Opinion
NO. 02-17-00366-CV
05-17-2018
AMIR FOAD JOHN AFLATOUNI AKA JONATHAN AFLATOUNI APPELLANT v. ENCLAVE AT GRAPEVINE, L.P., A TEXAS LIMITED PARTNERSHIP APPELLEE
FROM THE 342ND DISTRICT COURT OF TARRANT COUNTY
TRIAL COURT NO. 342-280952-15 MEMORANDUM OPINION
See Tex. R. App. P. 47.4.
I. Introduction
The basis of this appeal by Appellant Amir Foad John Aflatouni aka Jonathan Aflatouni is that his property interest was erroneously extinguished through a wrongful foreclosure. Because our sister court has already decided the wrongful foreclosure issue, see Grapevine Diamond, L.P. v. City Bank, No. 05-14-00260-CV, 2015 WL 8013401, at *5-7 (Tex. App.—Dallas Dec. 7, 2015, pets. denied) (mem. op. on reh'g), cert. denied, 137 S. Ct. 250 (2016), we affirm the trial court's summary judgment for Appellee Enclave at Grapevine, L.P., a Texas Limited Partnership.
II. Background
Enclave is the twice-removed purchaser of real property that was foreclosed upon in 2011. Aflatouni, the property's original owner, retained a vendor's lien when he sold the property to Grapevine Diamond L.P. (GDLP) in 2007. See id. at *1. Aflatouni's vendor's lien was subordinated to the interest of City Bank, which had loaned GDLP $6,375,000 to buy the property. See id. GDLP subsequently borrowed an additional $150,000 from City Bank, and there were loan modification agreements in 2008 and 2009, the details of which are not before us. See id.
The summary judgment evidence in the instant case reflects that Youval Zive, the president of GDLP's general partner, had guaranteed the indebtedness and had signed the $6,375,000 note to City Bank and that the portion of the vendor's lien securing Aflatouni "shall be subordinated in all respects to the portion of the Vendor's Lien securing [City Bank]." As acknowledged by Aflatouni, "[f]ollowing the valid foreclosure of a senior lien, junior liens, if not satisfied from the proceeds of sale, are extinguished." Conseco Fin. Servicing Corp. v. J & J Mobile Homes, Inc., 120 S.W.3d 878, 883 (Tex. App.—Fort Worth 2003, pet. denied). Aflatouni challenges the validity of the foreclosure on the senior lien.
GDLP defaulted and then filed for bankruptcy in 2010. Id. at *2. In its bankruptcy petition and related documents, GDLP listed the property as an asset valued at $2 million, with a $7 million corresponding "Amount of Secured Claim" (of which $5 million was also listed as unsecured), listed City Bank as a creditor with a deed of trust, and listed Aflatouni as an unsecured creditor with a $3.5 million nonpriority claim. Id.
In November 2010, the bankruptcy court granted relief to City Bank from the automatic stay in GDLP's case, finding that the balance due City Bank was $6,732,506.86, secured by a first lien deed of trust, that the value of the property was insufficient to provide City Bank with adequate protection, and that GDLP had no equity in the collateral. Id. Four days before City Bank issued its December 10, 2010 notice of trustee's sale, Aflatouni filed a bankruptcy petition under chapter 13. See id.
The foreclosure sale occurred on January 4, 2011, and as noted by the Dallas court, the automatic stay in Aflatouni's chapter 13 bankruptcy case was in effect at the time of the sale. See id. City Bank bought the property at the foreclosure sale for $3 million. See id. at *1-2. Less than two weeks later, Aflatouni's bankruptcy case was dismissed because he had failed to file the required documentation. Id. at *2.
City Bank sued GDLP's guarantors in Collin County for the deficiency between the foreclosure sale price and GDLP's remaining indebtedness. See id. at *1-2. Third-party claims were brought against GDLP and Aflatouni, and they, in turn, asserted cross-claims against City Bank for wrongful foreclosure, breach of contract, and several causes of action regarding title to the property. Id. at *2, *5. In the meantime, SPK Land Acquisition, LLC purchased the property from City Bank on September 29, 2011, and SPK sold the property to Enclave on October 5, 2012.
The January 4, 2011 foreclosure sale deed reflects GDLP's indebtedness of $6,525,000 and the acceptance of a $3,000,000 bid, leaving a deficiency of $3,525,000.
After the Collin County suit was resolved in City Bank's favor on summary judgment in January 2014, Aflatouni and GDLP appealed to the Dallas Court of Appeals. Id. at *1-2 & n.2. In July 2014, the Dallas court abated the appeal because Aflatouni had another pending chapter 11 bankruptcy case. The bankruptcy court subsequently lifted the stay as to the appeal, and the Dallas court reinstated the case in October 2014.
