Opinion
NUMBER 13-15-00289-CV
01-07-2016
PAUL P. BLACK, Appellant, v. FIRST COMMUNITY BANK, Appellee.
On appeal from the County Court at Law No. 1 of Nueces County, Texas.
MEMORANDUM OPINION
Before Justices Garza, Perkes, and Longoria
Memorandum Opinion by Justice Longoria
Appellant Paul P. Black ("Black") challenges a traditional and no-evidence summary judgment rendered in favor of appellee First Community Bank ("the Bank"). We affirm.
I. BACKGROUND
Black was indebted to the Bank on two promissory notes: a note in the amount of $722,500 executed in August of 2008 (the "First Note"), and a note in the amount of $19,000 executed in May of 2011 (the "Second Note"). To secure the indebtedness created by the First Note, Black granted the Bank a security interest in Lot 1B of Block One in the Marsden Place subdivision in Corpus Christi ("the Property"). The Second Note was unsecured.
Black defaulted on both notes, and the Bank began the process to foreclose on its security interest and sell the Property. The Bank also filed suit against Black to recover the $19,000 owed to it on the Second Note. The Bank then purchased the Property at a trustee's sale with a credit bid of $405,000. After subtracting the amount of its bid from the amount Black owed on the First Note, the Bank amended its pleadings to also seek a deficiency judgment for the sum remaining on the First Note plus accrued interest and attorneys' fees.
The Bank served Black with its first set of interrogatories, requests for admissions, and requests for production on November 25, 2014. Request for Admission No. 5 asked Black to admit or deny that "as of September 16, 2014, after every payment has been applied, Defendant owes Plaintiff on the [First Note] the principal sum of $233,427.06, plus accrued interest of $106,546.06." Black does not dispute that he did not timely respond to the Bank's discovery.
After Black failed to respond, the Bank filed a hybrid motion for traditional and no-evidence summary judgment. See TEX. R. CIV. P. 166a(c), (i). Black filed a response and a request for the trial court to determine the fair market value of the Property on the date of the foreclosure sale. See TEX. PROP. CODE ANN. § 51.003 (West, Westlaw through 2015 R.S.). The trial court denied the Bank's hybrid motion. The Bank later filed an amended hybrid motion for summary judgment asserting that Black was deemed to have admitted the amount of the deficiency by his failure to respond to the requests for admissions. The Bank attached to its motion an affidavit of Sylvia Aparicio, a Senior Vice President at the Bank, which included as exhibits copies of both promissory notes, the requests for admissions, the deed of trust, and a copy of the foreclosure sale deed. Black filed an amended answer, requests for disclosure, and a motion to strike deemed admissions. The trial court never ruled on Black's motion to strike.
Black filed an amended response in which he asserted that he was qualified to testify to the market value of the Property under the Property Owner Rule and attached an affidavit testifying to the Property's fair market value. The affidavit reads in relevant part:
2. In 2008 until the foreclosure in early 2012, I owned two neighboring lots (the subject lot was unimproved and the other was [sic] contained my homestead) on Ocean Drive in Corpus Christi, Texas. These lots were Marsden Place Block 1 Lot 1-B (the "1-B" lot) and Marsden Place Block 1 Lot 2-A. I purchased these lots for $850,000.00 and $2,030,000.00 respectively.
3. The 1-B lot is an unimproved, vacant, residential lot on the bay side of Ocean Drive. At the time of the purchase of the 1-B lot I learned that it was appraised by the bank for $850,000.00.
4. During the time I lived on the property, I kept up with property values in the area and based upon such knowledge I believe the fair market value of the 1 -B lot was $1,155,000.00 as of the time of foreclosure. Exhibit A 376
5. In 2011 (which became effective in 2012), I combined the 1-B lot with the 2-A lot which contained my homestead.
6. Around the time of the foreclosure, the appraisal district removed the homestead exemption and separated the lots. After this split, lot 1-B was the same lot, with the same dimensions, and same location as before the split. The value was the same as before the split.
7. At the time of the foreclosure lot 1-B was worth $1,155,000. However, the bank foreclosed on the Note and Deed of Trust and purchased it for a mere $405,000.00
The Bank filed a response and an objection to Black's summary judgment evidence arguing that the affidavit was inadmissible. The trial court never ruled on the Bank's motion or made an explicit finding of the fair market value of the Property at the time of the sale. However, after considering the pleadings, documents, and evidence on file, the trial court granted the Bank's hybrid motion for summary judgment. The court's order calculated the amount of the deficiency judgment using the foreclosure sale price. This appeal followed.
Specifically, the court awarded $339,972.12 in principal and accrued interest, statutory prejudgment interest, and $36,196.69 in attorneys' fees. Black does not challenge the award of attorneys' fees on appeal. --------
II. DISCUSSION
Black argues on appeal that (1) he raised a fact issue on whether he was entitled to an offset because his affidavit is competent evidence that the Property's fair market value exceeded the foreclosure sale price, and (2) the trial court erred to the extent it deemed him to have admitted the amount of the deficiency.
A. Standard of Review and Applicable Law
We review a grant of summary judgment de novo. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). The party moving for summary judgment bears the burden of proof. Neely v. Wilson, 418 S.W.3d 52, 59 (Tex. 2013). When, as here, both parties submit evidence in the context of a hybrid motion for summary judgment, the different burdens are immaterial "and the ultimate issue is whether a fact issue exists." Id.; see Buck v. Palmer, 381 S.W.3d 525, 527 & n.2 (Tex. 2012) (per curiam). A fact issue exists if the record contains more than a scintilla of evidence. Neely, 418 S.W.3d at 59; TEX. R. CIV. P. 166a(c), (i). Evidence is more than a scintilla if it "rises to a level that would enable reasonable and fair-minded people to differ in their conclusions." Serv. Corp. Int'l v. Guerra, 348 S.W.3d 221, 228 (Tex. 2011). Evidence is less than a scintilla if it "does no more than create a mere surmise or suspicion" of a fact. Id. We review the record in the light most favorable to the non-movant, indulging every reasonable inference and resolving all doubts in the non-movant's favor. Buck, 381 S.W.3d at 527.
