SW Loan A, L.P. v. Anibal J. Duarte-Viera, Antonio P. Pardo and Edward M. Reiss ( 2015 )

ACCEPTED
04-15-00255-CV
FOURTH COURT OF APPEALS
SAN ANTONIO, TEXAS
8/10/2015 4:39:08 PM
KEITH HOTTLE
CLERK
No. 04-15-00255-CV
_____________________________________________________
FILED IN
4th COURT OF APPEALS
IN THE FOURTH COURT A
OF PPEALSSAN ANTONIO, TEXAS
08/10/2015 4:39:08 PM
SAN ANTONIO, T EXAS KEITH E. HOTTLE
Clerk
_____________________________________________________
SW Loan A, L.P.,
Appellant,
v.
Anibal J. Duarte-Viera, Antonio P. Pardo, and
Edward M. Reiss,
Appellees.
_____________________________________________________
BRIEF OF APPELLANT
_____________________________________________________
From the 131st District Court, Bexar County, Texas, No. 2012-CI-12742
The Honorable John D. Gabriel Presiding
_____________________________________________________
John T. Gerhart, Jr.
jgerhart@hunton.com
State Bar No. 00784122
Bryan C. Bond
Counsel for Appellant: bbond@hunton.com
State Bar No. 24082701
Hunton & Williams LLP
1445 Ross Ave., Ste. 3700
Dallas, Texas 75202
Telephone: (214) 979-3000
Facsimile: (214) 880-0011
ORAL ARGUMENT REQUESTED
IDENTITY OF PARTIES AND COUNSEL
Appellant:
SW Loan A, L.P.
Appellate Counsel: Trial Counsel:
John T. Gerhart, Jr. Jo E. Hartwick
jgerhart@hunton.com hartwick@sbep-law.com
State Bar No. 00784122 State Bar No. 09175045
Bryan C. Bond David A. Klingler
bbond@hunton.com klingler@sbep-law.com
State Bar No. 24082701 State Bar No. 11574300
Hunton & Williams LLP Stutzman, Bromberg,
1445 Ross Ave., Ste. 3700 Esserman & Plifka, P.C.
Dallas, Texas 75202-2799 2323 Bryan Street, Suite 2200
Telephone: (214) 979-3000 Dallas, Texas 75201
Facsimile: (214) 880-0011 Telephone: (214) 969-4900
Facsimile: (214) 969-4999
–and–
Martin Thomas Hougham
martin-t-hougham@houghamlaw.com
State Bar No. 10034300
3700 Fredericksburg Rd., Suite 237
San Antonio, Texas 78201-7570
Telephone: (210) 375-7570
Facsimile: (210) 375-7569
i
Appellees:
Anibal J. Duarte-Viera,
Antonio P. Pardo, and
Edward M. Reiss
Appellate and Trial Counsel:
Robert A. McNiel
rmcniel@deanslyons.com
State Bar No. 24043814
Kathleen Kilanowski
kkilanowski@deanslyons.com
State Bar No. 24053303
Deans & Lyons, LLP
325 N. Saint Paul Street, Suite 1500
Dallas, Texas 75201-3891
Telephone: (214) 965-8500
Facsimile: (214) 965-8505
ii
TABLE OF CONTENTS
IDENTITY OF PARTIES AND COUNSEL ............................................ i
TABLE OF CONTENTS .......................................................................... iii
INDEX OF AUTHORITIES .......................................................................v
EXPLANATION OF REFERENCES ..................................................... viii
STATEMENT OF THE CASE.................................................................. ix
ISSUES PRESENTED ................................................................................. x
STATEMENT OF FACTS ......................................................................... 4
A. The Borrower and Guarantors executed a series of documents in
connection with the Loan. .............................................................................. 4
1. The Loan Agreement ........................................................................... 5
2. The Promissory Note ......................................................................... 9
3. The Deed of Trust ............................................................................. 13
4. The Guaranty Agreements ................................................................ 14
B. The Lender assigned to SW Loan all rights under the Loan Agreement,
the Promissory Note, the Deed of Trust, and the Guaranty Agreements. ...... 16
C. The Borrower defaulted on the loan, SW Loan began foreclosure
proceedings, and the Borrower filed bankruptcy. .......................................... 20
D. The Borrower’s sworn bankruptcy statements acknowledged both that
SW Loan’s claim was undisputed and that the Guarantors were co-debtors... 23
E. SW Loan foreclosed on the property and established a deficiency. ....... 24
F. SW Loan sued the Guarantors to recover the unpaid balance on the
Loan, and the Guarantors counterclaimed for a declaratory judgment seeking
iii
to validate their affirmative defenses.............................................................. 26
G. The Guarantors offered no evidence of the Borrower’s compliance with
the Promissory Note..................................................................................... 28
H. The jury found that the Borrower did not fail to comply with the
Promissory Note and therefore skipped the remaining questions dealing with
the Guarantors’ liability to SW Loan. ............................................................ 31
SUMMARY OF THE ARGUMENT ........................................................ 35
ARGUMENT .............................................................................................. 36
A. The evidence is legally and factually insufficient to support the jury’s
answer to Question No. 2. ............................................................................. 36
1. Standard and Scope of Review ........................................................... 36
2. SW Loan conclusively established every element of a claim for breach
of the Promissory Note. ............................................................................. 38
3. The Borrower’s default under the Promissory Note was conclusively
established according to the unambiguous terms of the governing Loan
Agreement. ................................................................................................ 46
4. Unrebutted prima facie evidence established the Borrower’s default. .49
5. Neither the fact that Bexar County allows a split-payment option nor
Mr. Redman’s credibility alters the inescapable conclusion that the
Borrower defaulted on the Promissory Note. ............................................. 52
B. The trial court abused its discretion in awarding attorney fees to the
Guarantors. ................................................................................................... 58
CONCLUSION AND PRAYER ............................................................... 60
CERTIFICATE OF COMPLIANCE ........................................................ 62
iv
INDEX OF AUTHORITIES
Cases
Bexar Cnty. Appraisal Review Bd. v. First Baptist Church, 846 S.W.2d 554 (Tex.
App.—San Antonio 1993, writ denied) .................................................... 58, 59
BHP Petroleum Co. Inc. v. Millard, 800 S.W.2d 838 (Tex. 1990) ................... 58, 59
Burlington N. & Santa Fe Ry. Co. v. Gunderson, Inc., 235 S.W.3d 287 (Tex. App.—
Fort Worth 2007, pet. withdrawn) ................................................................. 39
Burlington N. R.R. Co. v. Gen. Projection Sys., Inc., No. 05-97-00425-CV, 2000
WL 1100874 (Tex. App.—Dallas Aug. 8, 2000, pet. denied) (not designated
for publication) .............................................................................................. 56
Burns v. Resolution Trust Corp., 880 S.W.2d 149 (Tex. App.—Houston [14th
Dist.] 1994, no writ) ....................................................................................... 39
Choice Pers. No. Four, Inc. v. 1715 Johanna Square Ltd., No. 01-05-00830-CV,
2007 WL 1153046 (Tex. App.—Houston [1st Dist.] Apr. 13, 2007, pet. denied)
(mem. op.) .............................................................................................. passim
Choice Pers. No. Four, Inc. v. Richardson, No. 14-05-00675-CV, 2006 WL 2074681
(Tex. App.—Houston [14th Dist.] 2006, pet. denied) (mem. op.) ........... passim
City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) .................................... 36, 57
v
City of The Colony v. N. Tex. Mun. Water Dist., 272 S.W.3d 699 (Tex. App.—Fort
Worth 2008, pet. dism’d) .............................................................................. 54
Coca-Cola Co. v. Harmar Bottling Co., 218 S.W.3d 671 (Tex. 2006) .................... 39
DaimlerChrysler Motors Co., LLC v. Manuel, 362 S.W.3d 160 (Tex. App.—Fort
Worth 2012, no pet.)...................................................................................... 39
Deposit Ins. Bridge Bank, N.A., Dallas v. McQueen, 804 S.W.2d 264 (Tex. App.—
Houston 1991, no writ) ...................................................................... 41, 43, 49
Doncaster v. Hernaiz, 161 S.W.3d 594 (Tex. App.—San Antonio 2005, no pet.) . 38
Dow Chem. Co. v. Francis, 46 S.W.3d 237 (Tex. 2001).............................. 36, 37, 38
Durham Transp. Co., Inc., v. Beettner, 201 S.W.3d 859 (Tex. App.—Waco 2006,
pet. denied) ................................................................................................... 59
Gevinson v. Manhattan Constr. Co. of Okla., 449 S.W.2d 458 (Tex. 1969) ........... 39
Heritage Life v. Heritage Group Holding, 751 S.W.2d 229 (Tex. App.—Dallas
1998, writ denied).......................................................................................... 58
Hudspeth v. Investor Collection Servs. Ltd. P’ship, 985 S.W.2d 477 (Tex. App.—San
Antonio 1998, no pet.) ............................................................................. 38, 44
Ingham v. O’Block, 351 S.W.3d 96 (Tex. App.—San Antonio 2011, pet. denied) 36,
37, 38
vi
Johnson v. Structured Asset Servs., LLC, 148 S.W.3d 711 (Tex. App.—Dallas 2004,
no pet.) .......................................................................................................... 39
Jones v. Kelley, 614 S.W.2d 95 (Tex. 1981) .......................................................... 46
Kirkman v. Amarillo Sav. Ass’n, 483 S.W.2d 302 (Tex. Civ. App.—Amarillo 1972,
writ ref’d n.r.e.) ................................................................................. 41, 43, 49
Mem’l Med. Ctr. of East Texas v. Keszler, 943 S.W.2d 433 (Tex. 1997) .................46
MG Bldg. Materials, Ltd. v. Moses Lopez Custom Homes, Inc., 179 S.W.3d 51 (Tex.
App.—San Antonio 2005, pet. denied).......................................................... 46
Pool v. Ford Motor Co., 715 S.W.2d 629 (Tex. 1986) ............................................ 37
Rules
Tex. R. App. P. ............................................................................................. 34
Tex. R. Civ. P. 93 ......................................................................................... 26
Other Authorities
Tex. Pattern Jury Charge § 101.2................................................... 31, 32
vii
EXPLANATION OF REFERENCES
Clerk’s Record: CR.[page1]
Reporter’s Record: [Volume].RR.[page][:line (if applicable)]
Appendix: App. [tab]
1
Citations to page numbers are to the page numbers within the .pdf copies of the clerk’s
and reporter’s records on file with the Court.
viii
STATEMENT OF THE CASE
Nature of the Case: Breach-of-guaranty dispute
Trial Court: 131st District Court,
Bexar County, Texas,
Honorable John D. Gabriel presiding
Trial Court Disposition: Final judgment on the jury’s verdict providing that
Appellant SW Loan A, L.P. take nothing on its claims
and awarding attorney fees to Appellees Duarte-
Viera, Pardo, and Reiss. 2
2
CR.775–77 (App. A.).
ix
ISSUES PRESENTED
1. Uncontroverted evidence conclusively established that a borrower
filed for bankruptcy and that it failed to repay its loan. Bankruptcy
and non-payment unambiguously qualified as defaults under the
governing loan documents—including the borrower’s promissory
note. Moreover, the Appellant introduced unrebutted prima facie ev-
idence of the borrower’s default. Could the jury ignore conclusive
evidence of default and find instead that the borrower complied
with the promissory note?
2. The trial court’s attorney-fee award was based solely on the Appel-
lees’ counterclaim for a declaratory judgment. Texas law does not
allow a defendant to file a counterclaim seeking a declaratory judg-
ment on issues that are already pending in the underlying suit. The
Appellees’ counterclaim sought only to resolve the Appellees’ de-
fenses to the Appellant’s claims. Therefore, it was barred as a mat-
ter of law. Were the Appellees entitled to recover attorney fees for
their counterclaim?
x
No. 04-15-00255-CV
_____________________________________________________
IN THE FOURTH COURT OF APPEALS
SAN ANTONIO, TEXAS
_____________________________________________________
SW Loan A, L.P.,
Appellant,
v.
Anibal J. Duarte-Viera, Antonio P. Pardo, and
Edward M. Reiss,
Appellees.
_____________________________________________________
BRIEF OF APPELLANT
_____________________________________________________
To the Honorable Court of Appeals:
This case involves a loan that has not been repaid by either the
bankrupt entity that took out the loan or the guarantors who individually
guaranteed the loan’s repayment. 1946 Property, LLC (the “Borrower”)
borrowed $10,000,000.00 (the “Loan”) from Stillwater National Bank
and Trust Company (the “Lender.”) Appellees Duarte-Viera, Pardo, and
Reiss (the “Guarantors”) personally guaranteed the Loan’s repayment.
–1–
Appellant SW Loan A, L.P. (“SW Loan”) acquired the Loan and
was assigned all rights under the governing loan documents. Those doc-
uments unambiguously stated that if the Borrower failed to pay an
amount due under the Loan or if it filed bankruptcy, it would be in de-
fault under each of the governing loan documents—including the promis-
sory note executed in connection with the Loan (the “Promissory
Note”).
In proving its case against the Guarantors, SW Loan introduced
uncontroverted evidence establishing every element of a claim against
the Borrower for breaching the Promissory Note. It also introduced un-
controverted evidence establishing that the Borrower both failed to repay
the Loan and filed for bankruptcy. Either was sufficient to conclusively
establish a default under each of the loan documents—including the
Promissory Note. Further, the Plaintiff introduced unrebutted prima facie
evidence that the Borrower defaulted on its obligation to repay the in-
debtedness evidenced by the Promissory Note. That too was sufficient to
conclusively establish the Borrower’s noncompliance with the Promisso-
ry Note.
–2–
Yet, in response to Question No. 2, the jury found that the Borrow-
er did not fail to comply with the Promissory Note. Because a default un-
der the Promissory Note was conclusively established and the evidence
was both legally and factually insufficient to support the jury’s response
to that question, the trial court’s take-nothing judgment based on the ju-
ry’s verdict must be set aside.
The trial court’s judgment must also be reversed and rendered with
respect to the attorney fees awarded to the Guarantors. That award was
based solely on the Guarantors’ counterclaim brought under the Uniform
Declaratory Judgments Act (“UDJA”). But that counterclaim was barred
as a matter of law because it sought only to resolve the Guarantors’ af-
firmative defenses to SW Loan’s underlying claims. Because there was no
legal basis to support the Guarantors’ counterclaim under the UDJA,
there can be no legal basis for awarding their attorney fees.
–3–
STATEMENT OF FACTS
A. The Borrower and Guarantors executed a series of documents in connection
with the Loan.
