Hall CA-NV, LLC v. Robert Radovan and William Criswell

Reversed and Remand and Opinion Filed May 25, 2022
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-19-01412-CV
HALL CA-NV, LLC, Appellant
V.
ROBERT RADOVAN AND WILLIAM CRISWELL, Appellees
On Appeal from the 134th Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-18-02395
MEMORANDUM OPINION
Before Justices Molberg, Carlyle, and Smith1
Opinion by Justice Molberg
Hall CA-NV, LLC (Hall) appeals the trial court’s final judgment ordering that
it take nothing on its claim that appellees, Robert Radovan and William Criswell,
breached their loan guaranty agreements. Hall raises six issues on appeal: whether
(1) Hall proved all elements in its claim for recovery on the guaranty agreements;
(2) Hall conclusively established damages; (3) the guaranty agreements waived any
defenses raised by appellees; (4) appellees otherwise failed to plead or prove those
1
The Honorable John Browning participated in the case submission but not in the issuance of this
opinion, which occurred after the expiration of his term on December 31, 2020; the Honorable Craig Smith
succeeded him and has reviewed the briefs and record before the Court. See TEX. R. APP. P. 41.1.
defenses; (5) the trial court’s findings of fact should be set aside because Hall proved
liability and damages and appellees waived or failed to prove any defenses; and (6)
the trial court abused its discretion by admitting into evidence a bankruptcy order.
We conclude legally sufficient evidence supported Hall’s claim, and Radovan and
Criswell waived any defenses to liability and otherwise failed to prove any
applicable defense. We set aside the trial court’s findings to the contrary.
Accordingly, we reverse the trial court’s judgment and render judgment for Hall.
I. BACKGROUND
a. Loan and guaranty agreements
Hall CA-NV, LLC agreed to loan New Cal-Neva Lodge, LLC up to $29
million for a hotel renovation project. The hotel being renovated was the collateral
that secured the loan. As additional security for the loan, Hall would receive “100%
of the membership interests in” the nearby Fairwinds Estate. Their loan agreement
provided that the “maximum aggregate amount of the Loan shall not exceed the
lesser of (i) 60% of the Lender approved acquisition and renovation costs, (ii) 60%
of the appraised value of the Project, on an ‘as completed’ basis, or (iii)
$29,000,000.00.” The loan was to be paid in installments. Interest on the loan, at
“rates specified in the Note,” was computed on the unpaid principal balance and was
“due and payable as set forth in” a promissory note the parties executed. New Cal-
Neva agreed to pay “all expenses of the Loan,” including a Commitment Fee and
Hall’s attorney’s fees “incurred in connection” with the loan. According to the
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promissory note, an additional five percent in interest would accrue on the balance
in the event of default.
The loan agreement specified that Hall could “perform any of such covenants,
agreements and obligations, and any amounts expended by [Hall] in so doing shall
constitute additional indebtedness” if New Cal-Neva failed to perform any of its
covenants, agreements, or obligations under the agreement and other loan
documents. New Cal-Neva also covenanted and agreed Hall would be allowed to
settle mechanic’s lien claims that New Cal-Neva failed to discharge.
Radovan and Criswell, the principals of New Cal-Neva, executed and signed
separate but identical guaranty agreements guaranteeing the loan. In section two of
their respective agreements, Radovan and Criswell “unconditionally and irrevocably
guarantee[d] to [Hall] the punctual payment when due, whether by lapse of time, by
acceleration of maturity, or otherwise, and at all times thereafter, of the Guaranteed
Indebtedness.” The guaranties were continuing guaranties of payment and not
guaranties of collection. Radovan and Criswell each agreed “that if all or any part
of the Guaranteed Indebtedness shall not be punctually paid when due . . . Guarantor
shall, immediately, upon demand by Lender, pay the amount due” on the
indebtedness. The guaranty agreements specified that Radovan and Criswell were
“jointly and severally liable for the payment and performance” of the guaranteed
obligations.
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Radovan and Criswell, in section nine of the agreements, agreed that their
obligations under the agreements
shall not be released, discharged, diminished, impaired, reduced, or
affected for any reason or by the occurrence of any event, including,
without limitation, one or more of the following events, whether or not
with notice to or the consent of Guarantor: (a) the taking or accepting
of collateral as security for any or all of the Guaranteed Obligations or
the release, surrender, exchange, or subordination of any collateral now
or hereafter securing any or all of the Guaranteed Obligations; (b) any
partial release of the liability of Borrower or any Pledger, or Guarantor
hereunder, or the full or partial release of any other guarantor or obligor
from liability for any or an of the Guaranteed Obligations; (c) any
disability of Borrower, or the dissolution, insolvency, or bankruptcy of
Borrower, or any other guarantor, or any other party at any time liable
for the payment of any or all of the Guaranteed Obligations; . . . (i) the
settlement or compromise of any of the Guaranteed Obligations; . . . or
(n) any other circumstance which might otherwise constitute a defense
available to, or discharge of, Borrower or Guarantor.
