LANCE DUNCAN AND MARK IV ENERGY HOLDINGS, LLC, F/K/A MARK III ENERGY HOLDINGS, LLC, Appellants
GERALD B. HINDY; ASSEMBLIES OF GOD FINANCIAL SERVICES GROUP, D/B/A AG FINANCIAL SOLUTIONS; AND STEWARD ENERGY FUND, LLC, Appellees
Appeal from the 70th District Court Ector County, Texas Trial
Court Cause No. A-16-05-0551-CV
consists of: Bailey, C.J., Stretcher, J., and Wright, S.C.J.
M. BAILEY CHIEF JUSTICE.
appeal arises from a business dispute concerning a large
financial investment in oil and gas properties. It involves
multiple written agreements executed by the parties as well
as litigation between the parties in multiple counties over a
period of time. The trial court granted summary judgment in
favor of Appellees-Gerald B. Hindy; Assemblies of God
Financial Services Group, d/b/a AG Financial
Solutions; and Steward Energy Fund, LLC-on all of
Appellants' claims. Appellants, Lance Duncan and Mark IV
Energy Holdings, LLC, f/k/a Mark III Energy Holdings, LLC,
filed the underlying suit asserting numerous causes of
action.  Appellants contend that the trial court
erred by granting summary judgment in favor of Appellees on
Appellants' claims for tortious interference with a
contract, wrongful foreclosure, and declaratory relief. We
2008, Hindy, the president and CEO of AG Financial Solutions,
met with Duncan to discuss investing in the oil and gas
industry. Duncan identified certain oil and gas properties
(the Batson and Wortham leases) for AG Financial Solutions to
consider purchasing. AG Financial Solutions formed Steward
Energy to purchase the Batson and Wortham leases. Hindy was
also the president of Steward Energy. Steward Energy
purchased the Batson leases from Shamrock Energy Corporation
for $6, 000, 000 and the Wortham leases from Mark III for $4,
500, 000. After the sales, Duncan operated the leases through
his entity, BHB Operating, Inc., and received a monthly
soon discovered that the Wortham leases were producing
significantly less oil and gas than what Duncan had
represented prior to the sale and that, due to high operating
expenses, the Wortham leases were not profitable. In 2009,
Mark III agreed to pay Steward Energy $1, 080, 000 to resolve
2010, AG Financial Solutions and Steward Energy sued Duncan
in Freestone County, asserting additional claims related to
the Batson and Wortham transactions, including breach of
fiduciary duty, fraud based on intentional misrepresentations
and failure to disclose, and negligent misrepresentation. In
August 2010, Steward Energy, Mark III, BHB Operating, Duncan,
and Duncan's wife, Holly Duncan, entered into a
"Settlement Agreement and Release" of the Freestone
County claims. The Settlement Agreement and Release provided
(1) that Steward Energy would convey the Batson and Wortham
leases to Mark III, (2) that Appellants and Holly Duncan
would execute a promissory note payable to Steward Energy in
the principal amount of $9, 500, 000, (3) that payment on the
promissory note would be secured by a deed of trust on the
Batson and Wortham leases and on other leases known as the
Garner and Sanford Leases, (4) that Mark III would drill five
new oil wells on the Batson property, and (5) that Appellants
and Holly Duncan would sign a Confession of Judgment for $6,
000, 000 plus postjudgment interest at an annual rate of five
percent. The Confession of Judgment provided that the $6,
000, 000 principal amount was "subject to a
dollar-for-dollar credit and/or offset based upon any and all
payments made" by Appellants according to the terms of
the promissory note. The Freestone County district court
signed the Confession of Judgment on September 14, 2010.
February 28, 2013, AG Financial Solutions and Steward Energy
executed a settlement agreement with Appellants, BHB
Operating, and Holly Duncan to resolve a dispute arising from
a lawsuit in Lubbock County (the February 28 Settlement
Agreement). Appellants acknowledged in the February 28
Settlement Agreement that the Confession of Judgment remained
unpaid in the amount of $6, 000, 000 and that interest had
accrued on that amount at an annual rate of five percent. The
parties to the February 28 Settlement Agreement agreed (1)
that the $6, 000, 000 judgment balance would be reduced only
as the unpaid balance on all outstanding sums owed to Steward
Energy was reduced below $6, 000, 000 and (2) that, as
Appellants, BHB Operating, or Holly Duncan reduced the unpaid
balance owed to Steward Energy below $6, 000, 000, Steward
Energy would provide a corresponding dollar-for-dollar
reduction on the Confession of Judgment.
