Case: 14-60864 Document: 00513063388 Page: 1 Date Filed: 06/02/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 14-60864 United States Court of Appeals
Summary Calendar Fifth Circuit
FILED
June 2, 2015
FANNIE MAE, Lyle W. Cayce
Clerk
Plaintiff - Appellee
v.
JOHN HURST; SOUTHERN HOLDINGS III, L.L.C.,
Defendants - Appellants
Appeal from the United States District Court
for the Southern District of Mississippi
USDC No. 1:13-CV-399
Before REAVLEY, DENNIS, and SOUTHWICK, Circuit Judges.
PER CURIAM:*
Plaintiff-Appellee Fannie Mae brought this suit against John Hurst and
Southern Holdings III, L.L.C. (collectively, “Appellants”), seeking the unpaid
balance on a promissory note. Appellants challenge the district court’s denial
of their motion to compel certain discovery requests, refusal to certify an
* 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
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interlocutory appeal of that denial, and grant of summary judgment for Fannie
Mae. We AFFIRM the district court’s orders.
I.
In January 2008, Southern Holdings III, L.L.C., owner of an apartment
complex in Pascagoula, Mississippi, signed a secured promissory note with
Principal Life Insurance Company for $4,400,000, and used the apartment
complex as collateral. John Hurst guaranteed Southern Holdings’s obligations
under the promissory note. Principal Life Insurance Company later assigned
its interests in the promissory note to Fannie Mae. Appellants subsequently
defaulted. In September 2012, Fannie Mae had the property appraised and
the property’s fair market value was determined to be $1,800,000. In October
2012, Fannie Mae foreclosed on the property. At the foreclosure sale, Fannie
Mae was the only bidder and bid the appraisal price. Fannie Mae thereafter
assigned its bid to a third party for that same price and credited that amount
to Appellants’ balance, leaving a deficiency of $2,761,869.25. 1 Fannie Mae
then filed the instant suit, seeking that deficiency balance, as well as interest,
late charges, attorney’s fees, and court costs.
Appellants intended to defend against the suit by arguing that Fannie
Mae’s foreclosure sale was not commercially reasonable. During discovery,
Appellants sent Fannie Mae interrogatories seeking detailed information on
all other foreclosures of apartment complexes with which Fannie Mae had been
involved from Louisiana to Florida in the previous four years. Fannie Mae
objected to each of these interrogatories “on the grounds that the information
requested [was] irrelevant, immaterial, and not reasonably calculated to the
1 This sum took into account sums paid toward the promissory note prior to default,
as well as interest, late charges, and fees that had accrued.
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discovery of admissible evidence,” as well as being “overly broad, burdensome,
and costly.”
Appellants filed an Amended Motion to Compel Discovery, seeking full
responses to the above interrogatories, but the magistrate judge denied the
motions. As to the interrogatories relevant here, the district court affirmed the
magistrate judge’s order, concluding that the interrogatories were not likely to
lead to discoverable information. 2 Specifically, the district court concluded
that Fannie Mae’s actions in other foreclosures would have no impact on
whether a deficiency judgment was appropriate in the present case.
Appellants moved for interlocutory review of the district court’s decision and
the district court denied the motion. Ultimately, the district court granted
summary judgment for Fannie Mae. This appeal followed.
II.
A.
Appellants first argue that Fannie Mae should have been compelled to
provide full answers to their interrogatories. “We review a district court’s
decision to limit discovery for abuse of discretion.” Green v. Life Ins. Co. of N.
Am., 754 F.3d 324, 329 (5th Cir. 2014). To succeed on appeal when challenging
such a discovery order, “[t]he appellant must prove both abuse of discretion
and prejudice.” Id. As a general rule, “the deposition-discovery rules are to be
accorded a broad and liberal treatment.” Hickman v. Taylor, 329 U.S. 495, 507
(1947). Parties may generally obtain discovery so long as it is “relevant to any
party’s claim or defense” and “appears reasonably calculated to lead to the
discovery of admissible evidence.” See Fed. R. Civ. P. 26(b)(1).
2 The magistrate judge did determine that Appellants were entitled to obtain the
information sought from several other interrogatories that are not relevant to this appeal.
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According to Mississippi law, 3 prior to granting a deficiency judgment, a
court must ensure “that the debtor is given credit toward his obligations in an
amount fairly reflecting the market value of the collateral, all to the end that
he may not be saddled with an inequitable deficiency judgment.” Wansley v.
First Nat’l Bank of Vicksburg, 566 So. 2d 1218, 1221 (Miss. 1990). Appellants
argue that a credit of $1,800,000—the sale price of the apartment complex—
does not fairly reflect the market value of the collateral. They do not, however,
contest Fannie Mae’s appraisal, which determined that the property’s fair
market value did not exceed $1,800,000 at the time of the foreclosure sale.
Instead, Appellants theorize that Fannie Mae carried out a practice of selling
apartment complexes far below their fair market values throughout the Gulf
Coast region of Louisiana, Mississippi, Alabama, and Florida, thereby
significantly depressing the value of such properties in the entire region.
