Atlas IDF v. NexPoint Real Estate Partners

FILED IN
BUSINESS COURT OF TEXAS
BEVERLY CRUMLEY, CLERK
ENTERED
5/13/2025
2025 Tex. Bus. 16

The Business Court of Texas,
1st Division

ATLAS IDF, LP, Plaintiff §
§
V. §
§
NEXPOINT REAL ESTATE § Cause No. 25-BC01B-0004
PARTNERS, LLC F/K/A HCRE §
PARTNERS, LLC AND NANCY §
DONDERO, as Trustee of the §
Dugaboy Investment Trust, §
Defendants

═══════════════════════════════════════
OPINION
═══════════════════════════════════════

Syllabus *0F

This opinion addresses Texas Government Code Chapter 25A’s use of “qualified
transaction,” including (i) when an action “aris[es] out of” a qualified
transaction; (ii) the relevant period for determining the aggregate value of a
qualified transaction; and (iii) the burden for establishing the same. The opinion
also addresses what forms of “interest” are excluded in determining the amount
in controversy under this chapter.

* This syllabus is provided for the reader’s convenience; it is not part of the court’s opinion;
and it is not legal authority.
[¶ 1] Because this court has “a duty to examine [its] own jurisdiction,”

it requested briefing regarding its jurisdiction over this case considering

Government Code § 25A.001(14)’s definition of “qualified transaction.” See

Guillen v. U.S. Bank, N.A., 494 S.W.3d 861, 865 (Tex. App.—Houston [14th

Dist.] 2016, no pet.). Having considered the parties’ pleadings, submissions,

arguments, responses, and evidence, the court concludes that it has

jurisdiction because this action arises out of a qualified transaction and the

amount in controversy exceeds $10 million.

[¶ 2] Here, the assignment of the two promissory notes at issue is a

qualified transaction because a party to the transaction (plaintiff) received

aggregate consideration of at least $10 million. And the “amount in

controversy” includes a promissory note’s contracted-for interest.

I. BACKGROUND

[¶ 3] The court takes these facts from Plaintiff’s Original Petition (Pet.)

and supporting exhibits unless otherwise indicated:

A. The Parties

[¶ 4] Plaintiff Atlas IDF, LP is a Delaware limited partnership. 1
1F

1
Pet. ¶ 3.

OPINION AND ORDER, Page 2
[¶ 5] Defendants are NexPoint Real Estate Partners, LLC f/k/a/ HCRE

Partners, LLC, a Delaware limited liability company, and Nancy Dondero, as

Trustee for The Dugaboy Investment Trust. 2 2F For convenience, the court

refers to NexPoint as HCRE.

[¶ 6] Highland Capital Management, LP is not a party to this action, but

its interactions with Atlas and HCRE give rise to this lawsuit.

B. The Underlying Transactions

[¶ 7] Atlas sued to collect on two demand promissory notes HCRE

executed (the HCRE Notes) and Dondero’s related guaranty. Highland is the

named payee in both notes.

[¶ 8] HCRE executed the first HCRE Note on May 7, 2014. That note

was for $2.3 million in principal, together with interest at 9% per annum

compounded annually. 3 3F

[¶ 9] HCRE executed the second HCRE Note on May 27, 2014. That

note was for $5 million in principal, together with 9% interest per annum,

compounded annually. 4 4F

2
Pet. ¶ 4–5.
3
Pet. ¶ 10; Pet. Ex. 1.
4
Pet. ¶ 11; Pet. Ex. 2.

OPINION AND ORDER, Page 3
[¶ 10] On October 12, 2016, Highland—among other things—assigned

the HCRE Notes to Atlas pursuant to a Purchase and Sale Agreement (PSA). 5 5F

[¶ 11] The PSA memorializes two earlier transactions. First, in 2014,

Highland received from third parties two additional notes with aggregate

principal amounts of $10 million (the Third-Party Notes). 66F

[¶ 12] Second, on September 26, 2016, Highland transferred the Third-

Party Notes to Atlas. In exchange, Atlas paid over $1 million to Highland and

delivered to it two “seller notes,” with an aggregate principal amount of about

$9.7 million when they were executed (the Third-Party Seller Notes). 7 7F

[¶ 13] In total, the PSA produced these transfers:

• Atlas received the HCRE Notes from Highland, 8 and Atlas’s debt
8F

under the Third-Party Seller Notes was terminated. 9 9F

• Highland received the Third Party Notes back from Atlas, 10 and 10F

received a new seller note (HCRE Seller Note) from Atlas. 11 11F

5
Pet. ¶ 12; Pet. Ex. 3 (PSA).
6
PSA, Ex. A & Ex. B.
7
PSA at 1–2; PSA Ex. E & Ex. F.
8
PSA § 2(b)
9
PSA § 2(a).
10
PSA § 2(a).
11
PSA § 2(b).

OPINION AND ORDER, Page 4
[¶ 14] As of January 31, 2025, HCRE owed $7.3 million in principal and

around $6.4 million in interest, for a combined total of $13.7 million, on the

HCRE Notes. 12 Atlas sues to recover those amounts from defendants.
12F

C. Parties’ Arguments

[¶ 15] The court asked the parties to address the court’s jurisdiction

considering Government Code § 25A.001(14)’s “qualified transaction”

definition.

[¶ 16] The court later asked for the HCRE Notes’ balances on October

12, 2016, the PSA’s effective date. The parties generally agreed that the notes

had an aggregate combined principal and interest of about $8.9 million on that

date. 13
13F

[¶ 17] The court also asked whether the PSA could be considered a

“qualified transaction.”

[¶ 18] Atlas argued that jurisdiction exists because a § 25A.001(14)

“qualified transaction” includes where a party to the transaction “is entitled

to receive [] consideration with an aggregate value of at least $10 million” and

12
Pet. ¶s 17–18.
13
Defendants’ counsel noted that PSA § 4(h) represented that the HCRE Notes’ value to be
around $7.5 million but could not explain the difference.

OPINION AND ORDER, Page 5
is not limited to the HCRE Notes’ principal amounts. 14 It further argued that
14F

the PSA was a transaction entitling Atlas to receive in excess of $10 million

from HCRE, as evidenced by the nearly $14 million demand in this case. 15 15F

Finally, Atlas urged that “qualified transaction” refers to the transaction’s

aggregate value when made, including principal and anticipated interest. 16 16F

Because the HCRE Notes are demand notes, Atlas urged us to credit its good-

faith pleading allegations of their anticipated value. 17 17F

[¶ 19] Atlas later reiterated its premise that “consideration” includes

anticipated interest as part of the demand notes’ bargain and that the court

should accept the allegations in its pleadings based on precedents from the

Texas Supreme Court and this court. 18 18F Atlas attached as evidence its

calculations and emails with the court demonstrating the parties’ general

14
Atlas’s 4/9/2025 Brief on the Court’s Jurisdiction (Atlas’s Br.) at 3.
15
Atlas’s Br. at 7.
16
Atlas’s Br. at 9–10.
17
Atlas’s Br. 11.
18
Atlas’s 4/21/2025 Response on the Court’s Jurisdiction (Atlas’s Resp.) at 4–9 (citing
Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554 (Tex. 2000) and C Ten 31 LLC ex. rel.
SummerMoon Holdings LLC v. Tarbox, 2025 Tex. Bus. 1, ¶ 51, 708 S.W.3d 223, 243 (3rd
Div.)).

OPINION AND ORDER, Page 6
agreement that the HCRE Notes had a combined outstanding balance of

around $8.9 million at the time the PSA was executed. 19 19F

[¶ 20] HCRE agreed that a “qualified transaction” is determined based

on the bargain when made, which was less than $10 million on the HCRE

Notes because they had yet to accrue any interest. 20 HCRE also urged that the
20F

amount in controversy requirement failed because this was not an action

exceeding $10 million “excluding interest.” 21 21F

[¶ 21] HCRE further argued that the PSA is not a “qualified transaction”

because it is not the “lending transaction at issue.” 22 HCRE also reiterated
22F

its argument that the statute’s unambiguous language prohibits including

interest due under the notes when determining the amount in controversy. 23 23F

II. DISCUSSION

A. Applicable Standards

[¶ 22] Atlas pled subject matter jurisdiction based on a Government

Code § 25A.004(d) “qualified transaction.” So, for jurisdiction to exist, (i)

19
Atlas’s Resp. at 1, Ex. 1 & Ex. 2.
20
HCRE’s 4/14/2025 Brief on Jurisdiction (HCRE’s Br.) at 2–3.
21
HCRE’s Br. at 3–4.
22
HCRE’s 4/21/2025 Response on the Court’s Jurisdiction (HCRE’s Resp.) at 1–5.
23
HCRE’s Resp. at 1, 6–8.

