Court Opinion

ID: 3086380
Source: CourtListenerOpinion
Date Created: 2015-10-16 02:49:11.668104+00
Date Added: 2024-06-11T11:42:49.192793
License: Public Domain

AFFIRM; Opinion Filed January 30, 2014.

                                              S
                                   Court of Appeals
                                                   In The

                            Fifth District of Texas at Dallas
                                           No. 05-12-01551-CV

                                TST IMPRESO, INC., Appellant
                                                      V.
      ASIA PULP & PAPER TRADING (USA), INC. N/K/A OVERVEEN
              GENERAAL TRADING (USA), INC., Appellee

                           On Appeal from the 116th Judicial District Court
                                        Dallas County, Texas
                                Trial Court Cause No. DC-11-00890

                                  MEMORANDUM OPINION
                          Before Justices Moseley, FitzGerald, and Fillmore
                                     Opinion by Justice Moseley

        TST Impreso, Inc. sued Asia Pulp & Paper Trading (USA), Inc., n/k/a Overveen Generaal

Trading (USA), Inc. 1 for a declaratory judgment regarding the interpretation of a settlement

agreement between the parties.           Overveen counterclaimed against TST for breach of the

settlement agreement and sought liquidated damages under its terms. The trial court ruled in

favor of Overveen, granting its no-evidence and traditional motion for summary judgment as to

TST’s declaratory judgment claim and its traditional motion for summary judgment on its

counterclaim. TST appeals; in three issues it argues the trial court erred in rendering judgment

because the settlement agreement is ambiguous and genuine issues of material fact exist
        1
          Asia Pulp & Paper Trading (USA), Inc. changed its name to Overveen Generaal Trading (USA), Inc. after
signing the settlement agreement involved in this case. We refer to the company by its current name.
regarding TST’s declaratory judgment claim and Overveen’s counterclaim.

        The background of the case and the evidence adduced at trial are well known to the

parties; thus, we do not recite them here in detail. Because all dispositive issues are settled in

law, we issue this memorandum opinion. TEX. R. APP. P. 47.2(a), 47.4. We affirm the trial

court’s judgment.

                                              BACKGROUND

        TST and Overveen were parties to a lawsuit pending in state court in Dallas county,

described and defined in the settlement agreement as “The Litigation.” In settlement of The

Litigation, TST agreed to make a series of payments to Overveen and to the law firm of Arnold

& Porter, LLP. 2 If any payments were not timely paid, the unpaid entity was required to give

TST written notice of breach and TST had fifteen days after receipt of the notice to cure the

breach by making the required payment in full. Under the settlement agreement, the payments

were due sixty days, 120 days, and one year after the agreement’s complete execution, which

was accomplished on July 2, 2009.

        TST did not make the first scheduled payment to Overveen (although it did make

payments to Arnold & Porter). Overveen sent written notice of default to TST on January 13,

2011 and demanded TST cure the default within fifteen days. On January 27, 2011, TST

responded by filing this lawsuit.

        At issue is the italicized portion of the following provision in the settlement agreement:

        Except for payments not timely made under this Agreement resulting from the
        assertion by a party other than Arnold & Porter LLP of a security interest in the
        proceeds of the Litigation, if TST does not cure the breach in payment within
        fifteen (15) days after receipt of written notice, TST shall be in default of this
        2
         The settlement agreement recites that Arnold & Porter had notified TST of a lien against the proceeds
Overveen received as a result of The Litigation. The settlement agreement provides for TST to make certain
payments directly to Arnold & Porter and names Arnold & Porter as a party for the limited purpose of receiving
those payments and for agreements and representations made by Arnold & Porter under specific paragraphs of the
agreement.

                                                    –2–
         Agreement (“Default”), and [Overveen] shall be entitled to liquidated damages in
         the amount of Five Hundred Thousand Dollars ($500,000.00).

TST contended it was served with notices of judgments obtained by third parties against Asia

Pulp & Paper Co., Ltd. (APP), an entity related to but separate from Overveen, and that these

judgments triggered the italicized provision quoted above. TST characterized its declaratory

judgment claim as requesting a declaration “that TST’s action in suspending payments based on

asserted security interests (specifically money judgments against [Overveen’s] affiliates and

assigns, and APP/APP entities), was authorized by the Settlement Agreement, and that

[Overveen] is thus precluded from recovering liquidated damages.” 3

         Overveen counterclaimed for breach of the settlement agreement and asked for liquidated

damages. Overveen later moved for summary judgment on its counterclaim and on TST’s

declaratory judgment claim.               Overveen argued that TST’s requested declarations were not

supported by the language of the settlement agreement; the judgments TST was relying upon

were against an entity other than Overveen; and the judgments were not security interests in the

proceeds of The Litigation. It presented summary judgment evidence that TST did not timely

