Opinion
NO. 01-19-00284-CV
04-28-2020
RAMESH RAJ, Appellant v. FOUR STAR BUSINESS, INC., Appellee
On Appeal from the 239th District Court Brazoria County, Texas
Trial Court Case No. 84584-CV
MEMORANDUM OPINION
Ramesh Raj challenges the trial court's order granting summary judgment in favor of Four Star Business, Inc. ("FSB") on its suit against him for breach of the guaranty. Raj also challenges the trial court's order denying his consolidation motion. We affirm.
Background
In 2013, Raj purchased the Anchor Motel from FSB for $775,000. He paid $175,000 in cash and the remaining balance with a promissory note secured by a deed of trust. Along with the promissory note and the deed of trust, Raj also executed a guaranty. The guaranty provides that Raj unconditionally guarantees prompt payment of any debt owed to FSB and states, in part that:
For value received, undersigned (whether one or more) jointly, severally and unconditionally guarantee the full and punctual payment to the extent of the remaining balance due on the note payable to FOUR STAR BUSINESS, INC. of any debt due and owing by reason that certain promissory note in the principal amount of $600,000, dated June 4, 2013, from RAMESH RAJ, D/B/A NUVIRA ASSOCIATES to FOUR STAR BUSINESS, INC., and secured by deed of trust of [the] same date. . . .
After finalizing the transaction, Raj conveyed the property to Nuvira Hospitality, Inc. ("Nuvira"). Raj formed Nuvira "to hold this investment." Nuvira assumed Raj's obligations under the promissory note and the deed of trust. The seller's disclosure notice did not note any "known defects or malfunctions in the structural components of the property." Raj later discovered that the property was plagued with problems, including "wood rot," "extensive mold," and damage to the septic system. Raj also determined that the property's revenue history was inaccurate. Raj alleges that the revenue history was inaccurate because he only received "the first page from the prior three years' tax return," reflecting an increase in revenues each year. Yet the actual revenues were "roughly 30% less than the represented revenues," which Raj attributes to FSB's failure to "disclose any difficulty collecting rents from tenants." Nuvira then sued FSB and A. Panjwani, the owner of FSB, for fraud (the "Nuvira Lawsuit").
Nuvira is not a party to this appeal. Nuvira is a party to a separate action subject to the consolidation motion.
Panjwani is not a party to this appeal. Panjwani is a party to a separate action subject to the consolidation motion.
In 2015, after Raj defaulted on the note, FSB sent him a notice of default and an acceleration and demand for payment, declaring the non-payment a non-curable event of default under the promissory note and guaranty. Later, FSB sued Raj for breach of the guaranty (the "FSB Lawsuit"). Raj answered and asserted a counterclaim of fraud. Raj also moved to consolidate the Nuvira Lawsuit and the FSB Lawsuit. FSB did not respond. The trial court denied the motion.
FSB moved for summary judgment. The trial court never ruled on this motion. Meanwhile, FSB foreclosed on the property and purchased it at the foreclosure sale with a credit bid for $560,000. Raj then amended his answer in the FSB Lawsuit and added foreclosure-deficiency defenses under Texas Property Code Sections 51.003(b) and 51.005(b). FSB filed an amended motion for summary judgment, seeking the balance Raj owed under the promissory note and the guaranty after a credit was applied for the credit bid. FSB did not address Raj's fraud counterclaim on its merits. Instead, FSB argued that defenses, such as fraud, were unavailable to an unconditional guarantor.
After holding a hearing on the motions for summary judgment, the trial court granted the amended motion for summary judgment and entered a final judgment against Raj for $159,579.56, plus attorney's fees, court costs, and post-judgment interest.
Raj moved for reconsideration and new trial, which the trial court denied. This appeal followed.
Summary Judgment
In his first three issues, Raj argues that the trial court erred in granting summary judgment. He contends the trial court erred because (1) the language of the guaranty does not bar a fraud defense or a claim for offset; (2) he is entitled to assert a fraud defense given that he was the guarantor and maker of the promissory note; and (3) he raised a fact issue under Texas Property Code Section 51.003. In response, FSB asserts that (1) the unconditional guaranty precludes a fraud defense; (2) a guarantor who is also the maker is not entitled to assert a fraud defense; and (3) Raj did not raise a fact issue with the conclusory allegations in his affidavit.
