Comunidad Fondren Court, LLC v. Fannie Mae

Opinion issued

February 24, 2011

In

The

Court of

Appeals

For

The

First District

of Texas

————————————

NO. 01-09-00873-CV

———————————

Comunidad Fondren Court, LLC , Appellant

V.

FEDERAL

NATIONAL mortgage ASSOCIATION , Appellee

On Appeal from the 281st District

Court

Harris County, Texas

Trial Court Case No. 2008-28047

MEMORANDUM

OPINION

Comunidad

Fondren Court, LLC appeals a judgment in favor of the Federal National Mortgage

Association (“Fannie Mae”). Harris

County interpleaded funds with the trial court from a refund of ad valorem taxes on real property

because Comunidad and Fannie Mae both asserted a right to the funds. On cross-motions for summary judgment, the

trial court determined that Fannie Mae was entitled to the funds. On appeal, Comunidad asserts that the trial

court erred because Comunidad is the owner of the refunded funds, Fannie Mae’s security

interest did not attach to the funds, and Comunidad is not the successor or

assign of the original debtor. Fannie

Mae also appealed, raising a single issue—that the trial court erred by

refusing to award its attorneys’ fees. We

conclude that Comunidad took the real property subject to Fannie Mae’s

outstanding security interests, which covered the tax refund at issue

here. We also conclude that the record

does not show that the trial court abused its discretion by ordering Fannie Mae

and Comunidad to each pay their own attorneys’ fees. We affirm.

Background

In

1998, F. Court Partners, Ltd. was formed for the purpose of

owning and operating an apartment complex on Fondren Road in Houston, Texas (“the

Property”). The Property is composed of

two contiguous tracts. Over a period of several

years, F. Court obtained financing for the Property by executing a

series of three promissory notes (collectively “Notes”), each secured by a deed

of trust (collectively “Deeds of Trust”). [1] The monthly mortgage payments from the

borrower included a tax escrow component that was deposited into a tax escrow

account. The Notes and Deeds of Trust

were subsequently transferred to Fannie Mae, and Fannie Mae is the owner and

holder of the Notes and related loan documents.

In December 2003, F. Court conveyed

the Property to Comunidad. The Property remained

subject to the Deeds of Trust executed by F. Court. As part of the transfer, Comunidad did not

assume F. Court’s debt. Fannie Mae was

not asked to, and did not, consent to the transfer, even though the transfer

constituted an event of default under the Deeds of Trust. F. Court also defaulted by failing to

pay the amounts due under the Notes beginning in September 2006.

Comunidad

is a tax exempt community housing development organization. During the years 2004 to 2006, while

Comunidad owned the apartment complex, it qualified for a tax exemption on the

property. Harris County, however, made a

mistake on its tax rolls by exempting only one of the two tracts, which was

approximately one-half of the Property, and therefore assessed taxes on a tract

when it should not have. This mistake

was not corrected until August 2007, after Fannie Mae had foreclosed on the

property. Between the closing in

December 2003 and the default by non-payment in September 2006, F. Court,

through the property manager, timely paid the Notes to Fannie Mae from the

rents earned by the property. During the

same time, Fannie Mae, through its loan servicer, [2] paid

the mistakenly assessed property taxes from a tax escrow account into which F.

Court’s note payments, including the amount that was to be escrowed for taxes, were

deposited. Comunidad, which was tax

exempt, did not pay any of the tax payments in question.

After

F. Court defaulted on its monthly mortgage obligations, Fannie Mae sought foreclosure

on the Property. Fannie Mae was the high

bidder and purchased the Property in February 2007. The deficiency remaining after the

foreclosure sale was approximately $1.2 million.

In

September 2007, after the foreclosure, Comunidad applied for a refund of the

taxes paid on the Property from 2004 to 2006 with the Harris County Appraisal

Review Board, based upon Comunidad’s tax-exempt status. Fannie Mae also requested a refund. The review board subsequently granted the

refund request. At the time the refund

was granted, Comunidad had no ownership interest in the Property. Harris County filed an action in interpleader

based on the competing claims to the tax refund. The interpleaded funds totaled $381,538.78.

Both

Comunidad and Fannie Mae sought summary judgment on their respective claims to

the tax refund. [3] The trial court denied Comunidad’s motion and

granted Fannie Mae’s, rendering judgment for Fannie Mae for the tax refund.

