirm.

                                II. BACKGROUND

      Appellee David Vernon Dees is Dan’s brother. David married Appellee

Sarah Marie Dees in 1993.

      In June 2008, Dan loaned David and Sarah $15,000 because they were in

“financial distress.” David and Sarah never repaid the loan—it was supposed to

be repaid in sixty equal monthly installments—but they agreed that they had an

obligation to do so.

      Several years later, in October 2010, David contacted Dan about obtaining

another loan.    At the time, Sarah was working as a nurse and David was

unemployed but collecting unemployment benefits. Not wanting to see David

and Sarah in “jeopardy,” Dan loaned them $302,300. Dan made the loan with

the understanding that he would be repaid—either on a monthly basis after David

began working again or in full from the proceeds of the sale of the residence if

David and Sarah decided to sell the residence.2 Of the $302,300 loan, David and

Sarah used approximately $201,000 to pay off their mortgage. They used the

remainder of the money to remodel their bathroom; make repairs to the pool; pay

off a credit card; pay ad valorem taxes; pay for a cruise; pay for Sarah’s breast

      2
      Sarah recalled that David had told her that he would repay Dan using the
money that he was expecting to receive from a lawsuit against his former
employer.

                                       2
augmentation; and purchase a Tahoe, a Corvette, a Chevrolet Monza drag car,

furniture, and jewelry. As with the first loan, David and Sarah did not repay the

second loan, but they both agreed that they had an obligation to do so.

      Authorities arrested David on August 30, 2011, for aggravated sexual

assault against Sarah.3     Sarah filed for divorce shortly thereafter.      Several

months into the divorce action, Dan intervened and sought a declaration that

under the doctrine of equitable subrogation, he was entitled to a first lien on

Appellees’ residence in the amount that David and Sarah used to pay off the

mortgage.4 Dan pleaded that in the absence of such equitable relief, he “may

well be subjected to a full loss of $317,300.00.” After a final bench trial, the trial

court denied Dan’s claim for equitable subrogation but awarded him a judgment

against David and Sarah in the amount of $317,300.              The trial court also

appointed a receiver to sell David’s and Sarah’s residence.

      The trial court entered findings of fact, including the following:

      13.    On or about June 28, 2008, DAN DEES transferred to SARAH
             MARIE DEES and DAVID VERNON DEES the sum of
             $15,000, and that sum has not been repaid. On October 20,
             2010, DAN DEES transferred to SARAH MARIE DEES and
             DAVID VERNON DE[E]S the sum of $302,300, and that sum
             has not been repaid.

      3
       A jury later convicted David of sexual assault and sentenced him to four
years’ confinement.
      4
      Dan also pleaded for a lien against the vehicles that David and Sarah
purchased and the home improvements that they made.

                                          3
14.   No documents were executed by either SARAH MARIE DEES
      or DAVID VERNON DEES evidencing the transfer of
      $302,300 and the $15,000. No documents were executed
      evidencing a lien concerning the transfer of $302,300 and the
      $15,000.

            ....

16.   From the $302,300 transfer, the balance on the parties’ marital
      residence was paid in full in the sum of $201,262.86. The
      payment was made from the account of DAVID VERNON
      DEES and SARAH MARIE DEES.

17.   At the time of the transfer of the $302,300 on October 20,
      2010, and at the time of the payoff of the mortgage, all
      payments on the mortgage were current and the residence
      was not in danger of a forced sale.

18.   DAN DEES did not communicate with SARAH MARIE DEES
      regarding the transfer of the funds to SARAH MARIE DEES
      and DAVID VERNON DEES nor did he discuss with SARAH
      MARIE DEES the payoff of the mortgage on the marital
      residence.

19.   SARAH MARIE DEES was told by DAVID VERNON DEES
      that the repayment to DAN DEES would be made from the
      proceeds of DAVID VERNON DEES’ employment lawsuit that
      was pending at that time and remains pending as of the date
      of trial.

20.   DAN DEES acted as a volunteer in his transfer of the
      $302,300 and $15,000 to SARAH MARIE DEES and DAVID
      VERNON DEES.

21.   DAN DEES’ transfer of $302,300 and $15,000 was not made
      for necessaries.

22.   No action was taken by DAN DEES to collect any of the sums
      transferred to SARAH DEES and DAVID VERNON DEES until
      after the separation of SARAH MARIE DEES and DAVID
      VERNON DEES, after DAVID DEES was arrested (and later
      convicted) of sexual assault of SARAH MARIE DEES and
      after the divorce was filed.

                                 4
                    ....

