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Uddin v. Cunningham

Court of Appeals of Texas, First District

August 29, 2019


          On Appeal from the 334th District Court Harris County, Texas Trial Court Case No. 2012-29600

          Panel consists of Justices Lloyd, Kelly, and Hightower.



         Appellant Shakeel Uddin guaranteed a loan made by Sterling Bank to Nabeel & Amaan Investments, Inc. NAI used the loan to purchase real property. Following NAI's loan default and a superior lienholder's foreclosure on the property, Sterling filed a claim under the title-insurance policy it received from Appellee Southern Title Insurance Company. STIC, as Sterling's subrogee, sued Uddin and sought recovery, at least in part, based on Uddin's breach of his personal guaranty on the loan. After paying on Sterling's insurance claim and being assigned the rights under the guaranty, STIC amended its petition against Uddin to allege the assignment as a basis for recovery on its claim that Uddin breached the guaranty. STIC successfully moved for summary judgment over Uddin's arguments that the statute of limitations deprived STIC of standing or capacity, STIC failed to prove each element of its claim, and he had raised material issues of fact on his affirmative defenses. Uddin now appeals, raising the same arguments. We conclude that the statute of limitations did not implicate STIC's standing, any defect in STIC's capacity was cured by the relation-back doctrine, STIC established each element of its claim, and Uddin contractually waived his right to assert his other affirmative defenses. We therefore affirm.


         NAI obtained a $1, 400, 000 loan from Sterling Bank on January 10, 2008, to finance its purchase of real property located in Houston. By the terms of the Promissory Note, NAI had five years to pay off the loan and granted Sterling a first lien on the property. That same day, NAI's president, Shakeel Uddin, signed a Guaranty Agreement, promising Sterling that he would be responsible for NAI's obligations under the Note if NAI defaulted.

         STIC, a Virginia corporation authorized to do business in Texas, issued an Owner's Policy to NAI and a Lender's Policy to Sterling.[2] Under the Owner's Policy, STIC insured NAI against loss caused by any lien on the sold property. Under the Lender's Policy, STIC insured Sterling against loss caused by any lien on the property that was superior to Sterling's lien. Unknown to STIC and Sterling, a superior credit interest existed: JLE Investors, Inc. had previously loaned money to NAI, and NAI had failed to pay on that loan, resulting in JLE's lien on the property that predated Sterling's lien.

         Following NAI's failure to make several payments on the Note, Sterling sent a letter to NAI and Uddin on February 10, 2011, demanding full payment on the Note and the Guaranty Agreement. Neither NAI nor Uddin paid. Twelve days later, Sterling accelerated the Note. Sometime within the following month, Sterling discovered that JLE's lien was superior to its own and notified STIC. JLE foreclosed on the property in October 2011. The property was later sold during a trustee's sale. By this time, STIC was in serious financial trouble.

         The State Corporation Commission of Virginia filed an application with the Circuit Court of the City of Richmond, seeking its appointment as STIC's receiver. In December 2011, the Virginia circuit court found that STIC was "in a hazardous financial condition such that any further transaction of its business will be hazardous to its insureds, policyholders, creditors, and the public." Accordingly, the Commission was appointed as STIC's receiver and was authorized "to proceed with the rehabilitation or liquidation of [STIC] and to take whatever steps . . . reasonably necessary . . . for the protection of [STIC's] insureds, policyholders, creditors, or the public."

         On May 21, 2012, through its Virginia-appointed receiver, STIC filed its original petition against Uddin in Harris County District Court. STIC, being subrogated to Sterling's rights against third parties by the Lender's Policy's terms, sought payment from Uddin for the damages it would incur from its having to pay Sterling under the policy. STIC alleged that Uddin had signed the Guaranty Agreement with Sterling, and STIC stated that, "pursuant to the terms and provisions of the policy[, ] [it] is subrogated to the rights Sterling [has] against third parties, most specifically in this instance, its rights against Dr. Uddin as a result of the JLE lien." STIC asserted a cause of action for breach of contract, alleging that Uddin "has breached the terms of his agreements with Sterling and such breach has caused damages and legal costs," to which STIC was subrogated.

         After Sterling formally filed its claim with STIC under the Lender's Policy in September 2012, the trial court granted an agreed plea in abatement that removed the case from the trial court's docket until Sterling's claim against STIC was "settled or resolved such that the exact amount of damages sought by [STIC could] be confirmed." In 2015, STIC's receiver issued a notice to Sterling that its claim had been determined. The notice asserted that Sterling was entitled to $710, 000 under the Lender's Policy; however, because STIC was in receivership, that amount could not be paid immediately. STIC paid a portion of the total determination- $250, 000-and continued its suit against Uddin.

         Through a series of assignments that concluded in June 2016, Sterling's rights under the Note were assigned to STIC. And on August 30, 2016, STIC filed an amended petition against Uddin seeking full recovery under the Guaranty Agreement. In its live pleading, filed June 15, 2017, STIC continued to rely on the same facts and relationships among itself, Sterling, and Uddin that it had alleged in its original petition. STIC alleged that it had "the right to enforce and assert claims related to the Note, the Sterling Deed of Trust, the Guarantee Agreement, and the Loan Agreement (collectively, the 'Loan Documents')." STIC alleged that, after Sterling made its claim on the title policy, STIC "investigated the Property and the JLE Deed of Trust and retained counsel to represent Sterling's interests," incurring investigative and legal fees and "thereby implicating [STIC's] right to subrogation."

         In its live pleading, STIC further quoted the terms of the Lender's Policy and alleged that it had the right to "institute and prosecute any action or proceeding" that may be "necessary or desirable" to, among other things, "prevent or reduce loss or damage to the insured." It stated, "This lawsuit seeks to reduce loss or damage to Sterling by holding [Uddin] accountable for matters related to the Lender's Policy, specifically, the related Loan Documents." It further alleged, "Sterling contractually agreed to allow [STIC] to bring this lawsuit in the Lender's Policy. On March 4, 2016, [STIC] and Comerica Bank, successor in interest to Sterling Bank, inter alia, memorialized the details of this assignment." Based on these facts, STIC asserted that Uddin was liable for breach of the Guaranty Agreement.

         STIC unsuccessfully moved for summary judgment numerous times, and Uddin repeatedly asserted a number of defenses, including the statute of limitations and certain counterclaims that he believed would entitle him to offset his liability to STIC.

         In STIC's final attempt at summary judgment, it argued, among other things, that under Paragraph 11 of the Guaranty Agreement, Uddin waived all defenses, including his statute-of-limitations and other defenses that he asserted in an effort to obtain offsets against his alleged liabilities to STIC. STIC also contended that, even if Uddin did not waive his statute-of-limitations defense, its claim under the Note was still timely. The trial court granted STIC's motion and ultimately signed a judgment requiring Uddin to pay $1, 656, ...

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