IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 14-10182

HOMETOWN 2006-1 1925 VALLEY VIEW, L.L.C., a Texas Limited Liability 

Company, 

 Plaintiff - Appellee

v.

PRIME INCOME ASSET MANAGEMENT, L.L.C., 

 Defendant - Appellant

Appeal from the United States District Court

for the Northern District of Texas

USDC No. 3:11-CV-2633

Before HIGGINBOTHAM, CLEMENT, and HIGGINSON, Circuit Judges.

STEPHEN A. HIGGINSON, Circuit Judge:*

Prime Income Asset Management, L.L.C. (“Prime”) is the guarantor of a 

note held by Hometown 2006-1 1925 Valley View, L.L.C. (“Hometown”) and 

secured by real property in Texas. After the borrower defaulted, the property 

was sold in foreclosure, and Hometown sought a deficiency judgment against 

Prime. Prime then sought an offset equal to the amount that the property’s fair 

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not 

be published and is not precedent except under the limited circumstances set forth in 5TH 

CIR. R. 47.5.4.

United States Court of Appeals

Fifth Circuit

FILED

December 11, 2014

Lyle W. Cayce

Clerk

 

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market value exceeded its sale price. The district court denied Prime’s motion 

for a determination of the property’s fair market value, finding that Prime 

waived its offset rights in its contract with Hometown. Prime appeals that 

decision, as well as the district court’s award to Hometown of attorney’s fees

for work to protect the loan before Hometown sued Prime. We affirm both 

rulings by the district court.

FACTS AND PROCEEDINGS

In October 2006, Transcontinental Brewery, Inc. (“Borrower”) purchased 

real estate in Farmers Branch, Texas. The Borrower financed the acquisition 

of the property with a $2,450,000 loan from Hometown Commercial Capital, 

L.L.C. (“HCC”) and executed a promissory note for $2,450,000 (“Note”), payable 

to HCC. Repayment of the Note was secured by a Deed of Trust and Security 

Agreement (“Deed of Trust”). In a guaranty agreement (“Guaranty”), Prime 

guaranteed to HCC and “its successors and assigns” the performance of 

obligations that the Borrower owed under the Note and Deed of Trust. In 

November 2006, HCC assigned the Note and Deed of Trust (“Loan Documents”)

to LaSalle Bank National Association (“LaSalle Bank”), as trustee under an 

indenture between Hometown Commercial Trust 2006-1 (“Trust”) and LaSalle 

Bank. Bank of America, N.A. (“Bank of America”), the successor by merger to 

LaSalle Bank, later became the holder of the Loan Documents. 

In June and July 2010, the Borrower failed to make timely payments on 

the loan. In July 2010, Midland Loan Services, Inc., a special servicer, sent a 

notice of default to the Borrower and offered the Borrower an opportunity to 

cure the default. When the Borrower did not cure, the law firm Thompson & 

Knight, acting on behalf of Bank of America, sent the Borrower a notice that 

the balance on the Note was payable in full, and that a foreclosure sale had 

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been scheduled for the Farmers Branch property. Around the same time, the 

Borrower demolished a building on the Farmers Branch property. In 

September 2010, the Borrower conveyed the Farmers Branch property to EQK

Bridgeview Plaza, Inc. (“EQK”), an action that the district court characterized 

as an “event of default” under the Deed of Trust. EQK filed for bankruptcy in 

October 2010, triggering an automatic stay of any foreclosure sale. In March 

2011, Bank of America obtained relief from the stay in bankruptcy court. In 

June 2011, Bank of America assigned the Loan Documents to Hometown, a 

limited liability company.

A non-judicial foreclosure sale of the Farmers Branch property was 

conducted in July 2011. At the foreclosure sale, Hometown was the only bidder 

and purchased the property for $1,370,000, which was applied to the loan 

balance. In October 2011, Hometown sued Prime for the post-foreclosure 

deficiency. Hometown moved for partial summary judgment. Prime moved for 

a determination of the fair market value of the Farmers Branch property under 

section 51.003 of the Texas Property Code. That section entitles a debtor to

offset the deficiency amount by the difference between the sale price of the 

property and its fair market value. 

