Resolution Trust Corp. v. Northpark Joint Venture

United States Court of Appeals,
Fifth Circuit.
No. 91–1501.
RESOLUTION TRUST CORPORATION, as receiver for First Savings and
Loan Association of Waco and First Savings and Loan Association of
Temple, and as conservator of First Savings and Loan, F.A., Temple,
Texas, Plaintiffs–Appellees,
v.
NORTHPARK JOINT VENTURE, et al., Defendants,
and
Steven S. Schiff, Charles G. Dannis, Stephen T. Crosson, Barry
Howard, Robert L. Schiff, Charles H. Perry, Herbert G. Schiff and
Telstar Partnership, Defendants–Appellants.
April 24, 1992.
Appeal from the United States District Court for the Northern
District of Texas.
Before KING, JOHNSON and DAVIS, Circuit Judges.
JOHNSON, Circuit Judge:
This action originated in state court as a suit to recover the
balance of a debt. The state court granted partial summary
judgment against the defendants, concluding that the defendants
were responsible for the unsatisfied indebtedness. After the case
was removed to federal district court, the federal court declined
to reconsider the state court ruling and entered a judgment against
the defendants. Unable to conclude that the district court
committed reversible error, this Court affirms.
I. FACTS AND PROCEDURAL HISTORY
In April 1985 Northpark Joint Venture ("Northpark"), a joint
venture formed under Texas law, entered into a loan agreement with
Texas State Mortgages, Inc. ("TSM"). TSM advanced Northpark $9.15
million, which Northpark in a promissory note agreed to repay with
interest. To secure repayment of the loan, Northpark executed a
deed of trust granting TSM a lien upon certain real property
located in Mississippi. In addition, the individuals who formed
Northpark—Steven S. Schiff, Charles G. Dannis, Stephen T. Crosson,
Barry Howard, Robert L. Schiff, Charles H. Perry, Herbert G. Schiff
and Telstar Partnership—executed absolute and unconditional
personal guaranties to repay up to $3,202,500 of the $9.15 million
indebtedness.1
Two years later, Northpark defaulted on its obligation under
the promissory note. Unable to collect repayment, TSM assigned its
rights in the loan transaction to First Savings and Loan
Association of Waco ("First Waco") and First Savings and Loan
Association of Temple ("First Temple"). Pursuant to the terms of
the loan agreement, First Waco and First Temple made a formal
demand that Northpark and its individual guarantors cure the
default. The default remained uncured, and First Waco and First
Temple sold the Mississippi property in a public foreclosure sale
for $3,637,500. The proceeds of the foreclosure sale were applied
to the unpaid principal, leaving an unsatisfied indebtedness of
$3,253,464.96 in principal and $1,200,683.11 in accrued interest.
1
Two separate guaranties are in issue in this case. The
first guaranty was signed by defendants Herbert G. Schiff, Robert
L. Schiff, Steven S. Schiff, Charles H. Perry, Charles G. Dannis
and Stephen T. Crosson, while the second guaranty was signed by
Robert B. Howard. The separate guaranties are virtually
identical in their terms.
Following foreclosure, First Waco and First Temple filed suit
in Texas state court against Northpark and its individual
guarantors to recover the amount of the unsatisfied indebtedness.
The individual guarantors filed a counterclaim seeking a
declaratory judgment that they were not liable under the note or
their guaranties. Both sides then filed motions for summary
judgment. In September 1989 the court granted partial summary
judgment against the individual guarantors, concluding that the
guarantors must bear personal liability for $32,202,500 of the
unsatisfied indebtedness.2
While the action was still pending in state court, Northpark
declared bankruptcy and was dismissed from the lawsuit.3 Moreover,
First Waco and First Temple became insolvent. The Resolution Trust
Corporation ("RTC") was appointed to serve as the receiver of both
First Waco and First Temple.4 In August 1990 the RTC intervened in
2
As early as January 3, 1989, the state court had decided
that it would grant partial summary judgment against the
individual guarantors, but it reversed itself on reconsideration.