OPINION AND ORDER, Page 7
the action must arise out of a qualified transaction (id. at § 25A.004(d)(1)) and

(ii) the amount in controversy must exceed $10 million, excluding interest,

statutory damages, exemplary damages, penalties, attorney’s fees, and court

costs (id. at § 25A.004(d)).

[¶ 23] The court asked the parties to address the subject matter

jurisdiction question. We analyze their submissions using plea to the

jurisdiction standards.

[¶ 24] A plea to the jurisdiction is a procedural vehicle to challenge a

trial court’s subject matter jurisdiction. See Texas Dep’t of Parks & Wildlife v.

Miranda, 133 S.W.3d 217, 225–6 (Tex. 2004) (sovereign immunity

challenge). Whether a court has subject matter jurisdiction is a question of

law. Id. at 226.

[¶ 25] When a plea challenges pleadings, courts determine whether the

pled facts demonstrate the court’s jurisdiction to hear the cause. Id. In that

context, courts construe the pleadings liberally in the pleader’s favor and look

to the pleader’s intent. Id.

[¶ 26] If a plea challenges the existence of jurisdictional facts, the court

must consider relevant evidence. Id. at 227. If the evidence creates a fact

question regarding the jurisdictional issue, the court cannot grant the plea and

OPINION AND ORDER, Page 8
the fact finder will resolve the fact issue. Id. at 227–28. However, if the

evidence fails to raise a fact question on the jurisdictional issue, the trial court

rules on the plea as a matter of law. Id. at 228. This standard generally mirrors

the Texas summary judgment standards. Id.

B. “Qualified Transaction”

1. Atlas alleged an action arising out of a qualified transaction.

[¶ 27] A qualified transaction means:

a transaction . . . under which a party: (A) pays or receives, or
is obligated to pay or is entitled to receive, consideration with
an aggregate value of at least $10 million; or (B) lends,
advances, borrows, receives, is obligated to lend or advance, or
is entitled to borrow or receive money or credit with an
aggregate value of at least $10 million.

TEX. GOV’T CODE § 25A.001(14).

[¶ 28] Atlas pled that jurisdiction exists because its claims arise out of a

qualified transaction. 24 The court concludes that the PSA is a qualified
24F

transaction because Atlas would not have its claims in the suit but for the PSA.

[¶ 29] Specifically, courts interpret “arising out of” as denoting a broad

causal relationship—akin to “but for” causation instead of the narrower and

limiting linkage required of “proximate” causation. See Pinto Tech. Ventures,

24
Pet. ¶ 7.

OPINION AND ORDER, Page 9
L.P. v. Sheldon, 526 S.W.3d 428, 437–40 (Tex. 2017) (forum-selection clause:

“arising out of” has “broad significance” and “but for” causation suffices,

even without direct or proximate causation); In re Swift Transp. Co., Inc., 279

S.W.3d 403, 408 (Tex. App.—Dallas 2009, orig. proceeding) (arbitration

clause: “arising out of or relating to” satisfied when injury would not have

occurred “but for” agreement); Utica Nat’l Ins. Co. of Texas v. Am. Indem. Co.,

141 S.W.3d 198, 203 (Tex. 2004) (insurance policy: “arising out of” means

simply a “casual connection or relation”).

[¶ 30] Here, Atlas’s only alleged basis to sue HCRE on the HCRE Notes

is that Highland assigned them to Atlas. 25 But for that assignment, Atlas
25F

could not bring this suit. Accordingly, we conclude that the PSA is a “qualified

transaction” if it meets the $10 million aggregate value requirement. TEX.

GOV’T CODE § 25A.001(14)(A), (B).

2. The PSA has an aggregate value of at least $10 million.

a. Aggregate value is measured at the time of transaction.

