George M. Lee v. Galleria Loop Note Holder LLC ( 2023 )

Opinion issued August 24, 2023
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-22-00160-CV
———————————
GEORGE M. LEE, Appellant
V.
GALLERIA LOOP NOTE HOLDER LLC AND TIG ROMSPEN US
MASTER MORTGAGE LP, Appellees
On Appeal from the 269th District Court
Harris County, Texas
Trial Court Case No. 2020-12442
MEMORANDUM OPINION
This declaratory judgment action arises from the foreclosure of two senior
liens on a commercial property and the subsequent foreclosure sale of the property
to the senior lienholder, which resulted in the extinguishment of appellant George
M. Lee’s junior lien on the property. The trial court granted summary judgment
against Lee on his claims seeking declarations that the foreclosure sale was invalid
because the senior liens merged with title to the property prior to the foreclosure sale
and that the substitute trustee’s deed was defective and void. On appeal, Lee raises
three issues: (1) the trial court erred by granting summary judgment because a
genuine issue of material fact existed on his alter-ego merger claim and the summary
judgment motion did not address all parts of this claim; (2) Lee’s affidavit in support
of his summary judgment response constituted competent evidence and was not a
sham affidavit; and (3) the substitute trustee’s deed was defective and void, the
defects could not be cured by a correction deed, and the deed therefore conveyed
nothing. We affirm.
Background
The real property that is the subject of this appeal is a commercial building
located in Houston (the “subject property”). In 2012 and 2014, the owner of the
subject property, 1001 West Loop, LP (“1001 West Loop”), obtained loans from
MidFirst Bank secured by deeds of trust and liens on the property. These two liens
were the senior liens on the property.
In July 2014, Lee loaned nearly $3 million to 1001 West Loop secured by a
deed of trust and lien on the subject property. The deed of trust expressly
2
subordinated Lee’s lien to MidFirst Bank’s two senior liens. The deed of trust was
signed by Ali Choudhri as president of 1001 West Loop’s corporate general partner.
By May 2019, 1001 West Loop had defaulted on the MidFirst Bank loans.
Appellee Galleria Loop Note Holder LLC (“Galleria”) decided to purchase the
defaulted loans. On May 30, Galleria’s sole member, appellee TIG Romspen US
Master Mortgage LP (“Romspen”), issued a written resolution stating that Galleria
and Romspen had entered into a loan agreement with Choudhri, and Romspen
appointed Choudhri as the chief executive officer of Galleria and authorized him to
take action to execute and deliver the loan documents.1 In a May 30 letter to Galleria,
Romspen committed to loaning Galleria the funds necessary to purchase the senior
liens on the subject property. Choudhri signed the letter accepting the loan on behalf
of Galleria, and he personally guaranteed the loan. On May 31, Romspen issued a
promissory note to Galleria for $18,500,000. The parties also entered into an
assignment of leases and rents. Also on May 31, Romspen, Galleria, and Choudhri
entered into a membership interest option agreement granting Choudhri a call option
to purchase 100% of the membership interest in Galleria. Finally, on May 31,
Galleria purchased the senior liens from MidFirst Bank, effectively making Galleria
the senior lienholder on the subject property.
1
Although various individuals and entities were involved in the transactions relevant
here, the only parties to these proceedings are Lee, Galleria, and Romspen.
3
The following month, in June 2019, Galleria foreclosed on the senior liens
and posted notice of a substitute trustee’s sale on the subject property. The sale was
eventually held on September 3, 2019. Galleria was the only bidder on the subject
property at the foreclosure sale, and the substitute trustee conveyed the property to
Galleria by a substitute trustee’s deed. The record indicates that at least two
correction deeds were also filed.
Hours after Galleria made its winning bid, Choudhri exercised the option to
purchase all of the membership interest in Galleria. The following day, Galleria and
Romspen entered into a deed of trust securing Romspen’s loan to Galleria with a
lien on the subject property. However, no proceeds remained from the foreclosure
sale to pay off the junior liens, including Lee’s lien, and those liens were therefore
extinguished. See Kothari v. Oyervidez, 373 S.W.3d 801, 807 (Tex. App.—Houston
[1st Dist.] 2012, pet. denied) (“Under Texas law, generally, if, after a valid
foreclosure of a senior lien, a junior lien is not satisfied from the proceeds of a sale,
then the junior lien is extinguished.”).
In February 2020, Lee filed suit against Galleria alleging that both 1001 West
Loop—the pre-foreclosure owner of the subject property—and Galleria—the pre-
foreclosure senior lienholder and post-foreclosure owner of the subject property—
were alter ego entities used by Choudhri to perpetrate fraud on the junior creditors
of loans secured by the subject property, including Lee. Lee sought two declaratory
4
judgments. First, he requested a declaration that the foreclosure sale of the subject
property was void because prior to the sale, Choudhri, through alter-ego entities,
owned both legal title to the subject property and equitable title as the senior
lienholder, and therefore the two titles merged together and extinguished the senior
liens leaving nothing to foreclose on. Consequently, Lee alleged that his lien
remained as the superior lien on the subject property. Lee also sought a declaration
that the substitute trustee’s deed was fatally defective, could not be corrected by
correction deed, and therefore did not convey legal title of the subject property to
Galleria.
Galleria filed an answer denying Lee’s claims. Galleria also asserted a
counterclaim against Lee for a declaration that he has no valid lien on the property.
Romspen filed a petition in intervention and an application for temporary and
permanent injunctions. See TEX. R. CIV. P. 60. Romspen asserted two causes of
action against Lee for trespass to try title and suit to quiet title. Romspen also
requested that the trial court enjoin Lee from attempting to foreclose on or cloud title
to the subject property.