Only after a second reconsideration did the state court finally
conclude that the guarantors were liable for $3,202,500, the
maximum amount of the guaranties.
3
A guarantor may waive his right to have the maker of the
underlying note made a party defendant. Yandell v. Tarrant State
Bank, 538 S.W.2d 684, 688 (Tex.Civ.App.—Fort Worth 1976, writ
ref'd n.r.e.).
4
In July 1989 the Federal Home Loan Bank Board declared
First Waco insolvent and appointed the Federal Savings and Loan
Insurance Corporation to serve as receiver. The Bank Board then
organized First Savings and Loan, F.A., Waco, Texas ("First F.A.
Waco") and appointed the FSLIC to serve as conservator of the new
savings and loan. Under a purchase and assumption agreement, the
Bank Board transferred to First F.A. Waco almost all of First
Waco's assets, including the promissory note and the personal
guaranties. The Resolution Trust Corporation subsequently
the state court action and removed the case to federal court. The
individual defendants filed a motion for reconsideration of the
partial summary judgment. The federal district court denied the
motion for reconsideration, ruling that the guarantors indeed were
liable for $3,202,500 of the unsatisfied indebtedness, plus
interest and "reasonable" attorneys' fees.
On May 16, 1991, the individual defendants filed a notice of
appeal. Four days later, the federal district court entered a
"Final Judgment" denying all relief that the defendants had sought
in their counterclaim and granting the RTC a specific award of
$93,463.60 in attorneys' fees.
II. DISCUSSION
The defendants argue that the district court erred in
declining to reconsider the partial summary judgment that the state
court had entered. After removal of an action to federal district
court, "[a]ll injunctions, orders, and other proceedings had in
such action prior to its removal shall remain in full force and
effect until dissolved or modified by the district court." 28
U.S.C. § 1450 (1988). A prior state court order in essence is
federalized when the action is removed to federal court, although
replaced the FSLIC as receiver of First Waco and as conservator
of First F.A. Waco. Months later, the Office of Thrift
Supervision declared First Temple insolvent and appointed the RTC
receiver. Under another purchase and assumption agreement, the
Office of Thrift Supervision designated the RTC conservator of a
new institution, First Savings and Loan, F.A., Temple, Texas,
which received almost all of the assets once belonging to the
defunct First Temple.
the order "remains subject to reconsideration just as it had been
prior to removal." Nissho–Iwai American Corp. v. Kline, 845 F.2d
1300, 1303 (5th Cir.1988).
Federal procedure governs the enforcement of a prior state
court order in a case removed to federal court. Id. Thus, where
the prior state court order is a summary judgment, the federal
court must ensure that the order is consistent with the
requirements of Rule 56(c) of the Federal Rules of Civil Procedure.
See Fed.R.Civ.P. 56(c) (permitting summary judgment if "the
pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any, show that there is
no genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law."). If the federal
court declines to reconsider the state court summary judgment, then
the federal court certifies that the order is indeed consistent
with Rule 56(c). The standard of review is the same as if the
federal court itself had entered the order: this Court will review
the record de novo, resolving all reasonable doubts and drawing all
reasonable inferences in favor of the party opposing the summary
judgment. FDIC v. Hamilton, 939 F.2d 1225, 1227 (5th Cir.1991).
Before we reach the merits of the summary judgment in this
case, we must consider two preliminary questions: (1) whether this
Court has acquired the requisite appellate jurisdiction and (2)
whether Mississippi or Texas law governs the relative rights of the
parties.
A. Appellate Jurisdiction
A timely notice of appeal is a mandatory prerequisite to the
exercise of appellate jurisdiction. United States v. Robinson, 361
U.S. 220, 224, 80 S. Ct. 282, 285, 4 L. Ed. 2d 259 (1960). Rule
4(a)(1) of the Federal Rules of Appellate Procedure requires an
appellant to file its notice of appeal "within 30 days after the
date of entry of the judgment or order appealed from."
