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Great Northern Energy, Inc. v. Circle Ridge Production, Inc.

Court of Appeals of Texas, Sixth District, Texarkana

March 22, 2017

GREAT NORTHERN ENERGY, INC., Appellant
v.
CIRCLE RIDGE PRODUCTION, INC., Appellee

          Submitted: November 21, 2016

         On Appeal from the 71st District Court Harrison County, Texas Trial Court No. 14-0460

          Before Morriss, C.J., Moseley and Burgess, JJ.

          OPINION

          Ralph K. Burgess Justice.

         This case involves a complicated dispute between Circle Ridge Production, Inc. (Circle Ridge), and Kevin Stephens against Great Northern Energy, Inc. (Great Northern), arising out of the sale and foreclosure of certain oil and gas interests in Harrison County. We affirm the trial court's judgment in part and reverse in part.

         I. Introduction

         A. Summary of the Dispute

         Briefly, Circle Ridge and Stephens sold certain oil and gas leases referred to by the parties as the O'Benco leases[1] to Great Northern in exchange for a $700, 000.00 promissory note, a $180, 000.00 cash payment to Circle Ridge, and a $20, 000.00 cash payment to Stephens. The promissory note was secured by a deed of trust, listing Dean A. Searle as trustee and both Circle Ridge and Stephens as the "beneficiary [sic]." After the sale, Stephens agreed with Great Northern to sell his undivided interests in the O'Benco leases to Great Northern in consideration for receiving stock in Rangeford Resources. However, the Rangeford Resources agreement never materialized.

         Subsequently, Great Northern defaulted on the promissory note, and Circle Ridge instituted foreclosure of the O'Benco leases against Great Northern. Great Northern's interests in the O'Benco leases were sold at public auction, and Circle Ridge acquired all of Great Northern's interests in the O'Benco leases by virtue of its winning bid. However, Great Northern continued its physical possession of the wells included in the O'Benco leases despite the foreclosure. Great Northern took the position that because Stephens had assigned his interests in the O'Benco leases to it as part of the Rangeford Resources agreement, and because the deed of trust listed both Circle Ridge and Stephens as the "beneficiary [sic], " Circle Ridge could not institute foreclosure by itself. Circle Ridge and Stephens asserted that Stephens never assigned his interests in the O'Benco leases to Great Northern because the Rangeford Resources agreement was never completed.

         Both parties filed suit, and the two suits were ultimately consolidated in the 71st Judicial District Court of Harrison County. The case proceeded to trial on Circle Ridge's claims for trespass to try title and breach of contract against Great Northern as well as Great Northern's claims against Circle Ridge and Stephens for breach of contract and breach of the duty of good faith and fair dealing and a competing claim of trespass to try title. The trial court granted a directed verdict in favor of Stephens on Great Northern's breach of contract claim and granted both Stephens and Circle Ridge directed verdicts on Great Northern's breach of the duty of good faith and fair dealing claims. The trial court also granted a directed verdict in favor of Circle Ridge on its own breach of contract claim against Great Northern.

         The case then proceeded to trial before the jury and Great Northern's wrongful foreclosure claim. The jury found in favor of Circle Ridge and against Great Northern.[2] Pursuant to the jury's verdict, and the trial court's directed verdicts, the trial court entered judgment quieting title to the oil and gas interests in Circle Ridge and awarding it $637, 114.15 in damages for breach of contract against Great Northern, together with attorney's fees and court costs. Great Northern filed this appeal.

         B. Issues on Appeal

         On appeal, Great Northern argues that the trial court erred in (1) excluding evidence of an alleged assignment of Stephens' interest in the promissory note, (2) in granting the above-mentioned directed verdicts against Great Northern in favor of Circle Ridge, (3) in failing to grant a directed verdict in favor of Great Northern on its wrongful foreclosure claim against Circle Ridge, (4) in awarding $637, 114.15 to Circle Ridge for breach of the promissory note, (5) in quieting title in favor of Circle Ridge, (6) in permitting opposing counsel to make certain comments during voir dire and closing argument, (7) in submitting the wrongful foreclosure questions to the jury, (8) in failing to grant its motions for mistrial, (9) in denying motions for new trial and judgment notwithstanding the verdict, and (10) in awarding $150, 873.37 in attorney's fees.

