Redus TX Properties, LLC v. Gray

Filing 17

MEMORANDUM AND ORDER granting 11 MOTION for Summary Judgment.(Signed by Judge Ewing Werlein, Jr) Parties notified.(kcarr, )

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
REDUS TX PROPERTIES, LLC,

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Plaintiff,
v.
GARY M. GRAY,
Defendant.

CIVIL ACTION NO. H-10-4602

MEMORANDUM AND ORDER
Pending is Plaintiff Redus TX Properties, LLC’s Motion for
Summary Judgment (Document No. 11).

After considering the motion,

response, reply, and the applicable law, the Court concludes that
the motion should be granted.
I.
Plaintiff

Redus

Background

Properties,

LLC

seeks

a

post-foreclosure

deficiency judgment from Defendant Gary Gray, who executed a
personal guaranty (“Guaranty”) to secure GALP Grayridge Limited
Partnership’s (“GALP”) purchase of an apartment complex in Houston,
Texas

known

“Property”).1

1

as

the

Vinings

at

West

Oaks

Apartments

(the

The Guaranty requires Defendant to perform all of

See Document No. 11 at 1; GALP executed a Promissory Note
(“Note”) and Loan Agreement for $13,600,000 in order to purchase
the Property, which was secured by a Deed of Trust. See Document
No. 11, ex. A-1 (Note); id., ex. A-2 (Loan Agreement); id., ex. A-3
(Deed of Trust). Defendant executed both the Note and the Loan
Agreement in his capacity as President of GALP and signed the

the obligations owed by GALP on the occasion of an “Event of
Default” such as filing for bankruptcy protection.2

GALP filed for

bankruptcy on November 1, 2010, triggering Defendant’s liability on
the

Note.

Defendant

Accordingly,
as

guarantor

Plaintiff
to

collect

filed

this

amounts

action

due

on

against

the

Note.

Thereafter, Plaintiff foreclosed on the Property with leave of the
bankruptcy court, and now seeks a deficiency of $273,557.78 from
Defendant, plus attorneys’ fees and costs incurred to enforce its
rights under the Guaranty.
II.

Summary Judgment Standard

Rule 56(a) provides that summary judgment should be rendered
“if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of
law.”

FED . R. CIV. P. 56(a).

The moving party must “demonstrate

the absence of a genuine issue of material fact.”

Celotex Corp. v.

Catrett, 106 S. Ct. 2548, 2553 (1986).
Once the movant carries this burden, the burden shifts to the
nonmovant to show that summary judgment should not be granted.

Guaranty in his individual capacity. See id., exs. A-1, A-2, A-3,
and A-4 (Guaranty). Through a series of assignments, Plaintiff
became the holder of the Note, the Deed of Trust, and the Guaranty.
See id., ex. A-5 at 160-62 (Assignment from Wachovia Bank to
Plaintiff).
2

Filing for bankruptcy was one of several possible “Event[s]
of Default” outlined in the loan agreement. See Document No. 11,
ex. A-2 ¶ 8.1(f) (Page 31 of 54).
2

Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th
Cir. 1998).

A party opposing a properly supported motion for

summary judgment may not rest upon mere allegations or denials in
a pleading, and unsubstantiated assertions that a fact issue exists
will not suffice.
specific

facts

Id.

showing

“[T]he nonmoving party must set forth
the

existence

of

a

‘genuine’

concerning every essential component of its case.”

Id.

issue

“A party

asserting that a fact cannot be or is genuinely disputed must
support

the

assertion

by:

(A)

citing

to

particular

parts

of

materials in the record . . .; or (B) showing that the materials
cited do not establish the absence or presence of a genuine
dispute,

or

that

an

adverse

party

evidence to support that fact.”

cannot

produce

admissible

FED . R. CIV . P. 56(c)(1).

“The

court need consider only the cited materials, but it may consider
other materials in the record.” FED . R. CIV . P. 56(c)(3).
In considering a motion for summary judgment, the district
court must view the evidence “through the prism of the substantive
evidentiary burden.”

Anderson v. Liberty Lobby, Inc., 106 S. Ct.

2505, 2513 (1986). All justifiable inferences to be drawn from the
underlying facts must be viewed in the light most favorable to the
nonmoving party.