While the appeal remained pending in Dallas, Aflatouni and GDLP filed suit in Tarrant County against Enclave. In their original petition, Aflatouni and GDLP complained that title to the property via foreclosure was void based on the violation of the automatic stay in Aflatouni's chapter 13 bankruptcy case. They brought claims for trespass to try title and slander of title and sought to quiet title, to remove cloud from title, and to file a corrective document in the public real property records. On December 2, 2015, the trial court entered an agreed abatement order to await the Dallas appeal's resolution.
In the Dallas appeal, several of Aflatouni and GDLP's issues pertained to challenging the foreclosure sale based on the alleged violation of Aflatouni's bankruptcy stay. Id. at *1. The court affirmed the trial court's summary judgment for City Bank. Id. The supreme court denied petition for review on April 1, 2016, and the U.S. Supreme Court denied the petition for writ of certiorari on October 3, 2016.
On January 18, 2017, the Tarrant County court reinstated the instant case. Three months later, Aflatouni filed an amended petition—this time without GDLP—in which he again alleged that City Bank's January 4, 2011 foreclosure sale of the property had violated the bankruptcy stay in his December 2010 bankruptcy case. He also alleged that he had subsequently asked for payment from GDLP for the debt that was due and payable on demand and the subject of his vendor's lien, and he further alleged that Enclave had caused $8,950 in damages to his fence. Aflatouni restated his title-related claims and added a trespass claim as to his fence.
In April 2017, the parties filed competing motions for summary judgment. In its motion for summary judgment, Enclave argued that it was entitled to summary judgment as a matter of law on Aflatouni and GDLP's title-related claims because the City Bank action in Grapevine Diamond, L.P. v. City Bank had resolved those claims as to the validity of the foreclosure sale via which Enclave had subsequently obtained the property. Specifically, Enclave asserted that the title-related claims were barred by collateral estoppel because the validity of City Bank's title to the property had previously been fully litigated with regard to the alleged wrongful foreclosure, preventing Aflatouni from challenging the subsequent conveyance of the property to Enclave or Enclave's title to the property. Enclave attached the Collin County summary judgment order, the Dallas court's opinion, and the U.S. Supreme Court's denial of Aflatouni's petition for writ of certiorari to its motion.
In its final judgment, the Collin County trial court ordered that Aflatouni
take nothing on his causes of action for violation of the automatic stay, wrongful foreclosure, trespass to try title, slander of title, action to quiet title and remove cloud on title, breach of contract, actual and punitive damages, filing of corrective document in public real property records, re[s]cission, and attorneys' fees against City Bank.
In his combined motion for summary judgment and response to Enclave's motion for summary judgment, Aflatouni argued that the foreclosure was void either in its entirety or as to his vendor's lien because City Bank had conducted the foreclosure sale in violation of the automatic stay in his bankruptcy case and that he had established every element of his title-related claims.
Aflatouni further argued that Enclave's collateral estoppel defense failed because he had not demanded payment upon the debt secured by the vendor's lien until after the Dallas court's opinion had issued, and he complained that the Dallas court's opinion did not contain an express holding of whether the foreclosure sale was void or valid but rather merely held that he was not entitled to recover damages. Thus, he argued, Enclave's collateral estoppel argument failed because the issue presented in the instant litigation was not identical to the issue in the previous litigation.
To his motion and response, Aflatouni attached an affidavit in which he both averred about and sponsored additional summary judgment evidence: the 2007 deed, City Bank's September 11, 2007 letter to the title company about Aflatouni's share of the sales proceeds, his December 6, 2010 chapter 13 bankruptcy petition, City Bank's December 10, 2010 notice of foreclosure sale, the corrected foreclosure sale deed, the January 12, 2011 order dismissing Aflatouni's chapter 13 bankruptcy case, the September 29, 2011 special warranty deed from City Bank to SPK, the October 5, 2012 deed from SPK to Enclave, a July 17, 2013 replacement promissory note, and Aflatouni's March 14, 2017 demand for payment to GDLP. Aflatouni also attached a copy of the Dallas court's December 7, 2015 memorandum opinion, and the June 17, 2013 deposition of Morris Wilcox, who testified on behalf of City Bank in the case resolved by Grapevine Diamond, L.P. v. City Bank.
The January 12 deed corrected the January 4 deed regarding the property's legal description.
The July 17, 2013 replacement promissory note states that it was intended to replace the original promissory note dated September 12, 2007, with an original principal amount of $2,741,760.51 for the property purchased by GDLP on September 12, 2007. The note was payable "[o]n demand, which shall be no earlier than when [GDLP] sells the Property or develops the Property itself," and provided for simple interest at 7% per annum commencing September 12, 2007.
