Affirmed and Memorandum Opinion filed August 4, 2016.




                                     In The

                     Fourteenth Court of Appeals

                              NO. 14-15-00365-CV

                      JAMES RUTHERFORD, Appellant
                                        V.

                       724 INTERESTS, LTD., Appellee

                     On Appeal from the 55th District Court
                             Harris County, Texas
                       Trial Court Cause No. 2010-79184

                  MEMORANDUM                    OPINION


      Appellant James Rutherford guaranteed payment of a note to appellee 724
Interests, Ltd.   When the note was not paid, 724 Interests foreclosed on the
property provided as security and sued Rutherford to collect the balance of the
debt. The trial court granted a partial summary judgment, conducted a bench trial,
and signed a judgment in favor of 724 Interests. Rutherford appeals, raising three
issues. Rutherford first complains that the trial court erred when it found that he
waived his right to an offset based on the fair market value of the foreclosed
property. See Tex. Prop. Code Ann. § 51.003 (West 2014). In his second and third
issues, Rutherford asserts that the trial court erred when it found that he had
offered no competent evidence of the fair market value of the property at issue.
Because we conclude there is evidence supporting the trial court’s finding that
Rutherford failed to introduce any competent evidence of the fair market value of
the property, we affirm the judgment without reaching the issue of waiver.

                                  BACKGROUND

      Rutherford was president of 6300 Interests, Ltd. In 2009, 6300 Interests
borrowed $220,000 from 724 Interests. 6300 Interests executed a promissory note
in that amount in favor of 724 Interests. The note was secured by a Second Lien
Deed of Trust on commercial real property known as Reserve “B” of Houston
Northwest Medical Center. The first lien on the property was in the amount of
$3.51 million.    Rutherford simultaneously guaranteed the promissory note
executed by 6300 Interests.

      No payments were made on the note and 724 Interests sued Rutherford as
guarantor in December 2010. The property was sold at a non-judicial foreclosure
sale on February 1, 2011, and 724 Interests applied a $50,000 credit to the debt,
leaving a deficiency of $170,000.       After delays caused by an involuntary
bankruptcy proceeding, 724 Interests filed a third amended motion for traditional
summary judgment and motion for no-evidence summary judgment. 724 Interests
argued, among other things, that Rutherford had waived his right to a fair market
value offset under section 51.003(c) of the Texas Property Code.

      On March 23, 2015, the trial court signed an order granting 724 Interests’
motion in part. The court granted summary judgment against Rutherford on his
counterclaim for fraud in a real estate transaction, a decision that Rutherford has
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not challenged on appeal.      It also ordered that 724 Interests recover from
Rutherford “the principal sum of $170,000, with prejudgment interest at the rate of
six percent (6%) per annum to be calculated after the determination of
[Rutherford’s] set-off, if any.”   Finally, the court denied the motion on 724
Interests’ contention that Rutherford had waived his right to an offset pursuant to
section 51.003(c) of the Texas Property Code.

       The trial court then conducted a bench trial to determine the fair market
value of the foreclosed property. At the beginning of the trial, the trial court
indicated that it was reconsidering the denial of 724 Interests’ motion for summary
judgment on the waiver issue, but it still proceeded to hear testimony from real
estate appraiser George McLeod regarding the fair market value of the property
sold at foreclosure. McLeod was the only witness to testify during the bench trial.

       McLeod testified that he appraised the property at the request of the first
lienholder. According to McLeod, he appraised the property on May 6, 2010, and
the purpose of his appraisal was to estimate fair market value as of that date.
McLeod opined that the value of the property was $4,300,000. He acknowledged
that this value was no longer correct, but the trial court did not consider the
adjusted values McLeod provided to the first lienholder in June 2010 and January
or February 2011 because those values had not been disclosed in discovery.
McLeod testified that he did not recall factors in the economy that would
negatively impact the appraisal, but he also testified that he had been asked by
Rutherford’s counsel to update his appraisal and declined to do so.

