Court Opinion

ID: 6499550
Source: CourtListenerOpinion
Date Created: 2022-07-13 06:11:12.807325+00
Date Added: 2024-06-11T15:54:32.891477
License: Public Domain

REVERSE and REMAND and Opinion Filed July 5, 2022

                                   S  In The
                            Court of Appeals
                     Fifth District of Texas at Dallas
                               No. 05-20-00704-CV

LORY K. WILSON, GREGORY S. VENABLE, AND JAMES B. JOHNSON,
                       Appellants
                            V.
CAPITAL PARTNERS FINANCIAL GROUP USA, INC. AND BTH BANK,
             NATIONAL ASSOCIATION, Appellees

                On Appeal from the 44th Judicial District Court
                            Dallas County, Texas
                     Trial Court Cause No. DC-18-09275

                        MEMORANDUM OPINION
              Before Justices Schenck, Osborne, and Partida-Kipness
                       Opinion by Justice Partida-Kipness
      Appellants appeal a summary judgment in favor of appellees on claims arising

from the breach of an equipment-lease agreement and associated personal

guarantees. Appellants contend the trial court erred in granting summary judgment

because appellees failed to give proper notice before selling appellants’ collateral.

We reverse the trial court’s judgment and remand for further proceedings.
                                          BACKGROUND

        In August 2016, appellee Capital Partners Financial Group USA, Inc. agreed

to lease medical equipment to Fast Lane Emergency Room, LLC. Appellants each

signed personal guarantees on the lease.1

        The same month, Capital Partners executed a promissory note for $1.8 million

with appellee BTH Bank, National Association. Capital Partners later executed an

additional note with BTH for $140,000. To secure the notes, Capital Partners granted

BTH a security interest in the lease and other assets. Capital Partners also assigned

the lease to BTH.

        In October 2017, Fast Lane stopped making lease payments. Capital Partners

sent notices of default to appellants in January, February, and June 2018.

        On June 20, 2018, Capital Partners’ president Michael Austin sent an e-mail

to appellants stating Capital Partners’ intent to repossess and sell property located in

Fast Lane’s clinic. The e-mail stated that Capital Partners had hired Advantage

Healthcare Associates to inventory, remove, and sell “all the permissible equipment”

from Fast Lane’s clinic. Austin further noted that Capital Partners had already

“received a few bids . . . [m]ainly for the CT and radiology equipment.” Advantage

Healthcare removed and sold the equipment. According to Austin, the accelerated

        1
          Rick L. Miller also executed a personal guarantee, and he was a named defendant in this case and
filed a notice of appeal from the trial court’s judgment. However, he did not file a brief, and we dismissed
his appeal.
                                                   –2–
balance due under the lease was $1,768,500. After applying the net proceeds from

the collateral sale, the remaining balance due at that time was roughly $1.6 million.

         Capital Partners sued appellants as guarantors of the lease, seeking to recoup

the deficiency. Capital Partners brought claims for theft of service, fraud, breach of

contract, and quantum meruit. BTH intervened in the suit, alleging that Capital

Partners had defaulted on its loans, which were secured by the lease. Thus, BTH

sought recovery from both Capital Partners and appellants for amounts due on the

loans.

         Capital Partners moved for summary judgment on its contract claim and

eventually nonsuited its other claims. BTH moved for summary judgment on the

grounds that it was the beneficiary of Capital Partners’ notes and appellants’

guarantees, all of which were in default.

         Appellant Lory K. Wilson moved for summary judgment on Capital Partners’

contract claim on the grounds that Capital Partners failed to provide adequate notice

of the sale of the collateral as required by the Uniform Commercial Code (UCC).

Appellants James B. Johnson and Gregory S. Venable moved for summary judgment

by incorporating Wilson’s motion.

         The trial court granted Capital Partners’ and BTH’s summary judgment

motions and denied all other requested relief. The trial court rendered a final

summary judgment that awarded BTH roughly $1.73 million to compensate for the

deficiency on its loans, and it awarded Capital Partners roughly $1.78 million to

                                          –3–
compensate for the deficiency on the lease, plus attorney’s fees. This appeal

followed.