The Lender loaned $10,000,000.00 to the Borrower on April 17, 2008. 3 In
connection with that Loan, the Borrower and the Guarantors executed a series of
documents. 4 Those documents included: (1) a loan agreement (the “Loan
Agreement”) setting forth the terms and conditions of the transaction 5; (2) a
Promissory Note evidencing the Borrower’s indebtedness under the Loan 6; (3) a
Deed of Trust, Assignment of Rents and Security Agreement (the “Deed of
Trust”) providing security for the Loan 7; and (4) three limited guaranty agree-
3
2.RR.79:22–80:3; 2.RR.100:24–101:1; see also 5.RR.272 (Recitals in Substitute Trustee’s
Deed and Bill of Sale stating that the Lender made a $10,000,000.00 loan to the Borrower ev-
idenced by the Promissory Note).
4
See 5.RR.8 (listing various loan documents assigned to SW Loan).
5
See 5.RR.10–31 (Loan Agreement); 2.RR.104:16–17 (admitting the Loan Agreement into
evidence); 3.RR.6:18–7:14 (testimony from Appellant Pardo authenticating the Loan Agree-
ment).
6
5.RR.39–41 (Promissory Note) (not offered or admitted into evidence); see 2.RR.106:16–
22 (testimony from the loan servicer’s representative stating that the Promissory Note in the
amount of $10,000,000.00 was executed by the Borrower on April 17, 2008); 3.RR.9:2–12
(testimony from Appellee Pardo authenticating the Promissory Note and acknowledging that
he and Appellee Duarte-Viera signed it on behalf of the Borrower); 5.RR.272 (Recitals in Sub-
stitute Trustee’s Deed and Bill of Sale stating that the Borrower had made the Promissory
Note on April 17, 2008 and that it evidenced the Borrower’s $10,000,000.00 indebtedness).
7
5.RR.58–89 (Deed of Trust); see 2.RR.116:5-12 (admitting the Deed of Trust into evi-
dence); 5.RR.272 (Recitals in Substitute Trustee’s Deed and Bill of Sale stating that the in-
debtedness evidenced by the Promissory Note was secured by the Deed of Trust executed by
–4–
ments executed by each of the Guarantors (collectively, the “Guaranty Agree-
ments”) guaranteeing the Borrower’s compliance with its monetary obligations
under the Loan. 8
1. The Loan Agreement
The Loan Agreement, which was admitted into evidence,9 set forth the
general terms and conditions of the Loan. 10 One of those conditions was that the
Borrower and Guarantors would execute and deliver the Promissory Note, the
Deed of Trust, and the Limited Guaranty Agreements. 11 And each of those doc-
uments was included in the Loan Agreement’s definition of the term “Loan
the Borrower on April 17, 2008).
8
5.RR.43–46 (Appellee Duarte-Viera’s Limited Guaranty Agreement); 5.RR.48–51 (Ap-
pellee Pardo’s Limited Guaranty Agreement); 5.RR.53–56 (Appellee Reiss’s Limited Guaran-
ty Agreement).
9
2.RR.104:16–17; see also 3.RR.6:18–7:14 (presenting testimony from Appellant Pardo au-
thenticating the Loan Agreement).
10
See 5.RR.10 (“Subject to the terms and conditions hereinafter set forth, Lender agrees
to lend to Borrower, and the Borrower agrees to borrow from the Lender….”).
11
See 5.RR.12–13 § 6 1 1 (“This Loan Agreement, the [Promissory] Note, the Deed of
Trust, …, the Limited Guaranty Agreements, … and all other documents executed pursuant
thereto or in connection therewith as might be required by the Lender (all of the foregoing are
referred to herein as the ‘Loan Documents’) shall have been duly authorized, executed and
delivered to Lender.”).
–5–
Documents.”12 Moreover, all of those documents were considered part of the
“entire agreement” between the parties. 13
The term “Loan Documents” was also used in the Loan Agreement to
outline the conditions under which the Borrower would be in default of each of
the documents executed in connection with the Loan (including the Promissory
Note):
DEFAULT Each of the following shall constitute a Default here-
under and under each of the Loan Documents (“Default”).[ 14]
Among the conditions of default unambiguously set forth in the Loan
Agreement were bankruptcy, nonpayment of the Promissory Note, nonpayment
of any other amount payable under the Loan Documents, and the breach of any
covenant made in the Loan Documents:
91 Nonpayment of Note Failure to make payment of any
interest on or principal of the Note or any renewals or
modifications thereof within five (5) days after the due date
thereof, or
12
Id. References in this Brief to the term Loan Documents will have the same meaning as
in the Loan Agreement unless otherwise specified.
13
5.RR.28 (“This Loan Agreement, all of the Loan Documents and the other loan docu-
ments executed pursuant hereto or in connection herewith constitute the entire agreement
between the parties….”).
14
5.RR.23 (emphasis added).
–6–
92 Other Nonpayment Failure to make payment of any other
amount payable under the terms of this Loan Agreement or
any of the Loan Documents within five (5) days after the due
date thereof, or
93 Breach of Covenants Breach by Borrower in the performance
or observance of any covenant made under this Agreement or
any of the Loan Documents, or under the terms of any other
instrument delivered to Lender in connection with this Loan
Agreement, provided that with respect to any such covenants
which are non-monetary in nature, the Borrower will have
thirty (30) days to cure the breach of such covenant after the
occurrence thereof before such occurrence will constitute a
default hereunder, or
***
99 Bankruptcy The institution of bankruptcy, reorganization,
liquidation or receivership proceedings by or against the
Borrower or any of the Guarantors, or the making of any
assignment for the benefit of creditors by or against the
Borrower or any of the Guarantors, or if the Borrower or any
of the Guarantors becomes insolvent, or any admission by the
Borrower or any of the Guarantors of its or their inability to
pay its or their debts as such debts mature, or ….[15]
In addition, one of the Loan Agreement’s covenants required the Borrower to
promptly pay all taxes owed:
77 Payment of Taxes All taxes, assessments and governmental
charges or levies imposed on the Borrower or on Borrower’s
15
5.RR.23–25.
–7–
assets, income or profits will be paid prior to the date on
which penalties attach thereto.[ 16]
The Loan Agreement was amended by the Borrower and the Lender on
May 12, 2011 (the “Amendment”) to facilitate an additional $240,000.00 loan to
help the Borrower pay its overdue taxes from 2010. 17 As part of that Amendment,
the Borrower agreed to make monthly tax escrow payments of $20,000.00
commencing June 5, 2011. 18 The remaining terms of the Amendment are of little
significance to this appeal, but it should be noted that: (1) each of the Guarantors
consented to the amendment and acknowledged it would not alter their
obligations under the Limited Guaranty Agreements 19; (2) the Promissory Note,
the Deed of Trust, and the Limited Guaranty Agreements remained within the
16
5.RR.20–21; see also id. at § 7 1 (“The Borrower will promptly and punctually perform
all of the obligations hereunder and under the Loan Documents, and under all other instru-
ments executed or delivered pursuant thereto ….”).
17
5.RR.33–35 (the Amendment); 2.RR.105:17–18 (admitting the Amendment into evi-
dence); 3.RR.7:19–8:8 (authenticating the Amendment); 5.RR.305–07 (“Once we have re-
ceived consents from all of you these changes will be made and SNB will be in a position to
close and fund this loan to pay the overdue taxes.”); 3.RR.44–45 (admitting email chain
demonstrating purpose of additional loan into evidence).
18
Id.
19
5.RR.34 (“The Guarantors hereby jointly and severally consent to the modifications
made to the Loan Agreement and the Loan Documents by the terms of this First Amendment,
the Security Agreement and the Assignment of Management Agreement[.] The Guarantors
hereby jointly and severally agree that such modifications do not affect the guaranty obliga-
tions of the Guarantors under the Limited Guaranty Agreements, all of which remain in full
force and effect.”).
–8–
Loan Agreement’s definition of the term Loan Documents 20 following the
Amendment; and (3) the Loan Agreement’s other terms—to the extent they are
material to this appeal—remained unchanged and in full effect. 21
2. The Promissory Note
Although the Promissory Note itself was neither offered nor admitted into
evidence,22 evidence of its existence and the fact that it was signed by the Bor-
rower was presented at trial. 23 For example, Appellee Pardo identified the Prom-
issory Note during his testimony and admitted that both he and Appellee Duarte-
Viera signed the $10,000,000.00 note on behalf of the Borrower:
Q Mr. Pardo, I’m going to hand you what’s been
designated as Plaintiff’s Exhibit 5, and would you please read that --
the title of that document?
A This is a Promissory Note.
20
5.RR.33–34 (“This Loan Agreement, the [Promissory] Note, the Deed of Trust, … , the
Limited Guaranty Agreements, … and all other documents executed pursuant thereto or in
connection therewith as might be required by the Lender (all of the foregoing are collectively
referred to herein as the ‘Loan Documents’)….”).
21
5.RR.34–35 (“Except to the extent amended by this First Amendment, …, the Loan
Agreement and all of the Loan Documents, and the liens created thereby will all remain in full
force and effect, unabated and uninterrupted.”).
22
See 4.RR.42:12–24 (“[T]he court reporter and myself [Judge Gabriel] have reviewed the
exhibit list and [three exhibits (including the Promissory Note)] were referred to in the testi-
mony but they were never offered or admitted in evidence.”).
23
See, e.g., 3.RR.9:2–12(authenticating the Promissory Note); 5.RR.8, 10, 12–13, 20 (refer-
encing the Promissory Note and its terms).
–9–
Q In the amount -- how much is that promissory note, is
the amount of the note please, sir?
A Ten million.
Q And if you turn to the end of that document, sir, who
signed that note?
A I signed it as a borrower and manager of 1946
Property as well as my partner, Anibal J. Duarte-Viera.[24]
Mr. Gary Redman, an asset manager and representative from SW Loan’s
loan servicer, Situs Asset Management, also identified the Promissory Note:
Q Mr. Redman, I’m handing you what’s been designated
as Plaintiff’s Exhibit 5. What is Plaintiff’s Exhibit 5, Mr. Redman?
A This is the promissory note, the $10 million
promissory note that was executed by 1946 Property, LLC and
promises to pay Stillwater National Bank and Trust. It was executed
April 17, 2008.[ 25]
Many of the documents admitted into evidence at the trial also refer to the
Promissory Note and evidence its existence. 26 For example, the Recitals to the
Substitute Trustee’s Deed and Bill of Sale (the “Deed Recitals”)—issued in
24
3.RR.9:2–12 (emphasis added).
25
5.RR.106:16–22.
26
See, e.g., 5.RR.8, 10, 12–13, 20 (referencing the Promissory Note).
–10–
connection with SW Loan’s foreclosure on the property pledged by the Borrower
as security for the indebtedness evidenced by the Promissory Note—state that
Stillwater National Bank and Trust Company (“Original Lender”)
made a loan (the “Loan”) to 1946 Property, LLC, a Texas limited
liability company (“Borrower”), in the principal amount of
$10,000,000.00, the indebtedness of which is evidenced by that
certain Promissory Note made by Borrower and dated April 17,
2008 (the “Note”). 27
As discussed above, the Loan Agreement made executing the Promissory Note a
condition precedent to the Lender’s obligation to make the Loan and provides
evidence of the Promissory Note’s key terms:
BORROWER’S NOTE The Loan Commitment shall be
evidenced by a Promissory Note of even date herewith in the
principal face amount of TEN MILLION DOLLARS
($10,000,000[.]00) (the “Note”), which Note shall be in form and
substance and payable on the terms approved by Lender Interest on
the Note will be payable at the fixed interest rate equal to six percent
(6[.]00%) per annum (the “Interest Rate”)[.] Monthly installments
of principal and interest will be payable on the Note based on a three
hundred sixty (360) month amortization at the Interest Rate in
accordance with the terms of the Note[.] The entire unpaid
principal balance plus all accrued interest owing on the Note shall
be due and payable on the Maturity Date[. 28] All interest hereon
shall be calculated for the actual number of days elapsed at a per
diem charge based on a year consisting of 360 days.[29]
27
5.RR.272.
28
The “Maturity Date” as defined in the Loan Agreement was April 17, 2013. 5.RR.10.
29
Id.
–11–
The Deed of Trust likewise refers to, incorporates, and provides evidence of the
existence of the Promissory Note:
Note A certain Promissory Note of even date herewith,
incorporated herein by this reference, executed by Grantor and
payable to the order of Beneficiary in the principal face amount of
TEN MILLION AND 00/100 DOLLARS
($10,000,00[.]00)(“Note”), bearing interest as therein specified,
containing an attorneys’ fee clause, interest and principal being
payable as therein specified, and finally maturing five (5) years after
the date hereof, which Note is secured by, among other things, this
Deed of Trust, and any and all renewals, modifications,
amendments, rearrangements, consolidations, reinstatements,
enlargements, or extensions of such promissory Note or of any
promissory note or Note given in renewal, substitution or
replacement therefore, together with all interest thereon.[ 30]
Finally, each of the Guaranty Agreements refers to the Promissory Note and
provides evidence of its existence:
WHEREAS, pursuant to the terms of a certain Loan
Agreement of even date herewith (the “Agreement”), the Lender
has extended credit to 1946 PROPERTY, LLC, a Texas limited
liability company (the “Borrower”) in the principal amount of TEN
MILLION DOLLARS ($10,000,000[.]00) as evidenced by a
certain Promissory Note of even date herewith in the principal face
amount of $10,000,000[.]00 (the “Note”) ….[ 31]
30
5.RR.63.
31
5.RR.43, 48, 53.
–12–
3. The Deed of Trust
The Deed of Trust, which was admitted into evidence, 32 pledged the Bor-
rower’s property as security for both the Borrower’s indebtedness under the
Promissory Note and its obligations under the other “Loan Documents.” 33 In
addition to the references to the Promissory Note mentioned above, the Deed of
Trust contains other terms that are material to this appeal. For example, the Bor-
rower (Grantor) agreed that certain statements made in the Deed Recitals would
be prima facie evidence of the truth of those statements:
Trustee’s Deeds After any sale under this subsection,
Trustee shall make good and sufficient deeds, assignments, and
other conveyances to the purchaser or purchasers thereunder in the
name of Grantor, conveying the Mortgaged Property or any part
thereof so sold to the purchaser or purchasers with general warranty
of title by Grantor[.] It is agreed that in any deeds, assignments or
other conveyances given by Trustee, any and all statements of
fact or other recitals therein made as to the identity of
Beneficiary,[34] the occurrence or existence of any Event of
32
2.RR.116:5–12; see also 3.RR.10:7–16 (presenting testimony from Appellant Pardo au-
thenticating the Deed of Trust).
33
5.RR.63 (“A certain Promissory Note of even date herewith, incorporated herein by this
reference, executed by Grantor and payable to the order of Beneficiary in the principal face
amount of TEN MILLION and 00/100 DOLLARS ($10,000,000[.]00) (“Note”) … is se-
cured by, among other things, this Deed of Trust.”); 5.RR.65 (“To secure the full and timely
payment of the Indebtedness and the full and timely performance and discharge of the Obliga-
tions ….”).
