ACCEPTED
04-15-00255-CV
FOURTH COURT OF APPEALS
SAN ANTONIO, TEXAS
10/7/2015 3:09:13 PM
KEITH HOTTLE
CLERK
ORAL ARGUMENT REQUESTED
No. 04-15-00255-CV FILED IN
4th COURT OF APPEALS
SAN ANTONIO, TEXAS
10/7/2015 3:09:13 PM
KEITH E. HOTTLE
IN THE FOURTH COURT OF APPEALS Clerk
SAN ANTONIO, TEXAS
SW Loan A, L.P.,
Appellant,
vs.
Anibal J. Duarte-Viera, Antonio P. Pardo, and
Edward M. Reiss,
Appellees.
BRIEF OF THE APPELLEES
On Appeal from the 131st District Court
Bexar County, Texas
Cause No. 2012-CI-12742
Brian P. Lauten, Esq.
State Bar No. 24031603
blauten@deanslyons.com
DEANS & LYONS, LLP
325 N. St. Paul St., Ste. 1500
Dallas, Texas 75201
(214) 965-8500 telephone
(214) 965-8505 facsimile
1
SUPPLEMENTAL IDENTITY OF APPELLATE
COUNSEL FOR THE APPELLEES
Appellees’ Appellate Counsel:
Brian P. Lauten, Esq.
State Bar No. 24031603
blauten@deanslyons.com
DEANS & LYONS, LLP
325 N. St. Paul St., Ste. 1500
Dallas, Texas 75201
(214) 965-8500 telephone
(214) 965-8505 facsimile
2
TABLE OF CONTENTS
SUPPLEMENTAL IDENTITY OF APPELLATE COUNSEL ..................................................... 2
TABLE OF CONTENTS ................................................................................................... 3
INDEX OF AUTHORITIES ............................................................................................... 5
ISSUES PRESENTED ....................................................................................................... 8
STATEMENT OF FACTS................................................................................................ 10
A. Procedural and Factual Background of the Litigation ............................... 10
B. Appellant failed to Meet its Burden of Proof ............................................. 15
1. Documentary Evidence Important to Appellant’s Burden were
not admitted into evidence ................................................................ 15
2. A Reasonable Jury could have found there was no Default ...... 16
3. Appellant’s liability and damages witness had no personal
knowledge of the transaction and could not verify the amount
allegedly owed .................................................................................... 17
SUMMARY OF THE ARGUMENT................................................................................... 22
STANDARD OF REVIEW .............................................................................................. 23
A. Factual Sufficiency .................................................................................. 23
B. Legal Sufficiency ..................................................................................... 24
C. Attorney’s Fees under the Declaratory Judgment Statute .................... 25
3
ARGUMENT & AUTHORITIES...................................................................................... 26
A. Appellant failed to prove the Amount due on the Note at the time of
Foreclosure .................................................................................................... 26
B. A Reasonable Jury could have Concluded there was no Default ......... 31
C. The Standard of Review is dispositive ................................................... 33
1. There is factually sufficient Evidence .......................................... 33
2. There is legally sufficient Evidence ............................................. 35
D. The trial court acted within its discretion in awarding
Attorney’s Fees.............................................................................................. 36
PRAYER FOR RELIEF................................................................................................... 38
CERTIFICATE OF COMPLIANCE ................................................................................... 39
CERTIFICATE OF SERVICE ........................................................................................... 40
4
INDEX OF AUTHORITIES
CASE-LAW:
Bocquet v. Herring,
972 S.W.2d 19, 21 (Tex. 1998)................................................................................ 36
Carruth Mortgage Corp. v. Ford,
630 S.W.2d 897, 899 (Tex. App. -- Houston [1st Dist.] 1982, no pet. h.) .19, 26, 30
City of Keller v. Wilson,
168 S.W.3d 802, 822 (Tex. 2005)......................................................................25, 35
Cockrell v. Republic Mortgage Ins. Co.,
817 S.W.2d 106, 115 (Tex. App. -- Dallas 1991, no pet. h.) .................................31
Dameris v. Homestead Bank,
495 S.W.2d 52, 55 (Tex. Civ. App. -- Houston [1st Dist.] 1973, no pet. h.) ......... 31
David Berg & Co. v. Ravkind,
375 S.W.2d 317, 321 (Tex. Civ. App. -- Tyler 1964, writ ref’d n.r.e.) ................. 31
Dow Chem. Co. v. Francis,
46 S.W.3d 237, 242 (Tex. 2001).............................................................................. 24
Favor Ministries, Inc. v. Buttross V., Inc.,
2014 Lexis 13509 at *5-6 (Tex. App. -- Austin 2014, no pet. h.) .......................... 27
Funes v. Villatoro,
352 S.W.3d 200, 217 (Tex. App. -- Houston [14th Dist.] 2011, pet. denied)........ 36
Game Sys. v. Forbes Hutton Leasing, Inc.,
2011 Lexis 4098 at *56 (Tex. App. -- Fort Worth 2011, no pet. h.) ..................... 29
Glauser v. State Farm Life Ins. Co.,
1994 Lexis 2198 at *14
(Tex. App. -- Houston [1st Dist.] 1994, pet. denied)............................19, 26, 30, 31
5
Hartford Cas. Ins. Co. v. Budget Rent-A-Car Sys., Inc.,