                           STANDARD OF REVIEW

      We review a summary judgment de novo. Tex. Workforce Comm’n v. Wichita

Cnty., 548 S.W.3d 489, 492 (Tex. 2018). We consider the evidence presented in the

light most favorable to the nonmovant, crediting evidence favorable to the

nonmovant if reasonable jurors could, and disregarding evidence contrary to the

nonmovant unless reasonable jurors could not. Mann Frankfort Stein & Lipp

Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). We indulge every

reasonable inference and resolve any doubts in the nonmovant’s favor. Nassar v.

Liberty Mut. Fire Ins. Co., 508 S.W.3d 254, 257 (Tex. 2017).

      A plaintiff is entitled to summary judgment on a cause of action if it

conclusively proves all essential elements of the claim. MMP, Ltd. v. Jones, 710

S.W.2d 59, 60 (Tex. 1986); Affordable Motor Co., Inc. v. LNA, LLC, 351 S.W.3d

515, 519 (Tex. App.—Dallas 2011, pet. denied); see TEX. R. CIV. P. 166a(a), (c). A

matter is conclusively established if “the evidence must leave no room for ordinary

minds to differ as to the conclusion to be drawn from it.” Int’l Bus. Machs. Corp. v.

Lufkin Indus., LLC, 573 S.W.3d 224, 235 (Tex. 2019) (internal quotation omitted).

If the movant conclusively proves each element of its claim or affirmative defense,

the burden shifts to the nonmovant to raise a genuine issue of material fact

                                        –4–
precluding summary judgment. Lujan v. Navistar, Inc., 555 S.W.3d 79, 84 (Tex.

2018).

      Generally, a denial of a summary judgment is not reviewable on appeal.

Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 625 (Tex. 1996). A denial is

reviewable, however, when “both sides moved for summary judgment on the same

issues and the trial court granted one motion for summary judgment and denied the

other.” Clark v. Dillard’s, Inc., 460 S.W.3d 714, 724 (Tex. App.—Dallas 2015, no

pet.). When reviewing the trial court’s judgment on the parties’ cross-motions for

summary judgment, we “determine all questions presented and render the judgment

that the trial court should have rendered.” ConocoPhillips Co. v. Koopmann, 547

S.W.3d 858, 865 (Tex. 2018).

                                    ANALYSIS

      Appellants bring separate issues on appeal. However, each of their briefs

begins with the same argument within the first issue: because Capital Partners

provided inadequate notification of its intent to sell Fast Lane’s collateral, the

summary judgment in favor of appellees cannot stand. In Wilson’s second issue, she

takes this argument one step further when she reasons that the notification was so

grossly deficient that she should be entitled to a summary judgment disposing of

BTH and Capital Partners’ claims.

      We agree that the notification of disposition was deficient. The presence of a

fact issue on reasonable notice, though, makes summary judgment for either side

                                       –5–
inappropriate. Appellants each raise other issues on appeal. But appellants are

already entitled to reversal of summary judgment, and these other issues would

afford appellants no greater relief. We therefore do not consider them.

I.    Applicability of the UCC

      Both sides argue that the lease is not a traditional lease but a commercial

security interest as defined under the UCC. See TEX. BUS. & COM. CODE § 1.203(a)

(defining “[w]hether a transaction in the form of a lease creates a lease or security

interest”). The evidence supports the parties’ contentions. Specifically, the lease was

not terminable by the lessee and allowed the lessee to purchase the equipment for

nominal consideration at the end of the term. See id. § 1.203(b)(4). Accordingly,

Capital Partners’ disposition of the equipment was subject to the requirements stated

in chapter nine of the UCC. See id. §§ 9.101–.809 (governing secured transactions).

II.   Adequacy of Notification

      In most cases, the UCC requires secured creditors to provide reasonable

notification when disposing of repossessed collateral. Regal Fin. Co., Ltd. v. Tex

Star Motors, Inc., 355 S.W.3d 595, 599 (Tex. 2010). Under UCC chapter nine, a

creditor must give “a reasonable authenticated notification of disposition” to certain

interested parties, including “any secondary obligor.” TEX. BUS. & COM. CODE

§ 9.611(b)–(c); see People’s Capital & Leasing Corp. v. McClung, No. 5:17-CV-

484-OLG, 2018 WL 2996902, at *6 (W.D. Tex. May 4, 2018) (treating a guarantor

as a secondary obligor). “The purpose of this notification is to give the debtor an

                                         –6–
opportunity to discharge the debt, arrange for a friendly purchaser, or to oversee that

it is conducted in a commercially reasonable manner.” SMS Fin., LLC v. ABCO

Homes, Inc., 167 F.3d 235, 242 (5th Cir. 1999).

