R&L Inv. Prop., LLC v. Green
| Decision Date | 06 May 2014 |
| Docket Number | Civil Action No. 3:12-cv-4171-O |
| Parties | R&L INVESTMENT PROPERTY, LLC, Plaintiff, v. LARRY W. GREEN et al., Defendants. |
| Court | U.S. District Court — Northern District of Texas |
Before the Court are Defendants' Motion for Summary Judgment (ECF No. 27), filed March 21, 2014; Defendants' Amended Brief and Appendix in Support of Motion for Summary Judgment (ECF Nos. 32-33), filed March 26, 2014; Plaintiff's Memorandum in Opposition and Appendix (ECF No. 38), filed April 10, 2014; and Defendants' Reply (ECF No. 44), filed April 24, 2014. Having reviewed the motion, the record, and the applicable law, the Court finds that Defendants' Motion (ECF No. 27) should be and is hereby GRANTED.
This action arises out of the foreclosure of two tracts of land in Hunt County, Texas. On June 8, 2006, Plaintiff R&L Investment Property, LLC ("Plaintiff") purchased a tract of approximately 22 acres ("Marina Property") from Guy and Joyce Hamm ("Lenders") for $1,300,000. Pl.'s 2d Am. Compl. ¶ 4.2, ECF No. 22. On the Marina Property, Plaintiff placed $800,000 as a down payment, and the remaining $500,000 of the purchase price was seller-financed. Id. ¶ 4.4. On June 19, 2006, Plaintiff purchased an adjacent tract of approximately 400 acres ("400 Acre Property") from Lenders for $2,400,000. Id. ¶ 4.2. On the 400 Acre Property, Plaintiff placed $1,000,000 as a down payment,and the remaining $1,400,000 of the purchase price was seller-financed. Id. ¶ 4.3. The Promissory Notes and Deeds of Trust on the properties were executed in September 2006. See id. ¶¶ 4.3, 4.4. Both Promissory Notes set the interest rate on "unpaid principal from date" at 7%, and the interest rate on matured, unpaid amounts at the "[h]ighest legal rate allowed by law," which was 18%. Id. ¶ 4.5; see also Pl.'s App. Ex. 2 (Note-400 Acre Prop.), App. at 1, ECF No. 38-3; id. Ex. 3 (Note-Marina Prop.), App. at 1, ECF No. 38-4. Both Deeds of Trust named Defendant Larry Green ("Trustee") as the trustee. See id. Ex. 2 (Deed of Trust-400 Acre Prop.), App. at 9, ECF No. 38-3; id. Ex. 3 (Deed of Trust-Marina Prop.), App. at 4, ECF No. 38-4.
Plaintiff defaulted in payment of both Promissory Notes, but Lenders entered into an extension and modification agreement with Plaintiff in June 2009, which moved the maturity date on both Promissory Notes to December 31, 2013. See id. Ex. 4 (Modification Agreement-400 Acre Prop.), App. 1-9, ECF No. 38-5; id. Ex. 5 (Modification Agreement-Marina Prop.), App. 1-6, ECF No. 38-6. Plaintiff defaulted again on the payments, and Lenders, through Trustee, sent notices of foreclosure sales for the 400 Acre Property and the Marina Property in June 2011. See Defs.' Am. App. Supp. Mot. Summ. J. Ex. A-8 (Notice of Foreclosure Sale), App. at 49-50, ECF No. 33-1. The foreclosure sales took place in July 2011, before the Promissory Notes' maturity dates.
At the foreclosure sales, Lenders made a credit bid for both properties, and Trustee conveyed the properties to Lenders as the highest bidders but did not receive cash from Lenders. See id. Ex. A-1 (Trustee Aff.), App. at 1. The appraised value of the 400 Acre Property was $1,420,000.00, and the appraised value of the Marina Property was $540,000.00. See id. Ex. A-12 (Bid Sheet-400 Acre Prop.), App. at 82; id. Ex. A-13 (Bid Sheet-Marina Prop.), App. at 83. Lenders repurchased the 400 Acre Property for $1,420,000.00 and repurchased the Marina Property for $540,000.00. See id. Ex.A-10 (Trustee's Deed-400 Acre Prop.), App. at 67; id. Ex. A-11 (Trustee's Deed-Marina Prop.), App. at 78. According to the payoff statements, the sale price for the properties was insufficient to cover the remaining principal and interest due under the Promissory Notes. See id. Ex. A-14 (Payoff Statement-400 Acre Prop.), App. at 84; id. Ex. A-15 (Payoff Statement-Marina Prop.), App. at 86. Trustee stated that he made the calculations with regard to the alleged deficiency "[b]ased upon the information" provided to him by Lenders. Pl.'s App. Ex. 1 (Trustee Dep.), App. at 7, ECF No. 38-2; see also Defs.' Am. App. Supp. Mot. Summ. J. Ex. J (Trustee Dep.), App. at 45-50, ECF No. 33-2.
