Senior Care Living VI v. Preston Hollow Cap.

• Docket Number: 01-21-00602-CV
• Decision Date: 18 June 2024
• Citation: Senior Care Living VI v. Preston Hollow Cap., 695 S.W.3d 778 (Tex. App. 2024)
• Parties: SENIOR CARE LIVING VI, LLC and Mark C. Bouldin, Appellants v. PRESTON HOLLOW CAPITAL, LLC, UMB Bank N.A., and TMI Trust Company, Appellees
• Court: Texas Court of Appeals

695 S.W.3d 778

SENIOR CARE LIVING VI, LLC and Mark C. Bouldin, Appellants

v.PRESTON HOLLOW CAPITAL, LLC, UMB Bank N.A., and TMI Trust Company, Appellees

NO. 01-21-00602-CV

Court of Appeals of Texas, Houston (1st Dist.).

Opinion issued May 14, 2024

Rehearing Denied June 18, 2024

On Appeal from the 458th District Court, Fort Bend County, Texas, Trial Court CaseNo. 19-DCV-265897

David M. Gunn, Joshua S. Smith, Beck Redden LLP, 1221 McKinney, Suite 4500, Houston, TX 77010-2010, Christopher L. Halgren, Marcus V. Eason, McGinnis Lochridge LLP, 609 Main Street, Suite 2800, Houston, Texas 77002, Kevin M. Beiter, McGinnis Lochridge LLP, 1111 W 6th StSte. 400 Bldg. B, Austin, Texas 78703, for Appellants.

Craig T. Enoch, Melissa A. Lorber, Enoch Kever PLLC, 7600 N. Capital of Texas Hwy., Building B, Suite 200, Austin, Texas

78731, Nathan F. Coco, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., 666 Third Avenue, New York, NY 10017, Jeff Joyce, JOYCE + MCFARLAND, LLP, 712 Main St., Suite 1500, Houston, Texas 77002, for Appellees.

Panel consists of Justices Hightower, Rivas-Molloy, and Farris.

OPINION ON REHEARING

April L. Farris, Justice

AppellantMark C. Bouldin has filed a motion for rehearing of our November 30, 2023, opinion and judgment.Additionally, appelleePreston Hollow Capital, LLC("Preston Hollow") has filed a motion for rehearing and a motion for en banc reconsideration.We deny the motions for rehearing, withdraw our November 30, 2023 opinion and judgment, and issue this opinion and judgment in their stead.¹

This case arises out of financing arrangements for the construction of an assisted living facility in Sugar Land, Texas.AppellantSenior Care Living VI, LLC("Senior Care") borrowed proceeds from the sale of bonds to construct the facility, and it signed a series of promissory notes reflecting this debt.Bouldin guaranteed payment of the notes.

After appelleesUMB Bank N.A. and TMI Trust Company, the purported successor trustees under the relevant documents, threatened foreclosure following Senior Care’s alleged default on the promissory notes, Senior Care sought a temporary restraining order and asserted claims for affirmative relief.Preston Hollow, the "Noteholder Representative" and "Series 2017A Majority Representative" under the relevant documents, intervened and sought recovery of the outstanding debt from Senior Care and from Bouldin on his guaranty.

The trial court rendered summary judgment that UMB Bank and TMI Trust Company were properly appointed as successor co-trustees.The trial court also dismissed two of Senior Care’s affirmative claims pursuant to a Rule 166(g) pretrial management order.After a bench trial, the trial court ruled for Preston Hollow on its claim for breach of the "Bond Documents," finding that Senior Care had defaulted, the debt had been properly accelerated, and Bouldin was liable under his guaranty agreement for the accelerated debt on the promissory notes.The trial court entered judgment against Senior Care and Bouldin, jointly and severally, for $52,597,040.06 in outstanding principal on the accelerated debt and pre-judgment interest, $250,000 in trial-level attorney’s fees, and $520,000 in conditional appellate attorney’s fees.The court also appointed a post-judgment receiver for Senior Care with authority to sell the property.

[1] Both Senior Care and Bouldin filed notices of appeal.Senior Care raises six issues on appeal and contends that (1)the trial court erred in granting summary judgment that UMB Bank and TMI had been properly appointed as co-Master Trustees; (2) Preston Hollow lacked capacity to sue Senior Care because Preston Hollow had not provided the required notice to the Master Trustee to do so; (3) Preston Hollow failed to prove that Senior Care was liable for breach of the "Bond Documents" because, among other reasons, Preston Hollow failed to prove valid acceleration of the underlying debt; (4) Preston Hollow failed to prove the amounts due under the promissory notes; (5) Preston Hollow was not entitled to a receivership because it did not plead for this relief;² and (6)the trial court erred by dismissing Senior Care’s claims for conversion and money had and received pursuant to a Rule 166(g) pretrial management order.

