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Pineda Reo, LLC v. The Lomix Limited Partnership

Court of Appeals of Texas, Thirteenth District, Corpus Christi-Edinburg

November 7, 2019

PINEDA REO, LLC, Appellant,

          On appeal from the 138th District Court of Cameron County, Texas.

          Before Chief Justice Contreras and Justices Rodriguez and Benavides [1]


          GINA M. BENAVIDES, Justice

         On the panel's own motion, we withdraw the original memorandum opinion and judgment and replace them with this memorandum opinion and accompanying judgment.[2] Appellant Pineda REO, LLC appeals from a take-nothing judgment from its suit to collect on commercial loan guaranties.[3] Appellees, collectively referred to as Guarantors, [4] also cross-appeal[5] challenging the trial court's grant of partial summary judgment in Pineda's favor before trial. In addition, Guarantors also raise two conditional cross points challenging Pineda's attorneys' fees and the manner in which the cap on the guaranties should be applied.

         By issues one and two, Pineda contends it should prevail as a matter of law on Guarantors' defense of wrongful foreclosure and its claim for offset by the anti-deficiency statute because Guarantors waived their rights in the 2007 Guaranties. By issues three, four, and seven, Pineda challenges the sufficiency of the evidence on Guarantors' defense of wrongful foreclosure. By issue five, Pineda asserts that as a matter of law the 2007 Guaranties did not release Drs. Guajardo and Wong from their previous guaranties. By issue six, Pineda challenges the trial court's failure to issue a deficiency judgment based upon the jury verdict.

         We reverse and render in part, reverse and remand in part, and affirm in part.

         II. Background[6]

         A. Factual Background

         In 2004, a group of Brownsville physicians and others formed Brownsville MD Ventures, L.L.C. (MD Ventures) to purchase the Brownsville Surgical Hospital (BSH). The purchase was supported by an $8, 000, 000 loan from Texas State Bank (TSB) and guaranteed by the investors.[7]

         In September 2006, MD Ventures borrowed another $6, 000, 000 from TSB which was also guaranteed by the investors. The 2004 and 2006 guaranties were nearly identical.

         In November 2007, TSB loaned MD Ventures additional money and consolidated the 2004 and 2006 notes for a total loan amount of $16, 852, 317. New guaranty documents were signed in 2007, and the 2007 Note stated:

The note hereby secured is a master note and represents funds to be advanced to grantor pursuant to request for draws and to be used for the renewal and extension of two existing loans in favor of Texas State Bank . . . with the remaining balance to be used for the expansion of the existing facility located on the above-described property . . . .

         The Loan Agreement listed the Guarantors as: Gerardo Jesus Sanchez, Asim Zamir, The Guajardo Family Limited Partnership, C. Lynn Anderson, Jose Humberto Jimenez, Charles Zavala, Bradley Nordyke, The Lomix Limited Partnership, Robert Lekach, Michael S. Gomez, Madhaven Pisharodi, Vicki Miles Rodriguez, Chester Gonzalez, and Miguel A. Molinas. Each of the listed Guarantors executed new guaranty documents. Several of the Guarantors testified that TSB's attorney drew up all of the loan and guaranty documents in 2004, 2006, and 2007.

         In 2009, TSB merged with Compass Bank (Compass). Compass, an Alabama corporation, also acquired several other Texas banks at the same time. Compass was owned by BBVA, a Spanish bank.

         In 2010, BSH discovered that it had water infiltration and mold resulting from construction defects during renovations. The mold eventually caused BSH to seal off the second floor which included operating and patient rooms. In 2011, the entity that operated BSH stopped paying rent. By the end of 2012, the entity operating BSH owed MD Ventures $3, 000, 000 in past-due rent.

         By 2012, MD Ventures decided to either renegotiate the loan or sell BSH. MD Ventures approached Compass and negotiated interest only payments on the note.

         In 2012, Compass decided to liquidate some of its commercial loan portfolio. It privately auctioned several portfolios of commercial loans, including MD Ventures' 2007 Note, to large corporate bidders who participated by invitation. Compass kept the sale of the commercial loan portfolios confidential. The information available to the bidders included the Guarantors' confidential financial information. The Guarantors knew nothing about the planned sale of their loan. In June 2012, Compass commissioned an appraisal of BSH. The appraisal estimated BSH's fair market value at $21.9 million. Investor bidding on Compass' loan portfolio including MD Ventures' note began September 4, 2012.

