Court Opinion

ID: 9966155
Source: CourtListenerOpinion
Date Created: 2024-05-06 07:10:56.705686+00
Date Added: 2024-06-11T08:25:30.609015
License: Public Domain

In the
         Court of Appeals
 Second Appellate District of Texas
          at Fort Worth
      ___________________________
           No. 02-23-00376-CV
      ___________________________

      BANK OF THE WEST, Appellant

                     V.

PSMD MEDICAL ASSOCIATES, P.A., Appellee

   On Appeal from the 342nd District Court
           Tarrant County, Texas
       Trial Court No. 342-338479-22

    Before Kerr, Womack, and Wallach, JJ.
    Memorandum Opinion by Justice Kerr
                           MEMORANDUM OPINION

      Appellant Bank of the West appeals from the trial court’s limitations-based

summary judgment in favor of Appellee PSMD Medical Associates, P.A. The Bank

argues in its sole issue that the trial court erred by granting PSMD’s motion because

limitations did not bar the Bank’s claim. We will reverse and render in part on the

guarantee itself and remand in part on attorney’s fees.

                                     Background

      In 2015, MDPS Real Estate Holdings LLC and Siva Assisted Living Services,

Ltd. (the Borrowers) executed a $4,950,000 note in the Bank’s favor. Durga and

Madhavi Mekala signed the note as managers of both MDPS and Siva Assisted Living.

PSMD secured the note with a U.S. Small Business Administration Unconditional

Guarantee. Durga Mekala also signed the Guarantee as director of PSMD.

      The Borrowers made their last note payment on July 10, 2018, and four

months later, the Borrowers filed Chapter 7 bankruptcy proceedings. On December

11, 2018, the Bank informed the Borrowers (and PSMD) in writing that it was

accelerating the note, demanding payment in full and warning that a trustee’s sale

would take place in February 2019 if full payment was not received, with the

Borrowers and PSMD “remain[ing] jointly and severally liable for any deficiency

balance due on the Note, if any.” The real property securing the note was foreclosed

in 2019 and sold in 2022 for less than the foreclosure amount. On October 3, 2022,

the Bank sent a demand letter to PSMD for payment of the remaining balance due on

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the note and interest owed. The Bank later sent a revised demand letter after applying

additional credit from the foreclosure. The remaining principal balance ended up

being $278,269.47 with accrued interest of $209,891.10.

      On November 14, 2022, the Bank sued PSMD to recover all amounts due and

owing by the Borrowers under the note and moved for traditional summary judgment

contending that PSMD had unconditionally guaranteed payment of the note and had

failed to pay the outstanding balance upon proper demand.

      PSMD responded with a statute-of-limitations defense. PSMD asserted that the

Bank’s cause of action had accrued on August 11, 2018, when the Borrowers failed to

make any further payments on the note, and that both the Bank’s payment demand

and its lawsuit’s filing occurred more than four years after that date. The Bank

countered that its claim was timely filed because it had accrued on October 17, 2022,

when the Bank made a demand for payment.1 The trial court denied the Bank’s

motion for summary judgment.

      PSMD then filed its own summary-judgment motion on its limitations defense.

As in its response to the Bank’s motion, PSMD argued that limitations barred the

Bank’s claim because although the claim had accrued when the Borrowers failed to

make a payment in August 2018, the Bank did not timely demand payment or file suit

until October or November 2022—more than four years later.

      1
       The Bank did not at that time mention the December 2018 acceleration notice.

                                          3
      The Bank responded and now argued that the claim could not have accrued

before December 18, 2018—the date of the Bank’s notice of acceleration and demand

to the Borrowers and PSMD. 2 The Bank again contended that its suit was timely filed

on November 14, 2022, and asked the trial court to reconsider its denial of the Bank’s

summary-judgment motion.

      The trial court granted PSMD’s summary-judgment motion and ordered that

the Bank take nothing. This appeal followed.