Fed.R.App.P. 4(a)(1) (emphasis added). The defendants in this case
filed their notice of appeal four days before the district court
entered its final judgment. Consequently, under Rule 4(a)(1),
their notice of appeal was premature.
A premature notice of appeal is not necessarily ineffective.
In some circumstances, Rule 4(a)(2) of the Federal Rules of
Appellate Procedure will permit an appellate court to exercise its
jurisdiction despite a premature notice. Rule 4(a)(2) provides
that a notice of appeal "filed after the announcement of a decision
or order but before the entry of the judgment or order shall be
treated as filed after such entry and on the day thereof."
Fed.R.App.P. 4(a)(2). This rule recognizes that, unlike a tardy
notice of appeal, certain premature notices do not prejudice
opposing parties and therefore "should not be allowed to extinguish
an otherwise proper appeal." FirsTier Mortgage Co. v. Investors
Mortgage Ins. Co., ––– U.S. ––––, 111 S. Ct. 648, 651, 112 L. Ed. 2d
743 (1991).
In FirsTier Mortgage Co. v. Investors Mortgage Insurance Co.,
the United States Supreme Court attempted to determine the extent
to which Rule 4(a)(2) salvages a premature notice of appeal. The
plaintiff in FirsTier Mortgage filed a suit alleging that the
defendant breached several insurance contracts. The district court
granted summary judgment in favor of the defendant, but declined to
impose final judgment until the defendant submitted proposed
findings of fact and conclusions of law. Before the district court
could issue its final judgment, the plaintiff filed a notice of
appeal from the summary judgment ruling. The Supreme Court
concluded that the notice of appeal, although premature, was
effective to invoke the jurisdiction of the federal appellate
courts. 111 S. Ct. at 653. According to the Court, a premature
notice of appeal relates forward to final judgment and serves as an
effective notice from the final judgment whenever it follows "a
decision that would be appealable if immediately followed by the
entry of judgment." Id. (emphasis in original).
Like the notice of appeal in FirsTier Mortgage, the notice of
appeal in the instant case is an effective notice. The defendants
in this case appeal the district court order refusing to reconsider
the summary judgment in favor of the plaintiffs. At the time that
the state court first entered the summary judgment, this decision
was a partial judgment that determined the liability of the
individual guarantors, but did not purport to determine the
liability of defendant Northpark. Thus, at that time, the summary
judgment would not have been appealable, even if the state court
had entered judgment. However, by the time that the federal
district court entertained the motion to reconsider the summary
judgment, Northpark was bankrupt and had been dismissed from the
action. Since Northpark was no longer a party, the order refusing
to reconsider the summary judgment adjudicated the rights of all
the remaining parties to the action. This order would have been
appealable if the district court had immediately entered judgment.
See Hardy v. Gulf Oil Corp., 949 F.2d 826, 829 n. 6 (5th Cir.1992)
(district court can enter judgment if it "has effectively disposed
of all the claims before it"); see also Jetco Electronic Indus.,
Inc. v. Gardiner, 473 F.2d 1228, 1231 (5th Cir.1973). Accordingly,
although filed before final judgment, the notice of appeal in this
case serves as an effective notice from the final judgment.5 This
Court can exercise its appellate jurisdiction.
B. Choice of Law
In refusing to reconsider the summary judgment entered in
state court, the federal district court reasoned that Texas law
required the defendants to bear responsibility for the amount of
their guaranties. The defendants argue that the district court
should have applied Mississippi law, not Texas law. The RTC
concedes that if Mississippi law governs the substantive issues in
5
Prior to the decision in FirsTier Mortgage, the Fifth
Circuit had reasoned that, as long as the parties in a case had
not filed postjudgment or posttrial motions, a notice of appeal
was effective even if filed before the district court announced a
final judgment. See Alcom Electronic Exchange, Inc. v. Burgess,
849 F.2d 964, 967 (5th Cir.1988); Alcorn County v. United States
Interstate Supplies, 731 F.2d 1160, 1165–66 (5th Cir.1984).