Appellants fault the district court for failing to compel Fannie Mae to produce
files that may have substantiated Appellants’ theory.
The district court determined that the discovery Appellants sought was
not likely to lead to admissible evidence because Fannie Mae’s actions
throughout the general region were not relevant to Appellants’ case. Even if
Fannie Mae’s other foreclosures did in fact depress the value of Appellants’
property, the court noted, the only relevant question was whether the subject
property was sold for a price that fairly reflected the value of that property in
the real estate market. The various factors influencing the market as whole
were simply not at issue. For the following reasons, we conclude that the
district court’s decision was not an abuse of discretion.
3This dispute is in federal court on the basis of diversity jurisdiction. See 28 U.S.C.
§ 1332. “Under the Erie doctrine, federal courts sitting in diversity apply state substantive
law and federal procedural law.” Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427
(1996).
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Evidence is relevant if “(a) it has any tendency to make a fact more or
less probable than it would be without the evidence; and (b) the fact is of
consequence in determining the action.” Fed. R. Evid. 401. “For deficiency
judgment purposes[] . . . ‘[t]he legal determination of the adequacy of the
purchase price depends upon establishment of fair market value.’” Id. at 1224
(quoting Haygood v. First Nat’l Bank of New Albany, 517 So. 2d 553, 556 (Miss.
1987)). “Fair market value is defined as the amount at which property would
change hands between a willing buyer and a willing seller, neither being under
any compulsion to buy or sell and both having reasonable knowledge of the
relevant facts.” Hartman v. McInnis, 996 So. 2d 704, 711 (Miss. 2007)
(quotation marks and brackets omitted). Appellants do not contest that Fannie
Mae’s appraiser accurately calculated the fair market value of the property
and that the property was in fact sold for the fair market value. As the district
court held, evidence regarding Fannie Mae’s other foreclosure practices
throughout the Gulf Coast region would not impact whether the subject
property was sold for the amount at which it would have changed hands
between a willing buyer and seller having knowledge of the relevant facts. At
most, such evidence might have suggested that Fannie Mae’s conduct
throughout the region affected the fair market value of the subject property.
So long as the property was sold for fair market value, however, evidence of
the various market forces influencing that value is not relevant to this case.
Cf. id. The district court thus did not abuse its discretion by declining to
compel Fannie Mae to produce files on all of its foreclosures of apartment
buildings in the Gulf Coast region.
B.
Appellants next argue that the district court abused its discretion by
refusing to certify its discovery order for interlocutory appeal. “Interlocutory
appeals are generally disfavored, and statutes permitting them must be
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strictly construed.” Allen v. Okam Holdings, Inc., 116 F.3d 153, 154 (5th Cir.
1997) (per curiam). Appellants rely on 28 U.S.C. § 1292(b), which authorizes
a district judge to certify an interlocutory appeal from an order if the judge is
“of the opinion that such order involves a controlling question of law as to
which there is substantial ground for difference of opinion and that an
immediate appeal from the order may materially advance the ultimate
termination of the litigation.” Appellants’ argument amounts to a fact-specific
dispute over the application of the discovery rules to this case. Appellants have
not shown that the district court’s order involved a controlling question of law
or that immediate appeal would have materially advanced ultimate
termination of the case. See id. The district court’s refusal to certify an
interlocutory appeal therefore was not an abuse of discretion.
C.
Appellants lastly argue that Fannie Mae was not entitled to summary
judgment. We review a district court’s grant of summary judgment de novo
and apply the same standard as the district court. Dameware Dev., L.L.C. v.
Am. Gen. Life Ins. Co., 688 F.3d 203, 206 (5th Cir. 2012). Summary judgment
is appropriate if the movant demonstrates “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). Appellants’ principal argument against summary
judgment is that the district should have compelled answers to Appellants’
interrogatories seeking information about Fannie Mae’s other foreclosures in
the Gulf Coast region, contending that those answers would have created a
genuine issue of material fact. Since the district court did not abuse its
discretion by refusing to compel Fannie Mae to produce such information, we
will not reverse summary judgment on this ground.
Appellants also argue briefly that summary judgment for Fannie Mae
would be inequitable, because Fannie Mae must have conspired with a third
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party to buy the property “at a bargain-basement price.” Appellants arrive at
this conclusion because Fannie Mae was the sole bidder at the foreclosure sale
and assigned its bid to a third party the same day. Appellants surmise that
Fannie Mae and the third party must have entered into an agreement wherein
Fannie Mae would be the sole bidder in order to ensure a minimal sale price.
This is pure speculation and Appellants offer no evidence to support it.
Although we must draw all reasonable inferences in Appellants’ favor,
“[c]onclusional allegations and denials, speculation, improbable inferences,
unsubstantiated assertions, and legalistic argumentation do not adequately
substitute for specific facts showing a genuine issue for trial.” TIG Ins. Co. v.
Sedgwick James of Wash., 276 F.3d 754, 759 (5th Cir. 2002). We will not
reverse summary judgment based on Appellants’ unsubstantiated claim of a
conspiracy to cheat them out of the full value of their property. Accordingly,
the district court did not err in granting summary judgment for Fannie Mae.
AFFIRMED.
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