KOKB Medical Properties, LLC, Sullivan R. Bryant, and Finch Clinic, PLLC v. DTC Partners, LLC-Series I, a Series of Dallas Texas Capital Partners, LLC

AFFIRMED and Opinion Filed August 15, 2023
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-22-00403-CV
KOKB MEDICAL PROPERTIES, LLC, SULLIVAN R. BRYANT, AND
FINCH CLINIC, PLLC, Appellants
V.
DTC PARTNERS, LLC—SERIES I, A SERIES OF DALLAS TEXAS
CAPITAL PARTNERS, LLC, Appellee
On Appeal from the 160th Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-19-03360
MEMORANDUM OPINION
Before Justices Reichek, Nowell, and Garcia
Opinion by Justice Reichek
Following the foreclosure sale of property securing a promissory note, DTC
Partners, LLC—Series I, A Series of Dallas Texas Capital Partners, LLC brought a
deficiency action against KOKB Medical Properties, LLC and Sullivan R. Bryant.
DTC also alleged KOKB, Bryant, and Finch Clinic, PLLC fraudulently transferred
real property with intent to defraud DTC. The trial court granted summary judgment
for DTC on its claims and against KOKB and Bryant on counterclaims they brought
against DTC. KOKB, Bryant, and Finch Clinic challenge the trial court’s summary
judgment in five issues. We affirm.
BACKGROUND
On November 30, 2001, KOKB executed a promissory note in the amount of
$204,750 in favor of InterBay Funding, LLC to purchase nine separate parcels of
land. The note was secured by a deed of trust on the nine properties.
In 2006, KOKB refinanced the loan with InterBay. On February 17, 2006,
KOKB entered into a new promissory note in the amount of $263,250, and funds
from that note were used to pay off the first note. Bryant, KOKB’s sole managing
member, signed a guaranty and guaranteed repayment of the second note. The
second note was secured by a deed of trust granting a lien on two parcels of real
property in Dallas, 3534 N. Hampton Road and 3538 N. Hampton Road (“the
Hampton properties”). The Hampton properties were two of the nine parcels that
secured the first note. KOKB and Bryant would later contend the second note was
supposed to have been secured by all nine properties that had secured the first note.
In August 2006, InterBay assigned the second note and deed of trust to
Bayview Loan Servicing, LLC. Almost five years later, on June 28, 2011, KOKB
and Bryant entered into a stipulation agreement and a loan adjustment agreement
with Bayview regarding the second note. The stipulation agreement recited that the
loan was past due in an amount over $50,000. Bayview agreed to suspend
foreclosure proceedings if KOKB and Bryant complied with the terms of the
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stipulation agreement and executed the loan adjustment agreement. The agreements
modified the balance and the repayment terms of the note. No changes were made
to the deed of trust.
In April 2018, Bayview assigned the second note, which was in default, and
guaranty to DTC. The two Hampton properties securing the second note were
scheduled for foreclosure on July 3, 2018.
A few days before the scheduled foreclosure sale, KOKB and Bryant brought
suit in the 95th Judicial District Court of Dallas County against DTC to stop the
foreclosure. KOKB and Bryant admittedly stopped paying on the note years prior
to get Bayview’s attention over an issue with Bayview’s alleged failure to pay
property taxes. As alleged in that petition, in 2014, Bryant learned the second note
was secured by only two of the nine properties that secured the first note. KOKB
and Bryant alleged that “review of the refinancing closing documents revealed that
a second page of the property description was missing and did not get filed by
Bayview.” According to KOKB and Bryant, Bayview assured them it would work
to “restore a loan” secured by all nine parcels. KOKB and Bryant alleged they relied
on Bayview’s promises it would adjust the note to correct the problem with the
collateral. In addition to a claim for injunctive relief to stop the sale, KOKB and
Bryant asserted a breach of contract claim against DTC. They alleged Bayview and
InterBay breached the note by failing to review KOKB and Bryant’s request for
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reinstatement and payment of delinquent taxes. They argued DTC stepped into the
shoes of Bayview and InterBay.
DTC moved for summary judgment in the prior suit on grounds it was the
holder of the note and deed of trust and had authority to foreclose on the property.
Further, it was undisputed that KOKB and Bryant failed to make payments for years
and were in default. DTC argued the fact that, although the payment terms of the
note were modified in 2011 by agreement of the parties, the description of the
pledged collateral was not modified. On September 22, 2018, the 95th District Court
granted DTC’s motion and ordered that KOKB and Bryant take nothing on their
claims against DTC.