         3
             In its live pleading, TST sought the following declarations:
       (1) That the language of the Settlement Agreement itself that binds, warrants, benefits and releases APP
and [Overveen] can be interpreted that any payments received by [Overveen] can be subject to the claims of a
judgment creditor of APP; and, or in the alternative,
         (2) That notice to TST by a third party of a security interest in payments to an [Overveen] affiliate,
constitutes notice of a security interest in payments to [Overveen] and therefore invokes the exception clause in the
settlement agreement; and, or in the alternative,
         (3) Under the terms of the Settlement Agreement does notice to TST by a third party of a security interest
in the proceeds of the litigation permit TST to withhold payments to [Overveen], even though the security interest is
against a subsidiary, affiliate, predecessor, successor, parent, or assign; and, or in the alternative,
        (4) That the language of the Settlement Agreement fails to define “security interest” therefore does not
require TST to ascertain the validity of an assertion of a security interest prior to withholding payments to
[Overveen]; and, or in the alternative,
          (5) That APP is a party to the Settlement Agreement as a beneficiary and/or as a principal, due to the
language of the settlement agreement and the representations and warranties of its agent, [Overveen]; and, or in the
alternative,
         (6) That the language of the Settlement Agreement permits TST to withhold the payments to [Overveen],
therefore TST is not in default of the Settlement Agreement.

                                                            –3–
make the payments due under the settlement agreement, it sent written notice of default to TST,

and TST did not cure the default within fifteen days by making the required payment in full.

None of this evidence was disputed.

        In response, TST asserted it was excused from making the scheduled payments to

Overveen because it received notice of three different judgments rendered against APP: a New

York federal court judgment in favor of Export-Import Bank of the United States; 4 a New York

state court judgment in favor of U.S. Bank; 5 and an Illinois federal court judgment in favor of JP

Morgan Chase Bank. 6 TST argued the settlement agreement did not define the term “security

interest” and that the judgments against APP were “security interests” within the meaning of the

settlement agreement. It also contended there was a fact issue about whether APP was a party to

the settlement agreement, whether Overveen and APP were really the same entity, and whether

the judgments against APP triggered the exception to its payment obligation under the settlement

agreement. As a result, TST asserted there was at least an issue of fact as to whether its failure to

make the scheduled payments to Overveen was excused.

        The trial court granted Overveen’s motion for summary judgment, without specifying the

grounds for its ruling. The final judgment dismissed TST’s declaratory judgment claim and

awarded Overveen damages and liquidated damages under the terms of the settlement

agreement, attorney’s fees and costs.

                                          STANDARD OF REVIEW

        We review the trial court’s summary judgment de novo. Provident Life & Accident Ins.

        4
         TST was served on July 31, 2009 with a writ of garnishment issued by the New York federal court on the
Export-Import Bank judgment against APP. The Export-Import Bank judgment was satisfied and the writ of
garnishment dissolved sometime in December 2010.
        5
         TST was served with a restraining notice from the New York state court regarding the U.S. Bank judgment
against APP in December 2010.
        6
         During the pendency of this suit, TST was served on May 14, 2012 with a citation for post-judgment
discovery from the Illinois federal court relating to the JP Morgan Chase Bank judgment against APP.

                                                     –4–
Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). We apply the well-established standards for

reviewing summary judgments. See TEX. R. CIV. P. 166a(c), (i); Timpte Indus., Inc. v. Gish, 286
S.W.3d 306, 310–11 (Tex. 2009) (no-evidence summary judgment standards of review); Nixon v.

Mr. Property Mgmt. Co., 690 S.W.2d 546, 548–49 (Tex. 1985) (traditional summary judgment

standards of review).

                                                   ANALYSIS

    A. Ambiguity

        On appeal, TST argues the settlement agreement is ambiguous because it does not define

the term security interest. Overveen contends TST is improperly raising ambiguity for the first

time on appeal and that the settlement agreement is not ambiguous. TST says it did raise

ambiguity below by arguing the settlement agreement did not define the term “security interest.”

        Both the supreme court and this Court have addressed ambiguity when raised for the first

time on appeal in summary judgment and other types of cases. 7 We conclude we may consider

TST’s ambiguity issue.

