the Note Investment Group, Inc. v. Associates First Capital Corp., Successor by Merger to Associates Financial Services Company, Inc. ( 2015 )

In The
Court of Appeals
Ninth District of Texas at Beaumont
_________________
NO. 09-12-00573-CV
_________________
THE NOTE INVESTMENT GROUP, INC., Appellant
V.
ASSOCIATES FIRST CAPITAL CORP., SUCCESSOR BY MERGER TO
ASSOCIATES FINANCIAL SERVICES COMPANY, INC., Appellee
__________________________________________________________________
On Appeal from the 9th District Court
Montgomery County, Texas
Trial Cause No. 09-12-12262 CV
__________________________________________________________________
OPINION
This is an appeal from a dispute between appellant, The Note Investment
Group, Inc. (“TNIG”), and appellee, Associates First Capital Corp., successor by
merger to Associates Financial Services Company, Inc. (“Associates”), regarding
the sale by TNIG of partial interests in certain seller-financed notes and contracts
for deed to Associates. In three points of error, TNIG contends that the trial court
erred by: (1) awarding litigation costs to Associates under Texas Rule of Civil
1
Procedure 167; (2) concluding that Associates made a valid tender of funds to
TNIG, thereby precluding TNIG’s recovery of attorney’s fees and interest
following the date of the tender; and (3) reconsidering and granting Associates’
motion for partial summary judgment without notice after previously denying
same. We affirm.
I. Factual Background
A. Associates’ Purchases of Seller-Financed Notes and Contracts for Deed
Associates, through its private mortgage operations division (“PMO”), was
in the business of purchasing seller-financed notes and contracts for deed. In some
cases, Associates purchased the entirety of a note or contract for deed, and in each
such instance, Associates paid the full purchase price for the note or contract at the
time of the purchase. In other cases, Associates purchased only a partial interest in
the note or contract for deed. A “partial interest” consists of a set number of
payments under a note or contract for deed. 1 On occasion, Associates purchased
the “back-end” or remainder interest in a note or contract for deed after initially
1
For example, if a note provided for 240 monthly payments, and at the end
of the first year of the note, Associates purchased the next ten years of payments
(the next 120 consecutive monthly payments), Associates would have purchased a
120-month partial interest in the note consisting of payment numbers 13 through
132.
2
purchasing a partial interest. The “remainder interest” consisted of all payments
remaining due under the note or contract following the partial interest.2
In 1999, Associates began purchasing partial interests in seller-financed
notes and contracts for deed from TNIG. Each transaction involving the sale of a
partial interest was governed by an individual, transaction-specific written
agreement between TNIG and Associates, taking one of two forms. For
transactions involving the sale of a partial interest in a promissory note secured by
a deed of trust, TNIG and Associates entered into a written agreement called a
“Deed of Trust Participation Agreement.” For transactions involving the sale of a
partial interest in a contract for deed, TNIG and Associates entered into a written
agreement called an “Agreement for Purchase of a Participation in an Installment
Land Sales Contract.” For simplicity, and unless otherwise stated, we refer to both
types of agreements collectively as “DOTPAs.”
The DOTPAs provided for certain contingencies based on the manner in
which the borrower’s payments under the note or contract for deed were ultimately
made. First, if a note or contract for deed was paid in full by the borrower prior to
the end of Associates’ partial interest, the DOTPAs provided that Associates would
2
Thus, in the foregoing example, the remainder interest in the note consists
of the remaining 108 monthly payments following the expiration of Associates’
partial interest (i.e., payment numbers 133 through 240).
3
be entitled to retain a certain portion of the payoff proceeds (the “Guaranteed
Yield”). All proceeds in excess of the Guaranteed Yield were required to be paid to
the “Seller,” which the DOTPAs defined as TNIG. When a note or contract for
deed was paid in full by the borrower prior to the end of Associates’ partial
interest, the partial interest in the note or contract for deed was referred to as a
“paid-off” partial.
Second, if a note or contract for deed went into default for a period of sixty
days during the time period covered by Associates’ partial interest, the DOTPAs
provided that TNIG was entitled to either (1) repurchase Associates’ interest in the
note or contract for deed within thirty days following notice from Associates, or
(2) cure the default within thirty days and undertake in writing to make all future
scheduled payments to Associates. If TNIG failed to repurchase Associates’
interest or cure the default in a timely manner, Associates had the right under the
DOTPAs to foreclose on the property that was the subject of the note or contract
for deed. In the event of a foreclosure sale, the DOTPAs provided a formula for the
calculation of the amount of the foreclosure proceeds that Associates was entitled
to retain (the “Foreclosure Minimum”), and all proceeds, if any, in excess of the
Foreclosure Minimum were to be paid to the “Seller.”
4
Third, if all payments were timely made to Associates under its partial
interest as they became due, the Deed of Trust Participation Agreements provided
that Associates, upon receipt of the final payment under the partial interest, was
required to assign the note to the owner of the remainder interest and advise the
borrower to make all future payments to the “Seller.” Under such circumstances,
the partial interest in the note was referred to as a “paid-out” partial.
TNIG brokered the sales of the partial interests to Associates. Specifically,
TNIG purchased notes or contracts for deed in their entirety from third-party
sellers, and on the same day or shortly after those purchases, TNIG sold partial
interests in those notes or contracts for deed to Associates. In many cases, TNIG
purchased the notes and contracts for deed from its sellers under purchase
agreements requiring two installment payments by TNIG. Under those purchase
agreements, TNIG agreed to pay the first installment to its seller at the time it
purchased the note or contract for deed from the seller, and it agreed to pay the
second installment to its seller thirty-six months thereafter, provided that the note
or contract for deed did not go into default or was not paid in full prior to that time.
If the note or contract went into default within the first thirty-six months of TNIG’s
purchase, TNIG was not required to pay the second installment to its seller. If the
note or contract for deed was fully paid within the first thirty-six months of
5
TNIG’s purchase, TNIG was required to pay its seller the second installment at the
time of the payoff, and TNIG usually made such payment using the excess funds
that TNIG received from Associates for the paid off partial under the terms of the
DOTPAs. However, if the note or contract for deed did not go into default and was
not fully paid within the first thirty-six months of TNIG’s purchase, TNIG was
contractually obligated to pay its sellers the second installment on the thirty-six
month anniversary of its original purchase of the note or contract.
B. The “Global Agreement” Dispute
Most, if not all, of the sales of partial interests by TNIG to Associates
occurred between late 1999 and mid-2001. In 2000, Citigroup, Inc. (“Citigroup”)
acquired Associates. Within a few months of the acquisition, Citigroup decided to
wind down the operations of Associates’ PMO division and to cease purchasing
seller-financing paper. Accordingly, in May 2001, Associates notified its brokers
and sellers, including TNIG, that it would no longer be purchasing seller-financing
paper, and in June 2001, Associates ceased purchasing such paper from its brokers
and sellers.
After Associates announced that it would no longer be purchasing seller-
financing paper, TNIG contacted the sellers to whom it owed second installment
payments and offered to reassign each seller the remainder interest in the note or
6
contract for deed in exchange for that seller’s agreement to release TNIG from its
obligation to make the second installment payment under the purchase agreement.
In some cases, TNIG’s seller accepted the offer, and TNIG assigned the remainder
interest in the note or contract for deed back to the seller, who released TNIG from
its obligation to pay the second installment obligation under the purchase
agreement. In other cases, TNIG’s sellers did not accept the offer, and in many
such cases, TNIG failed to pay the second installment owed to its seller when it
became due. At least two of those sellers sent demand letters to TNIG threatening
to sue TNIG if it did not immediately make the second installment payment under
their purchase agreements with TNIG. One seller ultimately filed suit against
TNIG and Associates based on TNIG’s alleged failure to make the second
installment payment under the seller’s purchase agreements with TNIG.
According to TNIG’s pleadings in the present lawsuit, TNIG sent a series of
letters to Associates in February and March 2003. In those letters, TNIG claimed
that Associates was contractually bound to purchase the remainder interests in the
notes and contracts for deed in which Associates had previously purchased partial
interests from TNIG. Specifically, TNIG claimed that Associates and TNIG
entered into an agreement (the “Global Agreement”) in 1999 and that under such
agreement, Associates had agreed to purchase the entirety of certain notes and
7
contracts for deed from TNIG through a two-staged funding arrangement that
essentially mirrored the terms of TNIG’s purchase agreements with its sellers.
According to TNIG, the Global Agreement required Associates: (1) to purchase a
partial interest from TNIG in each of the notes and contracts for deed that formed
the basis of the Global Agreement (the first funding stage), and (2) to subsequently
purchase the remainder interest in each note and contract for deed thirty-six
months after the date of Associates’ partial interest purchase (the second funding
stage). TNIG demanded that Associates pay the purchase price for the remainder
interests in certain notes and contracts for deed that had purportedly become due or
were about to become due under the Global Agreement. According to TNIG,
Associates initially requested additional information regarding TNIG’s claims and
demands, but subsequently refused to respond to TNIG’s demands.
C. The DOTPA Dispute
Disagreements between TNIG and Associates also arose in connection with
the parties’ rights and obligations under the terms of the DOTPAs. In December
2001, Associates engaged Grand Servicing Corporation (“Grand”) to service the
partial interests owned by Associates, including the partial interests that Associates
had purchased from TNIG. Soon after Associates hired Grand, Associates and
Grand became aware of certain instances of fraud by sellers of partial interests in
8
seller-financed notes and contracts for deed. Examples of such fraud included
instances in which the seller did not own some or all of the partial interest that it
sold, despite representations to the contrary, as well as instances in which the seller
claimed that it was entitled to receive proceeds for a paid-off partial interest or that
it was entitled to reassignment of a note or contract following the expiration of
Associates’ partial interest when, in reality, the seller had previously transferred
the remainder interest to a third party. None of the fraudulent transactions involved
TNIG. However, after learning of the fraud, a Citigroup attorney instructed Grand
to begin verifying: (1) that any person or entity to whom it reassigned a note or
contract for deed following the expiration of Associates’ partial interest actually
owned the remainder interest in the note or contract; (2) that any person or entity to
whom Grand paid excess funds, if any, remaining following a foreclosure sale or
following an early payment in full of the note or contract for deed actually owned
the remainder interest in the note or contract; and (3) that all persons or entities that
were entitled to receive any portion of the excess funds remaining after a
foreclosure sale or following an early pay off of the note or contract for deed
actually received payment. Grand applied the verification procedures to all partial
interests owned by Associates, not just those that Associates purchased from
TNIG.
9
Following the implementation of the verification procedures, whenever
Grand received proceeds from an early payoff of a note or contract for deed or
from a foreclosure sale involving property securing a note or contract for deed,
Grand paid Associates its Guaranteed Yield or Foreclosure Minimum out of the
proceeds, as required under the DOTPAs. However, before Grand paid any
proceeds in excess of the Guaranteed Yield or Foreclosure Minimum (collectively,
“excess proceeds”) to TNIG, Grand began requiring TNIG to provide Grand with
sufficient documentation, such as TNIG’s purchase agreement with its seller, to
verify that TNIG was, in fact, the owner of the remainder interest in the note or
contract for deed. Similarly, whenever Associates’ partial interest in a note or
contract for deed paid out (i.e., all monthly payments under Associates’ partial
interest were paid by the borrower as they became due), Grand began requiring
TNIG to provide documentation sufficient to verify that TNIG was still the owner
of the remainder interest before Associates would reassign the remainder interest
back to TNIG.
When TNIG received Grand’s requests for documentation, TNIG provided
the requested documentation to the extent it had the documentation in its files.