796 S.W.2d 763, 771 (Tex. App. -- Dallas 1990, pet. denied) .............................. 36
Herbert v. Herbert,
754 S.W.2d 141, 144 (Tex. 1988)......................................................................24, 33
In re Estate of Wilson,
252 S.W.3d 708, 713-714 (Tex. App. -- Texarkana 2008, no pet. h.) .................. 29
Johnson v. Enriquez,
460 S.W.3d 669, 674 (Tex. App. -- El Paso 2015, no pet. h.) .........................23, 35
Oake v. Collin County,
692 S.W.2d 454, 455 (Tex. 1985)............................................................................ 26
Rego Co. v. Brannon,
682 S.W.2d 677, 680
(Tex. App. -- Houston [1st Dist.] 1984, writ ref’d n.r.e.) .................................24, 33
Sava Gumarska in Kemijska Industria D.D. v. Advanced Polymer Scis., Inc.,
128 S.W.3d 304, 323 (Tex. App. -- Dallas 2004, no pet. h.) ...........................25, 26
Simmons v. Compania Financiera Libano, S.A.,
830 S.W.2d 789, 791 (Tex. App. -- Houston [1st Dist.] 1992, pet. denied) .......... 31
Sterner v. Marathon Oil Co.,
767 S.W.2d 686, 690 (Tex. 1989)............................................................................ 24
Thompson v. Chrysler First Business Credit Corp.,
840 S.W.2d 25, 28 (Tex. App. -- Dallas 1992, no pet. h.) .........................19, 26, 30
TMI, Inc. v. Brooks,
225 S.W.3d 783, 794 (Tex. App. -- Houston [14th Dist.] 2007, pet. denied)........ 29
6
Town North Nat’l Bank v. Broaddus,
569 S.W.2d 489, 491 (Tex. 1978)............................................................................ 31
Wal-Mart Stores, Inc. v. Canchola,
121 S.W.3d 735, 739 (Tex. 2003)............................................................................ 25
Williams v. Henderson,
580 S.W.2d 37, 38-41
(Tex. Civ. App. -- Houston [1st Dist.], 1979, no pet. h.) .................................27, 30
Winfield v. Dosohs I,
1998 Lexis 4674 at * 8
(Tex. App. -- Houston [1st Dist.] 1998, no pet. h.) ....................................19, 26, 30
Winslow v. Acker,
781 S.W.2d 322, 328 (Tex. App. -- San Antonio 1989, pet. denied) .................... 36
STATUTES:
TEX. CIV. PRAC. & REM. CODE § 37.009 (Vernon 1998) ......................................... 25
OTHER:
2 McCormick & Ray, TEXAS LAW OF EVIDENCE 1671 ......................................31, 32
7
ISSUES PRESENTED
Is there legally and factually sufficient evidence to support the jury’s
findings when appellant did not offer the promissory note at issue, the notice of
assignment, and the calculations supporting its alleged damages into evidence
thereby failing to meet its burden of proof?
Under Texas law, is it true that appellant failed to offer any evidence, or,
alternatively, insufficient evidence showing what the alleged deficiency was at
the time of foreclosure creating a defect in appellant’s required burden of proof?
Because this court cannot substitute its opinion for the trier of fact
merely because another result is possible, is it true that a reasonable jury could
have found there was no default when Lender specifically agreed that it was its
obligation to pay the property taxes, which it did not pay?
8
No. 04-15-00255-CV
IN THE FOURTH COURT OF APPEALS
SAN ANTONIO, TEXAS
SW Loan A, L.P.,
Appellant,
vs.
Anibal J. Duarte-Viera, Antonio P. Pardo, and
Edward M. Reiss,
Appellees.
BRIEF OF THE APPELLEES
On Appeal from the 131st District Court
Bexar County, Texas
Cause No. 2012-CI-12742
TO THE HONORABLE JUSTICES OF THE COURT OF APPEALS:
COMES NOW, Anibal J. Duarte-Viera, Antonio P. Pardo, and Edward M.
Reiss, and files this Brief of the Appellees and would show unto the Justices of
the Court of Appeals for the Fourth District of Texas at San Antonio as follows:
9
STATEMENT OF FACTS
A.
PROCEDURAL AND FACTUAL BACKGROUND
OF THE LITIGATION
On April 17, 2008, a Texas limited liability company, 1946 Property,
LLC (“Borrower”), executed a promissory note (“Note”) payable to Stillwater
National Bank and Trust Company (“Lender”) in the principal amount of
$10,000,000. C.R. 4 (§ D, ¶ 7). The Note was secured by a Deed of Trust and an
Assignment of Rents and Security Agreement. C.R. 4 (§ D, ¶ 7). The Note
provided needed capital to Borrower in order to re-finance existing debt on an
apartment project on the northeast side of San Antonio. R.R. Vol. 2 (104:7-10).
Anibal J. Duarte-Viera, Antonio P. Pardo, and Edward M. Reiss
(defendants below and appellees herein) (collectively, “Guarantors”) each
executed a Limited Guaranty Agreement with the payment and performance
obligation capped at $2,500,000. C.R. 4-5 (§ D, ¶ 8).
On May 23, 2011, Borrower signed a First Amendment – loan
modification. R.R. Vol. 5 (43:6-9).
10
On May 24, 2011, Lender’s attorney realized the escrow agreement was
going to be insufficient to pay the property taxes owed to Bexar County;
therefore, Lender wanted to increase the amount being escrowed. R.R. Vol. 5
(43:10-44:5); DX 1. Lender and Guarantors decided the better solution would
be for Lender to continue escrowing the standard $20,000 per month and it
would be Lender’s obligation to pay half the taxes that were owed on an annual
basis on December 1, 2011 from the escrow account. R.R. Vol. 5 (43:10-44:5);
DX 1. The second property tax payment1 would be due on June 30, 2011,
which would also be paid out of escrow by Lender. R.R. Vol. 5 (43:10-44:5);
DX 1. This would establish the parties’ course of dealing going forward with
respect to the payment of property taxes. DX 1.
