888 F.2d 1497 (5th Cir. 1989), 88-1618, Savers Federal Sav. & Loan Ass'n v. Reetz

Docket Nº:88-1618.
Citation:888 F.2d 1497
Party Name:SAVERS FEDERAL SAVINGS & LOAN ASSOCIATION, Plaintiff-Appellee, v. Horst R. REETZ and Kathleen K. Reetz, Defendants-Appellants.
Case Date:November 30, 1989
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 1497

888 F.2d 1497 (5th Cir. 1989)



Horst R. REETZ and Kathleen K. Reetz, Defendants-Appellants.

No. 88-1618.

United States Court of Appeals, Fifth Circuit

November 30, 1989

Page 1498

Robert R. Bodoin, Daniel A. Foster, Randy Lynn Agnew, McLean, Sanders, Price, Head & Ellis, Fort Worth, Tex., for defendants-appellants.

Clifton T. Hutchinson, Hughes & Luce, Dallas, Tex., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before GARWOOD, JONES, and SMITH, Circuit Judges.

GARWOOD, Circuit Judge:

In this Texas law diversity case, defendants-appellants Horst R. Reetz and Kathleen K. Reetz appeal the district court's summary judgment awarding plaintiff-appellee Savers Federal Savings & Loan Association (Savers) recovery against appellants on their written guaranty of a promissory note (the Note) payable to Savers and executed by the Horst R. Reetz Trust (the Trust), a Texas general partnership of which appellants were the only partners. We affirm.

Facts and Proceedings Below

On August 27, 1984, the Trust executed the Note, which was in the principal amount of $6,300,000, payable to Savers. Appellants individually executed a personal guaranty of payment of the Note. The Note was secured by two deeds of trust, each covering a separate parcel of real property in Dallas County, Texas. One deed of trust, executed by the Trust, covered

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property known as the Richardson Tech Center; the other deed of trust, executed by appellant Horst R. Reetz, covered what is referred to as the East Collins Road property. The Note was payable in monthly installments due on the first day of each month, the installments being of interest only for an initial period and thereafter of principal and interest. The Note also authorized acceleration of maturity in the event of default in any payment. 1 On November 24, 1986, Savers gave written notice to appellants that "[t]he note is in default for the non-payments of the August through November, 1986 installments of interest." On January 28, 1987, Savers gave written notice that the Note had been accelerated because of the Trust's failure to pay any of the interest installments due August 1, 1986 through January 1, 1987. Sometime after January 1987, the Trust petitioned for relief under Chapter 11 of the Bankruptcy Code.

Thereafter, on April 22, 1987, Savers filed this suit against appellants on their guaranty for the sum of $5,906,569.29, the then outstanding principal balance of the Note, plus interest, reasonable attorneys' fees, and collection costs. The complaint alleges the defaults in the Note payments, the giving of notice thereof, and of the acceleration of the Note's maturity as above stated.

Thereafter, on May 20, 1987, appellants, through counsel, filed their answer. The answer denied none of the allegations of the complaint, expressly admitted certain of the allegations, and as to the others merely stated that appellants were "unable to admit or deny." 2 No affirmative defenses or similar matters were alleged. This answer was never amended, nor, until after final judgment, was it ever sought to be amended. Appellants filed no motions under Fed.R.Civ.P. 12. Although the answer prayed that Savers take nothing by its suit, nothing in the answer suggests any legal or factual basis for this prayer. On July 6, 1987, Savers filed its motion for summary judgment, with supporting brief and affidavits and sworn copies of the Note and the guaranty thereof executed by appellants. On July 24, 1987, appellants filed their response to the motion for summary judgment with supporting affidavit of appellant Horst Reetz. The response alleged the Trust's pending bankruptcy proceeding and requested that "this matter be abated until after October 1, 1987 to determine whether or not a plan of reorganization can be instituted and confirmed in the bankruptcy." Further, Horst Reetz's affidavit stated: "[I]t was my understanding that the guaranty was to be limited to the extend [sic ] of $750,000 liability," and this allegation is repeated, as to both appellants, in their response. 3 No other legal or factual reasons for denying Savers' summary judgment motion are asserted in appellants' response or Horst Reetz's supporting affidavit. On July 28, 1987, the district court deferred decision on the motion for summary judgment "until October 1, 1987 to determine whether a reorganization plan can be confirmed and implemented in the [Trust's] bankruptcy."