TNIG, however, did not have a purchase agreement with its seller for every
account, and in many cases, TNIG was unable to provide documentation sufficient
10
to satisfy Grand that TNIG owned the entirety of the remainder interest in a note or
contract. To complicate matters further, Grand realized over time that although a
copy of the purchase agreement between TNIG and its seller was sufficient to
verify whether TNIG had initially purchased the entirety of the note or contract for
deed from its seller (and, thus, that TNIG owned the remainder interest in the note
or contract at the time it entered into the DOTPA with Associates), it was not
sufficient to verify that TNIG had paid its seller the second installment under the
purchase agreement and, therefore, that TNIG was the only entity with a claim to
the excess proceeds under the DOTPAs. The purchase agreement between TNIG
and its seller was also not sufficient to verify that TNIG still owned the remainder
interest and had not assigned the remainder interest back to its seller or to a third
party since entering into the DOTPA with Associates. Therefore, in certain cases,
even when TNIG provided Grand with a copy of the purchase agreement between
TNIG and its seller, Grand nevertheless required TNIG to provide additional
documentation, such as a release, a cancelled check showing that TNIG had paid
its seller the second installment under the purchase agreement, or a written
statement from TNIG indicating whether it had paid the second installment to its
seller, before Grand would release the excess proceeds to TNIG or its sellers under
the DOTPAs.
11
Initially, in some cases, Grand was able to obtain documentation sufficient
to verify that TNIG owned the remainder interest in the note or contract for deed
and that TNIG still owed the second installment payment under its purchase
agreement with its seller. In those cases, if Grand was able to verify the amount
that TNIG owed to its seller for the second installment payment, Grand released
the excess proceeds in the form of two checks: one to TNIG’s seller for the amount
of the second installment payment, and one to TNIG for the rest of the excess
proceeds.
However, Grand’s representative testified that as time went on, TNIG
became less cooperative and less willing to comply with Grand’s verification
requests. In cases in which Grand was able to determine that TNIG still owned the
remainder interest in a note or contract for deed, but was unable to verify the
amount, if any, that TNIG still owed to its seller, Grand attempted to disperse the
excess proceeds by issuing a joint check made payable to both TNIG and its seller
for the total amount of the excess proceeds. TNIG, however, refused to accept
payment in the form of the joint checks it received from Grand.
Eventually, Grand began placing all excess proceeds for paid-off accounts
and accounts involving foreclosure sales in a non-interest bearing escrow account
(the “Escrow Account”), rather than releasing those funds to TNIG or to TNIG’s
12
sellers. Likewise, to the extent any accounts paid out (i.e., Associates collected all
payments due under its partial interest), Grand did not reassign the note or contract
for deed back to TNIG following the expiration of Associates’ partial interest, but
instead continued to collect monthly payments under the notes or contracts for
deed and placed those payments in the Escrow Account. At trial, Grand’s
representative testified that the excess proceeds and payments for paid-out
accounts were placed in the Escrow Account “for safekeeping, until such time as
[Grand] would gather enough documentation to ascertain where they should be
dispersed.”
II. Procedural Background
On August 14, 2006, TNIG filed suit against Associates. In its pleadings,
TNIG asserted claims against Associates for breach of contract, fraud, conversion,
and unjust enrichment arising out of Associates’ failure to make second funding
payments under the alleged Global Agreement (the “Global Agreement Claims”). 3
TNIG sought actual damages in the amount of $917,260, which TNIG claimed was
equal to the aggregate amount of the alleged second funding payments due under
the Global Agreement, plus attorney’s fees and exemplary damages. In October
3
TNIG also asserted a claim for violations of the Texas Deceptive Trade
Practices-Consumer Protection Act, which TNIG subsequently removed from its
pleadings.
13
2009, TNIG nonsuited its claims against Associates in that lawsuit and filed a
virtually identical lawsuit against Associates on December 21, 2009. 4
On May 13, 2011, Associates filed a traditional and no-evidence motion for
summary judgment on the Global Agreement Claims. In its motion, Associates
argued, among other things, that it was entitled to summary judgment because: (1)
no Global Agreement existed between TNIG and Associates; (2) even if it was
assumed that the Global Agreement existed, it was unenforceable under the statute
of frauds; (3) the admission of evidence regarding the alleged Global Agreement
was barred by the parol evidence rule; and (4) TNIG’s claims for fraud,
conversion, and unjust enrichment arising out of the Global Agreement were
barred by the economic loss rule. TNIG filed its response to Associates’ summary
judgment motion on June 2, 2011.
On June 6, 2011, prior to any ruling by the trial court on Associates’ motion
for summary judgment, Associates filed a “Declaration of Settlement Offer”
pursuant to Texas Rule of Civil Procedure 167. Four days later, on June 10, 2011,
Associates sent TNIG a written settlement offer, in which Associates offered to
4
The record reflects that when TNIG non-suited its initial lawsuit against
Associates, the parties entered into a Rule 11 agreement in which they agreed, for
purposes of limitations, that any suit filed thereafter by TNIG and Associates
involving the same claims would be treated as filed on the date the initial lawsuit
was filed. Further, the parties agreed that all discovery conducted during the initial
lawsuit could be used in any new proceeding.
14
pay TNIG the aggregate sum of $350,000 in exchange for a dismissal and release
of TNIG’s claims. It is undisputed that TNIG did not accept the offer.
On June 22, 2011, TNIG filed its third amended petition, in which it alleged,
for the first time, claims against Associates for breach of contract, conversion, and
exemplary damages arising out of the individual DOTPAs (the “Individual
DOTPA Claims”). In particular, TNIG alleged that Associates breached the
individual DOTPAs by failing to pay TNIG proceeds in excess of those to which
Associates was entitled under the DOTPAs. Additionally, TNIG alleged that
Associates converted funds owed to TNIG by continuing to collect and retain
payments for notes and contracts for deed after Associates had collected all
payments to which it was entitled under the terms of the DOTPAs. TNIG’s newly-
asserted claims were essentially based on the theory that Associates violated the
terms of the DOTPAs by failing to pay to TNIG: (1) all amounts in excess of
Associates’ Guaranteed Yield for notes and contracts for deed that were paid off in
full during Associates’ partial interest, (2) all amounts in excess of Associates’
Foreclosure Minimum for notes and contracts for deed involving a foreclosure
sale, and (3) all monthly payments collected by Associates for paid-out accounts
following the expiration of Associates’ partial interest.
15
On June 24, 2011, the trial court held a hearing on Associates’ motion for
summary judgment on the Global Agreement Claims. On July 8, 2011, the trial
court entered an order denying that motion.
On July 21, 2011, Associates sent a letter and check in the amount of
$174,562.50 to TNIG. In the letter, Associates explained that the $174,562.50
represented all amounts being held by Grand in the Escrow Account for paid-off
and paid-out accounts, plus interest on those amounts from the date each payment
was received through July 22, 2011.5 It also explained that the $174,562.50
represented Associates’ tender of all amounts owed to TNIG for the Individual
DOTPA Claims as of the date of the tender. TNIG received the tender letter and
check on July 22, 2011, but ultimately returned the check to Associates on
September 7, 2011, with a letter stating that TNIG had rejected Associates’ tender
of funds.
Thereafter, the trial court entered a docket control order setting the case for
trial on January 23, 2012. At the docket call on January 20, 2012, the trial judge
informed the parties that he had again reviewed Associates’ May 13, 2011 motion
for summary judgment on the Global Agreement Claims, as well as TNIG’s
5
Although Associates’ July 21, 2011 letter described the tender as only
including amounts withheld for paid-off and paid-out accounts, plus interest, the
record reflects that the tender also included amounts withheld by Grand for at least
one account in which the subject property was sold in foreclosure.
16
response thereto, and had decided to grant the motion. Accordingly, on January 20,
2012, the trial judge signed an order granting summary judgment in favor of
Associates on the Global Agreement Claims and stating that the only claims
remaining in the lawsuit were TNIG’s “causes of action for conversion and breach
of contract to recover any proceeds received and held by [Associates] in excess of
[Associates’] entitlement under the individual [DOTPAs].”
On January 23, 2012, the case was called to trial and a jury was impanelled.
On January 25, 2012, the third day of trial, the trial court declared a mistrial and
dismissed the jury. Additionally, the trial court ordered Associates to deposit the
$174,562.50 that it had tendered to TNIG on July 21, 2011, into the registry of the
court. The record indicates that Associates tendered the $174,562.50 into the
registry of the court on February 2, 2012.
On June 1, 2012, Associates filed a motion for partial summary judgment,
asserting that limitations barred a portion of TNIG’s remaining breach of contract
and conversion claims. On July 10, 2012, the trial court signed an order granting in
part and denying in part the June 1, 2012 partial summary judgment motion.
On July 10, 2012, the case proceeded to trial before the bench. At trial,
TNIG presented evidence in support of its remaining breach of contract and
conversion claims arising out of the individual DOTPAs for twenty-five notes and
17
contracts for deed. At the close of evidence, the trial court requested briefing from
the parties regarding TNIG’s right to recover attorney’s fees under section 38.002
of the Texas Civil Practice and Remedies Code. After both parties submitted trial
briefs on the issue of TNIG’s attorney’s fees, the trial court entered an order on
July 18, 2012, denying TNIG’s request for attorney’s fees under Texas Civil
Practice & Remedies Code § 38.002.
On August 24, 2012, the trial court rendered its final judgment. The trial
court’s judgment provided that TNIG was entitled to an award of damages against
Associates in the aggregate amount of $131,876.85, inclusive of interest. However,
the judgment further provided that under Texas Rule of Civil Procedure 167.4,
Associates was entitled to an award of litigation costs in the amount of $65,938.42,
which was to be applied as an offset against TNIG’s recovery. Accordingly, the
trial court ordered that $65,938.43 be paid to TNIG as its net recovery on its claims
against Associates and that $65,938.42 be paid to Associates for its litigation costs
under Rule 167. The trial court ordered that both TNIG’s net recovery and
Associates’ award of litigation costs would be paid out of the funds tendered by
Associates into the registry of the court. At TNIG’s request, the trial court entered
findings of fact and conclusions of law. TNIG then timely filed its notice of appeal.
18
III. Issues Presented
TNIG presents three issues on appeal. In its first issue, TNIG argues that the
trial court erred by awarding litigation costs to Associates under Texas Rule of
Civil Procedure 167 because the Individual DOTPA Claims had not been pled by
TNIG at the time Associates made its settlement offer under Rule 167 and, thus,
were not claims by and against Associates, as required to be included in a
settlement offer under that rule. TNIG argues that because Associates’ settlement
offer did not include the claims that ultimately formed the basis of the trial court’s
judgment, Associates was not entitled to an award of litigation costs under Rule
167. In its second issue, TNIG argues that the trial court erred in concluding that
the letter and check sent by Associates to TNIG on July 21, 2011, constituted a
valid tender of funds for the Individual DOTPA Claims, thereby precluding TNIG
from recovering attorney’s fees under Chapter 38 of the Texas Civil Practice and
Remedies Code and interest following the date of the tender. In its third issue,
TNIG argues that the trial court erred in reconsidering and granting Associates’
May 13, 2011 motion for summary judgment on the Global Agreement Claims
after previously denying such motion and failing to provide notice to TNIG that the
motion would be reconsidered.
19
IV. Litigation Costs
In its first point of error, TNIG argues that the trial court erred by awarding
litigation costs to Associates under Texas Rule of Civil Procedure 167.
Specifically, TNIG argues that the language of Rule 167 limits the claims that may
be included in a settlement offer under that rule to claims that have been formally
pled at the time the settlement offer is made. TNIG contends that because it had
not yet pled the Individual DOTPA Claims at the time Associates made its
settlement offer under Rule 167, the settlement offer could not and did not include
those claims. 6 TNIG argues that because Associates’ settlement offer did not
include the claims that ultimately formed the basis of the trial court’s judgment,
Associates was not entitled to an award of litigation costs under Rule 167.