Matsushita Elec. Indus. Co. v. Zenith Radio

Corp., 106 S. Ct. 1348, 1356 (1986).

“If the record, viewed in

this light, could not lead a rational trier of fact to find” for
the nonmovant, then summary judgment is proper.

3

Kelley v. Price-

Macemon, Inc., 992 F.2d 1408, 1413 (5th Cir. 1993).

On the other

hand, if “the factfinder could reasonably find in [the nonmovant’s]
favor, then summary judgment is improper.”

Id.

Even if the

standards of Rule 56 are met, a court has discretion to deny a
motion for summary judgment if it believes that “the better course
would be to proceed to a full trial.”

Anderson, 106 S. Ct. at

2513.
III.

Discussion

Under Texas law,3 a plaintiff seeking to recover a deficiency
judgment under a promissory note must establish: “(1) the note[] in
question,

(2)

that

[the

maker]

signed

the

note[],

(3)

that

[mortgagee] was the legal owner and holder of the note[], and
(4) that a certain balance was due and owing under the note[].”
Cockrell v. Republic Mortg. Ins. Co., 817 S.W.2d 106, 111 (Tex.
App.--Dallas 1991, no writ).

To recover on a guaranty of a

promissory note, a plaintiff must show “‘proof of (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.’” Haggard v. Bank
of Ozarks Inc., 668 F.3d 196, 199 (5th Cir. 2012) (quoting Marshall

3

It is undisputed that Texas law governs this dispute. See
Document No. 11, exs. A-1 (“This Note and each of the other Loan
Documents shall be interpreted and enforced according to the laws
of the state where the Property is located.”).
4

v. Ford Motor Co., 878 S.W.2d 629, 631 (Tex. App.--Dallas 1994, no
writ)).

“A guarantor’s liability on a debt is measured by the

principal’s liability unless a more extensive or a more limited
liability is expressly set forth in the guaranty agreement.”

Id.

n.4 (quotation omitted).
The uncontroverted summary judgment evidence conclusively
establishes the terms, existence, and ownership of the Note and the
Guaranty; Defendant signed the Guaranty; GALP defaulted on the Note
when it filed for bankruptcy, triggering Defendant’s liability
under the Guaranty; there is a deficiency balance as a result of a
foreclosure sale; and Defendant has not paid the deficiency balance
due on the Note.4

Plaintiff’s Vice President Matthew D. Burbank in

his affidavit provides detailed proof that (1) the principal amount
due on the date of foreclosure was $12,702,279.65; (2) accrued
interest from April 11, 2011 through June 6, 2011 (at 4% interest)
was $80,477.77; (3) default interest from November 1, 2010 to June
6, 2011 (at 5% interest) was $384,596.80; (4) legal fees in the
amount of $107,014.39; and (5) miscellaneous fees and expenses
in

the

amount

of

$15,675.77,

for

a

total

amount

owed

of

$13,290,014.385; Burbank’s verified proof then itemized certain
credits

to

which

the

debtor

was

entitled,

which

reduced

the

indebtedness to $13,038,279.96, as of June 6, 2011, and then

4

See Document No. 11, exs. A, A-1, A-2, A-4, and A-5.

5

Document No. 11, ex. A ¶ 9.
5

credited against that sum the proceeds of $12,764,22.18 received at
the public auction of the property, resulting in a post-foreclosure
debt of $273,557.78 owed by Defendant. This is sufficient proof of
the deficiency owed under the Note and Guaranty.

See Kelly v.

First State Bank Cent. Tex., No. 03-10-00460-CV, 2011 WL 6938522,
at *9 (Tex. App.--Austin Dec. 30, 2011, no pet.) (concluding that
the lender’s officer’s affidavit itemizing accrued interest and
incurred costs and fees was sufficient proof on summary judgment of
the amount due); see also Scott v. Commercial Servs. of Perry,
Inc., 121 S.W.3d 26, 29 (Tex. App.--Tyler 2003, pet. denied) (“A
lender need not file detailed proof reflecting the calculations of
the balance due on a note; an affidavit by a bank employee which
sets forth the total balance due on a note is sufficient to sustain
an award of summary judgment.” (citing Martin v. First Republic
Bank, Fort Worth, N.S., 799 S.W.2d 482, 485 (Tex. App.--Fort Worth
1990, writ denied))).
Defendant does not controvert, plead, or otherwise show that
any of the foregoing proof is erroneous or unreasonable.

