* 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.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 07-40099

MEECORP CAPITAL MARKETS LLC

Plaintiff-Appellee

v.

TEX-WAVE INDUSTRIES LP; MONTY GUILES; DAVID CROFT

Defendants-Appellants

Appeal from the United States District Court

for the Southern District of Texas

USDC No. 2:06-CV-00148

Before JOLLY, HIGGINBOTHAM, and PRADO, Circuit Judges.

PER CURIAM:*

A lender sought recovery on a defaulted debt. Via summary judgment, the

district court awarded the lender the full amount owed from, jointly and

severally, the debtor and two guarantors. Because a fact issue remains as to

whether the guarantors should be held personally liable, we reverse and remand

for a determination of their liability. We also reverse the district court’s

judgment on the total liability amount and remand for further proceedings to

United States Court of Appeals

Fifth Circuit

F I L E D

February 6, 2008

Charles R. Fulbruge III

Clerk
No. 07-40099

1 Tex-Wave also received support for this project from the U.S. Economic Development

Administration and the City of Robstown.

2 Also named in the suit were the law firm of Ysassi & Ysassi, PC, and Epimenio Ysassi,

a lawyer at that firm. Meecorp later amended its pleadings to add claims against the City of

Robstown and members of the Robstown City Council. Meecorp has settled its claims against

2

recalculate the award, crediting the amount recovered by the lender in its

foreclosure sale. 

I. FACTUAL & PROCEDURAL BACKGROUND

On June 15, 2004, Plaintiff-Appellee Meecorp Capital Markets (“Meecorp”)

and Defendant-AppellantTex-Wave Industries,LP(“Tex-Wave”) entered into an

agreement by which Meecorp agreed to loan $4,620,000 to Tex-Wave for the

building of a hot-dip galvanizing facility on a seven-acre site leased from the City

of Robstown, Texas.1In return, Tex-Wave executed three five-year promissory

notes in the amounts of $1,670,000, $1,662,000, and $1,288,000. Meecorp also

obtained a security interest in the galvanizing plant and the seven-acre

leasehold, a personal “Guaranty” agreement from Tex-Wave principals,

Defendants-Appellants Monty Guiles (“Guiles”) and David Croft (“Croft”), and

a pledge agreement under which Meecorp would have the right to take control

of and vote Tex-Wave’s partnership interests in the event of default. Meecorp

also obtained a surety bond from the City of Robstown. 

The promissory notes obligated Tex-Wave to pay interest on the loan from

July 1, 2004, until the maturity date of the loan. Tex-Wave made payments

until November 1, 2005, when itfailed to make the interest payment due on that

date. On November 9, 2005, Meecorp sent Tex-Wave, Croft, and Guiles

(collectively, “Defendants”) a written notice of default, warning that Meecorp

would exercise its rights under the loan agreement if it did not receive payment

within five days. Tex-Wave failed to make the payment, and Meecorp

accelerated the loan. On March 30, 2006, Meecorp filed the instant suit against

Defendants and others,2seeking a declaration that Tex-Wave defaulted on its
No. 07-40099

the law firm, Ysassi, Robstown, and the City Council members. 

3

loan, a judgment for the defaulted principal amount of $4,620,000 plus interest

and other fees, and enforcement of the Guaranty given by Guiles and Croft. 

On May 2, 2006, Meecorp foreclosed on the leasehold estate and

improvements. Meecorp was the only bidder at the sale and placed the winning

bid of $3 million. On October 12, 2006, Tex-Wave obtained a temporary

injunction from a Texas state district court “enjoining [Meecorp] from listing for

sale or selling the business of [Tex-Wave] during the pendency of this lawsuit.”

On October 27, 2006, Meecorp filed a motion for summary judgment

against Defendants. After responsive briefing, the district court granted

summary judgment, holding Defendants jointly and severally liable for

$7,013,869.93 (the balance due on the three promissory notes plus interest and

late fees), and declared that an “Event of Default” had occurred, giving Meecorp

the right to vote the partnership interests of Tex-Wave pursuant to the pledge

agreement. Tex-Wave, Guiles, and Croft brought this appeal.

II. STANDARD OF REVIEW

This court reviews de novo a district court’s grant of summary judgment.