Chapter 42 of the Texas Civil Practice and Remedies Code governs the
award of litigation costs against a party who rejects an offer of settlement made in
accordance with its provisions. See Tex. Civ. Prac. & Rem. Code Ann. §§ 42.001-
.005 (West 2015). Under Chapter 42, if a settlement offer is made and rejected, and
6
In the section of its brief entitled “Summary of the Argument,” TNIG casts
its first point of error as a challenge to the legal and factual sufficiency of the
evidence supporting the trial court’s award of litigation costs to Associates under
Rule 167. However, upon reviewing the substance of TNIG’s arguments for this
issue, we conclude that TNIG is actually challenging the trial court’s construction
of Rule 167, as well as its interpretation of the language contained in Associates’
offer of settlement under that rule.
20
the judgment ultimately proves to be significantly less favorable to the rejecting
party than the settlement offer, then the offering party shall recover litigation costs
from the rejecting party from the time the offer was rejected to the time of
judgment. Id. § 42.004(a), (c). The purpose of the offer of settlement mechanism
set forth in Chapter 42 is to reduce the cost of litigation in certain cases by
providing an incentive for litigants to make and accept reasonable settlement offers
early in the litigation process. In re CompleteRX, Ltd., 366 S.W.3d 318, 321-22
(Tex. App.—Tyler 2012, orig. proceeding); see also Amedisys, Inc. v. Kingwood
Home Health Care, LLC, 437 S.W.3d 507, 513 (Tex. 2014) (noting that “Texas has
a public policy preference for the settlement of legal disputes” and that “chapter 42
and rule 167 encourage such settlements”).
When the Legislature created the offer of settlement mechanism in Chapter
42, it directed the Texas Supreme Court to promulgate rules providing the
procedural details for its implementation. See Tex. Civ. Prac. & Rem. Code Ann. §
42.005. In response, the Court adopted Texas Rule of Civil Procedure 167. See
Tex. R. Civ. P. 167.1-.7; CompleteRX, 366 S.W.3d at 322. Rule 167.2(a) specifies
how the settlement offer provision is to be invoked:
(a) Defendant’s declaration a prerequisite; deadline. A settlement
offer under this rule may not be made until a defendant – a party
against whom a claim for monetary damages is made – files a
declaration invoking this rule. When a defendant files such a
21
declaration, an offer or offers may be made under this rule to settle
only those claims by and against that defendant. The declaration must
be filed no later than 45 days before the case is set for conventional
trial on the merits.
Tex. R. Civ. P. 167.2(a). Rule 167.2(b), in turn, sets forth the requirements with
which a settlement offer made under the rule must comply:
(b) Requirements of an offer. A settlement offer must:
(1) be in writing;
(2) state that it is made under Rule 167 and Chapter 42 of the
Texas Civil Practice and Remedies Code;
(3) identify the party or parties making the offer and the party
or parties to whom the offer is made;
(4) state the terms by which all monetary claims – including
any attorney fees, interest, and costs that would be recoverable
up to the time of the offer – between the offeror or offerors on
the one hand and the offeree or offerees on the other may be
settled;
(5) state a deadline – no sooner than 14 days after the offer is
served – by which the offer must be accepted;
(6) be served on all parties to whom the offer is made.
Id. 167.2(b).
Similar to Chapter 42, Rule 167.4(a) provides that if a settlement offer made
under the rule “is rejected, and the judgment to be awarded on the monetary claims
covered by the offer is significantly less favorable to the offeree than was the offer,
the court must award the offeror litigation costs against the offeree from the time
22
the offer was rejected to the time of judgment.” Id. 167.4(a). Rule 167.4(b) states
that “[a] judgment award on monetary claims is significantly less favorable than an
offer to settle those claims if: (1) the offeree is a claimant and the judgment would
be less than 80 percent of the offer; or (2) the offeree is a defendant and the
judgment would be more than 120 percent of the offer.” Id. 167.4(b). Litigation
costs awarded to a defendant under Rule 167 “must be made a setoff to the
claimant’s judgment against the defendant.” Id. 167.4(g).
TNIG argues that at the time Associates made its settlement offer on June
10, 2011, TNIG had not yet filed its third amended petition adding the Individual
DOTPA Claims. Rather, TNIG points out, the live pleading on file for TNIG at the
time the settlement offer was made was TNIG’s second amended petition, which
included only the Global Agreement Claims. TNIG argues that because the
Individual DOTPA Claims were not formally pled by TNIG until June 22, 2011—
twelve days after Associates made its Rule 167 settlement offer—the Individual
DOTPA Claims were not “claims by and against” Associates at the time the
settlement offer was made and thus could not, as a matter of law, be included in the
settlement offer under the express language of Rule 167.2(a). Essentially, TNIG
argues that the phrase “claims by and against that defendant,” as used in Rule
23
167.2(a), means only those claims that have been formally pled by and against the
defendant at the time the settlement offer is made.
Associates, on the other hand, argues that nothing in the language of Rule
167 requires claims to be expressly pled in the parties’ pleadings in order to
constitute “claims by and against that defendant” under Rule 167.2(a). Instead,
Associates contends that the phrase “claims by and against that defendant” was
intended to include both pled and unpled claims. Associates argues that any other
interpretation would frustrate the intent behind the rule.
The resolution of this issue requires us to interpret Rule 167.2(a). The
construction of a procedural rule is a question of law that is subject to de novo
review. See Thomas v. Olympus/Nelson Prop. Mgmt., 148 S.W.3d 395, 399 (Tex.
App.—Houston [14th Dist.] 2004, no pet.). We apply the same rules of
construction to procedural rules that we apply to the interpretation of statutes. Ford
Motor Co. v. Garcia, 363 S.W.3d 573, 579 (Tex. 2012). In construing a rule of
procedure, our primary objective is to determine and give effect to the rule’s intent.
See Thomas, 148 S.W.3d at 399. To accomplish this goal, “[w]e first look to the
plain language of the rule[.]” Ford Motor Co., 363 S.W.3d at 579. We must
examine the rule as a whole, giving effect to every word, clause, and sentence. See
Tex. Adjutant Gen.’s Office v. Ngakoue, 408 S.W.3d 350, 354 (Tex. 2013). If the
24
rule’s language is clear and unambiguous, we interpret the rule according to its
plain meaning unless a different meaning is apparent from the context or the plain
meaning would lead to absurd results. See In re Christus Spohn Hosp. Kleberg,
222 S.W.3d 434, 437 (Tex. 2007); Cadena Comercial USA Corp. v. Tex. Alcoholic
Beverage Comm’n, 449 S.W.3d 154, 162 (Tex. App.—Austin 2014, pet. filed).
Further, the Texas Code Construction Act applies to the construction of procedural
rules and, among other things, permits our consideration of the object sought to be
attained by the rule, the circumstances under which the rule was enacted, and the
consequences of a particular construction of the rule, regardless of whether the rule
is ambiguous. See Tex. Gov’t Code Ann. §§ 311.002(4), 311.023(1)-(2), (5) (West
2013); see also Atmos Energy Corp. v. Cities of Allen, 353 S.W.3d 156, 160 (Tex.
2011); In re Walkup, 122 S.W.3d 215, 217 (Tex. App.—Houston [1st Dist.] 2003,
no pet.). We are also guided by the mandate of Rule 1, which requires us to
liberally construe the Texas Rules of Civil Procedure to obtain a “just, fair,
equitable[,] and impartial adjudication of the rights of litigants under established
principles of substantive law” with “as great expedition and dispatch and at the
least expense both to the litigants and to the state as may be practicable[.]” Tex. R.
Civ. P. 1.
25
Based on the foregoing rules of construction, we begin our analysis by
examining the plain language of the rule. See Ford Motor Co., 363 S.W.3d at 579.
As both parties note, Rule 167.2(a) expressly limits the types of claims that may be
included in a settlement offer under Rule 167 to “claims by and against that
defendant.” Tex. R. Civ. P. 167.2(a). Rule 167 does not define the term “claims.”
See Tex. R. Civ. P. 167. Chapter 42, however, defines a “‘[c]laim’” as “a request,
including a counterclaim, cross-claim, or third-party claim, to recover monetary
damages.” Tex. Civ. Prac. & Rem. Code Ann. § 42.001(1). Because Rule 167 was
adopted for the specific purpose of implementing the offer of settlement procedure
set forth in Chapter 42, we find Chapter 42’s definition of the term “claim” to be
directly applicable here. See Tex. Gov’t Code Ann. § 311.011(b) (West 2013)
(“Words and phrases that have acquired a technical or particular meaning, whether
by legislative definition or otherwise, shall be construed accordingly.”). Nothing in
Chapter 42’s definition of the term “‘[c]laim’” requires a request for monetary
damages—whether it be a counterclaim, cross-claim, third-party claim, or
otherwise—to be expressly pled in a party’s pleadings at the time the settlement
offer is made in order to constitute a “‘[c]laim.’” See Tex. Civ. Prac. & Rem. Code
Ann. § 42.001(1). To the contrary, the definition unambiguously encompasses any
26
request to recover monetary damages, regardless of whether such request is
contained in a party’s pleadings. See id.
The words “by” and “against” are also not defined by Rule 167, nor are they
defined by Chapter 42. See Tex. Civ. Prac. & Rem. Code Ann. §§ 42.001-.005;
Tex. R. Civ. P. 167.1-.7. Therefore, we construe those words in accordance with
their ordinary and commonly understood meanings. See Indem. Ins. Co. v. City of
Garland, 258 S.W.3d 262, 269 (Tex. App.—Dallas 2008, no pet.). The ordinary
meaning of the word “by” is “through or through the medium of[.]” By,
WEBSTER’S NINTH NEW COLLEGIATE DICTIONARY (1988). The word “against”
means “in opposition or hostility to[.]” Against, WEBSTER’S NINTH NEW
COLLEGIATE DICTIONARY (1988). Thus, when we construe those words according
to their commonly accepted definitions, we find that claims are “by” a defendant if
they are simply “through” that defendant and claims are “against” a defendant if
they are “in opposition to” that defendant.
We also note that the word “that,” as used in the phrase “claims by and
against that defendant[,]” is used grammatically as a determiner, which is a word,
such as “this,” “that,” “these,” and “those,” that “determines the use of a noun
without actually modifying it.” See RANDOM HOUSE WEBSTER’S GRAMMAR,
USAGE, AND PUNCTUATION 66 (2008). When used as a determiner, “that”
27
commonly means the particular “person, thing, or idea indicated, mentioned, or
understood from the situation[.]” That, WEBSTER’S NINTH NEW COLLEGIATE
DICTIONARY (1988). Here, the word “that” determines the use of the word
“defendant.” See Tex. R. Civ. P. 167.2(a). The only other references to the term
“defendant” in Rule 167.2(a) are to the particular defendant that has filed the
declaration invoking Rule 167. Id. Thus, when read contextually and in accordance
with applicable grammatical rules, “that defendant” as used in Rule 167.2(a),
unambiguously refers to the specific defendant that filed the declaration invoking
Rule 167. See Tex. R. Civ. P. 167.2(a); see also Tex. Gov’t Code Ann. §
311.011(a).
