Opinion
No. 07-10-00012-CV
June 24, 2011.
Appealed from the 96th District Court of Tarrant County; No. 96-229807-08; Honorable Jeff Walker, Judge.
Before CAMPBELL and HANCOCK and PIRTLE, JJ.
MEMORANDUM OPINION
Appellants, Home Furnishings, Inc., George C. Burnett, Jr., and Marie Burnett, (collectively "Home Furnishings"), appeal the granting of a summary judgment in an action to collect a deficiency judgment brought by JPMorgan Chase Bank, NA (Chase). We affirm the trial court's judgment.
Factual and Procedural Background
Home Furnishings Group, Inc. executed a promissory note in favor of Chase in October 2005. The note was secured by all of the assets and inventory in its store in Southlake, Texas. Additionally and contemporaneously with execution of the note, the three appellants executed guaranty agreements which obligated each to pay Chase if the primary debtor defaulted. Home Furnishings Group, Inc. defaulted on the note and Chase foreclosed on all of the collateral.
Home Furnishings Group, Inc. was not a party to the lawsuit.
Chase hired an auction company to conduct sales of the collateral. These sales concluded and there was a deficiency owed on the note in question. Chase made demand that the guarantors pay the deficiency and, because no payments were made, filed suit for the deficiency amount. At the time the summary judgment was ruled upon by the trial court, Home Furnishings's answer consisted of a general denial, and a paragraph contending that Chase's disposition of the property was not done in a commercially reasonable manner. The trial court granted Chase's summary judgment and Home Furnishings subsequently filed a motion for new trial. For the first time in the motion for new trial, Home Furnishings raised the defense of impairment or loss of collateral. The trial court denied the motion for new trial and this appeal resulted.
Pursuant to the Texas Supreme Court's docket equalization efforts, this case was transferred to this Court from the Fort Worth Court of Appeals. See TEX. GOV'T CODE ANN. § 73.001 (West 2005). That being so, we must decide this case "in accordance with the precedent of the transferor court under the principles of stare decisis" if our decision otherwise would have been inconsistent with the precedent of the transferor court. TEX. R. APP. P. 41.3; Phillips v. Phillips, 296 S.W.3d 656, 672 (Tex.App.-El Paso 2009, pet. denied).
Through a single issue, Home Furnishings contends the trial court erred in granting a summary judgment because the proof as to the amount owed on the deficiency was insufficient. We disagree and affirm the trial court's judgment.
Standard of Review
We review a trial court's decision to grant a motion for summary judgment de novo. See Tex. Mun. Power Agency v. Pub. Util. Comm'n of Tex., 253 S.W.3d 184, 192 (Tex. 2007). In reviewing a traditional motion for summary judgment, we apply the standards established in Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985), which are as follows:
1. The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.
2. In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the [nonmovant] will be taken as true.
3. Every reasonable inference must be indulged in favor of the [nonmovant] and any doubts resolved in its favor.
See id.; May v. Nacogdoches Mem'l Hosp., 61 S.W.3d 623, 628 (Tex.App.-Tyler 2001, no pet.). For a party to prevail on a traditional motion for summary judgment, he must conclusively establish the absence of any genuine question of material fact and that he is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c). A plaintiff moving for summary judgment must conclusively prove all essential elements of its claim. MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex. 1986).
Analysis
To prove an action for a deficiency judgment, Chase was required to prove that 1) the parties executed a loan agreement for which Home Furnishings Group, Inc. pledged security and under which Home Furnishings personally guaranteed the note; 2) Home Furnishings Group, Inc. defaulted on the loan; 3) Chase made notice and demand for payment; 4) Chase foreclosed on the collateral and sold it in a commercially reasonable manner; and 5) the sale did not satisfy the debt and a deficiency remained. See McGee v. Deere Co., No. 03-04-00222-CV, 2005 Tex.App. LEXIS 2179, at *4-*5 (Tex.App.-Austin March 24, 2005, pet. denied) (mem. op.). According to Home Furnishings, there is no dispute as to the first four of the elements listed above. It is the issue of the sale not satisfying the debt and the amount of the deficiency that requires reversal under Home Furnishings's theory of the case.