      In non-consumer transactions such as this one, the UCC creates a safe harbor

for notifications of disposition that include five categories of information:

      (A) describes the debtor and the secured party;

      (B) describes the collateral that is the subject of the intended
      disposition;

      (C) states the method of intended disposition;

      (D) states that the debtor is entitled to an accounting of the unpaid
      indebtedness and states the charge, if any, for an accounting; and

      (E) states the time and place of a public disposition or the time after
      which any other disposition is to be made.

TEX. BUS. & COM. CODE § 9.613(1). If the notification lacks any of the required

information, then it becomes a question of fact whether the notification is

nevertheless sufficient. Id. § 9.613(2). No particular form is required for the

notification. Id. § 9.613(4). A notification that substantially provides the information

specified is sufficient, even if the notification includes excess information or minor

errors that are not seriously misleading. Id. § 9.613(3).

      Capital Partners maintains that its president Michael Austin sent a reasonable

notification of disposition when he e-mailed appellants on June 20, 2018. In the e-

mail, Austin explains his company’s plan to repossess Fast Lane’s collateral in the

weeks that followed:
                                          –7–
       I received your voice message, Bryan, and thought I would answer to
       everyone via email.

       Capital Partners is contracting with Advantage Healthcare for the
       inventory and removal of all the permissible equipment from the FLER
       clinic. As of now this will occur July 9 - 10 and we have received
       permission from the landlord for these dates.

       Advantage will conduct an inventory of what is at the facility so we will
       have a written record of the items before they are removed. The items
       will then be offered for sale and we have received a few bids. Mainly
       for the CT and radiology equipment thus far.

       The landlord is allowing us to remove the generator but not the HVAC
       systems since your tenant lease specifically prohibits their removal. We
       will not be able to remove anything that is considered attached to the
       building which includes the HVAC and med gas systems. Obviously
       there is a lot of tenant improvements which are not recoverable that will
       affect the final shortfall once the equipment and furnishings have been
       fully liquidated.

       As far as I know the landlord is the only party that has current access to
       the facility so all of the equipment and furnishings should be secure
       until they can be inventoried and removed.

This e-mail does not purport to be a notification of disposition, but it does touch on

the topic of disposing the collateral. The question is whether this e-mail substantially

includes all the elements required by section 9.613.2 See Regions Bank v. Thomas,

422 S.W.3d 550, 563–65 (Tenn. Ct. App. 2013) (analyzing whether general

correspondence concerning collateral met the UCC’s requirements for a notification

of disposition).

       2
          “The UCC should be construed to promote uniformity with other jurisdictions.” 1/2 Price Checks
Cashed v. United Auto. Ins. Co., 344 S.W.3d 378, 391 (Tex. 2011). We refer extensively to decisions from
other jurisdictions concerning UCC chapter 9.
                                                 –8–
      The first element is to describe the debtor and the secured party. TEX. BUS. &

COM. CODE § 9.613(1)(A). We conclude that the e-mail satisfies this element. The

e-mail mentions Capital Partners and gives information from which Capital Partners’

status as a secured party could be inferred. See USA Fin. Servs., LLC v. Young’s

Funeral Home, Inc., No. CIV.A. U607-11-102, 2010 WL 3002063, at *3 (Del. Com.

Pl. June 24, 2010) (implying that an element that was not specifically covered in a

notification of disposition could be inferred from its content). The e-mail mentions

that Capital Partners would be arranging repossession of collateral from “FLER,”

which appellants would have understood as an acronym for the debtor with which

they were affiliated, Fast Lane Emergency Room. Because the e-mail provides the

debtor’s and the secured party’s names and gives information from which their roles

in the secured transaction could be readily deduced, the e-mail satisfies the first

element.

