Richard A. Myers and Thomas J. Wouters v. HCB Real Holdings, LLC

Court of Appeals of Texas·Decided May 14, 2015·No. 05-13-00113-CV·Published

Opinion

Affirm in part and Reverse in part; and Remand; Opinion Filed May 14, 2015.

S In The

Court of Appeals

Fifth District of Texas at Dallas No. 05-13-00113-CV

RICHARD A. MYERS AND THOMAS J. WOUTERS, Appellants V.

HCB REAL HOLDINGS, LLC, Appellee

On Appeal from the 68th Judicial District Court Dallas County, Texas

Trial Court Cause No. DC-11-02904

MEMORANDUM OPINION

Before Justices Francis, Evans, and Stoddart Opinion by Justice Evans

Richard A. Myers and Thomas J. Wouters appeal the trial court’s judgment against them

for breach of a guaranty agreement. The guarantors bring four issues contending the trial court erred in (1) failing to dismiss the case, (2) denying their motion to determine the fair market value of the property, (3) granting summary judgment despite the existence of genuine issues of material fact, and (4) granting HCB Real Holdings, LLC summary judgment on its request for attorney’s fees. We affirm the trial court’s judgment on HCB’s claim for breach of the guaranty. We reverse the award of attorney’s fees and remand the cause for further proceedings.

I. FACTUAL BACKGROUND

At issue in this case is a payment guaranty for a promissory note between Hillcrest Bank, a Kansas state banking association, (“Hillcrest State”) and RCC Indian Creek, Ltd. Under the terms of the guaranty, Richard A. Myers and Thomas J. Wouters agreed that, in the event of a

default by Indian Creek, they would each be liable to pay Hillcrest State, its successors, and assigns, 50% of the remaining indebtedness. The purpose of the loan to Indian Creek was for the acquisition and development of property and the note was secured by a deed of trust on the property acquired.

It is undisputed that Indian Creek defaulted on payment of the note. Subsequent to the default, Hillcrest State was closed and placed into receivership by the Kansas State Bank Commissioner and the FDIC. Hillcrest Bank, N.A. then entered into an agreement with the FDIC under which it purchased “all right, title, and interest of the [FDIC] in and to all of the assets . . . of [Hillcrest State] whether or not reflected on the books of [Hillcrest State] as of Bank Closing.” Hillcrest N.A. presented evidence that it then assigned the loan and guaranty to its wholly owned subsidiary, HCB Real Holdings, LLC. HCB foreclosed on the property under the deed of trust and sold it at public auction for $4,003,933 leaving an alleged deficiency.

On March 11, 2011, Hillcrest N.A., brought this suit for breach of contract alleging that the guarantors had failed to pay under the terms of the guaranty agreement. The company filed a motion for summary judgment attaching the affidavit of Tracy Pancost, senior vice president in its Special Assets Group. In her affidavit, Pancost stated that Hillcrest N.A. conducted the foreclosure on the property and that it was seeking to enforce the guarantors’ obligations under the guaranty. The company argued it was entitled to summary judgment on its claim because there was no issue of material fact as to the guarantors’ liability and they had expressly waived any right to an offset against their liability under section 51.003 of the Texas Property Code. The motion was never set for a hearing.

On January 10, 2012, the guarantors filed an amended answer asserting for the first time that Hillcrest N.A. could not show that it was the owner and holder of the guaranty. The guarantors also included in their answer a motion to determine the fair market value of the

foreclosed property for purposes of obtaining an offset under section 51.003 of the Texas Property Code.

Shortly thereafter, HCB filed a first amended petition naming itself as plaintiff and stating that it was the assignee of the loan documents at issue, as well as a wholly owned subsidiary of Bank Midwest, N.A. which had merged with and succeeded Hillcrest N.A. HCB then filed a motion for summary judgment on essentially the same grounds as those urged in the motion filed previously by Hillcrest N.A. In addition, HCB’s motion addressed its status as the owner and holder of the note and guaranty. HCB’s motion included a new affidavit by Pancost that included testimony about the various transfers of the loan documents and attached authenticated copies of documents discussed in the affidavit. The motion was set to be heard on February 10, 2012.

On February 2, the guarantors filed a motion to dismiss. The guarantors argued that the trial court did not have jurisdiction over the cause because the original plaintiff, Hillcrest N.A., failed to show that it had standing to sue as the owner, holder, or beneficiary of the note or guaranty. Five days later, the guarantors filed a motion to continue the hearing on HCB’s motion for summary judgment contending they needed time to conduct discovery with respect to HCB.

On February 23rd, the trial court signed an order granting HCB summary judgment on the offset issue. The court did not, however, rule on the other issues and instead granted the guarantors’ motion for continuance to conduct discovery. HCB subsequently filed an amended motion for summary judgment including another new affidavit by Pancost discussing both the transfers of the loan documents and how Hillcrest N.A. was mistakenly named as the plaintiff in the original petition and attached authenticated copies of the documents discussed in the affidavit. Pancost further testified that any statements she made in her original affidavit relating to Hillcrest N.A. were made in error and those statements were superseded by her current

testimony including that HCB was the real party in interest in the suit. The amended motion for summary judgment also included a second affidavit by a bank officer calculating the current amount owed under the note and stating that HCB was the current owner and holder of the loan and the assignee of the rights under the guaranty. The guarantors filed a response arguing that genuine issues of material fact existed as to whether HCB was the owner or holder of the note and/or beneficiary of the guaranty.

A hearing was held on HCB’s amended motion for summary judgment on October 29, 2012. The trial court granted HCB’s motion and awarded the company $873,786.50 in actual damages, $15,000 in attorney’s fees, and pre and post-judgment interest. The guarantors brought this appeal.

II. ANALYSIS

A. Owner/Holder Status 1.) Evidence In their first issue, the guarantors contend the trial court erred in not dismissing this suit because “[t]he record is devoid of any evidence that the Note and Guaranty actually was [sic] transferred from the FDIC to Hillcrest NA, for Hillcrest NA to then subsequently assign the Note and Guaranty to HCB.” The guarantors reurge this argument in their third issue as a predicate to their arguments challenging the foreclosure sale arguing that there are genuine issues of material fact regarding HCB’s status as the owner or holder of the note and guaranty. The parties brief this as standing and capacity. We must review the trial court’s decision that HCB proved it was the owner and holder of the note, so we will not parse the procedural issues separately from the substantive.

A party not identified in a note who is seeking to enforce it as the owner or holder must prove the transfer by which it acquired the note. See Leavings v. Mills, 175 S.W.3d 301, 309

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Richard A. Myers and Thomas J. Wouters v. HCB Real Holdings, LLC, (Tex. Ct. App. 2015).

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