                                 Standard of Review

      We review a summary judgment de novo. Travelers Ins. v. Joachim, 315 S.W.3d

860, 862 (Tex. 2010). When both parties move for summary judgment and the trial

court grants one motion and denies the other, the reviewing court should review both

parties’ summary-judgment evidence and determine all questions presented. Mann

Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). We

should then render the judgment that the trial court should have rendered. See Myrad

Props., Inc. v. LaSalle Bank Nat’l Ass’n, 300 S.W.3d 746, 753 (Tex. 2009); Mann

Frankfort, 289 S.W.3d at 848. A plaintiff is entitled to summary judgment on a cause of

      2
        The Bank had not discovered the acceleration notice earlier because of its
previous counsel’s death; it has represented to us that its counsel’s files were located
in storage only after suit was filed. As the Bank’s appellate briefing states, “The Bank’s
Response to PSMD’s Motion for Summary Judgment and Motion to Reconsider
Plaintiff’s Motion for Summary Judgment . . . added a key piece of evidence to the
summary[-]judgment record not previously before the Trial Court: the [December 11,
2018] Notice of Acceleration.”

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action if it conclusively proves all essential elements of the claim. See Tex. R. Civ. P.

166a(a), (c); MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex. 1986).

      A defendant is entitled to summary judgment on an affirmative defense if the

defendant conclusively proves all elements of that defense. Frost Nat’l Bank v.

Fernandez, 315 S.W.3d 494, 508–09 (Tex. 2010); see Tex. R. Civ. P. 166a(b), (c). To

accomplish this, the defendant must present summary-judgment evidence that

conclusively establishes each element of the affirmative defense. See Chau v. Riddle,

254 S.W.3d 453, 455 (Tex. 2008).

                                   Applicable Law

      In its sole issue, the Bank argues that the trial court erred by granting PSMD’s

summary-judgment motion because the Bank’s suit was not time-barred.

A. Guaranty

      A guaranty is a person’s promise to perform an act that another person is

contractually bound to perform. 423 Colony, LTD. v. Indep. Ex’rs of Est. of Kern, No. 02-

18-00032-CV, 2019 WL 2223579, at *2 (Tex. App—Fort Worth May 23, 2019, pet.

denied) (mem. op.). There are two types of guaranties: payment (or unconditional)

guaranties and collection (or conditional) guaranties. Id. The primary difference is

whether the guaranty requires the creditor to pursue the principal debtor before it

pursues the guarantor for collection of the debt. Id. A guaranty of payment does not

require the creditor to first pursue the principal debtor. Id. Instead, “[a] guarantor of

payment is primarily liable; he waives any requirement that the holder of the note take

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action against the maker as a condition precedent to his liability on the guaranty.” Id.

(quoting Hopkins v. First Nat’l Bank at Brownsville, 551 S.W.2d 343, 345 (Tex. 1977)).

      The guaranty in this case is titled “Unconditional Guarantee” and by its terms

does not require the Bank to seek payment from any other source before demanding

payment from PSMD, the guarantor.

B. Limitations

      The parties do not dispute that the applicable period of limitations for the

unconditional guaranty is four years. See Tex. Civ. Prac. & Rem. Code Ann.

§ 16.004(a)(3). The dispute is when the cause of action accrued, which is a legal

question for the court to decide. Moreno v. Sterling Drug, 787 S.W.2d 348, 351 (Tex.

1990). A cause of action generally accrues at the time when facts come into existence

that authorize a claimant to seek a judicial remedy. Murray v. San Jacinto Agency, Inc.,

800 S.W.2d 826, 828 (Tex. 1990). If demand is an integral part of a cause of action or

a condition precedent to the right to sue, the statute of limitations does not begin to

run until demand is made, unless the demand is waived or unreasonably delayed.

Wiman v. Tomaszewicz, 877 S.W.2d 1, 5 (Tex. App.—Dallas 1994, no writ).

                                      Discussion

      Citing Wiman, the Bank argues that PSMD’s payment obligation began when

the Bank made its written demand in December 2018. In Wiman, the guaranty stated

that “the obligations of the Guarantor shall be performable upon written demand of the

Lender.” Id. at 3 (emphasis in original). The court held that a demand to the guarantor

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was a condition precedent to seeking a judicial remedy against the guarantor and that

limitations did not begin to run until demand was made unless demand was waived or

unreasonably delayed. Id. at 6.