        Ambiguity is a question of law for the court to determine by looking at the contract as a

whole in light of the circumstances present when the contract was entered into. Coker v. Coker,

650 S.W.2d 391, 394 (Tex. 1983). A contract is ambiguous when its meaning is uncertain or

        7
          See Progressive County Mut. Ins. Co. v. Kelley, 284 S.W.3d 805, 808-09 (Tex. 2009) (per curiam)
(summary judgment appeal where supreme court concluded contract was ambiguous even though neither party
asserted ambiguity); J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 231 (Tex. 2003) (concluding agreement was
ambiguous even though parties did not assert ambiguity in appeal from denial of motion to compel arbitration); Sage
St. Assoc. v. Northdale Constr. Co., 863 S.W.2d 438, 444-45 (Tex. 1993) (court may conclude that a contract is
ambiguous even in the absence of a pleading by either party); Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983)
(concluding agreement was ambiguous even though both parties asserted property settlement agreement was
unambiguous and moved for summary judgment); Simba Ventures Shreveport, L.L.C. v. Rainier Capital
Acquisitions, L.P., 292 S.W.3d 173, 178 (Tex. App.—Dallas 2009, no pet.) (“Although Simba did not raise
ambiguity before the trial court, this court may determine ambiguity as a matter of law for the first time on
appeal.”); Arredondo v. City of Dallas, 79 S.W.3d 657, 666–67 (Tex. App.—Dallas 2002, pet. denied) (“Patent
ambiguity of a contract may be considered for the first time on appeal from a motion for summary judgment.”);
Donahue v. Bowles, Troy, Donahue, Johnson, Inc., 949 S.W.2d 746, 753 (Tex. App.—Dallas 1997) (“A court may
conclude that a contract is ambiguous even in the absence of such a pleading by either party.”).

                                                       –5–
doubtful or it is reasonably susceptible to more than one meaning. Id. at 393. A contract is not

ambiguous if it can be given a certain or definite legal meaning or interpretation. Lopez v.

Munoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 861 (Tex. 2000).

         Undefined terms in a contract are given their plain, generally accepted meaning. See

Epps v. Fowler, 351 S.W.3d 862, 865-66 (Tex. 2011); Heritage Res., Inc. v. NationsBank, 939
S.W.2d 118, 121 (Tex.1996).               The term “security interest,” undefined in the settlement

agreement, has a well-accepted common meaning: a property interest created by agreement or

operation of law to secure performance of an obligation, especially the repayment of a debt.

BLACK’S LAW DICTIONARY (9th ed. 2009). Reading the settlement agreement as a whole, we

conclude the settlement agreement is not ambiguous. We overrule TST’s third issue.

    B. Alter-ego

         Much of TST’s opening brief and summary judgment response asserted there was

evidence of an alter ego relationship between Overveen and APP. 8 However, in response to

questioning at oral argument, counsel for TST stated TST is not relying on alter ego as a theory

to impute an alleged security interest against APP to Overveen. See Bates v. Dallas Indep. Sch.

Dist., 952 S.W.2d 543, 550 (Tex. App.—Dallas 1997, writ denied) (appellate court may refuse to

consider an issue conceded by a party at oral argument). Thus, any evidence relating to this alter

ego argument fails to raise a genuine issue of any material fact.

    C. Declaratory Judgment and Counterclaim

         TST’s first and second issues challenge the trial court’s summary judgment dismissing

TST’s declaratory judgment claim and granting judgment on Overveen’s counterclaim. Because

TST’s defense to the counterclaim is based on its declaratory judgment claim, we discuss TST’s

         8
          In its reply brief, TST states that the alter ego evidence was presented in support of its contention that it
was justified to maintain the status quo by withholding payments to Overveen in order to avoid double liability, not
to support an ultimate determination of whether Overveen was APP’s alter ego.

                                                         –6–
first and second issues together.

        TST does not dispute that it did not timely make the payments due under the settlement

agreement or that Overveen sent notice of default on January 13, 2011. It is also does not

dispute it did not cure the default within fifteen days of receipt of the notice of default. Thus, the

issue is whether TST’s failure to cure in January 2011 is excused under the terms of the

settlement agreement. 9

        The settlement agreement provides an excuse for payments not timely made as a result of

the assertion by a party other than Arnold & Porter of a security interest in the proceeds of the

Litigation. This provision requires at least: (1) a security interest (2) in the proceeds of The

Litigation. TST contends the three judgments against APP meet these requirements—or at least

there is a fact issue as to whether they meet these requirements. We disagree for two reasons:

(1) a judgment is not a security interest under Texas law; and (2) the judgments have no relation

to “the proceeds of the Litigation . . ..”

        1.       Security Interest

        TST states repeatedly that a judgment is a security interest. 10 However, it cites no

authority from this or any other jurisdiction to support that contention. We conclude this

argument is contrary to settled Texas law.

