Court Opinion

ID: 2986491
Source: CourtListenerOpinion
Date Created: 2015-09-23 00:33:26.689526+00
Date Added: 2024-06-11T11:44:46.645875
License: Public Domain

Reversed and Rendered and Opinion filed July 9, 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

                               OPINION

     Appellant, 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 service Orix Capital Markets LLC (“Wells Fargo”), appeals a
take-nothing judgment in favor of appellees, Michael B. Smuck and Edwin A.
White, in Wells Fargo’s suit to recover under a Non-Recourse Indemnification
Agreement. We reverse the trial court’s judgment and render judgment in favor of
Wells Fargo against appellees, jointly and severally, for $10,068,453.49.

                                 I. BACKGROUND

      MBS-The Falls, Ltd. (“MBS-The Falls”) was formed as a “special purpose
entity” to borrow funds to acquire an apartment complex named “The Falls.”
Another company, 9001 S. Normandale, L.L.C. (“Normandale”), was formed to
act as general partner of MBS-The Falls. Smuck is the managing member of
Normandale, and White’s company, Ed White & Associates, LLC, is a member.

      MBS-The Falls executed a promissory note (“the Note”) for $9 million in
favor of the lender and a deed of trust and security agreement pledging the real,
and other personal, property as collateral. By assignment, Wells Fargo eventually
became holder of these loan documents. The nature of the loan was non-recourse
financing. Specifically, the Note included a provision limiting MBS-The Falls’s
liability to the property pledged as collateral, unless one of the “Non-Recourse
Exceptions” listed therein was satisfied. Two of the Non-Recourse Exceptions,
items (a) and (b), are relevant in the present case. The provision containing the
Non-Recourse Exceptions states, in pertinent part,
      12. Exculpation. Subject to the provisions of this Section, Borrower’s
      liability under this Note, the Security Instrument or the Other Security
      Documents shall only extend to the Mortgaged Property and other
      collateral given to secure the Debt, and Lender shall not enforce such
      liability against any other asset, property or funds of Borrower or any
      person or entity constituting Borrower; provided, however, the
                                         2
      foregoing shall not: (a) impair the right of Lender to bring suit and
      obtain personal, recourse judgment against any person or entity
      (including Borrower or any person or entity constituting Borrower)
      relating to any losses sustained by Lender in connection with any
      fraud, intentional misrepresentation, waste, or misappropriation of
      tenant security deposits or rents collected more than one (1) month in
      advance by Borrower; (b) impair the right of Lender to name, and
      obtain a judgment against any person or entity (including Borrower or
      any person or entity constituting Borrower) to the extent required by
      law to either obtain a judgment of specific performance with respect
      to any of the provisions of this Note, the Security Instrument or any of
      the Other Security Documents (other than any requirement contained
      therein to pay the Debt), or to foreclose the Security Instrument and
      obtain title to the Mortgaged Property and other collateral given to
      secure the Debt ; . . . [(c)-(f)—defined circumstances inapplicable in
      the present case]. Items (a) through (f) above are collectively the
      “Non-Recourse Exceptions”. Borrower’s liability under the Non-
      Recourse Exceptions . . . shall be limited to the amount of any losses
      or damages sustained by Lender in connection with such Non-
      Recourse Exceptions. . . .

Thus, in the event of a default, including a deficiency on the balance owed after
foreclosure, MBS-The Falls’s liability was limited to the lender’s rights under the
Non-Recourse Exceptions.

      As a condition for making the loan, the lender required appellees to
individually sign a “NON-RECOURSE INDEMNIFICATION AGREEMENT”
(“the Indemnification Agreement”), contemporaneously with execution of the note.
Both appellees are defined as “Indemnitor,” and Wells Fargo’s assignor is defined
as “Lender,” under the Indemnification Agreement. The pertinent provision of the
Indemnification Agreement states,

           2. Indemnity. INDEMNITOR HEREBY ASSUMES
      LIABILITY FOR AND AGREES TO PAY, PROTECT,
      INDEMNIFY, DEFEND AND HOLD HARMLESS LENDER (AND
      ANY ASSIGNEE OR PURCHASER OF ALL OR ANY INTEREST
                                         3
       IN THE NOTE AND THE SECURITY INSTRUMENT) FROM
       AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS,
       LOSSES, DAMAGES, COSTS AND EXPENSES (INCLUDING
       ATTORNEYS’ FEES), CAUSES OF ACTION, SUITS, CLAIMS,
       DEMANDS AND JUDGMENTS WHICH AT ANY TIME MAY BE
       IMPOSED UPON, INCURRED BY OR AWARDED AGAINST
       LENDER AND FOR WHICH BORROWER AT ANY TIME MAY
       BE PERSONALLY LIABLE PURSUANT TO THE NON-
       RECOURSE EXCEPTIONS (AS DEFINED IN PARAGRAPH 12
       OF THE NOTE). EACH PERSON OR PARTY EXECUTING THIS
       INDEMNITY AGREES THAT THE LIABILITY HEREUNDER
       SHALL BE JOINT AND SEVERAL.