Because we conclude that the facts in the instant case fall
within the exception described in FirsTier Mortgage, we do not
address whether the rule in Alcom Electronic Exchange and Alcorn
County survives FirsTier Mortgage.
this lawsuit, then summary judgment would have been inappropriate.
See Lake Hillsdale Estates, Inc. v. Galloway, 473 So. 2d 461, 466
(Miss.1985); Mississippi Valley Title Ins. Co. v. Horne Constr.
Co., 372 So. 2d 1270, 1272 (Miss.1979). Nonetheless, we conclude
that the district court did not err in applying Texas law.
A federal court is required to follow the choice of law rules
of the state in which it sits. Klaxon v. Stentor Electric Mfg.
Co., 313 U.S. 487, 496, 61 S. Ct. 1020, 1021, 85 L. Ed. 1477 (1941).
In this case, therefore, the federal district court must look to
the Texas choice of law rules. Under the Texas rules, in those
contract cases in which the parties have agreed to an enforceable
choice of law clause, the law of the chosen state must be applied.
DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 678 (Tex.1990).6 But
in those cases in which the parties have not agreed to an
enforceable choice of law clause, "the law of the state with the
most significant relationship to the particular substantive issue
will be applied." Duncan v. Cessna Aircraft Co., 665 S.W.2d 414,
421 (Tex.1984).
6
Texas has adopted section 187 of the Restatement (Second)
of Conflict of Laws. DeSantis, 793 S.W.2d at 678. Section 187
states the appropriate choice of law rule governing contract
cases involving a contractual choice of law clause. In most such
cases, the law of the state chosen in the clause should be
applied. However, under subsection 2(b) of section 187, the law
of the state chosen in a contractual choice of law clause should
not be applied if "application of the law of the chosen state
would be contrary to a fundamental policy of a state which has a
materially greater interest than the chosen state ... and which
... would be the state of the applicable law in the absence of an
effective choice of law by the parties." Restatement (Second) of
Conflict of Laws § 187(2)(b) (1971). We do not address this
exception here.
Both the promissory note and the deed of trust contain
separate choice of law clauses.7 The promissory note specifies
that the laws of the state of Texas shall govern its terms. On the
other hand, the deed of trust specifies that Mississippi law shall
govern its terms, and it further provides:
[If the Grantor defaults on its obligations, the] Trustee ...
shall ... sell all or any part of the Property after giving
notice of the time, place and terms of sale as required by
Section 89–1–55 of the Mississippi Code of 1972.... Grantor
shall remain liable for any deficiency on the Obligations.
Deed of Trust ¶ 9, at 3 (emphasis added). The defendants contend
that the choice of law clause in the deed of trust is enforceable.
They argue that the plaintiffs brought an action for a deficiency
judgment and that, because the deed of trust creates the right to
a deficiency judgment, the choice of law clause in the deed of
trust should govern.
The flaw in this argument is the erroneous assumption that the
deed of trust creates the right to a deficiency judgment. "An
action against guarantors of a note for a deficiency following
foreclosure on real property is an action involving enforcement of
the underlying debt." Resource Savings Ass'n v. Neary, 782 S.W.2d
897, 902 (Tex.App.—Dallas 1989, writ denied). It does not arise
out of the real estate foreclosure. Id. See also First Commerce
Realty Investors v. K–F Land Co., 617 S.W.2d 806, 809
(Tex.Civ.App.—Houston [14th Dist.] 1981, writ ref'd n.r.e.). Thus,
7
Unlike the other documents, the guaranties do not contain a
choice of law clause.