Instead,

Defendant’s sole contention on summary judgment is that Plaintiff
failed to give credit for insurance proceeds claimed for a 2010
fire loss at the Property.
along

with

claims

for

This claim for insurance proceeds--

four

additional

2010

fire

losses

at

completely separate apartment projects that are also covered by the
same casualty loss policy--are all the subject of a separate

6

declaratory judgment suit filed by the casualty insurance company,
Ironshore Specialty Insurance Company.”6

Defendant contends that

a genuine issue of material fact exists because Plaintiff did not
apply, as an offset to the deficiency amount, insurance proceeds
that GALP seeks to recover in that separate lawsuit.7
The Guaranty provides:
Section 2.1
Events and Circumstances Not Reducing or
Discharging Guarantor’s Obligations. Guarantor hereby
consents and agrees to each of the following and agrees
that Guarantor’s obligation hereunder shall not be
released, diminished, impaired, reduced or adversely
affected in any way by any of the following, and waives
any common law, equitable, statutory or other rights
(including, without limitation, rights to notice) which
Guarantor might have in connection with any of the
following:
. . .
(c)
Invalidity, Unenforceability, Offset, Etc.
The invalidity, illegality or unenforceability of
all or any part of the Guaranteed Obligations or
any Loan Document, or of any other document or
agreement
executed
in
connection
with
the
Guaranteed Obligations for any reason whatsoever,
including, without limitation, the fact that . . .
(v) Borrower has valid defenses, claims, or offsets
. . . which render the Guaranteed Obligations
wholly or partially uncollectible from Borrower,
and whether such defense, claim, or right of offset
arises
in
connection
with
the
Guaranteed

6

Document No.
Ironshore Specialty
Partnership, et al.,
See Document No. 12,

12 ¶ 4.
The insurance suit is captioned
Insurance Company v. GALP Grayridge Limited
No. 4:11-cv-03310 (S.D. Tex.) (Ellison, J.).
ex. B.

7

See Document No. 12 ¶ 5.
Defendant’s sole claim for an
offset is based on its anticipated insurance payout.
7

Obligations, the transactions creating same, or
otherwise . . . .
Document No. 11, ex. A-4 ¶ 2.1 (Guaranty) (emphasis added).
Plaintiff

points

out,

Defendant

in

his

Guaranty

expressly waived any right to claim such an offset.

of

the

As
Note

See Tran v.

Compass Bank, No. 02-11-00189-CV, 2012 WL 117859, at *2 (Tex.
App.–-Fort Worth Jan. 12, 2012, no pet.) (finding that guarantor
had waived “any rights or defenses based . . . upon an offset” and
therefore “agreed to foreclose his right to invoke all separate
rights or defenses to an offset against a deficiency owed–-whether
statutory or otherwise” (emphasis in original)); Compass Bank v.
Veytia, No. EP-11-CV-228-PRM, 2011 WL 6130900, at *6 (W.D. Tex.
Dec. 8, 2011, no pet.) (guarantors waived “their ability to argue
that ‘credits, payments, funds in the Registry of the Court, and
loan payoffs’ . . . ‘offset’ the Guaranteed Debt”); see also
LaSalle Bank Nat. Ass’n v. Sleutel, 289 F.3d 837, 839-42 (5th Cir.
2002) (finding that the guarantor expressly waived the right to
offset under Tex. Prop. Code § 51.003 based on language in the
guaranty).8

