Court of Appeals of Texas, Fifth District, Dallas
FIRST BANK TEXAS, SSB, FORMERLY KNOWN AS FIRST NATIONAL BANK OF BAIRD, Appellant
W. D. WELCH, P.C., W. D. WELCH, RED RIVER TITLE CO., AND COMMONWEALTH LAND TITLE INSURANCE COMPANY, Appellees
Appeal from the 59th Judicial District Court Grayson County,
Texas Trial Court Cause No. CV-14-0048
Justices Evans, Stoddart, and Boatright.
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
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. 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,  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.
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.
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.
Standard of Review
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).
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
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 ...