Romspen filed a combined no-evidence and traditional motion for summary
judgment on all of Lee’s claims and its suit for quiet title. Romspen argued that Lee
lacked any valid interest in the subject property because his lien had been
extinguished pursuant to a valid substitute trustee’s sale of the property following
5
foreclosure. It also argued that Lee had no evidence of several elements of the merger
doctrine or evidence that Choudhri used any entity as an alter ego. It further argued
that the alleged defects in the substitute trustee’s deed did not invalidate the
conveyance to Galleria. Finally, Romspen argued that it was entitled to summary
judgment on its suit to quiet title.
Romspen attached numerous documents in support of its motion. It attached
an affidavit from Wesley Roitman, the vice president of Romspen’s corporate
general partner, describing the details of the transactions in dispute here. Roitman
averred that Romspen financed Galleria’s purchase of the senior liens from MidFirst
Bank and that Romspen was the sole member of Galleria at the time of the
foreclosure sale. Roitman also averred that Choudhri never had an interest in or
worked for Romspen and that Choudhri did not have an ownership interest in
Galleria before the foreclosure sale. Rather, Choudhri exercised an option to
purchase all the ownership interest in Galleria “sometime after 6:00 p.m. CT on
September 3, 2019,” which was the day of the foreclosure sale.
Romspen’s motion also relied on deeds of trust executed in 2012 and 2014
securing MidFirst Bank’s liens on the subject property. Choudhri signed both deeds
of trust on behalf of 1001 West Loop’s corporate general partner. The motion also
attached the May 2019 agreement between MidFirst Bank and Galleria to sell the
two superior liens. This agreement was signed by Roitman on behalf of Galleria, and
6
Choudhri signed the agreement in several capacities: president of 1001 West Loop,
the borrower of the secured loans from MidFirst Bank; guarantor of the loans in his
individual capacity; and president of Jetall Companies, Inc., which is not a party to
this proceeding. Romspen’s motion also attached the notices of the substitute
trustee’s foreclosure sale; email correspondence between Choudhri, Roitman, and
other third parties on September 3, 2019, concerning Galleria’s purchase of the
subject property at the foreclosure sale and Choudhri’s subsequent exercise of the
option to purchase the entire membership interest in Galleria; the substitute trustee’s
deed and two correction deeds; a deed of trust between Galleria and Romspen, dated
September 4, 2019, granting a secured lien on the subject property to Romspen the
day after the foreclosure sale; and an excerpt of a transcript of Lee’s deposition in
this case.
Lee filed a response arguing that fact issues precluded summary judgment. He
argued that the loan documents attached to Romspen’s summary judgment motion
controverted Roitman’s affidavit. He also argued that other documents created a fact
issue concerning whether Choudhri used alter ego entities to own the senior liens on
and legal title to the subject property at the same time.
Lee relied on his own affidavit averring that Choudhri had admitted to Lee
that Choudhri owned the subject property through various entities. Lee also averred
that Choudhri admitted “that he owned 100% of the beneficial interest in [Galleria]
7
and had arranged for a refinance of the property through that entity.” Lee further
averred that:
Ali [Choudhri] told me he had changed his mind and he was going to
foreclose the MidFirst Bank liens . . . that he had purchased with
[Romspen] refinancing funds to cut my [Lee’s] and other inferior liens
on the Property pursuant to an agreement he had expressly made with
[Romspen] to acquire the Property free of inferior liens to be used by
Ali. Ali told me he had gotten ownership and control of the Property
through [Galleria] by his agreement with [Romspen] and didn’t need to
pay me.
Lee’s response also attached documents showing that Romspen loaned
Galleria $18,500,000 to acquire the senior liens on the subject property, and the
parties intended that the subject property was to be used by Choudhri. A May 30,
2019 letter from Romspen to Galleria showed an agreement for Romspen to loan the
funds, and a May 31, 2019 promissory note evidenced the loan. On May 30, 2019,
Romspen—as Galleria’s then sole-member—entered written resolutions appointing
Choudhri as Galleria’s chief executive officer and granting him authority to
complete the loan process. Finally, on May 31, 2019, Romspen, Galleria, and
Choudhri executed a membership interest option agreement granting Choudhri an
assignable call option to purchase “100% of the issued and outstanding membership
interest of [Galleria.]” This agreement stated that the purpose of the separate loan
agreement was “to acquire certain real property” which “is intended to be used by
the Optionholder,” whom the option agreement defined as Choudhri.
8
Romspen filed a reply in support of its motion. It first argued that Lee’s
affidavit was a sham because it contradicted his prior deposition testimony.
Romspen argued that, at his deposition, Lee denied knowing who owned or
controlled Galleria, whether Galleria had an interest in the subject property, or
whether and to what extent Galleria had relationships with Choudhri or Romspen.
Lee also denied having heard of Romspen prior to the lawsuit. Romspen further
argued that Lee denied having any personal knowledge that the titleholder and
lienholder estates on the subject property had merged together; rather, Lee testified
that the basis for his claim was his attorney’s investigation and conclusion. The
record does not include a ruling on these objections. Romspen also replied on the
merits.
