Sky View at Las Palmas, LLC v. Mendez

• Decision Date: 01 June 2018
• Docket Number: No. 17–0140,17–0140
• Citation: 555 S.W.3d 101
• Parties: SKY VIEW AT LAS PALMAS, LLC and Ilan Israely, Petitioners, v. Roman Geronimo Martinez MENDEZ and San Jacinto Title Services of Rio Grande Valley, LLC, Respondents
• Court: Texas Supreme Court

555 S.W.3d 101

SKY VIEW AT LAS PALMAS, LLC and Ilan Israely, Petitioners,

v.Roman Geronimo Martinez MENDEZ and San Jacinto Title Services of Rio Grande Valley, LLC, Respondents

No. 17–0140

Supreme Court of Texas.

Argued March 20, 2018

OPINION DELIVERED: June 1, 2018

Rehearing Denied September 28, 2018

Murry B. Cohen, Akin Gump Strauss Hauer & Feld LLP, Houston, TX, Thomas R. Phillips, Baker Botts L.L.P., Austin, TX, Donald O. Walsh, Fishman Jackson PLLC, Joel Bailey, Hedrick Kring PLLC, Patrick Gregory O'Brien, Akin Gump Strauss Hauer & Feld, LLP., Dallas, TX, for Petitioners.

Ricardo Pumarejo Jr., Pumarejo Law, Terry Lane Scarborough, Hance Scarborough, LLP, Austin, TX, Michael E. Flanagan, Law Office of Michael E. Flanagan, Raymond L. Thomas Jr., Ray Thomas, PC, McAllen, TX, for Respondent Roman Geronimo Martinez Mendez.

Rafael Garcia Jr., Thronton Biechlin Segrato Reynolds & Guerra, McAllen, TX, Vaughan E. Waters, Thornton Biechlin Reynolds & Guerra LC, San Antonio, TX, for Respondent San Jacinto Title Services of Rio Grande Valley, LLC.

Justice Green delivered the opinion of the Court.

In this case, we consider whether the trial court erred in failing to apply the one-satisfaction rule and award a nonsettling defendant settlement credits. We hold that the one-satisfaction rule applies to this case, and the trial court therefore erred in denying the nonsettling defendant the settlement credits. We reverse the judgment of the court of appeals and remand the case to that court for proceedings consistent with this opinion.

I. Background

In 2007, Ilan Israely and Abraham Gottlieb formed Sky View at Las Palmas, L.L.C. for the purpose of purchasing and developing land in Hidalgo County. In March 2008, Sky View acquired a tract of land containing 38.416 acres in Hidalgo County (the Property), from M Construction, Ltd., the president of which was Hugo Martinez (Hugo). Sky View purchased the Property for $6.5 million, and it financed $4 million of the purchase price through a Promissory Note and Deed of Trust with Compass Bank¹ (the purchase loan). Sky View and M Construction also entered into a construction agreement in which M Construction would serve as the project's general contractor.

After obtaining the purchase loan, Sky View, through Israely and Gottlieb, sought a construction loan with Compass Bank for $9 million, but the bank said it would take months to complete the due diligence for this loan. To keep the project moving while it waited for this loan, Sky View sought a second construction loan for approximately $1.5 million. Israely, through a connection made by Hugo, approached Romano Geronimo Martinez Mendez (Martinez) about providing the financing for this second construction loan. There is evidence that Martinez was provided with Israely's personal financial statements indicating Israely's net worth to be approximately $35 million dollars.

To help facilitate this loan agreement with Sky View and Israely, Martinez retained the law firm of Kittleman, Thomas & Gonzales, LLP (Kittleman) to draft the loan documents. Martinez also retained San Jacinto Title Services of Rio Grande Valley, LLC (San Jacinto) to close the transaction and serve as the title company. San Jacinto was an agent authorized to issue title insurance policies for Fidelity National Title Insurance Company (Fidelity). Martinez agreed to make this second construction loan to Sky View (the Martinez loan), which consisted of Martinez's loan of $1.275 million to Sky View and Sky View's promise to repay the loan within six months at 18% interest (the Note), secured by a lien on the Property. This was the second lien on the Property behind Compass Bank's lien. Israely and Gottlieb also agreed to each provide a personal guaranty of the Martinez loan.

Part of this lawsuit arises out of the closing transaction of the Martinez loan. Kittleman drafted the loan documents but allowed Carmen Solis, an escrow officer with San Jacinto, to oversee the loan closing entirely. To finalize the loan, Solis sent the loan documents to Gottlieb by overnight mail, including both Gottlieb's and Israely's personal guaranty agreements. These documents were sent back to Solis fully executed, and Solis notarized them, falsely stating that they were signed in her presence.