To properly analyze this case, we have to review closely the issue as framed by Home Furnishings's appeal. In general, Home Furnishings alleges in its summary judgment proof that the inventory taken 70 days before the closing of the stores reveals not all of the items in the store were accounted for by Chase. However, when reviewed on closer detail it does not address the proof offered by Chase that all of the items seized were either sold by the auction firm, or accounted for by the consignees. The affidavit of George C. Burnett, Jr., does not raise a material issue of fact due to this temporal difference. Therefore, based upon the summary judgment record before the Court, when we indulge the inferences in favor of the nonmovant, Home Furnishings, there is still no genuine issue of material fact raised regarding the disposition of the property seized by Chase. Nixon, 690 S.W.2d at 548-49.
In its brief, Home Furnishings also alleges that the trial court erred in the summary judgment because the creditor, Chase, impaired the collateral in its possession and therefore discharged the guarantors, citing the Court to Kemper v. Patrick, 43 Tex.Civ.App. 216, 95 S.W. 51 (Tex.Civ.App.-Galveston 1906, no writ). Next, Home Furnishings contends that Chase did not account for all the collateral it seized, citing the Court to a number of decisions.See T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218 (Tex. 1992). Home Furnishings then arrives at the conclusion that, as a result of the first two steps, the trial court's damage award was not conclusively established. This fact resulted in harm to Home Furnishings and, therefore, we should reverse the trial court's decision.
Chase takes the position that Home Furnishings has waived the impairment or loss of collateral defense by failure to raise this defense at trial. A review of the record before us demonstrates that Home Furnishings was not relying on this argument in answer to the lawsuit nor in its reply to Chase's motion for summary judgment. At best, Home Furnishings gave some indication regarding this matter in the motion for new trial filed after the trial court entered summary judgment. However, notice of the issue in the motion for new trial did provide sufficient notice to preserve the issue for appeal. See TEX. R. APP. P. 33.1(a)(1).
Having determined that Home Furnishings's impairment or loss of collateral defense was not procedurally waived does not save Home Furnishings. Chase points out in its brief that the guaranty signed by the three appellants contains the following language:
6. RIGHTS, NOTICES, AND DEFENSES THAT GUARANTOR WAIVES
C. Guarantor waives defenses based upon any claim that:
4) The Collateral changed in value, or was neglected, lost, destroyed, or underinsured;
5) Lender impaired the Collateral;
6) Lender did not dispose of any of the Collateral;
8) Lender did not obtain a fair market value of the Collateral; and,
13) Lender impaired Guarantor's suretyship rights.
Chase further points to another provision in the guaranty agreement that states:
7. DUTIES AS TO COLLATERAL
Lender has no duty to preserve or dispose of any Collateral.
To support this proposition, Chase cites the Court to theT.O. Stanley case, see 847 S.W.2d at 223, which states that a party to a loan can contractually waive claims and defenses. Home Furnishings does not contest such claims can be waived. Our review of the record, convinces us that Home Furnishings did, expressly, waive the impairment or loss of collateral claim in the guaranty agreement they entered into.
Home Furnishings's contention is that waiver does not matter because Chase failed to prove its entitlement to summary judgment. Home Furnishings contends they produced an affidavit showing what was in the store when the inventory was foreclosed upon. However, for the reasons stated above, Home Furnishings did not raise a genuine issue of material fact about the property foreclosed upon. What Home Furnishings has not done is raise a genuine issue of material fact about Chase's proof of the amount of money that was owing at the time of foreclosure, amount of money that was spent on disposing of the property, and proceeds from the sale which in turn leads to the deficiency for which judgment was issued. McGee, 2005 Tex.App. LEXIS 2179, at *3. The record clearly supports the trial court's action in granting the summary judgment for the deficiency judgment. Appellants' issue is overruled.
Conclusion
Having overruled appellants' issue, we affirm the trial court's judgment.
Campbell, J., concurring.
Pirtle, J., dissenting.
CONCURRING OPINION
Although I cannot agree entirely with the reasoning of the majority, I agree the summary judgment in favor of JPMorgan Chase Bank, NA against appellants should be affirmed.
