U.S. Bank National Association, in Its Capacities as Indenture Trustee and Collateral Trustee, Appellant/Cross-Appellee v. H & H Pipe & Steel and Maddux Building Materials, Inc., Joe Lane D/B/A Hallsville Woodyard, Good Times Wood Products, Inc., Terry Diffey D/B/A Charter Trucking, W.D. Townley and Son Lumber Company, Inc., D/B/A Townley Lumber, Wanner Enterprises, Inc., D/B/A Ewell Equipment Co., DP Solutions, Inc., and Prime Acres Management, Inc., Appellees/Cross-Appellants
12-20-00142-CV
Tex. App.
Mar 10, 2021

Background

  • U.S. Bank acted as indenture and collateral trustee for >$50M in bonds issued to finance a Lufkin power plant owned by Aspen Power; the plant failed and Aspen abandoned the property to U.S. Bank.
  • Angelina County sued to collect ad valorem taxes; U.S. Bank advanced funds to pay the taxes and obtained partial summary judgment authorizing foreclosure; sale proceeds were deposited in the registry of the court.
  • Multiple creditors (Counter-Appellants) intervened asserting mechanic’s/materialman’s (M&M) liens and judgment liens against Aspen and Angelina Fuels, claiming priority over U.S. Bank’s security interests under the loan documents.
  • The deeds of trust and a Master Agreement defined certain 'Permitted Liens'; the trial court found the loan documents ambiguous and denied cross-motions for summary judgment, prompting a permissive interlocutory appeal.
  • The Court of Appeals reviewed whether the loan documents were ambiguous, whether various liens were ‘Permitted Liens’ with priority, whether equitable defenses created fact issues, and whether a deed description was sufficient.

Issues

Issue U.S. Bank's Argument Counter‑Appellants' Argument Held
1. Are the loan documents ambiguous? Documents are unambiguous and support U.S. Bank’s claimed priority. Documents are unambiguous but read to give ‘Permitted Liens’ priority over the deed of trust. Documents are unambiguous; the grant ‘subject to Permitted Liens’ means permitted liens have priority (appellate court sustains issue that documents not ambiguous).
2. Do M&M liens qualify as ‘Permitted Liens’ and thus take priority? M&M liens are subordinate to the earlier deed of trust; do not get priority. M&M liens are expressly listed as permitted (mechanic’s liens) and thus have priority per contract. M&M liens (H&H Pipe, Maddux) are ‘Permitted Liens’ under the Master Agreement and take priority over U.S. Bank’s deed of trust; U.S. Bank’s challenge to these liens overruled.
3. Do judgment liens qualify as ‘Permitted Liens’? Judgment liens are not created in the ordinary course of business and therefore are not ‘Permitted Liens’; U.S. Bank has priority. Judgment lienholders argue their liens were incurred in the ordinary course and thus are permitted. Judgment liens are not ‘Permitted Liens’ (abstracts of judgment create judicial liens, not ordinary‑course commercial liens); U.S. Bank has priority; denial of U.S. Bank’s MSJ as to judgment liens reversed.
4. Were Counter‑Appellants’ equitable defenses (e.g., unclean hands) sufficient to create fact issues? Counter‑Appellants presented no competent evidence supporting equitable defenses; U.S. Bank met its MSJ burden. Asserted equitable defenses in pleadings/responses but provided no competent summary‑judgment proof. Counter‑Appellants failed to produce competent proof; equitable defenses do not preclude summary judgment on the judgment liens; U.S. Bank’s third issue sustained.
5. Is the Angelina Fuels deed of trust property description insufficient? (U.S. Bank) Moot — property already foreclosed and sold. (Counter‑Appellants) Description insufficient, invalidating lien. Issue is moot because the property was sold; appeal on that point overruled.

Key Cases Cited

  • Cherokee Water Co. v. Ross, 698 S.W.2d 363 (Tex. 1985) (limited interlocutory appeal jurisdiction principles)
  • Friendswood Dev. Co. v. McDade & Co., 926 S.W.2d 280 (Tex. 1996) (contract ambiguity as a question of law)
  • Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587 (Tex. 1996) (interpret deed in light of circumstances to determine ambiguity)
  • Luckel v. White, 819 S.W.2d 459 (Tex. 1991) (four‑corners rule and harmonizing contract provisions)
  • Coker v. Coker, 650 S.W.2d 391 (Tex. 1983) (definition of ambiguity and deed construction)
  • Barrow‑Shaver Res. Co. v. Carrizo Oil & Gas, Inc., 590 S.W.3d 471 (Tex. 2019) (give contract language its plain grammatical meaning)
  • Sanchez v. Schroeck, 406 S.W.3d 307 (Tex. App.—San Antonio 2013) (priority of mechanic’s liens relative to earlier deeds of trust)
  • Science Spectrum, Inc. v. Martinez, 941 S.W.2d 910 (Tex. 1997) (burden on movant and opponent in traditional summary judgment)
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