Standard of Review

We review

summary judgments de novo. Valence

Operating Co. v. Dorsett , 164

S.W.3d 656, 661 (Tex. 2005). Summary

judgment is proper only when a movant establishes that there is no genuine

issue of material fact and that the movant is entitled to judgment as a matter

of law. Tex. R. Civ. P. 166a(c). On review, we indulge every reasonable

inference in favor of the nonmovant, take all evidence favorable to the

nonmovant as true, and resolve any doubts in favor of the nonmovant. Valence Operating Co. , 164 S.W.3d at 661 . When there are multiple grounds for summary judgment and the

order does not specify the ground on which the summary judgment was rendered,

the appealing party must negate all grounds on appeal. State Farm Fire & Cas. Co. v. S.S. , 858 S.W.2d 374, 381 (Tex. 1993); Ellis

v. Precision Engine Rebuilders, Inc. ,

68 S.W.3d 894, 898 (Tex. App.—Houston [1st Dist.] 2002, no pet.).

When both sides move for summary judgment and the trial court

grants one motion and denies the other, we review the summary judgment evidence presented by

both sides and determine all legal questions

presented. Comm’rs Court v. Agan , 940 S.W.2d 77, 81 (Tex. 1997). We render such judgment as the trial court

should have rendered. Id.

Entitlement to the Tax

Refund

Comunidad

asserts the trial court erred in awarding the refund to Fannie Mae because

Comunidad is the owner of the refunds and Fannie Mae’s security interest did

not attach to the refund. Fannie Mae

responds that its security interest plainly states that it covers tax refunds

and that Comunidad took the property subject to the security interests. Comunidad concedes in its brief that if

Fannie Mae’s security interest did attach to the funds, then the trial court’s

judgment is correct. Thus, the first

legal issue is whether Fannie Mae’s security interest created in its Deeds of

Trust reaches the tax refund. The

parties agree that the construction and interpretation of the Deeds of Trusts

is a legal question for the court.

“When

the owner of real estate executes a valid deed of trust, and then conveys an

interest in the mortgaged property to a third party, the rights of the

mortgagor’s vendee are subject to the rights held by the beneficiary of the

deed of trust.” Lavigne v. Holder , 186 S.W.3d 625, 628 (Tex. App.—Fort Worth 2006,

no pet.) (quoting Motel Enters., Inc. v.

Nobani , 784 S.W.2d 545, 547 (Tex. App.—Houston [1st Dist.] 1990, no writ)). Thus, Comunidad took the Property subject to

the existing Deeds of Trust and is bound by their terms.

Our primary concern in interpreting

a contract is to ascertain and give effect to the parties’

objective intent as it is expressed in the contract. Seagull Energy E & P, Inc. v. Eland

Energy, Inc. , 207 S.W.3d

342, 345 (Tex. 2006). The intent of the

parties must be taken from the agreement itself, not from the parties’ present

interpretations, and the agreement must be enforced as it is written. See Sun Oil Co. v. Madeley , 626 S.W.2d 726 , 731–32 (Tex. 1981). We also review the entire contract as a whole

in an attempt to harmonize its provisions and do not give any single provision

controlling effect without reference to the whole. Coker

v. Coker , 650 S.W.2d 391, 393 (Tex. 1983).

A deed of

trust is interpreted according to the ordinary rules of contract

interpretation. Fin. Freedom Sr. Funding Corp. v. Horrocks , 294 S.W.3d 749, 753 (Tex.

App.—Houston [14th Dist.] 2009, no pet.).

One of those rules is that deeds of trust are generally strictly construed against the

lender, which is the party normally responsible for the drafting of the

document. See Dodd v. Harper , 670

S.W.2d 646, 649 (Tex. App.—Houston [1st Dist.] 1983, no writ). That rule only

applies, however, if the agreement, after applying the ordinary rules of

contract interpretation, is susceptible to more than one reasonable

interpretation, i.e., when it is ambiguous.

Universal C.I.T. Credit Corp. v.

Daniel , 243 S.W.2d 154, 157 (Tex. 1951) ; Ramsay

v. Tex. Trading Co., Inc. , 254 S.W.3d 620, 630 (Tex. App.—Texarkana 2008, pet.

denied). Because neither party contends

that the Deeds of Trust are ambiguous, that rule has no application to this

case.

