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First Bank Texas, SSB v. W. D. Welch, P.C.

Court of Appeals of Texas, Fifth District, Dallas

June 5, 2017


         On Appeal from the 59th Judicial District Court Grayson County, Texas Trial Court Cause No. CV-14-0048

          Before Justices Evans, Stoddart, and Boatright.



         First Bank of Texas, SSB, formerly known as First National Bank of Baird, appeals the trial court's take-nothing summary judgment on its lawsuit against W. D. Welch, P.C., W. D. Welch, Red River Title Co., and Commonwealth Land Title Insurance Company (together "Title Closing Parties"). In three issues, First Bank generally complains that Title Closing Parties were estopped from raising subrogation as an affirmative defense to its claims, and there were genuine issues of material fact as to Title Closing Parties' subrogation and limitations defenses. We affirm.


         The following material facts are undisputed. This matter arises from a commercial real estate transaction involving the purchase of a sod farm. In April 2009, Larry M. Selman, doing business as Buena Vista Turf Farm, contracted to purchase the property from Riverside Irrigation & Landscaping, Inc. Selman financed his purchase with a secured loan from First Bank. Welch and Welch, P.C. handled the closing of the transaction. Although the closing occurred on June 29, 2009, certain instruments evidencing the transaction, including the deed of trust securing First Bank's loan, were not recorded until December 17, 2009. On August 20, 2009, between the closing date and the recording of the deed of trust, the State of Texas recorded a tax lien of $1, 164, 191.79 representing unpaid taxes owed by the seller Riverside.[1] The 2009 deed of trust, however, provided that to the extent the loan proceeds were used to pay any outstanding liens on the property, First Bank was to be "subrogated to all of the rights, liens, and remedies of the holders of the indebtedness so paid." Riverside had originally purchased the property with a loan from First National Bank of Mid-Cities, [2] and a deed of trust was recorded on March 24, 2006 securing First National's purchase loan. The summary judgment record reflects that $1, 926, 671.09 in loan proceeds from First Bank were used to pay off the First National loan. On January 14, 2010, a Release of Lien was recorded with respect to First National's loan. Nevertheless, a loan policy of title insurance dated December 17, 2009 was issued by Commonwealth listing the tax lien as an exception to coverage.[3]

         First Bank filed this lawsuit on January 9, 2014 asserting various causes of action against the Title Closing Parties including negligence, gross negligence, breach of contract, fraud, breach of fiduciary duty, violations of the Texas insurance code, conspiracy, agency, unjust enrichment, and aiding and abetting. While the lawsuit was pending, in April 2014, Selman filed for bankruptcy. First Bank filed an adversary proceeding in the bankruptcy case and ultimately paid $100, 000 to the State of Texas to subordinate the tax lien to First Bank's lien.

         In October 2015, Welch and Welch, P.C. filed a traditional motion for summary judgment on all of First Bank's claims. Welch argued that, as a matter of law, First Bank had no injuries or damages because its lien was superior to the tax lien through subrogation pursuant to the recorded 2006 deed of trust held by the prior lienholder whose loan was paid off with First Bank's loan proceeds. They also asserted First Bank's claims were barred by limitations. Red River and Commonwealth also moved for summary judgment, joining in and adopting the grounds and arguments set forth in Welch's motion for summary judgment. After hearing argument on the motions, the trial court granted summary judgment to all Title Closing Parties and ordered that First Bank take nothing on all of the claims it asserted against them. This appeal followed.


         A. Standard of Review

         We review the trial court's summary judgment ruling de novo. See Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). A defendant is entitled to summary judgment if it conclusively negates an essential element on each of the plaintiff's causes of action or conclusively establishes all necessary elements of an affirmative defense. See Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995). In our review, we take the nonmovant's evidence as true, and indulge every reasonable inference in favor of the nonmovant. See Little v. Tex. Dept. of Criminal Justice, 148 S.W.3d 374, 381 (Tex. 2004).

         B. Subrogation

         Among other grounds, Title Closing Parties moved for summary judgment on all of First Bank's causes of action on the basis that First Bank could not prove any injury or damages from the actions of which it complains. Title Closing Parties specifically asserted that although all of First Bank's claims presume its lien was subordinate to the tax lien, First Bank actually enjoyed a first lien status under the doctrine of subrogation as a matter of law. Title Closing Parties argued the tax lien did not encumber First Bank's priority lien status because (1) it was recorded after the 2006 deed of trust, (2) First Bank's loan paid off the loan referenced in the 2006 deed of trust, and (3) the 2009 deed of trust expressly stated that if the loan proceeds pay off a prior debt, First Bank is subrogated to all rights of the prior lien holder. On appeal, First Bank does not contest Title Closing Parties' assertion that all of its causes of action presume that First Bank did not have a valid first lien. Rather, First Bank generally asserts there are genuine issues of material fact as to the application of subrogation with respect to its causes of action and respective lien position.

         There are various types of subrogation. See Chase Home Fin., F.C.C. v. Cal. W. Reconveyance Corp., 309 S.W.3d 619, 631 (Tex. App.-Houston [14th Dist.] 2010, no pet.). Here, there is no contract between the two lenders, but there is an express deed of trust provision between the debtor and subsequent lender stating that, if proceeds are used to pay off a prior debt, the subsequent lender will be subrogated to all rights of the prior lienholder. See Providence Inst. for Sav. v. Sims, 441 S.W.2d 516, 519 (Tex. 1969); Chase Home Fin., 309 S.W.3d at 631. In these hybrid cases, subrogation is not wholly dependent upon contract nor it is wholly ...

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