The trial court granted Romspen’s motion for summary judgment. The
judgment found that Romspen prevailed on its suit to quiet title; “Romspen has the
exclusive right as senior lienholder to the Property”; and Romspen had established
its entitlement to an injunction. The judgment denied Lee’s request for declaratory
relief and permanently enjoined Lee from, without leave of court, seeking to
foreclose on the property, filing notices of lis pendens affecting the property, or
taking any action which could cloud title to the property. The order expressly denied
all other relief and stated that it is a final judgment on all of Lee’s claims. The court
9
later entered a separate order granting Romspen’s unopposed motion for entry of
final judgment. This appeal followed.2
Summary Judgment
On appeal, Lee argues that (1) summary judgment was improper because fact
issues exist concerning his claim of alter-ego merger and the summary judgment
motion did not address all parts of this claim; (2) Lee’s summary judgment affidavit
was competent summary judgment evidence and not a sham affidavit; and (3) the
substitute trustee’s deed was defective and void, and the defects could not be cured
by correction deed.
A. Standard of Review
We review an order granting a motion for summary judgment de novo. JLB
Builders, L.L.C. v. Hernandez, 622 S.W.3d 860, 864 (Tex. 2021); W. Loop Hosp.,
LLC v. Houston Galleria Lodging Assocs., LLC, 649 S.W.3d 461, 479 (Tex. App.—
Houston [1st Dist.] 2022, pet. denied). When a trial court does not specify the
grounds for the ruling, we must affirm if any ground advanced in the motion is
meritorious. Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 248 (Tex. 2013); see
also W. Loop Hosp., 649 S.W.3d at 480 (stating that when summary judgment order
2
Galleria did not file an appellate brief.
10
does not specify ground for ruling, appealing party must negate all possible grounds
upon which order could have been granted).
When, as here, a party moves for summary judgment on both traditional and
no-evidence grounds, we address the no-evidence bases first. W. Loop Hosp., 649
S.W.3d at 479; see Merriman, 407 S.W.3d at 248 (“[I]f the non-movant fails to
produce legally sufficient evidence to meet his burden as to the no-evidence motion,
there is no need to analyze whether the movant satisfied its burden under the
traditional motion.”). If the nonmovant does not meet his burden under the no-
evidence motion, there is no need to address the traditional grounds because they
necessarily fail. W. Loop Hosp., 649 S.W.3d at 479. Any claims that survive no-
evidence review are then reviewed under the traditional standard. Id.
A party may move for no-evidence summary judgment after an adequate time
for discovery. TEX. R. CIV. P. 166a(i). “The motion must state the elements as to
which there is no evidence.” Id. No-evidence summary judgment is proper when
there is no evidence of one or more essential elements of a claim or defense on which
the adverse party bears the burden of proof at trial. W. Loop Hosp., 649 S.W.3d at
479. A no-evidence summary judgment motion shifts the burden to the nonmovant
to present evidence raising a genuine issue of material fact on each element
challenged in the motion. TEX. R. CIV. P. 166a(i); Merriman, 407 S.W.3d at 248; W.
Loop Hosp., 649 S.W.3d at 479.
11
In our review of a summary judgment ruling, we take as true all evidence
favorable to the nonmovant, and we indulge every reasonable inference and resolve
any doubts in the nonmovant’s favor. JLB Builders, 622 S.W.3d at 864; W. Loop
Hosp., 649 S.W.3d at 480. We will sustain a no-evidence challenge when “(a) there
is a complete absence of evidence of a vital fact, (b) the court is barred by rules of
law or of evidence from giving weight to the only evidence offered to prove a vital
fact, (c) the evidence offered to prove a vital fact is no more than a mere scintilla, or
(d) the evidence conclusively establishes the opposite of the vital fact.” Merriman,
407 S.W.3d at 248 (quoting King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751
(Tex. 2003)). More than a scintilla of evidence exists if the evidence rises to a level
that would enable reasonable and fair-minded people to differ in their conclusions.
King Ranch, 118 S.W.3d at 751; W. Loop Hosp., 649 S.W.3d at 480.
B. Merger of Estates by Alter Ego
In his first issue, Lee argues that a genuine issue of material fact exists
concerning his alter-ego merger claim.3
3
Lee also argues that summary judgment was improper because Romspen’s summary
judgment motion did not address all bases of Lee’s merger claim. He argues that
Romspen addressed Lee’s claim that Choudhri exercised an option to purchase the
membership interest in Galleria, but it did not address his claim that Galleria was an
alter ego of Choudhri. We disagree. Although the summary judgment motion
addressed the claim concerning the option on traditional grounds—that is, by
presenting evidence that Choudhri did not exercise his option until after
foreclosure—the motion also asserted no-evidence grounds concerning several
specific elements of merger, including ownership of both legal and equitable title.
The no-evidence grounds asserted in the motion shifted the burden to Lee to present
12
In his live petition, Lee alleged that both 1001 West Loop and Galleria were
alter-ego entities of Choudhri that he used “to perpetrate frauds on his existing
creditors.” Lee alleged that when, prior to foreclosure, Choudhri held legal title to
the subject property through 1001 West Loop and equitable title to the subject
property through Galleria, the senior liens merged with ownership of the property,
thereby extinguishing the senior liens and rendering the foreclosure sale void. Lee
alleged that Galleria was the alter ego of Choudhri based on Choudhri’s exercise of
the option to purchase Galleria’s membership interest. Lee also alleged that defects
in the substitute trustee’s deed rendered the conveyance of the subject property void,
and the defects could not be cured by correction deeds. Lee sought two declarations:
(1) ownership of the property merged with the senior liens, which extinguished the
senior liens, rendered the foreclosure sale invalid, and established Lee’s lien as the
senior lien on the property; and (2) the defective substitute trustee’s deed failed to
transfer any title to the subject property.