The district court granted Hometown’s motion for partial summary 

judgment, finding that Prime was liable to Hometown, as owner and holder of 

the Note and Guaranty, for the Borrower’s payment and defaults. The district 

court denied Prime’s motion for a determination of the fair market value of the 

property, finding that Prime had waived its right to an offset through the 

following language in the Guaranty: 

Section 1.4 Guaranteed Obligations Not Reduced by Offset. The

Guaranteed Obligations and the liabilities and obligations of 

Guarantor to Lender hereunder, shall not be reduced, discharged 

or released because or by reason of any existing or future offset, 

claim or defense of Borrower, or any other party, against Lender 

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or against payment of any of the Debt or the Guaranteed 

Obligations, whether such offset, claim or defense arises in 

connection with the Loan (or the transactions creating the Loan) 

or otherwise.

The parties stipulated that Hometown suffered actual damages of 

$1,469,698.05, subject to Prime’s reservation of its right to appeal the district 

court’s ruling. The district court awarded Hometown $612,791.20 in attorney’s

fees, including $278,108.80 for work to protect the loan before the federal 

lawsuit and $334,682.40 for the federal lawsuit. 

DISCUSSION

The Guaranty between Prime and Hometown is a contract. See McLane 

Foodservice, Inc. v. Table Rock Rests., L.L.C., 736 F.3d 375, 377 (5th Cir. 2013). 

“The interpretation of a contract—including whether the contract is 

ambiguous—is a question of law, which we review de novo. If a contract is 

ambiguous, the district court’s findings of fact as to the intent of the parties 

are reviewed for clear error.” Id. (citation omitted). In diversity cases, we

interpret the contract by applying the substantive law of the forum state. Id.

Following principles of contract interpretation articulated by the Texas 

Supreme Court, we must “ascertain the true intentions of the parties as 

expressed in the instrument.” Moayedi v. Interstate 35/Chisam Rd., L.P., 438 

S.W.3d 1, 7 (Tex. 2014) (internal quotation mark omitted). “When parties 

disagree over the meaning of an unambiguous contract, we determine the 

parties’ intent by examining the entire agreement. Moreover, unless the 

agreement shows the parties used a term in a technical or different sense, the 

terms are given their plain, ordinary, and generally accepted meaning.” Id. 

(footnotes omitted). 

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Both Hometown and Prime claim that the Guaranty is unambiguous, but 

they dispute its meaning. Prime argues on appeal that the Guaranty’s 

language is not sufficiently specific to constitute a knowing and intentional

waiver of offset rights under section 51.003 of the Texas Property Code. In 

addition, Prime challenges the district court’s interpretation of the Guaranty 

as requiring Prime to pay for attorney’s fees incurred before Hometown filed 

the federal lawsuit. 

I. Offset Rights

Section 51.003 of the Texas Property Code is “designed to ensure that 

debtors receive credit when their foreclosed property is sold at an unreasonably 

low price.” Moayedi, 438 S.W.3d at 6. When real property is sold in foreclosure 

for less than the unpaid balance of the indebtedness secured by the property, 

the lender may sue the guarantor to recover the deficiency. See Tex. Prop. Code 

Ann. § 51.003(a). However, section 51.003(c) entitles the guarantor to an offset 

against his liability equal to the amount that the property’s fair market value 

exceeds its sale price. Tex. Prop. Code Ann. § 51.003(c); Moayedi, 438 S.W.3d 

at 5. 

The Texas Supreme Court has held that guarantors may, by contract,

waive their offset rights under section 51.003. Moayedi, 438 S.W.3d at 6. In

Moayedi, the Texas Supreme Court held that the guarantor unambiguously 

waived his right to an offset through the following language in the guaranty 

agreement: “Guarantor further agrees that this Guaranty shall not be 

discharged, impaired or affected by . . . any defense (other than the full 

payment of the indebtedness hereby guaranteed in accordance with the terms 

hereof) that the Guarantor may or might have as to Guarantor’s respective 

undertakings, liabilities and obligations hereunder, each and every such 

defense being hereby waived by the undersigned Guarantor.” Id. at 3.

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The court in Moayedi acknowledged that “[t]o be effective, a waiver must 

be clear and specific.” Id. at 6. The court defined “waiver” as the “intentional 

relinquishment of a known right or intentional conduct inconsistent with 

claiming that right.” Id. (internal quotation marks and citation omitted). The 

court nevertheless found that language waiving “any,” “each,” and “every” 

defense was sufficiently specific to effect a waiver of offset rights under section 

51.003. Id. at 8. The court noted that “[j]ust because the waiver is all 

encompassing does not mean that it is unclear or vague.” Id. 