As we will discuss, central to the present case is Wells Fargo’s contention that
appellees assumed liability under the Indemnification Agreement for any liability
of MBS-The Falls under the Non-Recourse Exceptions.1

       MBS-The Falls defaulted on the Note, and Wells Fargo foreclosed on the
property.2 Wells Fargo filed suit in Tarrant County, Texas against MBS-The Falls,
Normandale, and appellees. Wells Fargo sought damages from MBS-The Falls
and Normandale under Non-Recourse Exceptions (a) and (b), alleging they
committed waste and permitted liens to be filed on the property, thereby impairing
the value of the collateral and Wells Fargo’s rights relative to foreclosure. Wells
Fargo pleaded claims against appellees under the Indemnification Agreement.

       Wells Fargo obtained an interlocutory summary judgment (“the Tarrant
County Judgment”) on its claims against MBS-The Falls and Normandale for
$8,985,142.86, pre-judgment interest of $1,051,972.41, post-judgment interest, and

       1
          This transaction was one of many transactions, for various different properties,
involving the same non-recourse financing arrangement, whereby an “MBS” entity executed the
note and appellees executed the indemnification agreement.
       2
         For ease of reference, we will refer to Wells Fargo throughout the remainder of this
opinion as though it were the original lender.
                                             4
attorney’s fees of $31,338.22. The Tarrant County Judgment became final when
Wells Fargo non-suited, without prejudice, its claims against appellees in that suit.
      Wells Fargo then filed the present case in Harris County seeking recovery
from appellees under the Indemnification Agreement for the Tarrant County
Judgment against MBS-The Falls. The trial court conducted a bench trial. Among
other evidence, Wells Fargo offered the Note, the Indemnification Agreement, its
petition in the Tarrant County case, and the interlocutory and final judgments in
the Tarrant County case. On May 10, 2012, the trial court signed a final judgment
ordering that Wells Fargo take nothing on its claims against appellees. The trial
court subsequently made written findings of fact and conclusions of law.

                                   II. ANALYSIS

      In its sole issue, Wells Fargo contends it conclusively proved appellees’
liability under the Indemnification Agreement by presenting the Tarrant County
Judgment which established MBS-The Falls’s liability under the Non-Recourse
Exceptions.
      Appellees have filed separate briefs and present distinct arguments.
Smuck’s sole argument is that the Indemnification Agreement is applicable only
when MBS-The Falls is liable to Wells Fargo under the Non-Recourse Exceptions
for a third-party’s claims against Wells Fargo—not when MBS-The Falls is liable
under the Non-Recourse Exceptions for Wells Fargo’s own losses. In contrast,
White seems to acknowledge appellees are liable under the Indemnification
Agreement for any liability of MBS-The Falls under the Non-Recourse Exceptions.
However, White argues (1) the Tarrant County Judgment awarded the deficiency
owed under the Note after the foreclosure and was not based on the Non-Recourse
Exceptions, and (2) Wells Fargo failed to establish in the present case any

                                          5
circumstances, such as waste, triggering MBS-The Falls’s liability under the Non-
Recourse Exceptions.

A.    Smuck’s Interpretation of the Indemnification Agreement

      We will first address Smuck’s argument because determining the extent of
appellees’ liability under the Indemnification Agreement is preliminary to
evaluating whether Wells Fargo proved that liability. In construing a contract, we
must ascertain the true intentions of the parties as expressed in the writing itself.
Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 333
(Tex. 2011). We must examine and consider the entire writing in an effort to
harmonize and give effect to all provisions so that none will be rendered
meaningless. Id. We begin this analysis with the contract’s express language. Id.
If the written instrument is so worded that it can be given a certain or definite legal
meaning or interpretation, it is not ambiguous, and we will construe the contract as
a matter of law. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983); see Italian
Cowboy, 341 S.W.3d at 333.
      According     to   Smuck,    Wells       Fargo   incorrectly   characterizes   the
Indemnification Agreement as appellees’ guaranty of any liability of MBS-The
Falls under the Non-Recourse Exceptions. Smuck contends the term “indemnity”
or “indemnification” generally refers to an agreement to hold the indemnitee
harmless against claims brought against the indemnitee by a third party.
Therefore, Smuck contends the Indemnification Agreement is applicable only
when some third party has a claim against Wells Fargo in connection with the
Non-Recourse Exceptions—not when Wells Fargo sustains its own losses in

