Segal v. Emmes Capital, L.L.C.

• Decision Date: 11 March 2004
• Docket Number: No. 01-01-00460-CV.,01-01-00460-CV.
• Citation: 155 S.W.3d 267
• Parties: Richard J. SEGAL, Judith Segal, Joe Fogarty, and Nancy Fogarty, Appellants, v. EMMES CAPITAL, L.L.C., Appellee.
• Court: Texas Court of Appeals

155 S.W.3d 267

Richard J. SEGAL, Judith Segal, Joe Fogarty, and Nancy Fogarty, Appellants, v. EMMES CAPITAL, L.L.C., Appellee.

No. 01-01-00460-CV.

Court of Appeals of Texas, Houston (1st Dist.).

March 11, 2004.

Allyson L. Mihalick, Jeff Nobles, Beirne, Maynard & Parsons, L.L.P., Karl Vernon Hopkins, Brendan D. Cook, Baker & McKenzie, Steven E. Halpin, Steven E. Halpin, P.C., Houston, TX, for Appellant.

Kenneth E. McKay, Locke, Liddell & Sapp, LLP, Houston, TX, Thomas H., Jr. Broookman, Fort Worth, TX, for Appellee.

Panel consists of Justices NUCHIA, ALCALA, and HANKS.

OPINION ON REHEARING

SAM NUCHIA, Justice.

Appellants Richard J. Segal and Judith Segal ("the Segals") have moved for rehearing, as have appellants Joe Fogarty and Nancy Fogarty ("the Fogartys"). Appellee, Emmes Capital, L.L.C. ("Emmes"), has responded to both rehearing motions. We have granted the Segals' unopposed motion to supplement the appellate record on rehearing. We now grant the rehearing motions. Although we withdraw our opinion and judgment dated October 10, 2002 and issue this opinion and judgment in their place, our ultimate disposition of the trial court's judgment remains unchanged.

The Segals and the Fogartys (collectively, "appellants") appeal a judgment rendered after the trial court granted the summary judgment motion of Emmes and denied the Segals' and the Fogartys' summary judgment motions. We affirm.

I. Standard of Review and Burden of Proof

We follow the usual standard of review for an order granting one party's summary judgment motion, and denying other parties' summary judgment motions, under rule 166a(c) without specifying grounds. See Tex.R. Civ. P. 166a(c); Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex.2001) (summary judgment order not specifying grounds); Bradley v. State ex rel. White, 990 S.W.2d 245, 247 (Tex.1999) (order granting and denying cross-motions for summary judgment); Science Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex.1997) (standard of review and burden under rule 166a(c)).

II. Background

The Fogartys and the Segals had ownership interests in Jojac/Sejac, Ltd., a limited partnership ("the borrower"). To purchase three pieces of real estate in Texas, the borrower executed a promissory note ("the note") for $6,850,000 in favor of Emmes. On the same day, the borrower secured the note by a first lien, conveyed by a deed of trust ("the deed of trust") in Emmes's favor, on the three properties. Also on the same day, appellants executed an unconditional guaranty agreement ("the guaranty"), by which each agreed to be jointly and severally liable for, among other things, "any liability of the Borrower to [Emmes] pursuant to any documents executed and/or delivered in connection with any indebtedness of the Borrower to [Emmes]," including the "debt secured" portion of the deed of trust.

The note matured in 1998, and the borrower defaulted. In the spring of 1999, the borrower filed for Chapter 11 bankruptcy. Apparently because the bankruptcy stayed enforcement actions against the borrower and its collateral, Emmes sued the Segals and the Fogartys in New York ("the New York suits") in April 1999 to recover on the guaranty. See N.Y. C.P.L.R. § 3213 (McKinney 1992). In June and August 1999, the trial court in the New York suits rendered two judgments for Emmes against all appellants for a total of $4,609,076.77. In July 1999 and May 2000, respectively, Emmes sought to domesticate and to enforce the New York suit judgments in Texas by a lawsuit styled Emmes Capital, L.L.C. v. Joe Fogarty et al., cause no. 1999-38061, in the 281st District Court of Harris County, Texas ("the first Texas suit"). See Tex. Civ. Prac. & Rem.Code Ann. § 35.001-.008 (Vernon 1997).

On September 10, 1999, the bankruptcy court entered an order, agreed to by the borrower, Emmes, and appellants, modifying the automatic bankruptcy stay ("the agreed bankruptcy order"). The agreed bankruptcy order provided, among other things, that, if the borrower did not pay Emmes the remaining amount owing on the note by December 3, 1999, the automatic stay would lift to allow Emmes to foreclose on the deed-of-trust property on December 7, 1999.