A. Standard of review
We review a trial court's summary judgment de novo. Godoy v. Wells Fargo Bank, N.A., 575 S.W.3d 531, 536 (Tex. 2019). In reviewing the grounds for summary judgment, we take as true all evidence favorable to the nonmovant and we indulge every reasonable inference and resolve any doubts in the nonmovant's favor. Dallas Morning News, Inc. v. Tatum, 554 S.W.3d 614, 624 (Tex. 2018) (per curiam). We must consider whether reasonable and fair-minded jurors could differ in their conclusions considering all of the evidence presented. See Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007) (per curiam).
A movant for summary judgment must establish that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. See TEX. R. CIV. P. 166a(c); Ortiz v. State Farm Lloyds, 589 S.W.3d 127, 131 (Tex. 2019). A genuine issue of material fact exists when there is more than a scintilla of probative evidence on a particular issue. See Buck v. Palmer, 381 S.W.3d 525, 527 (Tex. 2012) (per curiam). "Evidence that is so weak as to do no more than create a mere surmise or suspicion that the fact exists is less than a scintilla." Regal Fin. Co., Ltd. v. Tex Star Motors, Inc., 355 S.W.3d 595, 603 (Tex. 2010) (internal quotations omitted). A trial court should not grant a summary-judgment motion unless the movant conclusively shows that there is no dispute about, among other things, "the inferences that may properly be drawn from the evidence." Jones v. Mem'l Hosp. Sys., 746 S.W.2d 891, 896 (Tex. App.—Houston [1st Dist.] 1988, no writ) (citing Gulbenkian v. Penn, 252 S.W.2d 929, 932 (Tex. 1952)).
B. The unconditional guaranty precludes a fraud defense
A guaranty of payment (or unconditional guaranty) is an obligation to pay the debt when due if the debtor does not and requires no condition precedent to its enforcement against the guarantor other than a default by the principal debtor. Chahadeh v. Jacinto Med. Group, P.A., 519 S.W.3d 242, 246-47 (Tex. App.—Houston [1st Dist.] 2017, no pet.). A guarantor of payment is primarily liable and waives any requirement that the holder of the note take action against the maker as a condition precedent to his liability on the guaranty. Id. at 247 (citing Cox v. Lerman, 949 S.W.2d 527, 530 (Tex. App.—Houston [14th Dist.] 1997, no writ)). "A guarantor of payment is thus akin to a co-maker in that the holder of the note can enforce it against either party." Id. (citing Reece v. First State Bank, 566 S.W.2d 296, 297 (Tex. 1978)).
When construing a guaranty agreement, our primary goal is to ascertain and give effect to the parties' intent. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). We must strictly construe a guaranty according to its precise terms to determine the parties' intent and, where the terms of the guaranty are clear and unambiguous, we may not look outside of the four corners of it to give it a different construction. Berry v. Encore Bank, No. 01-14-00246-CV, 2015 WL 3485970, at *5 (Tex. App.—Houston [1st Dist.] June 2, 2015, pet. denied) (mem. op.) (citing Univ. Sav. Ass'n v. Miller, 786 S.W.2d 461, 463 (Tex. App.—Houston [14th Dist.] 1990, writ denied)). We strictly construe a guaranty in favor of the guarantor. Chahadeh, 519 S.W.3d at 247.
Raj contends that the guaranty he signed and executed does not operate as an unconditional guaranty by the operation of law because it does not contain the terms "absolute" or "principal obligor." We reject this contention. In construing the parties' intent of the guaranty, the guaranty provides that Raj "unconditionally guarantee[s] the full and punctual payment" of any unpaid debt owed under the promissory note. Thus, Raj guaranteed prompt payment of the debt owed under the note based upon the unambiguous terms of the guaranty. See Berry, 2015 WL 3485970, at *5 (citing Coker, 650 S.W.2d at 393).
Raj contends that an unconditional guaranty does not bar his fraud defense or offset claim. In response, FSB asserts that a fraud defense or a claim for offset do not discharge Raj's liability due to the terms of the unconditional guaranty and relies on Universal Metals & Machinery, Inc. v. Bohart, 539 S.W.2d 874 (Tex. 1976).