The two guarantors also waived their right to require Hall to sue or exhaust its
remedies against New Cal-Neva and other guarantors and obligors. They waived
“any principles or provisions of law, statutory, or otherwise, which are or might be
in conflict with the terms hereof and any legal or equitable discharge of Guarantor’s
Obligations hereunder . . . .” These were waived whether they arose under “common
law, in equity, under contract, by statute, or otherwise . . . .” Radovan and Criswell
further agreed Hall could “exercise any and all rights granted to it under the Loan
Agreement, and the other Loan Documents without affecting the validity or
enforceability of this Guaranty.”
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b. Bankruptcy and litigation
Following foundation problems with the construction and the loss of certain
investors, New Cal-Neva defaulted on the Hall loan and filed for bankruptcy. A
buyer was found, and the hotel and related assets were sold for about $38.15 million.
The buyer also wanted to purchase the Fairwinds Estate, which was not part of the
bankruptcy estate. The bankruptcy court included a “limited exculpation” in its
order, which provided as follows:
For the avoidance of doubt, and in furtherance of Fed. R. Bankr. P.
6004(f)(2) and other applicable law, the Court hereby confirms and
orders that there shall be no personal liability for any individual who
executes any documents, including the revised Plan Documents, that
the Buyer reasonably deems necessary to effectuate the transfer of the
Purchased Assets, including without limitation the Fairwinds Estate, to
the Buyer, and any such individual is exculpated from any personal
liability that might otherwise arise on account of the execution of such
Plan Documents.
The general contractor, Penta Building Group, claimed to have a priority
mechanic’s lien over the hotel property. As part of the bankruptcy settlement, a “lien
litigation reserve” of $15 million was carved out of the sale proceeds for Hall and
Penta to resolve Penta’s claim. Hall and Penta ultimately agreed Penta would
receive $8,025,000 from the reserve. In total, Hall received about $27.5 million plus
furniture, fixtures, and equipment, which was about $700,000. Hall also received
$171,000 from Old Republic to reimburse it for attorney’s fees. Hall extended
additional funds in connection with the bankruptcy, totaling about $2 million. Hall
also incurred attorney’s fees from the bankruptcy proceeding.
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Through counsel, Hall demanded Radovan and Criswell pay the full amount
of the guaranteed indebtedness pursuant to their guaranty agreements. Hall sued
Radovan and Criswell to recover the guaranteed indebtedness under their
agreements. They answered, making general and specific denials, and asserting
several affirmative defenses, including waiver, estoppel, accord and satisfaction, the
one satisfaction rule, failure to mitigate, impaired collateral, res judicata, and
collateral estoppel. In appellees’ rule 166 disclosure, they noted the question of a
material alteration of the underlying contracts as a “contested issue of fact.” In their
“identification of legal matters to be ruled on or decided by the court,” they noted (i)
the scope of the bankruptcy court’s exculpation order, (ii) whether Hall may enforce
the guaranty agreements, (iii) “[w]hether [their] affirmative defenses preclude
enforcement of the guaranty agreements.”
At the bench trial, Michael Jaynes, president of Hall, testified that Hall had
not sold or transferred its interest in the loan at issue. He said Hall received about
$27.5 million plus furniture, fixtures, and equipment from the New Cal-Neva
bankruptcy estate. Hall received about $170,000 from its insurer, which it was
seeking to recover from Radovan and Criswell. Other than that, Hall had not
received anything from any other source. Jaynes said Hall did not pay Penta any
amount of money; instead, Penta was paid through the bankruptcy court, like Hall
was. Finally, Jaynes testified Hall had never agreed to release Radovan or Criswell
from their guaranty obligations.
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On cross-examination, Jaynes said the maximum amount Hall could advance
under the loan documents was $29 million, though it only ever disbursed just under
$20 million. He said Hall believed when it closed the loan that it would have a first-
priority lien. Eventually, during the bankruptcy, Hall decided there was “significant
risk as it related to the priority lien position to us.” Jaynes said it was never
determined whether Hall lost its “priority lien at any time.” He said Penta signed a
document saying that it had not begun construction at the time of the loan agreement.
But he testified there was risk with litigating Penta’s claims.
Ronda Tyrrell was responsible for selling the furniture, fixtures, and
equipment Hall received from the bankruptcy estate. She testified Hall retained
$194,021.62 worth of furniture, fixtures, and equipment, for which she said Hall had
not paid because they “haven’t used them.” Tyrrell said the total value of furniture,
fixtures, and equipment sold by Hall was $2,290,767.29. Radovan and Criswell also
stipulated Hall received about $545,000 for some of these assets and it retained
others valued at about $194,000 for a total of over $720,000.
David Epperson, Hall’s portfolio manager for the New Cal-Neva loan,
testified that, as of July 30, 2019, Hall was owed about $8.6 million on the loan.
According to the amortization schedule, this was the sum of the loan balance, which
was $7,439,342.70, the interest accrued, which was $639,570.83, and the default
interest, which was $531,365.49. The total was $8,610,279,02. Epperson said
neither the $194,000 worth of retained furniture, fixtures, and equipment nor the
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attorney’s fees received by Hall from the title company were reflected as credits on
the amortization schedule. Radovan and Criswell stipulated they had “not paid any
amounts under their guaranty agreements.”