34
The term “Beneficiary” was defined by the Deed of Trust to include the Lender “and
the subsequent holder or holders, from time to time, of the [Promissory] Note.” 5.RR.60.
–13–
Default, the notice of intention to accelerate, or acceleration of, the
maturity of the Indebtedness, the request to sell, notice of sale,
time, place, terms and manner of sale, and receipt, distribution, and
application of the money realized therefrom, the due and proper
appointment of a substitute Trustee, and without being limited by
the foregoing, any other act or thing having been duly done by or on
behalf of Beneficiary or by or on behalf of Trustee, shall be taken
by all courts of law and equity as prima facie evidence that such
statements or recitals state true, correct, and complete facts and
are without further question to be so accepted, and Grantor does
hereby ratify and confirm any and all acts that Trustee may lawfully
do in the premises by virtue hereof.[ 35]
Further, the Borrower (Grantor) agreed that after foreclosure, SW Loan—
as holder of the Promissory Note—would be entitled to seek a deficiency judg-
ment:
[T]he Beneficiary [SW Loan36] shall be entitled to seek a
deficiency judgment from Grantor [Borrower], the Guarantors [the
Appellees], and any other party obligated on the [Promissory] Note equal
to the difference between the amount owing on the [Promissory]
Note and the amount for which the Mortgaged Property was sold
pursuant to a judicial or nonjudicial foreclosure sale. 37
4. The Guaranty Agreements
Each of the Guarantors signed a Limited Guaranty Agreement in which he
ratified, agreed, and consented to the terms of the Loan Agreement, the Promis-
35
5.RR.68 (emphasis added).
36
See supra note 34.
37
5.RR.74.
–14–
sory Note, and all of the other “Loan Documents.” 38 And each of the Guaranty
Agreements was admitted into evidence. 39 Under the terms of those agreements,
each Guarantor
guarantee[d] to the Lender the absolute, complete and punctual
payment and performance when due of all principal indebtedness
and other monetary obligations evidenced by or owing under the
[Promissory] Note, the [Loan] Agreement, the Loan Documents,[ 40]
and all other documents executed in connection therewith and all
renewals, consolidations, modifications, amendments, increases and
extensions thereof, together with all interest thereon and all
expenses of collection therefor including attorneys’ fees and
expenses (all of the foregoing items are referred to herein as the
“Indebtedness”), provided that the Guarantor’s foregoing
guarantee of payment and performance obligation owing hereunder
is limited to $2,500,000[.]00 of principal plus all interest
attributable thereto[.] Except as limited herein, this Limited
Guaranty Agreement is an absolute, unconditional and continuing
guaranty of payment of the entire amount of the Indebtedness[.]
The obligations of the Guarantor hereunder will not terminate until
38
5.RR.43, 48, 53.
39
5.RR.43–46 (Appellee Duarte-Viera’s Limited Guaranty Agreement); 2.RR.110–11 (ad-
mitting Appellee Duarte-Viera’s Limited Guaranty Agreement into evidence); 3.RR.21:8–
22:21 (presenting testimony from Appellee Duarte-Viera authenticating his Limited Guaranty
Agreement); 5.RR.48–51 (Appellee Pardo’s Limited Guaranty Agreement); 2.RR.112–13 (ad-
mitting Appellee Pardo’s Limited Guaranty Agreement into evidence); 3.RR.9:16–10:3 (pre-
senting testimony from Appellee Pardo authenticating his Limited Guaranty Agreement);
5.RR.53–56 (Appellee Reiss’s Limited Guaranty Agreement); 2.RR.114 (admitting Appellee
Reiss’s Limited Guaranty Agreement into evidence); 3.RR.24:21–26:10 (presenting testimony
from Appellee Reiss authenticating his Limited Guaranty Agreement).
40
The term Loan Documents in in the Guaranty Agreements carries the same meaning as
it does in the Loan Agreement. See id.
–15–
the entire amount of the Indebtedness has been paid to the Lender
in full in current funds….[ 41]
Each of the Guarantors also agreed that “the Lender may, at the Lender’s
option, proceed to enforce this Limited Guaranty Agreement directly against the
Guarantor immediately after the occurrence of a Default under the [Loan] Agreement
(which term “Default” will have the same meaning herein as such term is defined in
the [Loan] Agreement).”42 Finally, each of the Guarantors consented to the as-
signment—without notice—of any of the Lender’s rights under the Guaranty
Agreements. 43
B. The Lender assigned to SW Loan all rights under the Loan Agreement, the
Promissory Note, the Deed of Trust, and the Guaranty Agreements.
On or about December 13, 2011, the Lender transferred to SW Loan all
“right, title and interest in and to,” among other things, the Loan Agreement
the Promissory Note, the Deed of Trust, and the Guaranty Agreements. 44 Mr.
Redman identified the documents that were assigned to SW Loan (including the
41
Id.
42
5.RR.45, 50, 55 (emphasis added).
43
5.RR.46, 51, 55 (“The Guarantor hereby consents to the assignment of all or any portion
of the rights of the Lender hereunder in connection with the assignment of the Indebtedness
or any portion thereof without notice to the Guarantor.”).
44
5.RR.6–8 (Assignment and Bill of Sale); 2.RR.100:4–13 (admitting Assignment and Bill
of Sale into evidence).
–16–
Promissory Note), 45 and he also testified that the Promissory Note contained an
allonge indicating its assignment to SW Loan:
Q Mr. Redman, I’m handing you what’s been designated
as Plaintiff’s Exhibit 5. What is Plaintiff’s Exhibit 5, Mr. Redman?
A This is the promissory note, the $10 million
promissory note that was executed by 1946 Property, LLC and
promises to pay Stillwater National Bank and Trust. It was executed
April 17, 2008.
Q If you’ll turn to the -- I think it’s the last page of that --
it was the third page. I think that’s the last page of the promissory
note, Mr. Redman. What’s the significance of the single-spaced
paragraph that’s kind – is the last thing on that page?
A The allonge.
Q And what does that mean?
A It’s an acknowledgment of the assignment of the note
from Stillwater National Bank to SW Loan A and it’s signed by the
senior vice president of Stillwater National Bank and Trust. It’s
something that they put on all promissory notes when -- I shouldn’t
say all. If it’s done correctly, all promissory notes will have a stamp
on them when there’s been an assignment of the note to a new party
to the benefit of the party acquiring the note.[ 46]
Appellee Pardo then testified that he was aware of the assignment:
45
2.RR.101:7–103:9.
46
2.RR.106:16–107:15.
–17–
Q Were you aware that such an assignment -- well first,
sir, let me ask you for the members of the jury to please read the
title of that document?
A It’s an Assignment and Bill of Sale.
Q Sir, were you aware that an assignment of the loan and
the other loan documents including the limited guaranty
agreements had been assigned?
A Yes.[ 47]
***
Q Thank you. Were you aware that, sir, that that loan
agreement was one of the documents that was assigned to SW Loan
through the assignment that you just looked at previously?
A Yes.[ 48]
***
Q I’m handing you, Mr. Pardo, what’s been designated as
Plaintiff’s Exhibit 4 and would you please read the title of that
document?
A Notice of Assignment of Note.
Q And what assignment is it referring to, sir?
A It’s assigning the Stillwater National Bank loan to SW
Loan A, L.P.
47
3.RR.6:6–13.
48
3.RR.7:10–14.
–18–
Q And I believe you testified previously a few minutes
ago, sir, that you were aware that assignment had occurred.
Yes.[ 49]
The Deed Recitals also established that SW Loan was the holder of the
Promissory Note and that it had been assigned all rights under the other Loan
Documents:
[Lender] assigned all its right, title and interest in, to and
under the Loan Documents to [SW Loan] pursuant to that certain
Assignment of Deed of Trust dated as of December 13, 2011 and
recorded in the Official Records as Document No. 20110228228
and that certain Assignment and Bill of Sale dated as of December
13, 2011.
***
[SW Loan] is the present legal and equitable owner and
holder of the [Promissory] Note and the beneficiary of the Deed
of Trust and all liens and security interests securing the
[Promissory] Note.[50]
Finally, the jury implicitly found that SW Loan was assigned all rights un-
der the Loan Documents when it answered “Yes” to Jury Question No. 1, which
asked: “Is SW Loan the holder/owner of the Limited Guaranty Agreements exe-
cuted by Anibal J. Duarte-Viera, Tony P. Pardo and Edward M. Riess [sic]?” 51
49
3.RR.8:12–22.
50
5.RR.272–73 (emphasis added).
51
CR.708.
–19–
C. The Borrower defaulted on the loan, SW Loan began foreclosure proceedings,
and the Borrower filed bankruptcy.
On or about June 5, 2012, Tim Murphy, a representative of SW Loan’s
loan servicer, sent the Borrower a Notice of Default (the “First Notice”). 52 In
that First Notice, the Borrower was informed that it had defaulted on the terms
of its loan because: (1) it had not been making its monthly tax escrow payments;
and (2) $262,322.35 in taxes due to Bexar County, Texas had not been paid be-
cause of the escrow shortage. 53 The letter indicated that SW Loan would be will-
ing to give the Borrower thirty days to cure the tax and escrow related defaults. 54
Mr. Redman testified, however, that those defaults were never cured. 55
On July 3, 2012, twenty-eight days after the First Notice was sent to the
Borrower, an attorney from the law firm that represented SW Loan in the trial
court sent a second Notice of Default to both the Borrower and the Guarantors
(the “Second Notice”). 56 The Second Notice again informed the Borrower that
it was in default because it had failed to make seven of its required monthly
52
5.RR.91; 2.RR.116:16–117:10 (admitting the First Notice into evidence).
53
5.RR.91.
54
Id.
55
2.RR.117:2–4.
56
5.RR.93–96; 2.RR.118:15–119:9 (admitting the Second Notice into evidence).
–20–
$20,000.00 tax escrow payments. 57 But the Second Notice also informed the
Borrower that it was in default because it failed to make two principal-and-interest
payments of $60,508.72 each (for a total of $121,017.44). 58 Those payments were
due on May 17, 2012 and June 17, 2012, respectively. 59 The principal-and-interest
defaults were different from the defaults SW Loan gave the Borrower thirty days
to cure in the First Notice. 60
Mr. Redman also testified that the Borrower failed to pay its indebtedness
when he discussed the Borrower’s defaults under the terms of the Deed of Trust:
Q … I direct your attention, sir, to Article III that is set
forth at the middle of Page 6 of Plaintiff’s Exhibit 9. What is that
entitled, sir?
A Article III is Events of Default.
Q And what Events of Default are set forth in Article III,
Mr. Redman?
A In 3.1, it’s Payment of Indebtedness; 3.2 is Performance
of Obligations, and 3.3 is Default Under the Loan Documents.
57
5.RR.94.
58
Id.
59
Id.
60
Compare 5.RR.91 with 5.RR.94.
–21–
Q Are you aware of any of those three events that are
enumerated on page six of Plaintiff’s Exhibit 9? Did any of those
events of default occur, to your knowledge, Mr. Redman?
A Yes.
Q Which ones?
A 3.2 and 3.3. 3.1, yes, eventually.[61]
Because of the Borrower’s defaults, SW Loan accelerated the amount due
on the Promissory Note 62 and demanded that the Borrower pay $10,363,669.97
by July 10, 2012. 63 In addition, SW Loan notified the Borrower that if it failed to
pay the full amount due within seven days, SW Loan might “instruct the trustee
under the Deed of Trust executed to secure the [Promissory] Note to post the
property pledged therein for public foreclosure.” 64 It also informed that if a defi-
ciency remained on the debt following the foreclosure sale, it might “seek to hold
[the Borrower] and/or the Guarantors personally liable for any deficiency re-
maining after the foreclosure.” 65
61
2.RR.114:2–115:13 (emphasis added).
62
5.RR.95.
63
Id.
64
5.RR.96.
65
5.RR.95.
–22–
After the Borrower failed to comply with the demand, a foreclosure sale
was noticed and scheduled for August 7, 2012. 66 That sale was postponed, how-
ever, because the Borrower filed for bankruptcy before the sale could be complet-
ed. 67
D. The Borrower’s sworn bankruptcy statements acknowledged both that SW
Loan’s claim was undisputed and that the Guarantors were co-debtors.
On August 7, 2012, the Borrower filed for protection under Chapter 11 of
the United States Bankruptcy Code. 68 Among the Borrower’s bankruptcy filings
admitted into evidence was the Borrower’s Schedule D.69 That filing—executed
under the penalty of perjury by Appellee Reiss 70—lists SW Loan as a secured
creditor holding a non-contingent, liquidated, and undisputed claim for
$10,292,760.61.71 Importantly, the Borrower’s sworn bankruptcy filings also
acknowledged that the Guarantors were co-debtors on the debt to SW Loan. 72
66
2.RR.119:13–22.
67
2.RR.120:2–122:15 (presenting testimony regarding the Borrower filing bankruptcy and
admitting documents related to the Borrower’s bankruptcy into evidence); 5.RR.106–08 (Bor-
rower’s Bankruptcy Petition); 5.RR.110–44 (Borrower’s bankruptcy schedules).
68
5.RR.106.
69
5.RR.118; 2.RR.116 (admitting Schedule D into evidence).
70
5.RR.144.
71
5.RR.118.
72
5.RR.142.
–23–
E. SW Loan foreclosed on the property and established a deficiency.
On October 19, 2012, the Borrower agreed to a final order modifying the au-
tomatic stay of bankruptcy to allow SW Loan to sell the Borrower’s property at
foreclosure. 73 Consistent with that order, a foreclosure sale was noticed for No-
vember 6, 2012. 74 At that sale, SW Loan purchased the Borrower’s property for
$7,000,000.00 75 and thus established a Loan deficiency of at least $3,292,760.61
(based on the amount owed according to the Borrower’s sworn bankruptcy
statements). 76 Mr. Redman testified at trial that the deficiency—as of November
17, 2012—was $3,482,872.63. 77
The Deed Recitals—issued by the substitute trustee following the foreclo-
sure sale of the Borrower’s property—are significant because they outline the
history of the Loan transaction and the Borrower’s default. 78 Among other
73
5.RR.146–49.
74
5.RR.281.
75
5.RR.272–75.
76
The Borrower’s sworn bankruptcy statements acknowledge SW Loan’s undisputed
claim for $10,292,760.61. See 5.RR.118. Thus, after the $7,000,000.00 sale price is credited to
the Loan, the Borrower cannot deny owing at least $3,292,760.61. See 5.RR.74 (Deed of Trust
provision explaining how a deficiency would be calculated following a foreclosure sale).
77
2.RR.124:25–125:4 (testifying that he believed the correct amount of the deficiency after
the $7,000,000.00 credit was applied, including interest and advances, was $3,482,872.63).
78
5.RR.272–73.