The Hampton properties were then scheduled for foreclosure on November 6,
2018. Thereafter KOKB filed for bankruptcy. DTC asked the bankruptcy court for
relief from the automatic stay as to the Hampton properties so it could proceed with
foreclosure. On January 3, 2019, the bankruptcy court granted DTC’s motion and
lifted the automatic stay with respect to the Hampton properties.
The two Hampton properties were sold at a foreclosure sale on March 5, 2019.
DTC purchased the properties for $250,000.
On March 7, 2019, DTC filed the instant suit against KOKB and Bryant,
alleging that after the proceeds of the sale were applied to KOKB’s balance,
$464,966.59 was still owed on the second note. DTC later amended its pleadings to
add defendants My Mail Center LC, John W. Dodd, and appellee Finch Clinic,
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PLLC. DTC added new claims involving the allegedly fraudulent transfer of real
property among these parties.
The fraudulent transfer claims involve the following facts. On May 1, 2017,
KOKB executed a deed of trust that gave “My Medical Center, LC” a security
interest in many of KOKB’s properties, including the two Hampton properties. That
deed of trust secured a $100,000 loan My Medical Center made to KOKB. Bryant
says he believed the second note had been written off at that point and he intended
to give My Medical Center a first priority lien for the properties. Apparently “My
Medical Center” is actually “My Mail Center.” Dodd, sole owner of My Mail and
Bryant’s long-time accountant, is listed as the trustee on the deed of trust between
KOKB and My Medical Center. Dodd admitted in his deposition that the name My
Medical Center was “inadvertently used” and was a mistake.
Almost two years later, on February 1, 2019, ahead of the foreclosure sale of
the Hampton properties scheduled for March 5, KOKB executed a General Warranty
Deed to My Mail. For “[c]ash and other good and valuable consideration,” KOKB
transferred seven Dallas properties to My Mail. The two Hampton properties were
not part of the transfer. KOKB later transferred a Hunt County property to My Mail.
There was another transfer of property while the deficiency suit was pending.
On September 14, 2020, My Mail transferred five properties to appellee Finch Clinic
in a Special Warranty Deed. Three of the properties were among those transferred
from KOKB to My Mail in February 2019. The other two were the Hampton
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properties. Finch Clinic’s only manager is Bryant. The Special Warranty Deed
indicates the consideration for the transfer was $20.00 and “other good and valuable
Consideration.”
DTC’s live pleading asserted claims for violations of the Texas Uniform
Fraudulent Transfer Act (“TUFTA”) based on KOKB’s conveyance of eight
properties to My Mail and based on My Mail’s conveyance of five properties to
Finch Clinic. DTC alleged the properties were transferred with intent to hinder,
delay, and defraud KOKB and Bryant’s creditors, including DTC. It also sought to
quiet its title to the two Hampton properties. DTC alleged its title to those properties
was superior to Finch Clinic’s claim to those properties under the Special Warranty
Deed. DTC also sought exemplary damages under a slander-of-title theory and an
injunction prohibiting the defendants from transferring the properties, entering the
Hampton properties, and advertising the properties for sale.1
KOKB and Bryant filed counterclaims against DTC for wrongful foreclosure,
breach of contract, conversion, and violations of the Texas Theft Liability Act. They
alleged InterBay refused to accept payments on the second note until the collateral
issue was resolved. InterBay told Bryant it would take care of the delinquent taxes
if he and KOKB would execute a new note and deed of trust with all nine properties
1
DTC’s live pleading added another defendant, Guel Family Builders, Inc. DTC alleged four
of the properties fraudulently transferred to My Mail/Dodd were later fraudulently transferred to
Guel. After Guel asserted a bona fide purchaser defense, DTC nonsuited its claims against Guel.
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as collateral. Bryant agreed and waited for InterBay to provide new documents.
Years passed, but InterBay had not drafted new documents and refused to accept
payments on the note. After the second note was assigned to Bayview, Bryant
informed Bayview of the situation and Bayview said the second note would be
written off.2 Thereafter, Bayview assigned the second note to DTC.
