Robert Andrew Shaw, Carl Kirk Hastings, Ponderosa Petroleum, Inc., and WFS Asset Management, Ltd. v. American Bank of Commerce

• Court: Court of Appeals of Texas
• Decided: April 13, 2023
• Docket: 07-22-00067-CV
• Status: Published

Opinion

In The Court of Appeals Seventh District of Texas at Amarillo

No. 07-22-00067-CV

ROBERT ANDREW SHAW, CARL KIRK HASTINGS, PONDEROSA PETROLEUM, INC., AND WFS ASSET MANAGEMENT, LTD., APPELLANTS

V.

AMERICAN BANK OF COMMERCE, APPELLEE

On Appeal from the 99th District Court Lubbock County, Texas Trial Court No. 2020-540,878, Honorable J. Phillip Hays, Presiding

April 13, 2023 MEMORANDUM OPINION Before QUINN, C.J., and PARKER and YARBROUGH, JJ.

Here, American Bank of Commerce (ABC) amended its petition four times. It did

so twice after the lapse of the trial court’s deadline mentioned in the scheduling order.

The trial court approved the last effort on December 29, 2021. WFS Asset Management,

Ltd., sought leave to amend its original answer about a week later. The trial court denied

the latter. Thereafter, it granted ABC’s amended motion for summary judgment, which

also happened to have been filed after the deadline for dispositive motions. That led to the entry of a modified final summary judgment awarding ABC recovery of a deficiency

against WFS, Robert Andrew Shaw, Carl Kirk Hastings, and Ponderosa Petroleum, Inc.

(referred to collectively as WFS). The two issues before us involve the denial of leave to

amend and ABC’s entitlement to summary judgment as a matter of law. We reverse and

remand the cause for further proceedings.

Background

This appeal arose from effort by ABC to recover a deficiency against WFS arising

from the latter’s default on a $216,000 loan secured by realty. After various attempts,

ABC ultimately bought the realty at foreclosure, paying $200,000. Its own appraisals

valued the property as high as $275,000. Thereafter, the bank sued to recover the

deficiency, which allegedly approximated $190,000. The sum included numerous

components, such as principal, interest, appraisal costs, taxes, asbestos inspection fees,

and attorney’s fees.

Upon entertaining ABC’s amended motion for summary judgment and WFS’s

response thereto, the trial court signed its modified final summary judgment favoring the

bank. Through the decree, it awarded ABC against WFS and Ponderosa “the principal

sum of $135,554.09, plus $20,716.97 as pre-judgment interest, plus $21,801.97 as

reasonable attorney’s fees, for a total of $178,073.03 . . . .” Against Shaw and Hastings,

the bank was awarded “$139,879.09, plus $21,579.81 as pre-judgment interest, plus

$21,801.97 as reasonable attorney’s fees, for a total of $183,260.87 . . . .”

Analysis

We begin by addressing issue two, given its dispositive nature. Through it, WFS

contends that “[t]he trial court erred in granting a summary judgment because there were

2 genuine issues of material fact relating to the deficiency calculation and reasonable and

necessary attorney’s fees.” We agree.

Regarding the matter of attorney’s fees, material issues of fact purportedly exist

because ABC failed to prove their reasonableness and necessity per the formula

mandated in Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469 (Tex.

2018). Commendably, ABC acknowledged both in its appellee’s brief and during oral

argument that its evidence failed to comport with the Rohrmoos methodology. Yet, it

believed the matter was waived because WFS did not object below.

The burden lay with ABC to prove its attorney’s fees. Yowell v. Granite Operating

Co., 620 S.W.3d 335, 354 (Tex. 2020) (stating that the party seeking attorney’s fees has

the burden of proof). Furthermore, no one questions that Rohrmoos controls the mode

of calculating attorney’s fees at bar. The fact finder’s starting point consists of

“determining the reasonable hours worked multiplied by a reasonable hourly rate, and the

fee claimant bears the burden of providing sufficient evidence on both counts.”

Rohrmoos, 578 S.W.3d at 498; accord, Yowell, 620 S.W.3d at 354 (requiring the party

seeking fees to “supply enough facts to support the reasonableness of the amount

awarded”). “Sufficient evidence includes, at a minimum, evidence of (1) particular

services performed, (2) who performed those services, (3) approximately when the

services were performed, (4) the reasonable amount of time required to perform the

services, and (5) the reasonable hourly rate for each person performing such services.”