–24–
things, the Deed Recitals show that: (1) the Borrower obtained the
$10,000,000.00 Loan from the Lender 79; (2) the Borrower’s indebtedness was
evidenced by the Promissory Note 80; (3) the Deed of Trust secured the indebt-
edness evidenced by the Promissory Note 81; (4) the Lender assigned all right, ti-
tle, and interest in, to, and under the Loan Documents to SW Loan 82; (5) SW
Loan “is the present legal and equitable owner and holder of the [Promissory]
Note and the beneficiary of the Deed of Trust and all liens and security interests
securing the [Promissory] Note” 83; (6) the substitute trustee was asked to fore-
close on the Borrower’s property “on account of one or more defaults in the ob-
ligations secured by the Deed of Trust” 84; and (7) the foreclosure sale “was con-
ducted in strict accordance with the Deed of Trust, the [notice of sale] and the
law.” 85
79
5.RR.272.
80
Id.
81
Id.
82
Id.
83
5.RR.273.
84
Id.
85
Id.
–25–
F. SW Loan sued the Guarantors to recover the unpaid balance on the Loan, and
the Guarantors counterclaimed for a declaratory judgment seeking to validate
their affirmative defenses.
SW Loan filed its suit against the Guarantors on August 6, 2012 to recover
the amount owed on the Loan. 86 The Guarantors answered and sought a coun-
terclaim for a declaratory judgment. 87 The Guarantors’ answer was not verified,
despite its allegation that SW Loan was not the holder of, and had not been as-
signed, the Promissory Note. 88 See Tex. R. Civ. P. 93 (“A pleading setting up
any of the following matters, unless the truth of such matters appear of record,
shall be verified by affidavit…. A denial of the genuineness of the indorsement or
assignment of a written instrument upon which suit is brought by an indorsee or
assignee and in the absence of such a sworn plea, the indorsement or assignment
thereof shall be held as fully proved.”).
86
CR.8–16.
87
CR.587–91 (Defendants’ Fourth Amended Answer and Second Amended Counterclaim
for Declaratory Judgment).
88
CR.587 (“Plaintiff is not the holder of the pertinent Note guaranteed by Defendants, as
the Note was not assigned under the assignment document Plaintiff relies upon as its basis for
the claims in this case, and Plaintiff failed to provide any other evidence of assignment or
transfer of the Note.”).
–26–
More importantly, however, the Guarantors did not deny that the Borrow-
er defaulted on the Promissory Note. 89 Nor did they claim that the Borrower’s
default was excused. 90 Rather, the only affirmative defenses raised by the Guaran-
tors were: (1) that SW Loan was not the holder of the Promissory Note; and (2)
that each Guarantor’s liability was limited to $2,500,000.00 of principal and in-
terest and therefore SW Loan could not seek to recover sums that were not at-
tributable to principal and interest. 91
With their answer, the Guarantors also filed a counterclaim seeking a de-
claratory judgment asking only that the trail court declare that their affirmative
defenses were valid:
10. Pursuant to Chapter 37 of the Texas Civil Practice &
Remedies Code, [Guarantors] hereby seek a declaration concerning
the Assignment and Guarantees from the Court that:
a) [SW Loan] is not the holder of the [Promissory] Note and
lacks standing to pursue [Guarantors] for the alleged deficiency;
and
89
CR.587–91.
90
Id.
91
CR.587–88.
–27–
b) [SW Loan] is not entitled to seek or recover any damages
from [Guarantors] under the Guarantees aside from principal
and/or interest under the [Promissory] Note.[ 92]
G. The Guarantors offered no evidence of the Borrower’s compliance with the
Promissory Note.
The trial was held between December 1, 2014 and December 3, 2014. 93 At
the trial, the Guarantors presented no evidence suggesting or stating that the
Borrower complied with all of its obligations under the Promissory Note. 94 More
specifically, the Guarantors offered no evidence suggesting that: (1) the Borrower
repaid its $10,000,000.000 Promissory Note; (2) the Borrower remained current
on all required principal, interest, and tax-escrow payments; and (3) the Borrow-
er never filed for bankruptcy. 95
On the contrary, the Defendants entered only two documents into evi-
dence, neither of which suggested or established the Borrower’s compliance with
the Promissory Note. 96 The first was an email chain showing that the Borrower
92
CR.590.
93
1.RR.1.
94
See generally Reporter’s Record.
95
See id.
96
See 5.RR.305–09, 311–12.
–28–
took out an additional loan from the Lender to pay past due taxes from 2010. 97
The Guarantors introduced the email chain to show that the Lender had alleged-
ly agreed to allow the Borrower to split its 2011 tax payment so that it could ex-
tend the deadline for fully paying those taxes until June 30, 2012. 98 The second
document was a copy of a print-out from the Bexar County Tax Assessor-
Collector’s web site demonstrating that—as of December 2, 2014—Bexar Coun-
ty allowed taxpayers to split their current-year tax payments with the first half
due on November 30th of the tax year and the remainder due by June 30th of the
following year. 99
Appellee Pardo testified that—consistent with that email chain—the
Lender agreed to allow the Borrower to escrow only $20,000.00 per month with
the understanding that $120,000.00 (half of the $240,000.00 tax base due for
2011) would be paid from escrow in December 2011 with the remaining
$120,000.00 being paid from escrow in June 2012. 100 Barring that agreement, the
Lender would have required the Borrower to escrow more than $20,000.00 per
97
5.RR.305–09.
98
5.RR.305–09.
99
5.RR.311.
100
3.RR.42:10–45:24; 5.RR.305–07.
–29–
month for the remainder of 2011 so that it would have enough money in escrow
to pay the full amount of the Borrower’s 2011 taxes when they became due in
January of 2012. 101
The Guarantors offered that evidence in hopes of negating one of SW
Loan’s grounds for claiming that the Borrower had defaulted:
[SW Loan’s trial counsel]: I have an objection as to
relevance, Your Honor. This is correspondence between Mr. Pardo
and Stillwater National Bank and not a correspondence or any way a
communication with SW Loan A, L.P.
THE COURT: Are you going to tie this up some way?
[Guarantors’ counsel]: Yes, Your Honor. The plaintiff has
alleged default under -- in the tax provision of the loan agreement,
and we’re going to show here -- and we show here that there was no
default. There was a subsequent agreement after the loan agreement
was executed that Stillwater National Bank was to pay the taxes on
November -- in November of 2011 and they did not do so.[102]
But apart from those two documents and Mr. Pardo’s testimony, which
related solely to the issue of whether the Borrower’s failure to timely pay its 2011
taxes constituted a default, the Guarantors presented no evidence on the
Borrower’s compliance with its obligations under the Promissory Note or any of
101
See id.
102
3.RR.44:15–45:4.
–30–
the other Loan Documents. 103 In fact, the only other evidence presented by the
Guarantors related to their claim for attorney fees that they acknowledged was
based on—and was limited to—their counterclaim for a declaratory judgment. 104
H. The jury found that the Borrower did not fail to comply with the Promissory
Note and therefore skipped the remaining questions dealing with the
Guarantors’ liability to SW Loan.
The Court’s Charge asked the jury first to determine whether SW Loan
was the holder/owner of the Guaranty Agreements executed by the Guaran-
tors. 105 The jury answered “Yes.” 106 The jury then proceeded to Question No. 2,
which asked: “If you answered “Yes” in Question No. 1, then answer the follow-
ing question. Otherwise, do not answer this question. Did 1946 Property, LLC
[the Borrower] fail to comply with the Promissory Note?1 Answer ‘Yes’ or
‘No’.”107 The footnote was a citation to Texas Pattern Jury Charge § 101.2 which
103
See generally 3.RR.42–46 (presenting the Guarantors’ direct examination of Appellee
Pardo).
104
3.RR.50:21–54:7.
105
CR.708.
106
Id.
107
CR.709.
–31–
is the standard pattern question for asking whether a party has breached a con-
tract. 108
In their closing argument to the jury, the Guarantors did not argue that the
Borrower complied with the Promissory Note. 109 Instead, the Guarantors errone-
ously asserted that SW Loan had presented no evidence of the Borrower’s de-
fault apart from the testimony of Mr. Redman, and they argued that Mr. Redman
was not credible:
Question Number Two, it’s on Page 6. Did 1946 Property,
LLC fail to comply with the promissory note? Did they? We’re here
in a loan case, a multimillion dollar loan case and do you all realize
there has not been any testimony or evidence that a principal and
interest payment were missed?
Mr. Redman didn’t say “hey, they missed a payment.” His
only notice was about taxes that he had the money for or they were
in escrow six months earlier. They’re not saying they missed
payments. Took the property any way.
So I think it’s arguable whether or not you can say yes to
number two. You’re stuck with what they’ve given you and they
bear the burden. It’s their burden to prove by a preponderance of
the evidence that 1946 Property, LLC failed to comply with the
promissory note, and your job is to judge the credibility of their one
108
CR.709; Tex. Pattern Jury Charge § 101.2.
109
4.RR.25:18–40:13.
–32–
witness whose testimony has been inconsistent throughout this
entire dispute, his credibility on that issue. 110
During their deliberations, the jury asked the judge whether SW Loan’s
exhibits 4 [Notice of Assignment of Note], 5 [Promissory Note], and 16 [Situs’s
calculations of amounts due on the Loan] were entered into evidence, noting that
they did not receive copies of those documents. 111 Judge Gabriel responded:
“Plaintiff’s Exhibits 4, 5 and 16 were referred to in testimony but were not of-
fered in evidence. Please continue with your deliberations.” 112
The jury answered “No” to Question No. 2—finding that the Borrower
did not fail to comply with the Promissory Note 113—and therefore did not answer
Question Nos. 3 through 15 dealing both with the Guarantors’ liability under the
Guaranty Agreements and SW Loan’s attorney fees. 114 Instead, the jury proceed-
ed to answer Question No. 16, finding that the Guarantors’ reasonable and nec-
essary attorney fees were $7,825.00 for representation in the trial court,
$7,500.00 for representation through appeal to the court of appeals, and
110
4.RR.32:7–33:1.
111
4.RR.42:12–16; CR.703.
112
4.RR.42:17–43:9; CR.702.
113
CR.709.
114
CR.710–23.
–33–
$10,000.00 for representation at the petition for review stage in the Supreme
Court of Texas. 115
SW Loan filed a Motion to Disregard Jury Findings and for Judgment
Notwithstanding the Verdict on January 20, 2015. 116 In that motion, SW Loan
argued that there was legally insufficient evidence to support the jury’s response
to Questions No. 2 and 16 and that the jury’s response to Question No. 2 was
“against the weight of the evidence.” 117 SW Loan sought a directed verdict and,
in the alternative, a new trial so that the jury could consider the questions it did
not answer because of its mistaken response to Question No. 2. 118 The trial court
entered its Final Judgment on January 28, 2015 119 and entered its Order Denying
Plaintiff’s Motion to Disregard Jury Findings and Judgment Notwithstanding
the Verdict on March 20, 2015. 120 SW Loan then perfected its appeal by filing a
Notice of Appeal in the trial court on April 27, 2015. See Tex. R. App. P.
26.1(a).
115
CR.724–25.
116
CR.732–72.
117
CR.732–33.
118
CR.733 & n.2.
119
CR.775–77 (App. A).
120
CR.803.
–34–
SUMMARY OF THE ARGUMENT
The evidence conclusively established that the Borrower was liable
on the Promissory Note. Indeed, it was conclusively established that: (1)
the Borrower signed a Promissory Note in which it promised to repay the
$10,000,000.00 Loan; (2) SW Loan was the holder of the Promissory
Note and the other Loan Documents; (3) the Borrower did not repay the
Loan, resulting in a deficiency; and (4) the Borrower filed for bankruptcy.
The evidence is therefore both legally and factually insufficient to sup-
port the jury’s finding that the Borrower did not fail to comply with the
Promissory Note. Consequently, the trial court’s take-nothing judgment
on the jury’s verdict must be reversed.
In addition, the trial court abused its discretion in granting attor-
ney fees to the Guarantors. It is well established in Texas that a defend-
ant cannot bring a counterclaim for a declaratory judgment seeking solely
to resolve issues pending before the court. Because the Guarantors’
counterclaim for declaratory judgment sought only to resolve their de-
fenses to SW Loan’s claims, it was barred as a matter of law. And because
that counterclaim was the sole basis for awarding the Guarantors their at-
–35–
torney fees, the judgment awarding attorney fees cannot stand. The
judgment of the trial court must therefore be reversed, judgment should
be rendered in favor of SW Loan with respect to the Guarantors counter-
claim for declaratory judgment and attorney fees, and this case should be
remanded for a new trial.
ARGUMENT
A. The evidence is legally and factually insufficient to support the jury’s answer
to Question No. 2.
1. Standard and Scope of Review
When a party attacks the legal sufficiency of an adverse finding on an issue
on which it had the burden of proof at trial, it “must demonstrate on appeal that
the evidence establishes, as a matter of law, all vital facts in support of the issue.”
Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001); Ingham v. O’Block, 351
S.W.3d 96, 99–100, (Tex. App.—San Antonio 2011, pet. denied). The reviewing
court “must first examine the record for evidence supporting the finding while
ignoring all evidence to the contrary unless a reasonable fact-finder could not.”
Ingham, 351 S.W.3d at 100 (citing City of Keller v. Wilson, 168 S.W.3d 802, 827
(Tex. 2005); Dow Chem., 46 S.W.3d at 241). But “[i]f there is no evidence to
support the finding, the reviewing court will then examine the entire record to
–36–
determine if the contrary proposition is established as a matter of law.” Dow
Chem., 46 S.W.3d at 241; Ingham, 351 S.W.3d at 100. To sustain a point of error,
“the contrary proposition must be conclusively established.” Dow Chem., 46
S.W.3d at 241; Ingham, 351 S.W.3d at 100.
Where a party attacks the factual sufficiency of an adverse finding on an is-
sue on which it had the burden of proof at trial, it “must demonstrate on appeal
that the adverse finding is against the great weight and preponderance of the evi-
dence.” Dow Chem., 46 S.W.3d at 242; Ingham, 351 S.W.3d at 100. The reviewing
court “must consider and weigh all of the evidence, and can set aside a verdict
only if the evidence is so weak or if the finding is so against the great weight and
preponderance of the evidence that it is clearly wrong and unjust.” Dow Chem.,
46 S.W.3d at 242; Ingham, 351 S.W.3d at 100. In setting aside the verdict, the re-
viewing court “must ‘detail the evidence relevant to the issue’ and ‘state in what
regard the contrary evidence greatly outweighs the evidence in support of the
verdict.’” Dow Chem., 46 S.W.3d at 242 (quoting Pool v. Ford Motor Co., 715
S.W.2d 629, 635 (Tex. 1986)); Ingham, 351 S.W.3d at 100.
