Wells Fargo Bank, N.A. v. HB Regal Parc, LLC
2012 Tex. App. LEXIS 7280
| Tex. App. | 2012Background
- Trustee sued Regal Parc entities for post-foreclosure deficiency after a non-recourse loan with carve-outs.
- Loan contained single-purpose entity provisions and recourse carve-outs for misapplication of rents, waste, and related events.
- Borrowers defaulted September 1, 2008; foreclosure sale occurred January 6, 2009 with Trustee bidding $12,000,000; outstanding loan balance after foreclosure was about $12.954 million.
- Trial court found the loan remained non-recourse, awarded $600,000 for actual waste, and found misappropriations of rents totaling $238,101.61 plus a $46,000 affiliate loan repayment, with a judgment for Trustee of about $1.083 million plus fees.
- On appeal, court affirmed the non-recourse status, rejected full-recourse arguments, and upheld waste and rent-misappropriation damages as against appellees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did affiliate loans convert the loan to recourse? | Regal Parc transfers labeled as loans breached Article 6, triggering full recourse. | There were no loan documents; funds were partner contributions; no commingling; loan remained non-recourse. | Non-recourse status preserved; $46,000 mischaracterizations did not convert to recourse. |
| Is the deficiency amount controlled by foreclosure value when non-recourse? | Deficiency should be the difference between foreclosure value and loan balance. | Non-recourse means no deficiency liability applicable to appellees. | Deficiency analysis ignored because loan remained non-recourse. |
| Whether $1.6 million in actual waste should be awarded but trial court awarded $600,000? | Trustee should recover total waste since inception of loan. | Waste liability limited to post-assumption period; post-assumption waste only. | Appellees liable only for waste after assumption; $600,000 upheld. |
| Whether damages for misappropriation of rents were properly awarded? | Misappropriated rents totaled $238,101.61; and post-default loan repayments of $46,000 were improper. | Rents were severed after default; some amounts reflect post-default transfers; no misappropriation. | Damages for misappropriated rents upheld; $238,101.61 plus appropriate post-default amounts supported. |
Key Cases Cited
- BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789 (Tex. 2002) (review of factual sufficiency and de novo legal conclusions on contract interpretation)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (standards for legal and factual sufficiency of evidence)
- Dow Chemical Co. v. Francis, 46 S.W.3d 237 (Tex. 2001) (evidence sufficiency with burdens of proof on pivotal facts)
- Cain v. Bain, 709 S.W.2d 175 (Tex. 1986) (standard for reversing on factual sufficiency; weight of evidence)
- Guerra v. Guerra, 348 S.W.3d 221 (Tex. 2011) (standards for reviewing damages awards on waste and misappropriation)