The Deeds of Trust clearly provide

that all property tax refunds are Fannie Mae’s collateral. The Deeds of Trust define the property that

secures the Notes to include the following:

(1) the Land;

. . .

(7) all awards, payments and other compensation made or

to be made by any municipal, state or federal authority with respect to the

Land . . ., or any other part of the Mortgaged Property, including

any awards or settlements resulting from condemnation proceedings or the total

or partial taking of the Land . . . or any other part of the Mortgaged Property

under the power of eminent domain or otherwise and including any conveyance in

lieu thereof;

. . .

(10) all Rents and Leases;

. . .

(12) all Imposition Deposits;

(13) all refunds or rebates of Impositions by any

municipal, state or federal authority or

insurance company (other than refunds applicable to periods before the real

property tax year in which this Instrument is dated) . . . .

Impositions,

the refunds of which are secured by the Deeds of Trust, are defined in section

7(a) of the Deeds of Trust:

Borrower shall deposit with Lender on the day monthly

installments of principal or interest, or both, are due under the Note . . .,

until the indebtedness is paid in full, an additional amount sufficient to

accumulate with Lender the entire sum required to pay, when due . . . Taxes . .

. . The amounts deposited under the

preceding sentence are collectively referred to in this Instrument as the

“Imposition Deposits”. The obligations

of Borrower for which the Imposition Deposits are required are collectively

referred to in this Instrument as “Impositions”. . . .

Section 7(b) further grants Fannie Mae, as the lender, a security

interest in Imposition Deposits:

. . . . Lender shall apply the Impositions Deposits to

pay Impositions so long as no event of Default has occurred and is continuing.

. . . Borrower hereby pledges and grants

to Lender a security interest in the Impositions deposits as additional

security for all of Borrower’s obligations under this Instrument and the other

Loan Documents. Any amounts deposited

with Lender under this Section 7 shall not be trust funds, nor shall they

operate to reduce the Indebtedness, unless applied by Lender for that purpose

under Section 7(e).

Finally, section 7(e) grants Fannie

Mae the right to apply the Impositions as payment on the Notes:

If an Event of Default has occurred and is continuing

Lender may apply any Imposition Deposits, in any amount and in any order as

Lender determines, in Lender’s discretion, to pay any Impositions or as a

credit against the indebtedness. . . .

The

Deeds of Trust expressly granted Fannie Mae a security interest on the payments

made by F. Court to the loan servicer to be held in escrow for taxes. Not only were the deposits themselves subject

to the security interest, the rents which were the source of the payments to

the loan servicer were also subject to a security interest by the terms of the

Deeds of Trust. If a borrower had

defaulted in the middle of a tax year after paying the first several monthly mortgage

payments with escrowed amounts for taxes, the Deeds of Trust granted a security

interest in the escrowed monies. And if

property values were re-assessed causing a tax refund, the Deed of Trust granted

a security interest in that refund. Based

on the plain language of the Deeds of Trust, we conclude that Fannie Mae had a security

interest first on the tax escrow account and then later on the tax refund. When Fannie Mae purchased the property at

foreclosure, any interest of the borrower in the refunds was extinguished under

section 43 of the Deeds of Trust.

Because

Comunidad took the Property subject to the existing Deeds of Trust, and those

Deeds of Trust granted a security interest in the rents, tax escrow accounts,

and tax refunds, the trial court did not err by interpreting the Deeds of Trust

as granting Fannie Mae a security interest on the tax refunds that were paid

from the rents and Imposition Deposits. See Lavigne , 186 S.W.3d at 628 (rights

of mortgagor’s vendee subject to rights of beneficiary of deed of trust).

We

next examine the legal effect of the Deeds of Trust. Comunidad raises two arguments to defeat the

language of the Deeds of Trust. First, Comunidad,

citing Winters v. Slover , asserts

that under the basic law of real property, a party cannot transfer or mortgage

more than it owns. 251 S.W.2d 726, 729

(Tex. 1952). Comunidad asserts that,

because F. Court was not a tax-exempt business entity, it did not have tax-exempt

status or own entitlement to a refund.

Thus, Comunidad concludes, Fannie Mae could not have acquired a security

interest in a tax-exempt status or refund that F. Court did not own. As summarized by Comunidad, “but for

Comunidad’s ownership of the real property and Comunidad’s tax exempt status,

there would be no refund for the parties to fight over.” Thus, Comunidad is implicitly arguing that

when a refund is due to the status of the property owner, rather than a re-assessment

of the value of the property, the refund is no longer collateral subject to the

lender’s security interest.