the promissory note and the guaranties, not the deed of trust,
create the right to a deficiency judgment against the guarantors of
a note. The deficiency judgment clause in the deed of trust has no
effect in this case.8
Because the deed of trust does not provide the source for the
action against the defendants, the choice of law clause in the deed
of trust is not enforceable: the parties cannot be said to have
agreed that Mississippi law would govern a deficiency judgment
action against the guarantors. If anything, it appears that the
parties agreed to the application of Texas law. The promissory
note, which in part creates the right to a deficiency judgment
against the defendant guarantors, states that Texas law governs the
obligations arising under the note and loan agreement. Texas State
Mortgages, the predecessor in interest of plaintiff RTC, was a
direct party to this promissory note and presumably helped
negotiate the choice of law clause. The individual defendants
agreed to guaranty the enforcement of the note and, as a
consequence, essentially ratified the choice of law clause. See
First Commerce Realty Investors, 617 S.W.2d at 809.
But even if the parties did not agree to the application of
Texas law, the same result ensues. In the absence of an
8
In determining whether the choice of law clause in the deed
of trust is "enforceable," this Court must look to Texas law
because Texas supplies the applicable choice of law rules.
DeSantis, 793 S.W.2d at 678. Texas cases therefore determine
whether a deficiency action against the guarantors of a note
arises out of the deed of trust.
enforceable choice of law clause, the law of the state that has
"the most significant relationship to the transaction and the
parties" must be applied. See DeSantis, 793 S.W.2d at 678 (quoting
Restatement (Second) of Conflict of Laws § 188 (1971)).9 The state
that has the most significant relationship to the transaction and
the parties in this case is Texas. First, Texas has greater
9
Section 188 of the Restatement, which the Texas Supreme
Court adopted in DeSantis v. Wackenhut Corp., 793 S.W.2d 670,
678–79 (Tex.1990), states the choice of law rule governing
contract cases that do not involve an enforceable choice of law
clause. It provides:
(1) The rights and duties of the parties with respect to an
issue in contract are determined by the local law of
the state which, with respect to that issue, has the
most significant relationship to the transaction and
the parties under the principles stated in § 6.
(2) In the absence of an effective choice of law by the
parties (see § 187), the contacts to be taken into
account in applying the principles of § 6 to determine
the law applicable to an issue include:
(a) the place of contracting,
(b) the place of negotiation of the contract,
(c) the place of performance,
(d) the location of the subject matter of the
contract, and
(e) the domicil, residence, nationality, place of
incorporation and place of business of the
parties.
These contacts are to be evaluated according to their
relative importance with respect to the particular
issue.
(3) If the place of negotiating the contract and the place
of performance are in the same state, the local law of
this state will usually be applied, except as otherwise
provided in §§ 189–199 and 203.
Restatement (Second) of Conflict of Laws § 188 (1971).
contacts with the transaction and the parties: (1) the parties
negotiated and executed the note and guaranties in Texas; (2)
First Waco and First Temple are Texas residents; (3) all of the
defendants, except one, were Texas residents or domiciliaries at
the time that the note and guaranties were executed; and (4) the
note and guaranties, by their express terms, are wholly performable
in Texas. Under the Texas choice of law rules, these contacts
alone can be conclusive in determining the appropriate state law.
See Cook v. Frazier, 765 S.W.2d 546, 549 (Tex.App.—Fort Worth 1989,
no writ) (applying Texas law because Texas residents negotiated and
executed the contracts in question and made all contract payments
in Texas).
Moreover, Texas has a greater interest in the application of
its law. At stake here is whether Texas residents are liable under
the personal guaranties they executed to a Texas corporation.
Texas has a direct interest in ensuring that Texas debts are
handled properly and that Texas debtors and creditors are treated
fairly. By contrast, Mississippi has little interest in this case.