On May 25, 2011, the agreement that Lender would make the semi-
annual tax payments on Borrower’s behalf was memorialized by email between
appellee Pardo and Lender’s Senior Vice President, Alan Goss. See DX 1; R.R.
Vol. 5 (42:10-15).
1 Of note, Bexar County specifically allows taxpayers to make semi-annual payments for
property taxes. DX 1; DX 2.
11
In December of 2011, Lender assigned the Note to SW Loan A, L.P.2 (the
plaintiff below and appellant herein) (“appellant”). C.R. 5 (§ D, ¶ 9).
On June 5, 2012, appellant, through its loan servicer, sent Borrower a
notice of default. PX 10. The basis for default was Borrower’s failure to pay
property taxes to Bexar County. Id. However, it was Lender who was
contractually obligated to pay the taxes to Bexar County. See DX 1; R.R. Vol. 5
(43:10-44:5). Therefore, there was no default by Borrower. DX 1; R.R. Vol. 5
(43:10-44:5).
On July 3, 2012, appellant sent a second notice of default to Borrower.
C.R. 5 (§ D, ¶ 11). In the second notice of default, appellant accelerated the
past due sums demanding $9,468,043.19 no later than 5 p.m. on July 10, 2012.
C.R. 358. Appellant accelerated the Note before Borrower’s right to cure
expired. R.R. Vol. 2 (156:19-22).
2 Appellant is a “single purpose entity” and its purpose ended when the real estate securing
the Note was sold. R.R. Vol. 2 (173:2-8). Appellant’s corporate representative, Gary Redman,
testified that he doubted whether appellant was even conducting business anymore at the
time of trial. R.R. Vol. 2 (172:23-173:2-8).
12
On August 6, 2012, appellant filed suit against Guarantors under Cause
No. 2012-CI-12742 in the 166th District Court for Bexar County, Texas seeking
a deficiency judgment. C.R. 1.
On August 7, 2012, Borrower filed for bankruptcy under Chapter 11 in
the Western District of Texas, San Antonio Division. See generally C.R. 38
(¶9); C.R. 151 (¶¶16-17). Appellant never put either the Borrower or the
Guarantors on notice that it was relying upon any bankruptcy filing (which
occurred after the lawsuit was already filed) as a basis for default. Accordingly,
appellant cannot now claim the bankruptcy is an event of default because it
never put Borrower on notice of that complaint.
On November 6, 2012, appellant foreclosed on the real property that
secured the loan pursuant to a trustee’s sale. C.R. 33 (¶ 7). Appellant claimed to
have purchased the real property for a credit bid of $7,000,000. C.R. 48 (¶ 18).
Appellant flipped the property and sold it in the $9,000,000 range. R.R. Vol. 2
(173:9-11; 174:9-13).
On December 1, 2014, the trial court called the case to trial. R.R. Vol. 1
(1).
13
On December 3, 2014, the attorneys gave their final arguments to the
jury. C.R. 697-724 (jury charge and verdict form). The jury unanimously
found in favor of Guarantors.3
On January 20, 2015, appellant filed a motion to disregard the jury’s
findings and for a JNOV (collectively, “the post-verdict motions”). C.R. 725.
On January 28, 2015, the trial court entered a final judgment in favor of
Guarantors pursuant to the jury’s unanimous findings. C.R. 768-770.
The post-verdict motions were heard on February 23, 2015. C.R. 779.
On March 20, 2015, the trial court denied the post-verdict motions. C.R.
796.
3 The jury also awarded Guarantors their attorney’s fees in the amount of $7,825 for
defending the case through trial (C.R. 717); $7,500 in attorney’s fees if the case was
unsuccessfully appealed to the court of appeals (C.R. 717); and an additional $10,000 in fees if
the matter is unsuccessfully appealed to the Texas Supreme Court. C.R. 718.
14
B.
APPELLANT FAILED TO MEET ITS BURDEN OF PROOF
1.
DOCUMENTARY EVIDENCE IMPORTANT TO APPELLANT’S
BURDEN WERE NOT ADMITTED INTO EVIDENCE
Appellant did not meet its burden of proof at trial. At its own choosing,
appellant did not offer three key exhibits into evidence. See PX 4, PX 5, PX 16;
R.R. Vol. 4 (42-43).
First, appellant did not offer the Note, the very contract it was suing
upon, into evidence. See PX 5.
Second, appellant did not offer any calculations explaining how any
alleged deficiency was computed, it did not offer the pay history of the loan,
and the allowable expenses, offsets, and credits were not admitted into
evidence. See PX 16. Accordingly, there were no calculations admitted from
which a reasonable jury could make a finding appellant had been damaged as a
proximate cause of any alleged wrongful act of Guarantors. See id.
Finally, appellant did not offer the “Notice of Assignment of Note”
(“Notice”) into evidence. See PX 4. The Notice, if admitted and believed to be
15
true, would have shown the jury that Borrower was allegedly notified by
Lender of the assignment to appellant. See id.
Appellant’s failure to meet its burden of proof explains the jury’s findings.
Indeed, the jury sent a note to the trial judge asking if PX 4 (Notice of
Assignment of Note), PX 5 (Note), and PX 16 (calculations) were in evidence.
R.R. Vol. 4 (42-43). The trial court instructed the jury that those documents
had not been admitted and to continue their deliberations. R.R. Vol. 4 (43).
The jury would unanimously find in the Guarantors’ favor. C.R. 701-724.
