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Branch Banking And Trust Co. v. Swig Partners GP, LLC

Court of Appeals of Texas, Fifth District, Dallas

December 13, 2017

BRANCH BANKING AND TRUST COMPANY, Appellant/Cross-Appellee
v.
SWIG PARTNERS GP, LLC, WOO YOUNG CHUNG, KUN YOUNG KIM, KYU YOUNG KIM, STEVEN LEE, HUN KYU LEE, EDWIN PAK, HYUK KEUN KWUN, SHI CHUI KUM, WOON CHUL CHUNG, NAM SUN PAEK, YOO SANG CHO, HWAN HURH, HAK SON AHN, HAROLD K. SHIN, HYO WON BANG, EDWARD KIM, SUN KYUM CHA A/K/A STEPHEN CHA, KWANG H. KIM, JANG Y. LEE, JIM HEE CHA, SUNG CHOOI LEE, JAMES LEE, JIN K. CHING, KWANG JAE LEE, MARY CHU DIERLAM, CHONG WON KIM, Appellees SWIG PARTNERS LP, Appellee/Cross-Appellant

         On Appeal from the 134th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-14-03427

          Before Justices Francis, Myers, and Whitehill.

          MEMORANDUM OPINION

          MOLLY FRANCIS JUSTICE.

         In this suit arising out of a foreclosure, Branch Banking and Trust Company appeals the trial court's take-nothing judgment on its deficiency claims based on application of the statute of limitations. In two issues, BB&T contends the trial court erred in (1) concluding BB&T did not exercise diligence in effecting service on appellees and (2) failing to apply the six-year statute of limitations for contract claims under the Federal Financial Institutions Reform, Recovery, and Enforcement Act. SWIG Partners LP brings five cross-issues contending the trial court erred in rendering a take-nothing judgment on its counterclaims because the evidence showed it did not owe BB&T a debt at the time of the foreclosure and the note and deed of trust were unenforceable. We conclude the record shows BB&T exercised diligence in service as a matter of law. Accordingly, we reverse that portion of the trial court's judgment and remand BB&T's claims for further proceedings. We affirm the remainder of the trial court's judgment.

         Appellees are the borrower and guarantors on a note made payable to Colonial Bank f/k/a Colonial Bank, N.A. (the SWIG loan). The note was secured by a deed of trust on real property. On August 14, 2009, the FDIC was appointed receiver for Colonial Bank. On the same day, the FDIC transferred the note, deed of trust, and guaranties to BB&T as part of an asset acquisition.

         On April 3, 2012, BB&T foreclosed on the SWIG loan and purchased the property at the foreclosure sale. BB&T asserts the purchase price was less than the amount due on the note, leaving a deficiency. On March 28, 2014, six days before the two-year anniversary of the foreclosure, BB&T filed this suit against appellees seeking to recover the deficiency. Citations were issued by the district clerk on April 3, 2014 and delivered to a process server on April 4. Both SWIG Partners GP, LLC and SWIG Partners LP were served the same day the process server received the citations. By April 23, ten more of the thirty named defendants had been served. All defendants answered on April 25.

         In their original answer, appellees asserted a general denial, a request for accounting, and various affirmative defenses including limitations. On May 7, appellees filed an amended answer in which they omitted three of the guarantors named as defendants. On May 9, BB&T filed a motion for substitute service on one of the guarantors, Harold K. Shin. The trial court granted BB&T's request. The court's order included a finding that "despite [BB&T's] due diligence, [BB&T's] attempts to serve Shin have not been successful and that the substitute service authorized herein is reasonably calculated to give Shin notice of the lawsuit."

         BB&T filed motions for substitute service on the two remaining guarantors on May 21 and June 3. The trial court granted both motions. In each order, the trial court made the same finding that BB&T had exercised due diligence in attempting to serve the subject defendants. BB&T ultimately nonsuited its claims against the two guarantors because one left the country and the other passed away.

         On November 11, SWIG Partners LP filed counterclaims against BB&T asserting causes of action for trespass to try title, slander of title, action to quiet title and remove cloud on title, breach of contract, and wrongful foreclosure. SWIG brought the counterclaims contending it learned during discovery that somehow it had paid off the loan in full two years before it stopped making payments.

         The trial court conducted a bench trial and rendered a take-nothing judgment on all claims asserted by both parties. In its findings of fact and conclusions of law, the court made no findings regarding the substance of BB&T's claims, but determined the claims failed because it did not timely bring its action to recover the deficiency. Although BB&T filed suit less than two years after the foreclosure sale, the court concluded BB&T failed to demonstrate diligence in serving citation on the defendants after the limitations period expired. Specifically, the court found that BB&T "did not present evidence regarding efforts that were made to serve the Defendants . . . and to explain every lapse in effort or period of delay." With respect to SWIG's counterclaims, the trial court determined they failed on the merits. Both sides timely appealed.

         In its first issue, BB&T contends the trial court erred in concluding the record did not show it exercised diligence in serving the defendants in this case. At trial, the court took judicial notice of its register of action which showed the following:

Suit Filed

03/28/2014

Citations Issued

04/03/2014

Service on SWIG Partners GP, LLC

04/04/2014

Service on SWIG Partners, LP

04/04/2014

Service on Kun Young Kim

04/09/2014

Service on Mary Chu Dierlam

04/09/2014

Service on Hun Kyu Lee

04/15/2014

Service on Woon Chul Chung

04/15/2014

Service on Hak Son Ahn

04/16/2014

Service on Jin K. Chung

04/16/2014

Service on Sun Kyum Cha

04/22/2014

Service on Shi Chui Kim

04/23/2014

Service on Edward Kim

04/23/2014

Service on Hwan Hurh

04/23/2014

All Defendants Answered

04/25/2014

Defendant's Amended Answer

05/07/2014

Motion for Substitute Service on H. Shin

05/09/2014

Motion for Substitute Service Granted

05/12/2014

Motion for Substitute Service on Kaim

05/21/2014

Motion for Substitute Service Granted

05/22/2014

Motion for Substitute Service on D. Shin

06/03/2014

Motion for Substitute Service Granted

06/04/2014

         Assuming the two-year limitations period applies in this case[1], it is undisputed BB&T filed suit within the limitations period, but effected service after the two-year period expired. If service is diligently effected after limitations has expired, the date of service will relate back to the date suit was filed. See Grant v. DeLeon, 786 S.W.2d 259, 260 (Tex. 1990). "Texas courts have consistently held that lack of diligence may be shown based on unexplained lapses of time between the filing of the suit, issuance of the citation, and service of process." See Boyattia v. Hinojosa, 18 S.W.3d 729, 733 (Tex. App.-Dallas 2000, pet. denied). But, the passage of time alone may not be determinative of the issue of diligence. Id. at 734. Instead we look at whether a party's actions manifested a "bona fide" intention to have process served. Id.

         The record in this case shows BB&T filed suit within two years after its claims accrued, obtained citations within four business days of the filing, and served the two defendant partnerships the next day. Twelve of the thirty named defendants were served within three weeks after citations were issued. All the defendants then made an appearance obviating the need for further service of process. See Tex. R. Civ. P. 120. The longest period of time without service on a defendant before all the defendants answered was four business days. The time between the date suit was filed and the date all defendants filed their original answer was twenty-eight days. When three of the defendants were omitted from the defendants' amended answer, BB&T moved for substitute service.[2] In granting BB&T's motions for substitute service, the trial court repeatedly found BB&T ...


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