We conclude that the phrase “claims by and against that defendant” in Rule
167.2(a) is clear and unambiguous and, according to its plain language, limits the
claims that may be included in a settlement offer under Rule 167 to (1) requests to
recover monetary damages that are by (i.e., “through”) the defendant that filed the
declaration invoking Rule 167, and (2) requests to recover monetary damages that
are against (i.e., “in opposition to”) the defendant that filed the declaration
invoking Rule 167. See Tex. R. Civ. P. 167.2(a). Contrary to TNIG’s argument,
nothing in the plain language of the rule indicates that a claim must be formally
pled when the settlement offer is made in order to be included in a settlement offer
28
under the rule, and we decline to read any such requirement into those words
when, as here, there is no indication in the language of the rule or otherwise that
the Texas Supreme Court intended that we do so. See Fitzgerald v. Advanced Spine
Fixation Sys., Inc., 996 S.W.2d 864, 867 (Tex. 1999) (explaining that a court may
not add words into a rule or statute unless truly extraordinary circumstances exist
showing an unmistakable intent by the enacting body); Young v. McKim, 373
S.W.3d 776, 781 (Tex. App.—Houston [14th Dist.] 2012, pet. denied) (concluding
that when construing a statute, a court should “presume words excluded from the
statute were excluded purposefully”).
Other provisions of Rule 167 support this interpretation. Specifically, Rule
167.2(d) identifies the types of claims that may not be included in a settlement
offer under Rule 167. See Tex. R. Civ. P. 167.2(d). Rule 167.2(d) provides: “An
offer must not include non-monetary claims and other claims to which this rule
does not apply.” Id. Rule 167.1, in turn, sets forth a list of claims to which Rule
167 does not apply, including claims in (a) class actions, (b) shareholder derivative
actions, (c) actions by or against the State, a unit of state government, or a political
subdivision of the State, (d) actions brought under the Family Code, (e) actions to
collect workers’ compensation benefits under title 5, subtitle A of the Labor Code,
and (f) actions filed in justice of the peace courts or small claims courts. See Tex.
29
Rawle Civ. P. 167.1. Noticeably absent from both of these provisions are claims that
have not been formally pled at the time the settlement offer is made. See Tex. R.
Civ. P. 167.1, 167.2(d).
Further, we find that the language of Chapter 42 supports our interpretation
of Rule 167.2(a). Section 42.002, which governs the applicability and effect of the
offer of settlement statute, states in relevant part:
(c) This chapter does not apply until a defendant files a declaration
that the settlement procedure allowed by this chapter is available in
the action. If there is more than one defendant, the settlement
procedure allowed by this chapter is available only in relation to the
defendant that filed the declaration and to the parties that make or
receive offers of settlement in relation to that defendant.
Tex. Civ. Prac. & Rem. Code Ann. § 42.002(c) (emphasis added). Moreover,
section 42.005, which directs the Texas Supreme Court to promulgate rules
implementing the offer of settlement procedures set forth in Chapter 42, states that
“[t]he rules promulgated by the supreme court must address actions in which there
are multiple parties[.]” Id. § 42.005(c). Rule 167.2(a), which was promulgated in
accordance with the directives set forth in section 42.005, largely follows the
format and substance of section 42.002(c). See Tex. R. Civ. P. 167.2(a); see also
Tex. Civ. Prac. & Rem. Code Ann. § 42.002(c). By contrast, we find nothing in the
language of Chapter 42 suggesting that the intended purpose of the phrase “claims
by and against that defendant” is, as TNIG contends, to limit the claims that may
30
be included in a settlement offer to those that have been specifically pled by and
against a defendant at the time the settlement offer has been made. Thus, the
language of Chapter 42 reinforces the conclusion that the intended purpose of the
phrase “claims by and against that defendant” in Rule 167.2(a) is to limit the
claims that may be included in a settlement offer to claims pertaining to the
specific defendant that filed the declaration invoking Rule 167, and not, as TNIG
suggests, to limit the claims in a settlement offer to those that have been formally
pled at the time the settlement offer is made.
TNIG argues that the language of Rule 167.2(b)(4) supports its interpretation
that a settlement offer under Rule 167 may only include claims that have been pled
by or against a defendant at the time the settlement offer is made. Rule 167.2(b)(4)
states that a settlement offer must “state the terms by which all monetary claims –
including any attorney fees, interest, and costs that would be recoverable up to the
time of the offer – between the offeror or offerors on the one hand and the offeree
or offerees on the other may be settled[.]” Tex. R. Civ. P. 167.2(b)(4). TNIG
argues that the phrase “that would be recoverable up to the time of the offer” in
Rule 167.2(b)(4) indicates that “the only thing the [d]efendant can try to settle in a
suit where it has invoked [Rule] 167 is a monetary claim that would have been
recoverable by [the] plaintiff at the time of the offer.” TNIG’s argument
31
necessarily assumes that the phrase “that would be recoverable up to the time of
the offer” in Rule 167.2(b)(4) modifies the term “all monetary claims[.]” We
disagree with that assumption.
The language on which TNIG relies—“that would be recoverable up to the
time of the offer”—is part of the larger phrase “including any attorney fees,
interest, and costs that would be recoverable up to the time of the offer.” Tex. R.
Civ. P. 167.2(b)(4). The word “‘including[,]’” which is a term of enlargement and
not limitation, typically introduces a non-exhaustive list of components that are
part of a larger whole. See Tex. Gov’t Code Ann. § 311.005(13) (West 2013). As
used in Rule 167.2(b)(4), the word “including” introduces a non-exhaustive list of
categories of monetary claims—“attorney fees, interest, and costs”—that are part
of a larger whole—“all monetary claims[.]” See Tex. R. Civ. P. 167.2(b)(4). This
non-exhaustive list is syntactically separated from the rest of the sentence,
including the phrase “all monetary claims[,]” by dashes. Id.
The phrase “that would be recoverable up to the time of the offer”
immediately follows the words “attorney fees, interest, and costs[]” and is likewise
included in the portion of the sentence that is set off by dashes. Id. As used in Rule
167.2(b)(4), the phrase “that would be recoverable up to the time of the offer” is an
adjective clause, which, by definition, modifies a noun or pronoun. See id.;
32
RANDOM HOUSE WEBSTER’S GRAMMAR, USAGE, AND PUNCTUATION at 97. It is a
general rule of grammar that modifying words or phrases are presumed to apply to
the words or phrases that immediately precede them and not to those more remote.
See Tex. West Oaks Hosp., LP v. Williams, 371 S.W.3d 171, 184 (Tex. 2012)
(“‘Modifiers should come, if possible, next to the words they modify.’” (quoting
WILLIAM STRUNK, JR. & E.B. WHITE, THE ELEMENTS OF STYLE R. 30 (4th ed.
2000))); see also BRYAN A. GARNER, GARNER’S MODERN AMERICAN USAGE 540
(3d ed. 2009) (noting that “[w]hen modifying words are separated from the words
they modify, readers have a hard time processing the information” and that “the
true referent should generally be the closest appropriate word[.]”); H. RAMSEY
FOWLER, THE LITTLE, BROWN HANDBOOK 147 (2d ed. 1983) (“Adjective clauses
ordinarily fall immediately after the noun or pronoun they modify.”). This rule is
related to the last antecedent doctrine of statutory interpretation, which provides
that “a qualifying phrase should be applied only to the portion of the sentence
‘immediately preceding it.’” Williams, 371 S.W.3d at 185 (quoting City of Dallas
v. Stewart, 361 S.W.3d 562, 571 n.14 (Tex. 2012)).
Applying this rule, the clause “that would be recoverable up to the time of
the offer” modifies only the words immediately preceding it—“attorney fees,
interest, and costs”—and not the more remote phrase “all monetary claims.” See
33
Tex. R. Civ. P. 167.2(b)(4). This interpretation is supported by the location of the
dashes in the sentence, which effectively limit the reach of the modifying clause
“that would be recoverable up to the time of the offer” to the words “attorney fees,
interests, and costs,” which, like the modifying clause, are located within the part
of the sentence set off by the dashes. See id. Rule 167.2(b)(4), therefore, does not
support TNIG’s construction of Rule 167.2(a).
Having concluded that Rule 167.2(a) does not prohibit a settlement offer
from including unpled claims, we now examine whether the trial court correctly
concluded that Associates’ settlement offer under Rule 167 included the Individual
DOTPA Claims that ultimately formed the basis of the trial court’s judgment. The
record reflects that Associates attached a copy of its June 10, 2011 settlement offer
as an exhibit to its motion for litigation costs under Rule 167. The settlement offer
states, in relevant part, as follows:
Defendant [Associates] has submitted to the Court a
Declaration of Settlement Offer regarding Associates’ intent to submit
to Plaintiff [TNIG] an offer of settlement pursuant to Rule 167 of the
Texas Rules of Civil Procedure. This letter constitutes that offer. This
offer is being made pursuant to Rule 167 of the Texas Rules of Civil
Procedure and Chapter 42 of the Texas Civil Practice & Remedies
Code. This offer is being made on behalf of Associates and being
made to TNIG.
Associates hereby offers to pay to TNIG the aggregate sum of
$350,000.00 (the “Settlement Sum”) in full and complete satisfaction
of all monetary claims of TNIG against Associates, including claims
34
for attorney’s fees, costs and interests [sic], if any, that would be
recoverable up to the date hereof. Pursuant to Rule 167.2(c), the only
conditions to such offer are (1) a dismissal of the claims asserted by
TNIG against Associates with prejudice, (2) a release by TNIG of
Associates, its employees, agents, officers, directors, and
representatives, including any servicer acting on behalf of Associates,
from any and all claims asserted or assertable by TNIG in the
pending lawsuit or which pertain in any way to any of the contracts
for deed, mortgages, and transactions which are the subject of the
pending lawsuit[,] and (3) TNIG’s agreement to indemnify Associates
and its representatives, including any servicer acting on behalf of
Associates, from any loss, injury, damage, or cost (including
attorney’s fees) suffered or incurred in connection with any claim by
any seller to TNIG of any of the contracts for deed or mortgages
which are the subject of the pending lawsuit.
(Emphasis added). The settlement offer expressly states that it applies to “all
monetary claims of TNIG against Associates[.]” It further states that it is
conditioned upon a dismissal of “the claims asserted by TNIG against Associates”
and TNIG’s execution of a release of Associates “from any and all claims asserted
or assertable by TNIG in the pending lawsuit or which pertain in any way to any of
the contracts for deed, mortgages, and transactions which are the subject of the
pending lawsuit[.]”
TNIG does not contend, and we do not find, that Associates’ settlement offer
under Rule 167 is ambiguous. “The construction of an unambiguous writing is a
question of law.” Ins. Corp. of Am. v. Webster, 906 S.W.2d 77, 80-81 (Tex. App.—
Houston [1st Dist.] 1995, writ denied). When a writing is unambiguous, effect will
35
be given to the objective intention of the party or parties as expressed within the
writing. Boyd v. Am. Bank of Commerce at Wolfforth, 872 S.W.2d 29, 31 (Tex.
App.—Amarillo 1994, writ dism’d by agr.).
In Amedisys, Inc., the Texas Supreme Court analyzed the language of a
settlement offer made under Rule 167 to determine, inter alia, whether the offer
was intended to include claims that had not yet been asserted. 437 S.W.3d at 515.
In that case, the defendant sent the plaintiff a settlement offer under Rule 167,
which stated in relevant part:
Please accept this letter as an offer of settlement regarding the above
referenced matter. Specifically, my client, [Kingwood] makes this
offer to pay your client, [Amedisys] to settle all monetary claims
between the parties in accordance with Texas Civil Practice &
Remedies Code Chapter 42 and Texas Rule of Civil Procedure 167.
...
[Kingwood] offers to settle with Amedisys the following claims in
accordance with Texas Civil Practice & Remedies Code Chapter 42
and Texas Rule of Civil Procedure 167:
[Kingwood] offers a total sum of $90,000 to settle all claims asserted
or which could have been asserted by Amedisys against [Kingwood]
in the above referenced case. This full and final offer is for all
monetary damages claimed—including attorney[’]s fees, costs and
interest that were recoverable as of the date of this offer by
[Kingwood]. A lump-sum payment in the amount of $90,000 will be
made by [Kingwood] within fifteen (15) days after acceptance. If your
client agrees, please indicate so by affixing your signature below and
returning to me.