Aflatouni's March 14, 2017 certified letter to Zive, GDLP's president, set forth his request for payment of the "July 13, 1013" replacement note for $2,741,760.51.
Enclave objected to Wilcox's deposition testimony, and Aflatouni conceded at the summary judgment hearing that the deposition testimony was "not properly before the Court as summary judgment evidence."
In his affidavit, Aflatouni explained that he had lost the original September 12, 2007 note but that on July 19, 2013, Zive had executed a replacement promissory note reflecting the original note's terms. Aflatouni asserted that he had made a demand for payment from GDLP on March 14, 2017, but that GDLP had not paid its debt, "which is now due and outstanding."
Enclave responded to Aflatouni's motion by pointing out that Aflatouni's motion "literally recites—sometimes word-for-word—the losing arguments he previously asserted in his motion for partial summary judgment and appellate brief" in Grapevine Diamond, L.P. v. City Bank and argued that collateral estoppel "was established precisely for cases such as this." To its response, Enclave attached Aflatouni's July 19, 2013 motion for partial summary judgment in the Collin County case, the Collin County trial court's summary judgment order, Aflatouni's appellate brief and reply brief filed in the Dallas Court of Appeals, City Bank's response filed in the Dallas Court of Appeals, the Dallas court's opinion, and the U.S. Supreme Court's denial of Aflatouni's petition of writ of certiorari.
The second issue listed in Aflatouni's appellate brief in the Dallas court stated,
The trial court erred when it granted summary judgment in favor of Bank and denied Grapevine Diamond's and Aflatouni's motion for summary judgment that the Aflatouni bankruptcy stay was violated by the foreclosure sale because: (1) a junior lien is property of the bankruptcy estate and (2) the foreclosure sale eliminating Aflatouni's junior lien was a willful violation of the bankruptcy stay.[For ease of reading, we have omitted unnecessary capitalization that appeared in the original brief.]
The trial court granted summary judgment for Enclave on Aflatouni and GDLP's causes of action for trespass to try title, slander of title, action to quiet and remove cloud on title, and the request for the filing of a corrective document in the public real property records, and it denied Aflatouni's motion for summary judgment. After Aflatouni and Enclave resolved the trespass claim, which Aflatouni nonsuited with prejudice, the trial court entered a final judgment.
III. Collateral Estoppel
In the first three of his four issues, Aflatouni argues that the trial court erred by granting summary judgment for Enclave and by denying his motion for summary judgment because he is the undisputed owner of an unpaid debt secured by a vendor's lien and because his summary judgment evidence established every element of his title-related claims. In his fourth issue, Aflatouni complains that the trial court erred by granting summary judgment on Enclave's collateral estoppel defense, contending that the Dallas court never reached the issue of whether City Bank's foreclosure sale was void for violating the automatic stay in his bankruptcy case.
Enclave responds that the trial court correctly granted summary judgment in its favor as Aflatouni's title-related claims are barred by collateral estoppel because they depend on the wrongful foreclosure issue already determined by the Dallas court.
A party asserting the affirmative defense of collateral estoppel has the burden to establish that (1) the facts sought to be litigated in the second action were fully and fairly litigated in the first action, (2) those facts were essential to the judgment in the first action, and (3) the parties were cast as adversaries in the first action. Wise Elec. Coop., Inc. v. Am. Hat Co., 476 S.W.3d 671, 715 (Tex. App.—Fort Worth 2015, no pet.); see also Getty Oil Co. v. Ins. Co. of N. Am., 845 S.W.2d 794, 801 (Tex. 1992) (stating that the collateral estoppel doctrine precludes relitigating ultimate issues of fact actually litigated and essential to the judgment in a prior suit and requires that the issue decided in the first action be identical to the issue in the pending action), cert. denied, 510 U.S. 820 (1993). Strict mutuality of parties is not required. Sysco Food Servs., Inc. v. Trapnell, 890 S.W.2d 796, 801 (Tex. 1994). Rather, only the party against whom the doctrine is asserted has to have been a party or in privity with a party in the first action. Id. at 802. The doctrine of collateral estoppel is designed to promote judicial efficiency, protect parties from multiple lawsuits, and prevent inconsistent judgments by precluding the relitigation of issues. Id. at 801.
We review a summary judgment de novo, Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010), and a defendant is entitled to summary judgment on an affirmative defense if the defendant conclusively proves all the elements of the affirmative defense. Frost Nat'l Bank v. Fernandez, 315 S.W.3d 494, 508-09 (Tex. 2010), cert. denied, 562 U.S. 1180 (2011); Chau v. Riddle, 254 S.W.3d 453, 455 (Tex. 2008); see Tex. R. Civ. P. 166a(b), (c). When both parties move for summary judgment and the trial court grants one motion and denies the other, the reviewing court should review both parties' summary judgment evidence and determine all questions presented before rendering the judgment that the trial court should have rendered. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009); see also Myrad Props., Inc. v. LaSalle Bank Nat'l Ass'n, 300 S.W.3d 746, 753 (Tex. 2009).