Rohrmoos, 578 S.W.3d at 498 (emphasis added).

Here, the bank attempted to establish its reasonable and necessary attorney’s fees

through the affidavit of legal counsel. The latter provided a five-page document

3 describing a myriad of services provided to ABC. Yet, missing were the identity of the

individuals performing the services, a description of the time required to perform them,

and a description of a reasonable hourly rate charged for each person who completed the

tasks. Thus, three of the five components which, “at a minimum,” constitute sufficient

evidence went undeveloped. Consequently, ABC failed to carry its burden to prove, as a

matter of law, the reasonableness and necessity of the fees awarded by the trial court.

In other words, its summary judgment proof was insufficient to establish the fees claimed

and awarded. See Cossio v. Delgado, No. 01-17-00704-CV, 2018 Tex. App. LEXIS 4828,

at *8-10 (Tex. App.—Houston [1st Dist.] June 28, 2018, no pet.) (mem. op.) (concluding

that though the attorney’s affidavit may be some evidence of attorney’s fees, it failed to

establish entitlement to them as a matter of law because it omitted two of the categories

of information required by Rohrmoos, namely the tasks performed and the time spent on

them).

That WFS may have waited until appeal to complain of the default matters not.

This is so because a nonmovant in a traditional summary judgment setting “need not

respond to the motion to contend on appeal that the movant’s summary judgment proof

is insufficient as a matter of law to support summary judgment.” M. D. Anderson Hosp.

& Tumor Inst. v. Willrich, 28 S.W.3d 22, 23 (Tex. 2000); Cossio, 2018 Tex. App. LEXIS

4828, at *6. So, the failure to provide sufficient evidence establishing one’s entitlement

to attorney’s fees may be raised for the first time on appeal. Given this, we must reverse

the trial court’s award of attorney’s fees.

The need to reverse the award of attorney’s fees obligates us to also reverse the

damages awarded ABC. This is so because those damages likewise included at least

4 $48,000 in attorney’s fees sought by the bank. The latter used the same mode of

calculating them as it did the fees awarded in addition to the damages. That is, ABC

attempted to prove it incurred about $70,000 in attorney’s fees using one affidavit. We

alluded to that affidavit earlier and found it deficient. About $48,000 of the $70,000 in

fees were awarded as damages resulting from WFS’s default. The remaining $21,801.97

were awarded as attorney’s fees. So, the same defect pretermitting the recovery of the

$21,801.97 also permeates the $48,000 award. That means ABC also failed to provide

sufficient evidence supporting the damages it recovered.

We sustain WFS’s second issue. That leaves issue one. Under it, WFS contends

that the trial court abused its discretion in refusing to allow an amendment of its answer.

Through that amendment, it sought to allege that ABC “knowingly submitted an

insufficient credit bid at the foreclosure sale not a fair market value for the property which

substantially contributed to the alleged deficiency balance.” This was followed by a

request for the trial court “to determine a fair market value of the real property subject to

this suit” pursuant to section 51.003(b) of the Texas Property Code. We sustain the issue.

The standard of review is abused discretion. Triex Tex. Holdings, LLC v. Marcus

& Millichap Real Estate Inv. Servs. of Nev., No. 07-18-00077-CV, 2019 Tex. App. LEXIS

3365, at*5 (Tex. App.—Amarillo April 25, 2019, no pet.) (mem. op.). Thus, the decision

must fall within the zone of reasonableness and comport with the law. Knorpp v. Cit

Group/Consumer Fin., Inc., No. 07-19-00177-CV, 2020 Tex. App. LEXIS 6090, at *3-4

(Tex. App.—Amarillo Aug. 3, 2020, no pet.) (mem. op.). Whether it does is influenced by

both legal authority relating to the amendment of pleadings and the circumstances of the

case. Regarding the former, courts begin with the proposition that parties may freely

5 amend their pleadings. Triex Tex. Holdings, LLC, 2019 Tex. App. LEXIS 3365, at *5.

That freedom grows less expansive in certain situations. For instance, a litigant “must

obtain leave from the trial court to file an amended pleading within seven days of trial,

including a summary judgment proceeding, or after the deadline set by the trial court.” Id.