Here, there is no evidence that could support a finding that the Borrower
repaid and otherwise complied with the Promissory Note. And, as will be dis-
–37–
cussed below, the jury’s finding on that issue is conclusively refuted by the evi-
dence. At the very least, the jury’s response to Question No. 2 is “so against the
great weight and preponderance of the evidence that it is clearly wrong and un-
just.” See Dow Chem., 46 S.W.3d at 242; Ingham, 351 S.W.3d at 100.
2. SW Loan conclusively established every element of a claim for breach
of the Promissory Note.
To recover against the Borrower for breach of the Promissory Note, SW
Loan had the burden of proving: (1) the existence of the Promissory Note; (2)
that the Borrower signed the Promissory Note; (3) that SW Loan is the holder of
the Promissory Note; and (4) that an amount is due and payable on the Promis-
sory Note. See Doncaster v. Hernaiz, 161 S.W.3d 594, 602 (Tex. App.—San Anto-
nio 2005, no pet.) (“To succeed on her traditional motion for summary judgment
in this suit on an unpaid debt, Hernaiz had the burden to establish (1) the exist-
ence of the debt or note; (2) that Doncaster had signed the note; (3) that Hernaiz
was the holder of the note; and (4) that a balance was due and owing under the
note.”); Hudspeth v. Investor Collection Servs. Ltd. P’ship, 985 S.W.2d 477, 479
(Tex. App.—San Antonio 1998, no pet.) (“In order to recover for the deficiency
on the note, ICS had to establish (1) the notes in question, (2) that Hudspeth
–38–
signed the notes, (3) that ICS was the legal owner and holder of the notes, and
(4) that a certain balance was due and owing under the notes.”). 121
a. The evidence conclusively established both the existence of the
Promissory Note and that it was signed by the Borrower.
SW Loan has conclusively proved both the existence of the Promissory
Note and that it was signed by the Borrower. 122 Indeed, Appellee Pardo identified
the Promissory Note at trial and testified that both he and Appellee Duarte-Viera
signed the Promissory Note on behalf of the Borrower:
121
Although the Loan Agreement has a choice-of-law provision stating that the Promissory
Note (as one of the Loan Documents) would be “deemed to be a contract made under the
laws of the State of Oklahoma,” 5.RR.28, neither party filed a motion under Rule 202 or oth-
erwise asked the trial court to take judicial notice of the applicable law of the State of Oklaho-
ma governing the elements SW Loan must prove to recover on the Promissory Note. There-
fore, it is presumed that Oklahoma law and Texas law are identical. See Burlington N. & Santa
Fe Ry. Co. v. Gunderson, Inc., 235 S.W.3d 287, 291 (Tex. App.—Fort Worth 2007, pet. with-
drawn) (citing Coca-Cola Co. v. Harmar Bottling Co., 218 S.W.3d 671, 695 (Tex. 2006) (Bris-
ter, J., dissenting); Johnson v. Structured Asset Servs., LLC, 148 S.W.3d 711, 720 (Tex. App.—
Dallas 2004, no pet.); Burns v. Resolution Trust Corp., 880 S.W.2d 149, 151 (Tex. App.—
Houston [14th Dist.] 1994, no writ); Gevinson v. Manhattan Constr. Co. of Okla., 449 S.W.2d
458, 465 n.2 (Tex. 1969)) (“Because BNSF never filed a rule 202 motion requesting the trial
court to take judicial notice of other states’ law, the presumption arises that the law of the
other states in question is identical to Texas law.”). Furthermore, the Guarantors resisted SW
Loan’s Motion for Summary Judgment at the trial court by arguing Texas law on the issue of
what SW Loan must prove to prevail on a claim under the Promissory Note. CR.539. Thus,
the Guarantors have waived the application of Oklahoma law to this issue. See DaimlerChrysler
Motors Co., LLC v. Manuel, 362 S.W.3d 160, 196–97 & n.31 (Tex. App.—Fort Worth 2012, no
pet.) (holding that party waived argument on choice-of-law issue by acting in a manner incon-
sistent with that argument in the trial court).
122
See generally supra notes 22–31 and surrounding text.
–39–
Q Mr. Pardo, I’m going to hand you what’s been
designated as Plaintiff’s Exhibit 5, and would you please read that --
the title of that document?
A This is a Promissory Note.
Q In the amount -- how much is that promissory note, is
the amount of the note please, sir?
A Ten million.
Q And if you turn to the end of that document, sir, who
signed that note?
A I signed it as a borrower and manager of 1946
Property as well as my partner, Anibal J. Duarte-Viera.[123]
Mr. Redman similarly identified the Promissory Note:
Q Mr. Redman, I’m handing you what’s been designated
as Plaintiff’s Exhibit 5. What is Plaintiff’s Exhibit 5, Mr. Redman?
A This is the promissory note, the $10 million
promissory note that was executed by 1946 Property, LLC and
promises to pay Stillwater National Bank and Trust. It was executed
April 17, 2008.[ 124]
Furthermore, under Texas law, the recitals in a substitute trustee’s deed
are prima facie evidence of the truth of the matters asserted in those recitals. See
Choice Pers. No. Four, Inc. v. 1715 Johanna Square Ltd., No. 01-05-00830-CV,
123
3.RR.9:2–12 (emphasis added).
124
5.RR.106:16–22.
–40–
2007 WL 1153046, at *6 (Tex. App.—Houston [1st Dist.] Apr. 13, 2007, pet. de-
nied) (mem. op.) (“Recitals in a deed are presumed correct, unless rebutted by
competent evidence.”); see also Deposit Ins. Bridge Bank, N.A., Dallas v. McQueen,
804 S.W.2d 264, 266 (Tex. App.—Houston 1991, no writ) (“The substitute trus-
tee’s deed, which was admitted in evidence, recites compliance with all condi-
tions of the deed of trust. Those recitals constitute prima facie evidence of the
validity of the foreclosure sale ….”); Choice Pers. No. Four, Inc. v. Richardson, No.
14-05-00675-CV, 2006 WL 2074681, at *5 (Tex. App.—Houston [14th Dist.]
2006, pet. denied) (Guzman, J.) (mem. op.) (“The Choice Companies offered no
evidence rebutting the presumption that these recitals are correct; therefore, the
Owners were not required to produce evidence proving the deed’s recitals.”);
Kirkman v. Amarillo Sav. Ass’n, 483 S.W.2d 302, 306 (Tex. Civ. App.—Amarillo
1972, writ ref’d n.r.e.) (“The trustee’s deed contained factual recitations of the
default and of the various steps taken in the foreclosure all in accordance with the
procedural steps set forth in the deed of trust, and such recitals are presumed to
be correct, unless rebutted by competent evidence.”).
The Deed Recitals executed in connection with the sale of the Borrower’s
property at foreclosure state, among other things, that
–41–
Stillwater National Bank and Trust Company (“Original Lender”)
made a loan (the “Loan”) to 1946 Property, LLC, a Texas limited
liability company (“Borrower”), in the principal amount of
$10,000,000.00, the indebtedness of which is evidenced by that
certain Promissory Note made by Borrower and dated April 17, 2008
(the “Note”). 125
The Guarantors offered no evidence rebutting those statements. 126 Therefore,
both the existence of the Promissory Note and the fact that it was made by the
Borrower were established as a matter of law. See id.
b. The evidence conclusively established that SW Loan was the
holder of the Promissory Note.
SW Loan also conclusively established that it holds the Promissory Note
and the other Loan Documents. 127 Indeed, the Assignment and Bill of Sale—in
which the Lender transferred all right, title, and interest in and to the Promissory
Note and the other Loan Documents—was admitted into evidence. 128 Mr. Red-
man also testified that the Promissory Note contained an allonge evidencing its
125
5.RR.272 (emphasis added).
126
5.RR.272.
127
See generally supra notes 44–51 and surrounding text.
128
5.RR.6–8 (Assignment and Bill of Sale); 2.RR.100:4–13 (admitting Assignment and Bill
of Sale into evidence).
–42–
assignment to SW Loan. 129 Appellee Pardo also testified that he was aware that
the Loan Documents were assigned to SW Loan. 130
Moreover, the Deed Recitals state that SW Loan is the legal holder of the
Promissory Note and that it was assigned all rights under the other Loan Docu-
ments:
[Lender] assigned all its right, title and interest in, to and
under the Loan Documents to [SW Loan] pursuant to that certain
Assignment of Deed of Trust dated as of December 13, 2011 and
recorded in the Official Records as Document No. 20110228228
and that certain Assignment and Bill of Sale dated as of December
13, 2011.
***
[SW Loan] is the present legal and equitable owner and
holder of the [Promissory] Note and the beneficiary of the Deed
of Trust and all liens and security interests securing the Note.[ 131]
As discussed above, those Deed Recitals are prima facie evidence of the truth of
the matters they assert. See 1715 Johanna Square Ltd., 2007 WL 1153046, at *6;
see also Deposit Ins. Bridge Bank, N.A., Dallas, 804 S.W.2d at 266; Richardson,
2006 WL 2074681, at *5; Kirkman, 483 S.W.2d at 306. The Guarantors offered
no evidence rebutting the presumption that SW Loan was the holder of the
129
2.RR.106:23–107:15 (emphasis added).
130
3.RR.6:6–13, 7:10–14, 8:12–22.
131
5.RR.272–73 (emphasis added).
–43–
Promissory Note and the other Loan Documents. Therefore, SW Loan’s status
as the holder of the Promissory Note was established as a matter of law.
Finally, the jury implicitly found that SW Loan was assigned all rights un-
der the Loan Documents when it answered “Yes” to Jury Question No. 1, which
asked: “Is SW Loan the holder/owner of the Limited Guaranty Agreements exe-
cuted by Anibal J. Duarte-Viera, Tony P. Pardo and Edward M. Riess [sic]?” 132
The evidence therefore allows only one conclusion—SW Loan held the Promis-
sory Note.
c. The evidence conclusively established that there was an amount
due and payable on the Promissory Note.
Mr. Redman testified that the deficiency on the Borrower’s Loan immedi-
ately after the foreclosure sale was $3,482,872.63. 133 That testimony alone was
sufficient to establish an amount due and owing. Hudspeth, 985 S.W.2d at 479
(“A lender need not file detailed proof reflecting the calculations reflecting the
balance due on a note; an affidavit by a bank employee which sets forth the total
balance due on a note is sufficient to sustain an award of summary judgment.”).
132
CR.708.
133
2.RR.124:25–125:4 (testifying that he believed the correct amount of the deficiency after
the $7,000,000.00 credit was applied, including interest and advances, was $3,482,872.63).
–44–
But even without Mr. Redman’s testimony, SW Loan conclusively estab-
lished through documentary evidence that an amount was due and owing on the
Promissory Note. The Borrower’s sworn bankruptcy statements, which were
submitted after the Borrower received notice of its default and before its property
was sold at foreclosure, acknowledged that SW Loan held a non-contingent, liq-
uidated, and undisputed claim for $10,292,760.61. 134 The Substitute Trustee’s
Deed and Bill of Sale establishes that the Borrower’s property was sold for
$7,000,000.00. 135 Thus, using the contractually agreed upon method of calculat-
ing the Borrower’s deficiency,136 it cannot be disputed that a deficiency of at least
$3,292,760.61 was due and owing on the Promissory Note.
Because the evidence conclusively established every element necessary for
SW Loan to prevail on a claim against the Borrower under the Promissory Note,
the evidence was legally and factually insufficient to support the jury’s response
to Question No. 2.
134
5.RR.118.
135
5.RR.273–74.
136
5.RR.74.
–45–
3. The Borrower’s default under the Promissory Note was conclusively
established according to the unambiguous terms of the governing Loan
Agreement.
Separate instruments or contracts that are “executed at the same time, for
the same purpose, and in the course of the same transaction are to be considered
as one instrument, and are to be read and construed together.” Jones v. Kelley,
614 S.W.2d 95, 98 (Tex. 1981); see also Mem’l Med. Ctr. of East Texas v. Keszler,
943 S.W.2d 433, 434 (Tex. 1997) (“When dealing with two documents compris-
ing a single agreement, a court should read and construe them together.”); MG
Bldg. Materials, Ltd. v. Moses Lopez Custom Homes, Inc., 179 S.W.3d 51, 59 (Tex.
App.—San Antonio 2005, pet. denied) (same).
The Loan Agreement, which governed the terms of the Loan transaction,
defined the terms under which the Borrower would be in default under each of
the Loan Documents that were executed in connection with the Loan—including
the Promissory Note:
DEFAULT Each of the following shall constitute a Default
hereunder and under each of the Loan Documents (“Default”).[137]
Because the Promissory Note is defined by the Loan Agreement as one of
the “Loan Documents,” 138 and those documents together constituted the par-
137
5.RR.23 (emphasis added).
–46–
ties’ “entire agreement,” 139 proof of a condition of default as outlined in the Loan
Agreement necessarily constituted proof of a default under the Promissory Note.
Among the conditions of default unambiguously outlined by the Loan
Agreement were bankruptcy, nonpayment of the Promissory Note, nonpayment
of another amount payable under the Loan Documents, and the breach of any
covenant made in the Loan Documents. 140 Each of those conditions was proved
by SW Loan.
The evidence established that the Borrower filed for bankruptcy. 141 And, as
discussed above, the evidence established that the Borrower failed to fully repay
its Loan, resulting in a deficiency. 142 Thus, there can be no question that the Bor-
rower defaulted under the terms of the Loan Agreement and the Promissory
138
See 5.RR.12–13 § 6 1 1 (“This Loan Agreement, the [Promissory] Note, the Deed of
Trust, …, the Limited Guaranty Agreements, … and all other documents executed pursuant
thereto or in connection therewith as might be required by the Lender (all of the foregoing are
referred to herein as the ‘Loan Documents’) shall have been duly authorized, executed and deliv-
ered to Lender.” (emphasis added)).
139
5.RR.28 (“This Loan Agreement, all of the Loan Documents and the other loan docu-
ments executed pursuant hereto or in connection herewith constitute the entire agreement
between the parties….”).
140
5.RR.23–25; see supra notes 14–15 and surrounding text.
141
2.RR.120:2–122:15 (presenting testimony regarding the Borrower filing bankruptcy and
admitting documents related to the Borrower’s bankruptcy into evidence); 5.RR.106–08 (Bor-
rower’s Bankruptcy Petition); 5.RR.110–44 (Borrower’s bankruptcy schedules).
142
See supra notes 133–136 and surrounding text.
–47–
Note. Moreover, the statements made by SW Loan’s representatives in the two
Notices of Default—that the Borrower failed to make two principal-and-interest
payments and seven required tax escrow payments—were uncontroverted. 143 In
addition, Mr. Redman testified that the Borrower never cured its tax defaults,
and the Borrower’s own sworn bankruptcy statements acknowledge owing
$560,699.16 to Bexar County as of September 14, 2012. 144 Thus, even if one were
to assume that the Borrower should have been given until June 30, 2012 to pay its
2011 taxes, it cannot be questioned that the Borrowers did not pay those taxes by
June 30, 2012. As such, there can be no question that the Borrowers also default-
ed by failing to make payments on the Promissory Note when due, by failing to
make tax escrow payments when due, and by failing to promptly pay its taxes to
Bexar County.