In the Dallas appeal, Aflatouni and GDLP argued that City Bank's foreclosure sale violated the automatic stay in Aflatouni's chapter 13 bankruptcy case. Grapevine Diamond, 2015 WL 8013401, at *5. In its December 7, 2015 opinion, the Dallas court held, in pertinent part, that because the bankruptcy court had judicially established "that there was no equity in the property . . . , there was nothing for Aflatouni's alleged lien to attach to at the time of the [foreclosure] sale." Id. at *6. The court stated, "Specifically, when Aflatouni filed his December 6, 2010 Chapter 13 petition, the bankruptcy court had already ruled, in [GDLP's] bankruptcy proceeding, that there was insufficient value in the collateral 'to provide City Bank with adequate protection' on its first lien" and had found that GDLP had no equity in the collateral. Id. The bankruptcy court's order permitted City Bank to exercise any and all remedies permitted under its loan documents, which included a foreclosure sale. Id. "[A]s a [GDLP] creditor, Aflatouni could have challenged both City Bank's motion to lift the stay and the bankruptcy court's order lifting the stay," but he took neither action. Id.
The court further noted that the property had sold for less than the amount of City Bank's secured claim and that Aflatouni had produced no summary judgment evidence that the property's value exceeded the amount stated in GDLP's bankruptcy schedules. Id. at *7. Accordingly, the court overruled Aflatouni's argument "that summary judgment for City Bank was improper because the foreclosure sale allegedly violated the stay in Aflatouni's bankruptcy." Id. That is, based on the Dallas court's reasoning, there was no wrongful foreclosure because the property had no value to Aflatouni's bankruptcy estate—it was not worth enough to pay off both the primary and secondary liens—and because Aflatouni had failed to take timely action in the bankruptcy court to prevent the foreclosure proceeding that extinguished his lien. See id.
As set out above, Aflatouni had ample opportunity to litigate the wrongful foreclosure issue against City Bank, did so, and lost. He is not entitled to a second bite at the apple. See Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 521 (Tex. 1998) (op. on reh'g) ("Kenneco's claim for breach of a contract to secure lost profits coverage is precluded if the claim was actually litigated and essential to the judgment in the federal action."). We conclude that the trial court did not err by granting Enclave's motion for summary judgment on collateral estoppel, overrule Aflatouni's fourth issue, and do not reach Aflatouni's remaining issues, which rely on his wrongful-foreclosure-in-violation-of-automatic-stay theory. See Tex. R. App. P. 47.1.
As to his argument that In re Three Strokes Limited Partnership, 397 B.R. 804 (Bankr. N.D. Tex. 2008), established that his vendor's lien was subject to the automatic stay, it is apparent to us—based on the record in this case, which includes Aflatouni's appellate brief in the Dallas court—that Aflatouni copied and pasted this argument from his appellate brief in the Dallas appeal. The Dallas court addressed this argument in its opinion and found it unpersuasive. See Grapevine Diamond, 2015 WL 8013401, at *6. Specifically, the court pointed out that in Three Strokes, there was at least a possibility of value in the property, while there was no such value established by Aflatouni with regard to his secondary lien; in the GDLP bankruptcy, wherein the property was foreclosed, the lien as to Aflatouni was worthless. See id.
As to Aflatouni's complaint that his subsequent demand for payment from GDLP revived his rights in the property, to the extent that the renewal note between Aflatouni and GDLP revived anything, it did so only against GDLP with regard to GDLP's unsecured debt because—as determined by our sister court—Aflatouni's vendor's lien was extinguished in the foreclosure sale. See Conseco Fin. Servicing Corp., 120 S.W.3d at 883 (stating that the valid foreclosure of a senior lien extinguishes junior liens not satisfied from foreclosure sale proceeds); see also City of Lubbock v. Stubbs, 327 S.W.2d 411, 414 (Tex. 1959) ("Estoppel by judgment . . . does not prevent a re-examination of the same question between the same parties, where, in the interval, the facts have changed, or new facts have occurred [that] may alter the legal rights or relations of the parties."). Aflatouni's demand for payment from GDLP did not alter the fact that City Bank's foreclosure was not wrongful or that Enclave subsequently received valid title pursuant to that foreclosure.
IV. Conclusion
Having overruled Aflatouni's dispositive issue, we affirm the trial court's judgment.
/s/ Bonnie Sudderth
BONNIE SUDDERTH
CHIEF JUSTICE PANEL: SUDDERTH, C.J.; MEIER and GABRIEL, JJ. DELIVERED: May 17, 2018