August 2, 2013, Steward Energy, as lender, and Appellants,
BHB Operating, and Holly Duncan, as borrowers, signed a Loan
Agreement (the Consolidated Loan Agreement), which
acknowledged that the promissory note relating to the
Confession of Judgment had an outstanding balance of $7, 295,
044.84, that the Duncans owed Steward Energy $401, 521.33
under a separate promissory note, and that both notes were in
default. The Consolidated Loan Agreement (1) consolidated the
remaining debt of Appellants, BHB Operating, and Holly Duncan
into a single loan and deed of trust, (2) waived the existing
defaults, and (3) lowered the monthly payments. Appellants,
BHB Operating, and Holly Duncan signed a "Deed of Trust,
Assignment of Leases, Rents, Revenues, Security Agreement and
Fixture Filing" (the Deed of Trust) that secured the
Consolidated Loan Agreement. Appellees recorded the Deed of
Trust in Ector County on August 28, 2013.
September 2014, Mark III and other companies entered into a
purchase and sale agreement (PSA) to sell their collective
70% working interest in certain Ector County oil and gas
leases to Ryder Operating, LLC for approximately $7, 700,
000. The closing date for the transaction was November 28,
2014. On November 19, 2014, a company called Ride the Wave,
LLC filed suit against Appellants and BHB Operating, alleging
that Duncan had refused to assign a working interest in the
Ector County lease that Ride the Wave had purchased two years
before. On November 25, 2014, Ryder Operating terminated the
PSA, asserting that (1) Mark III breached the PSA by
misrepresenting that there were no threatened suits against
the Ector County property at the time the agreement was
entered and (2) Mark III, a forfeited entity since July 2010,
misrepresented in the PSA that it was validly existing and in
remained in default of the Consolidated Loan Agreement in
multiple respects. As a result, Steward Energy foreclosed on
Appellants' assets, including Duncan's lake house in
December 2014, the interest in the Batson and Wortham leases
in February 2015, and the interest in the Ector County leases
in March 2015.
31, 2016, Appellants filed the underlying suit against
Appellees. Appellants brought multiple claims against
Appellees, including tortious interference with an existing
contract, civil conspiracy to tortiously interfere with an
existing contract, duress, civil conspiracy to breach a
fiduciary duty (aiding and abetting), common law fraud,
promissory estoppel, intentional infliction of emotional
distress, alter ego liability, fraudulent lien, and wrongful
foreclosure. Appellants also sought a declaratory judgment
construing the parties' rights under the February 28
Settlement Agreement and the Consolidated Loan Agreement with
respect to the provisions in those agreements that purported
to modify the Confession of Judgment. Appellees answered and
asserted a number of affirmative defenses, including release
and res judicata.
and Appellees filed competing motions for summary judgment.
After a hearing, the trial court granted Appellees'
traditional and no-evidence motion for summary judgment and
denied Appellants' traditional and no-evidence motion for
partial summary judgment. Appellants have appealed the trial
court's judgment only as to (1) Appellants' claims
for tortious interference with the PSA and wrongful
foreclosure, (2) Appellants' request for declaratory
relief, (3) Appellants' contention that Steward Energy is
the alter ego of AG Financial Solutions, and (4)
Appellees' defenses of res judicata and release.
their first three issues, Appellants assert that the trial
court erred in granting summary judgment in favor of
Appellees as to Appellants' claims for tortious
interference with contract and wrongful foreclosure and
Appellants' request for declaratory relief. We review a
trial court's entry of summary judgment de novo.
First United Pentecostal Church of Beaumont v.
Parker, 514 S.W.3d 214, 219 (Tex. 2017). When the trial
court's order fails to specify the grounds for its
summary judgment, we will affirm if any of the theories are
meritorious. Provident Life & Accident Ins. Co. v.
Knott, 128 S.W.3d 211, 216 (Tex. 2003). When both
parties move for summary judgment, and one is granted and the
other denied, we must review all the summary judgment
evidence, determine all issues presented, and render the
judgment that the trial court should have rendered.
Lightning Oil Co. v. Anadarko E&P Onshore, LLC,
520 S.W.3d 39, 45 (Tex. 2017).
adequate time for discovery, a party may move for summary
judgment on the ground that there is no evidence of one or
more essential elements of a claim or defense on which an
adverse party would have the burden of proof at trial.