[¶ 31] The parties agree that a potential qualified transaction’s aggregate

value is measured at the time of transaction. 26 Both sides rely on Goosehead
26F

25
Pet. ¶ 12.
26
Atlas’s Br. at 9; HCRE’s Br. at 2.

OPINION AND ORDER, Page 10
Ins. Agency, LLC v. Williams Ins. and Consulting, Inc., 533 F.Supp.3d 367, 376

(N.D. Tex. 2020), which construed “qualified transaction” in TEX. BUS. &

COM. § 271.001. But for a different threshold dollar amount, the “qualified

transaction” definition under that code is essentially identical to

§ 25A.001(14).

[¶ 32] Focusing on the statute’s meaning of “consideration,” the

Goosehead court held that “the plain meaning of ʻconsideration’ . . . plac[es]

focus on the time of transaction.” Id. at 380. And “[c]onsideration focuses on

the bargain—not the outcome or actual performance.” Id. Thus, the court

concluded that the “relevant time to value the transaction is at the time it was

entered, rather than the time of dispute.” Id. at 376.

[¶ 33] We agree regarding § 25A.001(14)(A)’s use of “consideration.”

And § 25A.001(14)(B)’s terms “lends, advances, borrows, receives,” or “is

obligated to lend or advance, or is entitled to borrow or receive” also focus on

when the transaction was made. Because § 25A.004(d)(1) must “aris[e] out

of” a qualified transaction, that transaction must exist prior to the action. So,

§ 25A.001(14)’s “qualified transaction” definition looks at when the

transaction happened, and § 25A.004(d)’s amount in controversy requirement

looks to when the suit is filed.

OPINION AND ORDER, Page 11
b. Plaintiff’s uncontroverted pleadings are determinative.

[¶ 34] The HCRE Notes are demand notes. 27 The time of payment on a
27F

demand note is not definite when it is made and thus neither is the total

amount of interest that will be due on the note. TEX. BUS. & COM. CODE §

3.108. But the payee’s expected interest on one is part of its consideration for

the note. See Goosehead, 533 F. Supp. 3d at 380 (“[T]he value agreed to by

the parties in advance constitutes the consideration.”) (emphasis removed).

Good faith, uncontroverted allegations of that value are determinative in the

jurisdictional analysis. See Miranda, 133 S.W.3d at 226–27.

c. Application to the PSA

[¶ 35] We conclude that, as a party to the PSA, Atlas received

consideration with an aggregate value of at least $10 million for two reasons.

[¶ 36] First, before considering the Third-Party Notes’ termination

value, the consideration Atlas received on October 12, 2016, by receiving the

HCRE Notes reasonably could have been valued above their combined

aggregate principal and accrued interest as of that date of $8.9 28 or $7.5 29
28F 29F

27
Including the HCRE Notes, the Third-Party Notes, and the various seller notes.
28
Atlas’s Reply at 1, Ex. 1, and Ex. 2.
29
PSA at § 4(h).

OPINION AND ORDER, Page 12
million. That is, the parties could have reasonably “placed value on [the]

transaction” higher than the then-current value of the notes because of the

expectation that the amount of interest would grow before there was a payment

demand. See Goosehead, 533 F.Supp.3d at 380.

[¶ 37] We credit Atlas’s allegations to that effect because it pled that this

action arises out of a qualified transaction with an aggregate value of at least

$10 million, and HCRE has not provided any contrary evidence. 30 The only
30F

evidence Atlas or defendants provided on this issue is two letters from early-

2025 suggesting that the present value of the HCRE Notes was between $0

and $500,000 because of the legal costs and time required to collect on

them. 31 However, those letters are not evidence challenging the value placed
31F

on the notes by the parties to the PSA in October 2016, nine years earlier.

[¶ 38] Regardless, Atlas’s PSA consideration also included the Third-

Party Seller Notes’ value of around $9.7 million, 32 because Highland’s
32F

termination of those notes eliminated Atlas’s related debts. Thus, Atlas’s

consideration (what it received) totaled around at least $18.6 or $17.2 million

30
Pet. ¶ 7.
31
HCRE’s Br. Exs. 1 & 2.
32
PSA at 1–2.

OPINION AND ORDER, Page 13
based on the HCRE Notes’ present value on October 12, 2016 (without

interest), plus the value of the terminated Third-Party Seller Notes ($9.7M +

$8.9M or $7.5M).