36
Id. at 514-15. One of the questions before the Court was whether the defendant’s
settlement offer was intended to settle all claims between the plaintiff and the
defendant, including claims that had not yet been asserted, or whether it was only
intended to settle the claims that had been asserted by the parties. Id. at 514-17.
After analyzing the language of the settlement offer, the Court concluded that the
offer was intended to settle all claims between the plaintiff and the defendant,
including claims that had not yet been asserted. Id. at 515. In reaching this
conclusion, the Court first noted that the defendant’s settlement offer was itself
internally inconsistent in its descriptions of the claims that the defendant was
offering to settle. Id. It observed that the settlement offer initially offered to settle
“‘all monetary claims between the parties,’” which omitted any explicit reference
to claims that could have been asserted. Id. It then described the claims as “‘all
claims asserted or which could have been asserted,’” which clearly included claims
not yet asserted. Id. But it subsequently stated that “‘the offer is for all monetary
damages asserted,’” omitting any reference to damages not asserted. Id. Despite
these inconsistencies, the Court concluded that, based on the second description of
“‘all claims asserted or which could have been asserted,’” the settlement offer was
intended to settle all claims, including any claims that had not been asserted. Id. In
doing so, it interpreted the first and third descriptions (“‘claims between the
37
parties’” and “‘damages asserted’”) as shorthand references to the second
description. Id.
We find the Court’s analysis of the settlement offer in Amedisys to be
instructive here. Similar to the settlement offer in Amedisys, Associates’ settlement
offer initially offers to settle “all monetary claims of TNIG against
Associates[.]”Although this description omits any explicit reference to claims that
could have been asserted by TNIG, nothing in that language excludes such claims.
To the contrary, we find that the broad phrase “all monetary claims of TNIG
against Associates[]” can reasonably be interpreted to include both asserted and
unasserted monetary claims by TNIG against Associates. In the next sentence,
Associates’ settlement offer requests a dismissal of “the claims asserted by TNIG
against Associates[,]” but this language is not determinative of the issue since there
would be no need for the court to enter a dismissal of claims that had not been
asserted. The settlement offer then requests TNIG, as part of the proposed
settlement, to release Associates from “any and all claims asserted or assertable by
TNIG in the pending lawsuit or which pertain in any way to any of the contracts
for deed, mortgages, and transactions which are the subject of the pending
lawsuit[.]” This third description clearly includes claims that have actually been
asserted by TNIG and claims that are “assertable”—that is, claims that have not
38
been, but could be, asserted—by TNIG in the pending lawsuit. It also expressly
includes claims by TNIG that pertain in any way to any of the contracts for deed,
mortgages, and transactions that are the subject of the pending lawsuit. This
description (“any and all claims asserted or assertable by TNIG in the pending
lawsuit or which pertain in any way to any of the contracts for deed, mortgages,
and transactions which are the subject of the pending lawsuit”) is the most detailed
description of the claims that Associates was offering to settle. Based on this
description, we conclude that Associates’ settlement offer was intended to settle all
monetary claims by TNIG against Associates, including (i) claims that were
actually asserted by TNIG in the pending lawsuit, (ii) claims that could have been
asserted by TNIG in the pending lawsuit, and (iii) all claims pertaining in any way
to the contracts for deed, mortgages, and transactions that are the subject of the
pending lawsuit. See Amedisys, 437 S.W.3d at 515.
TNIG’s third amended petition reflects that the Individual DOTPA Claims
are claims by TNIG for monetary relief against Associates. Although TNIG had
not yet asserted the Individual DOTPA Claims in its pleadings when Associates
made its settlement offer under Rule 167, the record establishes that each of the
Individual DOTPA Claims that forms the basis of the trial court’s judgment
constituted a claim that pertained to the contracts for deed, mortgages, and
39
transactions that were the subject of TNIG’s Global Agreement Claims or that
otherwise could have been asserted by TNIG in the pending lawsuit at the time the
settlement offer was made. See Tex. R. Civ. P. 51(a) (“The plaintiff in his petition .
. . may join either as independent or as alternate claims as many claims either legal
or equitable or both as he may have against an opposing party.”). Accordingly, we
conclude that Associates’ June 10, 2011 settlement offer under Rule 167 included
each of the Individual DOTPA Claims that form the basis of the trial court’s
judgment. We overrule TNIG’s first issue.
V. Validity of the Tender
In its second point of error, TNIG argues that the trial court erred by
concluding that the letter and check that Associates sent to TNIG on July 21, 2011,
constituted a valid tender with respect to the Individual DOTPA Claims, thereby
precluding TNIG from recovering attorney’s fees under Chapter 38 of the Texas
Civil Practice and Remedies Code and from recovering interest accruing after the
date of the tender. Specifically, TNIG argues that: (1) the tender was not made
within the thirty-day period following TNIG’s presentment of its claim, (2) the
tender was conditional, and (3) the tender was not for the correct amount owed.
Thus, TNIG contends, Associates’ purported tender did not operate to cut off
TNIG’s right to attorney’s fees and interest for the Individual DOTPA Claims, and
40
the trial court’s denial of attorney’s fees and interest accrued after the date of the
tender should be reversed.
Before we reach the merits of TNIG’s arguments under its second point of
error, we note that Texas Rule of Civil Procedure 167.4(f) states that “[a] party
against whom litigation costs are awarded may not recover attorney fees and costs
under another law incurred after the date the party rejected the settlement offer
made the basis of the award.” Tex. R. Civ. P. 167.4(f). Here, the record reflects
that TNIG rejected Associates’ settlement offer under Rule 167 when TNIG failed
to accept the offer by June 27, 2011—the deadline given for TNIG to accept the
offer. See Tex. R. Civ. P. 167.3(c). Because the trial court concluded that
Associates was entitled to an award of litigation costs against TNIG under Rule
167 and because we have resolved each of TNIG’s challenges to that award against
it on appeal, Rule 167.4(f) precludes TNIG from recovering, under Chapter 38 or
otherwise, any attorney’s fees that it incurred in this case after June 27, 2011. See
id. 167.4(f). However, because TNIG challenges the trial court’s denial of all
attorney’s fees and interest it incurred in connection with its claims for breach of
the individual DOTPAs, and not just the attorney’s fees it incurred after the date
that it rejected Associates’ Rule 167 settlement offer, we address the arguments
made by TNIG in its second point of error.
41
Section 38.001 of the Texas Civil Practice and Remedies Code permits a
party to “recover reasonable attorney’s fees . . . in addition to the amount of a valid
claim and costs, if the claim is for . . . an oral or written contract.” Tex. Civ. Prac.
& Rem. Code Ann. § 38.001(8) (West 2015). To recover attorney’s fees under that
section: “(1) the claimant must be represented by an attorney; (2) the claimant must
present the claim to the opposing party or to a duly authorized agent of the
opposing party; and (3) payment for the just amount owed must not have been
tendered before the expiration of the 30th day after the claim is presented.” Id. §
38.002. As a general rule, the party seeking to recover attorney’s fees carries the
burden of proof to show its entitlement to the fees. Smith v. Patrick W.Y. Tam
Trust, 296 S.W.3d 545, 547 (Tex. 2009). “If attorney’s fees are proper under
section 38.001(8), the trial court has no discretion to deny them.” Id.
A proper tender of the just amount owed is a defense to a claim for
attorney’s fees under Chapter 38. See Staff Indus., Inc. v. Hallmark Contracting,
Inc., 846 S.W.2d 542, 548 (Tex. App.—Corpus Christi 1993, no writ). It is also a
defense to a claim for interest on the obligation accruing after the tender. Id. at
549. If the defendant tenders payment for the full amount owed, and the plaintiff
refuses to accept it and proceeds to trial, the defendant is not liable for the
42
plaintiff’s attorney’s fees and subsequent interest. Thomas v. Thomas, 917 S.W.2d
425, 438 (Tex. App.—Waco 1996, no writ); Staff Indus., 846 S.W.2d at 548.
A. Timeliness of the Tender
TNIG first argues that Associates’ July 21, 2011 tender did not constitute a
valid tender of funds because the tender was not made within thirty days following
the presentment by TNIG of its claims for breach of the individual DOTPAs. 7
Specifically, TNIG argues that presentment of its claims for breach of the
individual DOTPAs can be traced back to 2008 when TNIG propounded, and
Associates served its answers to, TNIG’s first set of interrogatories. TNIG
contends that because the presentment of its claims occurred nearly three years
before Associates’ July 21, 2011 tender, the tender was not timely and did not
operate to cut off TNIG’s right to recover attorney’s fees under Chapter 38.
Associates, by contrast, argues that TNIG’s first set of interrogatories and
Associates’ answers thereto did not constitute presentment by TNIG of its claims
7
As Associates correctly points out in its brief, TNIG’s argument that the
tender was invalid because it was not made within thirty days of presentment of its
claims for breach of the individual DOTPAs pertains only to TNIG’s challenge to
the trial court’s denial of attorney’s fees under Chapter 38, and not to its challenge
to the trial court’s denial of interest following the date of the tender. The
requirement that a defendant tender the just amount owed within thirty days of
presentment of a claim is set forth in section 38.002 of the Texas Civil Practice and
Remedies Code, which governs a claimant’s entitlement to attorney’s fees, not
interest. See Tex. Civ. Prac. & Rem. Code Ann. § 38.002.
43
for breach of the individual DOTPAs and that the first time TNIG demanded
payment of or asserted a claim to recover the funds held in the Escrow Account
was when TNIG filed its third amended petition on June 22, 2011.
The trial court concluded that “[t]here was no presentment by TNIG of its
claims on or before June 22, 2011.” The trial court, therefore, implicitly concluded
that TNIG’s first set of interrogatories and Associates’ answers to those
interrogatories, served in 2008, did not constitute presentment of TNIG’s claims
for breach of the individual DOTPAs. The parties on appeal do not dispute the date
that Associates served its answers to TNIG’s first set of interrogatories, the date of
the tender, or the content of the interrogatories and Associates’ answers thereto.
Rather, the limited issue, as briefed by the parties, is whether the specific
interrogatory at issue and its answer, together, constituted presentment of TNIG’s
claims for breach of the individual DOTPAs so as to make Associates’ July 21,
2011 tender of funds untimely for purposes of section 38.002. Because this issue
turns principally on the application of section 38.002 to undisputed facts, it
presents a question of law that we review de novo. Cf. Grohman v. Kahlig, 318
S.W.3d 882, 887 (Tex. 2010) (“Whether a party has breached a contract is a
question of law for the court, not a question of fact for the jury, when the facts of
the parties’ conduct are undisputed or conclusively established.”); State ex rel.
44
Dep’t of Criminal Justice v. VitaPro Foods, Inc., 8 S.W.3d 316, 323 (Tex. 1999)
(concluding that when the underlying facts are undisputed, the determination of
whether something constitutes an “agricultural commodity” under the Direct
Purchasing Statute is a question of law); Friends of Canyon Lake, Inc. v.
Guadalupe-Blanco River Auth., 96 S.W.3d 519, 529 (Tex. App.—Austin 2002, pet.
denied) (concluding that because the facts were undisputed as to the content of the
notice under the Open Meetings Act, the determination of the adequacy of the
notice was a question of law).
Presentment of a claim under section 38.002 is required to allow the person
against whom the claim is asserted an opportunity to pay the claim within thirty
days of receiving notice of the claim, thereby avoiding the obligation to pay
attorney’s fees. Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809, 818 (Tex.
2006). “The claimant bears the burden to plead and prove presentment of the
claim.” Gibson v. Cuellar, 440 S.W.3d 150, 157 (Tex. App.—Houston [14th Dist.]