Comunidad, however, cites no

authority that its tax-exempt status is an ownership interest in real property

or somehow alters the ordinary interpretation of the Deeds of Trust in which a

tax refund is collateral subject to the lender’s security interest. The Deeds of Trust on their face do not

recognize this distinction. Rather, as

noted above, the rents, tax escrow accounts, and tax refunds were expressly

subject to Fannie Mae’s security interest.

There is no ownership in a party’s tax-exempt status; the ownership

dispute is between the parties who paid the monies into the tax escrow account and

the party that paid the taxes from that account, Fannie Mae. But that dispute is legally irrelevant

because Fannie Mae had a security interest in all the collateral, including the

tax escrow monies (“Imposition Deposits”), under the terms of the Deeds of

Trust. It also had a security interest

in all tax refunds (“all refunds or rebates of Impositions”).

And the reason for the

refund —Comunidad’s tax-exempt

status — is

not determinative of ownership; it is the ownership of the refund itself that

is in issue. Fannie Mae’s security

interest attached to the escrow account itself, not Comunidad’s tax-exempt

status or the cause of the tax refund.

Comunidad further argues

that it did not acquire the tax refund from F. Court and it could not have done

so because F. Court was not itself tax exempt.

But Comunidad acquired its interest in the property in December 2003,

and therefore the taxes had not been paid into escrow at that time. The tax refund in dispute arises out of taxes

paid after Comunidad purchased its interest.

Comunidad

also asserts that Fannie Mae lost its security interest on the monies in the

tax escrow account when it paid the taxes out of the Imposition Deposit

account. Fannie Mae, however, still has

a security interest on refunds under the express terms of the Deeds of

Trust. Comunidad relies on section 9.332

of the Texas Business and Commerce Code to support its contention that Harris

County took the tax payments free of any security interest. See

Tex. Bus.

& Com. Code Ann. § 9.332

(West 2002). However,

Comunidad raises this issue for the first time in its reply brief. This issue was not mentioned in Comunidad’s

motion for summary judgment, responses to Fannie Mae’s motion for summary

judgment, or opening brief. This issue,

therefore, is not preserved for review. See Tex.

R. Civ. P . 166a(c) (“Issues not expressly presented to the trial court

by written motion, answer or other response shall not be considered on appeal

as grounds for reversal.”); Rayl v.

Borger Econ. Dev. Corp. , 963 S.W.2d 109, 114 (Tex. App.—Amarillo 1998, no

pet.) (holding that party may not appeal

summary judgment in favor of opponent when grounds opposing summary judgment

asserted on appeal were not raised before trial court); see also Malcomson Rd. Util. Dist. v. Newsom , 171 S.W.3d 257, 279

(Tex. App.—Houston [1st Dist.] 2005, pet. denied) (declining to reach challenge

that was not raised in appellant’s opening brief).

We

overrule Comunidad’s first two issues. Because

the trial court’s judgment may be sustained on the basis discussed above, we do

not address Comunidad’s third issue, which presents an argument concerning an

alternative basis for the trial court’s judgment. See Ellis , 68 S.W.3d at 898 .

Fannie Mae’s Appeal

In a

single issue, Fannie Mae asserts that the trial court erred by refusing to

award its attorneys’ fees in this case.

Under

the Declaratory Judgments Act, a trial court “ may award costs and

reasonable and necessary attorney’s fees as are equitable and just.” Tex. Civ.

Prac. & Rem. Code Ann . § 37.009 (West 2008). The decision to grant or deny attorneys’ fees

under the Act is solely within the discretion of the trial court. Neeley

v. West Orange-Cove Consol. Indep. Sch. Dist. , 176 S.W.3d 746, 799 (Tex. 2005).

Because the grant or denial of attorneys’

fees is within the sound discretion of the trial court, its judgment will not

be disturbed on appeal in the absence of a clear showing that it abused its

discretion. Oake v. Collin County , 692 S.W.2d 454, 455 (Tex. 1985).

The trial

court’s decision to award attorneys’ fees is based on four factors: the fees

awarded must be reasonable and necessary, which are matters of fact, and they

must be equitable and just, which are matters of law. Tex.