KOKB and Bryant alleged DTC had no legal authority to foreclose on the
Hampton properties because DTC had assumed a cancelled note, as Bayview told
Bryant the second note had been written off. They alleged DTC breached the
contract it allegedly assumed when DTC claimed the second note was in default and
foreclosed. KOKB and Bryant alleged they were ready and willing to perform the
second note, but Bayview refused to accept payment until the collateral mistake was
corrected. For the same reasons, KOKB and Bryant asserted DTC wrongfully
converted the Hampton properties used as collateral in the second note. Finally,
KOKB and Bryant alleged DTC’s wrongful foreclosure constituted a violation of
2
KOKB and Bryant’s Original Counterclaim mistakenly asserts that InterBay assigned the
second note to Bayview in 2009. The undisputed evidence shows InterBay assigned the second
note and deed of trust to Bayview in August 2006, just a few months after the original loan was
refinanced. Apparently because of confusion over the timing of that assignment, KOKB and
Bryant alleged in their Original Counterclaim that they brought the collateral issue to InterBay’s
attention and InterBay agreed to execute new documents and refused to accept payments for years.
Yet later in the pleading, KOKB and Bryant allege it was Bayview that refused to accept their
payments. This is consistent with their allegations in the prior suit.
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the Texas Theft Liability Act.3 See TEX. CIV. PRAC. & REM. CODE ANN. § 134.003(a)
(person who commits theft is liable for resulting damages).
DTC filed a motion for partial summary judgment. It asserted it was entitled
to summary judgment on all of KOKB and Bryant’s counterclaims on res judicata
grounds. DTC also asserted that the breach of contract claim was barred by
limitations. In addition, DTC sought summary judgment on its fraudulent transfer
claims. DTC argued the record conclusively established that KOKB and My Mail
violated TUFTA when they made the My Mail and Finch Clinic conveyances. DTC
asked the trial court to void the My Mail and Finch Clinic conveyances.
The trial court granted DTC’s motion for partial summary judgment. It
ordered that KOKB and Bryant take nothing on their counterclaims against DTC.
The trial court also voided the conveyances to My Mail and the Finch Clinic.
Thereafter, DTC filed a second motion for partial summary judgment. DTC
sought judgment as a matter of law against KOKB and Bryant for the deficiency on
the second note. It also moved for summary judgment on its quiet title claim. It
argued that My Mail’s representation of ownership in the September 14, 2020
3
KOKB and Bryant also filed a third-party petition against InterBay and Bayview, asserting
claims for breach of contract, fraud, negligent misrepresentation, breach of fiduciary duty, and
negligence. InterBay and Bayview moved for summary judgment on grounds the claims against
them were barred by the res judicata effect of the lawsuit in the 95th District Court, by the statute
of limitations, and by the economic-loss rule. The trial court granted InterBay and Bayview’s
motion for summary judgment. KOKB and Bryant do not challenge the summary judgment for
those parties.
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Special Warranty Deed and attempted conveyance to Finch Clinic clouded DTC’s
title to the Hampton properties, which DTC purchased in March 2019 at the
foreclosure sale. DTC claimed the evidence conclusively established that the cloud
placed on DTC’s title by the Special Warranty Deed should be cleared.
The trial court granted DTC’s second partial motion for summary judgment.
It awarded judgment for DTC against KOKB and Bryant, jointly and severally, on
the deficiency in the amount of $771,913.76, plus attorney’s fees, post-judgment
interest, and court costs. It also declared the September 14, 2020 Special Warranty
Deed between My Mail and Finch Clinic void to the extent it attempted to convey
any interest in the two Hampton properties. DTC then nonsuited its claim for
exemplary damages.
In this appeal, KOKB, Bryant, and Finch Clinic contend the trial court erred
in granting both partial motions for summary judgment. First, KOKB and Bryant
contend their counterclaims were not barred by res judicata or the statute of
limitations. Appellants next argue allege that DTC’s TUFTA claims fail. Finally,
KOKB and Bryant assert the trial court erred in granting the second partial motion
for summary judgment because the second note was not a valid, enforceable contract
and because DTC failed to provide a proper accounting for the deficiency.
FIRST SUMMARY JUDGMENT ORDER
KOKB and Bryant’s Counterclaims
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In their first issue, KOKB and Bryant contend the trial court erred in finding
that their counterclaims against DTC were barred by res judicata. Res judicata
requires proof of three elements: (1) a prior final judgment on the merits by a court
of competent jurisdiction, (2) identity of parties, and (3) a second action based on
the same claims as were raised or could have been raised in the first action. Rosetta
Res. Operating, LP v. Martin, 645 S.W.3d 212, 225 (Tex. 2022). KOKB and Bryant
challenge the third element. They argue their counterclaims could not have been
brought in their prior lawsuit against DTC in the 95th District Court because the
claims are based on DTC’s alleged wrongful foreclosure and the foreclosure sale
took place after the first judgment.