Romspen moved for summary judgment on both no-evidence and traditional
grounds. Romspen primarily argued that Lee had no evidence of several elements
evidence raising a genuine issue of material fact on each element challenged in the
motion. TEX. R. CIV. P. 166a(i); Merriman v. XTO Energy, Inc., 407 S.W.3d 244,
248 (Tex. 2013); W. Loop Hosp., LLC v. Houston Galleria Lodging Assocs., LLC,
649 S.W.3d 461, 479 (Tex. App.—Houston [1st Dist.] 2022, pet. denied). Because
we conclude below that Lee did not meet this burden, we do not consider the
traditional grounds. See W. Loop Hosp., 649 S.W.3d at 479.
13
required to establish a merger of legal and equitable titles to the subject property.
Concerning Lee’s claim that Choudhri owned the subject property prior to
foreclosure through alter-ego entities, Romspen argued that “Lee has no evidence
Choudhri owned or controlled Galleria or Romspen [Galleria’s sole member prior
to foreclosure] at the time of Foreclosure.” As a traditional ground, Romspen argued
that Choudhri did not exercise his option to purchase the ownership interest in
Galleria until after the foreclosure sale, at which time Galleria no longer owned the
liens on the subject property.
We first consider whether Lee presented evidence raising a fact issue on the
challenged elements of the merger doctrine. See W. Loop Hosp., 649 S.W.3d at 479
(stating that when party moves for both no-evidence and traditional summary
judgment, courts consider no-evidence grounds first).
Merger of estates occurs when a lesser estate is absorbed into a greater estate.
Steger v. Muenster Drilling Co., 134 S.W.3d 359, 376 (Tex. App.—Fort Worth
2003, pet. denied); Smith v. U.S. Nat’l Bank of Galveston, 767 S.W.2d 820, 823
(Tex. App.—Texarkana 1989, writ denied) (“Merger is the absorption or
extinguishment of one estate or contract in another, and is largely a question of
intent.”). “Generally, when one acquires fee simple title to land, all prior liens,
inferior titles and interests owned by him are merged into a superior title, unless a
different intent is shown.” Smith, 767 S.W.2d at 823. The merger doctrine, which is
14
disfavored in Texas, applies to lienholder estates as well as to titleholder estates.
Steger, 134 S.W.3d at 376. The merger doctrine requires proof of six elements:
(1) the existence of a greater and lesser estate;
(2) both estates must unite in the same owner;
(3) both estates must be owned in the same right;
(4) there must be no intervening estate;
(5) merger must not be contrary to the intention of the owner of the
two estates; and
(6) merger must not be disadvantageous to the owner of the two estates.
Flag-Redfern Oil Co. v. Humble Expl. Co., 744 S.W.2d 6, 9 (Tex. 1987); Steger, 134
S.W.3d at 376; Franz v. Katy Indep. Sch. Dist., 35 S.W.3d 749, 754 (Tex. App.—
Houston [1st Dist.] 2000, no pet.).
Romspen’s summary judgment motion argued that Lee had no evidence of
elements two, three, five, and six.
In this case, identifying the owner of legal title and the owner of equitable title
to the subject property under the second element of the merger doctrine requires
determining whether to disregard the corporate fiction to find that Choudhri, through
alleged alter ego entities 1001 West Loop and Galleria, was the actual owner of the
titleholder and lienholder estates. This is because the appellate record shows that,
prior to foreclosure, the record owner of legal title to the subject property was 1001
West Loop, and the record owner of equitable title to the property was Galleria. To
establish that these estates were owned by the same owner, Lee asks the Court to
15
disregard the corporate fiction and find that 1001 West Loop and Galleria were alter
egos of Choudhri and, hence, Choudhri was the true owner of both estates.
“A bedrock principle of corporate law is that an individual can incorporate a
business and thereby normally shield himself from personal liability for the
corporation’s contractual obligations.” U.S. KingKing, LLC v. Precision Energy
Servs., Inc., 555 S.W.3d 200, 212 (Tex. App.—Houston [1st Dist.] 2018, no pet.)
(quoting Willis v. Donnelly, 199 S.W.3d 262, 271 (Tex. 2006)). However, the
corporate veil may be pierced upon a theory of alter ego “where a corporation is
organized and operated as a mere tool or business conduit of another . . . .” Tryco
Enters. v. Robinson, 390 S.W.3d 497, 508 (Tex. App.—Houston [1st Dist.] 2012,
pet. dism’d) (quoting Castleberry v. Branscum, 721 S.W.2d 270, 272 (Tex. 1986)).
Alter ego applies “when there is such unity between corporation and
individual that the separateness of the corporation has ceased and holding only the
corporation liable would result in injustice.” Id. (quoting Castleberry, 721 S.W.2d
at 272); see Wilson v. Davis, 305 S.W.3d 57, 69–70 (Tex. App.—Houston [1st Dist.]
2009, no pet.) (“[I]f the shareholders themselves disregard the separation of the
corporate enterprise, the law will also disregard it so far as necessary to protect
individual and corporate creditors.”) (quoting Castleberry, 721 S.W.2d at 272). We
determine whether an entity is an alter ego of an individual “from the total dealings
of the corporation and the individual, including the degree to which corporate
16
formalities have been followed and corporate and individual property have been kept
separately”; “the amount of financial interest, ownership, and control the individual
maintains over the corporation”; and “whether the corporation has been used for
personal purposes.” Tryco Enters., 390 S.W.3d at 508 (quoting Castleberry, 721
S.W.2d at 272).