                                           6
connection with the Non-Recourse Exceptions, as awarded in the Tarrant County
Judgment.3 We reject Smuck’s contention.4

       We apply the above-cited rules of contract construction and consider the
nature of the obligation to which the parties agreed and not merely the name of the
agreement. See Wells Fargo Bank, N.A. v. MBS-Hills, Ltd., No. 02-10-00289-CV,
2011 WL 6141619, at *3 (Tex. App.—Fort Worth Dec. 8, 2011, no pet.) (mem.
op.) (citing Wood v. Canfield Paper Co., 5 S.W.2d 748, 750 (Tex. 1928)).
Smuck’s interpretation does not comport with the express language of the
Indemnification Agreement, which is broader than urged by Smuck. Under the
provision, appellees did agree to indemnify Wells Fargo for claims by a third-party
against Wells Fargo in connection with the Non-Recourse Exceptions. However,
the provision also clearly encompasses any of Wells Fargo’s own “losses,
damages, costs and expenses” in connection with the Non-Recourse Exceptions:

       INDEMNITOR HEREBY ASSUMES LIABILITY FOR AND
       AGREES TO PAY, PROTECT, INDEMNIFY, DEFEND AND
       HOLD HARMLESS [Wells Fargo] . . . FROM AND AGAINST ANY
       AND ALL . . . LOSSES, DAMAGES, COSTS AND EXPENSES . .
       . WHICH AT ANY TIME MAY BE . . . INCURRED BY . . . [Wells
       Fargo] AND FOR WHICH [MBS-The Falls] AT ANY TIME MAY
       BE PERSONALLY LIABLE PURSUANT TO THE NON-
       RECOURSE EXCEPTIONS . . . .

       3
          Smuck is the only appellee who advances this contention. As discussed below, Smuck
is also the only appellee who unequivocally admits the Tarrant County Judgment was based on
the Non-Recourse Exceptions.
       4
           Smuck incorrectly suggests the trial court adopted his interpretation of the
Indemnification Agreement. The trial court’s findings and conclusions demonstrate it
determined appellees are liable for any liability of MBS-The Falls under the Non-Recourse
Exceptions but Wells Fargo failed to prove the latter. Nonetheless, we address Smuck’s
argument because “[w]e must uphold a correct lower court judgment on any legal theory before
it, even if the court gives an incorrect reason for its judgment.” Guar. Cnty. Mut. Ins. Co. v.
Reyna, 709 S.W.2d 647, 648 (Tex. 1986) (per curiam); In re Wells, 252 S.W.3d 439, 446 (Tex.
App.—Houston [14th Dist.] 2008, orig. proceeding).
                                              7
(emphasis added).
      Consequently, contrary to Smuck’s contention, the Indemnification
Agreement is essentially a guaranty. A “guaranty” is “an undertaking by one
person to be answerable for the payment of some debt or the performance of some
contract or duty by another person, who himself remains liable.” Wood, 5 S.W.2d
at 749; see Black’s Law Dictionary 773 (9th ed. 2009). The Indemnification
Agreement functions as appellees’ guaranty of all MBS-The Falls’s liability under
the Non-Recourse Exceptions—whether MBS-The Falls is liable for Wells Fargo’s
own losses or liable for third-party claims against Wells Fargo.

      Moreover, Smuck’s proposed construction does not comport with the
purpose sought to be achieved via the non-recourse financing.          We construe
contracts “from a utilitarian standpoint bearing in mind the particular business
activity sought to be served” and “will avoid when possible and proper a
construction which is unreasonable, inequitable, and oppressive.”        Frost Nat’l
Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 312 (Tex. 2005). It is difficult to
readily conceive of a situation in which a third-party would assert a claim against
Wells Fargo (as MBS-The Falls’s lender) in connection with the Non-Recourse
Exceptions at issue in this case; i.e., for MBS-The Falls’s causing waste of the
property or impairment of Wells Fargo’s right to foreclose. Instead, it is Wells
Fargo who would experience a loss due to such conditions. Wells Fargo forewent
any right to sue for the balance due on the note and was limited to the collateral in
the event of MBS-The Falls’s default. Waste or impairment of Wells Fargo’s right
to foreclose could preclude Wells Fargo from realizing the full value of the
property at a foreclosure sale or force Wells Fargo to alleviate these conditions
before it could realize the full value. Therefore, Wells Fargo clearly intended to
                                          8
protect the value of its collateral and ability to foreclose by retaining the right to
recourse against MBS-The Falls (and “any . . . entity constituting [MBS-The
Falls]”) under certain circumstances.