2.
A REASONABLE JURY COULD HAVE FOUND
THERE WAS NO DEFAULT
On June 5, 2012, appellant sent Borrower a notice of default. PX 10.
The sole basis for the alleged default was Borrower’s failure to pay property
taxes to Bexar County. Id. However, in May of 2011, and before Lender
assigned the Note to appellant in December of 2011, Lender agreed to pay the
taxes.4 DX 1; R.R. Vol. 3 (45); Vol. 5 (42:10-45:16). Lender forgot to pay the
4 In Bexar County, tax payers are allowed to “split” the payment of taxes i.e., the tax
payments do not have to be fully funded in one payment. DX 2; R.R. Vol. 3 (p. 45).
16
taxes presumably because it was in the process of selling the Note. R.R. Vol. 3
(43-44); DX 1; Vol. 5 (42:10-45:16).
After the Note was assigned, appellee Pardo contacted Situs Asset
Management5 (“Situs”) and asked why the taxes had not been paid – as the
Lender had previously agreed. Compare DX 1, with, R.R. Vol. 3 (46), and, R.R.
Vol. 5 (42:10-44:5). Despite that communication, neither Lender nor appellant
paid the taxes per the parties’ agreement. DX 1.
The reasonable inference left with the jury was that, because a
miscommunication had occurred between Lender and appellant, the taxes were
not paid resulting in Lender causing the default.
3.
APPELLANT’S LIABILITY AND DAMAGES WITNESS
HAD NO PERSONAL KNOWLEDGE OF THE TRANSACTION
AND COULD NOT VERIFY THE AMOUNT ALLEGEDLY OWED
Appellant’s liability and damages witness, Gary Redman, had no
personal knowledge of the facts giving rise to the underlying lawsuit. See R.R.
Vol. 2 (83 et seq.). Redman is Situs’ asset manager. R.R. Vol. 2 (83:25-84:2).
5 Situs is a real estate service company, who is not a party to this litigation.
17
Appellant designated Redman as its corporate representative. However,
Redman has never been appellant’s employee. R.R. Vol. 2 (91:20-24).
Redman did not participate in negotiating the Note, or any of the other
documents at issue, and he did not prepare any of the documents that were in
dispute at the trial. R.R. Vol. 2 (91:25-92:5). The various loan agreements were
dated three years before Redman was even involved in this dispute. R.R. Vol. 2
(129:14-17). Redman admitted he has no personal knowledge as to what
documents were exchanged in the assignment transaction between Lender and
appellant. R.R. Vol. 2 (92:20-93:1).
Astonishingly, in a multi-million dollar alleged damage case, where the
plaintiff maintains the burden of proof, Redman could not make up his mind on
what amount of money Guarantors allegedly owed. R.R. Vol. 2 (164:4-12)
(Redman admitted his own testimony was “inconsistent”). At trial, Redman
claimed the Guarantors owed $3,482,872.63. R.R. Vol. 2 (124:25-125:4).
However, $3,482,872.63 is indisputably inaccurate because appellant’s own
pleadings admit Guarantors’ liability is capped at $2,500,000. C.R. 4-5 (§ D, ¶
8). Redman impeached himself: he acknowledged having sworn the number
18
allegedly owed was $2,454,875.69 in a prior affidavit. R.R. Vol. 2 (125:9-11;
126:4-6). In a different affidavit altogether, Redman swore the number
allegedly owed was $3,584,434.98. R.R. Vol. 2 (125:9-11; 126:4-6). These three
numbers are materially different; these discrepancies are significant and cannot
be explained away like rounding errors.
Despite the irreconcilable inconsistencies in Redman’s testimony, he did
not give any number that was allegedly owed by Guarantors on the date of
foreclosure. 6 R.R. Vol. 2 (124:8-10; 124:25-125:4). Indeed, the foreclosure
occurred on November 6, 2012. C.R. 33 (¶ 7). However, Redman’s number of
$3,482,872.63 used November 17, 2012 as the operative date. R.R. Vol. 2
(124:8-125:4). Thus, Redman used the wrong date – a date that kills the
appellant’s claims under the case-law in a sufficiency of the evidence appeal.7
6 In Texas, it is well settled that, in order to be entitled to a deficiency judgment, appellant
had to prove, inter alia, the amount due on the note at the time of foreclosure. See
Thompson v. Chrysler First Business Credit Corp., 840 S.W.2d 25, 28 (Tex. App. -- Dallas
1992, no pet. h.); Carruth Mortgage Corp. v. Ford, 630 S.W.2d 897, 899 (Tex. App. --
Houston [1st Dist.] 1982, no pet. h.); Glauser v. State Farm Life Ins. Co., 1994 Lexis 2198 at
*14 (Tex. App. -- Houston [1st Dist.] 1994, pet. denied); accord Winfield v. Dosohs I, 1998
Lexis 4674 at * 8 (Tex. App. -- Houston [1st Dist.] 1998, no pet. h.) (holding same) [citations
omitted].
7 See f.n. 6, supra.
19
Redman gave no testimony – literally none – explaining how these
amounts were calculated. Redman simply gave a conclusory dollar amount
unsupported by any formula. In testifying to appellant’s alleged damages,
Redman read from a spreadsheet prepared by Situs’ asset manager, Tim
Murphy. R.R. Vol. 2 (123:22-124:1). Murphy did not even testify at the trial;
and, furthermore, Murphy’s hearsay spreadsheet that Redman partially read
from to the jury was not even admitted into evidence. PX 16 (not admitted).