Because default under the terms of the Loan Agreement was conclusively
established, default under the Promissory Note was likewise conclusively estab-
lished. Accordingly, the evidence is legally and factually insufficient to support
the jury’s response to Question No. 2.
143
See supra notes 52–59 and surrounding text.
144
5.RR.118.
–48–
4. Unrebutted prima facie evidence established the Borrower’s default.
Unrebutted prima facie evidence shows that the Borrower defaulted on its
obligation to repay the Promissory Note. As discussed earlier, the recitals in a
deed are presumed correct unless rebutted by competent evidence. See 1715 Jo-
hanna Square Ltd., 2007 WL 1153046, at *6; see also Deposit Ins. Bridge Bank,
N.A., Dallas, 804 S.W.2d at 266; Richardson, 2006 WL 2074681, at *5; Kirkman,
483 S.W.2d at 306.
The Deed Recitals stated that the indebtedness evidenced by the Promis-
sory Note was secured by the Deed of Trust, 145 that the substitute trustee was
asked to sell the Borrower’s property at foreclosure “on account of one or more
defaults in the obligations secured by the Deed of Trust,” 146 and that the foreclo-
sure sale was conducted in accordance with the Deed of Trust and the law. 147
Thus, SW Loan produced prima facie evidence of the Borrower’s default on its
obligation to repay the indebtedness evidenced by the Promissory Note and se-
cured by the Deed of Trust. There was no evidence introduced to rebut any of
the statements in the Deed Recitals. Therefore, SW Loan introduced evidence
145
5.RR.272.
146
5.RR.273.
147
Id.
–49–
that establishes—as a matter of law—that the Borrower defaulted on its obliga-
tion to repay the indebtedness secured by the Promissory Note.
Two decisions from the First and Fourteenth Courts of Appeals are in-
structive on this point. See 1715 Johanna Square Ltd., 2007 WL 1153046, at *6;
Richardson, 2006 WL 2074681, at *5. In Richardson, the appellants (who were also
the appellants in 1715 Johanna Square Ltd.) argued that summary judgment was
improper because the appellees [the “Owners”] had “produced no evidence
that, at the time of the foreclosure sale, Befral Properties [the note holder] owned
the note and Investment Choices [the borrower] was in default.” Richardson,
2006 WL 2074681, at *5. The court, in an opinion authored by Justice Eva M.
Guzman, disagreed:
This is incorrect. The Owners produced the Substitute Trustee’s
Deed that states Berfal Properties owns the note and all
prerequisites to the sale have been satisfied. The recitals in the
Substitute Trustee’s Deed constitute prima facie evidence of the
validity of the foreclosure sale. See Deposit Ins. Bridge Bank, N.A.,
Dallas v. McQueen, 804 S.W.2d 264, 266 (Tex. App.—Houston [1st
Dist.] 1991, no writ) (holding that recitals in a deed are presumed to
be correct, unless rebutted by competent evidence). The Choice
Companies offered no evidence rebutting the presumption that
these recitals are correct; therefore, the Owners were not required
to produce evidence proving the deed’s recitals.
Richardson, 2006 WL 2074681, at *5.
–50–
The First Court of Appeals reached the same conclusion in 1715 Johanna
Square Ltd. under “facts and arguments that [were] virtually identical” to those
at issue in Richardson:
The Choice Companies assert that the foreclosure sale was
invalid because Substitute Trustee’s Deed does not mention that
any borrower had defaulted, and the Purchasers did not produce
evidence that Berfal Properties owned the note on which it
foreclosed. The Fourteenth Court of Appeals considered this
assertion, and concluded that the recitals in the Substitute Trustee’s
Deed constituted prima facie evidence of the validity of the
foreclosure sale. Choice Personnel, 2006 WL 2074681 at *5. We agree
with the Fourteenth Court of Appeals. Recitals in a deed are
presumed correct, unless rebutted by competent evidence. Deposit
Ins. Bridge Bank, N.A., Dallas v. McQueen, 804 S.W.2d 264, 266
(Tex. App.—Houston [1st Dist.] 1991, no writ). The Purchasers
produced the Substitute Trustee’s Deed entered into by Gilmore
and Richardson, which states that Berfal Properties owns the note
and that all prerequisites to the foreclosure sale were satisfied. The
Fourteenth Court of Appeals correctly noted that Choice
Companies offered no competent evidence to rebut the
presumption that these recitals are correct. Choice Personnel, 2006
WL 2074681 at *5. We conclude, as did the Fourteenth Court of
Appeals, that production of the Substitute Trustee’s Deed was
sufficient evidence that Berfal Properties owned the note and that
Investment was in default. See id.
1715 Johanna Square Ltd., 2007 WL 1153046, at *6.
Here, as in Richardson and 1715 Johanna Square Ltd., SW Loan introduced
the Substitute Trustee’s Deed and Bill of Sale that provided unrebutted, prima
facie evidence of the Borrower’s default under the Promissory Note. Thus, the
–51–
Borrower’s default under the Promissory Note was established by SW Loan as a
matter of law, and the evidence was legally and factually insufficient for the jury
to conclude that the Borrower complied with the Promissory Note.
5. Neither the fact that Bexar County allows a split-payment option nor
Mr. Redman’s credibility alters the inescapable conclusion that the
Borrower defaulted on the Promissory Note.
As discussed above, SW Loan conclusively proved that the Borrower de-
faulted on its obligations under the Promissory Note as a matter of law. That
conclusion is inescapable based on documentary evidence that has nothing to do
with whether SW Loan could have obtained a tax extension on behalf of the Bor-
rower or whether Mr. Redman is a credible witness. The Guarantors’ strategy
both at trial and in resisting SW Loan’s Motion to Disregard Jury Findings and
for Judgment Notwithstanding the Verdict was to argue that: (1) either SW Loan
or the Lender “caused the default” by not obtaining a tax-payment extension on
behalf of the Borrower; and (2) that Mr. Redman lacked credibility. 148 Both asser-
tions are incorrect, and both are irrelevant to the issue of whether there is suffi-
cient evidence to conclude that the Borrower complied with the Promissory
Note.
148
See CR.791–92; 4.RR.32:7–33:1.
–52–
a. The Borrower’s defaults were not limited to its failure to pay its
2011 taxes when due.
The Guarantors’ split-payment argument is a red herring. While the evi-
dence arguably showed that the Borrower had escrowed enough money
($120,000.00) to obtain an extension on the balance of its 2011 taxes until June
of 2012,149 that same evidence also establishes that the Borrower failed to make
its required monthly $20,000.00 escrow payments. 150 Indeed, if the Borrower
had complied with its obligation to make the $20,000.00 monthly escrow pay-
ments beginning June 5, 2011,151 SW Loan would have held at least
$260,000.00 152 in escrow by June 5, 2012 (the date of the First Notice). 153 In-
stead, SW Loan held only $120,086.38. 154 This is consistent with the First No-
tice’s statement that the Borrower failed to include its monthly escrow payment
with its payments for principal and interest 155 and with the Second Notice’s
149
5.RR.91, 305–09; 310–11.
150
5.RR.91.
151
See 5.RR.34 § 2 4 (“Commencing on June 5, 2011 and by the 5th day of each month
thereafter, the Borrower will deposit or cause to be deposited $20,000[.]00 in immediately
available funds per month in the Account.”); 5.RR.305–09.
152
13 months at $20,000.00 per month would equal $260,000.00.
153
5.RR.91.
154
Id.
155
5.RR.91.
–53–
statement that the Borrower failed to make seven of its monthly escrow pay-
ments. 156 The Borrower therefore defaulted on its obligations by not making its
monthly tax escrow payments; it does not matter whether it also defaulted by not
paying the full amount of its taxes when due. The Guarantors’ argument that the
Lender or SW Loan somehow “caused the default” is fallacious—neither the
Lender nor SW Loan caused the Borrower to stop making its monthly tax escrow
payments.
Moreover, assuming that the Guarantors could have showed that the
Lender somehow “caused the default,” that argument would have constituted an
affirmative defense (assuming that such a defense would have been available). It
was not, however, pleaded as an affirmative defense. 157 See City of The Colony v.
N. Tex. Mun. Water Dist., 272 S.W.3d 699, 746 (Tex. App.—Fort Worth 2008,
pet. dism’d) (“[T]he contention that a party to a contract is excused from per-
formance because of a prior material breach by the other contracting party is an
affirmative defense that must be affirmatively pleaded or it is waived.”). And the
jury was not asked in Question 2 to determine whether the Borrower had proved
156
5.RR.94.
157
CR.587–88.
–54–
such an affirmative defense. Question No. 2 asked whether the Borrower failed
to comply with the Promissory Note, not whether the Borrower’s failure was ex-
cused. 158 Thus, the jury’s response to Question No. 2 could not possibly be up-
held on grounds that the Borrower’s failure to comply was excused.
The opinion of the Fifth Court of Appeals in Burlington Northern Railroad
Co. v. General Projection Systems, Inc., although non-precedential, is instructive on
this issue:
GPS argues on appeal that its breach of contract was excused
because Burlington prevented GPS’s performance by failing to
timely make the rooms ready for installation and by delaying the
project through numerous design changes. The jury, however, did
not find that GPS breached and that its breach was excused; instead,
it found that GPS did not breach the contract. Although a question
in the charge asked if GPS’s performance was excused, the jury did
not reach that question because the question was conditioned on a
finding that Burlington did not breach the contract, rather than on a
finding that Burlington breached the contract. Because GPS did not
obtain a jury finding on the defense of excuse and the defense is not
conclusively established, the judgment for GPS on its breach of
contract claim cannot be upheld in this appeal on the defense of
excused breach. See Peterson v. Dean Witter Reynolds, Inc., 805
S.W.2d 541, 552 (Tex. App.—Dallas 1991, no writ); see also Tex. R.
Civ. P. 279.
158
CR.709.
–55–
Burlington N. R.R. Co. v. Gen. Projection Sys., Inc., No. 05-97-00425-CV, 2000
WL 1100874, at *6 (Tex. App.—Dallas Aug. 8, 2000, pet. denied) (not designat-
ed for publication) (opinion on rehearing). Because the Guarantors neither
pleaded excuse as an affirmative defense nor obtained a jury finding on that de-
fense, its argument that SW Loan or the Lender “caused the default” is legally
irrelevant.
Furthermore, even if one were to incorrectly assume that the Borrower
complied with its tax-related obligations, that would not allow one to infer that it
complied with all of its other obligations under the Promissory Note. Indeed, ne-
gating one ground of default would not be sufficient to negate the other grounds
of default conclusively proved by the evidence—including the Borrower’s failure
to fully repay the Loan and its bankruptcy. There is simply no grounds on which
the jury could reasonably have concluded that the Borrower complied with all of
its obligations under the Promissory Note, given that it was presented with con-
clusive evidence to the contrary.
–56–
b. The jury was not free to ignore conclusive evidence of the
Borrower’s default based on its assessment of Mr. Redman’s
credibility.
The Guarantors also argued that the jury was free to conclude that SW
Loan had not proved its case based solely on its assessment of Mr. Redman’s
credibility. 159 While it is true that “[j]urors are the sole judges of credibility of the
witnesses and the weight to give their testimony,” their “decisions regarding
credibility must be reasonable.” City of Keller, 168 S.W.3d at 819–20. Jurors are
not permitted to “ignore undisputed testimony that is clear, positive, direct, oth-
erwise credible, free from contradictions and inconsistencies, and could have
been readily controverted.” Thus, they were not free to simply ignore everything
Mr. Redman said.
Moreover, while courts may not “substitute their opinions on credibility
for those of the jurors,” jurors likewise may not “substitut[e] their opinions for
undisputed truth. When evidence contrary to a verdict is conclusive, it can-
not be disregarded.” Id. (emphasis added). As outlined above, the documentary
evidence submitted in this case was uncontroverted, and it conclusively estab-
lished the Borrower’s liability on the Promissory Note. Consequently, the jury
159
CR.792–93.
–57–
was not free to conclude that SW Loan failed to prove its case simply because it
may have questioned Mr. Redman’s credibility.
B. The trial court abused its discretion in awarding attorney fees to the
Guarantors.
Although the issue of whether to award attorney fees under the UDJA is
typically a matter left to the court’s discretion, it is well settled in Texas that a
defendant may not bring a counterclaim seeking a declaratory judgment on issues
that are already before the court. See BHP Petroleum Co. Inc. v. Millard, 800
S.W.2d 838, 841 (Tex. 1990) (“The Declaratory Judgments Act is ‘not available
to settle disputes already pending before a court.’” (quoting Heritage Life v. Her-
itage Group Holding, 751 S.W.2d 229, 235 (Tex. App.—Dallas 1998, writ de-
nied))); Bexar Cnty. Appraisal Review Bd. v. First Baptist Church, 846 S.W.2d 554,
561 (Tex. App.—San Antonio 1993, writ denied) (“[A] litigant may not seek a
declaratory judgment in an existing suit simply to recover attorney’s fees that are
otherwise not authorized by statute.”).
Here, the Guarantors’—in a transparent attempt to obtain attorney fees to
which they otherwise were not entitled—counterclaimed seeking only a judg-
–58–
ment declaring the validity of their affirmative defenses to SW Loan’s pending
claims 160:
10. Pursuant to Chapter 37 of the Texas Civil Practice &
Remedies Code, [Guarantors] hereby seek a declaration concerning
the Assignment and Guarantees from the Court that:
a) [SW Loan] is not the holder of the [Promissory] Note and
lacks standing to pursue [Guarantors] for the alleged deficiency;
and
b) [SW Loan] is not entitled to seek or recover any damages
from [Guarantors] under the Guarantees aside from principal
and/or interest under the [Promissory] Note.[ 161]
Accordingly, it was an abuse of the trial court’s discretion to award attorney fees
to the Guarantors. See BHP Petroleum Co., 800 S.W.2d at 841; Bexar Cnty. Ap-
praisal Review Bd., 846 S.W.2d at 561; see also Durham Transp. Co., Inc., v.
Beettner, 201 S.W.3d 859, 873 (Tex. App.—Waco 2006, pet. denied) (“[I]t is an
abuse of discretion to award attorney’s fees under the Uniform Declaratory
Judgments Act if the claim for declaratory relief is urged solely as a vehicle to ob-
tain attorney’s fees.”). The trial court’s fee award must therefore be reversed.
160
See supra notes 91–92 and surrounding text.
161
CR.590.