[¶ 39] Thus, the aggregate value of consideration Atlas received is at

least $10 million and the PSA is a “qualified transaction.”

C. Amount in Controversy

[¶ 40] HCRE does not challenge that when the suit was filed the HCRE

Notes’ aggregate principal and interest exceeded $10 million. 33 Thus, the
33F

amount in controversy requirement is met if interest is included. 34 34F

[¶ 41] However, HCRE argues that only the combined principal amounts

of $7.3 million may be considered because the statute grants jurisdiction only

if “the amount in controversy exceeds $10 million, excluding interest,

statutory damages, exemplary damages, penalties, attorney’s fees, and court

costs.” TEX. GOV’T CODE § 25A.004(d) (emphasis added). That is, HCRE

urges that accrued interest due on the notes’ terms does not count. We

disagree for two reasons.

33
Pet. § 18.
34
See HCRE’s Br. at 3 (“[T]his Court lacks jurisdiction because the amount in controversy
does not exceed $10 million when interest is excluded.”) (emphasis original).

OPINION AND ORDER, Page 14
[¶ 42] First, we conclude that “jurisdiction is determined by the amount

recoverable under the pleadings at the commencement of the suit.” See Ritchie

v. Am. Sur. Co. of N. Y., 145 Tex. 422, 432 (1946); Nix v. Nix, 797 S.W.2d 64,

65 (Tex. App.—Corpus Christi 1990, no writ) (“The amount in controversy at

the time of filing a pleading is the determining sum for jurisdictional

purposes.”); supra ¶ 33.

[¶ 43] Second, we conclude that interest accrued on the terms of a

promissory note before filing suit is not the type of “interest” § 25A.004(d)

excludes. Rather, the entire principal and interest due on the HCRE Notes

represents the amount in controversy because “[i]t has long been the law that

the phrase ʻamount in controversy,’ in the jurisdictional context, means ʻthe

sum of money or the value of the thing originally sued for.’” Tune v. Texas Dep’t

of Pub. Safety, 23 S.W.3d 358, 361 (Tex. 2000) (emphasis original) (quoting

Gulf, C. & S.F.Ry. Co. v. Cunnigan, 95 Tex. 439, 67 S.W. 888, 890 (1902));

see also Amount in Controversy, BLACK’S LAW DICTIONARY (12th ed. 2024)

(“The damages claimed or relief demanded by the injured party in a lawsuit.”).

OPINION AND ORDER, Page 15
[¶ 44] Here, Atlas sues for approximately $13.7 million based on the

HCRE Notes’ full balance. 35 As the Texas Court of Appeals stated in 1887,
35F

“[t]his suit being upon a promissory note, it is manifest the plaintiff could

recover no more than legal interest as damages, and in fact his suit is brought

to recover no more than the principal and interest of the debt” and therefore

the “real amount in controversy was the debt and interest thereon.” B.

Oppenheimer & Co. v. Fritter, 3 Willson 320 (Tex. Ct. App. 1887).

[¶ 45] But some cases exclude promissory note interest from amount in

controversy requirements for the county and justice of the peace court

requirements. See, e.g., Eanes v. Haynes, 135 S.W.2d 190, 191 (Tex. Civ.

App.—Eastland 1939, no writ) (“It has been determined, in considering the

foregoing constitutional provision fixing the jurisdiction of the County Court,

in a suit upon a promissory note, that interest cannot be taken into

consideration in determining the amount in controversy.”).

[¶ 46] This court declines to follow those cases because they concern

different statutes with different wording from our jurisdictional statute.

Instead, reading the present statutory language in context with applicable

35
Pet. ¶ 18.

OPINION AND ORDER, Page 16
rules of construction, we conclude that the type of “interest” excluded by

Government Code § 25A.004(d) refers to only accessory items, such as

statutory interest, that do not form the principal or essential part of plaintiff’s

damages claims.

[¶ 47] Specifically, statutory construction is to implement the

legislature’s intent by giving effect to every word, clause, and sentence.