Disregarding the corporate fiction involves two considerations: (1) the
relationship between the individual and the entity; and (2) whether the use of limited
liability was illegitimate. SSP Partners v. Gladstrong Invs. (USA) Corp., 275 S.W.3d
444, 455 (Tex. 2008); U.S. KingKing, 555 S.W.3d at 213; Tryco Enters., 390 S.W.3d
at 508. To establish alter-ego liability, the plaintiff must show that (1) the entity on
which it seeks to impose liability is the alter ego of the debtor; and (2) the corporate
fiction was used for an illegitimate purpose, that is, to perpetrate an actual fraud on
the plaintiff for the defendant’s direct personal benefit. U.S. KingKing, 555 S.W.3d
at 213–14; Tryco Enters., 390 S.W.3d at 508; TEX. BUS. ORGS. CODE § 21.223(b).
“Generally, alter ego will not apply to disregard the corporate form absent
exceptional circumstances.” U.S. KingKing, 555 S.W.3d at 214 (quoting Nugent v.
Est. of Ellickson, 543 S.W.3d 243, 265 (Tex. App.—Houston [14th Dist.] 2018, no
pet.)).
17
1. Summary Judgment Evidence
Lee’s theory is that Choudhri owned both the legal title and the equitable title
to the subject property, and therefore the two estates merged into him and
extinguished the senior liens on the property prior to foreclosure and the substitute
trustee’s sale of the property. To raise a fact issue on whether the two estates merged
into the same owner under the second element of the merger doctrine, therefore, Lee
was required to present at least a scintilla of evidence that prior to foreclosure, 1001
West Loop—the titleholder—and Galleria—the lienholder—were alter ego entities
of Choudhri. See Merriman, 407 S.W.3d at 248; Flag-Redfern Oil, 744 S.W.2d at 9;
Tryco Enters., 390 S.W.3d at 508.
Lee relies on several documents to make this showing. First, a letter from
Romspen committing to loan Galleria the funds to buy the senior liens on the subject
property stated that there was a beneficial owner subject to the loan terms, although
the document did not identify the beneficial owner. Second, the membership interest
option agreement stated that the purpose of the loan was to acquire the subject
property “which is intended to be used by the Optionholder (Choudhri)[.]” Third,
Lee argues that Choudhri signed each of the loan documents individually and as
Galleria’s authorized agent, and he did so prior to the foreclosure sale. Fourth,
Romspen’s written resolution appointed Choudhri as Galleria’s chief executive
officer and authorized him to act on Galleria’s behalf before the foreclosure sale.
18
This evidence does not raise a fact issue on whether Galleria was an alter ego
of Choudhri prior to foreclosure. See Merriman, 407 S.W.3d at 248. These few
documents give almost no insight into the “total dealings” of Galleria and Choudhri.
See Tryco Enters., 390 S.W.3d at 508 (quoting Castleberry, 721 S.W.2d at 272). At
best, these documents show that Choudhri had control over Galleria through
Romspen’s appointment of him as Galleria’ chief executive officer, he signed
documents on behalf of Galleria, and Romspen and Galleria intended that the
property would be used by Choudhri. See id. Crucially, however, these documents
do not show whether Galleria’s corporate formalities were followed, whether
Galleria and Choudhri generally kept their respective properties separate, whether
Choudhri had any ownership interest in Galleria prior to exercising his option to
purchase its ownership interest after the foreclosure sale, or whether Choudhri used
Galleria for personal purposes. See id. This evidence falls short of raising a fact issue
on whether there is such unity between Choudhri and Galleria that the two are no
longer separate. See id.; see also Merriman, 407 S.W.3d at 248 (stating that appellate
court will sustain no-evidence challenge when, among other things, evidence is no
more than scintilla); King Ranch, 118 S.W.3d at 751 (stating that more than scintilla
of evidence exists when evidence rises to level that would enable reasonable and
fair-minded people to differ in their conclusions). Thus, we conclude that the Lee
19
did not meet his burden to raise a fact issue on whether Galleria was an alter ego of
Choudhri such that Choudhri was the true owner of the lienholder estate.
Nor did Lee present any evidence showing that 1001 West Loop was an alter
ego of Choudhri. The motion for summary judgment argued that there was no
evidence of the second element of merger: that both estates united in the same owner.
See Flag-Redfern Oil, 744 S.W.2d at 9; Steger, 134 S.W.3d at 376. To defeat this
no-evidence challenge, Lee was required to present evidence raising a fact issue on
whether Choudhri owned not just the lienholder estate (through Galleria), but also
on whether he simultaneously owned the titleholder estate (through 1001 West
Loop) prior to the foreclosure sale. See Merriman, 407 S.W.3d at 248 (stating that
no-evidence summary judgment motion shifts burden to nonmovant to present
evidence raising fact issue on each element challenged in motion). Lee did not point
to any evidence in his summary judgment response that raised a fact issue on whether
1001 West Loop was an alter ego of Choudhri. Nor does he do so on appeal. Thus,
we conclude that Lee did not meet his burden to raise a fact issue concerning the
second element of the merger doctrine: that both estates united in the same owner.
2. Lee’s Affidavit
In his second issue—which we construe as a subpart of his first issue—Lee
argues that his summary judgment affidavit constituted competent summary
judgment proof raising a fact issue on the alter-ego merger claim and that the
20
affidavit was not a sham. Romspen responds that the affidavit contradicted Lee’s
prior deposition testimony, and therefore the affidavit was a sham.