         C. Resolution of Issues on Appeal

         We affirm, in part, the trial court's judgment because we conclude that (1) the trial court did not abuse its discretion in making any of its evidentiary rulings related to the alleged assignment, (2) Great Northern did not preserve evidentiary challenges unrelated to the alleged assignment, (3) the motion for mistrial based on the trial court's evidentiary rulings was properly overruled, (4) Great Northern did not properly brief many of its challenges to the trial court's directed verdict ruling, (5) the properly briefed challenges to the trial court's directed verdict rulings are without merit, (6) the trial court's damage award was based on a stipulation by the parties, (7) the trial court properly quieted title in favor of Circle Ridge, (8) Great Northern failed to preserve complaints about (a) comments made during voir dire and closing argument, (b) challenges to the submitted jury charge, and (c) its appellate argument related to the trial court's denial of its motion for mistrial made during voir dire, and (9) the motions for new trial and judgment notwithstanding the verdict were properly denied. However, because attorney's fees were not properly segregated, we reverse the award of attorney's fees and remand the matter to the trial court for further proceedings consistent with this opinion.

         II. Factual Background and Procedural History

         Billy Joe Briscoe and Doug Friedel are the only two shareholders of Circle Ridge. On May 17, 2012, in exchange for $10, 000.00, O'Benco III, LP, assigned its decimal working interests and decimal revenue interests in several oil and gas leases located in Harrison County, Texas, which the parties in this case collectively refer to as the O'Benco leases, [3] to Circle Ridge and Stephens.

         A. Circle Ridge and Stephens Sell Their Interests in the O'Benco Leases to Great

         Northern

         Shortly after Circle Ridge and Stephens began production on wells located in the O'Benco leases, they received a call from Great Northern's President, Joe Loftis, who expressed an interest in acquiring their decimal working and revenue interests in the O'Benco leases. As consideration for Great Northern's execution and delivery of a $700, 000.00 promissory note, a $180, 000.00 cash payment to Circle Ridge, and a $20, 000.00 cash payment to Stephens, Circle Ridge and Stephens assigned to Great Northern the interests they had acquired in the O'Benco leases, subject to certain reservations not relevant to the main issues in this case.

         The assignment and bill of sale was executed by Circle Ridge and Stephens on September 11, 2012.[4] It recited the promissory note as consideration and further stated,

[I]t is expressly agreed that the Assignors herein expressly reserve for themselves, their successors and assigns, the Vendor's Lien, as well as the superior title in and to the above described property, premises and improvements, against the above described property, premises and improvements until the above described Note and all interest thereon has been fully paid according to the face, tenor, effect and reading thereof, when this Deed shall become absolute, and to additionally secure Assignors in the payment of the Note, the Grantees have executed and delivered a Deed of Trust of even date herewith conveying the herein described property to Dean A. Searle, Trustee.

         The promissory note was also executed on September 11, 2012, by Abercrombie. It provided that Great Northern would pay Circle Ridge and Stephens seventeen monthly installments of $38, 000.00, plus an eighteenth installment of the remaining balance, beginning December 1, 2012, with each installment due on or before the first day of every month. The note also warned that a default in payment by Great Northern could result in the acceleration of the debt. The promissory note was secured by a document titled "DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF PRODUCTION, AND FINANCING STATEMENT OF OIL AND GAS PROPERTIES (INCLUDING AFTER ACQUIRED TITLE), " which we simply refer to as the deed of trust.

         The deed of trust listed Dean A. Searle as the Trustee, and both "Circle Ridge Production, Inc. and Kevin Stephens" as the "Beneficiary [sic], " a fact which is critical to understanding the parties' arguments. The deed of trust, which also stated that Great Northern's default could result in the acceleration of the debt, provided, "Beneficiary shall have the right to assign all or a portion of its interest in this Deed of Trust to any subsequent holder of any portion of the Obligation." The deed of trust further specified that, in the event of default,

Beneficiary may request Trustee to proceed with foreclosure. In that event Trustee is expressly authorized and empowered, and it shall be his duty, on request by Beneficiary, and to the extent permitted by applicable Law, to sell all or any part of the Mortgaged Property at one or more sales, as an entirety or in parcels, at the place or places and otherwise in the manner and on such notice as may be required by applicable Law, or in the absence of any requirement, as Trustee and/or Beneficiary may deem appropriate, and to make conveyance(s) to the purchaser or purchasers at the sale. Any sale of any part of the Mortgaged Property shall be made to the highest bidder or bidders for cash, at the courthouse door of, or at such other place as may be required or permitted by applicable Law in the county (or judicial district) in the state where the Lands included within the Mortgaged Property to be sold is located.[5]

         It is undisputed that Great Northern did not pay the promissory note as required and that its interests in the O'Benco leases were foreclosed upon.