We review the granting of a motion for summary judgment de novo.
Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 248 (Tex. 2013). A party moving
for a traditional summary judgment has the burden of proving that there is no
genuine issue of material fact and that the movant is entitled to judgment as a matter
of law. TEX. R. CIV. P. 166a(c).
Res judicata is the generic term for a group of related concepts concerning the
conclusive effects given final judgments. Barr v. Resolution Trust Corp., 837
S.W.2d 627, 628 (Tex. 1992). Texas courts follow the transactional approach to res
judicata. Id. at 631. Under this approach, the doctrine bars lawsuits that arise out of
the same subject matter as a prior suit when, with the use of diligence, the subject
matter could have been litigated in the prior suit. Eagle Oil & Gas Co. v. TRO-X,
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L.P., 619 S.W.3d 699, 705 (Tex. 2021); Funmilayo v. Velandera Energy Partners
LLC, No. 05-21-01015-CV, 2023 WL 2472891, at *4 (Tex. App.—Dallas Mar. 13,
2023, pet. denied) (mem. op.). In determining what constitutes the same subject
matter, we examine the “factual basis of the claim or claims in the prior litigation”
and analyze “the factual matters that make up the gist of the complaint, without
regard to the form of action.” Funmilayo, 2023 WL 2472891, at *4 (quoting Barr,
837 S.W.2d at 630). The doctrine is necessary to bring an end to litigation, prevent
vexatious litigation, maintain the stability of court decisions, promote judicial
economy, and prevent double recovery. Eagle Oil & Gas, 619 S.W.3d at 705; Barr,
837 S.W.2d at 630.
In its first motion for partial summary judgment, DTC argued KOKB and
Bryant’s counterclaims for wrongful foreclosure, breach of contract, conversion, and
violations of the Texas Theft Liability Act were barred by the res judicata effect of
the judgment in the suit in the 95th District Court in Dallas County.4 That prior suit
was brought against DTC by KOKB and Bryant in June 2018, days before the
scheduled foreclosure sale of the Hampton properties. KOKB and Bryant sought a
temporary restraining order prohibiting DTC from going forward with the sale.
4
In its appellate brief, DTC argues the bankruptcy court’s decision to lift the stay as to the Hampton
properties also has a preclusive effect on the counterclaims. DTC contends the bankruptcy court determined
the validity of the second note when it lifted the stay to allow foreclosure. DTC did not, however, move
for summary judgment on that ground. Although DTC mentioned the bankruptcy proceeding in its first
summary judgment motion and attached some bankruptcy documents to the motion, DTC’s res judicata
argument was based only on the judgment in the 95th District Court.
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They alleged they had relied on Bayview’s promises to adjust the note to correct the
problem with the collateral. KOKB and Bryant alleged that Bayview and InterBay
breached the second note by failing to review KOKB and Bryant’s request for
reinstatement and payment of delinquent taxes. They argued DTC stepped into the
shoes of Bayview and InterBay as the breaching party.
In the prior suit, DTC moved for summary judgment on grounds it was the
holder of the note and deed of trust and had authority to foreclose on the property.
It was undisputed that KOKB and Bryant failed to make payments and were in
default. DTC further argued that any modification to pledge more collateral for the
second note was required to be in writing and there was none. Instead, the evidence
showed that KOKB, Bryant, and Bayview agreed to modify the payment terms of
the second note in 2011, and the description of the pledged collateral was not
modified. On September 22, 2018, the 95th District Court granted DTC’s motion
and ordered that KOKB and Bryant take nothing on their claims against DTC.
In the instant suit, KOKB and Bryant’s counterclaims for wrongful
foreclosure, breach of contract, conversion, and violations of the Texas Theft
Liability Act are all based on the premise that there had been a mistake in which
properties were collateral for the second note and Bayview refused to accept
payment on the note because it was going to revise the loan documents to correct the
issue. This is the same set of facts on which KOKB and Bryant sought to avoid
foreclosure in the first suit. The trial court in the first suit, in granting summary
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judgment for DTC, already determined these issues adversely to KOKB and Bryant.
