Trunkhill Capital, Inc. v. Jansma, 10-95-003-CV

• Decision Date: 31 August 1995
• Docket Number: No. 10-95-003-CV,10-95-003-CV
• Citation: 905 S.W.2d 464
• Parties: TRUNKHILL CAPITAL, INC., d/b/a Equitable Solutions, Appellant, v. David G. JANSMA and Randolph H. Wieser, Appellees.
• Court: Texas Court of Appeals

Page 464

905 S.W.2d 464

TRUNKHILL CAPITAL, INC., d/b/a Equitable Solutions, Appellant, v. David G. JANSMA and Randolph H. Wieser, Appellees.

No. 10-95-003-CV.

Court of Appeals of Texas Waco.

Aug. 31, 1995.

Billy D. Hullum, Fort Worth, for appellant.

J. David Dickson, Sheehy, Lovelace, & Mayfield, P.C., Waco, for appellees.

Before THOMAS, C.J., and CUMMINGS and VANCE, JJ.

OPINION

THOMAS, Chief Justice.

Section 51.003(a) of the Texas Property Code provides that, if real property is sold at a foreclosure sale for a price less than the unpaid balance of the indebtedness securing it, "any action brought to recover the deficiency must be brought within two years of the foreclosure sale and is governed by this section." TEX.PROP.CODE ANN. § 51.003(a) (Vernon 1995). The primary question presented in this appeal is whether section 51.003(a) is a statute of repose or a statute of limitations. We hold that it is a statute of limitations.

FACTUAL BACKGROUND

On July 3, 1985, David Jansma and Randolph Wieser executed a promissory note in the amount of $178,125 in favor of United Bank of Waco. The note was secured by a 1.214-acre tract of land. The Federal Deposit Insurance Corporation (FDIC) took control of United Bank when it failed.

On November 5, 1991, the FDIC foreclosed on the collateral, but the proceeds from its sale did not satisfy the balance owed on the note. Trunkhill Capital, Inc., doing business as Equitable Solutions, purchased the note from the FDIC and filed suit on August 17, 1994, against Jansma and Wieser to recover the deficiency on the note.

The parties do not dispute these basic facts. Their disagreement arises over the application of section 51.003(a) and section 1821(d)(14). See id.; Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), Pub.L. No. 101-73, § 212(d)(14), 103 Stat. 183, 232-33 (1989) (codified at 12 U.S.C.A. § 1821(d)(14) (West 1989 & Supp.1995)). ¹

Trunkhill argued in its motion for a summary judgment that it timely established its right to collect the deficiency because it was entitled to the six-year statute of limitations in section 1821(d)(14)(A)(i)(I). Jansma and Wieser argued in their motion that, regardless of section 1821(d)(14), section 51.003(a) is a statute of repose, which places a substantive limitation on Trunkhill's right to recover. The court granted the motion filed by Jansma and Wieser and denied Trunkhill's.

Trunkhill complains on appeal that the court erred in granting Jansma and Wieser's motion based on the two-year time period in section 51.003(a). It further contends that the court should have granted its motion based on the six-year statute of limitations in section 1821(d)(14).

Jansma and Wieser concede that Trunkhill, as an assignee of the FDIC, is entitled to whatever extension of time to file suit on the deficiency that section 1821(d)(14) provides. See Jackson v. Thweatt, 883 S.W.2d 171, 174 (Tex.1994) (holding that a successor in interest of the FDIC is entitled to the benefits of section 1821(d)(14) under the common-law maxim that an assignee stands in the shoes of his assignor). They argue, however, that section 1821(d)(14) does not extend the time for filing suit here because section 51.003(a) is not a statute of limitations, but a statute of repose. Thus, they insist, Congress' extension of the statute of limitations to six years, which is procedural, cannot and does not affect the substantive two-year statute of repose in section 51.003(a). They also contend that Jackson is distinguishable because section 51.003(a) was enacted after Jackson was decided and the facts here involve a foreclosure, while Jackson concerned a suit on a note.

STANDARD OF REVIEW

A party is entitled to a summary judgment if there is no genuine issue as to any material fact and he is entitled to judgment as a matter of law. TEX.R.CIV.P. 166a(c). We will review the summary judgment under the well-established rules set forth in Nixon v. Mr. Property Management. ²

JACKSON V. THWEATT

The Texas Supreme Court noted in Jackson:

One of FIRREA's purposes was to 'provide funds from public and private sources to deal expeditiously with failed depository institutions.' [citation omitted] If the FDIC's statute of limitations did not enure to the benefit of its transferees, the market value of notes and other assets in the hands of the FDIC would be diminished, hindering this statutory purpose.

Jackson, 883 S.W.2d at 174. The Court held that an assignee is entitled to receive the full rights of the assignor and that section 1821(d)(14) thus extends to purchasers from the FDIC. Id.