Radovan testified he and Criswell, through New Cal-Neva and with investors,
bought the Cal-Neva Lodge property in 2013. They also bought the neighboring
Fairwinds Estate. Radovan said he believed Penta had executed releases related to
any work Penta did prior to the Hall loan. Radovan testified he pledged the
Fairwinds Estate as additional collateral for the loan. “Given the amount of equity
in the property,” he said, “we never thought that we’d really be at risk on the personal
guarantees up to 20 million.” He said he would not have agreed to guarantee the
loan without Penta’s representations, Hall’s title insurance, and the collateral that
they had. He acknowledged the guaranty agreements did not reflect that
understanding, nor did he tell Hall that those safeguards were the only reason he
agreed to guarantee the loan.
Radovan said he thought the $32 million indebtedness was greater than the
amount he had agreed to guarantee. He testified he was shocked when Hall decided
to settle with Penta, though he admitted on cross-examination he did not know
whether Penta’s position was correct under the law. Radovan did not want to sell
the Fairwinds Estate, which he said he had previously pledged to Hall, but that “at
that point, we were doing what the attorneys and the Court was asking us to do.” On
cross-examination, Radovan acknowledged Capital One had a first lien on the
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Fairwinds Estate, and what Hall had was a pledge of membership interest. Radovan
said Hall’s attorney said Hall would come after his and Criswell’s guaranty
agreements if they sold the Fairwinds Estate. He said he would have resigned, but
he obtained an “exculpation” of personal liability relating to the transfer of the Estate
from the bankruptcy court.
Criswell testified he delegated authority to Radovan regarding “practically
every aspect of the Cal-Neva project.” Like Radovan, he said he did not think he
was liable under his guaranty agreement because he thought Hall had been “fully
paid.” If there was any deficiency, he said, it was because Hall decided to give away
some of the bankruptcy sale proceeds to Penta.
c. Findings of fact and conclusions of law
The trial court ruled for Radovan and Criswell, ordering that Hall take
nothing. The court entered findings of fact and conclusions of law. The court found
that (1) Hall loaned about $19.5 million to New Cal-Neva; (2) the maximum
aggregate amount of the loan Radovan and Criswell guaranteed was “never to
exceed $29 million”; (3) Radovan and Criswell’s guaranties were based on “three
key safeguards”: Hall was the first priority lien holder to New Cal-Neva Lodge, Hall
had a security interest in the hotel property and the neighboring Fairwinds Estate,
and Hall had title insurance; (4) Penta represented to Hall it had not commenced any
work prior to the loan; (5) Penta executed a subordination agreement in favor of
Hall; (6) Radovan and Criswell believed Penta had not begun any work under its
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contract with Hall; (7) New Cal-Neva defaulted on its obligations and filed for
bankruptcy in 2016; (8) Penta began an adversary proceeding claiming to have lien
priority, alleging it began work before Hall’s loan was made; (9) Hall represented,
during the bankruptcy proceedings, that it was the first priority lien holder, ahead of
Penta; (10) Hall settled the Penta adversary proceeding by agreeing to pay Penta
over $8 million despite representing that it was the first priority lien holder; (11)
Radovan and Criswell were not told about the agreement before it was agreed to;
(12) Hall received value for its payment to Penta; (13) the bankruptcy plan involved
selling the hotel property; (14) the purchaser wanted to buy the Fairwinds Estate,
which was not part of the bankruptcy estate, in addition to the hotel; (15) because
the transfer of the Fairwinds Estate would expose them to liability under their
guaranty agreements, Radovan and Criswell obtained an exculpation from the
bankruptcy court before transferring that estate to the purchaser; (16) Radovan and
Criswell executed “plan documents” to transfer the Fairwinds Estate to the buyer;
(17) the secured properties sold for over $38 million; (18) that amount was more
than sufficient to cover the entire amount owed Hall, but Hall elected to enter an
agreement with Penta, giving it over $8 million; (19) after paying Penta, Hall
collected at least $27 million from the bankruptcy proceeding after loaning around
$19.5 million, creating the alleged shortfall that is the subject of this suit; (20) Hall
also received valuable furniture, fixtures, and equipment, which it partly sold and
partly kept; (21) Hall’s alleged deficiency was based on a claimed aggregate loan
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amount of over $32 million in January 2018; (22) Hall has no damages from the
alleged breach; (23) Hall’s claims in this case are contrary to positions taken in the
bankruptcy proceeding; and (24) Hall’s claims are based on a loan balance of more
than $32 million; (25) Hall is simultaneously pursuing claims against third parties,
including its title insurer, Old Republic, to recover the same loss.
The trial court concluded that (1) Hall cannot obtain a double recovery for the
same injury; (2) Hall’s decision to settle with Penta, based on claims of seniority for
work performed before Hall made its loan, materially altered the parties’ agreements
under the loan documents; (3) the parties agreed to the loan documents based on the
mistaken belief Penta had not begun any work on the hotel that could entitle it to a
priority lien with seniority over Hall; (4) Hall is estopped from taking a position
contrary to one it took in the bankruptcy proceeding; (5) Hall elected its remedy in
the bankruptcy proceeding or otherwise waived its right to enforce the guaranty
agreements; (6) Radovan and Criswell were exculpated from liability by the
bankruptcy court and thus cannot be held liable for the indebtedness Hall alleges
because the indebtedness arises, at least in part, from the lost collateral of the
Fairwinds Estate; (7) Hall is not entitled to enforce the guaranty agreements; (8) Hall
failed to prove any cognizable damages; (9) Hall failed to mitigate its damages; (10)
Hall failed to prove Radovan and Criswell caused the damages alleged; and (11)
Radovan and Criswell’s obligation was discharged by accord and satisfaction. This
appeal followed.