      However, both MBS-The Falls and Normandale (the “entity constituting
[MBS-The Falls]”) are limited liability entities. Further, as mentioned above,
MBS-The Falls is a special purpose entity, meaning it was formed solely to borrow
funds to purchase the property. Accordingly, as recited in the Indemnification
Agreement, Wells Fargo required appellees to execute the agreement as a
condition for the loan; and appellees agreed because “[t]he extension of the Loan
to [MBS-The Falls] is a substantial benefit to [appellees] . . . .” Therefore, Wells
Fargo clearly intended to preserve some viable recourse (against appellees) in the
event MBS-The Falls’s actions within the Non-Recourse Exceptions impaired
Wells Fargo’s ability to realize full value of the property upon default and
foreclosure. It would be unreasonable to conclude Wells Fargo ensured MBS-The
Falls’s liability for all Wells Fargo’s losses in connection with the Non-Recourse
Exceptions yet Wells Fargo obtained appellees’ guaranty only when those losses
involve third-party claims against Wells Fargo.

      In MBS-Hills, 2011 WL 6141619, one of the other cases involving the same
parties and financing arrangement, for a different apartment complex, the court
rejected Smuck’s interpretation of the Indemnification Agreement. See id. at *3–5.
The court analyzed the extent of appellees’ liability under the Indemnification
Agreement for Wells Fargo’s claim that the borrower/“MBS” entity committed
waste and impaired Wells Fargo’s right to foreclose. See id. at *1–5. Applying
established principles of contract construction, the court construed the
Indemnification Agreement in accordance with the particular business activity

                                          9
sought to be served—non-recourse commercial financing.           See id. at *3–5.
Consistent with our reasoning, the court recognized that, because the borrower and
Normandale are limited liability entities, Wells Fargo intended to retain recourse
against appellees if the borrower’s liability under the Non-Recourse Exceptions
was triggered. See id. at *4. Therefore, the court held Wells Fargo has full
recourse against the borrower and, in turn, appellees for “the amount of any losses
or damages sustained by [Wells Fargo] in connection with such Non–Recourse
Exceptions” (such as damages for waste), but not for the entire amount due and
owing under the note. See id. at *4–5 (emphasis in original).

      Contrary to Smuck’s position, the court did not state the Indemnification
Agreement applies only to a third-party’s claims against Wells Fargo and is not a
guaranty of all the borrower’s obligations under the Non-Recourse Exceptions.
See id. at *3–5. Rather, the court held appellees did not guarantee all of the
borrower’s obligations under the Note—such as the full amount due and owing on
the debt. See id. at *4–5. However, the court effectively held the Indemnification
Agreement is a guaranty of all the borrower’s liability under the Non-Recourse
Exceptions, which would include Wells Fargo’s own losses in connection with the
Non-Recourse Exceptions.      See id.; see also White v. JPMC 2004-C3 Trails
Apartments LLC, No. 02-12-00164-CV, 2012 WL 6632776, at *2–3 (Tex. App.—
Fort Worth Dec. 21, 2012, no pet.) (mem. op.) (relative to same financing
arrangement, for different property, affirming judgment holding appellees liable
for losses incurred by lender’s assignee due to “MBS” entity’s committing waste
on property; and construing Indemnification Agreement as providing, “if MBS did
not make good on any obligation for which it was liable under recourse provisions
of the note and deed of trust, [White] would make good on them”); White v. MLMT
2004-BPC1 Carlyle Crossing, LLC, No. 02-10-00233-CV, 2011 WL 3672022, at
                                        10
*6 (Tex. App.—Fort Worth Aug. 18, 2011, pet. denied) (mem. op.) (same and
expressly referring to Indemnification Agreement as a “guarantee”).

      In summary, we conclude appellees are liable under the Indemnification
Agreement for any liability of MBS-The Falls under the Non-Recourse Exceptions.

B.    Proof Required to Establish             Appellees’    Liability   under    the
      Indemnification Agreement

      Next, we turn to Wells Fargo’s arguments regarding the proof required in the
present case to establish MBS-The Falls is liable under the Non-Recourse
Exceptions and thus appellees are liable under the Indemnification Agreement. In
this regard, Wells Fargo challenges several of the trial court’s findings of fact and
conclusions of law:
      FINDINGS OF FACT
      5.    Neither the Interlocutory Summary Judgment nor final
      judgment against [MBS-The Falls] and [Normandale] in the previous
      lawsuit makes mention of the non-recourse exceptions provided in
      section 12 of [the Note].