See Mello v. Sara Lee Corp., 431 F.3d 440, 443 (5th Cir. 2005). Summary

judgment is warranted “if the pleadings, the discovery and disclosure materials

on file, and any affidavits show that there is no genuine issue as to any material

fact and that the movant is entitled to judgment as a matter of law.” FED. R. CIV.

P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986) (“[T]he

plain language of Rule 56(c) mandates the entry of summary judgment, after

adequate time for discovery and upon motion, against a party who fails to make

a showing sufficient to establish the existence of an element essential to that

party’s case, and on which that party will bear the burden of proof at trial.”).

The movant “must establish beyond peradventure all of the essential elements
No. 07-40099

3 Defendants argued in their response to Meecorp’s summary judgment motion that a

side agreement with Meecorp averted default on the underlying debt. However, the district

court found no such agreement and Defendants do not appeal that portion of the judgment.

Therefore, we will not review that portion of the district court’s order. See Donovan v. Rd.

Rangers Country Junction, Inc., 736 F.2d 1004, 1006 (5th Cir. 1984) (per curiam). 

4

of the claim or defense to warrant judgment in [its] favor.” Fontenot v. Upjohn

Co., 780 F.2d 1190, 1194 (5th Cir. 1986). 

III. DISCUSSION

There is no dispute that Tex-Wave defaulted on its debt.3In their appeal,

Defendants instead focus on two issues: (1) whether Guiles and Croft should be

released from liability under the Guaranty; and (2) whether the judgment

awarded to Meecorp should be reduced by the $3 million recovered in its

foreclosure sale, an issue not raised by Defendants at summary judgment. 

A. Liability of Guiles and Croft under the Guaranty

The district court held that Meecorp met its summary judgment burden

by showing that (1) Guiles and Croft agreed to “‘guarantee[] absolutely and

unconditionally to Lender the payment of the Debt,’” and (2) Tex-Wave was in

default on that debt. Under the district court’s reasoning, this was sufficient to

establish that, as a matter of law, Meecorp was entitled to recover under the

Guaranty.

Guiles and Croft center their argument before this court—as they did in

opposing summary judgment—on the following provision in the Guaranty:

Notwithstanding anything else contained herein to the contrary, if,

after a default shall occur under the Loan Agreement and the Note,

if the Guarantors shall cooperate with the Lender in realizing the

collateral, including, without limitation, the foreclosure of the

Mortgagee, and shall not in any way interfere with the Lender in

connection therewith, and the foreclosure sale shall take place

without interference by any ofthe Guarantors or principals, officers

or directors of the Borrower, then the Lender shall waive the

provisions of this Guaranty and shall deliver the Guaranty back to

the Guarantors marked “satisfied.”
No. 07-40099

4 Relatedly, Guiles and Croft note that the face of the state injunction merely enjoins

Meecorp “from listing for sale or selling the business of [Tex-Wave].” (emphasis added). This,

they argue, might include Tex-Wave’s sweat equity or good will but cannot be construed to

include the leasehold, fixtures, and related property Meecorp owns outright as a result of the

foreclosure sale.

5 The Guaranty explicitly provides that it should be construed under New Jersey law:

“This Guaranty is, and shall be deemed to be, a contract entered into under and pursuant to

the laws ofthe State of New Jersey, without regard to conflicts of laws considerations and shall

be in all respects governed, construed, applied and enforced in accordance with the laws of said

state . . . .” 

5

Guiles and Croft argue that the district court improperly imposed the burden of

proof on them to show cooperation and lack of interference under this provision.