In enacting their guaranty laws, Mississippi legislators and judges
intended to protect Mississippi citizens. There is no reason why
Mississippi would have an interest in the application of its laws
to resolve the claims of foreign creditors against foreign debtors.
Cf. Duncan, 665 S.W.2d at 422. Thus, the relevant interests, as
well as the relevant contacts, favor the application of Texas law.
We conclude that, under either the choice of law clause in the
promissory note or the most significant relationship test, Texas
law governs the substantive issues in this case. The district
court did not err in determining that the choice of law clause in
the deed of trust is unenforceable.
C. The Merits of the Summary Judgment
The principal issue in this case is whether the defendants
must bear responsibility for the unsatisfied indebtedness. The
guaranties state that the defendants must pay the "indebtedness or
other liability ... which Northpark Joint Venture ... may now or at
any time hereafter owe" its creditors. According to the
defendants, this provision in the guaranties limits their liability
to the amount that Northpark would be obligated to pay First Waco
and First Temple. Under the terms of the promissory note and loan
agreement, Northpark's debt is non-recourse, and Northpark cannot
be held liable for any unsatisfied indebtedness remaining after
foreclosure of the property in the deed of trust. The defendants
argue that, because Northpark is not liable for the amount of debt
in the note, they also cannot be held liable.
The Texas rules for interpreting the breadth of a guaranty
agreement are well established. In construing a guaranty contract,
the primary concern of the reviewing court is to ascertain the
intent of the parties. Coker v. Coker, 650 S.W.2d 391, 393
(Tex.1983). If the guaranty is ambiguous, then the court must
apply the "construction which is most favorable to the guarantor."
Id. at 394 n. 1. See also Clark v. Walker–Kurth Lumber Co., 689
S.W.2d 275, 278 (Tex.App.—Houston [1st Dist.] 1985, writ ref'd
n.r.e.). But if the guaranty "can be given a certain or definite
meaning or legal interpretation, then it is not ambiguous and the
court will construe the contract as a matter of law." Coker, 650
S.W.2d at 393.
On motion for reconsideration of the state court summary
judgment, the federal district court ruled that the guaranties
which the defendants had executed were not ambiguous. The court
reasoned that "[d]espite the fact that Northpark is not liable for
the indebtedness underlying the Note, the indebtedness continues to
exist." District Court Opinion at 5. Noting that the guaranties
required the defendants to pay the "indebtedness," the district
court concluded that the defendants must pay $3,202,500 of the
remaining balance of the debt,10 and accordingly, it declined to
reconsider the state court summary judgment.
Like the district court, we are persuaded that the guaranties
in this case are not ambiguous. The word "indebtedness" is a legal
term of art describing "[t]he state of being in debt, without
regard to the ability or inability of the party to pay the same."
Black's Law Dictionary 691 (6th ed. 1990) (emphasis added). The
fact that a debt is non-recourse does not change the fact that the
debtor is "in debt" to a creditor. Even though Northpark cannot be
10
The guaranties limit the defendants' liability to a
maximum of $3,202,500. All of the parties agree that this amount
is the most that the RTC can recover under the guaranties. The
defendants contend, however, that the RTC is not entitled to
recover any sum.
held liable for the amount of debt in its promissory note, it still
incurred an "indebtedness" when it signed the note. The amount of
the indebtedness is the total sum reflected in the note, plus
interest and other costs. Since the defendants guarantied to pay
"any and all indebtedness" which Northpark owed its creditors under
the note, the defendants should be required to satisfy the debt up
to the express limit of their guaranties.11 Any other construction
of the guaranties would elevate form over substance. Cf. FDIC v.
University Anclote, Inc., 764 F.2d 804, 807 (11th Cir.1985).12
11
In Western Bank–Downtown v. Carline, 757 S.W.2d 111
(Tex.App.—Houston [1st Dist.] 1988, writ denied), a Texas court
of appeals addressed a situation similar to the situation in the
instant case. The principal in Carline, Tex–La Transportation,
Inc., executed a $1,000,000 promissory note to First Western
Bank. The guarantors agreed to pay "any and all indebtedness"
which Tex–La "may now or may at any time hereafter owe" the Bank.