         B. The Rangeford Resources/Rojo Burro Transaction

         Prior to the foreclosure, however, Stephens and Great Northern began investigating other business prospects involving the O'Benco leases. Great Northern proposed to include the O'Benco leases "in a package to be resold" to Rangeford Resources. In the fall of 2012, Great Northern discussed with Stephens the possibility of his participation in the sale of the O'Benco leases to Rangeford Resources. Briscoe testified that Stephens approached him to see if Circle Ridge would be willing to participate in the deal, but Circle Ridge declined. According to Stephens, he authorized his brother, Mike Stephens to look into the Rangeford Resources transaction.

         As a result of negotiation with Great Northern, and in anticipation of Rangeford Resources' ultimate acquisition of the O'Benco leases, Stephens agreed to sell his undivided interest in the O'Benco leases to Great Northern in consideration for, among other things, Rangeford Resources stock. However, the Rangeford Resources transaction never materialized. At trial, the court excluded evidence of this transaction, including alleged assignments of interest in the O'Benco leases from Stephens to Great Northern arising out of the Rangeford Resources/Rojo Burro Transaction.

         C. Great Northern's Interests Are Foreclosed After it Fails to Pay the Promissory Note

         Great Northern failed to pay Circle Ridge and Stephens in a timely manner pursuant to the terms of the promissory note. According to Briscoe, Circle Ridge and Stevens gave Great Northern additional time to pay on two or three occasions, but eventually decided to proceed with foreclosure. Loftis testified that Great Northern had a good relationship with Stephens, who did not make a personal demand for payment on the promissory note after Great Northern failed to make timely payments. Yet, both Briscoe and Stephens testified that they each gave Searle permission to foreclose on Great Northern's interest in the O'Benco leases.

         On August 2, 2013, Great Northern's attorney wrote to Searle proposing a solution to avoid the trustee's sale. The proposal stated that Great Northern would, among other things, pay $38, 000.00 into Searle's trust account for Circle Ridge's benefit by August 5, 2013, and would pay all sums due and owing to Circle Ridge under the note by not later than September 15, 2013. On August 23, 2013, Searle responded by indicating that he would provide "a payoff statement for the Circle Ridge portion of the . . . note."

         On October 11, 2013, Searle wrote to Great Northern "in connection with" Circle Ridge's "one-half (1/2) interest in a Promissory Note, " advised Great Northern that the entire balance of the promissory note was accelerated, and provided notice of foreclosure of the entire interest. The letter informed Great Northern that it would be obligated to repay the indebtedness if the proceeds of the foreclosure sale were insufficient to pay the indebtedness and afforded it an opportunity to cure the delinquency. Although the letter did not make reference to Stephens or his portion of the indebtedness, it clarified that Searle would sell the property as trustee under the deed of trust in accordance with the terms of the deed of trust. The letter also informed Great Northern that it had the right to file suit if it believed that it was not in default, but Great Northern did not attempt to prevent the foreclosure.

         Great Northern's interests were sold at public auction on November 5, 2013. Circle Ridge made a winning bid of $150, 000.00 and, by way of a trustee's deed, obtained all of Great Northern's interest in the O'Benco leases. On December 13, 2013, Stephens officially filed an assignment of his interest in the promissory note to Circle Ridge. The evidence at trial established that Circle Ridge paid Stephens $200, 000.00 in exchange for this transfer. Nevertheless, according to Briscoe, Great Northern continued its physical possession of the wells included in the O'Benco leases in spite of the foreclosure.

         D. Two Lawsuits Are Consolidated

         Great Northern sued Circle Ridge, Briscoe, and Stephens in the 116th Judicial District Court of Dallas County, Texas, asserting various causes of action. Subsequently, Circle Ridge sued Great Northern, Loftis, and Abercrombie in the 71st Judicial District Court of Harrison County, Texas, to quiet title to the interests in the O'Benco leases. On September 18, 2014, the 116th Judicial District Court of Dallas County granted a transfer of venue to Harrison County, and the cases were consolidated for trial.