      The second element requires the secured party to describe the collateral that

is the subject of the intended disposition. TEX. BUS. & COM. CODE § 9.613(1)(B). In

general, a description of personal property is sufficient, whether or not it is specific,

if it reasonably identifies what is described. Id. § 9.108(a); Crow-Southland Joint

Venture No. 1 v. N. Fort Worth Bank, 838 S.W.2d 720, 723 (Tex. App.—Dallas

1992, writ denied). The description need not be in exact detail or include a serial

number. In re ProvideRx of Grapevine, LLC, 507 B.R. 132, 162 (Bankr. N.D. Tex.

2014) (quoting TEX. BUS. & COM. CODE § 9.108 cmt. 2). “The test of sufficiency

                                          –9–
under this section . . . is that the description does the job assigned to it: make possible

the identification of the collateral described.” Id.

      In the e-mail, Austin states a plan to liquidate what he variously referred to as

“what is at the facility” and “the items.” These descriptions are insufficient. “A

description of collateral as ‘all the debtor’s assets’ or using words of similar import

does not reasonably identify collateral.” In re Essential Fin. Educ., Inc., 629 B.R.

401, 422 (Bankr. N.D. Tex. 2021); see TEX. BUS. & COM. CODE § 9.108(c). “These

supergeneric, catch-all descriptions fail as a matter of law.” Essential Fin., 629 B.R.

at 422; see Rossmann v. Bishop Colo. Retail Plaza, L.P., 455 S.W.3d 797, 809 (Tex.

App.—Dallas 2015, pet. denied).

      On the other hand, Austin’s message does mention that Capital Partners

intended to repossess and sell “all the permissible equipment from the FLER clinic”

and had already received bids “for the CT and radiology equipment.” A description

reasonably identifies the collateral if it identifies the collateral by category or by type

of collateral defined in the UCC. TEX. BUS. & COM. CODE § 9.108(b)(2)–(3).

“Equipment” is a type of collateral defined in the UCC. Id. § 9.102(33).

Furthermore, including the location of the property in the collateral description can

be “a significant factor” in assessing the adequacy of the description. In re Estate of

Wheeler, 410 P.3d 483, 486 (Colo. App. 2013). This reference to two categories of

medical equipment located at a specific place is sufficient to describe the items that

fell in those categories. See id.; Crow-Southland, 838 S.W.2d at 724; accord

                                          –10–
Milwaukee Mack Sales, Inc. v. First Wis. Nat. Bank of Milwaukee, 287 N.W.2d 708,

714 (Wis. 1980). However, Capital Partners’ own evidence shows that much of the

collateral did not fall into those categories. Austin’s e-mail does not describe any of

this other collateral, some of which was sold separately from the CT and radiology

equipment, and thus the e-mail does not satisfy the second element with respect to

much of the collateral in question. See 68A Am. Jur. 2d Secured Transactions § 519

(“When the collateral is sold in separate parts, proper notice must be given with

respect to the sale of each part.”).

      BTH and Capital Partners fare no better on the third element, which requires

the secured party to state the method of intended disposition. TEX. BUS. & COM.

CODE § 9.613(1)(C). To satisfy this element, we have required the notification of

disposition to state, at a minimum, whether the disposition will be through a public

or private sale. See Knights of Columbus Credit Union v. Stock, 814 S.W.2d 427,

430 (Tex. App.—Dallas 1991, writ denied); accord Boulevard Bank v. Malott, 397

S.W.3d 458, 465 (Mo. Ct. App. 2013) (“The [UCC] does not permit the creditor to

leave the debtor guessing regarding the type of sale contemplated.” (quoting Union

Safe Deposit Bank v. Floyd, 76 Cal. App. 4th 25, 31 (1999), as modified (Nov. 3,

1999)); Thomas, 422 S.W.3d at 565 (concluding that a notification was not

reasonably sufficient “where it did not indicate whether the [collateral] would be

sold at public or by private sale”). “Public and private sales of collateral are

significantly different methods of disposition[] and are subject to materially different

                                         –11–
notice requirements.” Boulevard Bank, 397 S.W.3d at 463. “[A] ‘public’ disposition

is ‘one at which the price is determined after the public has had a meaningful

opportunity for competitive bidding.’” Lister v. Lee-Swofford Invs., L.L.P., 195

S.W.3d 746, 752 (Tex. App.—Amarillo 2006, no pet.) (quoting TEX. BUS. & COM.