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II. ANALYSIS
a. Standard of review
A party challenging the legal sufficiency of an adverse finding on an issue on
which that party had the burden of proof at trial must demonstrate on appeal that the
evidence conclusively established, 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) (per curiam).
First, the challenging party must show that no evidence supported the trial court’s
finding; and then, if there was none, that the evidence conclusively established the
finding urged by the party. See PlainsCapital Bank v. Martin, 459 S.W.3d 550, 557
(Tex. 2015). “[T]he entire record must be examined to see if the contrary proposition
is established as a matter of law.” Sterner v. Marathon Oil Co., 767 S.W.2d 686,
690 (Tex. 1989).
When a party challenges the legal sufficiency of an adverse finding on an issue
on which an opposing party had the burden of proof, the challenger must
demonstrate on appeal that no evidence supports the adverse finding. Exxon Corp.
v. Emerald Oil & Gas Co., L.C., 348 S.W.3d 194, 215 (Tex. 2011). A no-evidence
challenge will be sustained when the record confirms: (1) a complete absence of a
vital fact; (2) the court is barred by rules of law or of evidence from giving weight
to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a
vital fact is no more than a mere scintilla; or (4) the evidence conclusively establishes
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the opposite of the vital fact. Ford Motor Co. v. Castillo, 444 S.W.3d 616, 620 (Tex.
2014). The evidence must be reviewed in the light most favorable to the verdict. Id.In a case tried before the court without a jury, in which there are findings of
fact and conclusions of law, the reviewing court will indulge every reasonable
presumption in favor of the findings and judgment of the trial court, and no
presumption will be indulged against the validity of the judgment. Vickery v.
Comm’n for Lawyer Discipline, 5 S.W.3d 241, 252 (Tex. App.—Houston [14th
Dist.] 1999, pet. denied). “Findings of fact entered in a case tried to a court are of
the same force and dignity as a jury’s verdict on jury questions.” Kahn v. Imperial
Airport, L.P., 308 S.W.3d 432, 436–37 (Tex. App.—Dallas 2010, no pet.).
b. Applicable law
A guaranty creates a secondary obligation according to which the guarantor
promises to answer for the debt of another and may be called upon to perform once
the primary obligor has failed to. Anderton v. Cawley, 378 S.W.3d 38, 46 (Tex.
App.—Dallas 2012, no pet.). A guaranty does not entitle a creditor to a double
recovery; “it merely provides an alternative source for recovery if the primary
obligor becomes insolvent.” Sunbelt Sav., FSB v. Barr, 824 S.W.2d 600, 603 (Tex.
App.—Dallas 1991), rev’d on other grounds, 837 S.W.2d 627 (Tex. 1992). The
elements of a breach of guaranty claim are: (1) the existence and ownership of the
guaranty contract; (2) the terms of the note underlying the guaranty or the
performance of the underlying contract by the holder; (3) the occurrence of the
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conditions upon which liability is based; and (4) the guarantor’s failure or refusal to
perform the guaranty’s promise. Marshall v. Ford Motor Co., 878 S.W.2d 629, 631
(Tex. App.—Dallas 1994, no pet.); Rivero v. Blue Keel Funding, L.L.C., 127 S.W.3d
421, 424 (Tex. App.—Dallas 2004, no pet.).
We construe guaranty agreements as any other contract. See Coker v. Coker,
650 S.W.2d 391, 393–94 (Tex. 1983). The construction of an unambiguous contract
is a question of law for the court. MCI Telecommunications Corp. v. Texas Utilities
Elec. Co., 995 S.W.2d 647, 650 (Tex. 1999). To ascertain the entire agreement
between the parties, separate documents executed simultaneously in the course of
the same transaction for the same purpose are to be construed together. Jim Walter
Homes, Inc. v. Schuenemann, 668 S.W.2d 324, 327 (Tex. 1984).
c. Discussion
Hall argues it conclusively proved each element to recover on the guaranty
agreements. We agree. First, the guaranties exist and are owned by Hall. Under the
two guaranty agreements admitted at trial, Radovan and Criswell guaranteed
payment to Hall. See Schubiger v. First Newport Realty Inv’rs, 601 S.W.2d 218,
222 (Tex. App.—Dallas 1980, writ ref’d n.r.e.) (“the party offering the note is
presumed to be the owner, especially if it is listed as payee, unless the contrary is
shown”). Second, it is undisputed that Hall loaned money to New Cal-Neva under
the terms of the underlying agreement. This was Hall’s only obligation under the
loan agreement. Third, New Cal-Neva defaulted on the loan and Hall eventually
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demanded payment from Radovan and Criswell of the guaranteed indebtedness.