2013, no pet.). The term “presentment” means “simply a demand or request for
payment or performance[.]” Id. All that is necessary is that the party seeking
attorney’s fees show that it made an assertion of a debt or claim and a request for
compliance to the opposing party, and that the opposing party refused to pay the
claim. Busch v. Hudson & Keyse, LLC, 312 S.W.3d 294, 300 (Tex. App.—Houston
45
[14th Dist.] 2010, no pet.). “No particular form of presentment is required.” Jones
v. Kelley, 614 S.W.2d 95, 100 (Tex. 1981). However, neither the filing of suit, nor
the allegation of a demand in the pleadings can, alone, constitute presentment of a
claim or a demand that a claim be paid. Helping Hands Home Care, Inc. v. Home
Health of Tarrant Cnty., Inc., 393 S.W.3d 492, 516 (Tex. App.—Dallas 2013, pet.
denied); Jim Howe Homes, Inc. v. Rogers, 818 S.W.2d 901, 904 (Tex. App.—
Austin 1991, no writ).
Associates served its answers and objections to TNIG’s first set of
interrogatories on July 3, 2008. Interrogatory number twelve and Associates’
answer to that interrogatory state as follows:
INTERROGATORY NO. 12:
Please specify any and all notes/contracts listed in Exhibit A
that have been paid in full to Associates yet Associates has failed to
pay the residual balance due to TNIG. Please state the name of the
borrower(s), the date(s) of the payoff(s), the residual balance(s) due to
TNIG and the reason or reasons why Associates has withheld
payment.
ANSWER:
Subject to the general objections set forth above, [Associates]
answers Interrogatory No. 12 on information and belief as follows:
To the extent that any amount over and above the amounts
[Associates] was entitled to receive and retain either as a result of a
refinance, foreclosure or otherwise, was received by [Associates], the
excess was tendered to [TNIG] unless [TNIG] was unwilling or
unable to establish that [TNIG] owned the residual interest and
46
[Associates] could not verify ownership with the original payee/seller.
In those cases, the excess is being held by [Associates] in trust.
Accounts for which any excess is being held are as follows:
8009812196; 8009811128; 8009815912; 8009804488;
8009819540; 8009815128; 8009812295; 8008810282; 8008314035;
8009811273; 80082837172; 8009819360; 8009811907; 8009815518;
8009812309; 8009812208.
The total for the foregoing is: $93,867.27.
TNIG argues that interrogatory number twelve and Associates’ answer to that
interrogatory, together, constitute presentment of its claim for breach of the
individual DOTPAs for purposes of section 38.002. In support of this argument,
TNIG argues that at least two Texas courts have found that the presentment
requirement can be accomplished through a request for admission and the opposing
party’s response thereto. TNIG argues that interrogatory number twelve and
Associates’ answer to that interrogatory are analogous to the requests for
admissions and responses in those cases and, therefore, serve as a sufficient basis
to find that TNIG presented its claim for breach of the individual DOTPAs to
Associates no later than July 3, 2008.
In certain cases, Texas courts have found a request for admission and the
opposing party’s response thereto sufficient to satisfy the presentment requirement
under section 38.002. See, e.g., Busch, 312 S.W.3d at 301; Lone Star Steel Co. v.
Scott, 759 S.W.2d 144, 157 (Tex. App.—Texarkana 1988, writ denied); Gensco,
47
Inc. v. Transformaciones Metalurgicias Especiales, S.A., 666 S.W.2d 549, 554
(Tex. App.—Houston [14th Dist.] 1984, writ dism’d); Welch v. Gammage, 545
S.W.2d 223, 226 (Tex. Civ. App.—Austin 1976, writ ref’d n.r.e.). In those cases,
however, the request for admission and response, either alone or coupled with
other evidence, generally established that the party seeking attorney’s fees had
made a demand for payment on the opposing party or that a claim or debt had been
asserted and the opposing party refused to pay the claim. See Busch, 312 S.W.3d at
301; Lone Star Steel, 759 S.W.2d at 157; Gensco, 666 S.W.2d at 552, 554; Welch,
545 S.W.2d at 226.
In Busch, for example, the court of appeals found that requests for
admissions and the defendant’s responses thereto, in which the defendant admitted
(1) that the plaintiff “‘made demand on [the defendant] before filing suit[] for
payment of the outstanding balance due at that time’” and (2) that the defendant
had “‘received a demand letter from [the plaintiff,] for payment on the account’”
were sufficient to satisfy the presentment requirement under section 38.002. 312
S.W.3d at 301. Similarly, in Lone Star Steel, the court of appeals concluded that
the defendant’s response to a request for admission, in which the defendant
admitted that the plaintiff had repeatedly requested payment for a suggestion he
had made that improved the efficiency of certain operations performed by the
48
defendant, was sufficient proof of presentment for purposes of section 38.002. 759
S.W.2d at 146, 157. In each of those cases, the request for admission and response
established that the party seeking attorney’s fees had made a specific demand or
request for payment on the opposing party. See Busch, 312 S.W.3d at 301; Lone
Star Steel, 759 S.W.2d at 157.
In Gensco, the court of appeals concluded that copies of invoices sent by the
plaintiff to the defendant, coupled with the defendant’s responses to requests for
admission in which the defendant admitted that it had accepted the goods, that the
amounts reflected in the invoices were the agreed prices, and that it had not paid
the full purchase price under any of the invoices, were sufficient to establish that
the plaintiff had presented its claim to the defendant under the predecessor statute
to section 38.002. 666 S.W.2d at 552, 554. In that case, the invoices themselves
constituted evidence of a request for payment by the plaintiff, and the defendant’s
admissions established that the invoices contained the agreed upon prices and
remained unpaid. See id.
In Welch, the plaintiff real estate broker sued the defendant for breach of
contract to recover an $8,905 real estate commission and sought recovery of his
attorney’s fees. 545 S.W.2d at 224. The court of appeals found that a request for
admission propounded by the plaintiff, coupled with the defendant’s response in
49
which the defendant admitted that he “‘refused to pay and still refuses to pay the
said sum ($8,905) to [the plaintiff,]’” were sufficient to operate as presentment of
the claim for purposes of the statute. Id. at 226 (construing predecessor statute to
Chapter 38 of the Texas Civil Practice and Remedies Code). In that case, the
request for admission and its response satisfied the presentment requirement
because they established that the defendant had refused and was still continuing to
refuse to pay a claim that had been asserted by the plaintiff. See id.
In the present case, interrogatory number twelve inquires about the existence
of a specific category of notes and contracts—namely, notes and contracts that
have been paid in full to Associates and which have a residual balance that is
owed, but has not been paid, to TNIG. The interrogatory does not mention the
individual DOTPAs or assert that Associates has failed to comply with any terms
of the individual DOTPAs. It does not demand or request payment of any excess
funds, and it does not ask Associates to admit that a demand or request for
payment by TNIG has ever been made. The interrogatory does not assert that a
debt for the excess funds is actually owed by Associates; rather, at most, it inquires
whether a debt exists at all. In its answer, Associates does not admit the existence
of any debt for excess funds owed to TNIG, nor does it admit that TNIG has ever
affirmatively asserted a debt or a claim for excess funds. Associates’ answer also
50
does not admit that TNIG ever made a demand or request to Associates for
payment of excess funds or that Associates had ever refused or was continuing to
refuse to pay excess funds to TNIG after being requested to do so. Accordingly, we
find that the trial court did not err when it concluded that interrogatory number
twelve and Associates’ answer thereto did not constitute presentment by TNIG of
its claims for breach of the individual DOTPAs.
C. Whether the Tender Was Unconditional
TNIG next argues that the July 21, 2011 tender was ineffective because it
was not an unconditional tender of funds. In order for a tender to defeat a claim for
attorney’s fees or a claim for interest on the obligation accruing after the date of
the tender, the tender must be unconditional. See Staff Indus., 846 S.W.2d at 548-
49, 549-50; see also Baucum v. Great Am. Ins. Co. of N. Y., 370 S.W.2d 863, 866
(Tex. 1963). “An attempted tender is without legal effect if it is accompanied by
conditions which the debtor has no right to impose.” Staff Indus., 846 S.W.2d at
549; see also Thomas, 917 S.W.2d at 438.
In Staff Industries, the creditor claimed that the debtor owed it $99,524.45,
but the debtor tendered a check to the creditor for only $53,119.71. 846 S.W.2d at
548. On the back of the check, the debtor wrote: “‘Endorsement constitutes
payment in full of PO 270-003 except for $2,500.00 retainage for vents.’” Id. The
51
creditor refused the tender, and after a bench trial, the trial court found that the
creditor was entitled to recover $53,119.71, plus pre-judgment interest. Id. at 545.
The Corpus Christi Court of Appeals held that the check was not a valid tender by
the debtor because it did not constitute an unconditional tender of funds. Id. at 549.
Specifically, the court noted that the offer “was conditional upon [the creditor]
relinquishing any claim for the higher amount and therefore was an offer to settle
the dispute for the lesser amount.” Id. The court explained that “[a]n offer to settle
. . . is not equivalent to an unconditional tender of the amount offered in
settlement[]” and that “[u]nlike an unconditional tender, an offer to settle for the
lower amount would deprive the [the creditor] of his right even to seek the higher
amount.” Id. The court concluded that because the offer required the creditor to
give up its right to seek the higher amount, the offer did not constitute an effective
tender for purposes of section 38.002. Id.
Other Texas courts have similarly concluded that a purported tender by a
debtor that requires the creditor to release its claims against the debtor, to give up a
legal right, or to otherwise perform an act that the debtor has no right to demand is
conditional and does not constitute a valid tender. See, e.g., Crisp Analytical Lab,
L.L.C. v. Jakalam Props., Ltd., 422 S.W.3d 85, 92 (Tex. App.—Dallas 2014, pet.
denied) (concluding that debtor’s offer to pay debt, which was in the form of a
52
release of claims, was a conditional offer and did not constitute a valid tender);
Thomas, 917 S.W.2d at 438 (concluding that debtor’s offer to pay debt, which
required the creditor to relinquish her right to collect attorney’s fees in a turnover
proceeding, was an invalid, conditional tender); Stratton v. Del Valle Indep. Sch.
Dist., 547 S.W.2d 727, 729 (Tex. Civ. App.—Austin 1977, no writ) (concluding
that debtor’s purported offer to pay creditor delinquent property taxes “‘if [the
creditor] would straighten [the description of the property tracts] out’” was a
conditional offer to pay the debt and, therefore, did not constitute a valid tender).
Texas courts have also found that a debtor who deposits funds into the registry of
the court, but who simultaneously files a claim for affirmative relief to recover all
or a portion of the deposited funds, does not make an unconditional tender. See
Weisfeld v. Tex. Land Fin. Co., 162 S.W.3d 379, 383 (Tex. App.—Dallas 2005, no
pet.) (concluding that debtor did not make an unconditional tender when it
deposited funds into the registry of the court, but at the same time filed a
counterclaim against the creditor for usurious interest and sought to recover a
portion of the deposited funds).
The trial court concluded that Associates’ July 21, 2011 tender was a valid
tender and, thus, implicitly found that the tender was unconditional. See Whiteside
v. Griffis & Griffis, P.C., 902 S.W.2d 739, 747 n. 11 (Tex. App.—Austin 1995,
53
writ denied). Although the issue of whether a tender is conditional is typically a
question of fact, TNIG again challenges only the trial court’s application of the law
to undisputed facts. The July 21, 2011 tender letter, which was admitted into
evidence at trial, states as follows:
Enclosed please find a check payable to [TNIG] in the amount
of $174,562.50 which amount is comprised of (i) $141,558.89
representing the aggregate amount held by [Grand] for paid off and
paid out accounts plus (ii) interest from the dates the payments which
make up the [$141,558.89] were received by [Grand] through July 22,
2011 totaling $33,003.61. . . . Additionally, for the paid out contracts
for deed and mortgages listed on the enclosed spreadsheet,
[Associates] is prepared [to] reassign the contracts for deed and
mortgage[s] to TNIG or TNIG’s designee and to deliver any payments
received by or on behalf of [Associates] with respect to such contracts
for deed and mortgages from and after the date hereof. In that regard,
for each of the paid out contracts for deed and mortgages listed on the
enclosed spreadsheet, please identify the person(s) to whom
[Associates] is to reassign the contract for deed or mortgage and
please provide the address for delivery of the documents and any
payments received from and after July 22, 2011.