         In its live pleading, a third amended petition, Great Northern, Loftis, and Abercrombie argued that the December 13, 2013, assignment from Stephens to Circle Ridge was invalid because Stephens had purportedly executed another assignment to Great Northern on December 1, 2012, in exchange for valuable consideration. Great Northern also alleged that the foreclosure was invalid because the trustee, Dean Searle, purported to act on behalf of Stephens and Circle Ridge, but could not act on Stephens' behalf in light of the assignment of his interest to Great Northern. Great Northern also asserted (1) a cause of action against Stephens for breach of an agreement to deliver two pump jacks and 500 joints of 3½ -inch tubing, (2) causes of action against Circle Ridge and Stephens for unjust enrichment and breach of an implied covenant of good faith and fair dealing for their failure to deliver "the bargained for rights to well bores and oil and gas lease interests, " (3) causes of action against Circle Ridge and Stephens for negligent misrepresentation, [6](4) a cause of action against Stephens for fraud as a result of statements made in an affidavit of forgery accusing Great Northern of forging his signature on an alleged assignment that it filed in Harrison County's property records, (5) a cause of action against Circle Ridge, Briscoe, and Stephens for tortious interference with contract as a result of a conspiracy to "create the Affidavit of Forgery . . . in order to defraud Great Northern, " (6) a cause of action against Circle Ridge for wrongful foreclosure, based on the premise that it could only foreclose on one-half of its undivided interests due to Stephens' purported assignment to Great Northern, and (7) a cause of action asserting trespass to try title.

         In response, Circle Ridge filed a trespass to try title claim. It argued that the purported assignment from Stephens to Great Northern filed in Harrison County was a forgery, that Stephens never signed the assignment because he did not receive the promised consideration for the assignment, and that any conveyances from Great Northern to others prior to the time Great Northern acquired any interest in the O'Benco leases were void. Circle Ridge also filed a breach of contract claim for Great Northern's failure to perform under the deed of trust and causes of action for civil conspiracy for the forgery. Circle Ridge also alleged spoliation of evidence and sought attorney's fees.[7]

         E. Exclusion of Evidence

         During the jury trial, the court excluded evidence related to the Rangeford Resources/Rojo Burro transaction. Great Northern complained that the trial court's evidentiary rulings prevented it from effectively presenting its case. Specifically, Great Northern claims it was effectively prevented from arguing that Stephens had assigned any interest in either the O'Benco leases or the promissory note. We discuss a few key items at this juncture to give context to the parties' appellate arguments.

         1. The Excluded Letter of Agreement

         One of the documents excluded from evidence was entitled "LETTER OF AGREEMENT KEVIN AND MIKE STEPHENS INTEREST PURCHASE OBENCO AND ROJO BURRO, LLC." The Letter of Agreement, which Stephens' signed, provided that Stephens and Mike (1) "agree to sell [to Great Northern] any and all interests held or otherwise controlled by them in the leasehold commonly known as OBENCO . . . includ[ing] all interest in and to all debts payable to [Stephens or Mike] as of this date for which [Great Northern] is obligated, " [8] and (2) "agree to sell all interests o[f] Rojo Burro Energy Services, LLC, A Texas Limited Liability Company." The Letter of Agreement further stated, "The leasehold, wells[, ] and all other rights are also hereby transferred to [Great Northern] by assignment of that interest to be filed of record in Harrison County, Texas[, ] on closing of this transaction."

         As consideration, Stephens was to receive $125, 000.00, Mike was to receive $10, 000.00, and both were to receive shares of Rangeford Resources stock. The body of the Letter of Agreement listed its effective date as December 1, 2013, instead of December 1, 2012.

         2. The Excluded Note Assignment

         Another document excluded from evidence was labeled "PURCHASE OR NOTE AND FINANCIAL INSTRUMENT KEVIN STEPHENS UNTO GREAT NORTHERN ENERGY, INC. OBENCO PROPERTIES" and was signed by Stephens on December 1, 2012 (Note Assignment). In the Note Assignment, Stephens gave to Great Northern all of his "right, title[, ] and interests in and to that certain debt instrument wherein [Stephens was] a lender unto [Great Northern] under a note and according to the . . . stated terms and conditions."[9] The Note Assignment provided, "[Stephens] does hereby, effective December 1st, 2013, sell and grant his undivided portion, whatever such portion may be, but not less than 50% of, that certain note due from [Great Northern] unto [Stephens] and Circle Ridge Production, Inc., jointly, and that certain Deed of Trust attached hereto." (Emphasis added). Abercrombie notarized the document in the following manner:

I, the below signed Notary Public in and for the State of Texas, did witness the above named parties execute this document as their free and voluntary act on this date. I did enter the names of the parties into the required notary ledger and did identify these parties as required by law.[10]

         3. The Filed Assignment that Was Not Offered Into Evidence

         In its pleadings, Great Northern argued that Stephens executed an assignment on December 1, 2012, which it filed of record in Harrison County (Filed Assignment). Great Northern argues that by virtue of the Filed Assignment, Stephens, "individually, and as any portioned owner of Circle Ridge Production, Inc. if any, " assigned "any and all right, title and interests" in the working interests in O'Benco leases. The Filed Assignment further stated,

This assignment includes and is not limited to that certain debt instrument by and between the parties related to these leases and wells and does hereby convey those rights unto Great Northern Energy, Inc. without restriction nor offset of any kind, and does hereby represent notice to the public that the portion of said debt is paid in full as of this date and time as to the Kevin Stephens interest therein.

         The Filed Assignment was purportedly signed by "K Stephens, Individual." It was notarized by Abercrombie, but the acknowledgement stated, "I did witness one K Stephens sign this assignment after identifying him as one in the same as the person signing this document and entering his name in the notary register as required by state law."

         The Filed Assignment was recorded on April 1, 2013. On February 4, 2014, Stephens, who owned no interest in Circle Ridge, executed an affidavit of forgery averring that he never signed the Filed Assignment. The Filed Assignment was never offered into evidence at trial.[11]

         F. The Result

         In addition to excluding evidence of the Rangeford Resources/Rojo Burro transaction, the trial court entered directed verdicts on Great Northern's claims for unjust enrichment, breach of implied covenant of good faith and fair dealing, negligent misrepresentation, tortious interference, and fraud. The trial court also granted a motion for directed verdict in favor of Circle Ridge on its breach of contract claim after Great Northern's counsel (1) admitted that Great Northern was "a little behind" on payments under the promissory note, and (2) entered into the following stipulation: "that the amount of the note between Circle Ridge and Kevin Stephens as lender and Great Northern as borrower . . . [a]s of . . . 22nd of October 2015, if Great Northern did not buy Kevin Stephens' one-half of the note, the balance owed today, including interest up until today, is in the amount of $637, 114.15."

         The trial court's directed verdicts left the jury to decide only the issue of wrongful foreclosure, namely whether Great Northern established that there was a defect in the foreclosure sale and whether Great Northern established that Circle Ridge paid a grossly inadequate sales price at the foreclosure sale. The jury returned a negative answer to both questions. By agreement, the issue of attorney's fees was tried to the court.

         In its final judgment, the trial court recited the directed verdicts it had entered during trial which favored both Circle Ridge and Stephens, and it entered a take-nothing judgment against Great Northern. The judgment (1) declared that Great Northern had defaulted under the terms of the promissory note, (2) quieted title in Circle Ridge as a result of the trustee's sale, [12] and (3) provided that Circle Ridge was entitled to immediate possession of the wells included in the O'Benco leases. The judgment further provided that Great Northern was to pay Circle Ridge $637, 114.15, the amount owed under the terms of the promissory note as of October 22, 2015, $150, 873.37 in attorney's fees, $8, 756.90 as costs of suit, and $78, 798.75 as costs of collection.

         From this judgment, Great Northern appeals.

         G. Great Northern's Arguments on Appeal

         Great Northern advances a total of fifty-three complaints grouped into eleven categories. Among these complaints, Great Northern argues that the trial court erred in excluding a majority of its evidence, improperly granted directed verdicts against it, erred in overruling its motions for mistrial and objections to voir dire and closing argument, failed to submit properly requested jury instructions, and erred in quieting title in Circle Ridge and awarding it attorney's fees.

         III. The Trial Court Did Not Abuse its Discretion in Excluding Great Northern's Evidence

         Great Northern first argues that the trial court abused its discretion in excluding documents and testimony related to the negotiation of the Rangeford Resources/Rojo Burro transaction and an alleged assignment made by Stephens as a result of those negotiations. Because we conclude that there was no evidence of any actual assignment by Stephens to Great Northern, we conclude that the trial court did not abuse its discretion in making its evidentiary rulings.

         A. Standard of Review

         "We review a trial court's evidentiary . . . rulings for abuse of discretion." Sw. Energy Prod. Co. v. Berry-Helfand, 491 S.W.3d 699, 727 (Tex. 2016) (citing JLG Trucking, LLC v. Garza, 466 S.W.3d 157, 161 (Tex. 2015) ("We review a trial court's exclusion of evidence for an abuse of discretion."). "A trial court abuses its discretion when it acts without regard for any guiding rules." Caffe Ribs, Inc. v. State, 487 S.W.3d 137, 142 (Tex. 2016) (citing Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985)).