Civ. Prac. & Rem. Code Ann . § 37.009; see Bocquet v. Herring , 972 S.W.2d 19, 21 (Tex. 1998). The trial court is not required to award

attorneys’ fees to the prevailing party. Moosavideen v. Garrett , 300 S.W.3d 791, 802 (Tex. App.—Houston

[1st Dist.] 2008, pet. denied) .

In exercising its discretion, the trial court may, as it did here, decline

to award attorneys’ fees to either party.

See Univ. of Tex. Health Sci. Ctr.

v. Mata & Bordini, Inc. , 2 S.W.3d 312, 319 (Tex. App.—San Antonio 1999,

pet. denied); United Interests, Inc. v.

Brewington, Inc. , 729 S.W.2d 897, 906 (Tex. App.—Houston [14th Dist.] 1987,

writ ref’d n.r.e.).

Within

this issue, Fannie Mae asserts several arguments. First, Fannie Mae contends, “As a general

rule, it is proper to make a fee award to a party who obtains a declaratory

judgment and the court is given broad discretion to make such an award.” As noted above, it is true that the trial

court has broad discretion in making an award and that it may be “proper” to do

so, if the award is equitable and just.

But just because it is “proper” to award fees does not make it

mandatory. There is no “general rule”

that a court should award attorneys’ fees.

As explained above, the statute makes no mention of a prevailing party;

an award of reasonable and necessary fees may be made if such an award is

“equitable and just.” See Moosavideen , 300 S.W.3d at 802 .

Second,

Fannie Mae contends that the trial court abused its discretion in failing to

award Fannie Mae its attorneys’ fees because “Comunidad asserted a competing,

albeit meritless, claim to the tax refund.”

This is essentially a variation on the “prevailing party” argument. Fannie Mae contends that because the trial

court denied Comunidad’s summary judgment and granted Fannie Mae’s it should be

entitled to an award of attorneys’ fees.

As noted above, the fact that Fannie Mae prevailed does not mean that it

is entitled to attorneys’ fees. See id.

Finally,

Fannie Mae contends that it “presented uncontroverted testimony of the

reasonableness and necessity of attorneys’ fees, both at the trial court level

and the estimated fees in the event of appeal.

This evidence is sufficient to support an award of attorney’s

fees.” Once again, the reasonableness

and necessity of attorneys’ fees is only part of the inquiry in the trial

court’s decision under the Declaratory Judgments Act. An award of reasonable and necessary fees is

only proper if the award is “equitable and just.” See id.

Fannie

Mae presents no argument and discusses no evidence concerning whether the trial

court’s decision to have each party pay their own attorneys’ fees is equitable

and just. [4] Fannie Mae has failed to show that it

established as a matter of law that an award of fees was equitable and

just. Based on the record before us, we

cannot conclude that Fannie Mae has shown that the trial court committed an

abuse of discretion. See Abraxas Petroleum Corp. v. Hornburg ,

20 S.W.3d 741, 762 (Tex. App.—El Paso 2000, no pet.) (“[I]in reviewing a trial

court’s decision to not award fees, we must examine whether the complaining

party established not only that the fees sought are reasonable and necessary,

but also that the award is equitable and just.”).

We

overrule Fannie Mae’s sole issue.

Conclusion

We affirm the judgment of the trial court.

Harvey

Brown

Justice

Panel consists of Justices

Jennings, Higley, and Brown.

[1] The

Deeds of Trust contain identical provisions concerning the material issues in

this appeal.

[2] Fannie Mae relies on third-party

servicers to service the mortgages that Fannie Mae acquires.

[3] Other parties joined the interpleader

action, but in its final judgment, the trial court declared that no other party

was entitled to any portion of the tax refund and dismissed those claims with

prejudice. Only Comunidad and Fannie Mae

have appealed.

[4] Fannie Mae does assert that prior to

Comunidad filing its claim for the interpleaded tax refund, Fannie Mae’s

counsel sent a letter explaining the legal basis for its claim to the tax

refund. Fannie Mae does not expressly

argue that setting out its claim prior to Comunidad filing suit makes the

subsequent attorneys’ fees incurred in this suit “equitable and just.” Furthermore, correspondence between opposing

parties before litigation occurs is common.

We decline to hold that such correspondence requires a court to find

subsequent fees are equitable and just.