On cross examination, Redman admitted that all he was doing was
reading from the documents the appellant’s attorneys were handing him on the
witness stand; no different than a juror or anyone else would do – who had no
personal knowledge of the case. R.R. Vol. 2 (130:14-19).
Examples of Redman’s conflicting and unsubstantiated testimony during
the trial are many and include the following:
* Admission that appellant provided erroneous and
inconsistent payoff amounts to Borrower and Guarantors
[R.R. Vol. 2 (164:4-10)];
* Appellant claimed that Borrower defaulted because of a
code or ordinance violation. R.R. Vol. 2 (115:14-116:4).
20
However, upon cross examination, Redman admitted no
evidence of a violation was produced or disclosed in
discovery [R.R. Vol. 2 (157:5-25)];
* There were a number of documents Redman admitted
existed and that were germane to the litigation, but were
not produced – however, Redman could go back to the
office and “whip [the documents] up.” R.R. Vol. 2 (149:17-
24); R.R. Vol. 2 (145:5-146:1).
* Redman had no knowledge of a specific default date, but
that appellant just “picked a date.” R.R. Vol. 2 (162:6-24;
163:3-9).
In summary, Redman could not testify to how or when the loan
documents were created, he did not participate in the negotiation of the
assignment, he lacked any knowledge of how the documents were maintained
prior to the assignment, and he could not agree – even with himself – as to the
amount that was allegedly owed. Redman’s only knowledge of the transaction
was that he acquired the loan portfolio from a law firm along with a batch of
other loans. See R.R. Vol. 2 (131:21-25).
21
A reasonable jury could have found there was no evidence, or,
alternatively, insufficient evidence that appellant conclusively met its burden of
proof.
SUMMARY OF ARGUMENT
Appellant failed to meet its burden of proof. Indeed, appellant did not
offer the Note (the very contract it was suing on) into evidence, it did not offer
the Notice of Assignment into evidence, and it did not offer its damage
calculations into evidence. During its deliberations, the jury specifically asked
for these documents, but they were not admitted.
In order to be entitled to a deficiency judgment, appellant had to prove,
inter alia, the amount due on the Note at the time of foreclosure. Appellant’s
liability and damage witness at trial, Gary Redman, offered no opinion
testimony on what the alleged damages were on the date of foreclosure. On the
contrary, Redman offered three different numbers – a moving target – that
were admittedly “inconsistent” and unsupported by any calculations.
Appellant’s first notice of default claimed that Borrower failed to pay the
property taxes; however, Lender had agreed to pay those taxes in an amended
22
agreement following the execution of the loan modification. Despite Lender’s
agreement to pay the taxes, neither the Lender nor appellant paid those taxes as
the amended contract required. Accordingly, appellant caused the default.
As the sole judges of the credibility and the weight to be afforded the
witnesses’ testimony, the jury reasonably concluded there was a defect in
appellant’s proof. With all inferences resolved in favor of the jury’s findings,
there is factually and legally sufficient evidence to support the take nothing
judgment in Guarantors’ favor. The trial court’s judgment should be affirmed.
STANDARDS OF REVIEW
A.
FACTUAL SUFFICIENCY
When a party attacks the factual sufficiency of an adverse finding on an
issue on which it has the burden of proof at trial, it must demonstrate on
appeal that the adverse finding is against the great weight and preponderance of
the evidence. See, e.g., Johnson v. Enriquez, 460 S.W.3d 669, 674 (Tex. App. --
El Paso 2015, no pet. h.). The appellate court will set aside the adverse finding
only if, after considering and weighing all the evidence, the court of appeals
concludes the evidence is so weak or the finding is so against the great weight
23
and preponderance of the evidence that it is clearly wrong and manifestly
unjust. See id. at 675 (citing Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242
(Tex. 2001)).
Because the trier of fact is the sole judge of the credibility of the
witnesses and the weight to be given their testimony, in conducting a factual
sufficiency review, the court of appeals may not substitute its opinion for that
of the trier of fact merely because it might have reached a different fact
conclusion. Herbert v. Herbert, 754 S.W.2d 141, 144 (Tex. 1988); Rego Co. v.
Brannon, 682 S.W.2d 677, 680 (Tex. App. -- Houston [1st Dist.] 1984, writ ref’d
n.r.e.).
B.
LEGAL SUFFICIENCY
Where, as here, an appellant attacks the legal sufficiency of an adverse
finding on an issue on which it had the burden of proof, it must show that the
evidence conclusively established all vital facts in support of the issue. Sterner
v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex. 1989). When a party
challenges the legal sufficiency of the evidence supporting a jury finding, the
appellate court considers the evidence in the light most favorable to the finding
24
and indulges every reasonable inference that supports it. See City of Keller v.
Wilson, 168 S.W.3d 802, 822 (Tex. 2005).
If the evidence would permit reasonable and fair-minded people to reach
the finding under review, the legal sufficiency challenge fails. Id. at 827. If
more than a scintilla of evidence supports the finding, the no-evidence
challenge must fail. Wal-Mart Stores, Inc. v. Canchola, 121 S.W.3d 735, 739
(Tex. 2003). If the evidence at trial would enable reasonable minds to differ in
their conclusions, a reviewing court must allow the jury to do so and not
substitute its judgment, so long as the evidence falls within a zone of reasonable
disagreement. See City of Keller, 168 S.W.3d at 822.
C.
ATTORNEY’S FEES UNDER THE DECLARATORY
JUDGMENT STATUTE
The Declaratory Judgment Act permits the trial court to award
reasonable and necessary attorney's fees as are equitable and just. See TEX. CIV.