A lender who is the sole bidder at a foreclosure sale can control the price of the sale and, by implication, the amount of the deficiency judgment. Moayedi v. Interstate 35/Chisam Rd., L.P., 438 S.W.3d 1, 5 (Tex. 2014). As a result, the price the lender pays "often does not directly represent what a buyer might pay in the market" for the foreclosed property because there is little incentive for the lender to bid high. Id. To address this situation, the Texas Legislature enacted section 51.003 of the property code, which enables any person against whom a deficiency judgment is sought to ask the factfinder to determine the fair market value of the foreclosed property at the time of the sale. TEX. PROP. CODE ANN. § 51.003(b); see Moayedi, 438 S.W.3d at 5. If the factfinder determines that the fair market value at the time of the sale exceeded the sale price, the former owner is entitled to an offset in the amount of the difference less the value of any unextinguished claim remaining on the property after the foreclosure. TEX. PROP. CODE ANN. § 51.003(c). However, the factfinder must use the foreclosure sale price to compute the deficiency if the parties do not introduce competent evidence of the property's fair market value at the time of the sale. Id. Section 51.003 defines competent evidence as, among other things, "expert testimony." Id. § 51.003(b).
The Property Owner Rule provides that a property owner is qualified to testify to the fair market value of his property even if the owner would not qualify to testify on the value of like property belonging to another person. Porras v. Craig, 675 S.W.2d 503, 504 (Tex. 1984). The owner is limited to testifying to the property's fair market value and not its intrinsic or other speculative value. Id. Property owner testimony "is the functional equivalent of expert testimony" and therefore "must be judged by the same standards." Nat. Gas Pipeline Co. of Am. v. Justiss, 397 S.W.3d 150, 159 (Tex. 2012). Like any expert, the property owner must explain "the factual basis on which his opinion rests." Id.; see Coastal Transp. Co., Inc. v. Crown Cent. Petroleum Corp., 136 S.W.3d 227, 232 (Tex. 2004) (observing that "it is the basis of the witness's opinion, and not the witness's qualifications or his bare opinions alone, that can settle an issue as a matter of law" (quotation marks omitted)). The Texas Supreme Court cautioned in Justiss that a property owner testifying to the value of his property may not "simply echo the phrase 'market value'" followed by a number but "must provide the factual basis on which his opinion rests." Justiss, 397 S.W.3d at 159.
B. Analysis
Black argues that summary judgment was improper because he raised a fact issue with his affidavit testimony on whether he was entitled to an offset. The Bank replies that summary judgment was proper because Black's affidavit is not competent evidence of the Property's fair market value.
We agree with the Bank. Black's affidavit asserted in relevant part: "[d]uring the time I lived on the property, I kept up with property values in the area and based upon such knowledge I believe the fair market value of the 1-B lot was $1,155,000.00 as of the time of foreclosure." Black asserted in his affidavit that he arrived at his valuation based on his knowledge of the property values in the area of the Property but did not explain how he arrived at the specific valuation of $1,155,000. Black's affidavit is similar in this respect to the testimony that the Texas Supreme Court held to be incompetent evidence of the fair market value of land in Justiss. There, the landowner testified that he was familiar with the area property values through his work as a loan officer at a bank. Id. The landowner opined that his property was originally worth $650,000 and declined in value by $400,000 as a result of the nuisance at issue in that case. Id. The Texas Supreme Court held that the landowner's testimony was "conclusory and no evidence" because even though the landowner "demonstrated his familiarity with area market values, he failed to explain the factual basis behind his determination that his property suffered a $400,000 decrease in value." Id. at 161. His assertion that he arrived at this valuation based on the property values for the area provided "little more detail than using the words 'market value.'" Id. Similar to the testimony at issue in Justiss, while Black asserted that he was knowledgeable of the property values in the area, he did not explain how that knowledge led him to conclude that the Property was worth $1,155,000, an increase of $305,000 from the price Black originally paid to purchase it. Black's use of the phrase "fair market value" in his testimony is not a substitute for explaining how he arrived at that figure. See id.; see also Wood v. Kennedy, No. 14-13-00755-CV, ___ S.W.3d ___, ___, 2014 WL 6677945, at *6 (Tex. App.—Houston [14th Dist.] Nov. 25, 2014, no pet.) (holding that a witness's testimony of the fair market rental value of real property supported by the witness's long experience managing a property-rental company was insufficient to support the verdict on damages).
In sum, we hold that Black's affidavit testimony is conclusory as a matter of law because it states his valuation without a factual basis for it. See Justiss, 397 S.W.3d at 161. Without the affidavit, Black produced no "competent evidence" of the Property's fair market value on the date of the foreclosure sale. See TEX. PROP. CODE ANN. § 51.003(c). The trial court correctly granted summary judgment to the Bank. See id.; see also Justiss, 397 S.W.3d at 161. We overrule Black's first issue. We do not address Black's second issue because the result of the case would be the same regardless of the status of the deemed admissions. See TEX. R. APP. P. 47.1.
III. CONCLUSION
We affirm the judgment of the trial court.
NORA LONGORIA,
Justice Delivered and filed the 7th day of January, 2016.