March 27, 2015
This week, the Court, while hearing oral arguments, also released one new opinion related to foreclosure litigation.
PlainsCapital Bank v. Martin, Case 13-0337
Borrower, a builder, defaulted on a construction loan with PlainsCapital, who held a contractual deed of trust lien on the property secured by the note. At the foreclosure sale, PlainsCapital bought the property at a price that was arguably less than the fair market value of the home on the date of the foreclosure sale, leaving a deficiency under the note. As the real estate market declined, the bank sold the property at fair market value on the date of the sale, but less than the fair market value arguably was on the date of the foreclosure sale.
The bank sought a deficiency judgment against the borrower based upon the post-foreclosure sale price despite the borrower’s argument that the fair market value at the time of the foreclosure sale controlled, which would have provided him a credit, based upon Section 51.003 of the Texas Property Code. The bank argued Section 51.003 did not apply because it was not seeking a deficiency based upon the foreclosure price, as required in the statute, but instead sought a deficiency judgment based upon the actual sale price of the property. The trial court agreed with the bank, but the court of appeals reversed, finding that Section 51.003 applied and the Legislature intended the trial court to apply the traditional “willing buyer-willing seller” paradigm for fair market value at the time of sale. The Texas Supreme Court reversed and remanded to the court of appeals.
The Texas Supreme Court rejected the Bank’s hyper-textualist argument finding that Section 51.003 governs deficiency lawsuits.
However, the Court reversed the court of appeals as to the standard to be applied for calculating fair market value. Because Section 51.003 provides the factors a trial court may consider when determining fair market value of the property on the date of the foreclosure sale, the traditional “willing buyer-willing seller” approach does not apply to cases under Section 51.003.
The trial court issued findings of fact in case it was later determined that Section 51.003 applied. The trial court used the actual post-foreclosure sales price of the property by the bank, applied the bank’s actual holding cost and commission fees to the amount owed by the borrower, and determined the borrower still had a deficiency following sale by PlainsCapital. The borrower challenged the legal sufficiency of this finding. The Texas Supreme Court rejected the borrower’s legal sufficiency challenge, finding the trial court considered the evidence allowed by the statute.
The Court remanded the case to the court of appeals to deal with the borrower’s factual sufficiency challenge as well as consideration of the trial court’s award of attorneys’ fees to PlainsCapital in light of its opinion.
Please check back in with The Bassett Firm’s Texas Supreme Court Update next week. Because next Friday is Good Friday, our offices will be closed. If the Court releases any opinions next Friday, we will report them to you no later than Monday.