         We "must uphold the trial court's [decision to exclude evidence] if there is any legitimate basis for the ruling" or "if it is correct under any legal theory, " "even if that ground was not raised in the trial court." Enbridge Pipelines (E. Tex.) L.P. v. Avinger Timber, LLC, 386 S.W.3d 256, 264 (Tex. 2012) (citing Owens-Corning Fiberglas Corp. v. Malone, 972 S.W.2d 35, 43 (Tex. 1998)); Columbia Med. Ctr. Subsidiary, L.P. v. Meier, 198 S.W.3d 408, 411 (Tex. App-Dallas 2006, pet. denied); Barnhart v. Morales, 459 S.W.3d 733, 742 (Tex. App-Houston [14th Dist] 2015, no pet.) (citing Hooper v. Chittaluru, 222 S.W.3d 103, 107 (Tex. App-Houston [14th Dist.] 2006, pet. denied) (op. on reh'g)); see Calhoun/Holiday Place, Inc. v. Wells Fargo Bank, N.A., No. 01-14-00872-CV, 2016 WL 3272216, at *4 (Tex. App-Houston [1st Dist.] June 14, 2016, no pet); In re Block Fin. Advisors, Inc., 262 S.W.3d 896, 899 (Tex. App-Houston [14th Dist.] 2008, orig. proceeding) ("Because a trial court cannot abuse its discretion in reaching a correct result for the wrong reasons, we will uphold the trial court's order on any ground supported by the record."); Edgeworth v. Wilson, 113 S.W.3d 559, 562 (Tex. App -Texarkana 2003, no pet.).[13]

         B. Preliminary Matters

         1. The Promissory Note is Not a Negotiable Instrument

         Great Northern argues that, because the promissory note was payable to Circle Ridge and Kevin Stephens, it was payable to all of them and could only be enforced by all of them. Although Stephens testified that he gave permission to Searle to foreclose, Great Northern argues that Stephens had assigned his one-half undivided interest in the promissory note to Great Northern and that Great Northern did not provide permission for the foreclosure. Great Northern further argues that, since the foreclosure was made pursuant to the deed of trust, of which Circle Ridge and Stephens were joint beneficiaries, the foreclosure was wrongful, or, in the alternative, resulted in foreclosure of only Circle Ridge's one-half undivided interest in the O'Benco leases.

         Great Northern cites to Section 3.110 of the Business and Commerce Code in support of this argument.[14] As a preliminary matter, we conclude that the promissory note in this case was not negotiable. Section 3.110 of the Business and Commerce Code states,

If an instrument is payable to two or more persons alternatively, it is payable to any of them and may be negotiated, discharged, or enforced by any or all of them in possession of the instrument. If an instrument is payable to two or more persons not alternatively, it is payable to all of them and may be negotiated, discharged, or enforced only by all of them.

         Tex. Bus. & Com. Code Ann. § 3.110(d) (West 2002).

         "The negotiability of an instrument is a question of law." Guniganti v. Kalvakuntla, 346 S.W.3d 242, 248 (Tex. App-Houston [14th Dist] 2011, no pet.) (citing FFP Mktg. Co. v. Long Lane Master Trust IV, 169 S.W.3d 402, 407 (Tex. App-Fort Worth 2005, no pet.)). Chapter 3 of the Business and Commerce Code only "applies to negotiable instruments." Tex. Bus. & Com. Code Ann. § 3.102 (West 2002). Under Chapter 3,

"negotiable instrument" means an unconditional promise or order to pay a fixed amount of money, . . . if it: . . .
(3) does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain:
(A) an undertaking or power to give, maintain, or protect collateral to secure payment;
(B) an authorization or power to the holder to confess judgment or realize on or dispose of collateral; or
(C) a waiver of the benefit of any law intended for the advantage or protection of an obligor.

         Tex. Bus. & Com. Code Ann. § 3.104(a)(3) (West Supp. 2016). While promissory notes can be and are often referred to as negotiable instruments, they can only be negotiable instruments under Chapter 3 if they constitute "an unconditional promise or order to pay a fixed amount of money." Id. Whether an instrument meets this standard is governed by Section 3.106, titled ...


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