      The guaranty signed by PSMD states in the first paragraph titled

“GUARANTEE” that:

             Guarantor unconditionally guarantees payment to Lender of all
      amounts owing under the Note. This Guarantee remains in effect until
      the Note is paid in full. Guarantor must pay all amounts due under the
      Note when Lender makes written demand upon Guarantor. Lender is not
      required to seek payment from any other source before demanding
      payment from Guarantor. [Emphasis added.]

Like the guaranty in Wiman, the terms of this guaranty stated that PSMD’s obligation

to pay all amounts due began upon the Bank’s written demand. Id. at 3.

      But PSMD points to the sixth paragraph of PSMD’s guaranty titled “RIGHTS,

NOTICES, AND DEFENSES THAT GUARANTOR WAIVES,” in which the

guaranty listed numerous waivers. Among them were that Guarantor waived all rights

to “[r]equire presentment, protest, or demand upon Borrower” and that the

Guarantor waived notice of “[a]ny default under the Note” and of “[p]resentment,

dishonor, protest, or demand.” PSMD further waived notice of “[a]ny action or

inaction on the Note or Collateral, such as disbursements, payment, nonpayment,

acceleration, intent to accelerate.” PSMD contends that because, under paragraph 6, it

had expressly waived the requirement for the Bank to make a written demand or give

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notice, limitations started to run 30 days after the Borrowers made their last monthly

payment in July 2018.

      Nothing about these waivers—which were PSMD waivers vis-à-vis the

Borrowers, not Bank waivers—invalidates the first paragraph’s requirement that the

Bank make a written demand upon PSMD. Moreover, limitations did not even start to

run against the Borrowers until the Bank followed the requisite steps to accelerate the

note, which did not happen until December 2018. See, e.g., Tapia v. Collins Asset Grp.,

LLC, No. 02-20-00129-CV, 2022 WL 325392, at *5 (Tex. App.—Fort Worth Feb. 3,

2022, no pet.) (mem. op.) (“If a note secured by real property contains an optional

acceleration clause, limitations does not automatically start to run upon default; an

action accrues ‘only when the holder actually exercises its option to accelerate’ the

entire note. Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 566 (Tex.

2001).”).

      PSMD also argues that the unconditional nature of the guaranty negated the

Bank’s requirement to make a written demand. Although we agree that because the

guaranty was unconditional, PSMD waived any requirement that the Bank take action

against the Borrowers as a condition precedent, see 423 Colony, LTD.,

2019 WL 2223579, at *2, we do not agree that the unconditional guaranty waived the

first paragraph’s requirement of a written demand.

      In U.S. v. Vanornum, the court considered similar language in an SBA guaranty.

912 F.2d 1023, 1026 (8th Cir. 1990). That guaranty stated:

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      In case the Debtor shall fail to pay all or any part of the Liabilities when
      due, whether by acceleration or otherwise, according to the terms of said
      note, the Undersigned [guarantor], immediately upon the written
      demand of Lender, will pay to Lender the amount due and unpaid by the
      Debtor.

Id. The court held that under the guaranty’s plain language, a written demand was a

condition precedent to filing suit and that limitations did not begin to run until a

written demand was made upon the guarantor. Id. at 1027.

      We agree with the Eighth Circuit’s decision: the Bank here was required to

make a written demand upon PSMD as a condition precedent to filing suit, and the

statute of limitations did not begin to run until that demand was made. Vanornum,

912 F.2d at 1027; see also Wiman, 877 S.W.2d at 5.

      PSMD further argues that even if the guaranty required the Bank to make a

demand on PSMD, the demand was unreasonably delayed under Wiman. 877 S.W.2d

at 5–6 (noting that limitations do not begin to run “until demand [was] made,

unless . . . demand [was] waived or unreasonably delayed” and holding that three-

week delay between acceleration of note and demand to guarantor was not

unreasonable). But as with its other arguments, PSMD’s contention depends on its

incorrect view that any demand requirement would have been triggered on August 11,

2018, when the Borrowers failed to make a payment and upon its related position that

the December 2018, demand was unreasonably late. As we have noted, limitations did

not accrue as to the Borrowers until the Bank accelerated the note, and acceleration

                                           9
and written demand to PSMD were simultaneously conveyed with the Bank’s

December 11, 2018 communication. There was no delay.