Under Texas law, to recover under the loan guarantees signed by appellants, Chase was required to show the existence and ownership of the guarantee contracts; the terms of the underlying promissory note; the default of the note's maker; and the failure or refusal to perform the promise by the guarantor. Albright v. Regions Bank, No. 13-08-262-CV, 2009 Tex.App. LEXIS 8308, at *6 (Tex.App.-Corpus Christi Oct. 29, 2009, no pet.), citing Marshall v. Ford Motor Co., 878 S.W.2d 629, 631 (Tex.App.-Dallas 1994, no writ). Chase's pleadings sought a judgment against appellants, as guarantors, for all unpaid principal, interest and other amounts due under the note. With their response to Chase's motion for summary judgment, appellants produced the affidavit of George C. Burnett, Jr. and attachments supporting their assertion a fact issue existed with regard to the unpaid amount of the note. By appellants' theory, the existence of evidence that Chase had failed to "account for" all the collateral securing the note, consisting of store inventory, meant that Chase could not conclusively establish the amount due under the guarantee. The evidence raised a fact issue, they contended, that Chase foreclosed on certain collateral but either did not sell it at the foreclosure sale or sold it but failed to account for it in its summary judgment evidence.
See also Wiman v. Tomaszewicz, 877 S.W.2d 1 (Tex.App.-Dallas 1994, no writ), citing Barclay v. Waxahachie Bank Trust Co., 568 S.W.2d 721, 723 (Tex.Civ.App.-Waco 1978, no writ) (listing elements of recovery on guaranty as (1) the existence and ownership of the guaranty contract; (2) the terms of the underlying contract by the holder; (3) the occurrence of the conditions upon which liability is based; and (4) the failure or refusal to perform the promise by the guarantor.).
The majority rejects appellants' contention, in part because the majority reads Burnett's affidavit to say there was a seventy-day lapse of time between the date of the inventory on which appellants' assertion rests and the date the store was locked by the landlord. I believe Burnett's affidavit should be read to say that the inventory list dated March 15, 2007, appended to the affidavit, shows the inventory on hand as of the end of the last day the store was open for business. Although the date on which Chase took possession of the collateral is not clear to me on this record, I cannot agree with the majority that the dates stated in Burnett's affidavit are fatal to appellants' contention.
Nonetheless, I agree with the majority that the trial court did not err by granting summary judgment to Chase. As the majority points out, the guarantee agreements appellants signed relieved Chase of any duty to preserve or dispose of any collateral. The agreements are Small Business Administration form documents. By other clear terms of the guarantees, appellants waived defenses that the collateral was neglected or lost, and defenses that Chase impaired the collateral, did not dispose of any of the collateral or failed to obtain a fair market value for the collateral. Having agreed to those terms, appellants nevertheless point to evidence of discrepancies in Chase's handling of the collateral, which they couch in terms of its failure to "account for" some items, as raising a fact issue precluding summary judgment. To me, their contention thus is not that there is a fact issue over the unpaid balance of the note, but that the balance might be different if the collateral had been handled differently. An immaterial issue of fact does not preclude summary judgment. Harris County v. Ochoa, 881 S.W.2d 884, 889 (Tex.App.-Houston [14th Dist.] 1994, writ denied); Borg-Warner Acceptance Corp. v. C.I.T. Corp., 679 S.W.2d 140, 144 (Tex.App.-Amarillo 1984, writ ref'd n.r.e.). Because the trial court was presented with a guarantee agreement that, on its face, rendered immaterial the issue appellants raised, it did not err by granting summary judgment.
Appellants do not contend this case is affected by Business and Commerce Code section 9.602. See Tex. Bus. Com. Code Ann. § 9.602 (West 2011) (listing non-waivable duties of secured parties). Appellants' brief on appeal states there is no dispute over the commercial reasonableness of Chase's disposition of the collateral.
For those reasons, I concur in the court's judgment.
DISSENTING OPINION
The memorandum opinions authored by Justices Campbell and Hancock reach the same final result (affirm), but for different reasons. While I agree with large portions of both opinions, because I disagree with the final result, I respectfully dissent.
As stated in both memorandum opinions, this is a suit on a promissory note by a lender against guarantors for a deficiency judgment. In that regard, it is undisputed that Home Furnishings Group, Inc., a non-party, executed and delivered to JPMorgan Chase Bank NA ("Chase"), a promissory note, in the original principal sum of $522,000; which note was both guaranteed by Home Furnishings, Inc., George C. Burnett, Jr. and Marie E. Burnett (Appellants herein; collectively "guarantors"), and collateralized by assets and inventory located at Home Furnishings Group, Inc.'s store in Southlake, Texas. It is also undisputed that Home Furnishings Group, Inc. defaulted on the note and that Chase then seized the collateral, foreclosed its security interest, and made a demand for payment upon the guarantors for the alleged deficiency. Against those undisputed facts, what is at issue here is whether Chase met its summary judgment burden of proof in its suit against the guarantors for the deficiency. The guarantors contend the trial court erred in granting Chase summary judgment because a material issue of fact exists as to the amount due and owing. Specifically, guarantors contend, via an affidavit from George C. Burnett, that Chase has not accounted for or otherwise allowed credit for certain items of collateral seized by Chase pursuant to its security agreement; whereas, Chase contends that all credits have been given.