      6.    Under the loan documents that are the basis for this law suit,
      [appellees] may only be held liable to [Wells Fargo] under the specific
      and defined situations listed in section 12 of [the Note].

      7.     [Wells Fargo] has not proven that these specific and defined
      situations exist. [Wells Fargo] has failed to provide any evidence that
      these exceptions have been met.

      CONCLUSIONS OF LAW

      1.     [Wells Fargo] failed to prove waste, or any other non-recourse
      exception sufficient to trigger [appellees’] liability under Section 12
      of [the Note].

                                         11
      2.     [Wells Fargo] also failed to provide sufficient evidence at trial
      that the losses it sustained fall within these non-recourse exceptions.

      3.   Accordingly, under the Non-Recourse Indemnification
      Agreement, [appellees] should not be held liable to [Wells Fargo].

      Wells Fargo suggests Findings Nos. 6 and 7 are actually legal conclusions
regarding interpretation of the Note and the Indemnification Agreement and these
conclusions, as well as Conclusions Nos. 1, 2, and 3, are erroneous. Wells Fargo
suggests these findings and conclusions indicate the trial court incorrectly
determined Wells Fargo was required to establish a Non-Recourse Exception
against MBS-The Falls in the present case; i.e., establish MBS-The Falls
committed waste or impaired Wells Fargo’s right to foreclose. It is undisputed
Wells Fargo did not offer evidence in the present case to establish a Non-Recourse
Exception. However, Wells Fargo argues it was required to prove only that MBS-
The Falls has already been found liable under a Non-Recourse Exception.
According to Wells Fargo, it satisfied that burden by proving the Tarrant County
Judgment against MBS-The Falls was based on two Non-Recourse Exceptions.
Thus, Wells Fargo asserts Finding No. 5 is immaterial because it was unnecessary
for the Tarrant County Judgment to mention a Non-Recourse Exception.
      If read in isolation, Findings No. 6 and 7 and Conclusions No. 1, 2, and 3
indicate the trial court concluded Wells Fargo was required to establish a Non-
Recourse Exception in the present case.       However, such a conclusion would
conflict with Finding No. 5; that finding indicates the trial court determined proof
Wells Fargo obtained a judgment against MBS-The Falls under a Non-Recourse
Exception would be sufficient to trigger appellees’ liability under the
Indemnification Agreement but Wells Fargo failed to offer such proof. When a
trial court’s findings appear to conflict, they will be reconciled whenever possible.
                                         12
Zieba v. Martin, 928 S.W.2d 782, 791 (Tex. App.—Houston [14th Dist.] 1996, no
writ).    Reconciling the above-cited findings and conclusions, the trial court
apparently determined 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 judgment, establish a Non-Recourse Exception in the present case.
The trial court apparently further determined Wells Fargo did not satisfy either
option, hence the court’s general Conclusion No. 3: “under the Indemnification
Agreement, [appellees] should not be held liable to [Wells Fargo].”
         Nevertheless, to the extent the trial court’s findings and conclusions are
conflicting and it determined Wells Fargo was required to establish a Non-
Recourse Exception in the present case, we disagree. As discussed below, Wells
Fargo proved the Tarrant County summary judgment was based on two Non-
Recourse Exceptions.        Axiomatically, a summary judgment for a plaintiff
constitutes a judgment on the merits of a claim. See Tex. R. Civ. P. 166a(c);
Cullins v. Foster, 171 S.W.3d 521, 530 (Tex. App.—Houston [14th Dist.] 2005,
pet. denied) (citing MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex. 1986) and stating
a plaintiff moving for summary judgment must conclusively prove all essential
elements of its claim). Therefore, a summary judgment against MBS-The Falls
based on two Non-Recourse Exceptions demonstrates MBS-The Falls has been
held liable under the Non-Recourse Exceptions.
         As Wells Fargo asserts, requiring it to establish a Non-Recourse Exception
in the present case would amount to allowing an impermissible, collateral attack on
the Tarrant County Judgment. Only a void judgment may be collaterally attacked.
Browning v. Prostok, 165 S.W.3d 336, 346 (Tex. 2005). Undisputedly, the Tarrant
County Judgment is not void. A collateral attack is “an attempt to avoid the
binding force of a judgment in a proceeding not instituted for the purpose of