PRAC. & REM. CODE § 37.009 (Vernon 1998). The granting of attorney's fees in a
declaratory judgment action is within the discretion of the trial court, and its
decision will not be reversed on appeal absent a clear abuse of discretion. Sava
25
Gumarska in Kemijska Industria D.D. v. Advanced Polymer Scis., Inc., 128
S.W.3d 304, 323 (Tex. App. -- Dallas 2004, no pet. h.) (citing Oake v. Collin
County, 692 S.W.2d 454, 455 (Tex. 1985)).
ARGUMENT & AUTHORITIES
A.
APPELLANT FAILED TO PROVE THE AMOUNT DUE
ON THE NOTE AT THE TIME OF FORECLOSURE
In Texas, it is well settled that, in order to be entitled to a deficiency
judgment, appellant had to prove, inter alia, the amount due on the note at the
time of foreclosure. See Thompson v. Chrysler First Business Credit Corp., 840
S.W.2d 25, 28 (Tex. App. -- Dallas 1992, no pet. h.); Carruth Mortgage Corp. v.
Ford, 630 S.W.2d 897, 899 (Tex. App. -- Houston [1st Dist.] 1982, no pet. h.);
Glauser v. State Farm Life Ins. Co., 1994 Lexis 2198 at *14 (Tex. App. -- Houston
[1st Dist.] 1994, pet. denied) (“Where a validly executed note goes into default
and there is a trustee’s sale of the security for the note, the mortgagee must
prove the … amount due on the note at the time of foreclosure …”) [citations
omitted]; accord Winfield v. Dosohs I, 1998 Lexis 4674 at * 8 (Tex. App. --
Houston [1st Dist.] 1998, no pet. h.) (holding same) [citations omitted].
26
Williams v. Henderson, 580 S.W.2d 37, 38-41 (Tex. Civ. App. --
Houston [1st Dist.], 1979, no pet. h.), is factually analogous to the present case.
There, Williams sued Henderson to recover a deficiency after a trustee’s sale of
property securing a note. Id. at 38. Henderson defaulted on the note, leaving a
contested balance of approximately thirteen thousand dollars. Id. The trustee
foreclosed and the land was sold back to Williams for five thousand dollars. Id.
The trustee deducted the expense of the sale and the depreciation from the
balance creating a deficiency of approximately nine thousand dollars. Id.
At trial, Williams did not offer any calculations into evidence. Id. In
addition, Williams could not state the exact amount of money due and owing at
the time of foreclosure. See id. at 39 (“[I]n order to recover in this case,
Williams would have to prove the amount due on the note at the time of
foreclosure . . .”). Because Williams failed to prove the amount owing at the
time of foreclosure, the trial court held that Williams could not recover a
deficiency from Henderson. Id. at 39. The court of appeals affirmed. Id; see
also Favor Ministries, Inc. v. Buttross V., Inc., 2014 Lexis 13509 at *5-6 (Tex.
App. -- Austin 2014, no pet. h.) (reversing a summary judgment and holding
27
that lender failed to conclusively prove the amount due and owing at the time
of the foreclosure).
Williams can be analogized to the case at bar. Here, appellant provided
no testimony of the amount allegedly due and owing at the time of foreclosure.
The foreclosure occurred on November 6, 2012. C.R. 33 (¶ 7). Redman
testified to the amount allegedly owed on November 17, 2012. R.R. Vol. 2
(124:8-10). Perhaps recognizing that he was using the wrong date, Redman
attempted to explain away his mistake by saying this is “the way the system was
set up.” R.R. Vol. 2 (124:17-20) (emphasis added). That amount, according to
Redman, is $3,482,872.63. R.R. Vol. 2 (124:25-125:4). However, this number
cannot be right – even assuming arguendo Redman had used the correct date –
because appellant’s own pleadings admit Guarantors’ liability is capped at
$2,500,000. C.R. 4-5 (§ D, ¶ 8).
Redman testified that, despite using the wrong date, he “believed”8 his
number was accurate. R.R. Vol. 2 (124:25-125:4). Redman’s “belief” is no
8
Q: Mr. Redman, do you believe that the correct amount of the deficiency on
the principal of the loan after the $7 million credited was applied – after that was applied is
the $3,482,872.63?
28
evidence. See In re Estate of Wilson, 252 S.W.3d 708, 713-714 (Tex. App. --
Texarkana 2008, no pet. h.) (“It is well established under Texas case law that an
affidavit, based on the affiant's ‘best knowledge and belief,’ is no evidence of the
facts asserted.”) [citations omitted]; e.g., Game Sys. v. Forbes Hutton Leasing,
Inc., 2011 Lexis 4098 at *56 (Tex. App. -- Fort Worth 2011, no pet. h.)
(“Weaver's statement of his belief about to whom Seven Sky made payments is
no evidence because it is conclusory”); see also TMI, Inc. v. Brooks, 225 S.W.3d
783, 794 (Tex. App. -- Houston [14th Dist.] 2007, pet. denied) (“The
homeowners' affidavits attesting to their understanding of the scope of the
arbitration clause and their belief Trendmaker's interpretation of that
arbitration clause is wrong constitute no evidence as they (1) are not readily
controvertible, (2) are not based on the affiants' personal knowledge and (3) do
not unqualifiedly represent that the alleged ‘facts’ are true.”).
Akin to the problems of proof in Williams, the calculations in the instant
case were not admitted into evidence. See PX 16 (marked, but not admitted).
Redman provided three different numbers that were allegedly owed. R.R. Vol.
A: Yes, and that includes interest and advances.
See R.R. Vol. 2 (125:25-126:3) (emphasis added).