–59–
CONCLUSION AND PRAYER
It cannot be disputed that the Borrower took out a $10,000,000.00 Loan
that it did not repay. In fact, it filed bankruptcy to avoid paying back that Loan.
The collateral it pledged as security was lawfully sold, resulting in a deficiency
that remains unpaid. SW Loan was entitled to recover that deficiency both from
the Borrower and from the Guarantors. Nevertheless, the jury concluded that the
Borrower did not fail to comply with its obligations under the Promissory Note.
It therefore did not reach the other questions dealing with the extent of the
Guarantors’ liability to SW Loan. The trial court then rendered a take-nothing
judgment based on the jury’s verdict. Because the evidence supporting that ver-
dict was both legally and factually insufficient, the trial court’s judgment must be
reversed.
The trial court also abused its discretion in awarding attorney fees to the
Guarantors for their baseless declaratory-judgment counterclaim. The trial
court’s judgment with respect to both its declaratory ruling and its award of at-
torney fees must therefore be reversed and rendered in favor of SW Loan.
Accordingly, SW Loan requests that the Final Judgment of the trial court,
signed January 28, 2015, be reversed, that judgment be rendered in favor of SW
–60–
Loan with respect to the Guarantors’ counterclaim for a declaratory judgment
and attorney fees, and that this case be remanded for a new trial to determine the
Guarantors’ liability to SW Loan. Alternatively, SW Loan requests that the
Court reverse all portions of the trial court’s judgment that cannot withstand SW
Loan’s challenges and render its judgment accordingly. SW Loan also requests
any other relief to which it may be entitled.
Respectfully submitted,
Hunton & Williams LLP
By: /s/ Bryan C. Bond________
John T. Gerhart, Jr.
jgerhart@hunton.com
State Bar No. 00784122
Bryan C. Bond
bbond@hunton.com
State Bar No. 24082701
1445 Ross Avenue, Suite 3700
Dallas, Texas 75202-2799
Telephone: (214) 979-3000
Facsimile: (214) 880-0011
Counsel for Appellant
–61–
CERTIFICATE OF COMPLIANCE
I certify that this document contains 12,834 words, excluding the sections
exempted by Texas Rule of Appellate Procedure 9.4. The body font is 14pt, and
the footnote font is 12pt.
/s/ Bryan C. Bond________
Bryan C. Bond
–62–
CERTIFICATE OF SERVICE
A copy of this Appellants’ Brief was sent on this 10th day of August 2015
to the following counsel via email:
Counsel for Appellees
Robert A. McNiel
rmcniel@deanslyons.com
State Bar No. 24043814
Kathleen Kilanowski
kkilanowski@deanslyons.com
State Bar No. 24053303
Deans & Lyons, LLP
325 N. Saint Paul Street, Suite 1500
Dallas, Texas 75201-3891
/s/ Bryan C. Bond________
Bryan C. Bond
–63–
No. 04-15-00255-CV
_____________________________________________________
IN THE FOURTH COURT OF APPEALS
SAN ANTONIO, TEXAS
_____________________________________________________
SW Loan A, L.P.,
Appellant,
v.
Anibal J. Duarte-Viera, Antonio P. Pardo, and
Edward M. Reiss,
Appellees.
_____________________________________________________
APPENDIX TO BRIEF OF APPELLANT
_____________________________________________________
From the 131st District Court, Bexar County, Texas, No. 2012-CI-12742
The Honorable John D. Gabriel Presiding
_____________________________________________________
John T. Gerhart, Jr.
jgerhart@hunton.com
State Bar No. 00784122
Bryan C. Bond
Counsel for Appellant: bbond@hunton.com
State Bar No. 24082701
Hunton & Williams LLP
1445 Ross Ave., Ste. 3700
Dallas, Texas 75202
Telephone: (214) 979-3000
Facsimile: (214) 880-0011
–64–
INDEX TO APPENDIX
Location in Record
Tab A Final Judgment of the Trial Court CR.775–77
Tab B Jury Charge and Verdict CR.704–31
–65–
Tab A
DOCUMENT SCANNED AS FILED
2012CI12742 -0131
CAUSE NO. 2012-CI-12742
SW LOAN A, L.P., § IN THE DISTRICT COURT
§
Plaintiff, §
§
v. §
§ BEXAR COUNTY, TEXAS
ANIBAL J. DUARTE-VIERA, §
ANTONIO P. PARDO, and §
EDWARD M. REISS § -t
§ \~\~
Defendant(s). § ~JUDICIAL DISTRICT
FINAL JUDGMENT
On December 1, 2014, this case was called for trial. PlaintiffSW Loan A, L.P. appeared
by and through its attorney and announced ready for trial. Defendant Antonio P. Pardo appeared
in person and through his attorney and announced ready for trial. Defendants Anibal J. Duarte-
Viera and Edward M. Reiss appeared through their attorney and announced ready for trial.
After a jury was impaneled and sworn, it heard evidence and arguments of counsel. In
response to the jury charge, the jury made findings that the Court received, filed, and entered of
record. The charge of the court and the verdict of the jury are incorporated herein for all purposes
0
1 by reference. The unanimous jury therefore determined that ANIBAL J . DUARTE-VIERA,
~ ANTONIO P. PARDO, and EDWARD M. REISS were not responsible for Plaintiff's claims.
~ The jury further awarded Defendants attorneys' fees in the amount of $7,825.00 for
0
1 representation at the trial court level; $7,500.00 for representation through appeal to the court of
5
appeals should any appeal be filed; and $10,000.00 for representation at the petition for review
v
0
L stage in the Supreme Court of Texas, should any appeal be so presented.
~ Defendants' counter-suit for declaratory judgment was submitted to the Court. The Court,
3 having considered the contents of its file, including but not limited to all pleadings, the arguments
6
.p
G
FJNAL JUDGMENT PAGEt
f
3
4 768
. DOCUMENT SCANNED AS FILED
of counsel at trial, and the evidence presented at trial, finds, as a matter of law, that the express
terms of the Limited Guaranty Agreements executed by each of the Defendants provide that each
Defendant personally guaranteed principal and interest only up to the amount of $2,500,000.00;
no other amounts such as taxes, environmental and/or appraisal costs, were guaranteed by the
Defendants.
The Court hereby RENDERS a take-nothing judgment in favor of ANIBAL J. DUARTE-
VIERA, ANTONIO P. PARDO, and EDWARD M. REISS, against Plaintiff.
It is therefore ORDERED, ADJUDGED and DECREED that Plaintiff take nothing by its
suit against ANIBAL J. DUARTE-VIERA, ANTONIO P. PARDO, and EDWARD M. REISS.
It is further ORDERED that ANIBAL J. DUARTE-VIERA, ANTONIO P. PARDO, and
EDWARD M. REISS recover the following from Plaintiff:
(a) Attorneys' fees in the amount of $7,825.00 for representation at the trial court level;
$7,500.00 for representation through appeal to the court of appeals should any appeal
be filed; and $10,000.00 for representation at the petition for review stage in the
Supreme Court of Texas, should any appeal be so presented;
8
1 (b) Pursuant to Rule 9la of the Texas Rules of Civil Procedure and as ordered by the Court
I
2 on November 26, 2013, attorneys' fees in the amount of$1,500.00;
9
(c) Costs of court pursuant to Texas Rule of Civil Procedure 131 and 303 and section
a
l 31.007 (b) of the Texas Civil Practice and Remedies Code in the amount of$65.00 for
5
filing fees and $1,026.59 for costs of the deposition of Plaintiffs designated witness;
v
0 and
L
~
(d) Post-Judgment interest at the rate of 5% from the date of signing this judgment until
3 paid.
6
~
~
FJNAL JUDGMENT PAGE2
769
.. DOCUMENT SCANNED AS FILED
This judgment is final, disposes of all parties and all claims, and is appealable.
Signed this _ _ _ day of _ ___:J~A..:..:..N..:..__2_8_i0_1_5__ 2015.
AGREED AS TO FORM:
DEANS & LYONS, LLP
Robert A. McNiel TSB #24043814
rmcniel@deanslyons.com
Kathleen Kilanowski TSB #24053303
kkilanowski@deanslyons.com
325 N. Saint Paul St., Suite 1500
Dallas, Texas 75201-3891
Phone: (214) 965-8500
Fax: (214) 965-8505
ATTORNEYS FOR DEFENDANTS
0
1
I
2
~
1
5
v
e
4
3
3
6
~
1 FINAL JUDGMENT PAGE3
!
G
770
Tab B
.
·.-\·{`` -.
,_'
'·
·•.
1111 P.t:``P.£11111
2012CI12742-=P00076 ____
CAUSE NO. 2012-CI-12742
SW LOAN A, L.P., § IN THE DISTRJCT COURT
§
Plaintiff, §
§ '. ......___
v. §
§
ANIBAL J. DUARTE-VIERA, § BEXAR COUN1Y, TEXAS
ANTONIO P. PARDO and §
EDWARD M. REISS, §
'§
Defendants. § 166TH JUDICIAL DISTRJCT
jURY !NSTRUCflONS. DEFINffiONS, AND
SPECIAL ISSUES
697
DOCUMENT SCANNED AS FILED
' .
CHARGE OF THE COURT
MEMBERS OF THE JURY:
After the closing arguments, you will go to the jury room to decide the case, answer
the questions that are attached, and reach a verdict. You may discuss the case with other
jurors only when you are all together in the jury room.
Remember my previous instructions: Do not discuss the case with anyone else, either
in person or by any other means. Do not do any independent investigation about the case or
conduct any research. Do not look up any words in dictionaries or on the Internet. Do not
post information about the case on the Internet. Do not share any special knowledge or
experiences with the other jurors. Do not use your phone or any other electronic device
during your deliberations for any reason. I will give you a number where others may contact
you in case of an emergency.
Any notes you have taken are for your own personal use. You may take your notes
back into the jury room and consult them during deliberations, but do not show or read your·
notes to your fellow jurors during your deliberations. Your notes are not evidence. Each of
you should rely on your independent recollection of the evidence and not be influenced by
the fact that another juror has or has not taken notes.
You must leave your notes with the bailiff when you are not deliberating. The bailiff
will give your notes to me promptly after collecting them from you. I will make sure your
notes are kept in a safe, secure location and not disclosed to anyone. After you complete
your deliberations, the bailiff will collect your notes. When you are released from jury duty,
the bailiff will promptly destroy your notes so that nobody can read what you wrote.
Here are the instructions for answering the questions.
1. Do not let bias, prejudice, or sympathy play any part in your decision.
2. Base your answers only on the evidence admitted in court and on the law that is
in these instructions and questions. Do not consider or discuss any evidence that
JURY rNSTRUCTIONS, DEFrNITIONS, AND
SPECIAL ISSUES 2
698
DOCUMENT SCANNED AS FILED
was not admitted in the courtroom.
3. You are to make up your own minds about the facts. You are the sole judges of
the credibility of the witnesses and the weight to give their testimony. But on
matters of law, you must follow all of my instructions.
4. If my instructions use a word in a way different from its ordinary meaning, use
the meaning I give you, which will be a proper legal definition.
5. All the questions and answers are important. No one should say that any question
or answer is not important.
6. Answer "yes" or "no" to all questions unless you are told otherwise. A "yes"
answer must be based on a preponderance of the evidence. Whenever a question
requires an answer other than "yes" or "no," your answer must be based on a
preponderance of the evidence.
The term preponderance of the evidence means the greater weight of credible
evidence presented in the case. If you do not find that a preponderance of the evidence
supports a "yes" answer, then answer "no." A preponderance of the evidence is not measured
by the number of witnesses or by the number of documents admitted in evidence. For a fact
to be proved by a preponderance of the evidence, you must find that the fact is more likely
true than not true.
7. Do not decide who you think should win before you answer the questions and
then just answer the questions to match your decision. Answer each question
carefully without considering who will win. Do not discuss or consider the effect
your answers will have.
8. Do not answer questions by drawing straws or any method of chance.
9. Some questions might ask you for a dollar amount. Do not agree in advance to
decide on a dollar amount by adding up each juror's amount and then figuring the
JURY INSTRUCTIONS, DEFINITIONS, AND
SPECIAL ISSUES 3
699
DOCUMENT SCANNED AS FILED
average.
10. Do not trade your answers. For example, do not say, "I will answer this question
your way if you answer another question my way."
11. Unless otherwise instructed, the answers to the questions must be based on the
decision of at least ten of the twelve jurors. The same ten jurors must agree on
every answer. Do not agree to be bound by a vote of anything less than ten jurors,
even if it would be a majority.
As I have said before, if you do not follow these instructions, you will be guilty of
juror misconduct, and I might have to order a new trial and start this process over again.
This would waste your time and the parties' money, and would require the taxpayers of this
county to pay for another trial. If a juror breaks any of these rules, tell that person to stop
and report to me immediately.
In this charge, S W Loan A, LP shall be referred to as "SW Loan".
In this charge, Anibal J. Duarte -Viera shall be referred to as "Duarte- Viera."
In this charge, Antonio P. Pardo shall be referred to as "Pardo."
In this charge, Edward M. Reiss shall be referred to as "Reiss."
In this charge, Duare-Viera, Pardo and Reiss shall be cumulatively referred to herein as
..Guarantors."
In this charge, 1946 Property, LLC shall be the original borrower of the Promissory Note.
In this charge, the Limited Guaranty Agreements dated April 17, 2008, shall be referred
to herein as the "Limited Guaranty Agreement(s)."
JURY INSTRUCfiONS, DEFINrTIONS, AND
SPECIAL ISSUES 4
700
DOCUMENT SCANNED AS FILED
QUESTION NO. 1
Is SW Loan the holder/owner of the Limited Guaranty Agreements executed by Anibal J.
Duarte-Viera, Tony P. Pardo and Edward M. Riess?
Answer "Yes" or "No"
If you answer "NO" to Question No. 1, DO NOT answer Questions Nos. 2 through 15, However,
proceed to answer Question No. 16.
JURY INSTRUCTIONS, DEFINITIONS, AND
SPECIAL ISSUES 5
701
DOCUMENT SCANNED AS FILED
QUESTION NO.2
If you answered "Yes" in Question No.· 1, then answer the following question.
Otherwise, do not answer this question.
1
Did 1946 Property, LLC, fail to comply with the Promissory Note?
Answer "Yes" or "No":
Oo
1
TPJC 101.2
JURY INSTRUCTIONS, DEFINffiONS, AND
SPECIAL ISSUES 6
702
DOCUMENT SCANNED AS FILED
QUESTION NO. 3
If you answered "Yes" in Question Nos. 1 a11d 2, then answer the following question.
Otherwise, do not answer this question.
Did Anibal J. Duarte-Viera sign the Limited Guaranty Agreement?