Yet, even then, leave must be granted unless an opposing party shows that same will

operate as a surprise to the opposite party. Id. (quoting TEX. R. CIV. P. 63). Indeed, a

trial court lacks discretion to refuse amendment unless the nonmovant presents evidence

of surprise or prejudice on its face. Id. And, the latter occurs when, in the context of the

record, the amendment “(1) asserts a new substantive matter that reshapes the nature of

the case, (2) could not have been anticipated by the opposing party, and (3) prejudices

the presentation of the opposing party’s case.” Id. (Emphasis added). If nothing else,

these factors illustrate a bias favoring leave to amend, which bias the opponent must

overcome. That said, we turn to the case at hand.

WFS wanted to interject an issue regarding the fair market value of the realty into

the discussion. Doing so could affect the deficiency recoverable by ABC. See TEX. PROP.

CODE ANN. § 51.001(c) (stating that if fair market value is greater than the sale price at

foreclosure sale, the debtors are entitled to an offset against the deficiency in the amount

by which the fair market value, less the amount of any obligation that is secured by a lien

or encumbrance on the real property that was not extinguished by the foreclosure,

exceeds the sale price). Authority likens such an offset to an affirmative defense, thereby

necessitating its affirmative averment. See PlainsCapital Bank v. Martin, 459 S.W.3d

550, 557 (Tex. 2015) (so stating).

6 No doubt, WFS’s attempt to interject the topic raised a new issue, but it did not

substantively “reshape the nature of the case.” Simply put, the case remained the same.

It was no more or less a dispute about the collection of a secured debt and the deficiency

recoverable after foreclosure. That the ultimate question remained the amount of

deficiency served as ABC’s own justification for seeking and receiving leave to belatedly

file an amended petition. As its counsel said at the hearing, “[a]ll they [the amended

pleadings] did was change the amount of the deficiency by a few thousand dollars.” WFS

merely wanted to “change the amount of the deficiency” by thousands of dollars too.

Doing so implicated another step, i.e., the determination of fair market value. But ABC

did not show that completion of the step involved substantive effort or deviation from crux

of the suit, i.e., the amount of the deficiency.

Also of note is ABC’s own pleading. Therein, it alleged that it arrived at the sum

due “[a]fter deducting all credits and offsets to which said Defendants are entitled . . . .”

(Emphasis added). If nothing else, this suggests that “offsets” and their consideration

were deemed by ABC as components of the deficiency long before WFS wanted to

perfect its demand for an omitted offset via an amended answer and an affirmative

pleading.

Could ABC have anticipated the invocation of section 51.003 . . . we say yes. First,

an amended pleading affecting only the amount of damages does not automatically

equate surprise. Greenhalgh v. Service Lloyds Ins. Co., 787 S.W.2d 938, 940 (Tex.

1990). Second, ABC possessed the very evidence placing the issue in play. That

evidence consisted of two appraisals evincing a fair market value of the property

exceeding ABC’s foreclosure bid of $200,000. One depicted a fair market value of

7 $255,000 and the other, $275,000. Thus, both suggest it acquired the realty at a sum

potentially far below its market value. Moreover, ABC apparently commissioned those

appraisals. So too were they in its possession. Undoubtedly, it knew of its bid. One can

reasonably infer that it also knew of the appraisals it commissioned and how the bid

underpriced the market value of the property as reflected in its own appraisals. That

coupled with ABC being an entity engaged in the business of loans and presumably

knowing the law, see Greater Houston Transp. Co. v. Phillips, 801 S.W.2d 523, 525 n.3

(Tex. 1990) (acknowledging that all persons are presumed to know the law), we find it

strained analysis to conclude that section 51.003 and its potential impact could not be

anticipated by ABC. See Rodriguez v. Crowell, 319 S.W.3d 751, 759 (Tex. App.—El

Paso 2009, pet. denied) (stating that the question is not whether the opposing party did

in fact anticipate it, but rather whether it could have anticipated it). Indeed, when opposing

the motion, counsel for ABC argued that “all deficiency actions [were] governed by

[51.003]”. All deficiency actions being so governed hardly supports the notion that a

business regularly engaged in those actions could not anticipate the application of a part

of that very statute. This seems especially so when its own bid came in far less than what

it knew to be the appraised value.