By making this tender, [Associates] is not waiving its argument
that [Grand] on behalf of [Associates] was justified in withholding
excess proceeds for paid off contracts and mortgages and in delaying
paying amounts collected for paid out accounts and reassigning the
contracts for deed and mortgages based on TNIG’s breach of its
representations and warranties set forth in the [DOTPAs], nor is
[Associates] waiving any of its indemnity rights against TNIG under
those agreements with respect to any claim asserted or which may be
asserted in the future by any third-party including, but not limited to
TNIG’s sellers. Furthermore, please note that this tender is being
made within thirty (30) days of the filing of Plaintiff’s Third
Amended Petition wherein TNIG for the first time asserted a claim for
an alleged failure by [Associates] to pay amounts due to TNIG under
54
the [DOTPAs] as contrasted with TNIG’s claim for breach of an
alleged global agreement arising out of [Associates’] failure to pay
second funding. Therefore, pursuant to Texas Civil Practice &
Remedies Code §38.002(3), TNIG is not entitled to recover any
attorney’s fees in connection with the newly added claim.
Lastly, to the extent TNIG contends that the amount of the
tender for any of the listed contracts for deed or mortgages is in any
way insufficient, please let me know and provide the basis for such
contention as [Associates] fully intends to pay the correct amount, if
any, due.
(Emphasis added).
TNIG claims that Associates’ reservation of its justification defense in the
tender letter constitutes an improper condition that rendered the tender ineffective.8
Associates, by contrast, argues that the statement regarding its justification defense
in the July 21, 2011 letter does not constitute a condition on the tender. Instead,
Associates argues, the July 21, 2011 tender letter and check unconditionally
tendered the full amount due to TNIG under the DOTPAs and, by reserving its
justification defense, Associates merely reserved its right to defend itself against
8
TNIG does not argue that Associates’ reservation of its contractual
indemnity rights under the DOTPAs constituted an improper condition on the
tender. Therefore, we need not address whether this additional reservation
constituted an improper condition on appeal. See Fulgham v. Fischer, 349 S.W.3d
153, 158 (Tex. App.—Dallas 2011, no pet.) (concluding that the failure to raise an
issue or cite supporting legal authority results in waiver of a complaint on appeal);
Canton-Carter v. Baylor Coll. of Med., 271 S.W.3d 928, 930 (Tex. App.—Houston
[14th Dist.] 2008, no pet.) (“In the review of a civil case, an appellate court has no
discretion to consider an issue not raised in an appellant’s brief.”).
55
claims, including TNIG’s request for punitive damages, seeking additional
damages over and above the amount of the tender. We agree that the statement in
the July 21, 2011 letter reserving Associates’ justification defense was not a
condition on the tender.
The July 21, 2011 letter expressly states that Associates sought to tender to
TNIG an amount representing all payments that were being held by Grand in the
Escrow Account for “paid off and paid out accounts[,]” plus interest on those
payments from the date they were received by Grand through July 22, 2011. The
letter also offers to reassign to TNIG all of the paid-out notes and contracts for
deed for the accounts listed in the letter and to deliver to TNIG any future
payments received by Grand for those accounts. In the last paragraph, the letter
states that Associates fully intended to pay the correct amount due to TNIG and
requested that TNIG notify Associates to the extent it found any of the tendered
amounts to be insufficient. These statements unambiguously express an intention
by Associates to pay TNIG all amounts that TNIG was seeking to recover as direct
damages in connection with its claims for breach of the individual DOTPAs. They
also express an unambiguous intention to reassign all active paid-out notes and
contracts for deed to TNIG so that any future payments made by the borrowers on
those notes and contracts for deed would be paid to TNIG directly.
56
The only statement in the July 21, 2011 letter that TNIG claims constituted a
condition on the tender is Associates’ reservation of its justification defense. A
condition is “[a] future and uncertain event on which the existence or extent of an
obligation or liability depends[,]” or “an uncertain act or event that triggers or
negates a duty to render a promised performance.” Condition, BLACK’S LAW
DICTIONARY (9th ed. 2009). Nothing in the letter’s reservation language, or in any
other portion of the July 21, 2011 letter, indicates that TNIG’s ability to accept or
retain the tendered funds was dependent upon some future and uncertain event or
that TNIG was required to undertake any action in order to obtain the tendered
funds. Cf. id.; Stratton, 547 S.W.2d at 729. Further, nothing in the letter requires
TNIG to release or dismiss any claims against Associates, nor does the letter
demand that TNIG waive or relinquish any rights that it may possess, including the
right to seek a larger amount in connection with its claims for breach of the
individual DOTPAs. Cf. Crisp Analytical Lab, 422 S.W.3d at 92; Thomas, 917
S.W.2d at 438; Staff Indus., 846 S.W.2d at 549.
Instead, the July 21, 2011 letter merely reserves Associates’ right to argue
that “[Grand] on behalf of [Associates] was justified in withholding excess
proceeds for paid off contracts and mortgages and in delaying paying amounts
collected for paid out accounts and reassigning the contracts for deed and
57
mortgages based on TNIG’s breach of its representations and warranties set forth
in the [DOTPAs.]” Associates’ justification defense is not based on the premise
that Associates is entitled to any portion of the tendered funds, and it does not seek
to recoup or recover back any portion of the tendered funds from TNIG. Rather,
Associates’ justification defense simply seeks to establish that Grand, on behalf of
Associates, was entitled to withhold and delay payment of the funds in the Escrow
Account, and to delay reassignment of the paid-out accounts, while Grand
investigated whether other parties had potential claims to those funds. We do not
interpret Associates’ reservation of its justification defense as reserving any right
to challenge TNIG’s contractual entitlement to the tendered funds under the terms
of the DOTPAs. Instead, we interpret it as merely reserving Associates’ right to
defend itself against the imposition of additional damages beyond the amount of
the tender, including punitive damages based on TNIG’s claim for malicious
conversion, which TNIG might claim resulted from Grand’s act of withholding
payment of the excess proceeds, rather than paying those funds immediately to
TNIG. 9 We conclude, therefore, that Associates unconditionally tendered the
9
Associates’ reservation of its justification defense essentially restates
Associates’ “qualified good faith refusal” defense to TNIG’s claims for
conversion, including TNIG’s claim for malicious conversion on which TNIG’s
request for punitive damages is based. See Whitaker v. Bank of El Paso, 850
S.W.2d 757, 760 (Tex. App.—El Paso 1993, no writ) (concluding that a qualified
58
$174,562.50 as payment for the portion of TNIG’s claims that it did not dispute.
The fact that Associates reserved the right to defend itself against the remaining
portion of TNIG’s claims seeking damages over and above the amount of the
tender did not make Associates’ tender of $174,562.50 conditional.
TNIG relies on Commercial Union Ins. Co. v. La Villa Independent School
District, in support of its argument that the tender was conditional. 779 S.W.2d 102
(Tex. App.—Corpus Christi 1989, no writ). In Commercial Union, the plaintiff, a
school district, entered into a construction contract with the defendant, a
contractor, for the construction of a gymnasium. Id. at 104. After the construction
was completed, the school district notified the contractor of certain deficiencies in
the construction. Id. The contractor failed to remedy the problem, and the school
district hired a different contractor to correct the deficiencies for $12,950. Id. The
school district also separately withheld $9,100 from the contractor’s payment
pursuant to a liquidated damages provision in the contract because the contractor
did not complete the construction by the date set forth in the contract. Id. at 106.
Before suit was filed, the contractor, in an attempt to resolve the dispute, made an
offer to pay the school district what it claimed to be the full amount due, including
refusal to “deliver property on request may be justified in order to investigate the
rights of the parties” and is a defense to a claim for conversion if it “is made in
good faith to resolve a doubtful matter”).
59
attorney’s fees. Id. at 107. The school district, however, rejected the offer when the
contractor refused to surrender its right to claim that the liquidated damages
provision was invalid and its right to recover the $9,100 withheld by the school
district under that provision. Id. Thereafter, the school district filed suit against the
contractor, and the contractor filed a counterclaim seeking the $9,100 withheld by
the school district. Id. at 104, 107. After a trial, the court entered a judgment in
favor of the school district for $12,950, plus attorney’s fees, and denied the
contractor’s counterclaim. Id. at 104. On appeal, the contractor argued that it had
tendered the full amount due prior to the filing of suit and that the school district
was therefore barred from recovering attorney’s fees. Id. at 107. The court of
appeals, however, held that the tender was ineffective because it did not constitute
an unconditional offer to pay. Id. The court explained that the contractor “placed a
condition upon its settlement offer; i.e. that [the contractor] would retain the right
to claim that the liquidated damage provision was invalid.” Id. The court also
explained that the contractor’s offer constituted an offer of settlement, which is not
the equivalent of a tender, and even if it had been a tender, it would have been less
than the amount necessary to avoid awarding attorney’s fees because the amount
did not include a relinquishment of the contractor’s affirmative claim to recover
the liquidated damages. Id.
60
TNIG argues that Commercial Union stands for the general proposition that
when a defendant makes a tender of the full amount due, but states that it is
retaining its right to maintain a defense, the tender is conditional and does not
operate to cut off the plaintiff’s right to attorney’s fees under section 38.002. We
do not read Commercial Union so broadly. In Commercial Union, the rights that
the contractor refused to surrender when it made the attempted tender were its right
to claim that the liquidated damages provision constituted an unenforceable
penalty and its right to affirmatively recover sums withheld under that provision by
seeking an offset against the amount demanded by the school district. See id. at
107. By reserving its right to seek an offset, the contractor essentially reserved its
right to claim that it was entitled to recover back a portion of the total amount due
to the school district. See id. By contrast, in its July 21, 2011 letter, Associates
does not assert that it is entitled to any portion of the tendered funds or any offset
against the tendered funds. Further, as noted above, the tender letter does not
reserve the right to assert any claim or defense that seeks to recover back any
portion of the tendered funds, but only to defend against claims for further
damages. We conclude, therefore, that Commercial Union is distinguishable from
the present case.
61
TNIG also relies on statements contained in a September 22, 2011 letter
from Associates to TNIG to establish that the July 21, 2011 tender was
conditional.10 In the September 22, 2011 letter, which itself did not attempt to
tender any funds, Associates stated in relevant part as follows:
I received your letter of September 21, 2011, once again
returning the tendered funds after a significant delay. The check was
first sent to you on July 21, 2011 and received by you on July 22,
2011. You returned the check for the first time on September 7, 2011.
The check was returned to you by FedEx on the same day, received by
you on September 8, 2011, and held by you until it was sent to me
again on September 21, 2011.
Since the funds have been returned by TNIG twice, I do not
think there is any question that any further efforts to tender the funds
would be rejected. If you contend otherwise, please let me know.
....
As set forth in previous letters, by making the tender,
Associates is not waiving any argument that the alleged delay by
Associates and [Grand] in paying the alleged excess was justified, and
Associates reserves its right to argue that the delay was justified and
the payment [was] excused by TNIG’s misrepresentations and
breaches of warranties, including those arising out of TNIG’s failure
to pay its sellers the full purchase price.