         In September 2012, MD Ventures advised Compass of a $15 million offer to buy BSH by Alamo Street Development, but Compass did not respond. MD Ventures furnished Compass with the proposed real estate contract on October 2, 2012 with a projected closing date of November 15, 2012. If Compass approved the contract, it would receive $12, 000, 000, which was less than the amount due on the note. Compass never responded regarding this prospective sale. MD Ventures did not know that Compass was trying to sell the note at this time.

         On October 19, 2012, MD Ventures gave Compass permission for prospective purchasers of the note to review confidential financial information related to BSH and the Guarantors. The bank sold one loan portfolio, including MD Ventures' note, to Istrouma Trustee, LLC as trustee for Pineda Grantor Trust, II[8] on November 1, 2012. The amount Pineda paid for the 2007 Note was excluded from evidence at trial. However, Guarantors learned in discovery in other litigation that Pineda's accepted bid for the 2007 Note was approximately 54% of its value to Compass, as part of Pineda's overall bid for the entire loan portfolio.

         On January 7, 2013, Pineda's attorney sent the first of a series of letters to MD Ventures and the Guarantors advising them that the note was in default and that Pineda would seek to exercise all of its rights under the note and the guaranties. In August 2013, Pineda accelerated the note and demanded payment in full by September 3, 2013.

         On August 26, 2013, MD Ventures filed a voluntary petition in bankruptcy and obtained a stay of actions related to BSH. Pineda then initiated this action against the Guarantors to collect the alleged deficiency.

         On June 16, 2014, the bankruptcy court lifted the automatic stay to allow foreclosure. Pineda posted BSH for foreclosure in August 2014 and sent the Guarantors a letter dated August 12, 2014 with a Notice of Substitute Trustee's Sale scheduled for September 2, 2014. By that time BSH was vacant. The Guarantors sought a temporary restraining order and temporary injunction in this action to prevent foreclosure on the grounds that they had a prospective buyer for BSH for $18 million. The trial court denied the motion on August 19, 2014. BSH was scheduled to be sold at foreclosure on September 2, 2014 at 1:00 p.m.

         Before the September 2, 2014 sale, Dennis Stratford, the senior vice president in charge of asset management for Capital Crossing, received several calls regarding the BSH sale. The inquiries were from two different entities who were interested in BSH, one of which was Optima. Optima was trying to prevent the foreclosure sale and purchase BSH through the bankruptcy proceedings. Another prospective buyer asked what Pineda's position was going to be at the auction. According to Stratford, he refused to discuss Pineda's bidding position and invited the prospective buyer to attend the foreclosure auction.

         On the morning of September 2, 2014, MD Ventures attempted to postpone the foreclosure sale in the bankruptcy court. MD Ventures had reached a tentative agreement with Optima for an immediate payment of $400, 000 to Pineda. The bankruptcy court refused to stay the sale but told Pineda that if $400, 000 was delivered to it by 1:00 p.m., they could not foreclose: "if you've got $400, 000 I'm going to stop the sale. You get $400, 000 before 1:00 o'clock . . . the sale is off." The bankruptcy court did not sign an order but the clerk made the following entry on the bankruptcy court's electronic docket sheet: "Arguments heard. Motion approved. Debtor was ordered to include specific aspects in the plan. The sale was cancelled. Parties are to process payment later today. A detailed order will follow."

         The foreclosure auction was held shortly after 1:00 p.m. on September 2, 2014 on the Cameron County Courthouse steps. According to Jeffrey Livingston, the attorney hired by Pineda to bid on the hospital at the foreclosure sale, he made a $7 million credit bid for BSH. No one else bid. The Substitute Trustee's Deed memorializing the sale was filed with Cameron County later that day, but the amount paid for BSH was left blank.

         On September 3, 2014, MD Ventures filed a motion to dismiss the bankruptcy proceedings. MD Ventures filed a petition in intervention in this case in November 2014 in which it claimed wrongful foreclosure against Pineda. Pineda opposed the intervention.

         B. Procedural Background

         Pineda filed its first no-evidence motion for summary judgment in November 2014 as to the Guarantors' defenses of: usury, failure to mitigate damages, fraud, unclean hands, material alteration of the note, offset/setoff, limitations, and negligence. Pineda also sought a ruling dismissing other defenses as not recognized by Texas law.