As for prejudicing ABC’s case, its argument below was two-fold. First, it proposed

that leave to amend would substantially change the nature of the case. We addressed

and rejected that above. Next, it alleged that WFS should have acted sooner. That

argument, however, deviates from the test. We listed the pertinent factors of the equation

above. None is whether one seeking leave could have done so earlier. Rather, they

concern the detrimental impact, if any, on the disposition of the case and on the opponent.

8 To the foregoing we add that little of record reflected the need for an appreciable

delay in the proceedings, if leave were granted. Again, ABC already had possession of

the very evidence underlying WFS’s section 51.003 request and desire for opportunity to

amend. And, it said nothing about the quantum of time, if any, needed to gather additional

evidence, if any, on the topic. Nor did WFS argue that more evidence or time to gather it

was needed.

Also, disposition of the suit had already been delayed by ABC’s own actions. It

sought (and received) leave to amend its pleadings and motion for summary judgment

after the lapse of applicable pretrial deadlines. Receiving such leave about a week before

the scheduled summary judgment hearing caused the latter to be postponed. See TEX.

R. CIV. P. 166a(c) (requiring a response to a motion for summary judgment to be filed at

least seven days before the hearing). And, we cannot ignore that the leave received by

ABC was for the purpose of allowing it to enhance the deficiency. WFS sought the

opportunity to decrease it. We know of no authority holding that leave to amend should

be more forthcoming when one seeks to enhance recovery as opposed to reduce it. Nor

did ABC cite us to any such authority.

Much was said by ABC about Bagwell v. Ridge at Alta Vista Invs. I, LLC, 440

S.W.3d 287 (Tex. App.—Dallas 2014, pet. denied). It too involved review of a denied

request to amend a pleading and interject a section 51.003(b) and (c) request. Missing

there, yet present here, was evidence of the party opposing amendment having itself

sought and obtained leave to amend its own pleadings after applicable deadlines lapsed

and mere days before the scheduled summary judgment hearing.

9 Missing there, yet present here, was evidence of minimal need for discovery upon

the topic of fair market value. The appellee in Bagwell voiced to the trial court its need

for an expert witness on the subject. ABC voiced no similar need here. Id. at 293-94.

Rather, it already had engaged such a witness when it commissioned the two appraisals

previously mentioned. It already had the evidence which a court could consider in

assigning a fair market value to the property.

Missing there, yet present here, was the debtor moving swiftly to amend its

pleading and interject the section 51.003(b) and (c) matter after the creditor last amended

its pleading. As observed by the Bagwell majority, “appellants’ argument still ignores the

fact that appellants waited five months to add a section 51.003 affirmative defense after

appellee filed its revised pleading. This case does not present a situation where appellee

amended its pleading and appellants sought to respond with an amended pleading of

their own shortly thereafter.” Id. at 296. Our case actually does present “a situation where

appellee amended its pleading and appellants sought to respond with an amended

pleading of their own shortly thereafter.” WFS acted on the heels of ABC’s amending its

live pleading for the fourth time. In short, pivotal circumstances differ between the cause

at hand and Bagwell. Thus, we find it distinguishable and inapposite.

No doubt, a trial court has a legitimate interest in expeditiously disposing of matters

before it. And, reasonable discretion must be afforded it when pursuing that end. Yet, it

does not have the discretion to deny amendment when the opponent failed to prove

surprise or prejudice. ABC failed to do so here. Instead, it succeeded in obtaining leave

to press its own belated efforts to increase the purported deficiency due it. “Taint fair”

and “what’s good for the goose is good for the gander” are not maxims of law, though

10 many have alluded to them in opinion and word. Luckily here, we have more to rely on

than those sayings. Upon comparing the circumstances of record to the criteria iterated

in Triex, we conclude that the trial court abused its discretion in denying WFS leave to

amend.

Having sustained the second issue, we reverse the modified summary judgment

and remand the cause for further proceedings. TEX. R. APP. P. 44.1(b); Estrada v. Dillon,

44 S.W.3d 558, 562 (Tex. 2001) (stating that a general denial requires remand on both

damages and liability when the judgment is reversed); Clear Lake Ctr., L.P. v. Garden

Ridge, L.P., 416 S.W.3d 527, 545-46 (Tex. App.—Houston [14th Dist.] 2013, no pet.)

(same though involving a summary judgment).

Brian Quinn Chief Justice