Fourth, Radovan and Criswell then failed to pay under their guaranty agreements, as
they stipulated at trial. Furthermore, Hall established that the amount owed under
the guaranties was $8,610,279.02. This number was proved through the testimony
of Epperson and the account statement exhibit. See Diaz v. Multi Serv. Tech. Sols.
Corp., No. 05-17-00462-CV, 2018 WL 6521916, at *8 (Tex. App.—Dallas Dec. 12,
2018, no pet.) (mem. op.) (concluding that a debt amount was established through
the testimony of a company’s director of credit and risk management as well as an
account statement).
Accordingly, we conclude no evidence supported the trial court’s findings that
Hall failed to prove Radovan and Criswell’s liability, and moreover, the evidence
conclusively established Radovan and Criswell’s liability under their guaranty
agreements. We set aside the trial court’s findings of fact and conclusions of law to
the contrary.
1. Loan amount
In deciding otherwise, the trial court found that Radovan and Criswell never
guaranteed any amount over $29 million. Radovan and Criswell, in their argument
supporting this finding, point to the loan agreement provision that the “maximum
aggregate amount of the Loan shall not exceed the lesser of (i) 60% of the Lender
approved acquisition and renovation costs, (ii) 60% of the appraised value of the
Project, on an ‘as completed’ basis, or (iii) $29,000,000.00.” Hall points to other
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provisions in the agreement and the note in its argument that the $29 million figure
was only a limit on principal advances it could make to New Cal-Neva. For the
reasons that follow, we agree with Hall.
One of the recitals at the beginning of the loan agreement made clear that the
$29 million limit related to “credit” for New Cal-Neva. It provided that “Borrower
has requested Lender to extend credit to Borrower in the aggregate amount of up to
$29,000,000 (the “Loan”) . . . .” (emphasis added). See Clark v. Walker-Kurth
Lumber Co., 689 S.W.2d 275, 279 (Tex. App.—Houston [1st Dist.] 1985, writ ref’d
n.r.e.) (“The $1000 limit was a limit on credit to be extended Clarco, Inc., and clearly
was not intended to limit the guarantor’s liability.”).
The definitions section of the agreement noted that the meaning of “loan” was
“[a]s defined in [the recital].” Thus, “loan” was defined as “credit to [New Cal-
Neva] in the aggregate amount of up to [$29 million].” This meaning of loan was
confirmed by its use elsewhere in the agreement. For example, in the representations
and warranties section of the agreement, New Cal-Neva represented that “[n]o part
of the proceeds of the Loan will be used for the purpose of purchasing or acquiring
any ‘margin stock’ . . . .” So restricting the use of anything other than a proceed
disbursed to New Cal-Neva would not make sense. See MCI Telecommunications
Corp. v. Tex. Utilities Elec. Co., 995 S.W.2d 647, 652 (Tex. 1999) (“When
interpreting a contract, we examine the entire agreement in an effort to harmonize
and give effect to all provisions of the contract so that none will be meaningless.”).
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In the promissory note, New Cal-Neva promised to pay Hall “the principal
sum of TWENTY NINE MILLION [] DOLLARS . . . or so much thereof as may be
advanced by Lender [ ], together with interest thereon at the Note Rate [ ], and
otherwise in strict accordance with the terms and provisions hereof.” In other words,
the note made a distinction between “the principal sum”—$29 million or some other
amount—and “interest thereon at the Note Rate.” Both were to be paid to Hall. In
the remedies section of the note, New Cal-Neva agreed that, in the event of default,
Hall could demand payment on “the entire unpaid balance of the indebtedness
evidenced by this Note,” including the outstanding principal balance, “all sums
advanced or accrued hereunder or under any other Loan Document,” and all accrued
but unpaid interest.
Under their guaranty agreements, Radovan and Criswell did not merely
guarantee the “loan” but all of the indebtedness under the loan documents. Each
guaranteed to Hall “the punctual payment when due . . . of the Guaranteed
Indebtedness,” which was defined as “[a]ll of the indebtedness of Borrower under
the Note, the Loan Agreement, the other Loan Documents . . . .”
2. Credibility
Radovan and Criswell argue the trial court made credibility determinations to
which we must defer. They argue that Hall’s evidence about the amount owed
“varied by over $1.5 million.” Michael Jaynes, Hall’s president, testified on cross-
examination that as of November 28, 2017, the loan balance was $24,730,742.50,
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the accrued interest was $4,628,151.04, and the default interest was $2,346,677.88.
Counsel for Radovan and Criswell then cross-examined him using an affidavit he
submitted during the bankruptcy proceeding. According to the affidavit, on the same
date, the principal balance was $23,067,058.03, the contract interest was
$4,545,526.92, and the default interest was $2,304,654.21. Jaynes conceded these
amounts were different from those in the account statement admitted at trial, but he
said that there were “post-protective advances, there’s other advances that are
outlined on that affidavit.” He also testified on re-direct that the affidavit noted,
“Amounts outlined above may not include expenses incurred but not yet processed
by [Hall].” And Hall, Jaynes further testified, incurred expenses—roughly $2
million—during the bankruptcy proceeding. Jaynes’s bankruptcy affidavit was not
admitted in evidence, nor was any further evidence offered to explain the
discrepancy in the November 28, 2017 numbers.