29
2 (164:4-12). Redman admitted that his figures – a constantly moving target -
were “inconsistent.” R.R. Vol. 2 (164:4-7). The inconsistencies in Redman’s
own testimony underscored the point that he had no personal knowledge of the
transaction. R.R. Vol. 2 (129:14-17; 130:14-19; 159:10-14). Redman testified:
Q: On the amounts you’re seeking in this case, would you
agree with me that you’ve been a bit inconsistent –
A: Sure.
Q: -- on what you’re claiming is owed?
A: I’ll admit that the affidavits have three different numbers,
yes.
R.R. Vol. 2 (164:4-10) (emphasis added).
Here, a reasonable jury could have and, in fact, did conclude appellant
failed to prove the amount allegedly due on the Note at the time of foreclosure.
Because appellant failed to conclusively prove each and every element of its
claim,9 the jury’s verdict is supported by the evidence and must be upheld.
9
Thompson, 840 S.W.2d at 28; Carruth Mortgage Corp., 630 S.W.2d at 899; Glauser, 1994
Lexis 2198 at *14; Winfield, 1998 Lexis 4674 at * 8; Williams, 580 S.W.2d at 38-41.
30
B.
A REASONABLE JURY COULD HAVE CONCLUDED
THERE WAS NO DEFAULT
The general rule is that a loan agreement that is clear and express in its
terms, cannot be varied by parol agreements or representations of a payee that a
maker will not be liable for payment. Town North Nat’l Bank v. Broaddus, 569
S.W.2d 489, 491 (Tex. 1978); Simmons v. Compania Financiera Libano, S.A.,
830 S.W.2d 789, 791 (Tex. App. -- Houston [1st Dist.] 1992, pet. denied).
“However, acts and conduct of the parties after the execution of the note do not
violate the parol evidence rule.” See Glauser, 1994 Lexis 2198 at * 20 (emphasis
added) (citing Cockrell v. Republic Mortgage Ins. Co., 817 S.W.2d 106, 115
(Tex. App. -- Dallas 1991, no pet. h.) (discharge by means of some performance
acceptable to holder of note may always be shown); Dameris v. Homestead
Bank, 495 S.W.2d 52, 55 (Tex. Civ. App. -- Houston [1st Dist.] 1973, no pet. h.)
(discharge by means of some performance acceptable to holder of note may
always be shown); David Berg & Co. v. Ravkind, 375 S.W.2d 317, 321 (Tex. Civ.
App. -- Tyler 1964, writ ref’d n.r.e.) (quoting 2 McCormick & Ray, TEXAS LAW
31
OF EVIDENCE 1671: nothing in the parol evidence rule prevents written
transactions from being later modified by a new, oral agreement)).
In the case at bar, the trial court admitted DX 1 into evidence, which is
a subsequent agreement between Lender and Borrower.10 DX 1 required
Lender to pay the taxes on the property. See DX 1. Pardo testified:
Q: Can you describe to me what agreement was made in that
e-mail chain [DX 1]?
A: The e-mail started when the bank’s attorney realized that
the escrow agreement that they had put together in the loan
modification was not going to be sufficient to pay the taxes
at the end of January so they wanted to increase the amount
that they were escrowing for. Going back and forth, we
determined that a better solution would be for them to
continue escrowing at $20,000 a month and pay half the
taxes on December 1st. They would have had $120,000 in
the account by that time. Pay the [sic] half the taxes on
December 1st and the second half of the taxes would have
been due on June 30th. They agreed to that. So we were
operating under that assumption back in May 2011.
10
Appellant does not claim that the trial judge erred in admitting DX 1.
32
Q: And, to your knowledge, did Stillwater Bank [Lender] pay
the taxes in November of 2011?
A: What happened was that at some point around the same
time they were supposed to pay taxes, they were selling the
note and they forgot to pay the taxes.
See R.R. Vol. 5 (43:10-44:5) (emphasis added).
Based on Pardo’s testimony, and the admission of DX 1 into evidence, a
reasonably prudent jury could have found that Borrower did not default.
C.
THE STANDARD OF REVIEW IS DISPOSITIVE
1.
THERE IS FACTUALLY SUFFICIENT EVIDENCE
Because the jury is the sole judge of the credibility of the witnesses and
the weight to be given their testimony, the court of appeals may not substitute
its opinion for the jury merely because it might have reached a different result.
Herbert, 754 S.W.2d at 144 (factual sufficiency review); Rego Co., 682 S.W.2d
at 680 (same).
Here, appellant sought millions of dollars in damages, but it brought the
jury only scant proof to support such an award. During its deliberations, the
jury specifically asked the trial judge if the Notice of Assignment of Note (PX
33
4), the Note itself (PX 5), and the alleged damage calculations (PX 16) were in
evidence. R.R. Vol. 4 (42-43). Because those documents were not admitted,
there was insufficient proof to support either a liability or a damage finding
against Guarantors.
A reasonably prudent jury could have easily found that (1) appellant’s
failure to admit the Note, the very contract it was suing upon, was a defect in
its proof; (2) appellant’s failure to prove damages to a reasonable degree of
certainty was a defect in its proof; (3) appellant’s failure to admit any
calculations showing how its alleged damages were computed was a defect in its
proof; (4) appellant’s failure to provide any basis for an amount of money owed
by Guarantors on the date of foreclosure was a defect in its proof; (5) appellant’s
failure to call any witnesses who actually had personal knowledge of the
transaction with Lender was a defect in its proof; (5) appellant’s reliance upon
Borrower’s alleged failure to pay property taxes as a basis for a default when, in
reality, Lender had agreed to pay those taxes was a defect in its proof; (6) and/or
Redman’s lack of credibility and inability to answer questions on cross
examination was a defect in its proof.