In October 2008, Sky View defaulted on the Note and the parties began informal negotiations regarding its repayment. Over a year later, the dispute had not been resolved, and Martinez retained the law firm of Walker & Twenhafel, L.L.P (Walker) to assist in recovering on the Note. In May 2010, Martinez filed suit against Sky View, Israely, and Gottlieb (the Sky View defendants), seeking damages for "the outstanding balance of the Note and Guaranty Agreements" and attorney's fees. Martinez claims Walker never advised him during this time that the first lienholder—Compass Bank—could foreclose on the Property, which would adversely affect his lien interest and a claim under his title insurance policy with Fidelity. In October 2011, after Sky View had stopped making payments to Compass Bank on the purchase loan, Compass Bank foreclosed on the Property, which Martinez claims "effectively wip[ed] out" his secondary interest. Three months after the foreclosure, Fidelity denied Martinez's claim under his title insurance policy.

Over a nearly four-year period of litigation, Martinez added Kittleman, San Jacinto, and Fidelity as defendants in his suit against the Sky View defendants, alleging various causes of action based on the closing transaction on the Martinez loan.² Martinez also later added Walker as a defendant, alleging several causes of action based on its representation during the litigation with Sky View.³ Martinez eventually settled with each of these four added defendants.⁴

In April 2014, Martinez proceeded to trial against the Sky View defendants based on the following causes of action: breach of the Martinez loan Note and guaranty agreements, fraud, promissory estoppel, quantum meruit, ratification/adoption, and conspiracy. The only questions submitted to the jury related to the breach-of-contract and fraud claims, and Martinez submitted only one damages question:

What sum of money, if any, if paid now in cash, would fairly and reasonably compensate Martinez for his damages, if any, that resulted from either (1) Sky View's failure to comply with the Note; (2) Gottlieb's failure to comply with the guaranty agreement; (3) Israely's failure to comply with the guaranty agreement; or (4) Israely's fraud?

The jury found that: (1) Israely and Gottlieb authorized Sky View's execution of the Martinez loan Note; (2) Israely and Gottlieb both ratified Sky View's execution of the Note; (3) Sky View failed to comply with the terms of the Note; (4) Gottlieb failed to comply with his guaranty agreement; (5) Israely authorized another to execute the guaranty agreement on his behalf and ratified the guaranty agreement; (6) Israely failed to comply with the guaranty agreement; (7) Israely committed fraud on Martinez; and (8) Martinez incurred damages of $2,665,832.72—the same amount Martinez claimed was due on the Note. The jury also awarded Martinez attorney's fees related to trial, appeals, and any post-judgment efforts to collect the judgment. Martinez elected to recover on the breach-of-contract claim.

In response to Martinez's motion for judgment, Sky View and Israely together asserted that under the one-satisfaction rule, they were entitled to offset the final judgment by the amounts the four settling defendants paid to Martinez, plus applicable interest.⁵ However, the trial court rendered judgment against the Sky View defendants, jointly and severally, for the full jury award—$2,665,832.72—in damages and prejudgment interest, plus trial attorney's fees of $574,062 and contingent appellate attorney's fees of $200,000. Sky View and Israely again argued in post-judgment motions that they were entitled to settlement credits, and they requested that Martinez produce those settlement documents.⁶ Sky View and Israely eventually introduced an affidavit from their counsel as to the amount and timing of each of Martinez's settlements, and Martinez's counsel admitted those same amounts to the trial court in a hearing on the motions. Martinez did not file any responses or offer evidence that the Sky View defendants were not entitled to settlement credits. The trial court never ruled on any of Sky View and Israely's post-judgment motions, so their request for settlement credits was denied by operation of law. See TEX. R. CIV. P. 329b(e), (g). Sky View and Israely appealed.

The court of appeals affirmed the trial court's denial of settlement credits. 548 S.W.3d 18, ––––, 2017 WL 219122 (Tex. App.—Corpus Christi–Edinburg 2017, pet. granted). After purportedly examining "Martinez's causes of action, allegations, and the injuries he claimed" against each of the settling defendants, the court of appeals held that Martinez's claims against Sky View and Israely were "independent of the other injuries Martinez alleged against the settling defendants." Id. at 23. It stated:

Although Martinez's claims against each of the seven defendants in this case arise out of a common set of underlying facts and sequence of events, ... the damages for which the jury found Sky View and Israely liable are not part of a "single, indivisible injury," as [Sky View and Israely] contend.

Id. at 25. The court of appeals also held that there was factually sufficient evidence to support the amount of Martinez's attorney's fees. Id. at ––––. Sky View and Israely appealed, and we granted their petition for review. 61 Tex. Sup. Ct. J. 332 (Feb. 16, 2018). For ease of reference, we refer to Sky View and Israely together as "Sky View."

II. Analysis

A. The One–Satisfaction Rule

This case concerns the availability of settlement credits under the one-satisfaction rule. "Under the one satisfaction rule, a plaintiff is entitled to only one recovery for any damages suffered."

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