      24.    DAN DEES continued to transfer funds for the benefit of
             DAVID VERNON DEES after the divorce was filed for legal
             expenses incurred in connection with the divorce proceeding
             and for the criminal defense of the sexual assault charges for
             which he was later convicted. The legal fees paid by DAN
             DEES for the benefit of DAVID VERNON DEES are in excess
             of $150,000 as of the date of trial.

      The trial court’s tenth conclusion of law sets out the order in which the

proceeds from the sale of the residence are to be disbursed, and the court’s

twelfth conclusion states that Dan’s claim for equitable subrogation is denied.5

      After filing his notice of this appeal, Dan filed an emergency motion to stay

the receiver’s sale of David’s and Sarah’s residence pending our resolution of

this appeal, which we granted.

                            III. EQUITABLE SUBROGATION

      Dan argues in his first issue that the trial court reversibly erred by denying

his claim for equitable subrogation. He contends that this case is controlled by

our memorandum opinion in Hulen v. Hamilton, No. 02-06-00288-CV, 2008 WL
553812, at *3‒6 (Tex. App.—Fort Worth Feb. 28, 2008, no pet.) (mem. op.); that

the evidence is legally and factually insufficient to support the trial court’s findings

      5
        The proceeds from the receiver’s sale of the residence are to be
distributed in the following order: to pay receiver fees; to pay delinquent
homeowner association fees; to pay any tax debt encumbering the property,
including reimbursing Dan for sums that he had paid against the tax debt; and to
be divided between David and Sarah’s attorneys as trustees for David and
Sarah.

                                           5
of fact numbers 17, 18, 19, 20, and 21; and that the trial court erred in its

conclusions of law numbers 10 and 12. Appellee responds that Hulen is factually

distinguishable from this case and that Dan voluntarily loaned the money to

David and Sarah, thus negating his claim for equitable subrogation.6

      A trial court’s findings of fact have the same force and dignity as a jury’s

answers to jury questions and are reviewable for legal and factual sufficiency of

the evidence to support them by the same standards. Catalina v. Blasdel, 881
S.W.2d 295, 297 (Tex. 1994); Anderson v. City of Seven Points, 806 S.W.2d
791, 794 (Tex. 1991); see also MBM Fin. Corp. v. Woodlands Operating Co., 292
S.W.3d 660, 663 n.3 (Tex. 2009). We may sustain a legal sufficiency challenge

only when (1) the record discloses a complete absence of evidence of a vital fact;

(2) the court is barred by rules of law or of evidence from giving weight to the

only evidence offered to prove a vital fact; (3) the evidence offered to prove a

vital fact is no more than a mere scintilla; or (4) the evidence establishes

conclusively the opposite of a vital fact. Uniroyal Goodrich Tire Co. v. Martinez,

977 S.W.2d 328, 334 (Tex. 1998), cert. denied, 526 U.S. 1040 (1999); Robert W.

Calvert, “No Evidence” and “Insufficient Evidence” Points of Error, 38 Tex. L.

Rev. 361, 362–63 (1960). When reviewing an assertion that the evidence is

factually insufficient to support a finding, we set aside the finding only if, after

      6
       On May 23, 2014, Dan filed a motion for leave to file a letter brief. We
deny the motion because it directs the court to facts that are not part of the
record and that were not before the trial court.

                                         6
considering and weighing all of the evidence in the record pertinent to that

finding, we determine that the credible evidence supporting the finding is so

weak, or so contrary to the overwhelming weight of all the evidence, that the

answer should be set aside and a new trial ordered. Pool v. Ford Motor Co., 715
S.W.2d 629, 635 (Tex. 1986) (op. on reh’g); Cain v. Bain, 709 S.W.2d 175, 176

(Tex. 1986); Garza v. Alviar, 395 S.W.2d 821, 823 (Tex. 1965).

      We may review conclusions of law to determine their correctness based

upon the facts, but we will not reverse because of an erroneous conclusion if the

trial court rendered the proper judgment.        City of Austin v. Whittington, 384
S.W.3d 766, 779 n.10 (Tex. 2012) (citing BMC Software Belgium, N.V. v.

Marchand, 83 S.W.3d 789, 794 (Tex. 2002)); H.E.B., L.L.C. v. Ardinger, 369
S.W.3d 496, 513 (Tex. App.—Fort Worth 2012, no pet.).