Under the transactional approach, KOKB and Bryant’s claims in the prior lawsuit
and in this case arise from the same subject matter for purposes of res judicata. See
Ohio Gravy Biscuit, Inc. v. NRZ Pass-Through Trust X, No. 05-20-00881-CV, 2022
WL 1164660, at *6 (Tex. App.—Dallas Apr. 20, 2022, no pet.) (mem. op.) (quiet
title counterclaim was barred by res judicata because it arose out of same transaction
in prior suit where deed of trust was at issue); McMillan v. Tally Two Inv. Grp., LLC,
No. 03-20-00452-CV, 2022 WL 319854, at *2 (Tex. App.—Austin Feb. 3, 2022,
pet. ref’d) (mem. op.) (issue of validity of warranty deed had been finally adjudicated
and res judicata barred further attempts to invalidate deed). We are not persuaded by
KOKB and Bryant’s argument that res judicata does not apply because they could
not have brought a wrongful foreclosure claim prior to foreclosure. The subject
matter upon which their wrongful foreclosure claim and other claims are premised
was previously litigated in the 95th District Court. To allow KOKB and Bryant to
relitigate the issue of the validity of the second note and deed of trust would run
counter to the principles behind the doctrine of res judicata. We conclude DTC was
entitled to summary judgment on the counterclaims under the doctrine of res
judicata. We overrule KOKB and Bryant’s first issue.
In their second issue, KOKB and Bryant contend the trial court erred in
granting summary judgment on limitations grounds. Because we have concluded
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that res judicata barred KOKB and Bryant’s counterclaims, we need not address this
issue. See TEX. R. APP. P. 47.1.
Fraudulent Conveyance/TUFTA Claims
In their third issue, KOKB and Bryant contend the trial court erred in granting
summary judgment for DTC on its claim that KOKB’s transfer of properties to My
Mail violated TUFTA. KOKB and Bryant first argue that TUFTA did not apply
because the transferred properties were not assets as defined by TUFTA.
TUFTA’s purpose is to prevent debtors from prejudicing creditors by
improperly moving assets beyond their reach. Janvey v. Golf Channel, Inc., 487
S.W.3d 560, 566 (Tex. 2016). TUFTA provides that a transfer made by a debtor is
fraudulent as to a creditor if the debtor made the transfer with actual intent to hinder,
delay, or defraud any creditor of the debtor. TEX. BUS. & COM. CODE ANN. §
24.005(a). “Transfer” means every mode of disposing of or parting with an asset or
interest in an asset. Id. § 24.002(12). “Asset” means property of a debtor, but does
not include property to the extent it is encumbered by a valid lien. Id. § 24.002(2).
The value of property in excess of a lien encumbering it is an “asset” under TUFTA.
See Telephone Equip. Network, Inc. v. TA/Westchase Place, Ltd., 80 S.W.3d 601,
610 n.6 (Tex. App.—Houston [1st Dist.] 2002, no pet.).
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In their opening brief, KOKB and Bryant asserted that the properties at issue
were not assets under TUFTA because they were encumbered by a valid lien. They
refer to the May 1, 2017 deed of trust executed in favor of “My Medical Center.”
In their reply brief, KOKB and Bryant acknowledge that any equity in the property
above the amount of the lien would be an asset under TUFTA. They also
acknowledge that the properties’ equity exceeds the amount of the $100,000 lien.
Although the parties disagree about the amount of equity, the properties meet the
definition of “asset” and TUFTA applies.
KOKB and Bryant’s other arguments under this issue involve evidence of the
intent to defraud. In determining actual intent under § 24.005(a)(1), TUFTA
provides a list of eleven, nonexclusive indicia of fraudulent intent. Janvey, 487
S.W.3d at 566; see TEX. BUS. & COM. CODE ANN. § 24.005(b). Evidence of a single
“badge of fraud” does not conclusively demonstrate intent, but a confluence of
several presents a strong case of fraud. Janvey, 487 S.W.3d at 566–67.
KOKB and Bryant say DTC relied on just three of the eleven factors in §
24.005(b) to show fraudulent intent: (1) the transfer was to an insider (My Mail), (2)
the value of the consideration received by KOKB was less than reasonable value of
the assets transferred, and (3) KOKB was insolvent or became insolvent shortly after
the transfer was made. See TEX. BUS. & COM. CODE ANN. § 24.005(b) (1), (8) & (9).
KOKB challenges the evidence to support these three factors. It argues My Mail
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was not an insider of KOKB, the properties were transferred for a reasonably
equivalent value, and KOKB and Bryant were not insolvent at the time of transfer.