        Under Texas law, “no lien is created by the mere rendition of a judgment.” Citicorp Real

Estate, Inc. v. Banque Arabe Internationale D’Investissement, 747 S.W.2d 926, 929 (Tex.

        9
          The record indicates the Export-Import Bank judgment and writ of garnishment were resolved before
Overveen sent notice of default in January 2011. TST’s summary judgment evidence shows that TST was served
with a third party discovery request regarding the JP Morgan Chase Bank judgment on May 14, 2012, after the time
to cure the default had expired.
        10
           For example, TST argued in its response to the motion for summary judgment that a judgment against
APP was a security interest: “TST is basing the invocation of the exception clause on the judgment against APP, not
the restraining notice. The U.S. Bank judgment from the New York state court is a security interest. . . . There is a
judgment against APP in the State of New York. This judgment creates by operation of law a security interest in all
proceeds owed to APP, whether the interest is perfected or not.”

                                                        –7–
App.—Dallas 1988, writ denied); Burton Lingo Co. v. Warren, 45 S.W.2d 750, 751–52 (Tex.

Civ. App.—Eastland 1931, writ ref’d). An unsecured money judgment is simply an adjudication

between the plaintiff and defendant that the defendant owes the plaintiff some amount of money.

Under the judgment, the plaintiff has no priority over any other claimant against the defendant.

The plaintiff’s “only superior position is against his judgment debtor, against whom he has

litigated.” Fore v. United States, 339 F.2d 70, 72 (5th Cir. 1964); see also Schumann v.

Breedlove & Bensey, 983 S.W.2d 333, 334 (Tex. App.—Houston [1st Dist.] 1998, no pet.).

Thus, any judgments against APP are nothing more than adjudications that APP owes money to

the judgment plaintiffs.

       To establish a lien on real property, a judgment creditor must comply with the statutory

requirements for abstracting and recording the judgment in any county where the judgment

debtor has real property. See TEX. PROP. CODE ANN. § 52.001; Hoffman, McBryde & Co., P.C. v.

Heyland, 74 S.W.3d 906, 908–09 (Tex. App.—Dallas 2002, pet. denied).              With regard to

personal property, such as the settlement payments at issue here, a judgment does not give rise to

a lien until a valid levy of execution against the personal property occurs. See Williams v.

Gillespie, 346 S.W.3d 727, 731 (Tex. App.—Texarkana 2011, no pet.).

       There is no evidence that any of the judgments were domesticated in Texas under the

Uniform Enforcement of Foreign Judgments Act or under any other applicable law. See TEX.

CIV. PRAC. & REM. CODE ANN. §§ 35.001–.008; see also 28 U.S.C. § 1962 (federal court

judgments in a state shall be a lien on property located in the state to the same extent and under

the same conditions as a state court judgment of the state); 28 U.S.C. § 1963 (providing for

registration of federal court judgments in other federal districts). Nor is there evidence of any

procedures taken to establish the judgments as a lien against any person’s property in Texas. See

TEX. PROP. CODE ANN. § 52.001; TEX. R. CIV. P. 622.

                                               –8–
         While it can be argued that the writ of garnishment issued by a New York federal court in

favor of the Export-Import Bank may have established a security interest, it would run only

against the property of APP in the hands of TST at the time the writ was served. Furthermore,

the summary judgment evidence indicates the garnishment writ was dissolved before Overveen

sent notice of default and triggered the fifteen-day cure period. 11 Thus, the writ of garnishment

did not serve to excuse TST’s failure to cure in January 2011.

         2.          “Proceeds of the Litigation”

         The parties devote much of their efforts to arguing whether APP is a party to the

settlement agreement. But that is not the dispositive issue. The real question is whether a third

party’s assertion of a judgment against APP is “the assertion . . . of a security interest in the

proceeds of the Litigation . . ..”

         The settlement agreement disposes of “The Litigation,” defined by the settlement

agreement as the lawsuit between TST and Overveen. The proceeds of “The Litigation” are the

payments to be made by TST under the settlement agreement.                            Although the settlement

agreement mentions APP, the only entities entitled to receive the settlement proceeds are

Overveen and Arnold & Porter LLP. 12 Even if, as TST contends, APP is considered a party to

the settlement agreement for some purpose, the agreement’s express terms give APP no right to

receive the settlement proceeds. 13 Thus as a matter of law, any claims, judgments, or liens