      In short, the statute of limitations began to run on December 11, 2018 when

the Bank made a written demand for payment from PSMD. The Bank timely sued

PSMD on November 14, 2022, and the trial court erred by granting PSMD’s

limitations-based summary judgment. We sustain the Bank’s sole issue insofar as the

trial court erred in granting PSMD’s motion for summary judgment. The Bank’s

undisputed summary-judgment evidence showed that it is entitled to recover on

PSMD’s Unconditional Guarantee. Therefore, we will render the judgment that the

trial court should have rendered, see Mann Frankfort, 289 S.W.3d at 848—that the Bank

recover the remaining principal balance of $278,269.47 and the accrued interest of

$209,891.10.

      In its brief, the Bank also requests that we render judgment awarding

$22,760 in attorney’s fees with an additional $12,500 for each subsequent appeal. We

cannot, however, render judgment in the Bank’s favor on its attorney’s fees. The

Bank’s trial counsel submitted an affidavit averring that $8,265 was a reasonable and

necessary fee through the filing of its motion for summary judgment, that an

additional $1,995 would be necessary for additional proceedings on the summary

judgment, and that a further $12,500 would be reasonable and necessary for each

stage of any subsequent appeal. No billing records were attached.

                                         10
      Although billing records, while “strongly encouraged,” are not required to prove

up attorney’s fees, a party seeking its fees must nonetheless present “sufficient

evidence” that “includes, at a minimum, evidence of (1) particular services performed,

(2) who performed those services, (3) approximately when the services were

performed, (4) the reasonable amount of time required to perform the services, and

(5) the reasonable hourly rate for each person performing such services.” Rohrmoos

Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469, 498, 502 (Tex. 2019).

“Without detail about the work done, how much time was spent on the tasks, and

how he arrived at the . . . sum, [the attorney’s] testimony lacks the substance required

to uphold a fee award.” Id. at 505.

      These minimum criteria are lacking here. While the attorney’s-fee affidavit

listed the general tasks performed in this matter, it did not state the reasonable

amount of time needed to perform each of these services. See Largent v. Cassius Classic

Cars & Exotics, LLC, No. 02-22-00043-CV, 2023 WL 2179465 at *8 (Tex. App.—Fort

Worth Feb. 23, 2023, no pet) (mem. op.). The attorney’s-fee affidavit further listed

anticipated additional fees for preparing for and attending a summary-judgment

hearing, but the record does not reflect that the trial court actually held a hearing on

either party’s motion.

      Further, the evidence related to the conditional appellate fees is insufficient. See

id.; Wells Fargo Bank, N.A. v. Rodriguez, No. 02-21-00155-CV, 2022 WL 803839, at *4–

5 (Tex. App.—Fort Worth Mar. 17, 2022, no pet.) (mem. op.). The attorney’s-fee

                                           11
affidavit opined only that “$12,500 would be a reasonable and necessary attorneys’ fee

for each stage of any subsequent appeal.” To support a conditional award of appellate

attorney’s fees, a party must provide opinion testimony about the services it

reasonably believes will be necessary to defend the appeal and about a reasonable

hourly rate for those services. Yowell v. Granite Operating Co., 620 S.W.3d 335, 355 (Tex.

2020). The attorney’s-fee affidavit here provides no such testimony. Even though

PSMD did not challenge these asserted attorney’s fees as unreasonable or

unnecessary, the Bank still must carry its burden of proof. See id. at 354; Wells Fargo,

2022 WL 803839 at *5.

                                      Conclusion

      Having sustained the Bank’s sole issue, we reverse the trial court’s judgment

that the Bank take nothing from PSMD and render judgment for the Bank for the

remaining principal balance of $278,269.47 and the accrued interest of $209,891.10.

We remand the issue of the Bank’s attorney’s fees for proceedings consistent with this

opinion.

                                                       /s/ Elizabeth Kerr
                                                       Elizabeth Kerr
                                                       Justice

Delivered: May 2, 2024

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