The sham affidavit rule prohibits a nonmovant from submitting an affidavit
that directly contradicts prior testimony, without explanation, in an attempt to raise
a fact issue to survive summary judgment. Lujan v. Navistar, Inc., 555 S.W.3d 79,
85, 90 (Tex. 2018). The basis for the rule is to distinguish genuine fact issues from
non-genuine fact issues under Rule of Civil Procedure 166a. Id. at 86; see TEX. R.
CIV. P. 166a(c), (i). When an affidavit contradicts earlier deposition testimony and
appears to the trial court to be a sham designed to avoid summary judgment, the trial
court may require a sufficient explanation and, in the absence of one, may grant
summary judgment. Lujan, 555 S.W.3d at 90. A contradictory affidavit may be
warranted when, for example, the contradiction is based on newly discovered
evidence or confusion about what was asked during a deposition. Id. In such a
circumstance, an affidavit, though facially inconsistent, should be considered upon
sufficient explanation. Id.Absent a timely objection and a ruling from the trial court on the objection,
however, a complaint that a summary-judgment affidavit is a sham is waived for
purposes of appellate review. Parkway Dental Assocs., P.A. v. Ho & Huang Props.,
L.P., 391 S.W.3d 596, 604 (Tex. App.—Houston [14th Dist.] 2012, no pet.); Scott
v. Hunt, No. 01-11-00042-CV, 2012 WL 983339, at *5 (Tex. App.—Houston [1st
21
Dist.] Mar. 22, 2012, no pet.) (mem. op.); see also TEX. R. APP. P. 33.1(a). An
objection that an affidavit is a sham is one that complains of a defect in form, not
substance. Scott, 2012 WL 983339, at *5; Hogan v. J. Higgins Trucking, Inc., 197
S.W.3d 879, 883 (Tex. App.—Dallas 2006, no pet.). A party must object in writing
and obtain an express or implied ruling from the trial court to preserve a complaint
about the form of summary judgment evidence. Scott, 2012 WL 983339, at *5; TEX.
R. CIV. P. 166a(f); TEX. R. APP. P. 33.1(a)(2)(A). “[A] trial court’s ruling on an
objection to summary judgment evidence is not implicit in its ruling on the motion
for summary judgment.” Scott, 2012 WL 983339, at *5 (quoting Delfino v. Perry
Homes, 223 S.W.3d 32, 35 (Tex. App.—Houston [1st Dist.] 2006, no pet.)).
When the trial court does not rule on a challenge to a purported sham affidavit,
we presume that the court considered the affidavit as competent summary judgment
evidence. See Parkway Dental Assocs., 391 S.W.3d at 604 (stating that party waived
complaint that affidavit was sham by failing to timely object and obtain ruling on
objection); Scott, 2012 WL 983339, at *5; see also Tejada v. Gernale, 363 S.W.3d
699, 707 (Tex. App.—Houston [1st Dist.] 2011, no pet.) (“We note that the trial
court did not strike Raskin’s affidavit as a sham. Given that the trial court considered
the affidavit as summary-judgment evidence and Raskin proffered an explanation
for the change, we decline to strike the affidavit on appeal.”).
22
In this case, Romspen’s reply in support of its summary judgment motion
argued that Lee’s summary judgment affidavit was a sham because it contradicted
his prior deposition testimony, and Romspen provided examples of the alleged
inconsistencies. Romspen argued that “Lee cannot suddenly contradict his prior
testimony to create a fact issue to survive summary judgment.” Romspen did not,
however, request that the trial court strike the affidavit, and the trial court did not
rule on the complaint. Therefore, we presume that the trial court considered the
affidavit, and we conclude that Romspen has waived any challenge to defects in the
form of the affidavit, including whether it was a sham. See Parkway Dental Assocs.,
391 S.W.3d at 604; Scott, 2012 WL 983339, at *5.
In his affidavit, Lee averred in relevant part that:
Ali [Choudhri] has always indicated to me that the Property was his,
that he controlled it, and held ownership of the various entities he
transferred record ownership to over the period of my [Lee’s] loan. In
fact, [before the foreclosure sale] he indicated that he owned 100% of
the beneficial interest in [Galleria] and had arranged for a refinance of
the property through an entity and that if I would agree to a reduced
payoff on my loan . . . , he would agree to pay that amount out of the
refinancing funds . . . .
Subsequently, Ali told me he had changed his mind and he was going
to foreclose the MidFirst Bank liens, which were prior in time to my
lien, that he had purchased with [Romspen] refinancing funds to cut my
and other inferior liens on the Property pursuant to an agreement he had
expressly made with [Romspen] to acquire the Property free of inferior
liens to be used by Ali. Ali told me he had gotten ownership and control
of the Property through [Galleria] by his agreement with [Romspen]
and didn’t need to pay me.
23
This affidavit does not create a fact issue on whether Galleria was an alter ego
of Choudhri. While it may show that Choudhri owned all the beneficial interest in
Galleria prior to foreclosure, Lee’s theory is that Choudhri owned the liens on the
subject property through Galleria. See Tryco Enters., 390 S.W.3d at 508. The
affidavit does not address information relevant to an alter-ego claim, such as whether
Galleria followed corporate formalities and kept other property separate from
Choudhri’s property or whether Choudhri used Galleria for personal purposes. See
id. In short, Lee’s affidavit does not establish that, “from the total dealings” of
Galleria and Choudhri, “there is such unity between [Galleria] and [Choudhri] that
the separateness of the corporation has ceased . . . .” See id.Furthermore, the affidavit does not mention 1001 West Loop, the pre-
foreclosure-sale owner of the subject property, at all. See Steger, 134 S.W.3d at 376
(stating that merger requires proof that both estates united in same owner). The
affidavit generally refers to ownership of the subject property, stating that Choudhri
admitted he owned and controlled the property through various entities. But this does
not establish that 1001 West Loop—which held legal title to the property when
Galleria held equitable title—was an alter ego of Choudhri. Nor does the affidavit
offer any insight into the total dealings between Choudhri and 1001 West Loop;
show whether 1001 West Loop’s corporate formalities were followed or its property
kept separate from Choudhri’s property; show the amount of financial interest,
24
ownership, and control Choudhri held in 1001 West Loop; or show whether
Choudhri used 1001 West Loop for personal purposes. See Tryco Enters., 390
S.W.3d at 508.
