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Senger Creek Development, LLC v. Fuqua

Court of Appeals of Texas, First District

June 1, 2017

SENGER CREEK DEVELOPMENT, LLC, JAMES GILBERT, CLAY MOORE AND TRENTON TORREGROSSA, Appellants
v.
RICHARD L. FUQUA, II, FUQUA FAMILY LIMITED PARTNERSHIP, AND LEVEL 2 SOLUTIONS, INC., Appellees

         On Appeal from the 127th District Court Harris County, Texas Trial Court Cause No. 2014-31147-B

          Panel consists of Chief Justice Radack and Justices Jennings and Bland.

          MEMORANDUM OPINION

          Sherry Radack Chief Justice

         Appellants, Senger Creek Development, LLC, James Gilbert, Clay Moore, and Trenton Torregrossa (collectively referred to as Senger Creek), appeal the trial court's order which granted summary judgment in favor of appellees, Richard L. Fuqua, II, Fuqua Family Limited Partnership, and Level 2 Solutions, Inc. (collectively referred to as the Fuqua Defendants). In three issues on appeal, Senger Creek argues that the trial court erred in granting summary judgment on its claims for wrongful foreclosure, trespass to try title, breach of contract, knowing participation in a breach of fiduciary duty, and civil conspiracy.[1]We affirm in part and reverse in part.

         Background

         On April 19, 2007, Gilbert, Moore, Torregrossa, and Robert Ferguson, Sr. formed Senger Creek to purchase and develop 56 acres of land in North Houston.[2]To fund the purchase, Ferguson, on behalf of his limited partnership, Parkway Lakes Master, L.P., executed a Real Estate Lien Note ("the Note") that provided Senger Creek with a line of credit in the amount of $1, 200, 000 that matured after a year. The Note was secured by a Deed of Trust that provided that the beneficiary, Parkway Lakes, could appoint a substitute trustee, and if Senger Creek defaulted, Parkway

          Lakes could declare the unpaid principal balance and earned interest on the Note immediately due and request the trustee to foreclose the lien. The Deed of Trust further provided that the beneficiary could purchase the property at the foreclosure sale by offering the highest bid and then having the bid credited on the Note.

         On April 19, 2008, Senger Creek and Ferguson entered into an extension agreement, extending the maturity date of the Note until April 19, 2009. The parties signed a second extension agreement on April 19, 2009, extending the maturity date of the Note until April 19, 2010 and increasing the line of credit to $2, 000, 000. Senger Creek asserted that in October 2009, a third-party appraiser valued the property at $6, 000, 000. After this appraisal, Senger Creek alleged that the relationship between Senger Creek and Ferguson deteriorated because Ferguson wanted a bigger share of the profits.

         Unbeknown to Gilbert, Moore, and Torregrossa, on November 3, 2009, Parkway Lakes assigned the Note and Deed of Trust to Level 2, an entity formed by Fuqua, [3] in exchange for cancelling various debts Ferguson owed to Fuqua and related entities. Senger Creek alleged that between March and May 2010, Senger Creek "made numerous attempts to contact Ferguson and Fuqua to arrange and tender payments on the Note, to obtain draws on [Senger Creek's] line of credit, and to renew the Note and Deed of Trust."[4]

         On May 5, 2010, Fuqua's law firm, Fuqua & Associates, sent a letter to Senger Creek, notifying it that Level 2 was the current owner of the Note, that his firm had been retained by Level 2, and that the Note had matured on April 19, 2010. The letter also stated that Senger Creek defaulted on the Note, immediate payment of the unpaid principal and all accrued and unpaid interest was due, and that if Senger Creek did not make immediate payment, Level 2 intended to foreclose the lien in accordance with an attached "Notice of Substitute Trustee's Sale." The notice provided that Fuqua was the substitute trustee, Level 2 was the holder of the Deed of Trust, and the sale would occur on June 1, 2010 in Harris County. The notice did not provide the substitute trustee's address.

         On May 6, 2010, Fuqua filed an appointment of substitute trustee appointing himself substitute trustee under the Deed of Trust. On May 27, 2010, Senger Creek's attorney sent Fuqua a letter, acknowledging receipt of the Notice of Substitute Trustee's Sale and stating that pursuant to the Note's terms, Senger Creek had not received a 10-day notice and the opportunity to cure. The attorney further stated that if "the property is sold at that foreclosure sale, my clients will pursue a claim for wrongful foreclosure against all responsible parties."

         On June 1, 2010, the Fuqua Family Limited Partnership (FFLP) bought the property at the foreclosure sale with a $1, 500, 000 credit bid. Six months later, FFLP recorded the foreclosure deed reflecting its purchase of the property.

         In July 2012, FFLP sold the property to IH45 Investments, LLC. Senger Creek alleged that IH45 was advised of the "defective and invalid" foreclosure sale and that IH45 attempted to get Senger Creek, Gilbert, Moore, and Torregrossa to sign releases.