They claim that because Meecorp did not show either a failure to “cooperate with

the Lender in realizing the collateral” or some “interference,” Guiles and Croft

should have been released under the plain language of the Guaranty after the

foreclosure sale. Guiles and Croft also stated in their response to Meecorp’s

summary judgment motion that they did “cooperate[] with any and all requests

of Meecorp, even offering to turn over the keys.” In addition, Guiles and Croft

claim that regardless of who bore the burden of proof on this question at

summary judgment, Tex-Wave’s injunction could not be interpreted as

interference, because Tex-Wave obtained the state court injunction five months

after Meecorp’s successful foreclosure sale.4

Meecorp counters that Guiles and Croft failed to carry their burden to

prove thatthey had satisfied the requirements ofthe Guaranty. See Fitzmaurice

v. Van Vlaanderen Mach. Co., 264 A.2d 740, 744 (N.J. Super. Ct. App. Div. 1970)

(“Where a party seeks to avoid a contractual obligation by reason of the

happening of an event or condition stipulated in a contract, the burden of

establishing the occurrence of the condition rests upon the party asserting it.”).5

Because the moving party does not need to produce evidence showing the

absence of an issue of fact with respectto an issue on which the nonmoving party

would bear the burden of proof at trial, see Celotex Corp. v. Catrett, 477 U.S. 317,
No. 07-40099

6

322-23 (1986), Meecorp argues that it need not negate Guiles and Croft’s

unsupported assertions of cooperation. See also Fontenot v. Upjohn Co., 780F.2d

1190, 1195 (5th Cir. 1986) (“If the movant . . . does not bear the burden of proof,

he should be able to obtain summary judgment simply by disproving the

existence of any essential element of the opposing party’s claim or affirmative

defense.”). 

First, we consider whether Meecorp met its initial burden under Rule

56(c). A genuine issue of facts exists “if the evidence is such that a reasonable

jury could return a verdict for the non-moving party.” Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 248 (1986). “We must view all evidence in the light

most favorable to the party opposing the motion and draw all reasonable

inferences in that party’s favor.” Crawford v. Formosa Plastics Corp., 234 F.3d

899, 902 (5th Cir. 2000) (citing Anderson, 477 U.S. at 255). Additionally, 

when the movant is a plaintiff he must ordinarily do more than

defeat the opposing party’s affirmative defenses in order to obtain

a final [rather than partial] judgment. Since, in addition to

asserting an affirmative defense, the defendant will likely have

denied the plaintiff’s allegations,the plaintiff must also establish all

of the essential elements of his claim. 

Fontenot, 780 F.2d at 1195-96 (internal quotation marks and citations omitted).

“If the moving party fails to meet this initial burden,the motion must be denied,

regardless of the nonmovant’s response.” Little v. Liquid Air Corp., 37 F.3d

1069, 1075 (5th Cir. 1994) (citing Celotex, 477 U.S. at 325). 

In its summary judgment motion, Meecorp established through

authenticated documents that Tex-Wave was in default on its debt and that

Guiles and Croft were liable under a provision of the Guaranty. However, the

plain language of the Guaranty also directs that if the foreclosure takes place

without interference, then Meecorp “shall deliver the Guaranty back to the

Guarantors marked ‘satisfied.’” Meecorp ignored this provision in its initial
No. 07-40099

6 Meecorp’s motion also was accompanied by copies of the loan agreement, the three

promissory notes, the Guaranty, the pledge agreement, Meecorp’s notice of Tex-Wave’s

November 1, 2005 missed loan payment, and a copy of the state court injunction. However,

there was no explanation of the total amount due other than the figure cited in Edrei’s

affidavit. 

7

motion, and in its reply brief, Meecorp’s citation to the state court injunction

actually raised a factual question as to whether interference existed. Because

Meecorp failed to establish that there was no issue of fact with respect to the

Guaranty, summary judgment was not appropriate. 

Evidence of the state court injunction raises a fact question as to whether

Guiles and Croft interfered with Meecorp’s realizing on the collateral.

Therefore, on the question of the individual liability of Guiles and Croft under

the Guaranty, we vacate the district court’s summary judgment and remand for

a determination of whether Guiles and Croft fulfilled their obligation to

cooperate and not interfere with Meecorp’s effort to “realiz[e]” its collateral.

B. Outstanding Loan Amount

In its motion for summary judgment, Meecorp presented the affidavit of

Daniel Edrei (“Edrei”), Managing Member of Meecorp, attesting that the total

amount due under the company’s loan to Tex-Wave, including interest and late

fees, was $7,013,869.93.6 Tex-Wave explicitly denied that the total amount

calculated by Meecorp was the correct amount, but it did not request that the $3

million credit from the foreclosure sale be applied to the debt, nor did

Defendants offer any evidence to refute Meecorp’s calculation. The district court

awarded the full amount requested in Meecorp’s summary judgment motion

without applying any credit for the $3 million Meecorp recovered in the

foreclosure sale. We hold that the district court erred by failing to credit the

outstanding loan amount by proceeds of the foreclosure sale. 