Tex.R.Civ.P. 166a(i). We review a no-evidence motion for
summary judgment under the same legal sufficiency standard as
a directed verdict. Merriman v. XTO Energy, Inc.,
407 S.W.3d 244, 248 (Tex. 2013). Under this standard, the
nonmovant has the burden to produce more than a scintilla of
evidence to support each challenged element of its claims.
moving for traditional summary judgment bears the burden of
proving that there is no genuine issue of material fact and
that it is entitled to judgment as a matter of law.
Tex.R.Civ.P. 166a(c); Nassar v. Liberty Mut. Fire Ins.
Co., 508 S.W.3d 254, 257 (Tex. 2017). To be entitled to
traditional summary judgment, a defendant must conclusively
negate at least one essential element of the cause of action
being asserted or conclusively establish each element of an
affirmative defense. Sci. Spectrum, Inc. v.
Martinez, 941 S.W.2d 910, 911 (Tex. 1997). Evidence is
conclusive only if reasonable people could not differ in
their conclusions. City of Keller v. Wilson, 168
S.W.3d 802, 816 (Tex. 2005). If the movant initially
establishes a right to summary judgment on the issues
expressly presented in the motion, then the burden shifts to
the nonmovant to present to the trial court any issues or
evidence that would preclude summary judgment. See City
of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671,
678-79 (Tex. 1979).
reviewing both traditional and no-evidence summary judgments,
we consider the evidence in the light most favorable to the
nonmovant, indulging every reasonable inference in favor of
the nonmovant and resolving any doubts against the movant.
Merriman, 407 S.W.3d at 248; City of
Keller, 168 S.W.3d at 824. "If a party moves for
summary judgment on both traditional and no-evidence grounds,
as the parties did here, we first consider the no-evidence
motion." Lightning Oil Co., 520 S.W.3d at 45.
their second issue, Appellants assert that the trial court
erred by granting summary judgment in favor of Appellees on
Appellants' request for declaratory relief. Appellants
pleaded that the February 28 Settlement Agreement and the
Consolidated Loan Agreement, both of which were executed in
2013, were improper collateral attacks on the 2010 Confession
of Judgment. Appellants requested that the trial court
"issue a declaratory judgment declaring the parties'
rights under these agreements, with respect to the provisions
purporting to modify the Confession of Judgment."
Specifically, Appellants sought a declaration that the
subsequent agreements were "void, voidable, or otherwise
invalid" to the extent that they attempted to modify the
Confession of Judgment.
moved for traditional summary judgment on Appellants'
request for declaratory relief on the grounds that the
requested relief was barred by the doctrine of res judicata.
As set out below, Appellants based their claim of res
judicata on litigation occurring between the parties in
Freestone County in 2016 in a turnover proceeding. Appellants
moved for no-evidence summary judgment on Appellees' res
judicata affirmative defense on grounds that there was no
evidence that Appellants' request for declaratory relief
was based on the same claims as were raised or could have
been raised in prior litigation between the parties. We
conclude that Appellees established their affirmative defense
of res judicata as a matter of law.
judicata, or claim preclusion, is an affirmative defense that
prevents the litigation by parties and their privies of
matters actually litigated in a previous suit, as well as
matters that, with the use of diligence, could have been
litigated in a prior suit. Hallco Tex., Inc. v. McMullen
Cty., 221 S.W.3d 50, 58 (Tex. 2006); see also
Tex. R. Civ. P. 94 (identifying res judicata as an
affirmative defense). Texas applies the transactional
approach to res judicata, which requires that claims arising
out of the same subject matter be litigated in a single
lawsuit. Hallco, 221 S.W.3d at 58. "The party
relying on the affirmative defense of res judicata must prove
(1) a prior final determination on the merits by a court of
competent jurisdiction; (2) identity of parties or those in
privity with them; and (3) a second action based on the same
claims as were or could have been raised in the first
action." Travelers Ins. Co. v. Joachim, 315
S.W.3d 860, 862 (Tex. 2010).
September 2016, while this case was pending in the trial
court, Appellees learned that BHB Operating had recently
entered into a settlement agreement in an unrelated lawsuit
and received settlement proceeds of $475, 000. Appellees
filed an Application for Turnover Relief in Freestone County
on September 14, 2016. Appellees asserted in their
Application for Turnover Relief that Appellants and BHB
Operating still owed money under the Confession of Judgment.
Appellants and BHB Operating initially filed a response
wherein they disputed the amount due under the Confession of
Judgment. They argued that all lawful offsets, payments, and
credits had not been accounted for by Appellees. The
Freestone County district court held a hearing and, following
the receipt of evidence and arguments, signed an order
granting Appellees' application for ...