In fact, DTC argued in its summary judgment motion that seven of the factors
in § 24.005(b) showed intent to defraud. In addition to the three already mentioned,
DTC asserted that (1) KOKB and Bryant retained control of the transferred
properties after the transfer; (2) they were aware of the imminent deficiency suit at
the time of the transfers, (3) the My Mail conveyances were for substantially all of
KOKB’s assets, and (4) KOKB transferred all of its property to My Mail, an alleged
lienor, who transferred much of the properties to Finch Clinic, an insider. See id. §
24.005(b) (2), (4), (5) & (11). By failing to challenge these factors upon which DTC
relied to show it was entitled to summary judgment, KOKB and Bryant have failed
to negate all possible grounds for summary judgment. See Jarvis v. Rocanville
Corp., 298 S.W.3d 305, 313 (Tex. App.—Dallas 2009, pet. denied). DTC was not
required to produce evidence of all eleven factors to show intent. The trial court
could have determined that the four unchallenged factors alone supported a
conclusion that KOKB acted with intent to defraud. See Tidwell v. Roberson, No.
14-16-00170-CV, 2017 WL 3612043, at *3–4 (Tex. App.—Houston [14th Dist.]
Aug. 22, 2017, pet. denied) (mem. op.) (upholding summary judgment on fraudulent
transfer claim where plaintiffs presented evidence of three badges of fraud). By
failing to challenge all factors relevant in this case to the intent to defraud, KOKB
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and Bryant cannot demonstrate that summary judgment on DTC’s TUFTA claim
was improper.
Further, the evidence conclusively established that My Mail was an insider,
another “badge of fraud.” KOKB and Bryant argue Dodd, My Mail’s sole owner,
does not meet the TUFTA definition of an insider or otherwise qualify as one. If the
debtor is a corporation, the term “insider” includes: the director of the debtor, an
officer of the debtor, a person in control of the debtor, a partnership in which the
debtor is a general partner, a general partner in a partnership in which the debtor is
a general partner, or a relative of a general partner, director, officer, or person in
control of the debtor. TEX. BUS. & COM. CODE ANN. § 24.002(7)(B). The TUFTA
definition of “insider” does not limit an insider to the listed descriptions. Putman,
M.D.P.A. Money Purchase Pension Plan v. Stephenson, 805 S.W.2d 16, 18–19 (Tex.
App.—Dallas 1991, no writ). Here, Dodd was Bryant’s accountant of more than
forty years. Dodd stated in his deposition that he and Bryant had been friends and
business associates since the 1970s. DTC’s evidence showed that Dodd allowed
Bryant to control the properties after the transfer. Further, after KOKB transferred
property to My Mail, My Mail conveyed some of them back to Bryant via the Finch
Clinic for just $20. The evidence establishes Dodd’s insider status and that status,
coupled with the badges of fraud KOKB and Bryant do not challenge, is more than
sufficient to conclusively establish actual intent to defraud. We overrule the third
issue.
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SECOND SUMMARY JUDGMENT ORDER
KOKB and Bryant’s remaining issues involve the summary judgment for
DTC on its deficiency claim. In their fourth issue, KOKB and Bryant argue the
second note was not a valid, enforceable contract. They argue that a mutual mistake
about the collateral for the note prevented the meeting of the minds necessary for
contract formation. Alternatively, they argue that if the contract was valid, there was
a prior material breach when Bayview refused to accept their payments.
DTC contends KOKB and Bryant waived these arguments. DTC argues
KOKB and Bryant failed to plead mutual mistake or prior material breach as
affirmative defenses and also failed to argue prior material breach in their response
to DTC’s summary judgment motion. DTC is correct that KOKB and Bryant did
not plead the affirmative defense of prior material breach or argue it in their
summary judgment response. Although KOKB and Bryant assert otherwise, they
have not included any record references in support of their assertion. An affirmative
defense not raised in a responsive pleading is waived, and issues that are not
expressly presented to the trial court by written motion, answer, or response will not
serve as grounds for reversal of a summary judgment on appeal. Roark v. Stallworth
Oil & Gas, Inc., 813 S.W.2d 492, 495 (Tex. 1991); Parks v. Developers Sur. &
Indem. Co., 302 S.W.3d 920, 924 (Tex. App.—Dallas 2010, no pet.). The issue of
prior material breach has been waived.
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Although KOKB and Bryant also did not raise mutual mistake in their
answers, it appears the defense was tried by consent. See Purser v. Coralli, No. 05-
15-00359-CV, 2016 WL 6087675, at *3 (Tex. App.—Dallas Oct. 18, 2016, no pet.)