Bohart involved a dispute about an absolute and unconditional guaranty of payment. Id. at 875. The guarantors asserted a defense of forgery. Id. The Texas Supreme Court held that a guarantor is not freed from liability because of the forged signature of the maker. Id. at 877. The court reasoned that a guarantor of payment is akin to a co-maker in that both are primary obligors, and the holder of the note can enforce it against either party. Id. at 878.
Other courts have applied the court's reasoning in Bohart to similar defenses personal the primary obligor. For example, Texas courts have held that a guarantor may not assert defenses personal to the principal obligor, such as usury and offset. See, e.g., Houston Sash & Door Co., Inc. v. Heaner, 577 S.W.2d 217, 222 (Tex. 1979) (holding that usury defense is personal to principal obligor and it cannot be asserted); Farmers & Merchants State Bank of Krum v. Reece Supply Co., 79 S.W.3d 615, 619 (Tex. App.—Eastland 2002, pet. denied) (holding that asserted defenses of offset and failure of consideration were unavailable to "the primary, absolute, unconditional obligor"); Wiman v. Tomaszewicz, 877 S.W.2d 1, 5 (Tex. App.—Dallas 1994, no writ) (determining that guarantor's liability not discharged where statute of limitation bars action against principal obligor). Applying Bohart and its progeny, we hold that Raj may not assert his fraud defense or offset claim because these defenses are personal to Raj as the principal obligor of the promissory note pursuant to the unambiguous terms of the guaranty.
Raj also argues that, even if the guaranty bars his personal fraud defense as the primary obligor, it does not bar the fraud defense of a guarantor who is also the purchaser of the property and the maker of the promissory note. This argument is without merit. First, Raj failed to cite any authority to the effect that a guarantor who is also the purchaser and the maker of the promissory note is permitted to raise a fraud defense, and the cases cited by Raj do not support his position. Second, the liability of an unconditional guarantor is absolute unless the transaction is void due to illegality. Heaner, 577 S.W.2d at 222; Harrington v. Norex Am., Inc., No. 01-93-01116-CV, 1995 WL 19219, at *7 (Tex. App.—Houston [1st Dist.] Jan. 19, 1995, writ denied) (op. on reh'g) (applying Heaner and upholding guarantor liability because the usurious interest did not void the transaction). Raj does not allege the transaction was illegal. We therefore overrule Raj's first and second issues.
C. Raj did not raise a material fact issue about an offset
In his third issue, Raj contends that he raised a material fact issue because he is entitled to an offset to recover the deficiency because the Anchor Motel's fair market value was greater than its sales price at the foreclosure sale. Raj offered his own affidavit as evidence of the market value as of the foreclosure date. In response, FSB argues that Raj's affidavit testimony regarding the market value was insufficient because he failed to meet the requirements of opinion evidence and recited bare conclusions that do not raise a material fact issue.
Under Section 51.003 of the Texas Property Code, a person may bring an action to recover the deficiency if the price at which real property is sold at a foreclosure sale under Section 51.002 is less than the unpaid balance of the indebtedness secured by the real property. TEX. PROP. CODE § 51.003(a). "Any person against whom such a recovery is sought by motion may request that the court in which the action is pending determine the fair market value of the real property as of the date of the foreclosure sale." Id. § 51.003(b). "The fair market value shall be determined by the finder of fact after the introduction by the parties of competent evidence of the value." Id. Competent evidence of value may include, but is not limited to: (1) expert opinion testimony; (2) comparable sales; (3) anticipated marketing time and holding costs; (4) cost of sale; and (5) the necessity and amount of any discount to be applied to the future sales price or the cash flow generated by the property to arrive at a current fair market value. Id.
A property owner is qualified to testify to the value of his property even if he is not an expert and would not be qualified to testify to the value of other property. Reid Rd. Mun. Util. Dist. No. 2 v. Speedy Stop Food Stores, Ltd., 337 S.W.3d 846, 852-53 (Tex. 2011). "Opinion testimony concerning [damages to land] is subject to the same requirements as any other opinion evidence." Porras v. Craig, 675 S.W.2d 503, 504 (Tex. 1984). "[A]lthough expert opinion testimony often provides valuable evidence in a case, '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; a claim will not stand or fall on the mere ipse dixit of a credentialed witness.'"Coastal Transp. Co., Inc. v. Crown Cent. Petroleum Corp., 136 S.W.3d 227, 232 (Tex. 2004) (quoting Burrow v. Arce, 997 S.W.2d 229, 235 (Tex. 1999)). A conclusory or speculative statement "will neither establish good faith at the summary judgment stage nor raise a fact issue to defeat summary judgment." Wadewitz v. Montgomery, 951 S.W.2d 464, 466 (Tex. 1997).