During the pendency of the bankruptcy proceedings, the bankruptcy court granted Savers relief from the automatic stay imposed by section 362 of the Bankruptcy Code, and the substitute trustee in the deed of trust on the Richardson Tech Center

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posted that property to be nonjudicially foreclosed under the deed of trust on August 4, 1987. The property was sold to Savers for $3,000,000 at the foreclosure sale on that date, with the Note being then credited in that amount, but Savers and the substitute trustee later rescinded the sale because it was discovered that "there might have been deficiencies" in giving notice of the sale, and the property was posted for a second sale to be conducted on September 1, 1987. Savers was again the successful bidder for $3,000,000 at the September 1, 1987 sale. On November 3, 1987, the substitute trustee in the deed of trust on the East Collins Road property, after notice, sold that property at nonjudicial foreclosure sale to Savers for $1,000,000, which was then credited on the Note.

The bankruptcy court dismissed the Trust's petition on December 31, 1987.

On February 9, 1988, Savers filed a supplemental motion for summary judgment, supported by affidavits and copies of the trustee's foreclosure deeds, and informed the court that the foreclosures of the two properties had resulted in the referenced credits to appellants' indebtedness. Appellants filed a response to the supplemental motion for summary judgment in which they asserted only that there was no deficiency because, when foreclosed on, the Richardson Tech Center had a fair market value of $6,000,000 and the East Collins Road property had a fair market value of $2,000,000, which in combination exceeded the amount owed on the Note (there being no dispute as to that amount). Two affidavits were attached to this response, one as to the value of the Richardson Tech Center, the other as to the value of the East Collins Road property. In rejoinder, Savers objected to the affidavits as not being made on personal knowledge, and further asserted that in any event market value was irrelevant because there was no claim that there was any irregularity in the foreclosure which caused or contributed to any inadequacy in price. Responding on March 28, 1988 to this rejoinder, appellants merely contended that the affidavits as to market value were not hearsay. On April 26, 1988, the district court granted Savers' motion. The court concluded that the facts were undisputed and that appellants had asserted only two matters in opposition to the motion for summary judgment, namely, that they signed the guaranty "on the understanding" that their liability would be limited to $750,000 and that the value of real estate at the time of foreclosure exceeded the amounts credited on the Note when Savers purchased the property at the foreclosure sales. The district court rejected the former contention, and no complaint is made in this regard on appeal. As to the latter contention, the district court ruled that the value of the property was immaterial since there was no claim of any irregularity in the foreclosures. On May 10, the court entered a final judgment for Savers and against appellants for $3,600,979.67 plus interest and court costs.

Thereafter, appellants, who had obtained new counsel on May 6, 1988, filed on May 24, 1988 motions for leave to file a supplemental answer, for a new trial, to vacate and/or to reconsider summary judgment and for a rehearing, and, subsequently, for leave to file an original counterclaim and to join the Trust. By way of these pleadings, appellants attempted to assert various new defenses to Savers' claims. The court denied all of these post-judgment motions on August 4, 1988.


Appellants' contentions on appeal fall into two categories, those based on the record as it stood when the district court rendered summary judgment, and those based on denial of appellants' post-judgment motions. We consider them in that order.


Summary Judgment

(a) Note acceleration and foreclosure procedure

Appellants attack the summary judgment on three grounds. The first two, which we consider in this part (a), are that there was inadequate demand and notice of intention to accelerate and that the Richardson

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Tech Center trustee foreclosure sale was procedurally improper.

We reject each of these two contentions because they were never even hinted at prior to the post-judgment motions. To allow them to be first raised after judgment "would encourage trial by ambush." Smith v. Olin Chemical Corp., 555 F.2d 1283, 1285 (5th Cir.1977). Thus we have rejected the assumption "that the entire record in the case must be searched and found bereft of a genuine issue of material fact before summary judgment may be properly entered" and have stated that "[t]o the contrary, Fed.R.Civ.P. 56(e) 'requires ... the nonmoving party to ... designate "specific facts showing that there is a genuine issue for trial." ' " Nissho-Iwai American Corp. v. Kline, 845 F.2d 1300, 1307 (5th Cir.1988) (emphasis in original). See also Franz Chemical Corp. v. Philadelphia Quartz, 594 F.2d 146, 150 (5th Cir.1979); DeBardeleben v. Cummings, 453 F.2d 320, 324 (5th Cir.1972). And, we...

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