Opinion
No. 05-11-00593-CV
08-03-2012
STEVE KING, TIMM BAUMANN, AND DAVID WILLIAMS, Appellants v. PARK CITIES BANK, Appellee
AFFIRM; Opinion Filed August 3, 2012.
On Appeal from the 193rd Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-10-05734-L
MEMORANDUM OPINION
Before Justices FitzGerald, Murphy, and Fillmore
Opinion By Justice Murphy
Guarantors, Steve King, Timm Baumann, and David Williams, appeal from a summary judgment rendered in favor of Park Cities Bank for the unpaid balance on four promissory notes they guaranteed. We affirm.
BACKGROUND
Savannah Homes, L.P. sought four loans from the Bank to finance the construction of improvements on four properties owned by Savannah in Collin County, Texas. For each property, Savannah executed a promissory note payable to the Bank and a construction deed of trust for the benefit of the Bank, which granted the Bank a secured interest in each of the properties. The Guarantors executed guaranty agreements for each note, in which they unconditionally guaranteed and promised to pay to the Bank "any and all of [Savannah's] indebtedness" until such indebtedness had been fully paid. As part of the guaranty agreements, each of which contained identical terms, the Guarantors agreed to waive
any and all rights or defenses arising by reason of (A) any "one action" or "anti- deficiency" law or any other law which may prevent [the Bank] from bringing any action, including a claim for deficiency, against Guarantor, before or after [the Bank's] commencement or completion of any foreclosure action, either judicially or by exercise of a power of sale; . . . or (F) any defenses given to guarantors at law or in equity other than actual payment and performance of the Indebtedness.The Guarantors further
waive[d] and agree[d] not to assert or claim at any time any deductions to the amount guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demand, recoupment or similar right, whether such claim, demand or right may be asserted by [Savannah], the Guarantor, or both.
Savannah defaulted on its obligations under each of the notes, and the Bank exercised its right to sell the properties at non-judicial foreclosure sales. After the proceeds from the foreclosure sales and other credits were applied to Savannah's indebtedness, a deficiency balance on each note remained due and owing.
The Bank then sued the Guarantors to recover the deficiency owed by Savannah and moved for summary judgment. The Bank alleged it was entitled to summary judgment because the terms of the guaranty agreements established the individual liability of the Guarantors for payment of the amounts due the Bank under the notes and the Guarantors waived any defense of offset to the Bank's deficiency claim in the guaranties. See Tex. Prop. Code Ann. § 51.003(c) (West 2007) (entitling guarantor to offset against deficiency owed when fair market value of foreclosed property exceeds property's sale price). In response, the Guarantors did not dispute they personally guaranteed each of the four notes or that they failed to pay the deficiency the Bank alleged remained after Savannah's defaults and the foreclosure sales. Rather, they maintained the right of offset in section 51.003(c) of the property code could not be waived, and therefore, they were entitled to a determination of the fair market value of the properties on the day of foreclosure. See id. § 51.003(b). They asserted alternatively that the guaranties were materially deficient regarding the "right of offset." The trial court granted the Bank's motion for summary judgment and awarded it the outstanding amounts due on each of the promissory notes plus interest and reasonable attorney's fees.
The Bank also sued Savannah and Savannah's general partner, Steve King Custom Homes, Inc., to recover the deficiency. These defendants, however, were later nonsuited from the case and are not parties to this appeal. We therefore do not include the additional defendants in our discussion.
DISCUSSION
The Guarantors essentially raise the same arguments on appeal as they did in the trial court. That is, they assert the right of offset provided in section 51.003(c) of the property code cannot be contractually waived (Issue One), and alternatively, if a guarantor can waive the right of offset under that section, then because "use of the phrase 'right of offset' is not contained within the four corners of the guaranty agreements," the Guarantors have no liability to the Bank (Issue Two).
After this case was submitted, this Court issued Interstate 35/Chisam Road, L.P. v. Moayedi, No. 05-11-00209-CV, 2012 WL 3125148, at *1 (Tex. App.-Dallas Aug. 2, 2012, no pet. h.), deciding the question of whether general language waiving defenses in a debt guaranty agreement includes waiver of a specific statutory right of offset under property code section 51.003(c). In Moayedi, the guarantor agreed that his liability for indebtedness would not be discharged or affected by "any defense" (other than full payment of the indebtedness), and he waived "each and every such defense" he might have as to his liabilities and obligations under the agreement. Id. After considering the entire writing, giving the words used their ordinary meaning, and examining the parties' intent as expressed in the guaranty, we concluded the waiver language of "any defense" and "each and every defense" encompassed all defenses, statutory or otherwise, that might be available to a guarantor. Id. at *8 (noting this broad language conveyed intent "that the guaranty would not be subject to any defense other than payment"). Those statutory defenses included the right of offset as provided in section 51.003(c). Id.