Id. at 114. Tex–La subsequently declared bankruptcy, and the
Bank sought to collect from the guarantors the unpaid principal,
post-petition interest and attorneys' fees. The guarantors did
not dispute that they were liable for the unpaid principal. They
argued, however, that they were not liable for the interest and
attorneys' fees. The court of appeals agreed. Noting that the
Federal Bankruptcy Act extinguished Tex–La's obligation to pay
any post-petition interest and attorneys' fees, id. at 113 & n.
6, the court concluded that the guarantors also could not be held
liable for the interest and fees. Id. at 114.
While the facts in Carline are similar to those here,
Carline is distinguishable. In Carline, the debt was
extinguished; thus, there was no remaining "indebtedness"
for which the guarantors would have been liable. In the
instant case, though, the debt continues to exist, even
though it is non-recourse. The principal may not be liable
for the unsatisfied "indebtedness," but there is a remaining
"indebtedness" for which the guarantors can be held liable.
12
The facts in FDIC v. University Anclote, Inc. are similar
to the facts in the instant case. University Anclote executed a
non-recourse promissory note in favor of Metropolitan Bank and
Trust Company. James C. Petersen executed a guaranty in which he
agreed to pay "all indebtedness and liabilities" which University
Anclote owed Metropolitan Bank. After University Anclote
defaulted, the FDIC, as successor of the defunct Metropolitan
Bank, sought recovery from Petersen on his guaranty. Petersen
We recognize that, as a general rule, the liability of a
guarantor is equal to that of its principal. Technical Consultant
Serv., Inc. v. Lakewood Pipe of Texas, Inc., 861 F.2d 1357, 1363
(5th Cir.1988) (interpreting Texas law). But we also recognize
that there is an exception to the general rule: if the guarantor
agrees, a guaranty contract can impose greater liability upon the
guarantor than the note imposes upon the principal. See Western
Bank–Downtown v. Carline, 757 S.W.2d 111, 114 n. 7
(Tex.App.—Houston [1st Dist.] 1988, writ denied); Simpson v. MBank
Dallas, N.A., 724 S.W.2d 102, 110 (Tex.App.—Dallas 1987, writ ref'd
n.r.e.). By agreeing to pay the "indebtedness," the defendants
agreed to accept greater liability for the debt.
The defendants complain that they did not intend to "obligate
themselves to pay the non-recourse portion" of the debt. However,
when the guaranties are examined in light of the underlying note,
it appears clear that the defendants indeed intended to accept
greater liability for the debt. The note provides that the
guarantors of the debt are excluded from its non-recourse
protection:
Notwithstanding the promise to pay contained herein and
notwithstanding any of the other provisions of this Note or of
any other instrument evidencing, securing the payment of or
argued that he could not be held liable because the original
promissory note was non-recourse. Applying Florida law, the
Eleventh Circuit ruled that the guaranty was not ambiguous. 764
F.2d at 807. It noted that "[m]erely because Anclote cannot be
held liable for a deficiency judgment does not mean that Anclote
did not incur an indebtedness when it signed the note." Id. at
806.
 executed in connection with this Note (except to the extent
otherwise provided with respect to the guaranties which are
executed on even date herewith and which guarantee portions of
the indebtedness evidenced hereby ("Guaranties") and except to
the extent otherwise provided in the Profit Sharing Agreement
and except as otherwise provided in the immediately following
sentence), the undersigned shall have no liability for the
indebtedness and obligations of the undersigned pursuant to
the Deed of Trust or any other instrument securing this Note
or the loan evidenced hereby or executed in connection
herewith or for the accrued and unpaid interest on this
Note....