The language in Prime’s Guaranty is even more specific than the 

language in the agreement at issue in Moayedi. The Guaranty provided, in 

relevant part, that “the liabilities and obligations of Guarantor to Lender 

hereunder, shall not be reduced . . . by reason of any existing or future offset, 

claim or defense of Borrower, or any other party, against Lender or against 

payment of any of the Debt or the Guaranteed Obligations.” Guaranty § 1.4. If

language in the Moayedi guaranty waiving “every . . . defense” was sufficiently 

specific to waive offset rights, so too was language in Prime’s Guaranty waiving 

“any . . . offset, claim or defense.” See Moayedi, 438 S.W.3d at 7 & n.31 (noting 

that language in a guaranty agreement that waived the “right of offset” was 

more specific than the language at issue in Moayedi).1

1 Prime effectively argues that Moayedi was wrongly decided because the waiver at 

issue in that case was not sufficiently specific. However, under the Erie doctrine, we are 

bound to apply principles of contract interpretation articulated by the Texas Supreme Court 

and to make an informed judgment as to how a Texas court would rule if presented with the 

same facts. Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938); Quorum Health Res., L.L.C. v. 

Maverick Cnty. Hosp. Dist., 308 F.3d 451, 458 (5th Cir. 2002) (“Although there is no Texas 

Supreme Court case involving the exact contract language at issue here, Texas Supreme 

Court cases applying the applicable rules of contract construction to similar indemnity 

provisions provide ample guidance for this court to substitute an informed judgment for an

informed guess as to how a Texas court would rule if presented with these facts.” (internal 

quotation marks, alterations, and citation omitted)). Indeed, in an unsuccessful motion to 

stay the appeal pending the issuance of a decision in Moayedi, Prime acknowledged candidly

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Nor do the identities of the parties provide a sufficient basis to 

distinguish this case from Moayedi. The Moayedi court noted that there was 

no “indication that Moayedi [the guarantor] was not a sophisticated 

businessman. After all, he was the president of Villages’ [the borrower’s] 

general partner.” Id. at 8. Similarly, there is no indication that Prime, an asset 

management company, is not a sophisticated party.2

A finding of waiver here is also consistent with our own precedent. In 

LaSalle Bank National Ass’n v. Sleutel, 289 F.3d 837, 839–42 (5th Cir. 2002), 

we held that the guarantor waived his section 51.003 rights based on the 

following language in the guaranty agreement: 

To the extent allowed by applicable law, Guarantor expressly 

waives and relinquishes all rights and remedies now or hereafter 

accorded by applicable law to guarantors or sureties, including, 

without limitation: . . . any defense, right of offset or other claim 

which Guarantor may have against Borrower or which Borrower 

may have against Lender or the Holder of the Note.

If a waiver of “any . . . right of offset” in the Sleutel guaranty constitutes a 

waiver of section 51.003 rights, then so too does language in Prime’s Guaranty 

that “obligations of Guarantor . . . shall not be reduced . . . by reason of any 

existing or future offset.” See also Haggard v. Bank of the Ozarks, Inc., 668 

F.3d 196, 202 (5th Cir. 2012) (holding that the guarantor waived his offset 

rights through language providing that the guarantor’s obligation “shall not be 

impaired or released, without written consent of the Bank, based on: ‘any 

defenses, set-offs or counterclaims which may be available to Borrower or any 

other person or entity’”). 

that the Texas Supreme Court in Moayedi was “considering the very issue which would 

provide dispositive guidance relevant to this case to this Court, sitting as an Erie court.” 

2 The record reflects that Prime had contracts to advise various companies that 

invested in real estate.

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However, our analysis does not end with section 1.4 of the Guaranty; we 

must look to the entire contract to determine the parties’ intent. See Moayedi, 

438 S.W.3d. at 8. Prime points to the following language in the Guaranty: 

“Guarantor WAIVES each and every right to which it may be entitled by virtue 

of any suretyship law, including any rights it may have pursuant to . . . Section 

51.005 of the Texas Property Code.”3 Guaranty § 5.13. Prime argues that the 

express waiver of section 51.005 rights, compared to the absence of an explicit 

reference to section 51.003, indicates that the parties did not intend for Prime 

to waive its offset rights under section 51.003. See CKB & Assocs., Inc. v. Moore 

McCormack Petrol., Inc., 734 S.W.2d 653, 655 (Tex. 1987) (relying on the rule

of contract construction “expressio unius est exclusio alterius, meaning that the 

naming of one thing excludes another”). However, the words “any” and

“including” indicate that the list of waived rights in section 5.13 of the 

Guaranty is illustrative, and not exhaustive. See Tex. Prop. & Cas. Ins. Guar.