         Pineda filed a traditional motion for partial summary judgment seeking recovery of a deficiency judgment against the Guarantors and daily interest. Alternatively, Pineda sought summary judgment declaring that it: owned the Guaranties; MD Ventures was in default by August 14, 2014; the Guarantors defaulted; they breached their guaranties; and Pineda was damaged. Pineda next filed traditional and no-evidence motions for summary judgment on the Guarantors' counterclaims[9] in December 2014.

         After a full day hearing on February 11, 2015, the trial court issued an order on February 19, 2015:

         1. striking MD Venture's plea in intervention;

         2. granting Pineda's motion for protective order and precluding discovery on the value of BSH and Pineda's purchase of BSH note and guaranties; and

         3. granting Pineda's motion for summary judgment in part and dismissing with prejudice Guarantors' alleged counterclaims for:

a. civil conspiracy to breach the common law duty of good faith and fair dealing,
b. breach of the duty of good faith and fair dealing, and
c. bad faith and unreasonable foreclosure.

         The Guarantors filed responses to Pineda's additional motions and sought reconsideration of the protective order. The trial court denied the motion to reconsider.

         Additionally, Drs. Guajardo and Wong filed motions for summary judgment asserting that they were not liable on the 2007 Note because they did not sign personal guaranties. The Guarantors also sought a continuance of the hearing on the motions for summary judgment to obtain and compel discovery against Pineda.

         On October 7, 2015, the trial court conducted another lengthy hearing and took the matters under advisement. On October 30, 2015, without ruling on Guarantors' pending discovery motions, the trial court advised the parties that Pineda's various motions for summary judgment to dismiss Guarantors' remaining counter-claims and defenses, and Pineda's motion for a deficiency judgment would be granted. The Guarantors objected. The trial court held another hearing and signed a final judgment dated February 16, 2016, disposing of all claims in Pineda's favor. The trial court awarded Pineda a deficiency judgment against each of the Guarantors, including Drs. Guajardo and Wong, up to the limits of liability set forth in the individual guaranties. Guarantors filed motions to reconsider the grants of summary judgment against them and Drs. Guajardo and Wong filed a motion for new trial.

         On March 18, 2016, the Guarantors filed a motion to recuse the trial judge. After the motion was filed, the trial judge voluntarily recused himself and a visiting judge was appointed.

         On April 20, 2016, the newly-appointed visiting judge heard the motions for new trial and to reconsider the summary judgments granted on February 2016. The newly-appointed judge determined there was a fact issue regarding release of the 2006 guaranties and granted Drs. Guajardo and Wong's motion for new trial. The trial court later determined there was a fact issue as to the Guarantors' defense of wrongful foreclosure and granted their motion for reconsideration only on that issue. Those two issues proceeded to jury trial.

         The jury found that Pineda wrongfully foreclosed, that the market value of BSH at the time of foreclosure was $14 million, and that Drs. Guajardo and Wong were not individually liable on the 2007 Note. It assessed $225, 000 for Pineda's past attorneys' fees and assessed conditional attorneys' fees for appeal against the Guarantors.

         During a hearing on post-judgment motions, Guarantors' counsel argued that the finding of wrongful foreclosure precluded a deficiency judgment for Pineda. The trial court agreed and signed a judgment on May 17, 2017, that Pineda take nothing against the Guarantors, and dismissed Guarantors' counterclaim for wrongful foreclosure. This appeal followed.

         II. Wrongful Foreclosure

         By issues three and four, and part of issue seven, Pineda argues that Guarantors' evidence of wrongful foreclosure is legally and factually insufficient.

         A. Standard of Review

         In reviewing a legal sufficiency challenge, we consider the evidence "in the light favorable to the verdict, crediting favorable evidence if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not." City of Keller v. Wilson, 168 S.W.3d 802, 807 (Tex. 2005). "Our traditional legal sufficiency-or 'no evidence'-standard of review upholds a finding supported by '[a]nything more than a scintilla of evidence.'" State Office of Risk Mgmt. v. Pena, 548 S.W.3d 84, 90 (Tex. App.-Corpus Christi-Edinburg 2018, no pet.). "More than a scintilla exists when the evidence would enable reasonable and fair-minded people to reach different conclusions." Burbage v. Burbage, 447 S.W.3d 249, 259 (Tex. 2014). Because it is the jury's province ...

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