Sunstate Equip. Co. v. Hegar, 601 S.W.3d 685, 689–90 (Tex. 2020). Indeed,

statutory text is the “first and foremost” indication of legislative intent.

Greater Hous. P’Ship v. Paxton, 468 S.W.3d 51, 58 (Tex. 2015). Thus, courts

apply the words’ common, ordinary meanings unless (i) the text supplies a

different meaning or (ii) the common meaning produces absurd results. Fort

Worth Transp. Auth. v. Rodriguez, 547 S.W.3d 830, 838 (Tex. 2018).

[¶ 48] HCRE’s premise that the plain meaning of “interest” means all

forms of interest without distinction ignores the surrounding statutory

context. 3636F That is, § 25A.004(d) excludes “interest, statutory damages,

exemplary damages, penalties, attorney’s fees, and court costs” from the

amount in controversy calculation. But the noscitur a sociis canon—“it is

36
HCRE’s Br. at 4.

OPINION AND ORDER, Page 17
known by its associates”—provides that a word’s meaning in a list should be

known by the other words included in the list. Paxton, 468 S.W.3d at 61.

Given that principle, all the items § 25A.004(d) excludes are additional,

accessory sums that may be included in a plaintiff’s ultimate recovery but are

not the primary basis of its suit.

[¶ 49] Accordingly, we conclude that the type of “interest” Government

Code § 25A.004(d) excludes means only accessory forms of interest, such as

statutory interest, and not interest that forms the primary basis of a party’s

claim. See Tucker v. Pac-Van, Inc., No. 13-19-00536-CV, 2021 WL 1687040,

at *2 (Tex. App.—Corpus Christi Apr. 29, 2021) (mem. op.) (the exclusion of

“interest” under TEX. GOV’T CODE § 27.031(a)(1) (JP court) refers to

“statutory interest”).

[¶ 50] As of January 31, 2025, the HCRE Notes are alleged to carry

approximately $13.7 million in combined principal and interest and therefore

the amount in controversy was over $10 million at the time Atlas filed its

Original Petition on February 13, 2025. 37 37F

37
Pet. ¶ 18.

OPINION AND ORDER, Page 18
[¶ 51] Accordingly, this suit meets our jurisdictional amount in

controversy requirement under Government Code § 25A.004(d).

III. CONCLUSION

[¶ 52] For these reasons, the court signed its April 22, 2025, order

concluding at this stage that the amount in controversy exceeds $10 million

and this action arises out of a qualified transaction.

BILL WHITEHILL
Judge, Texas Business Court
First Division

SIGNED: May 13, 2025

OPINION AND ORDER, Page 19
Automated Certificate of eService
This automated certificate of service was created by the efiling system.
The filer served this document via email generated by the efiling system
on the date and to the persons listed below. The rules governing
certificates of service have not changed. Filers must still provide a
certificate of service that complies with all applicable rules.

Envelope ID: 100766447
Filing Code Description: No Fee Documents
Filing Description: Opinion
Status as of 5/13/2025 12:12 PM CST

Case Contacts

Name BarNumber Email TimestampSubmitted Status

Deborah Deitsch-Perez deborah.deitschperez@stinson.com 5/13/2025 12:07:50 PM SENT

Jeff Prudhomme jeff.prudhomme@stinson.com 5/13/2025 12:07:50 PM SENT

Patricia Tomasky patricia.tomasky@stinson.com 5/13/2025 12:07:50 PM SENT

Abigail Blaker ablaker@ccsb.com 5/13/2025 12:07:50 PM SENT

Brian P.Shaw bshaw@ccsb.com 5/13/2025 12:07:50 PM SENT

Sherry Stewart sstewart@ccsb.com 5/13/2025 12:07:50 PM SENT

Business Court 1B BCDivision1B@txcourts.gov 5/13/2025 12:07:50 PM SENT

Tammi Alvarado talvarado@ccsb.com 5/13/2025 12:07:50 PM SENT

Angie Barrera abarrera@ccsb.com 5/13/2025 12:07:50 PM SENT

Andrea Reed areed@ccsb.com 5/13/2025 12:07:50 PM SENT

Rhonda LThomas rthomas@ccsb.com 5/13/2025 12:07:50 PM SENT