                                         13
correcting, modifying, or vacating the judgment, but in order to obtain some
specific relief which the judgment currently stands as a bar against.” Id. A trial on
the merits of a Non-Recourse Exception in the present case could result in a fact-
finder (1) determining MBS-The Falls did not commit waste or impair Wells
Fargo’s right to foreclose, inconsistent with the Tarrant County judgment, or (2)
awarding a different amount of damages than the Tarrant County judgment. In
such   situations,   appellees   would   effectively   avoid   liability   under   the
Indemnification Agreement for some or all of the Tarrant County judgment by
attacking the merits of the judgment.
       Finally, our conclusion is consistent with MBS-The Hills. That court held
Wells Fargo failed to prove appellees’ liability under Indemnification Agreement
because (1) the summary judgment against the borrower and Normandale awarded
damages representing the deficiency owed on the note—not damages in connection
with the Non-Recourse Exceptions; and (2) Wells Fargo did not otherwise offer
evidence of such damages. 2011 WL 6141619, at *5–6. Therefore, the court
implicitly recognized, consistent with our conclusion, a judgment against the
borrower under a Non-Recourse Exception would be sufficient to trigger
appellees’ liablility under the Indemnification Agreement. See id.

C.     Proof Wells Fargo Obtained Judgment against MBS-The Falls under
       Non-Recourse Exceptions.

       Wells Fargo essentially presents a challenge to legal sufficiency of the
evidence supporting the trial court’s judgment in the present case by contending
Wells Fargo conclusively proved the Tarrant County Judgment was based on Non-
Recourse Exceptions. When examining a legal-sufficiency challenge, we review
the evidence in the light most favorable to the challenged finding and indulge
every reasonable inference that would support it. City of Keller v. Wilson, 168
                                         14
S.W.3d 802, 822 (Tex. 2005). We credit favorable evidence if a reasonable fact
finder could and disregard contrary evidence unless a reasonable fact finder could
not. Id. at 827. The evidence is legally sufficient if it would enable a reasonable
and fair-minded person to reach the verdict under review. Id. When, as in the
present case, a party attacks legal sufficiency relative to an adverse finding on
which it had the burden of proof, it must demonstrate the evidence conclusively
establishes all vital facts in support of the issue. Dow Chem. Co. v. Francis, 46
S.W.3d 237, 241 (Tex. 2001).        The fact finder is the sole judge of witness
credibility and the weight to give their testimony. City of Keller, 168 S.W.3d at
819.

       The trial court found neither the Tarrant County interlocutory summary
judgment nor the order non-suiting appellees and rendering the summary judgment
final “makes mention of” the Non-Recourse Exceptions. We agree with Wells
Fargo that it was not necessary for either order to expressly state the summary
judgment represented recovery based on a Non-Recourse Exception.             In the
interlocutory summary judgment, the Tarrant County court ordered that Wells
Fargo “recover on its claims against [MBS-The Falls] and [Normandale] . . . .”
(emphasis added). Wells Fargo’s petition in the Tarrant County suit demonstrates
the only “claims” pleaded against MBS-The Falls were for damages in connection
with the Non-Recourse Exceptions. The following is the entire section of the
petition in which Wells Fargo set forth its claims against MBS-The Falls:

       Defendants’ Liability

              19. The obligations of MBS-Falls, Normandale, Smuck, and
       White under the Note and Guaranty are generally non-recourse, unless
       certain exceptions to the non-recourse nature of the obligations exist.
       In this case, the following exceptions apply and the Defendants are

                                         15
personally liable for the losses, damages and expenses incurred by
Plaintiffs pursuant to Sections 12(a) and 12(b) of the Note and Section
2 of the Guaranty:

      (a)   Waste, as described below.

      (b)   Impairment of Plaintiffs’ right to foreclose on the
            Property, as described below.

Waste

       20. Upon information and belief, MBS-Falls and
Normandale took unreasonable actions and unreasonably failed to act
in their management of the Property.

       21. Pursuant to the Note, MBS-Falls and Normandale are
jointly and severally liable for the loss, damage and expenses incurred
by Plaintiffs as a result of such actions. Likewise, pursuant to the
Guaranty, Smuck and White are jointly and severally liable for the
loss, damage and expenses incurred by Plaintiffs as a result of such
actions.

Impairment of Right to Foreclose

       22. MBS-Falls expressly agreed that impairing the right of
Plaintiffs to foreclose on the Deed of Trust and obtain title to the
Property would be excepted from the otherwise non-recourse nature
of the Note:

      [Item 12(b) of Non-Recourse Exceptions]

       23. Several liens remain on the Property even after the
foreclosure, encumbering the title obtained by Plaintiffs in and
through the foreclosure sale. The liens remaining on the Property
total $72,570.28, exclusive of any accrued interest.