The borrower paid some, but not all, of the debt, and the stay thus lifted automatically. Emmes sold the three deed-of-trust properties by non-judicial foreclosure sale on December 7, 1999 in Harris County. Emmes was the high bidder on all three properties, purchasing them for $1,550,000 total. The parties and the record are unclear about how much deficiency remained after the foreclosure sales, but a deficiency did remain.

In early 2000, the Fogartys and the Segals counterclaimed against Emmes in the first Texas suit, alleging that the three properties were sold for less than fair-market value and seeking a determination and declaration under Texas law of the properties' fair-market value and an offset in that amount from any deficiency judgment. See Tex. Prop.Code Ann. § 51.005 (Vernon 1995) (allowing guarantor to challenge fair-market value of property sold in non-judicial foreclosure sale as prelude to seeking offset from deficiency amount). The Segals expressly pleaded Property Code section 51.005.

On February 2, 2000, shortly after having filed their counterclaim in the first Texas suit, the Fogartys filed their own suit against Emmes — Joe Fogarty & Nancy Fogarty v. Emmes Capital, L.L.C., cause no. 20009-06408, in the 281st District Court of Harris County, Texas ("the second Texas suit") — for a determination of the three properties' fair-market value and an offset in that amount from any deficiency judgment.¹ The Segals intervened in the second Texas suit on March 1, 2000, requesting the same determination and declaration as the Fogartys did and, again, expressly referencing Property Code section 51.005. The parties agree that the first and the second Texas suits had substantially identical parties and issues. This appeal is from the final judgment in the second Texas suit, and the remainder of this opinion concerns that suit's procedural history.²

The parties then filed various summary judgment pleadings. Before discussing those pleadings, we note that, in the second Texas suit, with few exceptions, the parties filed summary judgment motions and responses that did not themselves state any grounds, but that instead incorporated by reference equivalent motions or responses from the first Texas suit or from their or other parties' summary judgment motions or responses in the second Texas suit. Normally, summary judgment grounds must be stated in the motion itself, not in an attached brief or evidence, and no special exception would be required to preserve an appellate complaint about a total lack of grounds in the motion. See McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 342 (Tex.1993). However, all parties used the incorporation-by-reference procedure below without objection, and, more importantly, no party complains on appeal of any other party's use of the incorporation-by-reference procedure. See Walling v. Metcalfe, 863 S.W.2d 56, 58 (Tex.1993) (holding that appellate court cannot reverse judgment for reason not raised in point of error).

Emmes moved for rule-166a(c) summary judgment on the ground that appellants had waived their rights under Property Code section 51.005 (fair-market-value determination) by express waiver in the guaranty. The Fogartys' summary judgment response claimed that the guaranty's waiver of a fair-market-value determination and an offset under section 51.005 (1) violated Texas's public policy and (2) was invalid because the rights that it waived did not exist when the waiver was signed.³ The Fogartys' response expressly stated that the "issue presented is whether a guarantor's waiver of his right to determination of the fair market value ... pursuant to Tex. Prop.Code. Ann. § 51.005 (Vernon 1995) is enforceable." The Fogartys admitted in their response that their claim was for a determination "pursuant to Tex. Prop.Code Ann. § 51.005." The Segals also responded to Emmes's summary judgment motion about the same time,⁴ arguing that the guaranty's waiver of a fair-market-value determination and an offset under section 51.005 (1) was void for violating Texas's public policy, (2) was ambiguous, and (3) was unenforceable for not being conspicuous.⁵

The trial court did not rule on Emmes's summary judgment motion at the scheduled hearing, but instead allowed appellants additional time to file their own rule 166a(c) summary judgment motions. Thereafter, the Fogartys amended their petition, seeking the following, alternative declarations:

1. A declaration that New York law (specifically, a deficiency-law defensive bar) precluded a deficiency judgment and required that the properties' sale price be deemed in full satisfaction of the debt.

2. A declaration of the properties' fair-market value and of any offset to which the Fogartys were entitled from a deficiency judgment.

On the same day that they amended their petition, the Fogartys moved for partial summary judgment on the ground that the note, deed of trust, and guaranty provided that New York law applied to any deficiency action; that Emmes did not comply with New York deficiency law; and that Emmes was thus barred entirely from seeking any deficiency judgment. They also moved for summary judgment on the ground that the foreclosure sales of some of the properties were void under Texas law for allegedly having taken place in the wrong county. The Segals later moved for summary judgment on essentially the same grounds as had the Fogartys, the only substantive difference being that the Segals' motion asserted that the two foreclosure sales were either void or voidable.⁶

Emmes responded to appellants' summary judgment motions by arguing that (1) Texas law, not New York law, applied to any deficiency action; (2) alternatively, even if New York deficiency law applied, appellants had waived any...