Rodney Haggard v. Bank of the Ozarks, Inc.
2012 U.S. App. LEXIS 1102
| 5th Cir. | 2012Background
- Bank loaned McKinney Meadows L.P. $1.6M secured by a lien on real property.
- Haggard, a limited partner, executed a guaranty limited to the last $500k of principal and accrued interest.
- Guaranty states no reduction in guaranteed amount until principal balance is below $500k and then reductions occur dollar-for-dollar.
- Partnership defaulted; Bank foreclosed on the property for $975k; reported deficiency of about $718k.
- Bank and Haggard filed cross-motions for summary judgment; district court granted partial summary judgment and later awarded fees, then denied amendment; appellate court vacates the summary judgment and attorney’s-fees award and remands.
- Court addresses whether the guaranty is ambiguous and the proper scope and enforceability of the purported guarantee.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Haggard liable immediately for $500k or only after balance drops below $500k? | Haggard's liability is capped at the last $500k and does not reduce until below $500k. | Bank contends guaranty is unconditional and requires immediate payment on default. | Ambiguity; summary judgment vacated and remanded for proper construction. |
| Was the guaranty unconditional or subject to a condition under Texas law? | Language shows liability limited to last $500k and reduction only after balance below $500k. | Language reflects unconditional guaranty; Bank need not sue debtor first. | Ambiguity; proper interpretation required; not resolved in favor of either party on summary judgment. |
| Did the district court abuse its discretion in denying Haggard’s supplemental claim under Texas §51.003? | Offset should be available for foreclosure deficiency as FMV exceeds sale price. | Guaranty waived set-off rights; district court did not abuse discretion. | Kept denial; court affirmed denial of supplemental claim. |
| Were attorney’s fees properly awarded to the Bank if summary judgment on guaranty claim was vacated? | Fees premised on breach of guaranty; breach not settled here. | Bank is entitled to reasonable fees if guaranty breached. | Vacated award of attorney’s fees and costs. |
Key Cases Cited
- United States v. Vahlco Corp., 800 F.2d 462 (5th Cir. 1986) (guaranty construed in favor of guarantor; defenses may be raised against unconditional guaranties)
- Resolution Trust Corp. v. Northpark Joint Venture, 958 F.2d 1313 (5th Cir. 1992) (strict construction of guaranties; ambiguities resolved in guarantor's favor)
- NH Properties Limited Partnership v. Mittleider, 267 F.App’x 375 (5th Cir. 2008) (unpublished; described interpretive approach to guaranty language)
- Cox v. Lerman, 949 S.W.2d 527 (Tex.App.—Houston [14 Dist.] 1997) (distinguishes guaranty of collection vs. payment; relevant to interpretation)
- LaSalle Bank N.A. v. Sleutel, 289 F.3d 837 (5th Cir. 2002) (waiver of offset rights by guarantor under Tex. Property Code §51.003; set-off defense)
- Federal Deposit Insurance Corp. v. Woolard, 889 F.2d 1477 (5th Cir. 1989) (language guiding interpretation of guaranty instruments)
- Simpson v. MBank Dallas, N.A., 724 S.W.2d 102 (Tex.App.–Dallas 1987) (principle that guaranty liability is measured by the guaranty terms)