The term "ipse dixit" means "something asserted by not proved" and is literally translated "he himself said it." Ipse dixit, BLACK'S LAW DICTIONARY (11th ed. 2019); Gen. Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997).
Raj is qualified to testify to the value of the Anchor Motel as the property owner. In his affidavit, Raj stated that the property's "fair market value was at least $675,000.00 in December 2016." In support of his opinion, Raj stated that he paid $775,000 for the property in 2013, that defects existed on the property, and that he paid more than $148,000.00 to repair the defects.
Although Raj testified about the purchase price in 2013, he did not provide competent evidence to support the fair market value of $675,000. See Vill. Place, Ltd. v. VP Shopping, LLC, 404 S.W.3d 115, 133 (Tex. App.—Houston [1st Dist.] 2013, no pet.) ("Evidence of the purchase price of property can be some evidence of its value."). The record contains no evidence explaining how the property defects or the repairs to the property affected the property's value. The valuation of the property after the repairs must be substantiated. See Nat. Gas Pipeline Co. of Am. v. Justiss, 397 S.W.3d 150, 159 (Tex. 2012). Moreover, there is no evidence regarding whether market conditions at the time Raj purchased the property were comparable to the conditions at the time of the foreclosure sale. See Preston Reserve, L.L.C. v. Compass Bank, 373 S.W.3d 652, 663 (Tex. App.—Houston [14th Dist.] 2012, no pet.). Thus, Raj's opinion about the fair market value of the property is conclusory and speculative. For these reasons, we conclude that Raj did not raise a fact issue to defeat summary judgment. See Wadewitz, 951 S.W.2d at 466; Justiss, 397 S.W.3d at 156. We therefore overrule Raj's third issue.
Consolidation
In his final issue, Raj contends that the trial court erred by denying his motion to consolidate the FSB Lawsuit with the Nuvira Lawsuit. In response, FSB asserts that the claims and the parties in the FSB Lawsuit and the Nuvira Lawsuit are vastly different, warranting denial of the consolidation motion.
A. Standard of review
A trial court has broad discretion to consolidate cases. See Bennett v. Grant, 525 S.W.3d 642, 653 (Tex. 2017). A trial court abuses its discretion when it acts "without reference to any guiding rules and principles." Id. It is an abuse of discretion for a trial court to deny consolidation when the cases seeking to be consolidated are "so interwoven . . . as to involve the same facts and issues." In re Stonebridge Life Ins. Co., 279 S.W.3d 360, 363 (Tex. App.—Austin 2008, no pet.).
B. The trial court did not abuse its discretion by denying the consolidation motion
Rule 174(a) governs consolidation of cases. TEX. R. CIV. P. 174(a). When cases involve a common question of law or fact, a court may "order a joint hearing or trial of any or all the matters in issue," "order all the actions consolidated," and "make such orders . . . as may tend to avoid unnecessary costs or delay." Id.; In re Pirelli Tire, L.L.C., 247 S.W.3d 670, 676 (Tex. 2007). Consolidation merges two or more "separate suits into a single proceeding under one docket number." Hong Kong Dev., Inc. v. Nguyen, 229 S.W.3d 415, 432 (Tex. App.—Houston [1st Dist.] 2007, no pet.).
The FSB Lawsuit involves a single claim of breach of a guaranty between two parties, FSB and Raj. The Nuvira Lawsuit involves multiple fraud claims with different parties. Nuvira sued FSB and Panjwani in the Nuvira Lawsuit. Raj is not a party to that suit. We cannot say that the trial court did not act without reference to any guiding rules and principles when it denied Raj's motion to consolidate. Grant, 525 S.W.3d at 653. Therefore, we overrule Raj's fourth issue.
Conclusion
We affirm the trial court's judgment.
Sarah Beth Landau
Justice Panel consists of Justices Landau, Hightower, and Countiss.