Before filing the instant action, Plaintiff filed suit against Lenders asserting Lenders had represented that the 400 Acre Property had an active waste water permit but failed to disclose that the permit had expired several months before the closing. See Defs.' Am. App. Supp. Mot. Summ. J. Ex. B (Pl.'s 3d Am. Compl.), App. at 89-91, ECF No. 33-2. Lenders counterclaimed for the deficiencies from the sales. See id. Ex. D (Lenders' Counterclaim), App. at 98. The district court dismissed Plaintiff's fraud claim, and the Fifth Circuit affirmed finding Plaintiff "with full knowledge of the alleged fraud, ratified the purchase and sale of the property," which "foreclosed [Plaintiff's] right to damages . . . ." See R&L Inv. Prop., L.L.C. v. Hamm, 715 F.3d 145, 146 (5th Cir. 2013). The jury did not award damages to either party at trial. See Defs.' Am. App. Supp. Mot. Summ. J. Ex. G (Final Judgment-District Court), App. at 19, ECF No. 33-1; see also id. Ex. H (Judgment-Fifth Circuit), App. at 20 ().
On October 17, 2012, Plaintiff filed the instant action against Trustee and Trustee's law firm, Pemberton, Green, Newcomb & Weis (collectively "Defendants").1 Plaintiff asserts causes of actionfor wrongful foreclosure and breach of contract.2 See Pl.'s 2d Am. Compl. ¶ 1.1, ECF No. 22. In the event of a foreclosure, the Deeds of Trust provided that Trustee must:
See, e.g., Defs.' App. Supp. Mot. Summ. J. Ex. A-3 (Deed of Trust-400 Acre Property), App. at 15, ECF No. 33-1. Plaintiff argues Trustee breached his duties and obligations under the Deeds of Trust by: (1) wrongfully performing deficiency calculations, (2) failing to receive cash at the foreclosure sale, and (3) failing to return the balance of the foreclosure proceeds to Plaintiff after the foreclosure sale. See Pl.'s Mem. Opp'n 23, ECF No. 38.
On March 26, 2014, Defendants moved for summary judgment on Plaintiff's claims. Defendants contend Plaintiff's wrongful foreclosure claim fails because Plaintiff cannot show: (1) a defect in the foreclosure sale proceeding, (2) a grossly inadequate selling price, or (3) a causal connection between Trustee's acts or omissions and the sales price. See Defs.' Am. Br. Supp. Mot. Summ. J. 20-23, ECF No. 32. Defendants also argue they are entitled to summary judgment onPlaintiff's breach of contract claim because Plaintiff cannot show that Trustee breached his duties arising under the Deeds of Trust. See id. at 23-24. The issues have been fully briefed and are ripe for determination.
To be entitled to summary judgment, a movant must show that there is no genuine dispute as to any material fact and that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The movant bears the initial burden of demonstrating the absence of a genuine issue of material fact, and then it is up to the nonmovant to point to "'specific facts showing that there is a genuine issue for trial.'" Cannata v. Catholic Diocese of Austin, 700 F.3d 169, 172 (5th Cir. 2012) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The movant makes a showing that there is no genuine issue of material fact by informing the court of the basis of its motion and by identifying the portions of the record which reveal there are no genuine material fact issues. See Celotex Corp., 477 U.S. at 323; see also Fed. R. Civ. P. 56(c). The evidence is examined in the light most favorable to the nonmovant and any reasonable inferences are drawn in favor of the nonmovant. Cannata, 700 F.3d at 172 (citations omitted). To determine whether a genuine issue of material fact exists, courts must look to the substantive law to identify which facts are material. Anderson, 477 U.S. at 248.
Plaintiff asserts claims against Defendants for wrongful foreclosure and breach of contract based on Trustee's duties under the Deeds of Trust for the 400 Acre Property and the Marina Property. Defendants argue that, as a matter of law, Plaintiff cannot establish that Trustee is liablefor wrongful foreclosure or breach of contract. The Court will address each claim in turn.
A trustee exercising the authority to foreclose in accordance with the terms of a deed of trust has a specific legal responsibility as a "special agent for both the debtor and the lienholder," and must act with absolute impartiality and fairness in conducting a foreclosure. Clauer v. Heritage Lakes Homeowners Ass'n, Inc., 726 F. Supp. 2d 668, 673 (E.D. Tex. 2010) (); see also Marsh v. Wells Fargo Bank, N.A., 760 F. Supp. 2d 701, 708 (N.D. Tex. 2011) (Lynn, J.). While the trustee has no duty to take affirmative actions beyond that required by statute or the deed of trust to ensure a fair sale, the trustee must conduct a foreclosure sale fairly and strictly comply with the terms of the deed of trust and the provisions of Section 51.002 of the Texas Property Code. Clauer, 726...
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