Wells Fargo Bank, N.A. v. Smuck
407 S.W.3d 830
| Tex. App. | 2013Background
- MBS–The Falls (a special-purpose LLC) borrowed $9M via a non-recourse note secured by an apartment complex; two individuals (Smuck and White) executed a contemporaneous Non-Recourse Indemnification Agreement as condition of the loan.
- The Note limited borrower liability to the collateral except for enumerated “Non-Recourse Exceptions” (including waste and impairment of lender’s right to foreclose).
- The Indemnification Agreement states Indemnitors (Smuck and White) "assume liability for and agree to pay... losses, damages, costs and expenses... for which Borrower may be personally liable pursuant to the Non-Recourse Exceptions," and makes liability joint and several.
- Wells Fargo (assignee) obtained interlocutory summary judgment in Tarrant County against MBS–The Falls and Normandale for amounts tied to alleged waste and impairment of foreclosure rights; that judgment later became final when Wells Fargo nonsuited claims against the indemnitors in that case.
- Wells Fargo sued Smuck and White in Harris County seeking indemnity for the Tarrant County judgment; the trial court entered a take‑nothing judgment for the indemnitors. The appellate court reversed and rendered judgment for Wells Fargo for $10,068,453.49.
Issues
| Issue | Plaintiff's Argument (Wells Fargo) | Defendant's Argument (Smuck / White) | Held |
|---|---|---|---|
| Scope of Indemnification Agreement — whether it covers lender's own losses or only third‑party claims | Indemnitors guaranteed payment for any losses of lender arising from borrower liability under Non‑Recourse Exceptions (including lender's own losses) | Smuck: “indemnification” applies only to third‑party claims against lender; not lender's own losses. White: acknowledges scope but argues the Tarrant judgment was a deficiency judgment, not Non‑Recourse Exception damages | Court: Agreement is a guaranty covering lender’s own losses and third‑party claims arising from borrower liability under Non‑Recourse Exceptions; Smuck’s narrow reading rejected |
| Whether Wells Fargo could rely on the Tarrant County summary judgment to trigger indemnitors’ liability, or had to re‑prove Non‑Recourse Exceptions in the Harris County trial | A final judgment against the borrower on Non‑Recourse Exception claims suffices to trigger indemnitors’ liability; requiring relitigation would be an impermissible collateral attack | Indemnitors argued Wells Fargo needed to prove the Non‑Recourse Exceptions anew because the Tarrant judgment did not explicitly reference the exceptions or instead represented a deficiency | Court: A plaintiff’s summary judgment is a judgment on the merits; Wells Fargo proved the Tarrant judgment arose from its Non‑Recourse Exception claims and thus indemnitors’ liability was triggered; relitigation would be collateral attack and is impermissible |
| Sufficiency of evidence that Tarrant judgment was based on Non‑Recourse Exceptions | Petition and interlocutory judgment, plus uncontested trial evidence and admissions, show Tarrant suit pleaded only Non‑Recourse Exception claims and the interlocutory order awarded recovery on those claims | White contended the judgment was merely a deficiency judgment and that summary‑judgment proof was insufficient | Court: Evidence legally sufficient; appellees failed to rebut that the Tarrant judgment relied on Non‑Recourse Exceptions; Smuck even admitted this on appeal |
| Whether defendants can avoid liability because the borrower failed to contest the summary judgment | Wells Fargo: Indemnitors assumed risk that borrower might not contest and thus could be bound by unchallenged judgment | Indemnitors: An unopposed or insufficiently supported summary judgment should not bind them; trial court found summary lacked proof of Non‑Recourse Exceptions | Court: Even if summary was unopposed, movant must prove entitlement; but failure to appeal by borrower leaves the judgment binding and enforceable against indemnitors under their guaranty |
Key Cases Cited
- Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323 (Tex. 2011) (rules on contract construction and giving effect to the whole instrument)
- Coker v. Coker, 650 S.W.2d 391 (Tex. 1983) (unambiguous contracts are construed as a matter of law)
- Wood v. Canfield Paper Co., 5 S.W.2d 748 (Tex. 1928) (definition and character of a guaranty)
- Browning v. Prostok, 165 S.W.3d 336 (Tex. 2005) (only void judgments may be collaterally attacked)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (legal‑sufficiency review standards)
- Dow Chem. Co. v. Francis, 46 S.W.3d 237 (Tex. 2001) (burden on party attacking adverse finding to show evidence conclusively establishes vital facts)
- Guar. Cnty. Mut. Ins. Co. v. Reyna, 709 S.W.2d 647 (Tex. 1986) (appellate courts may uphold correct judgment on any theory supported by record)