Ass’n/Sw. Aggregates, Inc. v. Sw. Aggregates, Inc., 982 S.W.2d 600, 608 (Tex. 

App. 1998) (“It is hornbook law that the use of the word including indicates 

that the specified list . . . is illustrative, not exclusive.” (alteration in original) 

(internal quotation marks and citation omitted)); cf. Tex. Gov’t Code Ann. § 

311.005(13) (providing that in the context of statutory construction, 

“‘[i]ncludes’ and ‘including’ are terms of enlargement and not of limitation or 

exclusive enumeration, and use of the terms does not create a presumption 

that components not expressed are excluded”). In addition, the expressio unius

canon is only “an aid to the resolution of ambiguities,” and does not trump the

3 Section 51.005 of the Texas Property Code provides for offset rights if the foreclosure 

sale takes place after the debt holder obtains a judgment against the guarantor. See Tex. 

Prop. Code Ann. § 51.005(a). Because the foreclosure sale of the Farmers Branch property 

took place before Hometown obtained a judgment against Prime, section 51.005 does not 

apply to their dispute. 

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Guaranty’s clear language precluding “any existing or future offset, claim or 

defense.” Guaranty § 1.4. See Smith v. Stonebridge Life Ins. Co., 217 F. App’x 

360, 361 (5th Cir. 2007) (“Smith argues that we should apply the canon 

expressio unius est exclusio alterius, but that canon is only an aid to the 

resolution of ambiguities. Here there is no ambiguity.” (citation omitted)); 

Keystone Equity Mgmt. v. Thoen, 730 S.W.2d 339, 340 (Tex. App. 1987) 

(declining to apply the expressio unius canon where the plain meaning of a 

contract supported the opposite interpretation). 

Prime further argues that the Deed of Trust establishes that Prime did 

not waive offset rights in the Guaranty. The Deed of Trust provides a 

mechanism for determining the fair market value of the Farmers Branch 

property in the context of a deficiency action. Deed of Trust § 23.17. However, 

the mechanism provided by the Deed of Trust differs from and replaces the 

procedure that section 51.003 provides for calculating fair market value. Given 

that Prime moved in the district court for a determination of fair market value 

under section 51.003, Prime cannot now assert that it is bound by—and may 

benefit from—the procedure outlined in the Deed of Trust. In addition, while 

Prime, under the Guaranty, assumed the Borrower’s obligations set forth in 

the Deed of Trust, see Guaranty §§ 1.1, 1.2, the Guaranty does not entitle Prime 

to assert the Borrower’s defenses, including the defense of offset. Indeed, the 

Guaranty provides:

Guarantor hereby . . . waives any common law, equitable, statutory 

or other rights . . . which Guarantor might otherwise have . . . in 

connection with any of the following: [inter alia,] [t]he invalidity, 

illegality or unenforceability of all or any part of the Loan or the 

Guaranteed Obligations . . . including without limitation the fact 

that . . . the Borrower has valid defenses, claims or offsets . . . which 

render the Loan or the Guaranteed Obligations wholly or partially 

uncollectible from Borrower . . . it being agreed that Guarantor 

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shall remain liable hereon regardless of whether Borrower or any 

other person be found not liable on the Loan . . . .

Guaranty § 2.4. The Guaranty therefore precludes Prime from enforcing the 

offset rights to which the Borrower is entitled under the Deed of Trust. 