Justice Hancock's opinion takes the position that Burnett's affidavit does not raise a material issue of fact as to the disputed credits because there is a perceived temporal gap between the inventory date relied upon by Burnett in his affidavit and the date the collateral was seized. In this regard, I agree with Justice Campbell's opinion in its finding that Burnett's affidavit should be read as saying the inventory list appended thereto was the inventory on hand as of the end of the last day the store was open for business. Although Burnett's affidavit does not definitively state that the inventory listed was the collateral seized by Chase, it does state that "no inventory was sold . . . removed, relocated, or otherwise disposed of after that date." It further states that "the items listed on Exhibit C of Defendants' Response to Plaintiff's Third Amended Motion for Summary Judgment represent a list of inventory that was in the store at the end of the last day of business, " but which was not sold at the foreclosure sales and cannot be accounted for." (Emphasis added.) A reasonable deduction from that statement is that the guarantors contend Chase seized assets for which the guarantors received no credit. While Chase's summary judgment evidence does state that credits were allowed for the net proceeds from four separate liquidation sales and a settlement with an alleged consignor, it does not aver that Chase has allowed credit for all of the collateral seized. Therein lies the rub.
The opinions of both Justices Campbell and Hancock take the position that the guarantors contractually waived their defense of "impairment or loss of collateral." Apparently they take this position because, at the time the trial court considered Chase's motion for summary judgment, the guarantors' live pleading consisted of nothing more than a general denial and an allegation that Chase's "disposition of the collateral, including the method, manner, time, and place of said disposition was not commercially reasonable." A general denial places in issue the amount allegedly due and owing on a promissory note and a plaintiff seeking recovery upon a note has the burden of proving the amount of the balance due. Fikes and Associates v. Evans, 610 S.W.2d 245 (Tex.Civ.App.-Fort Worth 1980, no writ). Whether or not the guarantors have plead either an affirmative defense or assert a counterclaim regarding the collateral allegedly retained, to establish its entitlement to judgment as a matter of law, Chase had the burden of proving every essential element of its claim, MMP, Ltd. v. Jones, 710 S.W.2d 59 (Tex. 1986), including the amount due and owing.
Justice Campbell's opinion concludes that because the guaranty agreements waive certain defenses there is no material issue of fact which precludes summary judgment. He argues that the applicable waiver listed is the waiver of claims based upon an allegation that Chase "did not dispose of any collateral." While I will agree Chase was under no obligation to pursue its right to foreclose the security interest it held in the collateral at issue before it sought to enforce the guaranty agreements, Christian v. Univ. Fed. Sav. Ass'n, 792 S.W.2d 533, 555 (Tex.App.-Houston [1st Dist.] 1990, no writ), having chosen to do so, it must account for the collateral seized. Tanenbaum v. Economics Laboratory, Inc. 628 S.W. 2d 769, 771-72 (Tex. 1982) (holding that a note holder is not entitled to a deficiency judgment unless collateral seized has been disposed of in a commercially reasonable manner).
See Justice Campbell's opinion regarding waiver of the "defense that the collateral was neglected or lost, and defenses that Chase impaired the collateral, did not dispose of any of the collateral or failed to obtain a fair market value for the collateral." See also Justice Hancock's opinion regarding Rights, Notices, and Defenses that Guarantor Waives and Duties as to Collateral.
Although neither the guarantors nor Chase have briefed the matter, issues pertaining to the seizure of collateral, its foreclosure, and entitlement to credit for net proceeds from a commercially reasonable sale thereof are governed by Chapter 9 of the Texas Uniform Commercial Code. See Tex. Bus. Com. Code Ann. §§ 9.101 — 9.709 (West 2011)
Because a material issue of fact exists as to the guarantors' right to additional credits, Chase has not met its burden of conclusively proving the amount of its damages. Therefore, I believe the trial court erred in granting summary judgment in favor of Chase. Tex. R. Civ. P. 166a(c). Accordingly, I would reverse and remand for further proceedings.