Bouldin raises five issues on appeal and contends that (1) Preston Hollow lacked the capacity to sue Bouldin on his guaranty agreement; (2) Preston Hollow cannot recover under the Master Indenture because that document had been amended, but Preston Hollow did not offer the amended document into evidence; (3) the evidence does not support the award of damages; (4) the "conditional" assertion of claims by UMB Bank and TMI do not support the judgment; and (5)the trial court erred by requiring Bouldin to pay attorney’s fees.

We affirm in part, reverse in part, and remand for further proceedings.

Background

A.The Transaction to Finance Construction of an Assisted Living Facility

Mark Bouldin is the president and owner of Senior Care Ownership 3, Inc., the entity that manages Senior Care.Bouldin is a real estate developer who has developed numerous projects over the last twenty years, including several assisted living facilities for seniors throughout the southern United States.

Around 2016, an engineer who works with Bouldin identified a property in Sugar Land that he believed would be ideal for a new assisted living facility called Inspired Living at Missouri City.Throughout the initial stages of development, Bouldin was also having discussions with Piper Jaffray, a bond underwriter, about the possibility of issuing bonds to raise funds to acquire the land and develop the facility.Eventually, an agreement was reached concerning the financing of the project through the issuance and sale of bonds, and the relevant parties executed a series of documents that set out the various rights and obligations.

On January 1, 2017, Woodloch Health Facilities Development Corporation("Woodloch") issued four tiers of over $44 million in bonds: (1) $30,320,000 in tax-exempt Series 2017A-1 bonds; (2) $2,580,000 in taxable Series 2017A-2 bonds; (3) $2,025,000 in taxable Series 2017A-3 bonds; and (4) $9,750,000 in subordinate Series 2017B bonds.Woodloch entered into a Trust Indenture and Security Agreement ("the Bond Indenture") with Branch Banking and Trust Company("BB&T"), which agreed to serve as the Bond Trustee.Woodloch and BB&T are the only signatories to the Bond Indenture.Preston Hollow, which purchased over $21 million in Series 2017A-1 bonds, was named the "Series 2017A Majority Representative," a position that had certain rights under the Bond Indenture, but it did not sign this document.

The Bond Indenture contemplated that Woodloch would simultaneously enter into a Loan Agreement with Senior Care, under which Woodloch would loan the proceeds from the sale of the bonds to Senior Care.The Bond Indenture authorized the sale of the bonds, authorized the issuance of promissory notes ("the Notes") to secure repayment of the loan to Senior Care, and assigned most of Woodloch’s rights as issuer of the bonds to BB&T as the Bond Trustee.The rights assigned to BB&T included Woodloch’s right to receive loan payments from Senior Care.

The Bond Indenture set out the interest rate and maturity date for each series of bonds.This document also directed BB&T to establish several different funds with specific purposes for the bond proceeds and stated that all proceeds "shall be held by the Bond Trustee in trust and shall be applied only in accordance with the provisions of this Bond Indenture."The Bond Indenture contained provisions describing what constitutes an "Event of Default," and it allowed BB&T to accelerate payment of the unpaid principal and interest on the bonds and to exercise remedies upon default.The Bond Indenture also contained provisions authorizing the appointment of co-Bond Trustees, allowing BB&T to resign as the Bond Trustee, and authorizing the appointment of a successor Bond Trustee.

On the same date that Woodloch and BB&T signed the Bond Indenture, Woodloch and Senior Care entered into a Loan Agreement.In this agreement, Woodloch agreed to use the proceeds from the sale of the bonds to fund a loan to Senior Care by depositing the proceeds with BB&T, as provided in the Bond Indenture.Senior Care agreed to use the loan proceeds to "pay a portion of the costs of acquiring, constructing, developing, furnishing[,] and equipping" the assisted living facility.It also agreed to "make payments sufficient to pay the principal of, premium, if any, and interest on the Series 2017 Bonds when due."Senior Care agreed to execute a series of promissory notes to secure payment of the loan, deliver the Notes to BB&T, and make all payments required by the Notes.

In the Loan Agreement, Senior Care also agreed to promptly pay all lawful taxes assessed against the property; promptly pay or satisfy all indebtedness, claims, and demands against it; and ensure that no liens attached to the property.The Loan Agreement defined several "Events of Default," including Senior Care’s failure to make any principal or interest payment on the Notes, Senior Care’s failure to perform or comply with any covenant contained in the Loan Agreement, and the occurrence of any "Event of Default" under another bond document.The agreement allowed BB&T, upon the occurrence of an Event of Default, to declare all payments due on the Notes to be immediately due and payable.

Senior Care signed four promissory notes, one for each of the bond series issued by Woodloch.Each of the Notes required Senior Care to make interest payments on June 1 and December 1 of each year, beginning in 2017 and ending in the year the respective series of bonds matured.The Notes corresponding to the Series 2017A-2 bonds and the Series 2017B bonds required Senior Care to make yearly principal payments beginning December 1, 2021.For the Series 2017A-1 Note, the yearly principal...