Promissory Note at 4 (emphasis added).13 The defendants cannot
reasonably argue that they did not intend to obligate themselves to
pay the non-recourse portion of the note when the note itself
excludes guarantors from its non-recourse protection.14
In sum, we find that under Texas law the defendants must bear
responsibility for the unsatisfied indebtedness, up to the limit
stated in their guaranties. While Northpark is not liable for the
13
When a guaranty agreement is absolute and unconditional,
the defendants are deemed to have incorporated all of the terms
of the note into the guaranty. Hopkins v. First Nat'l Bank, 551
S.W.2d 343, 345 (Tex.1977); First Bank of Houston v. Bradley,
702 S.W.2d 683, 686 (Tex.App.—Houston [14th Dist.] 1985, no
writ). Under Texas law, a guaranty is absolute and unconditional
if it "requires no condition precedent to its enforcement against
the guarantor other than mere default by the principal debtor."
United States v. Vahlco Corp., 800 F.2d 462, 466 (5th Cir.1986).
The guaranties in this case do not require a condition precedent
to enforcement other than Northpark's default. The fact that the
guaranties limit the guarantied amount to $3,202,500 does not
preclude them from being absolute and unconditional. See Arndt
v. National Supply Co., 633 S.W.2d 919, 923 (Tex.App.—Houston
[14th Dist.] 1982, writ ref'd n.r.e.).
14
The defendants suggest that the non-recourse provision of
the note does not exclude them from its protection. Indeed,
according to the defendants, the non-recourse provision supports
their argument that they are not liable for the unsatisfied
indebtedness because it recognizes that the guaranties only
"guarantee portions of the indebtedness." At most, however, we
believe that this language simply reflects the fact that the
guaranties are limited to a maximum of $3,202,500.
amount of its debt, it nonetheless has incurred an indebtedness.
Because the guaranties unambiguously state that the defendants must
pay the unsatisfied "indebtedness," the defendants have agreed to
accept greater liability for the debt. This is especially true
since the note itself excludes guarantors from its non-recourse
protection. We conclude that the district court did not err in
refusing to reconsider the state court summary judgment.
D. "Reasonable" Attorneys' Fees
The defendants argue that the district court erred in
granting the RTC a specific summary judgment of $93,463.60 in
attorneys' fees. The guaranties provide for the recovery of
"reasonable" attorneys' fees, and according to the defendants, the
use of the term "reasonable" renders the amount of recoverable
attorneys' fees a genuine issue of material fact. We disagree.
A party that moves for summary judgment bears the burden to
establish that its opponent failed to raise a genuine issue of
material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106
S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986). If the crucial issue is
one on which the movant will bear the ultimate burden of proof at
trial, then the movant can satisfy its summary judgment burden by
submitting evidentiary documents that establish all of the elements
of the claim or defense. Id. The burden then shifts to the
nonmovant to demonstrate that summary judgment is inappropriate.
Lavespere v. Niagara Mach. & Tool Works, Inc., 910 F.2d 167, 178
(5th Cir.1990).
In the instant case, the RTC satisfied its initial summary
judgment burden. It submitted an affidavit from its attorney, G.
Dennis Sheehan, who described the billable rate and the hours
expended and concluded that "[t]he total amount of $93,463.60 is a
reasonable amount for services rendered in this matter." The
burden then shifted to the defendants to demonstrate that summary
judgment was inappropriate. The defendants could have filed a
counter affidavit contesting the billable rate that the RTC claimed
was "reasonable," or they could have filed an affidavit arguing
that the billable hours claimed in the Sheehan exhibit were
unreasonable. However, the defendants did neither of these things.
They have failed to sustain their burden to demonstrate that
summary judgment was inappropriate. See Fed.R.Civ.P. 56(e).
III. CONCLUSION
We are unable to conclude that the district court erred in
granting summary judgment in favor of the RTC. Accordingly, we
affirm the judgment of the district court.
AFFIRMED.