We conclude that Lee did not meet his burden to present a scintilla of evidence
that either Galleria or 1001 West Loop was an alter ego of Choudhri prior to the
foreclosure sale, and therefore that Choudhri was the actual owner of the lienholder
estate and the titleholder estate at the same time. See Merriman, 407 S.W.3d at 248;
TEX. R. CIV. P. 166a(i). Thus, there is no evidence in the record before us establishing
the second merger element: that legal and equitable title united in one owner. See
Flag-Redfern Oil, 744 S.W.2d at 9; Steger, 134 S.W.3d at 376; Franz, 35 S.W.3d at
754. We therefore hold that the trial court did not err by granting summary judgment
in Romspen’s favor on Lee’s claim of alter-ego merger.4 We overrule Lee’s first and
second issues.
4
Because Lee did not meet his burden to establish that he presented a scintilla of
evidence on one element of merger, we need not consider the remaining no-evidence
grounds or the traditional grounds concerning this claim. See Merriman, 407 S.W.3d
at 248 (stating that no-evidence motion for summary judgment shifts burden to
nonmovant to present evidence raising fact issue on each element challenged in
motion); W. Loop Hosp., 649 S.W.3d at 479 (stating that if nonmovant does not
meet burden on no-evidence ground, court need not address traditional grounds
because they necessarily fail); TEX. R. APP. P. 47.1.
25
C. Validity of Substitute Trustee’s Deed
In his third issue, Lee argues that defects in the substitute trustee’s deed
rendered it void, and the defects could not be cured by correction deed.5
“A conveyance of an estate of inheritance, a freehold, or an estate for more
than one year, in land and tenements, must be in writing and must be subscribed and
delivered by the conveyor or by the conveyor’s agent authorized in writing.” TEX.
PROP. CODE § 5.021; see Gordon v. W. Houston Trees, Ltd., 352 S.W.3d 32, 43 (Tex.
App.—Houston [1st Dist.] 2011, no pet.) (“There is, however, no longer a
requirement that a deed or instrument to effect the conveyance of real property must
have all the formal parts of a deed recognized at common law or technical
language.”). This Court has held that there are four “essential characteristics of a
deed” that constitute a legally valid conveyance:
(1) a grantor and a grantee can be ascertained from the instrument as
a whole;
(2) there are operative words of grant showing the grantor’s
intention to convey to the grantee title to a real property interest;
5
Lee does not argue that the correction deeds failed to cure the deficiencies. Rather,
he argues that a correction instrument could not be used at all because the
conveyance did not otherwise comply with all requirements in Property Code
Chapter 51 for the sale of real property under a power of sale, specifically the
requirement in section 51.002(b)(3) that written notice of the trustee’s sale be sent
by certified mail to each debtor. See TEX. PROP. CODE §§ 5.027(b) (prohibiting use
of correction instrument for purposes of sale of real property under power of sale
pursuant to Chapter 51 unless conveyance complied with all Chapter 51
requirements), 51.002(b)(3). Because we conclude that the original deed was not
defective, we do not reach these sub-issues. See TEX. R. APP. P. 47.1.
26
(3) the property is sufficiently described; and
(4) the instrument is signed and acknowledged by the grantor.
Gordon, 352 S.W.3d at 43; see also Green v. Canon, 33 S.W.3d 855, 858 (Tex.
App.—Houston [14th Dist.] 2000, pet. denied). Lee argues that the substitute
trustee’s deed does not identify the grantor and grantee and does not contain
operative words conveying the property.
The construction of an unambiguous deed is a question of law for the court.
Gordon, 352 S.W.3d at 43. Our primary duty in construing a deed is to ascertain the
parties’ intent from the language contained within the four corners of the deed.
Luckel v. White, 819 S.W.2d 459, 461 (Tex. 1991); Gordon, 352 S.W.3d at 43. We
must strive to harmonize and give effect to all parts of the instrument. Luckel, 819
S.W.2d at 462; Gordon, 352 S.W.3d at 43. Whether a deed is ambiguous is also a
question of law. Gordon, 352 S.W.3d at 43. If a deed is worded in such a way that it
can be given a definite or certain legal meaning, then the deed is not ambiguous. Id.If the deed is susceptible to a single meaning, the court is confined to the plain
language of the deed. Id.The substitute trustee’s deed recited that a promissory note existed, which was
secured by a deed of trust to the subject property, and that the deed of trust was
delivered to substitute trustee Kamelia Namazi Momin. The deed also recited several
conditions of “[t]his conveyance[.]” The habendum clause stated:
27
TO HAVE AND TO HOLD the above-described property, together
with all and singular the rights and appurtenances thereto in anywise
belonging, unto it, the said [Galleria], its successors and assigns,
forever, in fee simple; and I, the said KAMELIA NAMAZI MOMIN,
do hereby bind [Galleria], his heirs, executors and administrators,
forever against every person whomsoever lawfully claiming or to claim
the same, or any part thereof as fully as I, KAMELIA NAMAZI
MOMIN, as Trustee, lawfully can do: HOWEVER, WITHOUT
COVENANTS OR WARRANTIES, EXPRESSED OR IMPLIED, OR
ANY LIABILITY WHATSOEVER ON ME PERSONALLY[.]”