(mem. op.) (in summary judgment context, affirmative defense is tried by consent if
nonmovant expressly raises defense in its response, and movant responds to defense
on merits without objecting). KOKB and Bryant argued mutual mistake in their
summary judgment response. DTC did not argue waiver in its reply. It instead
briefly addressed the issue in a footnote.
In their summary judgment response, KOKB and Bryant argued both no
meeting of the minds and mutual mistake in the same section. In the footnote in its
reply, DTC argued the trial court should not consider a “meeting-of-the-minds
argument” because it was “another means to make the same [tired] argument.” DTC
went on to argue, “Without ambiguity from the Note’s terms, and no evidence
supporting a mutual mistake, KOKB Defendants’ allegation that the Note was
cancelled is irrelevant.” It is possible the trial court interpreted DTC’s argument to
be that the issue of mutual mistake had been previously litigated and that it agreed
with that position. Because DTC’s arguments on mutual mistake were not fleshed
out in the trial court, however, out of an abundance of caution we will address KOKB
and Bryant’s argument that fact issues exist regarding mutual mistake. We are aware
that consideration of this issue is inconsistent with the determination the
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counterclaims were barred by res judicata because KOKB and Bryant had the
opportunity to litigate the allegedly mistaken collateral in the prior suit.
We further note that KOKB and Bryant do not contend the Hampton
properties were not supposed to be collateral for the second note. Rather, they seek
to avoid the note because those properties—plus additional properties—were to be
collateral for the note. It is incongruous for KOKB and Bryant to be seeking to avoid
an agreement due to an alleged mistake that they benefitted from.
A mutual mistake of fact occurs when the parties to an agreement have a
common intention but the written contract does not reflect the intention of the parties
due to a mutual mistake. Smith-Gilbard v. Perry, 332 S.W.3d 709, 713 (Tex. App.—
Dallas 2011, no pet.). When a party alleges that an agreement does not express the
real intentions of the parties by reason of mutual mistake, extrinsic evidence is
admissible to show the real agreement. Id. To prove a mutual mistake, the evidence
must show that both parties were acting under the same misunderstanding of the
same material fact. Id. The party seeking relief from a mutual mistake must prove
what the true agreement was and also that the provisions of the writing that differ
from the true agreement made were placed in the instrument by mutual mistake.
Estes v. Republic Nat’l Bank of Dallas, 462 S.W.2d 273, 275 (Tex. 1970); Smith-
Gilbard, 332 S.W.3d at 714. Claims that both parties made a mistake regarding the
terms in a written agreement are often difficult to prove because a party who signs a
document is presumed to know its contents. Fort Apache Energy, Inc. v. Houston
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Energy, L.P., No. 09-14-00007-CV, 2015 WL 5042133, at *7 (Tex. App.—
Beaumont Aug. 27, 2015, no pet.) (mem. op.) (citing Toler v. Sanders, 371 S.W.3d
477, 482 (Tex. App.—Houston [1st Dist.] 2012, no pet.)).
KOKB and Bryant contend that issues of material fact exist about whether the
second note is enforceable due to mutual mistake. They argue that they and InterBay
intended that all nine properties be included as collateral on the second note. KOKB
and Bryant’s briefing of this issue does not identify what source provides this
evidence or include any references to the record for this argument. See TEX. R. APP.
P. 38.1(i).
Presumably they rely on Bryant’s affidavit to show mutual mistake. In his
affidavit, Bryant states that when he signed the second note, he believed it covered
all nine properties like the first note. On August 29, 2006, Interbay assigned the note
to Bayview. Bryant called Bayview at an unspecified date to explain the collateral
defect, and Bayview acknowledged an error in the closing documents. Bayview
refused to accept further payments until the issue was resolved with the collateral.
Months and years passed while Bryant waited for Bayview to present new
documents. Bryant called Bayview repeatedly. Bayview eventually informed him
the second note was defective and would be written off. However, Bayview later
assigned the second note to DTC.
Bryant’s affidavit does not raise a genuine fact issue about whether he/KOKB
and InterBay were mutually mistaken about the collateral for the second note. The
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original parties to the second note were KOKB and InterBay. KOKB has not
presented any evidence that InterBay was mistaken about the collateral for the
second note. Further, to the extent Bayview’s alleged acknowledgement of an error
in the closing documents is relevant to the issue of a mutual mistake between KOKB
and InterBay, Bayview’s undisputed actions counter any evidence there was a
mutual mistake. Bayview and KOKB modified the loan documents in 2011, five
years after KOKB executed the second note. No changes were made to the
collateral, only the repayment terms. Bayview never modified the loan documents
in response to Bryant’s communications with them. And it never wrote off the note.