Although section 51.003(a) had not been enacted when the Court decided Jackson, that fact does not render the reasoning of Jackson invalid. The policy reasons that persuaded the Court to extend protection to the FDIC's assignees in Jackson apply in this situation as well.

Furthermore, that Jackson involved a suit on a note and this is a suit for a deficiency is of no consequence. Section 1821(d)(14) expressly states that it applies to "any action" brought by the FDIC. 12 U.S.C.A. § 1821(d)(14)(A). Thus, it applies to all actions that could have been brought by the FDIC and not just to an action on a note. The FDIC possessed the right to recover on the deficiency, as it had acquired all rights that United Bank possessed. See Jackson, 883 S.W.2d at 174. Because the FDIC could have sued Jansma and Wieser for the deficiency, Trunkhill, as assignee of the FDIC note, is likewise entitled to whatever benefits section 1821(d)(14) may provide. Id.

SECTION 51.003(a)

--A STATUTE OF LIMITATIONS OR REPOSE?

Jansma and Wieser contend that section 51.003(a) is a statute of repose and that, because Trunkhill failed to sue for the deficiency within two years after the foreclosure, it no longer possessed that cause of action under state law. Because Trunkhill did not possess a cause of action, they argue, the six-year statute of limitations in section 1821(d)(14) is irrelevant and cannot revive Trunkhill's lost cause of action. Jansma and Wieser rely upon Resolution Trust Corp. v. Olson, 768 F.Supp. 283, 285 (D.Ariz.1991) (holding that an Arizona statute requiring a suit on a deficiency to be filed not later than three months following foreclosure was a statute of repose, not of limitation). The Olson opinion, which labeled the Arizona statute as one of repose, fails to provide any reasoned analysis to reach that conclusion. Furthermore, we do not know the legislative intent or purpose behind the Arizona statute.

Section 51.003(a) provides:

If the price at which real property is sold at a foreclosure sale under Section 51.002 [Sale of Real Property Under Contract Lien] is less than the unpaid balance of the indebtedness secured by the real property, resulting in a deficiency, any action brought to recover the deficiency must be brought within two years of the foreclosure sale and is governed by this section.

TEX.PROP.CODE ANN. § 51.003(a).

Jansma and Wieser contend that the language of section 51.003(a) is substantially similar to that found in other Texas statutes of repose--i.e., the plaintiff "must bring suit ... not later than ten years after the substantial completion of the improvement," citing sections 16.008 and 16.009 of the Texas Civil Practice and Remedies Code in support of their interpretation of section 51.003(a) as a statute of repose. See TEX.CIV.PRAC. & REM.CODE ANN. §§ 16.008, 16.009 (Vernon 1986). This argument is unpersuasive, however, as section 16.007 [Return of Execution] contains the same language, yet is included with other statutes of limitation in section 16.061 (Rights Not Barred). See id. §§ 16.007, 16.061 (Vernon Supp.1995); Monsanto v. Cornerstones Mun. Utility, 865 S.W.2d 937, 940-41 (Tex.1993) (holding that the statute exempting the state from the defense of limitations is not applicable to political subdivisions). Section 16.061, while including section 16.007, does not exempt the state from the statutes of repose found in sections 16.008 and 16.009. TEX.CIV.PRAC. & REM.CODE ANN. § 16.061.

The Texas Supreme Court has recently reviewed the purposes and applications of statutes of limitation and statutes of repose. See Trinity River Auth. v. URS Consultants, 889 S.W.2d 259 (Tex.1994). The Court noted that statutes of repose differ from traditional statutes of limitation because they potentially cut off a right of action before it accrues. Id. at 263. This can occur because a statute of repose begins to run from a specified date without regard to the accrual of a cause of action. Id. at 261. The purpose of so doing is to protect certain actors--architects, engineers, and contractors--from the threat of claims arising many years after completion of a building or project. Id.; see also TEX.CIV.PRAC. & REM.CODE ANN. §§ 16.008, 16.009.

The effect of a statute of repose is that a party cannot possess, and never did possess, a cause of action if it did not arise within a given time period, regardless of the party's diligence after discovering the defect or problem; thus, a statute of repose has been said to be a substantive definition of rights. Trinity River Auth., 889 S.W.2d at 261.

On the other hand, a statute of limitations is a procedural limitation of one's rights. Id. It is intended to compel a party who possesses a right of action to exercise that right within a reasonable time after it accrues. Id. at 263. A statute of limitations runs not from a specified independent date, but from the date the cause of action accrues. Id. at 261. Inherent in the definition or application of a statute of limitations is the fact that a party has a cause of action; that is, facts have come into existence that authorize him to seek a judicial remedy. Celtic Life Ins. Co. v. Coats, 885 S.W.2d 96, 100 (Tex.1994).

From the date that section 51.003(a) requires the two-year period to begin, i.e., the date of foreclosure, a creditor possesses all facts that authorize him...