         On May 30, 2014, Senger Creek sued the Fuqua Defendants and other parties. In its petition, Senger Creek asserted claims against the Fuqua Defendants for wrongful foreclosure, trespass to try title, breach of contract, knowing participation in a breach of fiduciary duty, civil conspiracy, unjust enrichment, promissory estoppel, and usury. Senger Creek asserted that it suffered actual and exemplary damages and sought monetary relief. In its prayer, Senger Creek alternatively argued that the trial court should declare the foreclosure deed void and set it aside as well as setting aside all subsequently-recorded instruments and declaring Senger Creek the legal and equitable owner of the property. Senger Creek stated that the discovery rule applied because it did not discover the existence of its claims against the Fuqua Defendants until April 2014. Each of the Fuqua Defendants filed an answer asserting a general denial and various affirmative defenses, including statute of limitations, waiver, and estoppel.

         Motions for summary judgment

         On November 19, 2014, the Fuqua Defendants moved for summary judgment on Senger Creek's claims for breach of contract, knowing participation in a breach of fiduciary duty, civil conspiracy, unjust enrichment, promissory estoppel, and usury. The Fuqua Defendants asserted that the Note matured on April 19, 2010, that Senger Creek's attorney objected to the foreclosure on May 27, 2010, and by waiting until May 30, 2014, more than four years after the Note matured and Senger Creek failed to pay the amounts remaining due, limitations had run on Senger Creek's claims. The Fuqua Defendants also asserted that the discovery rule did not apply because the Note's maturity date and the written notice received by Senger Creek were not inherently undiscoverable.

         On January 16, 2015, Senger Creek responded to the motion for summary judgment, arguing that the Fuqua Defendants did not present competent evidence to conclusively show that a wrongful act caused injury to Senger Creek on April 18 or May 5, 2010. Senger Creek alleged that the breach of contract claim established that "Level 2 breached the Note and Deed of Trust causing injury to [Senger Creek] (at the earliest) on June 1, 2010, when Fuqua wrongfully foreclosed Level 2's lien o[n] the Property."

          With regard to its claims for knowing participation in a breach of fiduciary duty and civil conspiracy, Senger Creek argued that the Fuqua Defendants' reliance on the Note and Notice of Substitute Trustee's Sale did not show when Senger Creek knew or, in the exercise of ordinary diligence, should have known of the wrongful act and resulting injury. Senger Creek argued that discovery had just begun and no depositions had been taken, and "[t]hus, it is yet to be determined what confidential information was leaked to [the] Fuqua Defendants by Ferguson-who owed fiduciary duties to [Senger Creek] in his capacity as owner of [Parkway Lakes Master], a member of [Senger Creek]." Senger Creek continued, "Because a fact issue exists as to when [Senger Creek's] claims accrued and whether they knew or should have known about the wrongful acts of [the] Fuqua Defendants and Ferguson Defendants which caused injury to [Senger Creek] . . . the discovery rule applies and therefore [the Fuqua] Defendants statute of limitations affirmative defense fails."

         On February 6, 2015, the Fuqua Defendants sought summary judgment on Senger Creek's wrongful foreclosure and trespass to try title claims. The Fuqua Defendants asserted that Senger Creek's claims fail as a matter of law because Senger Creek had actual notice of the foreclosure sale, Senger Creek cannot connect any claimed defects in the foreclosure sale to any injury it has suffered, and it cannot show a grossly inadequate price at the foreclosure sale. They also argued that the foreclosure sale was not void and, even if Senger Creek could establish a defect in the foreclosure, a failure to comply with the notice requirement would render the foreclosure sale voidable. They also argued that if the foreclosure had been voidable, Senger Creek's delay in challenging the foreclosure sale served to waive its claims because the property had been sold to a good faith purchaser.

         Senger Creek responded to the Fuqua Defendants' summary judgment on wrongful foreclosure and trespass to try title, arguing that the foreclosure sale was void because the notice of sale did not disclose the substitute trustee's street address as required in section 51.0075(e) of the Texas Property Code, Level 2 failed to provide a 10-day notice of opportunity to cure before posting the property for foreclosure, and the substitute trustee was not authorized to sell the property to an entity in which he owns or controls an interest. Senger Creek also argued that the property sold for an amount that was grossly inadequate, which is a question of fact for the jury to decide, and that because Level 2 and its predecessor in interest, Parkway Lakes, committed a prior material breach of the note by failing to fund draw requests, Senger Creek was excused from its obligations.

         The Fuqua Defendants replied, arguing that their failure to include a substitute trustee's address rendered the foreclosure sale voidable rather than void. And that even though the notice did not include the substitute trustee's address, Senger Creek could still not recover on its wrongful foreclosure claim because it failed to show that the defect caused the property to be sold for a grossly inadequate price. The

          Fuqua Defendants further replied that Senger Creek received actual notice of the substitute trustee's address as evidenced by Senger Creek's attorney sending a letter to Fuqua, acknowledging receipt of the Notice of Substitute Trustee's Sale.

         Senger Creek filed a cross-motion for partial summary judgment on the wrongful foreclosure and trespass to try title claims, arguing that the foreclosure sale was void ab initio because the notice of sale did not disclose the substitute trustee's street address, Level 2 failed to provide a 10-day opportunity to cure notice before posting the property for foreclosure and the substitute trustee was not authorized to sell the property to an entity in which it owns or controls an interest.

