IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 98-10859
Summary Calendar
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In The Matter Of: DICKIE WAYNE CLEMENT,
Debtor.
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DICKIE WAYNE CLEMENT,
Appellant,
versus
FIRST NATIONAL BANK OF BOWIE,
Appellee.
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Appeal from the United States District Court
for the Northern District of Texas
(4:98-CV-224-Y)
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December 14, 1998
Before JOLLY, SMITH, and WIENER, Circuit Judges.
PER CURIAM:*
Dickie Wayne Clement, a debtor in the bankruptcy proceedings
underlying this appeal, challenges the bankruptcy court’s order
overruling his objection to a proof of claim filed by First
National Bank of Bowie (the “Bank”). The district court affirmed
the order. We conclude that the bankruptcy court properly allowed
the claim. Therefore, we affirm the district court’s judgment.
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
I
Before discussing the bankruptcy proceedings, we recap some of
the events leading up to those proceedings. The relevant facts are
not in dispute.
In 1992, the Bank obtained a judgment, in state court, against
Clement in the amount of $73,283.23. The day the court issued the
judgment, the Bank recorded the abstract of judgment in the
Official Public Records of Real Property of Wise County, Texas.
The Bank was not the only party to act swiftly upon issuing of the
judgment. Also on the same day, Clement’s attorney recorded a deed
conveying Clement’s real property to a friend of Clement. The
Bank, however, successfully petitioned a Texas district court to
label the conveyance as fraudulent and set it aside. Soon
thereafter, the local sheriff conducted an execution sale to
satisfy the Bank’s judgment.
At this sale, which occurred in 1995, the Bank purchased one
of Clement’s tracts of land for $58,400. The Bank credited this
amount against the judgment award owed by Clement. A little over
one month after purchasing the property, the Bank resold the
property for $116,067.40. Meanwhile, to satisfy what it perceived
as a remaining deficiency in the judgment, the Bank set another one
of Clement’s tracts of land for execution sale.1 Before the
1
A Texas district court judgment, entered on May 22, 1995,
stated that the Bank could foreclose its judgment lien on the two
tracts of land.
2
sheriff could carry out this execution sale, however, Clement filed
a petition for bankruptcy under Chapter 13 of the Bankruptcy Code,
which had the effect of staying the execution sale.2 See 11
U.S.C.A. § 362 (West Supp. 1998).
During the bankruptcy proceedings, the Bank filed a proof of
claim for $47,331.23. See 11 U.S.C.A. § 501 (West 1993). Clement
objected to this claim under 11 U.S.C.A. § 502(b)(1).3 The
bankruptcy court issued an order overruling the objection. The
district court subsequently affirmed the bankruptcy court’s order.
2
The bankruptcy filing also had the effect of staying other
pending litigation in the state court.
3
The relevant language of § 502(b)(1) provides:
(b) [I]f such objection to a claim is made, the court,
after notice and a hearing, shall determine the amount of
such claim in lawful currency of the United States as of
the date of the filing of the petition, and shall allow
such claim in such amount, except to the extent that–
(1) such claim is unenforceable against the
debtor and property of the debtor, under
any . . . applicable law for a reason other
than because such claim is contingent or
unmatured.
3
II
A
“We review the decision of the district court by applying the
same standard[] of review to the bankruptcy court’s . . .
conclusions of law as applied by the district court.” Crowell v.
Theodore Bender Accounting, Inc., 138 F.3d 1031, 1033 (5th Cir.
1998) (citations omitted). The bankruptcy court’s conclusions of
law are reviewed de novo. Id. The parties have not brought before
us any relevant factual disputes.
B
Clement argues that the Bank’s claim is unenforceable under
Texas law. Although admitting that the actual sale price at the
execution sale left a deficiency, Clement argues that this sale of
his land has satisfied the judgment in full. This is so, he
argues, because the Bank, which bought the land at the execution
sale, turned around and resold the land, just one month later, for
$116,067.40—an amount far greater than the judgment award. Clement
urges us to recognize that, in this case, Texas law requires that
“persons against whom recovery of [a] deficiency is sought are
entitled to an offset against the deficiency in the amount by which
the fair market value . . . exceeds the sale price.” TEX. PROP. CODE
ANN. § 51.003(C) (WEST 1995); see also id. § 51.004(c).
4
The Bank, however, contends that fair market value plays no
role in computing the deficiency that remains after an execution
sale. Chapter 51 of the Texas Property Code, the Bank points out,
only applies to foreclosure sales of property subject to a trust or
other contract lien. See id. § 51.004(a)(1) (“This section applies
if real property subject to a deed of trust or other contract lien
is sold at a foreclosure sale . . .”); id. § 51.003 (referencing to
§ 51.002, which provides the procedure for conducting a sale of
real property under contract lien). In this case, the sheriff
conducted a foreclosure sale of property subject to a judgment
lien, not a deed of trust or any other contract lien. The Bank
argues that Chapter 51, therefore, does not apply to this case.
According to the Bank’s interpretation of Texas’ common law,
Clement can only challenge the sheriff’s sale by showing (1) that
the price paid for the property was grossly inadequate, and (2)
that there were irregularities in the sale. Clement, however, has
stipulated that there were no irregularities in the sheriff’s
execution sale. We are thus left with the simple question of
whether Chapter 51 applies to this execution sale.
III
We agree with the Bank’s straightforward reading of Chapter
51. Chapter 51 limits itself to foreclosure sales of property
subject to a deed of trust or other contract lien. Id. §§ 51.002,
51.004. The property involved in this case was subject to a
judgment lien. The creation of a judgment lien is governed by
5
Chapter 52 of the Texas Property Code. See TEX. PROP. CODE ANN.
§ 52.001 (West 1995). Section 51.001 specifically provides that
“this subtitle does not affect a lien that is not treated in this
subtitle, including a lien arising under common law, in equity or
under another statute of this state.” As Chapter 52 governs
judgment liens, and judgment liens are not treated in the
provisions of Chapter 51, the code provisions that Clement relies
upon do not provide any support for his argument. A plain reading
of the Texas code prompts this conclusion. It is not surprising,
therefore, that Clement has not directed us to any Texas cases that
apply the provisions of Chapter 51 to judgment liens. Because
Clement bases his sole objection to the Bank’s claim on the
provisions of Chapter 51, the bankruptcy court properly overruled
his objection.4
The judgment of the district court is
4
Clement also offers a policy reason for expanding the
application of Chapter 51 to judgment liens. Clement contends that
by restricting the application of Chapter 51 to its textually
defined limits, our court would create a loophole for creditors
wishing to deny hypothecators their protections provided by Chapter
51. Instead of foreclosing on the property subject to a contract
lien, Clement suggests, a creditor could sue on the defaulted note
and obtain a judgment. When the creditor forces an execution sale
producing proceeds less than the fair market value of the property
sold, the creditor could claim that Chapter 51 does not apply.
This sale of property would be the result of an execution sale, not
a sale “under power of sale conferred by a deed of trust or other
contract lien.” Id. § 51.002(a). If Texas’ Property Code allows
for the nefarious evasions that Clement thinks it does, only the
Texas courts or legislature, not the federal courts, have the power
to close the alleged loophole.
6
A F F I R M E D.
7