We first note that none of the trial court’s findings and conclusions appear to
be based on this discrepancy. Second, the fact finder’s credibility determinations
must be reasonable. Bentley v. Bunton, 94 S.W.3d 561, 599 (Tex. 2002). It “cannot
ignore undisputed testimony that is clear, positive, direct, otherwise credible, free
from contradictions and inconsistencies, and could have been readily controverted.”
City of Keller v. Wilson, 168 S.W.3d 802, 820 (Tex. 2005). The existence of an
affidavit, which acknowledged not-yet-processed expenses, does not create a
credibility problem that calls in to question Hall’s direct evidence about the amount
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owed, which “could have been readily controverted.” Cf. Chahadeh v. Jacinto Med.
Group, P.A., 519 S.W.3d 242, 250 (Tex. App.—Houston [1st Dist.] 2017, no pet.)
(discrepancy between a bankruptcy claim and a guaranty claim did not create a fact
issue when there was an uncontroverted reason for the difference).
3. One-satisfaction rule
The trial court concluded that Hall “cannot obtain a double recovery for the
same injury.” A “double recovery” exists when a plaintiff obtains more than one
recovery for the same injury. Waite Hill Services, Inc. v. World Class Metal Works,
Inc., 959 S.W.2d 182, 184 (Tex. 1998). Such a recovery is prohibited by the one-
satisfaction rule, under which “a claimant is entitled to only one recovery for any
damages suffered.” Nat’l City Bank of Indiana v. Ortiz, 401 S.W.3d 867, 887 (Tex.
App.—Houston [14th Dist.] 2013, pet. denied); see also Mundheim v. Lepp, No. 05-
19-01490-CV, 2021 WL 1921122, at *8 (Tex. App.—Dallas May 13, 2021, pet.
denied) (mem. op.) (“The prohibition against double recovery is a corollary of the
rule that a party is entitled to but one satisfaction for the injuries sustained by him.”).
Here, there is no evidence Hall recovered anything from Radovan and
Criswell under their guaranty agreements. As discussed above, Hall proved it
obtained about $27 million from the bankruptcy, which was less than the roughly
$32 million balance at the time.
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4. Affirmative defenses
The trial court also concluded Radovan and Criswell proved numerous
defenses, including material alteration, mistake, estoppel, waiver, accord and
satisfaction, and failure to mitigate. Hall argues Radovan and Criswell waived all
possible defenses in their guaranty agreements. Again, we must agree with Hall.
The two guarantors agreed in section nine that their “obligations under this
Guaranty shall not be released, discharged, diminished, impaired, reduced, or
affected for any reason or by the occurrence of any event, including, without
limitation . . . any other circumstance which might otherwise constitute a defense
available to, or discharge of, Borrower or Guarantor.” And under section ten, they
waived “for the benefit of Lender,” among other things, “any principles or provisions
of law, statutory, or otherwise, which are or might be in conflict with the terms
hereof and any legal or equitable discharge of Guarantor’s Obligations hereunder . .
. .”
We conclude this broad language in the guaranty agreements waived the
affirmative defenses raised by Radovan and Criswell. “To be effective, a waiver
must be clear and specific.” Moayedi v. Interstate 35/Chisam Rd., L.P., 438 S.W.3d
1, 6 (Tex. 2014). Simply because a waiver is “all encompassing does not mean that
it is unclear or vague.” Id. at 8. Indeed, a waiver of “all possible defenses seems to
very clearly indicate what defenses are included: all of them.” Id. For example, in
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Holmes v. Graham Mortgage Corp., 449 S.W.3d 257, 259-60 (Tex. App.—Dallas
2014, pet. denied), the guaranty agreement at issue specified that,
[u]ntil the Guaranteed Obligations are fully performed, Guarantor shall
not be released . . . by reason of the illegality or unenforceability of all
or any part of the indebtedness represented by the Note as against
Borrower or Guarantor based on usury or other legal defenses, statutory
or otherwise, and Guarantor hereby to the maximum extent permitted
by applicable law expressly waives and surrenders any defense to
liability hereunder based upon the foregoing acts, things, agreements or
waivers, or any of them.
The guarantor raised numerous affirmative defenses, including judicial estoppel,
payment, accord and satisfaction, unjust enrichment, cancellation of debt, illegality,
equitable estoppel, and promissory estoppel. Id. at 265. “Based upon this plain
language of the Guaranty,” this Court concluded the guarantor “waived all of these
defenses.” Id.Radovan and Criswell agreed their obligations would not be diminished by
the occurrence of any event or any circumstance that might constitute a defense.
They waived any principles of law, statutory or otherwise, that might be in conflict
with the terms of their agreements. We conclude this language in the guaranties was
clear and specific enough to waive the affirmative defenses raised.
Radovan and Criswell argue we must “harmonize the contract as a whole,”
ignoring that we must also give effect to every provision. See MCI
Telecommunications Corp., 995 S.W.2d at 652. The effect of these provisions was
the waiver of the above-listed affirmative defenses to liability under the guaranty
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agreements. See In re A.B., 458 S.W.3d 207, 210 (Tex. App.—Dallas 2015, pet.
denied) (“‘[m]utual mistake’ is an affirmative defense”); McGraw v. Brown Realty
Co., 195 S.W.3d 271, 277 (Tex. App.—Dallas 2006, no pet.) (noting that failure to
mitigate is an affirmative defense); Frost Nat’l Bank v. Burge, 29 S.W.3d 580, 588
(Tex. App.—Houston [14th Dist.] 2000, no pet.) (“material alteration is an
affirmative defense”); Clark v. Cotten Schmidt, L.L.P., 327 S.W.3d 765, 770 (Tex.