      Although equitable subrogation most often arises in the insurance context,

it applies in every instance in which one person, not acting voluntarily, has paid a

debt for which another was primarily liable and which in equity should have been

paid by the latter. Frymire Eng’g Co. ex rel. Liberty Mut. Ins. Co. v. Jomar Int’l

Ltd., 259 S.W.3d 140, 142 (Tex. 2008). The doctrine allows a party who pays the

debt of another to put on the released creditor’s shoes and collect

reimbursement. Drilltec Techs., Inc. v. Remp, 64 S.W.3d 212, 216 (Tex. App.—

Houston [14th Dist.] 2001, no pet.).         The general purpose of the doctrine,

therefore, is to prevent the unjust enrichment of the debtor. O’Dell, 856 S.W.2d

at 415.   As the name indicates, however, subrogation is proper only if it is

                                         7
equitable. Id. The trial court must balance the equities in view of the totality of

the circumstances to determine whether a party is entitled to equitable

subrogation. Bank of Am. v. Babu, 340 S.W.3d 917, 926 (Tex. App.—Dallas

2011, pet. denied).

      Dan’s equitable-subrogation claim is at odds with one basic requirement of

the doctrine: a third-party payment. The supreme court has stated, “[T]his court

has always made it clear that the payment had to be for the benefit of the

debtor—i.e., an obligor on the debt—at the time of the ‘subrogation’ transaction,

for the doctrine to apply.” O’Dell, 856 S.W.2d at 415 (emphasis in original).

While the emphasis in that statement was on the requirement that there be a

debtor on whose behalf a payment is made, equally important is the other, un-

italicized part of the sentence—that a payment be made for the debtor. Indeed,

the supreme court long ago described equitable subrogation as a legal fiction

whereby “an obligation, extinguished by a payment made by a third person, is

treated as still subsisting for the benefit of this third person, so that by means of it

one creditor is substituted to the rights, remedies, and securities of another.”

First Nat’l Bank of Houston v. Ackerman, 70 Tex. 315, 320, 8 S.W. 45, 47 (1888)

(emphasis added).

      Here, there is no evidence that Dan paid a debt for which David and Sarah

were primarily liable.      Instead, regarding the $302,300, the evidence is

undisputed that Dan transferred the money to David and Sarah’s account and

that they spent the money on various things, including to pay the balance of their

                                           8
mortgage. The transaction has all the hallmarks of a standard loan agreement—

David initiated contact with Dan about obtaining the money, Dan advanced David

and Sarah the money with the understanding that they would pay him back, and

David and Sarah spent the money. Similar circumstances surround the first loan.

The trial court awarded Dan a judgment against David and Sarah in the amount

of $317,300. When “an adequate and complete remedy at law is provided, our

courts, though clothed with equitable jurisdiction, will not grant equitable relief.”

Rogers v. Daniel Oil & Royalty Co., 130 Tex. 386, 392, 110 S.W.2d 891, 894

(1937).   Dan directs us to no caselaw, nor have we found any, reasoning that

equitable subrogation, as opposed to a judgment at law for the amount of the

money loaned, is the appropriate remedy under these circumstances.

      Even if Dan’s failure to pay a debt on behalf of David and Sarah did not bar

his equitable-subrogation claim, the evidence supports the trial court’s finding

that Dan loaned the money as a volunteer. One who pays the debt of another as

a mere stranger or volunteer is not entitled to equitable subrogation. O’Dell, 856
S.W.2d at 415.     A payment is voluntary when the payor acts without any

assignment or agreement for subrogation, without being under any legal

obligation to make a payment, and without being compelled to do so for the

preservation of any rights or property. Frymire Eng’g Co., 259 S.W.3d at 145.

      Here, Dan had no legal obligation to loan David and Sarah any money, nor

was he compelled to do so to preserve some right or property. The evidence

instead demonstrates a course of conduct whereby Dan voluntarily provided

                                         9
financial assistance to his family members—in addition to the two loans the

subject of this suit, Dan paid approximately $75,000 in attorneys’ fees that David

incurred in his sexual assault case and approximately $80,000 in attorneys’ fees

that David incurred in his divorce action.    Dan argues that he is entitled to

equitable subrogation under the theory of unjust enrichment, but the requirement

of unjust enrichment to the debtor is met by showing that the debt was paid

involuntarily by the party seeking equitable subrogation. Babu, 340 S.W.3d at

927. Dan did not meet that burden.

      Dan directs us to our Hulen opinion and argues that the volunteer

exception to his equitable-subrogation claim does not apply because the loan

was for necessaries. In Hulen, Hamilton paid the balance of Donna’s mortgage

because she was unemployed, ill from diabetes, and unable to make her

mortgage payments. 2008 WL 553812, at *1, *6. We held that Hamilton was

entitled to equitable subrogation even if he had voluntarily paid Donna’s debt

because the payment was for necessaries (housing) and that a payment for

necessaries, although voluntary, can preclude the application of the volunteer

exception. Id. at *5‒6.