Bayview instead assigned the note and deed of trust to DTC. Bayview’s assignment
of the deed of trust lists only the Hampton properties.
In addition, any invalidity of the second note does not impact Bryant’s
guaranty. The guaranty provides that Bryant’s obligations “shall be unconditional
irrespective of the genuineness, validity, regularity or enforceability of the Note”
and the deed of trust. We overrule KOKB and Bryant’s fourth issue.
In their fifth issue, KOKB and Bryant contend the trial court erred in granting
summary judgment because DTC did not provide a proper accounting. Without
citation to authority, they argue DTC did not provide the trial court with enough
information to determine the deficiency owed on the second note.
The trial court awarded DTC actual damages of $771,913.76, which was
comprised of: (1) $239,767.36 in principal, (2) $108,576.71 in accumulated interest,
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(3) $87,873.10 in accumulated default interest, (4) $112,629.26 for a negative
escrow balance, (5) $58,896.70 in accumulated interest on escrow, (6) $164,330.11
in corporate advances, and (7) $374 in NSF fees. KOKB and Bryant argue DTC
provided only a general “six-point bullet list” to support these numbers.
Where a validly executed note goes into default and there is a foreclosure sale
of the security for the note, the owner of the note must prove the following elements
to be entitled to a judgment for any deficiency remaining on the note: (1) the amount
due on the note at the time of foreclosure; (2) that proper notice of acceleration has
been given; (3) that a valid foreclosure sale was made; and (4) that it has given credit
to the obligor for the amount received at the foreclosure sale and any other legitimate
credit. Thompson v. Chrysler First Bus. Credit Corp., 840 S.W.2d 25, 28 (Tex.
App.—Dallas 1992, no writ). Courts do not usually require the movant to file
detailed proof reflecting the calculations of the balance due on a note in order to
support a motion for summary judgment. Obasi v. Univ. of Okla. Health Sci. Ctr.,
No. 04-04-00016-CV, 2004 WL 2418009, at *1 (Tex. App.—San Antonio Oct. 27,
2004, pet. denied) (mem. op.).
Because DTC was not required to file detailed proof of the calculations
reflecting the balance due on the note, this issue is without merit. See Cha v. Branch
Banking & Trust Co., No. 05-14-00926-CV, 2015 WL 5013700, at *4 (Tex. App.—
Dallas Aug. 25, 2015, pet. denied) (mem. op.) (uncontroverted affidavit made on
personal knowledge of bank officer that identifies note and guaranty and recites
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principal and interest due is sufficient to support summary judgment). And contrary
to KOKB and Bryant’s assertion that DTC provided only a short bullet-point
summary of the amounts due, DTC’s summary judgment evidence included a
thirteen-page loan history ledger and a loan history summary authenticated by a
business records affidavit. The ledger dates back to the inception of the loan in
March 2006, before DTC acquired the note, and has columns for the principal,
escrow, and corporate advances which correspond to the amounts in the judgment.
The loan history summary contains all the figures awarded to DTC. KOKB and
Bryant submitted no evidence to contradict DTC’s proof of the amount of the
deficiency. We overrule the fifth issue.
We affirm the trial court’s summary judgment orders.
/Amanda L. Reichek/
AMANDA L. REICHEK
JUSTICE
220403F.P05
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
KOKB MEDICAL PROPERTIES, On Appeal from the 160th Judicial
LLC, SULLIVAN R. BRYANT, District Court, Dallas County, Texas
AND FINCH CLINIC, PLLC, Trial Court Cause No. DC-19-03360.
Appellants Opinion delivered by Justice
Reichek. Justices Nowell and Garcia
No. 05-22-00403-CV V. participating.
DTC PARTNERS, LLC-SERIES I,
A SERIES OF DALLAS TEXAS
CAPITAL PARTNERS, LLC,
Appellee
In accordance with this Court’s opinion of this date, the judgment of the trial
court is AFFIRMED.
It is ORDERED that appellee DTC PARTNERS, LLC-SERIES I, A SERIES
OF DALLAS TEXAS CAPITAL PARTNERS, LLC recover its costs of this appeal
from appellants KOKB MEDICAL PROPERTIES, LLC, SULLIVAN R.
BRYANT, AND FINCH CLINIC, PLLC.
Judgment entered this 15th day of August, 2023.
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