(Emphasis added). TNIG argues that the statement in the September 22, 2011 letter
that “Associates reserves its right to argue that . . . the payment [was] excused . . .”
makes the tender conditional because Associates reserved its right to argue that
10
The September 22, 2011 letter was admitted into evidence at trial as
Exhibit 496. Exhibit 496 is not included in the reporter’s record. However, the
September 22, 2011 letter is included in the clerk’s record.
62
TNIG was not entitled to retain all or a portion of the tendered funds. However, we
need not analyze whether this statement constitutes a condition because there is no
evidence in the record that such a statement was included in or otherwise made a
part of the July 21, 2011 tender. Instead, the record reflects only that the statement
was made by Associates in subsequent correspondence, which did not purport to
tender any money to TNIG and did not, itself, constitute a tender of funds. See
Collingsworth v. King, 283 S.W.2d 30, 33 (Tex. 1955) (concluding that no
evidence existed to support the trial court’s finding that the tender of funds due
under certain notes was conditional; although the debtor sent the creditor pre-
tender letters requesting that the creditor execute a release and an assignment of the
notes in connection with the tender, there was no evidence that the debtor required
a release or an assignment at the time the tender was actually made); see also
Baucum, 370 S.W.2d at 866 (“A valid tender of money consists of the actual
production of the funds and offer to pay the debt involved.”). Because we conclude
that the statement in the July 21, 2011 tender reserving Associates’ right to assert
its justification defense does not constitute a condition on TNIG’s acceptance of
the tendered funds, we conclude that the statement did not operate to invalidate the
tender.
63
D. Amount of the Tender
TNIG next argues that the tender was invalid because it was not for the
correct amount owed to TNIG under the individual DOTPAs. As a general rule, a
tender of payment must include everything to which the creditor is entitled, and a
tender of any less sum is ineffective. Crisp Analytical Lab, 422 S.W.3d at 92.
Accordingly, a partial tender will not prevent an award of attorney’s fees or the
accrual of interest. Id.; J.M. Hollis Constr. Co. v. Paul Durham Co., 641 S.W.2d
354, 358 (Tex. App.—Corpus Christi 1982, no writ).
The trial court made the following relevant findings of fact: (1) TNIG
presented evidence in connection with twenty-five accounts at trial; (2) TNIG was
entitled to recover damages for eighteen of those accounts; (3) TNIG was entitled
to an aggregate recovery of $131,876.85, inclusive of interest; (4) on July 21,
2011, Associates tendered the aggregate sum of $174,562.50, inclusive of interest,
to TNIG; (5) the tender included payments of principal and interest for each of the
eighteen accounts for which TNIG was ultimately awarded damages at trial; and
(6) the amount of damages that TNIG was entitled to recover for each of the
eighteen accounts was equal to or less than the amounts included in the tender for
those accounts. TNIG has not challenged any of these findings on appeal.
64
The trial court’s findings establish that the amount of the July 21, 2011
tender exceeded the aggregate amount of damages awarded to TNIG at trial by
over $40,000. Further, the trial court’s findings establish that the tender included
payments for each of the accounts for which TNIG recovered at trial and that those
payments were equal to or greater than the amount of damages ultimately found to
be owed by Associates to TNIG for those accounts. These unchallenged findings
support the trial court’s conclusion that Associates’ July 21, 2011 tender was for
“an amount in excess of the just amount owed by Associates to TNIG.” Because
TNIG has not challenged the relevant fact findings pertaining to this issue on
appeal and because those findings support the trial court’s conclusion that the July
21, 2011 tender exceeded the just amount owed to TNIG, we conclude that the
tender was for an amount sufficient to preclude TNIG’s recovery of attorney’s fees
and to stop the accrual of interest on the obligations underlying the claims that
form the basis of the trial court’s judgment. See Robberson Steel, Inc. v. J.D.
Abrams, Inc., 582 S.W.2d 558, 565 (Tex. Civ. App.—El Paso 1979, no writ)
(concluding that amount of tender was sufficient where the tender was for an
amount that was greater than the actual amount found to be due to the creditor).
We overrule TNIG’s second issue.
65
VI. Motion for Summary Judgment
In its third point of error, TNIG argues that it was procedurally improper for
the trial court to reconsider and grant Associates’ May 13, 2011 motion for
summary judgment at the docket call on January 20, 2012, because TNIG received
no notice that the trial court intended to reconsider such motion. Specifically,
TNIG argues that under Texas Rule of Civil Procedure 166a(c), it was entitled to
receive twenty-one days’ notice of any hearing on Associates’ May 13, 2011
motion for summary judgment, including a hearing to reconsider such motion.
TNIG argues that because it did not receive any such notice, the January 20, 2012
order partially granting Associates’ May 13, 2011 motion for summary judgment
should be reversed. We disagree.
An order denying a motion for summary judgment is an interlocutory order.
See Humphreys v. Caldwell, 888 S.W.2d 469, 470 (Tex. 1994). A trial court has
the inherent authority to change or modify an interlocutory order or judgment at
any time before the judgment becomes final. Rush v. Barrios, 56 S.W.3d 88, 98
(Tex. App.—Houston [14th Dist.] 2001, pet. denied). “A trial court may, in the
exercise of discretion, properly grant summary judgment after having previously
denied summary judgment without a motion by or prior notice to the parties, as
long as the court retains jurisdiction over the case.” H.S.M. Acquisitions, Inc. v.
66
West, 917 S.W.2d 872, 876-77 (Tex. App.—Corpus Christi 1996, writ denied); see
also KSWO Television Co., Inc. v. KFDA Operating Co., LLC, 442 S.W.3d 695,
699 (Tex. App.—Dallas 2014, no pet.).
In Winn v. Martin Homebuilders, Inc., the Amarillo Court of Appeals
concluded that the 21-day notice provision in Rule 166a(c) does not apply to the
trial court’s reconsideration of its prior ruling denying a motion for summary
judgment. 153 S.W.3d 553, 556 (Tex. App.—Amarillo 2004, pet. denied). In Winn,
the defendant filed a motion for summary judgment on the plaintiffs’ claims, which
the trial court subsequently denied. Id. at 555. The defendant filed a motion for
rehearing on its summary judgment motion, and the trial court held a hearing on
the motion for rehearing thirteen days after the defendant’s motion for rehearing
was filed. Id. Following the hearing, the trial court entered an order granting the
defendant’s motion for summary judgment. Id. at 555. The plaintiffs appealed,
arguing that the trial court erred in reconsidering and granting the defendant’s
motion for summary judgment because the plaintiffs did not receive proper notice
of the hearing on the defendant’s motion for rehearing. Id. at 555-56. Specifically,
the plaintiffs argued that under Rule 166a(c), they were entitled to receive at least
twenty-one days’ notice of any hearing on the defendant’s motion for summary
judgment, including any hearing to rehear or reconsider the summary judgment
67
motion. Id. The court of appeals, however, rejected the plaintiffs’ argument,
concluding that the notice requirement under Rule 166a(c) applies only to the
initial hearing on a motion for summary judgment. Id. at 555. The court of appeals
explained that the “[d]enial of a motion for summary judgment is not a final
adjudication, but an interlocutory ruling that may be changed or modified until a
final judgment is rendered.” Id. at 556. In addition, the court explained that “[a]
motion for summary judgment previously denied maybe granted without a further
motion or prior notice to the parties.” Id. at 556. The court, therefore, concluded
that the failure to provide the plaintiffs with 21 days’ notice before the hearing at
which the trial court reconsidered the defendant’s motion for summary judgment
was not error. Id. at 556.
We agree with the reasoning set forth in Winn and conclude that the twenty-
one day notice requirement set forth in Rule 166a(c) does not apply to a trial
court’s reconsideration of its prior ruling on a motion for summary judgment. See
id. We also agree that a trial court may reconsider and grant a motion for summary
judgment that it has previously denied without prior notice to the parties as long as
the trial court retains jurisdiction over the case. See KSWO Television, 442 S.W.3d
at 699; Rush, 56 S.W.3d at 98; H.S.M. Acquisitions, 917 S.W.2d at 876-77. In the
present case, the record reflects that the trial court rendered judgment on August
68
24, 2012, and that the judgment became final on December 7, 2012, thirty days
after TNIG’s motion for new trial was overruled by operation of law. See Tex. R.
Civ. P. 329b(c), (e). Therefore, the trial court had authority at the docket call on
January 20, 2012 to reconsider its prior interlocutory order denying Associates’
May 13, 2011 motion for summary judgment and to modify or change that order
without prior notice to the parties. See Winn, 153 S.W.3d at 556; Rush, 56 S.W.3d
at 98; H.S.M Acquisitions, 917 S.W.2d at 877. Therefore, we conclude that the trial
court did not err when it reconsidered and granted the May 13, 2011 motion for
summary judgment without giving prior notice to the parties.
Further, as the court in Winn explained, “[t]he notice provisions of Rule
166a are intended to prevent rendition of summary judgment without the non-
movant having full opportunity to respond on the merits of the motion.” Winn, 153
S.W.3d at 556. Here, Associates’ motion for summary judgment was filed on May
13, 2011. On June 2, 2011, TNIG filed a thirty-seven page response, to which it
attached over 850 pages of exhibits. After Associates filed a reply brief in support
of its motion for summary judgment on June 9, 2011, TNIG sought leave to and
filed additional briefing that addressed the arguments raised by Associates in its
May 13, 2011 motion for summary judgment. TNIG does not contend that it did
not receive the required twenty-one days’ notice of the initial hearing on the
69
motion for summary judgment, which was held on June 24, 2011. Accordingly, we
conclude that TNIG was afforded a full opportunity to respond to the merits of
Associates’ May 13, 2011 motion for summary judgment.
TNIG also argues that the trial court lacked authority to reconsider and grant
the May 13, 2011 motion for summary judgment on its own initiative. TNIG relies
on Daniels v. Daniels, 45 S.W.3d 278, 282 (Tex. App.—Corpus Christi 2001, no
pet.), for authority that the trial court erred. In Daniels, the trial court entered
summary judgment in a case in which no motion for summary judgment was filed
by either party. Id. at 282. On appeal, the court concluded that the trial court had
no jurisdiction and, thus no authority, “to enter a summary judgment . . . absent a
proper motion for summary judgment[.]” Id. at 281, 282. While we agree with the
general proposition in Daniels that a trial court may not grant a summary judgment
where no motion for summary judgment has ever been filed, that is clearly not the
case here. It is undisputed that Associates filed a motion for summary judgment on
May 13, 2011 and that the trial court’s January 20, 2012 order granted certain parts
of that motion. Therefore, we conclude that Daniels is distinguishable from the
present case.
Here, TNIG’s real complaint appears to be that the trial court, sua sponte,
reconsidered the May 13, 2011 motion for summary judgment in the absence of
70
any further request by either party to reconsider or rehear the motion for summary
judgment. A trial court has the authority to reconsider its original ruling on a
motion for summary judgment either on a proper motion or on its own initiative.
Ravkind v. Mortgage Funding Corp., 881 S.W.2d 203, 205 (Tex. App.—Houston
[1st Dist.] 1994, no writ). No motion or request for reconsideration by a party is
required. See KSWO Television, 442 S.W.3d at 699; Rush, 56 S.W.3d at 98; H.S.M.
Acquisitions, 917 S.W.2d at 877. We conclude, therefore, that the trial court had
authority to reconsider and grant Associates’ May 13, 2011 motion for summary
judgment on its own initiative. We overrule TNIG’s third issue.
Having overruled each of TNIG’s issues on appeal, we affirm the judgment
of the trial court.
AFFIRMED.
_____________________________
CHARLES KREGER
Justice
Submitted on May 1, 2014
Opinion Delivered September 24, 2015
Before McKeithen, C.J., Kreger and Johnson, JJ.
71