We also addressed the guarantor's contention that Texas public policy "prohibits waiver of section 51.003 rights." Id. In rejecting the guarantor's contention, we first observed that various courts have concluded Chapter 51 rights of offset may be contractually waived. Id. (citing LaSalle Bank Nat'l Ass'n v. Sleutel, 289 F.3d 837, 840-42 (5th Cir. 2002), Segal v. Emmes Capital, L.L.C., 155 S.W.3d 267, 279-80 (Tex. App.-Houston [1st Dist.] 2004, pet. dism'd) (op. on reh'g), and Kelly v. First State Bank Cent. Tex., No. 03-10-00460-CV, 2011 WL 6938522, at *9 (Tex. App.-Austin Dec. 30, 2011, pet. granted, jdgm't vacated, w.r.m.) (mem. op.)). Those courts chronicled legislative acts providing for non-waivable rights in other sections of the property code as contrasted with the lack of such a designation for section 51.003 rights. We agreed with the reasoning of those courts and concluded the waiver language at issue was enforceable as a matter of law to waive the offset rights identified in section 51.003 of the property code. See id. at *9; see also Haggard v. Bank of the Ozarks, Inc., 668 F.3d 196, 202 (5th Cir. 2012) (per curiam) (noting prior holding under Texas law, that a guarantor of debt "could waive the statutory right to offset against his liability for deficiency"); Tran v. Compass Bank, No. 02-11-00189-CV, 2012 WL 117859, at *3 (Tex. App.-Fort Worth Jan. 12, 2012, no pet.) (mem. op.) (concluding language in guaranty sufficient to waive guarantor's right to determination of fair market value of foreclosed property for purposes of obtaining an offset against deficiency owed).
This case involves the same section of the property code-section 51.003-that was at issue in Moayedi. In their first issue, the Guarantors contend that because the "legislature did not provide for any waiver of § 51.003 of the Texas Property Code," this Court should not interject unintended language in the statute and should conclude section 51.003 "does not provide for waiver." Following our decision in Moayedi as we must, we reject the Guarantors' contention that section 51.003 of the property code cannot be waived. See Moayedi, 2012 WL 3125148, at *8 (agreeing with reasoning from other courts that concluded section 51.003 rights may be contractually waived); see also Roe v. Ladymon, 318 S.W.3d 502, 510 n.5 (Tex. App.-Dallas 2010, no pet.) (intermediate courts in Texas are bound by United States Supreme Court, Texas Supreme Court, and prior decisions of this Court); MobileVision Imaging Servs., L.L.C. v. LifeCare Hosps. of N. Tex., L.P., 260 S.W.3d 561, 566 (Tex. App.-Dallas 2008, no pet.) ("We may not overrule a prior panel decision of this Court absent an intervening change in the law by the legislature, a higher court, or this Court sitting en banc."). We therefore conclude a guarantor may waive his right to an offset under property code section 51.003 through the terms of the guaranty. We overrule the Guarantors' first issue.
We also reject the contentions raised in the Guarantors' second issue. The Guarantors argue that even if section 51.003 rights could be waived, no such waiver occurred here because the waiver language in the guaranty agreements refers only to "any claim of setoff" and not waiver of the "right of offset." But in addition to the "any claim of setoff" language referenced by the Guarantors, the language in each of the guaranty agreements also states that the Guarantors relinquished any rights or defenses which may prevent the Bank from bringing a claim for deficiency as well as "any defenses given to guarantors at law or in equity other than actual payment and performance of the Indebtedness." We conclude this language is sufficient to waive the Guarantors' right to a determination under section 51.003(b) of the fair market value of the foreclosed property for purposes of obtaining an offset against the deficiency owed under property code section 51.003(c). See Moayedi, 2012 WL 3125148, at *8 (concluding broad waiver language encompassed all possible defenses available to a guarantor, including section 51.003(c)'s right of offset); see also Haggard, 668 F.3d at 202 ("We are unpersuaded by [guarantor's] attempts to distinguish Sleutel based on the difference in the wording of the waivers."); Capital One, N.A. v. Jolly, Civil Action No. H-11-1113, 2011 WL 5290623, at *4 (S.D. Tex. Nov. 2, 2011) (holding guarantor waived right to offset under terms of guaranty, which included "any defense, right of set-off or counterclaim which any Obligor may have or assert" language).
In our review of traditional summary judgments, we determine whether the Bank, as movant, met its summary-judgment burden by establishing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Beesley v. Hydrocarbon Separation, Inc., 358 S.W.3d 415, 418 (Tex. App.-Dallas 2012, no pet.). We review the trial court's summary judgment de novo to determine whether the Bank's right to prevail is established as a matter of law. Beesley, 358 S.W.3d at 418.
Here, no material fact exists with respect to the Guarantors' liability to the Bank under each of the four promissory notes. We conclude the trial court properly granted summary judgment in favor of the Bank. We overrule the Guarantors' second issue and affirm the trial court's judgment.
MARY MURPHY
JUSTICE
110593F.P05
Court of Appeals Fifth District of Texas at Dallas JUDGMENT
STEVE KING, TIMM BAUMANN, AND DAVID WILLIAMS, Appellants
V.
PARK CITIES BANK, Appellee
No. 05-11-00593-CV
Appeal from the 193rd Judicial District Court of Dallas County, Texas. (Tr.Ct.No. DC-10- 05734-L).
Opinion delivered by Justice Murphy, Justices FitzGerald and Fillmore participating.
In accordance with this Court's opinion of this date, the judgment of the trial court is AFFIRMED. It is ORDERED that appellee Park Cities Bank recover its costs of this appeal from appellants Steve King, Timm Baumann, and David Williams.
Judgment entered August 3, 2012.
MARY MURPHY
JUSTICE