App.—Fort Worth 2010, no pet.) (“[q]uasi-estoppel is an affirmative defense”); TEX.
R. CIV. P. 94 (“accord and satisfaction” and “waiver” are affirmative defenses).
5. Material alteration
Radovan and Criswell argue that even if some defenses were waived, material
alteration was not because, if it applies, then the guarantors are no longer bound by
the guaranties, including the waivers. The trial court found Hall’s decision to settle
with Penta materially altered its agreement with Radovan and Criswell. Hall
responds that material alteration was neither pleaded by Radovan and Criswell nor
agued by them at trial, and that moreover, it was not proved. Setting aside the
questions of whether this defense was properly before the trial court or waived in the
guaranty agreements, we conclude that Radovan and Criswell did not carry their
burden to prove it at trial.
A material alteration is an alteration of the underlying contract between a
creditor and principal debtor that either injures or enhances the risk of injury to the
guarantor. Futerfas Family Partners v. Griffin, 374 S.W.3d 473, 478 (Tex. App.—
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Dallas 2012, no pet.). “Because a material alteration is an affirmative defense, the
burden is on the surety to demonstrate that a material alteration occurred.” Frost
Nat’l Bank v. Burge, 29 S.W.3d 580, 588 (Tex. App.—Houston [14th Dist.] 2000,
no pet.). A guarantor may rely upon the terms and conditions of the guaranty being
strictly followed, and if the creditor and principal debtor vary in any material degree
from the terms of their contract, then a new contract has been formed and the
guarantor is not bound to it. Vastine v. Bank of Dallas, 808 S.W.2d 463, 464 (Tex.
1991).
Radovan and Criswell fail to identify any terms of the underlying contract that
were altered by the parties when Hall settled with Penta during the bankruptcy. On
the contrary, the loan agreement allowed Hall to “procure the release and discharge
of” mechanics’ lien claims if New-Cal Neva failed to do so. Furthermore, the
agreement specified that in “settling, compromising or discharging any claims for
lien, [Hall] shall not be required to inquire into the validity or amount of any such
claim.” Thus, Hall not only did not “vary in any material degree from the terms of
their contract” when it settled with Penta, it acted within the agreement’s terms,
which did not require Hall to “inquire into the validity” of Penta’s claim. Cf. Mann
v. NCNB Tex. Nat. Bank, 854 S.W.2d 664, 667 (Tex. App.—Dallas 1992, no writ)
(“Any alterations of the underlying loan were made in accordance with the terms of
the continuing guaranty.”). No evidence supported Radovan and Criswell’s defense
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of material alteration; we set aside the trial court’s findings and conclusions to the
contrary.
6. Bankruptcy discharge
The trial court also found that Radovan and Criswell were exculpated from
liability by the bankruptcy court and therefore cannot be held liable for the
indebtedness under their guaranty agreements.2 A discharge in bankruptcy does not
affect the liability of a guarantor. See, e.g., Austin Hardwoods, Inc. v. Vanden
Berghe, 917 S.W.2d 320, 324 (Tex. App.—El Paso 1995, writ denied); Chahadeh v.
Jacinto Med. Group, P.A., 519 S.W.3d 242, 248 (Tex. App.—Houston [1st Dist.]
2017, no pet.) (“Under the terms of the guaranty agreements, Chahadeh may be held
independently liable for the amount of the outstanding debts under the promissory
notes without regard to the outcome of the bankruptcy proceeding.”). Radovan and
Criswell acknowledge this rule but argue that the bankruptcy court’s order
specifically extinguished their liability under the guaranty agreements. And, indeed,
such a discharge is possible. See Geary v. Tex. Commerce Bank, 967 S.W.2d 836,
838 (Tex. 1998) (rejecting “argument that a bankruptcy reorganization plan cannot
discharge the debts of someone other than the bankrupt party to someone other than
the bankrupt party”). Hall responds, among other ways, that the bankruptcy court’s
2
We will assume for the sake of argument that this defense was not waived. But see TEX. R. CIV. P.
94 (“discharge in bankruptcy” is an affirmative defense).
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“limited exculpation” did not release Radovan and Criswell from their liability under
the guaranty agreements.
As described above, the bankruptcy court ordered “that there shall be no
personal liability for any individual who executes any documents . . . necessary to
effectuate the transfer of the Purchased Assets . . . to the Buyer, and any such
individual is exculpated from any personal liability that might otherwise arise on
account of the execution of such Plan Documents.” In other words, anyone who
executed documents transferring the hotel and the Fairwinds Estate to the buyer was
shielded from any liability arising from the execution of those documents.
Radovan and Criswell do not explain in their briefing how their liability under
the guaranties arose from the execution of plan documents in the bankruptcy court.
