457 S.W.3d 208
Tex. App.2015Background
- Marhaba borrowed from City Bank in 2007 and granted security interests in (a) a Harris County MUD No. 402 reimbursement/bond-proceeds stream (the "MUD 402 Receivables") and (b) real property; documents in 2009 reaffirmed those assignments and refinanced the debt.
- Marhaba defaulted; City Bank foreclosed on the real property in May 2011, credit-bid and purchased it, but records showed a remaining indebtedness.
- City Bank assigned the loan and related security agreements (including the assignments of the MUD 402 Receivables) to Kindron in December 2011.
- Kindron notified Marhaba it would sell the MUD 402 Receivables and then purchased them at a nonjudicial foreclosure sale in April 2012 (credit bid). Marhaba disputed Kindron’s right to sell.
- Kindron sued for declaratory relief confirming its right to the Receivables; Marhaba counterclaimed for declaratory relief, usury, breach of contract, conversion, and unfair debt collection. The trial court struck some of Marhaba’s valuation evidence and granted traditional summary judgment for Kindron; Marhaba appealed.
Issues
| Issue | Marhaba's Argument | Kindron's Argument | Held |
|---|---|---|---|
| Whether Tex. Prop. Code § 51.003 (fair-market-value offset for deficiencies) applies to Kindron’s declaratory action confirming its nonjudicial foreclosure sale of the Receivables | §51.003 applies because a deficiency existed after the property foreclosure sale, so fair-market-value evidence is relevant and must offset any deficiency before Kindron foreclosed on additional collateral | The claim is only to confirm a nonjudicial foreclosure sale of additional collateral (Receivables), not an action to recover a deficiency; §51.003 does not apply | Court: §51.003 does not apply to Kindron’s declaratory action confirming the Receivables sale; fair-market-value evidence was irrelevant and properly excluded |
| Whether §51.003 applies to Marhaba’s counterclaims (including claims challenging the Receivables foreclosure) | Same as above: Marhaba can assert §51.003 to offset deficiency and block/southward Kindron’s foreclosure on Receivables | §51.003 is inapplicable for serial/nonjudicial foreclosures on mixed collateral where lender seeks no personal deficiency judgment; Marhaba’s counterclaims thus not governed by §51.003 | Court: §51.003 does not apply to Marhaba’s counterclaims |
| Whether the MUD 402 Receivables were collateral securing the loan (vs. a mere "direct-pay" passthrough) | Receivables were only a contingent/direct-pay mechanism and not intended as collateral, so Kindron had no right to foreclose on them | Loan documents (Assignment of Right to Reimbursement, Assignment of Bond Proceeds, Credit Agreement) show the Receivables were assigned as collateral to secure the loan | Court: The Receivables served as collateral (a pledge/assignment as security), so Kindron had authority to foreclose on them |
| Whether Marhaba’s usury claim survived summary judgment (including validity of contractual waiver) | The foreclosure of additional collateral after the property sale resulted in "over-foreclosure" and usurious charges; contractual waivers of usury are void/public-policy barred | Summary judgment evidence shows a debt remained after the property sale; Marhaba’s usury theories lack evidentiary support; even assuming waiver invalid, usury not proven | Court: Summary judgment proper on usury — Marhaba’s substantive usury theories fail; resolution does not turn on any alleged waiver |
Key Cases Cited
- Browning v. Prostok, 165 S.W.3d 336 (Tex. 2005) (summary-judgment standard and burdens)
- MMP, Ltd. v. Jones, 710 S.W.2d 59 (Tex. 1986) (plaintiff’s burden on summary judgment)
- Frost Nat’l Bank v. Fernandez, 315 S.W.3d 494 (Tex. 2010) (defendant’s burden to negate an element or establish an affirmative defense on summary judgment)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (conclusive establishment standard for summary judgment evidence)
- Moayedi v. Interstate 35/Chisam Rd., L.P., 438 S.W.3d 1 (Tex. 2014) (explaining §51.003 fair-market-value offset and its purpose)
- Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844 (Tex. 2009) (review standard — view evidence in light most favorable to nonmovant)
- Pipkin v. Kroger Tex., L.P., 383 S.W.3d 655 (Tex. App.—Houston [14th Dist.] 2012) (abuse-of-discretion review for exclusion of summary-judgment evidence)