CODE § 9.610, cmt. 7). “A private sale, by contrast, is not open to the general public,

usually does not occur at a pre-appointed time and place, and may or may not be

generally advertised.” Boulevard Bank, 397 S.W.3d at 463.

      The e-mail does not state whether the sale would be public or private. At most,

the e-mail may offer a clue on this issue when it states that “[t]he items will then be

offered for sale and we have received a few bids.” This statement may imply that the

sale would be a private sale since it suggests that the bids were being received ahead

of time rather than being received live, as in a public auction. Even so, this one clue

concerning the sale’s format does not conclusively answer the question of whether

the sale would be public or private. See, e.g., SunTrust Bank v. Monroe, No. 02-16-

00388-CV, 2018 WL 651198, at *12 (Tex. App.—Fort Worth Feb. 1, 2018, no pet.)

(mem. op.) (documenting “a private sale at an auction”).

      The fourth element requires the notification to state “that the debtor is entitled

to an accounting of the unpaid indebtedness and state[] the charge, if any, for an

accounting.” TEX. BUS. & COM. CODE § 9.613(1)(D). The e-mail makes no mention

of appellants’ right to an accounting, and it does not satisfy this element. See Pate

Ga. Timber, LLC v. Kilpatrick, No. CV415CV0237HLMWEJ, 2015 WL 13389608,

                                        –12–
at *3 (N.D. Ga. Dec. 15, 2015); In re Schwalb, 347 B.R. 726, 751 (Bankr. D. Nev.

2006); Arthur v. Carver Fed. Sav. Bank, 55 N.Y.S.3d 5, 6 (N.Y. App. Div. 2017).

See generally TEX. BUS. & COM. CODE § 9.210 (defining the parties’ rights and

duties with respect to accounting).

      The fifth element requires the notification to state “the time and place of a

public disposition or the time after which any other disposition is to be made.” TEX.

BUS. & COM. CODE § 9.613(1)(E). The e-mail did not specifically state whether the

sale would be public or private, and thus we have no firm benchmark against which

to grade the e-mail’s content. Regardless, even if the intended disposition were a

private sale, which is the less rigorous option from a notice perspective, the e-mail

would nonetheless be deficient on this element. The only dates mentioned in the e-

mail are that Advantage would “inventory and remov[e] . . . all the permissible

equipment from the FLER clinic” on “July 9 – 10.” Stating that the repossession of

collateral would occur at a certain time is significantly different than stating that the

sale of that collateral would occur at a certain time. See, e.g., SunTrust Bank, 2018

WL 651198, at *12 (holding there was a fact issue concerning reasonable notice

where some evidence indicated that the collateral sale took place two years after

property was repossessed). While the e-mail gives dates for the repossession, it

offers no information concerning when the sale might occur. Therefore, it fails to

satisfy the fifth and final element.

                                         –13–
      BTH maintains that any gaps in the e-mail’s content can be filled by a set of

demand letters that Capital Partners sent to appellants on February 15, 2018. There

is mixed precedent on whether two documents may jointly provide notice, such that

one document might compensate for a shortfall in another document’s content.

Compare ProvideRx of Grapevine, 507 B.R. at 165 (reading two documents together

and concluding that they jointly gave sufficient notice), with States Res. Corp. v.

Gregory, 339 S.W.3d 591, 597 (Mo. Ct. App. 2011) (concluding that notice of

disposition cannot be jointly given by two documents). Regardless, even assuming

for the moment that it is appropriate to read multiple documents together, we

disagree that the demand letters compensate for the email’s shortcomings. The

demand letters stated appellants could obtain further details about the obligations in

default by calling Capital Partners. This does not conclusively satisfy the fourth

element’s requirement to state that the debtor is entitled to an accounting of the

unpaid indebtedness and to list the charge for any accounting. See In re Downing,

286 B.R. 900, 904 (Bankr. W.D. Mo. 2002) (concluding that a letter gave no notice

of debtor’s right to accounting even where it invited the debtor to call creditor with

any questions). For present purposes, all that the letters offer is a more particular

description of the debtor, the guarantors, and the secured party. We have determined

that the e-mail already satisfied the first element’s requirement to describe the

parties, and the letters add nothing with respect to the other four missing elements.