Section 2.12 of the Guaranty further corroborates Prime’s intent to waive 

offset rights. That section provides: “it is the unambiguous and unequivocal 

intention of Guarantor that Guarantor shall be obligated to pay the 

Guaranteed Obligations when due, notwithstanding any occurrence,

circumstance, event, action, or omission whatsoever, whether contemplated or 

uncontemplated, and whether or not otherwise or particularly described 

herein, which obligation shall be deemed satisfied only upon the full and final 

payment and satisfaction of the Guaranteed Obligations.” Guaranty § 2.12 

(emphasis added). The Texas Court of Appeals, in an analysis cited approvingly 

by the Texas Supreme Court, found that Moayedi’s promise to 

“‘unconditionally’ . . . guarantee[] payment of [the] debt” corroborated his 

intent to waive offset rights under section 51.003. Interstate 35/Chisam Rd., 

L.P. v. Moayedi, 377 S.W.3d 791, 800 (Tex. App. 2012), aff’d, 438 S.W.3d 1, 8 

(Tex. 2014) (“We agree with Moayedi that the meaning of the waiver in 

paragraph 7 depends on the rest of the agreement, but we agree with the court 

of appeals that these provisions indicate an intent that the guaranty would not 

be subject to any defense other than full payment.”). Prime’s guarantee of “full 

. . . payment” therefore further corroborates Prime’s clear waiver, in section 

1.4 of the Guaranty, of its offset rights under section 51.003 of the Texas 

Property Code. It was therefore proper for the district court to deny Prime’s 

motion for a determination of the fair market value of the property sold in 

foreclosure. 

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II. Attorney’s Fees

Prime also challenges the district court’s award to Hometown of 

$278,108.80 for attorney’s fees incurred between July 2010 and July 5, 2011 

(the “pre-foreclosure” period). During that time, the law firm Thompson & 

Knight, acting on a contingency fee basis for Bank of America, sent the

Borrower a notice of foreclosure sale, posted the Farmers Branch property for 

foreclosure sale, and litigated in EQK’s bankruptcy proceeding to obtain relief 

from an automatic stay of the foreclosure sale. The district court awarded these 

fees to Hometown based on time sheets submitted by Thompson & Knight. The 

court rejected Prime’s argument that these fees are not recoverable under the 

language of the Guaranty.

Under Texas law, “[a] person may recover reasonable attorney’s fees 

from an individual or corporation, in addition to the amount of a valid claim 

and costs, if the claim is for . . . an oral or written contract.” Tex. Civ. Prac. & 

Rem. Code Ann. § 38.001(8). However, “[p]arties are free to contract for a feerecovery standard either looser or stricter than Chapter 38’s.” Intercont’l Grp. 

P’ship v. KB Home Lone Star L.P., 295 S.W.3d 650, 653 (Tex. 2009); see also 

Spillman v. Self-Serv Fixture Co., 693 S.W.2d 656, 657 (Tex. App. 1985)

(interpreting the language of a guaranty to decide the extent of the guarantor’s 

obligation to pay attorney’s fees to the creditor). We review the district court’s 

interpretation of a contract de novo. McLane Foodservice, Inc., 736 F.3d at 377.

The Guaranty provides: “In the event that Guarantor should breach or 

fail to timely perform any provisions of this Guaranty, Guarantor shall, 

immediately upon demand by Lender, pay Lender all costs and expenses 

(including court costs and attorneys’ fees) incurred by Lender in the 

enforcement hereof or the preservation of Lender’s rights hereunder.” 

Guaranty § 1.8. “Lender’s rights hereunder,” i.e., under the Guaranty, include 

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“the payment and performance of . . . the full amount of the Debt and all other 

obligations of Borrower to Lender under the Loan Documents,” which include 

the Note and Deed of Trust. Guaranty §§ 1.1, 1.2; Deed of Trust § 2.6. Because 

the pre-foreclosure attorney’s fees represent work to enforce the Note and Deed 

of Trust, these fees were incurred in “the preservation of Lender’s rights” under 

the Guaranty. The district court therefore properly awarded Hometown 

attorney’s fees for action to protect the loan before the foreclosure and ensuing 

federal court litigation.4

CONCLUSION

For the foregoing reasons, we AFFIRM the district court’s order denying

Prime’s motion for a determination of fair market value and its award to 

Hometown of attorney’s fees of $278,108.80 for the pre-foreclosure period.

4 Prime argues only that the Guaranty does not cover fees incurred during the preforeclosure period; Prime does not argue on appeal that Hometown is not the proper party to 

collect these fees because these fees were incurred before the Loan Documents were assigned 

to Hometown. The district court considered and rejected that argument, concluding that 

Hometown was entitled to these fees because Hometown had a “right to enforce the Loan 

Documents” as their current owner and holder. 

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