         11
         The deposition testimony of TST’s CEO indicates Overveen’s notice of default was sent after the writ of
garnishment was dissolved.
         Overveen attached to its appendix on appeal documents, including an order dissolving the writ of
garnishment, that do not appear in the appellate record and apparently were never presented to the trial court. We do
not consider these documents. See Drum v. Calhoun, 299 S.W.3d 360, 374 (Tex. App.—Dallas 2009, pet. denied);
Perry v. Kroger Stores, Store No. 119, 741 S.W.2d 533, 534 (Tex. App.—Dallas 1987, no writ) (“The attachment of
documents as exhibits or appendices to briefs is not formal inclusion in the record on appeal and, thus, the
documents cannot be considered.”).
         12
              Arnold & Porter LLP was paid and is not involved in this dispute.
         13
         TST asserts on appeal that the judgments are also against certain paper mills in Indonesia and these mills
are Overveen’s assigns. There is no summary judgment evidence to support the assertion the mills are assigns of

                                                           –9–
asserted against APP are not, according to the terms of the settlement agreement, assertions “of a

security interest in the proceeds of the Litigation.”

         TST does not dispute that Overveen is not a party to any of the three judgments.

Therefore, Overveen is not a judgment debtor on those judgments and Overveen’s property may

not be applied to satisfy those judgments. See Brown v. Zimmerman, 160 S.W.3d 695, 703 (Tex.

App.—Dallas 2005, no pet.) (“Generally a person is not bound by a judgment in a suit to which

he was not a party.”); Gerjets v. Davila, 116 S.W.3d 864, 869 (Tex. App.—Corpus Christi 2003,

no pet.) (judgment against corporation did not permit judgment creditor to seek a turnover order

against shareholder’s personal assets). The judgments TST relies on could only reach the

property of APP, not Overveen.

         A judgment against a parent, subsidiary, affiliate, or former assignee is not a judgment

against Overveen and such judgment cannot support the assertion of a security interest in

Overveen’s property, i.e., the proceeds of the settlement agreement.

         3.       Summary

         The judgments TST’s relies on are not security interests under Texas law. TST cannot

rely on these judgments to establish that third parties are asserting security interests against the

settlement proceeds payable to Overveen. We overrule TST’s first and second issues.

                                                  CONCLUSION

         TST states it is asking this Court to conclude that a third party who comes forward with a

judgment against APP is thereby presenting a security interest in proceeds of The Litigation.

There are several problems with this argument: (1) a judgment under Texas law does not create a

security interest; (2) any security interest based on the judgment would be against property of

Overveen. The deposition testimony of Overveen’s former officer was merely to the effect that Overveen collected
accounts receivable between 2004 and 2010 and then paid its accounts payable to the paper mills. This evidence
fails to raise a genuine issue of fact that Overveen assigned the settlement proceeds to the mills after executing the
settlement agreement.

                                                       –10–
APP, not property of Overveen; and (3) the payments under the settlement agreement are not

property of APP to which any such security interest could attach. Thus we conclude that the out-

of-state judgments against APP are not assertions of a security interest in the proceeds of The

Litigation as defined in the settlement agreement.

       We conclude TST failed to raise a genuine issue of material fact on its declaratory

judgment claim and affirmative defense to Overveen’s counterclaim. Accordingly, the trial court

did not err by granting summary judgment for Overveen. We affirm the trial court’s judgment.

                                                     /Jim Moseley/
                                                     JIM MOSELEY
                                                     JUSTICE

121551F.P05

                                              –11–
                                         S
                               Court of Appeals
                        Fifth District of Texas at Dallas
                                        JUDGMENT

TST IMPRESO, INC., Appellant                         On Appeal from the 116th Judicial District
                                                     Court, Dallas County, Texas
No. 05-12-01551-CV         V.                        Trial Court Cause No. DC-11-00890.
                                                     Opinion delivered by Justice Moseley.
ASIA PULP & PAPER TRADING (USA),                     Justices FitzGerald and Fillmore
INC. N/K/A OVERVEEN GENERAAL                         participating.
TRADING (USA), INC., Appellee

       In accordance with this Court’s opinion of this date, the trial court’s November 9, 2012
Modified Order on Overveen Generaal Trading (USA), Inc.’s Motion for Reconsideration and
Rehearing of Defendant’s Amended Motion for Summary Judgment is AFFIRMED.
       It is ORDERED that appellee ASIA PULP & PAPER TRADING (USA), INC. N/K/A
OVERVEEN GENERAAL TRADING (USA), INC. recover its costs of this appeal from
appellant TST IMPRESO, INC.

Judgment entered this 30th day of January, 2014.

                                                   /Jim Moseley/
                                                   JIM MOSELEY
                                                   JUSTICE

                                              –12–