         The Fuqua Defendants responded to the cross-motion and filed objections to Senger Creek's summary judgment evidence. The Fuqua Defendants asserted that the sale was not void ab initio because the notice failed to include the substitute trustee's address and that FFLP, which owns 100% of the interest of Level 2, designated Level 2 to hold the Note as Parkway's assignee. The Fuqua Defendants also asserted that Senger Creek's argument regarding the lack of 10-day notice relies on a provision of the Note that does not apply; rather, because the Note reached maturity, the amount due was immediately owed.

          The trial court's orders

         On March 6, 2015, the trial court issued an amended order finding that the Note matured on April 19, 2010[5] and granting the Fuqua Defendants' summary judgment on limitations on Senger Creek's claims for breach of contract, breach of fiduciary duty, civil conspiracy unjust enrichment, promissory estoppel, and usury.[6]Also on March 6, 2015, the trial court granted the Fuqua Defendants' partial summary judgment on Senger Creek's wrongful foreclosure and trespass to try title claims.

         On March 27, 2015, Senger Creek filed a motion for reconsideration of the trial court's order granting the Fuqua Defendants' motion for summary judgment on its claims for wrongful foreclosure and trespass to try title. The trial court denied the motion for reconsideration on April 14, 2015. On September 19, 2015, the trial court severed the claims against the Fuqua Defendants into a separate cause number thus making its judgments final. On October 19, 2015, Senger Creek filed a motion for new trial, motion for reconsideration, motion for ruling on objections and motion to modify, correct or reform summary judgment regarding the wrongful foreclosure and trespass to try title claims. The trial court denied Senger Creek's motion for new trial and for reconsideration on December 8, 2015. Senger Creek appeals the trial court's orders granting summary judgment in favor of the Fuqua Defendants.

         Foreclosure Sale

         In its first issue on appeal, Senger Creek argues that the trial court erred in granting the Fuqua Defendants' summary judgment and in denying its cross-motion for summary judgment on its claims for wrongful foreclosure.[7]

         Standard of Review

         We review the trial court's grant of a summary judgment de novo. Tex. Mun. Power Agency v. Pub. Util. Comm'n of Tex., 253 S.W.3d 184, 192 (Tex. 2007); Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). To prevail on a traditional summary judgment motion, the movant bears the burden of proving that no genuine issues of material fact exist and that it is entitled to judgment as a matter of law. Tex.R.Civ.P. 166a(c); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009).

         When both parties move for summary judgment on the same issues and the trial court grants one motion and denies the other, we review both parties' summary judgment evidence and determine all questions presented. Dorsett, 164 S.W.3d at 661; FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000). Each party bears the burden of establishing that it is entitled to judgment as a matter of law. City of Santa Fe v. Boudreaux, 256 S.W.3d 819, 822 (Tex. App.-Houston [14th Dist.] 2008, no pet.); see also Tex. R. Civ. P. 166a(c) ("The judgment sought shall be rendered forthwith if . . . there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law on the issues expressly set out in the motion or in an answer or any other response.").

         When a defendant moves for summary judgment, it must either (1) disprove at least one element of the plaintiff's cause of action or (2) plead and conclusively establish each essential element of an affirmative defense to rebut plaintiff's cause. Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995) (per curiam). To decide whether issues of material fact preclude summary judgment, evidence favorable to the non-moving party must be taken as true, every reasonable inference must be indulged in its favor, and any doubts resolved in its favor. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). The movant must conclusively establish its right to judgment as a matter of law. Charida v. Allstate Indem. Co., 259 S.W.3d 870, 872 (Tex. App.-Houston [1st Dist.] 2008, no pet.) (citing MMP Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex. 1986)). A matter is conclusively established if reasonable people could not differ as to the conclusion to be drawn from the evidence. City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex. 2005).

         If we determine that the trial court erred, we render the judgment that the trial court should have rendered. Dorsett, 164 S.W.3d at 661; FM Props., 22 S.W.3d at 872. If the trial court's order does not specify the grounds for its summary judgment ruling, we affirm the summary judgment if any of the theories presented to the trial court and preserved for appellate review are meritorious. See Knott, 128 S.W.3d at 216.

         Was the Foreclosure Sale Void?

         On appeal, Senger Creek argues that the foreclosure sale was void for four reasons: (1) Level 2 failed to provide the substitute trustee's street address in the Notice of Substitute's Trustee's Sale as required by the Texas Property Code; (2) Level 2 failed to provide a 10-day notice of default and opportunity to cure before posting the property for foreclosure; (3) Senger Creek was not in default due to Level 2's prior material breach; and (4) no public sale for cash occurred because FFLP purchased the property using a credit bid for a debt it did not own. We address these in turn.

          1. Notice of address

         Section 51.0075(e) of the Texas Property Code provides that "[t]he name and a street address for a trustee or substitute trustees shall be disclosed on the notice required by Section 51.002(b)." ...


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