                                        –14–
      Again, if the notification lacks any of the required information, it becomes a

question of fact whether the notification is nevertheless sufficient. TEX. BUS. & COM.

CODE § 9.613(2). Because the notification lacked four categories of required

information, this issue was for the factfinder to decide. The summary judgment in

BTH and Capital Partners’ favor cannot stand. See VFS Leasing v. Bric

Constructors, LLC, No. M2011-01894-COA-R3CV, 2012 WL 2499518, at *6

(Tenn. Ct. App. June 28, 2012) (reversing summary judgment because two

categories of required information were not included in the notification of

disposition).

      In her second issue, Wilson contends that the notification was so grossly

deficient that she should be entitled to summary judgment disposing of BTH and

Capital Partners’ claims. We disagree. The presence of fact issues on reasonable

notice precludes a summary judgment in favor of appellants.

      Next, Wilson and appellees dispute the effect that a defective notification

should have on this case. Wilson contends that because the e-mail did not satisfy the

requirements of section 9.613(1), appellees were barred from obtaining any

deficiency judgment at all, and she was entitled to summary judgment dismissing

appellees’ claims. See TEX. BUS. & COM. CODE § 9.613(1). Appellees claim that a

defective notification would simply reduce their deficiency judgment in accordance

with UCC section 9.626. Id. § 9.626. We agree with appellees.

                                        –15–
       Wilson relies on dated caselaw for the premise that a failure to give proper

notification of disposition barred recovery of any deficiency. See, e.g., Wright v.

Interfirst Bank Tyler, N.A., 746 S.W.2d 874, 878 (Tex. App.—Tyler 1988, no writ)

(reversing judgment for creditor and rendering take-nothing judgment in debtor’s

favor because reasonable notification of disposition was not provided). This caselaw

was abrogated in part in 1999 with the passage of section 9.626, which permits a

commercial creditor to recover a deficiency despite failing “to prove that the

collection, enforcement, disposition, or acceptance” was conducted in accordance

with the relevant provisions of the subchapter, subject to certain limitations. TEX.

BUS. & COM. CODE § 9.626(a)(3); see Beardmore v. Am. Summit Fin. Holdings,

LLC, 351 F.3d 352, 356 (8th Cir. 2003) (“Texas abandoned the absolute bar rule

effective July 1, 2001.”). Under section 9.626, a secured party’s ability to collect a

deficiency without proper notification is limited, but not eliminated. Thus, appellees

could still recover a deficiency even if they failed to provide sufficient notification

of disposition.

       We sustain appellants’ respective first issues. We overrule Wilson’s second

issue. We do not consider appellants’ remaining issues, which could afford them no

greater relief.

                                        –16–
                                 CONCLUSION

      Having concluded the trial court erred in granting appellees’ motions for

summary judgment, we sustain appellants’ first issues. Accordingly, we reverse the

trial court’s judgment and remand the case for further proceedings.

                                          /Robbie Partida-Kipness/
                                          ROBBIE PARTIDA-KIPNESS
                                          JUSTICE

200704F.P05

                                       –17–
                                    S
                            Court of Appeals
                     Fifth District of Texas at Dallas
                                   JUDGMENT

LORY K. WILSON, GREGORY S.                     On Appeal from the 44th Judicial
VENABLE, AND JAMES B.                          District Court, Dallas County, Texas
JOHNSON, Appellant                             Trial Court Cause No. DC-18-09275.
                                               Opinion delivered by Justice Partida-
No. 05-20-00704-CV           V.                Kipness. Justices Schenck and
                                               Osborne participating.
CAPITAL PARTNERS
FINANCIAL GROUP USA, INC.
AND BTH BANK, NATIONAL
ASSOCIATION, Appellee

       In accordance with this Court’s opinion of this date, the judgment of the trial
court is REVERSED and this cause is REMANDED to the trial court for further
proceedings consistent with this opinion.

      It is ORDERED that appellants LORY K. WILSON, GREGORY S.
VENABLE, AND JAMES B. JOHNSON recover their costs of this appeal from
appellees CAPITAL PARTNERS FINANCIAL GROUP USA, INC. AND BTH
BANK, NATIONAL ASSOCIATION.

Judgment entered this 5th day of July 2022.

                                        –18–