Because Defendant waived any right to an offset, and

8

Not only did Defendant contractually waive any right to
offset, he also did so by his failure to plead offset as an
affirmative defense in his Answer. See Brown v. Am. Transfer &
Storage Co., 601 S.W.2d 931, 936 (Tex. 1980) (“The right to offset
is an affirmative defense. The burden of pleading offset and of
proving facts necessary to support it are on the party making the
assertion.” (citing Sw. Bell Tel. Co. v. Gravitt, 551 S.W.2d 421
(Tex. Civ. App.–-San Antonio 1977, writ ref’d n.r.e.)).
8

has not offered summary judgment evidence sufficient to raise a
genuine issue of fact contesting Plaintiff’s proof, Plaintiff is
entitled to summary judgment against Defendant for the postforeclosure deficiency amounts.
In

addition

to

the

deficiency

amount,

Plaintiff

seeks

attorneys’ fees and costs in the amount of $14,500.00 for enforcing
the Guaranty based upon its proviso that the Guarantor pay the
Lender “any and all costs and expenses (including court costs and
reasonable attorneys’ fees and expenses) incurred by Lender” in the
enforcement of the rights under the Guaranty if “the Guarantor
fails to timely perform any provisions of this Guaranty.”9
Plaintiff’s counsel has provided verified proof that the
attorneys’ fees and costs for services performed for enforcement of
the

Guaranty

amount

to

“at

least

$12,000.00,”

and

that

“an

additional $2,500 in attorneys’ fees will be required to reply to
any response filed by Defendant, prepare for and attend a hearing
on the summary judgment, and to execute on the judgment” for a
total fee of $14,500.00.10

9

Defendant does not contest Plaintiff’s

Document No. 11, ex. A-4 ¶ 1.7.

10

Plaintiff’s counsel states that he considered the following
factors on the fee claim:
(a)
(b)

the time and labor required, the novelty and difficulty
of the questions involved, and the skill requisite to
perform the legal services properly;
the likelihood, if apparent to the client, that the
acceptance of the particular employment will preclude
other employment by the lawyer;
9

proof

for

attorney’s

fees

and

expenses,

and

has

offered

no

controverting evidence.
Counsel for Plaintiff represents that its firm reviewed the
loan documents, investigated the underlying claims and history
regarding the note, attended status conferences, communicated with
Defendant’s counsel, researched and analyzed the statutory and case
law, and drafted the Motion for Summary Judgment.11

The Court has

considered Plaintiff’s proof and, although it is not contested by
Defendant, finds that the fee is reasonable except for inclusion of
a

sum

“to

prepare

for

and

attend

a

hearing

on

the

summary

judgment,” which hearing the Court determined was not necessary.
Accordingly, an adjustment will be made.
Plaintiff

is

entitled

to

$13,150.00

for

The Court finds that
its

reasonable

and

necessary attorneys’ fees in connection with its enforcement of the
Guaranty.

(c)
(d)
(e)
(f)
(g)

the fee customarily charged in this locality for similar
legal services;
the amount involved and the results obtained;
the nature and length of the professional relationship
with the client;
the experience, reputation and ability of the lawyer or
lawyers performing the services; and
whether the fee is fixed or contingent on results
obtained or uncertainty of collection before the legal
services have been rendered.

Document No. 11, ex. D ¶ 8. See also Arthur Andersen & Co. v.
Perry Equipment Corp., 945 S.W.2d 812, 818 (Tex. 1997) (delineating
the factors to consider in awarding attorneys’ fees in Texas).
11

Document No. 11, ex. D ¶ 3.
10

IV.

Order

Accordingly, it is
ORDERED that Plaintiff Redus TX Properties, LLC’s Motion for
Summary Judgment (Document No. 11) is GRANTED, and Plaintiff shall
have and recover from Defendant Gary M. Gray the sums of:
(1)

$273,557.78 in actual damages as of June 6, 2011;

(2)

Pre-judgment interest at the rate of 5% per annum from
June 6, 2011 until the date of Final Judgment, which is
separately signed this day, which pre-judgment interest
totals $11,804.21;

(3)

Reasonable and necessary attorneys’ fees and expenses in
the amount of $13,150.00; and

(4)

Contractual post-judgment interest on the total of the
foregoing amounts, which in all total $298,511.99, at the
current federal rate of 0.18% per annum, compounded
annually, from the date of Final Judgment until paid.

The Clerk shall notify all parties and provide them with a
signed copy of this Order.
SIGNED at Houston, Texas, on this 17th day of April, 2012.

____________________________________
EWING WERLEIN, JR.
UNITED STATES DISTRICT JUDGE

11