      24. MBS-Falls and its general partner Normandale are jointly
and severally liable under the Note for any losses and damages arising
from MBS-Falls’s failure to clear the liens that have impaired
                                  16
      Plaintiffs’ rights to foreclose on the Property. Smuck and White are
      jointly and severally liable under the Guaranty for any losses and
      damages arising from MBS-Falls’s failure to clear the liens that have
      impaired Plaintiffs’ rights to foreclose on the Property.

Accordingly, the Tarrant County court did express the summary judgment was
based on the Non-Recourse Exceptions by ordering Wells Fargo recover on its
“claims.”

      At trial of the present case, appellees did not present any evidence refuting
the Tarrant County suit was based solely on the Non-Recourse Exceptions. On
appeal, White makes a blanket assertion the summary judgment was “nothing more
than a deficiency judgment” against MBS-The Falls and Normandale for “the
principal remaining on the Promissory Note, prejudgment interest and post-
judgment interest.” However, White either cites no record references or cites a
non-existent portion of the record to support his assertions. As factual background
in the Tarrant County petition, Wells Fargo stated there remained a deficiency after
the foreclosure. However, Wells Fargo asserted no claim for the deficiency.

      We recognize the Tarrant County petition was entitled “PLAINTIFFS’
SUPPLEMENTAL PETITION.” However, the supplemental petition reads as an
amended original petition, rather than a supplemental petition. An original petition
or amended original petition (if necessary to add to, or withdraw, matters in the
original petition) is the pleading in which a party alleges its claims, whereas a
supplemental petition is used to respond to an allegation in the opponent’s most
recent pleading. See Tex. R. Civ. P. 62, 64; Sixth RMA Partners, L.P. v. Sibley,
111 S.W.3d 46, 53–54 (Tex. 2003). In the “supplemental” petition, Wells Fargo
recited it had previously filed an “Original Petition and Agreed Application for
Appointment of Receiver and Temporary Restraining Order,” pursuant to which a
                                         17
receiver was appointed and the property foreclosed upon. It is clear Wells Fargo
then filed the “supplemental” petition to (1) add claims under the Non-Recourse
Exceptions against MBS-The Falls and Normandale, who were already defendants,
and (2) add appellees as defendants for claims under the Indemnification
Agreement (which were eventually non-suited and re-asserted in the present case).
In the “supplemental” petition, Wells Fargo pleaded an entire cause of action,
including identity of the parties, jurisdiction and venue, claims, and a prayer, as a
party would do in an original or amended petition.

       There is no indication in our record that any Tarrant County defendant
specially excepted to the misnomer and/or the petition was stricken. Thus, despite
the misnomer, the “supplemental” petition constituted an operative petition for
purposes of pleading claims against MBS-The Falls under the Non-Recourse
Exceptions. See Sibley, 111 S.W.3d at 54–55 (“[T]hough a pleading may be
denominated a supplement it may actually constitute an amendment or set up a
counter-claim or cross-action, and, if not excepted to but allowed to stay in the
case until judgment, may be considered for all that it means instead of what it is
called.”).

       Because the “supplemental” petition actually constituted an amended
petition, it arguably superseded the original petition. See Tex. R. Civ. P. 65; Wren
v. Tex. Emp’t Comm’n, 915 S.W.2d 506, 508 (Tex. App.—Houston [14th Dist.]
1995, no writ). On the other hand, by using the term “supplemental,” Wells Fargo
arguably did not supersede its original petition. In the present case, Wells Fargo
did not introduce the original petition to expressly negate it included a claim for
the deficiency after foreclosure.      Regardless, Wells Fargo recited in the
“supplemental” petition that the original petition was filed before the foreclosure;

                                         18
this recital is the only evidence regarding the date of those events. Accordingly,
even if the original petition technically remained viable after filing of the
“supplemental” petition, the original petition could not have included a claim for a
deficiency because there was not yet any deficiency. Alternatively, to the extent
Wells Fargo might have asserted a claim for the deficiency in the original petition,
Wells Fargo superseded that claim in the “supplemental” petition by expressly
conceding its only avenue for recovery was via the Non-Recourse Exceptions. At
trial of the present case, appellees did not offer the original or any other petition in
the Tarrant County suit to show Wells Fargo pleaded any claims other than those
based on the Non-Recourse Exceptions.

      Moreover, the interlocutory summary judgment does not support White’s
contention. The Tarrant County court did not recite that the recovery represented
the principal remaining on the Note. Rather, the court ordered that Wells Fargo
recover “the principal amount of $8,985,142.86, prejudgment interest . . .
postjudgment interest.” This language reflects the court used the term “principal”
to mean the principal amount of the judgment, i.e., the damages, as opposed to
interest, and not to mean the principal remaining on the Note.