The deed is signed by Momin as “Trustee,” and it is notarized.
Lee first contends that the substitute trustee’s deed does not sufficiently
identify the grantor and the grantee.6 Lee argues that Momin and Galleria are
identified only in the part of the deed referencing the secured note, but neither is
identified as grantor or grantee. Lee also argues that the habendum clause implies
that Galleria is both the grantor and the grantee. We disagree.
Momin and Galleria are the only two individuals or entities named in the deed.
This Court has previously held that a deed sufficiently identifies a grantee where the
person appears in the habendum clause as the person who is “to have and to hold”
6
Both parties’ arguments assume that the proper grantor to a conveyance of real
property under a substitute trustee’s deed is the substitute trustee. Accordingly, for
purposes of our analysis, we assume without deciding that the grantor was Momin,
the substitute trustee. See Stephenson v. LeBoeuf, 16 S.W.3d 829, 836–37 (Tex.
App.—Houston [14th Dist.] 2000, pet. denied) (op. on reh’g) (stating that trustee’s
authority to sell deed for parties after foreclosure of lien is derived from deed of
trust); see also Mosby v. Post Oak Bank, 401 S.W.3d 183, 186 (Tex. App.—Houston
[14th Dist.] 2011, pet. denied) (stating that substitute trustee’s deed was signed by
trustee).
28
the property. Harris v. Strawbridge, 330 S.W.2d 911, 915 (Tex. App.—Houston
1959, writ ref’d n.r.e.). Here, the habendum clause states that Galleria is to have and
to hold the described property in fee simple, and thus Galleria is sufficiently
identified as the grantee. See id.; Gordon, 352 S.W.3d at 43 (stating that conveyance
is valid where grantor and grantee can be ascertained from instrument as whole).
Moreover, Momin is the only other person or entity named in the deed, and
she signed the deed. See Gordon, 352 S.W.3d at 43 (stating that grantor must sign
and acknowledge deed); see also Harris, 330 S.W.2d at 915 (concluding that deed
sufficiently identifies grantor where deed states person was paid consideration and
person signed and acknowledged instrument). Lee has not provided any legal
authority supporting his argument that the deed does not sufficiently identify the
grantor and the grantee. Because we can ascertain the grantor and the grantee from
the instrument as a whole, we conclude that the substitute trustee’s deed sufficiently
identified the grantor and the grantee. See Gordon, 352 S.W.3d at 43.
Lee also argues that the deed does not contain operative words of conveyance.
A document can operate as a deed only if it conveys an interest in property. Id.Without operative words of grant showing the grantor’s intention to convey an
interest in property to the grantee, an instrument is not a deed. Id. at 44. Words of
grant are necessary because, without them, it would not be possible to determine
what portion of ownership (e.g., 100% or something less) or type of ownership
29
interest (e.g., fee simple or, for example, an easement) is being conveyed. Cohen v.
Tour Partners, Ltd., No. 01-15-00705-CV, 2017 WL 1528776, at *6 (Tex. App.—
Houston [1st Dist.] Apr. 27, 2017, no pet.) (mem. op.). A conveyance of land does
not require magic language or particular terms, but it must at least identify the
interest being conveyed. Id.; Gordon, 352 S.W.3d at 43; Green, 33 S.W.3d at 858–
59.
“[T]he words ‘to have and to hold the above[-]described land * * * unto the
said [grantee], her heirs or assigns forever’ show an intention to convey title in fee
simple to [the grantee].” Harris, 330 S.W.2d at 916. If these words appear anywhere
in the deed, including in the habendum clause, it is sufficient. Id. In this case, the
habendum clause of the substitute trustee’s deed included this precise language, and
we can determine from this language the portion and type of ownership being
conveyed to Galleria. See Cohen, 2017 WL 1528776, at *6; Gordon, 352 S.W.3d at
44. We therefore conclude that the deed contained sufficient words of conveyance.
Lee counters that a habendum clause cannot provide missing grant language
in a deed. As support for this argument, Lee relies on Veltmann v. Damon, in which
a granting clause in a deed conveyed the grantor’s “undivided one-half (1/2) interest”
in property subject to a life estate retained by the grantor, but the habendum clause
recited that the grantee was to have and to hold all of the property, including the
grantor’s spouse’s other undivided one-half interest in the property that was not
30
included in the granting clause. 701 S.W.2d 247, 247–48 (Tex. 1985) (per curiam).
Because the granting clause “obviously conflict[ed] with the deed’s habendum
clause,” the Texas Supreme Court held that the appellate court erred by interpreting
the deed to convey more than the grantor’s undivided one-half interest as stated in
the granting clause. Id. at 248. In this case, by contrast, the habendum clause does
not conflict with a granting clause, and therefore Veltmann is inapposite.
We conclude that the original substitute trustee’s deed sufficiently identified
the grantor and the grantee and contained operative words of grant. Accordingly, we
hold that the trial court did not err by granting summary judgment against Lee on his
declaratory claim that the deed was void. We overrule Lee’s third issue.
Conclusion
We affirm the judgment of the trial court.
April L. Farris
Justice
Panel consists of Justices Hightower, Rivas-Molloy, and Farris.
31