Of course, their liability under the guaranty agreements arose under the guaranty
agreements and the other loan documents. While the transfer of the Fairwinds Estate
to the buyer perhaps motivated Hall to pursue Radovan and Criswell on their
guaranties, as they indicated at trial, their liability under the guaranty agreements
cannot be said to have arisen on account of the transfer. The language in the
bankruptcy order makes this case unlike, for example, the release involved in
Republic Supply Co. v. Shoaf, 815 F.2d 1046, 1047 (5th Cir. 1987) (emphasis added),
where “the bankruptcy court confirmed a reorganization plan [ ] that released a
guaranty executed by the appellant, Dr. Joseph Shoaf, in favor of the creditor, now
plaintiff-appellee, Republic Supply Company[.]”
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Moreover, no “plan documents” were admitted at trial. Thus, there was no
evidence before the trial court about what liability was extinguished by the
bankruptcy court because the plan documents remained an unknown. Under
questioning from Hall, Radovan first said in a circular way that the plan documents
“were a group of documents that made up the plan documents,” but later admitted
he did not know how “plan documents” was defined in the bankruptcy court’s order.
We conclude that Radovan and Criswell failed to present any evidence their guaranty
agreements were released by the bankruptcy court.
7. Retained furniture, fixtures, and equipment
Finally, Radovan and Criswell argue Hall failed to carry its burden because it
admitted it had not sold some of the furniture, fixtures, and equipment it received in
the bankruptcy, and it did not deduct the value of those assets from Radovan and
Criswell’s indebtedness. Hall responds that they waived any right to complain about
how it treated the collateral when they agreed their obligations would not be
diminished by “any impairment of any collateral securing” the loan or by the “failure
of Lender to sell any collateral securing any or all of the Guaranteed Obligations in
a commercially reasonable manner or as otherwise required by law[.]”
Furthermore, under section five of the guaranties, Radovan and Criswell
agreed that Hall was not required to enforce its remedies against any collateral before
demanding payment from them:
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In the event of default in payment or performance of the Guaranteed
Obligations, or any part thereof, when such Guaranteed Obligations
become due, whether by its terms, by acceleration, or otherwise,
Guarantor shall promptly pay the amount due thereon to Lender without
notice or demand, of any kind or nature, in lawful money of the United
States of America or perform the obligations to be performed
hereunder, and it shall not be necessary for Lender in order to enforce
such payment and performance by Guarantor first, or
contemporaneously, to institute suit or exhaust remedies against
Borrower or others liable on the Guaranteed Obligations, or to enforce
any rights, remedies, powers, privileges or benefits of Lender against
any property covered by a lien created under the Mortgage or any other
security or collateral which shall ever have been given to secure the
Guaranteed Obligations.
The Supreme Court of Texas looked at similar guaranty-agreement language in Fed.
Deposit Ins. Corp. v. Coleman, 795 S.W.2d 706 (Tex. 1990). The agreements there
specified that “[t]he Creditor shall not be required to pursue any other remedies
before invoking the benefits of this guaranty, especially it shall not be required to
exhaust its remedies against endorsers, collateral and other security.” Id. at 707.
The court concluded that “the guaranties expressly relieved the creditor from seeking
to satisfy its debt from the collateral at all.” Id. at 710. The lender, under the
guaranties, had “the right to ignore the collateral and obtain a judgment against [the
guarantors] for the full amount of the debt, even if the collateral might have been
sold to satisfy part of that debt.” Id.
So, too, here: the guaranties relieved Hall from seeking to satisfy its debt from
the collateral. We therefore conclude that, “[i]f Texas law implies a duty to dispose
of all collateral before suing on a guaranty,” Radovan and Criswell “expressly
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waived [their] right[s] to insist on it.” See SEI Bus. Sys., Inc. v. Bank One Tex., N.A.,
803 S.W.2d 838, 840 (Tex. App.—Dallas 1991, no writ).
III. CONCLUSION
We sustain Hall’s first five appellate issues, reverse the trial court’s judgment,
and render judgment that Hall recover $8,610,279.02 plus post-judgment interest.
We remand to the trial court to determine post-judgment interest. Because we render
judgment for Hall, we do not reach its sixth issue regarding the admissibility of the
bankruptcy court order. See TEX. R. APP. P. 47.1.
191412f.p05 /Ken Molberg/
KEN MOLBERG
JUSTICE
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Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
HALL CA-NV, LLC, Appellant On Appeal from the 134th Judicial
District Court, Dallas County, Texas
No. 05-19-01412-CV V. Trial Court Cause No. DC-18-02395.
Opinion delivered by Justice
ROBERT RADOVAN AND Molberg. Justices Carlyle and Smith
WILLIAM CRISWELL, Appellees participating.
In accordance with this Court’s opinion of this date, the judgment of the trial
court is REVERSED and judgment is RENDERED that:
HALL CA-NV, LLC recover from appellees ROBERT RADOVAN
and WILLIAM CRISWELL actual damages of $8,610,279.02 plus
post-judgment interest.
We REMAND to the trial court for a calculation of post-judgment interest.
It is ORDERED that appellant HALL CA-NV, LLC recover its costs of this
appeal from appellees ROBERT RADOVAN and WILLIAM CRISWELL.
Judgment entered this 25th day of May 2022.
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