The plain language of the loan agreement requires a credit in this

situation: “In the event of a sale of the Collateral, or any other disposition
No. 07-40099

7 The Guaranty also provides for a credit in a foreclosure sale: “IF THE LENDER

FORECLOSES ON ANY REAL PROPERTY COLLATERAL PLEDGED BY THE

BORROWER: (I) THE AMOUNT OF THE DEBT MAY BE REDUCED ONLY BY THE PRICE

FORWHICH THAT COLLATERALISSOLD ATTHE FORECLOSURE SALE, EVEN IF THE

COLLATERAL IS WORTH MORE THAN THE SALE PRICE . . . .”

8 Meecorp claims that because of the state court injunction, “the Leasehold Estate is of

no value and thus represents no offset to the loan.” However, Meecorp cites no legal authority

for this proposition, and we have no evidence that the state court action hindered or continues

to hinder Meecorp’s use or sale of the foreclosed property it now owns. 

8

thereof, Lender shall apply all proceeds first to all costs and expenses of

disposition, including reasonable attorneys’ fees, and then to the Obligations of

Borrower to Lender.”7 There is no dispute that Meecorp successfully sold—and

itself purchased—Tex-Wave’s leasehold, fixtures, and related property securing

the loan for $3 million on May 2, 2006. Meecorp should have reduced TexWave’s debt by that amount. 

In its pleadings, Meecorp admits as much, stating that “[s]ince the filing

of this lawsuit, Plaintiff Meecorp has pursued non-judicial remedies and has

foreclosed upon certain collateral securing the loan. The amount sought in this

lawsuit will be offset to the extent of this foreclosure.” Further, in its summary

judgment motion, Meecorp stated, “This sale price [of the foreclosed property]

should have operated as an offset to the balance due under the loan.” 

Meecorp claims, however, that the $3 million credit Tex-Wave seeks is an

“offset” and is therefore an affirmative defense that Tex-Wave should have

raised in its pleadings. Meecorp also claims that Tex-Wave is not entitled to a

credit because the state court injunction allegedly prevented Meecorp from

selling the collateral.8 We find this reasoning unpersuasive. The $3 million

operates not as an offset, but as a credit, which, by operation of law, should

reduce the amount of the underlying debt. Indeed, this is the purpose of the
No. 07-40099

9

It is a basic concept of mortgage law that the amount recovered in a foreclosure sale

reduces the overall amount of the debt. See RESTATEMENT (THIRD) OF PROP.: MORTGAGES

§ 8.4(a), (b) (1997) (“Ifthe foreclosure sale price is less than the unpaid balance ofthe mortgage

obligation, an action may be brought to recover a deficiency judgment against any person who

is personally liable on the mortgage obligation . . . . [T]he deficiency judgment is for the amount

by which the mortgage obligation exceeds the foreclosure sale price.”).

9

foreclosure sale.9 Meecorp advocates a result in which it sells the collateral,

pockets the proceeds, and does not adjust the loan amount. This cannot be the

correct result. We hold that, as a matter of law, Defendants were entitled to

have their outstanding loan amount credited by the amount recovered in

Meecorp’s foreclosure sale. 

However, itis unclear whether simply reducing the judgment by $3 million

would achieve the proper result. In its summary judgment submission,

Meecorp’s only basis for its figure was Edrei’s affidavit setting the total amount

due, “including interest and late fees.” It is possible that a $3 million reduction

in the loan amount could affect those calculations. Furthermore, the loan

agreement specifies that proceeds from the foreclosure should first be applied to

“all costs and expenses of disposition, including reasonable attorneys’ fees.”

Therefore, we remand to the district court to recalculate the proper judgment

amount, taking into account a $3 million credit for Meecorp’s foreclosure sale.

IV. CONCLUSION

Finding that the district court erred in granting summary judgment on

both issues discussed herein, we reverse and remand for proceedings consistent

with this opinion.

REVERSED AND REMANDED.