Answer " Yes" or "No"
JURY INSTRUCTIONS, DEFINITIONS. AND
SPECIAL ISSUES 7
703
DOCUMENT SCANNED AS FILED
QUESTION NO. 4
If you answered "Yes" in Question No. 1, 2 and 3, then answer the following
question. Otherwise, do not answer this question.
Did Anibal J. Duarte-Viera fail to comply with the terms of the Limited Guaranty
Agreemene?
Failure to comply is excused by SW Loan's previous failure to comply with a material
obligation of the Limited Guaranty Agreement.
Answer "Yes" or "No":
2
TPJC 101.2
JURY £NSTRUCTIONS, DEFINITIONS, AND
SPECIAL ISSUES 8
704
DOCUMENT SCANNED AS FILED
QUESTION NO. 5
If you answered "Yes" to Question No. 4, then answer the following question.
Otherwise, do not answer this question.
Did SW Loan suffer damages, if any, as a direct result of the alleged breach of
Limited Guaranty Agreement by Anibal J. Duarte-Viera?
No damages can be recovered for a breach of contract, which are not clearly ascertainable
in both their nature and origin. 3 Oklahoma law prohibits recovery of damages that are uncertain
and speculative.4
Answer "Yes" or "No":
3
Okla. Stat. Ann. tit. 23, §21
4
See Great Western Motor Lines, Inc. v. Cozard,417 P.2d 575,578 (Okla. 1966)
JURY INSTRUCTIONS, DEFINITIONS, AND
SPECIAL ISSUES 9
705
DOCUMENT SCANNED AS FILED
QUESTION NO. 6
If you answered "Yes" to Question No. S, then answer the following question.
_Otherwise, do not answer this question.
What sum of money, if any, if paid in cash now, would fairly and reasonably
compensate SW Loan for its damages, if any, that resulted from Anibal J. Duarte-Viera's
breach of the Limited Guaranty Agreement5?
Consider the following elements of damages, if any, and none other.
Other than the interest due on the loan, do not add any other interest.
Answer separately in dollars and cents for damages, if any.
In answering questions about damages, answer each question separately. Do not increase
or reduce the amount in one answer because of your answer to any other question about
damages. Do not speculate about what any party's ultimate recovery may or may not be. Any
recovery will be determined by the court when it applies the law to your answers at the time of
. d gment. 6 .
JU
Principal:--------
Interest:
Other incurred expenses, excluding attorneys' fees/costs: - - - - - - - - - -
5
-TPJC 115.3
6
TPJC 100.11
TURY INSTRUCTIONS, DEFINITIONS, AND
SPECIAL ISSUES 10
706
DOCUMENT SCANNED AS FILED
QUESTION NO. 7
If you answered "Yes" in Question No.1 and 2, then answer the following question.
Otherwise, do not answer this question.
Did Antonio P. Pardo sign the Limited Guaranty Agreement?
Answer "Yes" or "No"
JURY lNSTRUCfiONS, DEFINITIONS, AND
SPECIAL ISSUES 11
707
DOCUMENT SCANNED AS FILED
QUESTION NO. 8
If you answered "Yes" in Question Nos. 1, 2 and 7, then answer the following
question. Otherwise, do not answer this question.
Did Antonio P. Pardo fail to comply with the terms of the Limited Guaranty
Agreemene?
Failure to comply is excused by SW.Loan's previous failure to comply with a material
obligation of the Limited Guaranty Agreement.
Answer "Yes" or "No":
7
TPJC 101.2
JURY INSTRUCTIONS, DEFINmONS, AL'ID
SPECIAL ISSUES 12
708
DOCUMENT SCANNED AS FILED
QUESTION NO. 9
If you answered "Yes" to Question No. 8, then answer the following question.
Otherwise, do not answer this question.
Did SW Loan suffer damages, if any, as a direct result of the alleged breach of
Limited Guaranty Agreement by Antonio P. Pardo?
No damages can be recovered for a breach of contract, which are not clearly ascertainable
in both their nature and origin. 8 Oklahoma law prohibits recovery of damages that are uncertain
and speculative.9
Answer "Yes" or "No":
\
8
Okla. Stat. Ann. tit. 23, §21
9
See Great Western Motor Lines, Inc. v. Cozard, 417 P.2d 575, 578 (Okla. 1966)
JURY INSTRUCTIONS, DEFINmONS, AND
SPECIAL ISSUES '-,,, 13
709
DOCUMENT SCANNED AS FILED
QUESTION NO. 10
If you answered "Yes" to Question No. 9, then answer the following question.
Otherwise, do not answer this question.
What sum of money, if any, if paid in cash now, would fairly and reasonably
compensate SW Loan for its damages, if any, that resulted from Antonio P. Pardo's breach
of the Limited Guaranty Agreement10?
Consider the following elements of damages, if any, and none other.
Other than the interest due on the loan, do not add any other interest.
Answer separately in dollars and cents for damages, if any.
In answering questions about damages, answer each question separately. Do not increase
or reduce the amount in one answer because of your answer to any other question about
damages. Do not speculate about what any party's ultimate recovery may or may not be. Any
recovery will be determined by the court when it applies the law to your answers at the time of
judgment. 11
Principal: _ _ _ _ _ _ __
Interest:
Other incurred expenses, excluding attorney's fees/costs:
10
TPJC I 15.3
II TPJC 100.11
JURY £NSTRUCTIONS, DEFINffiONS. AND
SPECIAL ISSUES 14
710
DOCUMENT SCANNED AS FILED
QUESTION NO~ 11
If you answered "Yes" in Question Nos. 1 and 2, then answer the following question.
Otherwise, do not answer this question.
Did Edward M. Reiss sign the Limited Guaranty Agreement?
Answer "Yes" or "No"
JURY INSTRUCTIONS, DEFINITIONS, AND
SPECIAL ISSUES 15
711
DOCUMENT SCANNED AS FILED
QUESTION NO. 12
If you answered "Yes" in Question Nos. 1, 2 and 11, then answer the following
question. Otherwise, do not answer this question.
Did Edward M. Reiss fail to comply with the terms of the Limited Guaranty
Agreemene 2?
Failure to comply is excused by SW Loan' s previous failure to comply with a material
obligation of the Limited Guaranty Agreement.
Answer "Yes" or "No":
12
TPJC 101.2
JURY TNSTRUCfiONS, DEFINmONS, AND
SPECIAL ISSUES 16
712
DOCUMENT SCANNED AS FILED
QUESTION NO. 13
If you answered "Yes" to Question No. 12, then answer the following question.
Otherwise, do not answer this question.
Did SW Loan suffer damages, if any, as a direct result of the alleged breach of
Limited GuarantY Agreement by Edward M. Reiss?
No damages can be recovered for a breach of contract, which are not clearly ascertainable
in both their nature and origin. 13 Oklahoma law prohibits recovery of damages that are uncertain
and speculative. 14 ..
Answer "Yes" or "No":
13
Okla. Stat. Ann. tit. 23, §21
14
See Great Western Motor Lines, Inc. v. Cozard, 417 P.2d 575, 578 (Okla. 1966)
JURY INSTRUCTIONS, DEFINITIONS, AND
SPECIAL ISSUES 17
713
DOCUMENT SCANNED AS FILED
QUESTION NO. 14
If you answered "Yes" to Question No. 13, then answer the following question.
Otherwise, do not answer this question.
What sum of money, if any, if paid in cash now, would fairly and reasonably
compensate SW Loan for its damages, if any, that resulted from Edward M. Reiss's breach
of the Limited Guaranty Agreement15?
Consider the following elements of damages, if any, and none other.
Other than the interest due on the loan, do not add any other interest.
Answer separately in dollars and cents for damages, if any.
In answering questions about damages, answer each question separately. Do not increase
or reduce the amount in one answer because of your answer to any other question about
damages. Do not speculate about what any party's ultimate recovery may or may not be. Any
recovery will be determined by the court when it applies the law to your answers at the time of
judgment. 16
Principal:--------
Inlerest:
Other incurred expenses, excluding attorney' s fees/costs: - - - - - - - - - -
15
TPJC 115.3
16
TPJC 100. 11
JURY INSTRUcriONS. DEFINITIONS, AND
SPECIAL ISSUES 18
714
DOCUMENT SCANNED AS FILED
QUESTION NO. 15
If you have answered "Yes" to any of the blanks Question 5,;, and 13 and if you
have inserted a sum of money in response to Question No.'s 6, 10 and 14 then answer the
following question. Otherwise, do not answer the following question.
What is a reasonable fee for the necessary services of SW Loan A's attorney, stated
in dollars and cents? 17
Factors to consider in determining a reasonable fee include-
1. The time and labor required, the novelty and difficulty of the questions involved,
and the skill required to perform the legal services properly.
2. The likelihood that the acceptance of the particular employment will preclude
other employment by the lawyer.
3. The fee customarily charged in the locality for similar legal services.
4. The amount involved and the results obtained.
5. The time limitations imposed by the client or by the circumstances.
6. The nature and l~ngt~ of the professional relationship with the client.
7. The experience, reputation, and ability of the lawyer or lawyers performing the
services.
8. Whether the fee is fixed or contingent on results obtained or uncertainty of
collection before the legal services have been rendered.
Answer with an amount for each of the following:
17
TPJC 115.47
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SPECIAL ISSUES 19
715
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a. For representation in the trial court.
Answer: _ _ _ _ _ _ _ _ _ _ __
b. For representation through appeal to the court of appeals.
Answer: _ _ _ _ _ _ _ _ _ _ __
c. For representation at the petition for review stage in the Supreme Court of
Texas.
Answer: _ _ _ _ _ _ _ _ _ _ __
d. t the merits briefing stage in the Supreme Court of
Texas.
Answer: _ _ _ _ _ _ _ _ _ _ __
e. For representation ough oral argument and the completion of
proceedings in the Supre
Answer:_ _ _ _ _ _ _ _ _ _ __
JURY INSTRUCTIONS. DEFINITIONS. AND
SPECIAL ISSUES 20
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QUESTION NO. 16
What is a reasonable fee for the necessary services of Guarantors' attorney, stated
in dollars and cents? 18
Factors to consider in determining a reasonable fee indude -
1. The time and labor required, the novelty and difficulty of the questions involved,
and the skill required to perform the legal services properly.
2. The likelihood that the acceptance of the particular employment will preclude
other employment by the lawyer.
3. The fee customarily charged in the locality for similar legal services.
4. The amount involved and the results obtained.
5. The time limitations imposed by the client or by the circumstances.
6. The nature and length of the professional relationship with the client.
7. The experience, reputation, and ability of the lawyer or lawyers performing the
services.
8. Whether the fee is fixed or contingent on resultr obtained or uncertainty of
collection before the legal services have been rendered.
Answer with an amount for each of the following:
a. For representation in the trial court.
Answer:_......... 1\c....;_/_1(---"'~---"S:=--"-QQ._--
b. For representation through appeal to the court of appeals.
Answer:_.....t:;.1\,__"]'0--&,..;:;_0_0___,_,g2_---
18
TPJC 115.47
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SPECIAL ISSUES 21
717
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c. For representation at the petition for review stage in the Supreme Court of
Texas.
Answer:__ ``-l~o-+)_ceo-=--=----
d. For representation at the erits briefing stage in the Supreme Court of
Texas.
Answer:_ _ _ _ _ _ _ _ _ _ __
e. For representation oral argument and the completion of
proceedings in the Supreme Co
Answer:
---------------
JURY INSTRUCTIONS, DEFINITIONS, AND
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After you retire to the jury room, you will select your own presiding juror.
The first thing the presiding juror will do is to have this complete charge read aloud
and then you will deliberate upon your answers to the questions asked.
It is the duty of the presiding juror -
1. to preside during your deliberations,
2. to see that your deliberations are conducted in an orderly manner and
in accordance with the instructions in this charge,
3. · to write out and hand to the bailiff any communications concerning the
case that you desire to have delivered to the judge,
4. to vote on the questions,
5. to write your answers to the questions in the spaces provided, and
6. to certify your verdict in the space provided for the presiding juror's
signature or to obtain the signatures of all the jurors who agree with
the verdict if your verdict is less than unanimous.
You should not discuss the case with anyone, not even with other members of
the jury, unless all of you are present and assembled in the jury room. Should
anyone attempt to talk to you about the case before the verdict is returned, whether
at the courthouse, at your home, or elsewhere, please inform the judge of this fact.
When you have answered all the questions you are required to answer under
the instructions of the judge and your presiding juror has placed your answers in
the spaces provided and signed the verdict as presiding juror or obtained the
signatures, you will inform the bailiff at the door of the jury room that you have
reached a verdict, and then you will return into Court with your verdict.
JURY INSTRUCTIONS. DEFINITIONS, AND
SPECIAL ISSUES 23
719
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Certificate
We, the jury, have answered the above and foregoing questions as herein
indicated, and herewith return same into Court as our verdict.
(to be signed by the presiding juror if unanimous.)
(to be signed by those rendering the verdict if not unanimous.)
JURY INSTRUCTIONS, DEFINITIONS, AND
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720
I
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Instructions for Signing the Verdict Certificate
1. You may answer the questions on a vote of ten jurors. The same ten jurors must agree
on every answer in the charge. . This means you may not have one group of ten jurors
agree on one answer and a different group of ten jurors agree on another answer.
2. If ten jurors agree on every answer, those ten jurors sign the verdict. If eleven jurors
agree on every answer, those eleven jurors sign the verdict. If all twelve of you agree
on every answer, you are unanimous and only the presiding juror signs the verdict.
3. All jurors should deliberate on every question. You may end up with all twelve of
you agreeing on some answers, while only~ ten or eleven of you agree on other
answers. But when you sign the verdict, only those ten who agree on every answer
will sign the verdict.
Do you understand these instructions? If you do not, please tell me now.
JUDGE PRESIDING
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721
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Verdict Certificate .
:z eck :
Our verdict is unanimous. All twelve of us have agreed to each and every
The pres·ding juror has signed the certificate for all twelve of us.
Si Printed Name of Presiding Juror
_ _ _ _Our verdict is not unanimous. Eleven of us have agreed to each and every
answer and have signed the certificate below.
_ _ _ _Our verdict is not unanimous. Ten of us have agreed to each and every answer
and have signed the certificate below.
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SPECIAL ISSUES 26
722
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Signature Name Printed
1..____________________________
2._________________________
3._____________________
4 . _ _ _ _ _ _ _ _ _ _ _ _ _ ___
5._ _ _ _ _ _ _ _ _ _ _ _ ___
6._ _ _ _ _ _ _ _ _ _ _ _ __
7.__________________
8._ _ _ _ _ _ _ _ _ _ _ _ _ __
9 . _______________
10._____________________
11..__________________
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Additional Certificate
I certify that the jury was unanimous in answer the following questions. All twelve
of us agreed to each of the answers. The presiding juror has signed the certificate for all
twelve of us.
Sig Printed Name of Presiding Juror
JURY INSTRUCriONS, DEFINITIONS, AND
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