      White also asserts in his brief,

      In the interest of expediency and cost-saving, Appellant took a
      judgment against two unrepresented corporate defendants. The
      motion for this judgment lacked the level of proof to support a finding
      of waste and therefore the Trial Court found in favor of Appellees.
      Appellant now asks this Court to enforce an unchallenged and
      insufficient judgment against White.

White again cites no record references to support his assertion, and the motion for
summary judgment was not introduced at trial of the present case.

                                           19
      Regardless, even if the non-movant fails to respond, the movant must
establish entitlement to traditional summary judgment as a matter of law. City of
Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979). If Wells
Fargo failed to meet that burden relative to its claims under the Non-Recourse
Exceptions, MBS-The Falls could have appropriately raised such complaint in an
appeal of the summary judgment. White’s raising that complaint in the present
case constitutes an impermissible collateral attack on the judgment.          See
Browning, 165 S.W.3d at 346. Therefore, the summary judgment constitutes a
judgment on the merits of MBS-The Falls’s liability under the Non-Recourse
Exceptions even if the motion was unopposed or not supported by sufficient
evidence. As discussed above, in return for the “substantial benefit” to appellees
from the loan to MBS-The Falls, appellees guaranteed MBS-The Falls’s liability
under the Non-Recourse Exceptions, with no limitation on how that liability might
be established. Therefore, appellees agreed to the possibility they would be held
liable under the Indemnification Agreement if MBS-The Falls failed to oppose or
challenge a judgment against it under the Non-Recourse Exceptions.

      White also cites MBS-The Hills to support his position that the Tarrant
County Judgment merely represented a deficiency judgment. However, MBS-The
Hills is distinguishable on this issue because that court held the record clearly
demonstrated judgment was rendered against the borrower and Normandale for the
deficiency on the note after the foreclosure sale—not damages in connection with a
Non-Recourse Exception. See 2011 WL 6141619, at *5–6.          Thus, Wells Fargo
did not prevail on its claims against appellees under the Indemnification
Agreement, although the court agreed appellees would have been liable for Wells
Fargo’s damages in connection with the Non-Recourse Exceptions.           See id.

                                        20
Conversely, in the present case, Wells Fargo offered uncontroverted evidence it
obtained judgment against MBS-The Falls under the Non-Recourse Exceptions.

       Finally, we point out that Smuck (but not White) unequivocally admits in his
appellate brief the Tarrant County Judgment “was for waste damages caused Wells
Fargo by [MBS-The Falls].” We have discretion to accept a statement made in a
brief as a judicial admission. See Jansen v. Fitzpatrick, 14 S.W.3d 426, 431 (Tex.
App.—Houston [14th Dist.] 2000, no pet.) (citing Bowles v. Wade, 913 S.W.2d
644, 649 (Tex. App.—Dallas 1995, writ denied)).5 Irrespective of this admission,
we have concluded Wells Fargo proved the Tarrant County Judgment was based
on the Non-Recourse Exceptions. However, this admission alone would support
imposing liability against Smuck under the Indemnification Agreement.

                                      III. CONCLUSION

       Wells Fargo established MBS-The Falls is liable for $10,068,453.49 under
the Non-Recourse Exceptions via the Tarrant County judgment. Accordingly,
Wells Fargo is entitled to recover that amount from appellees under the
Indemnification Agreement. We sustain Wells Fargo’s sole issue. We reverse the

       5
          Additionally, at trial of the present case, Wells Fargo offered both appellees’ responses
to requests for admission. Smuck (but not White) admitted the following: (1) “[Wells Fargo]
sued [MBS-The Falls] to establish its liability under the non-recourse exceptions provided for by
the Note attached as Exhibit 2;” and (2) “[MBS-The Falls’s] liability under the non-recourse
exceptions provided for by the Note was established by the summary judgment attached as
Exhibit 3.” The referenced Exhibits were not attached to the responses presented at trial.
However, it is undisputed MBS-The Falls was a “special purpose” entity formed to secure
financing for The Falls, thus indicating there was only one note executed by MBS-The Falls. It
also appears undisputed the Tarrant County judgment is the only summary judgment against
MBS-The Falls. Regardless, we need not rely on Smuck’s responses because of our analysis
regarding the basis for the Tarrant County judgment and Smuck’s admission in his brief.
However, we note the responses as presumably explaining why Smuck admitted the same fact on
appeal and instead argues this fact does not entitle Wells Fargo to judgment under a legal
interpretation of the Indemnification Agreement.
                                                21
trial court’s judgment and render judgment that Wells Fargo recover
$10,068,453.49 from appellees, jointly and severally.

                                      /s/    John Donovan
                                             Justice

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

                                        22