      Hulen is inapposite for several reasons. First, unlike the loan that Dan

advanced in this case, Hamilton paid the balance of Donna’s mortgage directly to

the bank. Id. at *1. Further, although Dan testified that he loaned David and

Sarah the money so that they would not lose their home, there is evidence that

the trial court could have relied upon to conclude that David and Sarah were not

                                       10
in jeopardy of losing their home. Specifically, Dan acknowledged at trial that

there was no evidence that David and Sarah were behind in their mortgage

payments, and the evidence showed that their September and October 2010

payments were automatically debited from their checking account without

incident. David and Sarah had approximately $9,000 in their checking account

and $15,000 in their savings account for the reporting period ending on

October 5, 2010, and they had approximately $7,700 in their checking account

and $9,000 in their savings account just before Dan transferred the $302,300.

Sarah was gainfully employed as a nurse, David was receiving unemployment

income, and Sarah had a 401(k) with a balance of approximately $50,000 when

Dan transferred the second loan. Sarah testified that she did not know if they

were in financial trouble in late 2010.

      Moreover, although David and Sarah used part of the loaned money to pay

the balance of their mortgage, they also spent a sizeable amount of the loan on

things that are not necessaries—Sarah had her breasts augmented, David

bought a Corvette and a drag car, they purchased furniture and jewelry, and they

went on a cruise.     David and Sarah had work performed on their pool and

bathroom, but Sarah testified that neither the pool nor the bathroom was

malfunctioning. She also said that they owned a Jeep and a Honda at the time of

the second loan. Contrary to Dan’s arguments, all of this evidence easily renders

Hulen distinguishable from this case.

                                          11
      The trial court carefully considered the unique facts of this case and

concluded that the circumstances did not favor equitable relief.            We have

reviewed the entire record.     We hold that as to Dan’s equitable subrogation

claim, the evidence is legally and factually sufficient to support the trial court’s

findings of fact and that the trial court did not err in making its conclusions of law.

We overrule his first issue.

                                   IV. ATTORNEY’S FEES

      In his second issue, Dan argues that the trial court erred by failing to award

him attorney’s fees under chapter 37 or 38 of the civil practice and remedies

code or section 27.01 of the business and commerce code.

      The Uniform Declaratory Judgments Act allows a trial court to award

reasonable and necessary attorney’s fees as are equitable and just. Tex. Civ.

Prac. & Rem. Code Ann. § 37.009 (West 2008).                The decision to award

attorney’s fees is a matter within the trial court’s discretion, and we will not

reverse the trial court’s decision absent a showing that the trial court abused its

discretion. Oake v. Collin Cnty., 692 S.W.2d 454, 455 (Tex. 1985). Having

determined that equity did not favor Dan on his claim for equitable subrogation,

the trial court could have reasonably concluded that it would not have been

equitable and just to award Dan attorney’s fees under section 37.009.

      To recover attorney’s fees under chapter 38, a party must (1) prevail on a

cause of action for which attorney’s fees are recoverable and (2) recover

damages. MBM Fin. Corp., 292 S.W.3d at 666; see Tex. Civ. Prac. & Rem.

                                          12
Code Ann. § 38.001 (West 2008). Regarding the first requirement, a prevailing

party has been defined as the party “who successfully prosecutes the action or

successfully defends against it, prevailing on the main issue, even though not to

the extent of its original contention.”    Head v. U.S. Inspect DFW, Inc., 159
S.W.3d 731, 749 (Tex. App.—Fort Worth 2005, no pet.) (emphasis added).

Here, from the outset of this intervention action, through trial, and now on appeal,

the main issue alleged, litigated, and argued by Dan has been his claim for

equitable subrogation—a claim that he did not successfully prosecute at trial or

on appeal. Consequently, Dan is not entitled to an award of attorney’s fees

under chapter 38.7

      Section 27.01(e) of the business and commerce code permits recovery of

reasonable and necessary attorney’s fees in cases involving fraud in real estate

or stock transactions. Tex. Bus. & Comm. Code Ann. § 27.01 (West 2009). Dan

is not entitled to fees under this section because he did not prevail on his section

27.01 claim. We overrule Dan’s second issue.

      7
       We note that Dan did recover a judgment against David and Sarah on the
loan agreement, but that claim—which David and Sarah did not even contest at
trial—was absolutely by no means the primary issue involved in this litigation.
See Head, 159 S.W.3d at 749.

                                          13
                                   V. CONCLUSION

      Having overruled Dan’s two issues, we affirm the trial court’s judgment.

We lift the July 26, 2013 order staying the sale of David and Sarah’s residence,

the property located at 1100 Wildlife Lane, Crowley, Texas 76036.

                                                 /s/ Bill Meier

                                                 BILL MEIER
                                                 JUSTICE

PANEL: GARDNER, MEIER, and GABRIEL, JJ.

DELIVERED: June 5, 2014

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