34
Based upon the record before this court, it cannot be credibly argued that
the jury’s verdict is so against the great weight and preponderance of the
evidence as to be manifestly wrong and unjust. Johnson, 460 S.W.3d at 674.
The trial court’s judgment should be affirmed.
2.
THERE IS LEGALLY SUFFICIENT EVIDENCE
Where, as here, the appellant attacks the legal sufficiency of an adverse
finding on an issue on which it had the burden of proof, it must show that the
evidence conclusively established all vital facts in support of the issue. Sterner,
767 S.W.2d at 690. In the light most favorable to the Guarantors, and indulging
all reasonable inferences in favor of the jury’s findings, there is legally sufficient
evidence to support the take nothing award. City of Keller, 168 S.W.3d at 822.
In the present case, appellant not only failed to conclusively prove an
amount due and owing on the date of the foreclosure, but it provided the jury
with absolutely no evidence to make such a finding. As noted above, Redman
used the wrong date in his damages testimony. Redman provided three
different and unexplained damage figures – making his own testimony
inconsistent and not credible. Appellant failed to conclusively prove a default.
35
With all reasonable inferences resolved in favor of the jury’s findings, the trial
court’s judgment should be affirmed.
D.
THE TRIAL COURT ACTED WITHIN ITS
DISCRETION IN AWARDING ATTORNEY’S FEES
In Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998), the Supreme Court
explained that "the Declaratory Judgments Act entrusts attorney fee awards to
the trial court's sound discretion, subject to the requirements that any fees
awarded be reasonable and necessary, which are matters of fact, and to the
additional requirements that fees be equitable and just, which are matters of
law." Id. at 21.
Indeed, an award of attorney's fees in a declaratory judgment action is
highly discretionary and is not limited to the prevailing party. See Funes v.
Villatoro, 352 S.W.3d 200, 217 (Tex. App. -- Houston [14th Dist.] 2011, pet.
denied); Hartford Cas. Ins. Co. v. Budget Rent-A-Car Sys., Inc., 796 S.W.2d 763,
771 (Tex. App. -- Dallas 1990, pet. denied).
In Winslow v. Acker, 781 S.W.2d 322, 328 (Tex. App. -- San Antonio
1989, pet. denied), the plaintiffs filed suit to recover their share of overriding
36
royalties in a mineral estate. The defendants filed a counterclaim to obtain a
declaration of their right to the overriding royalties and for attorney's fees
under the Declaratory Judgments Act. The plaintiffs filed a motion to strike
defendants' counterclaim for declaratory relief and for attorney's fees; the trial
court denied the motion to strike. Id. at 323. The court of appeals stated
that "when a declaratory judgment counterclaim has greater ramifications than
the original suit, the court may allow the counterclaim." Id. at 328.
In the present case, the Guarantors’ action for declaratory relief was not a
“transparent attempt to obtain attorney fees to which they otherwise were not
entitled” as appellant argues in its Brief. See Appellant Brief (p. 58, § 5(B), ¶
2)). On the contrary, Guarantors are allowed under the Declaratory Judgment
Act to ask the trial court to declare the rights and obligations of the parties in so
far as appellant was seeking relief beyond the principal and interest payments
that were allegedly requested in the underlying Note. C.R. 590. That is a
request for relief separate and apart from the appellant’s affirmative claims in
the underlying lawsuit.
37
The trial court acted within its broad discretion in awarding Guarantors a
minimal amount of attorney’s fees. There is no error. The trial court’s
judgment should be affirmed.
CONCLUSION
In conclusion, the trial court’s judgment is supported by factually and
legally sufficient evidence. In addition, the trial court acted well within its
discretion in awarding the Guarantors their reasonable and necessary attorney’s
fees. Accordingly, the trial court’s judgment should be affirmed.
WHEREFORE, PREMISES CONSIDERED, Anibal J. Duarte-Viera,
Antonio P. Pardo, and Edward M. Reiss, appellees herein, pray that this court
affirm the trial court’s judgment and that they be awarded their costs and
attorney’s fees in this appeal.
38
Respectfully Submitted,
DEANS & LYONS, LLP
_______________________
Brian P. Lauten
State Bar No. 24031603
blauten@deanslyons.com
325 N. St. Paul Street, Ste. 1500
Dallas, Texas 75201
(214) 965-8500 telephone
(214) 965-8505 facsimile
ATTORNEYS FOR THE
APPELLEES
CERTIFICATE OF COMPLIANCE
This document complies with the typeface requirements of Tex. R. App.
P. 9.4(e) because it has been prepared in a conventional typeface no smaller
than 14 point for text and 12 point for footnotes. This document also complies
with the word count limitations of TEX. R. APP. P. 9.4(i)(2)(d), if applicable,
because it contains 5,801 words, excluding any subparts exempted by Tex. R.
App. P. 9.4(i)(l).
________________________
Brian P. Lauten
39
CERTIFICATE OF SERVICE
In accordance with Rule 9.5(e) of the Texas Rules of Appellate
Procedure, I hereby certify that a true and correct copy of this Brief of the
Appellees was served on all counsel of record via the electronic filing case
manager system and by first class United States mail postage prepaid on this the
7th day of October, 2015 to the following recipients:
John T. Gerhart, Jr., Esq.
Bryan C. Bond, Esq.
HUNTON & WILLIAMS, LLP
1445 Ross Avenue, Ste. 3700
Dallas, Texas 75202
_________________________
Brian P. Lauten
40