       After the bench trial, the court signed a final judgment in favor of 724
Interests.   In the judgment, the trial court “ORDERED, ADJUDGED and
DECREED that the Plaintiff’s Third Amended Motion for Summary Judgment
Order signed on March 23, 2015, is final.”        The court also determined that

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Rutherford was not entitled to an offset against the deficiency remaining after the
foreclosure sale. The court then awarded 724 Interests $170,000 in damages plus
prejudgment and post-judgment interest, and attorney’s fees.

       The trial court subsequently filed findings of fact and conclusions of law.
The court found that Rutherford failed to meet his burden to prove the fair market
value of the property as of the date of the foreclosure because the only evidence
was an appraisal nearly nine months prior to the foreclosure. The court thus
concluded that Rutherford offered no competent evidence of fair market value.
The court also concluded, however, that Rutherford had waived his rights under
section 51.003 because “section 2.10 of the Guaranty Agreement, taken as a whole,
conveys a clear intention to waive every possible contractual or statutory right.”
This appeal followed.

                                         ANALYSIS

       In his first issue on appeal, Rutherford argues that the trial court erred when
it concluded that he had waived the right to an offset based on the fair market value
of the foreclosed property. In his second and third issues, Rutherford contends that
the trial court erred when it concluded he introduced no competent evidence of the
fair market value of the foreclosed property on the date of the foreclosure.

       The trial court’s ruling on waiver is not entirely clear: the judgment made
final the previous order denying summary judgment on waiver of offset, and the
findings and conclusions include a finding that Rutherford did not prove the offset
amount, yet they also include a conclusion that offset was waived.1 We need not
resolve this tension or address Rutherford’s first issue, however, because it is
       1
          For a discussion regarding waiver of the offset right under the Texas Anti-Deficiency
Statute, see Moayedi v. Interstate 35/Chisam Road, L.P., 438 S.W.3d 1, 6–8 (Tex. 2014), and
Grace Interest, LLC v. Wallis State Bank, 431 S.W.3d 110, 126–28 (Tex. App.—Houston [14th
Dist.] 2013, pet. denied).

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immaterial given the remainder of the trial court’s decision. Even if Rutherford
did not waive his offset right under section 51.003 of the Property Code, we hold
the trial court correctly found that he failed to prove the fair market value of the
foreclosed property on the date of the foreclosure.

      In conducting a legal-sufficiency review, we consider the evidence in the
light most favorable to the challenged finding and indulge every reasonable
inference that supports it. Univ. Gen. Hosp., L.P. v. Prexus Health Consultants,
LLC, 403 S.W.3d 547, 550 (Tex. App.—Houston [14th Dist.] 2013, no pet.). The
evidence is legally sufficient if it would enable reasonable and fair-minded people
to reach the decision under review. Id. at 551. We must credit favorable evidence
if a reasonable trier of fact could, and disregard contrary evidence unless a
reasonable trier of fact could not. Id. The trier of fact is the sole judge of the
witnesses’ credibility and the weight to afford their testimony.       Id.   A party
attacking the legal sufficiency of an adverse finding on an issue on which he had
the burden of proof must demonstrate that the evidence conclusively establishes all
vital facts in support of the issue. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241
(Tex. 2001).

      The Texas Anti-Deficiency Statute provides relief for debtors under certain
circumstances when real property securing the debt is sold for less than the balance
due, resulting in a deficiency. See Tex. Prop. Code Ann. § 51.003. Section
51.003(b) allows a debtor to ask the trial court to determine the fair market value
of the property “as of the date of the foreclosure sale.” Id. If the fact-finder
determines that the fair market value of the property is greater than the foreclosure
sale price, the debtor may ask the court to offset the deficiency in the amount by
which the fair market value (less the amount of any lien not extinguished by the
foreclosure) exceeds the foreclosure sale price.        Id.; Moayedi v. Interstate

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35/Chisam Rd., L.P., 438 S.W.3d 1, 5 (Tex. 2014). The fair market value must be
determined by the fact-finder based on competent evidence presented by the
parties. Tex. Prop. Code Ann. § 51.003(b). Because an offset operates as an
affirmative defense to a deficiency claim, Rutherford had the burden of proving a
fair market value exceeding the foreclosure sales price. PlainsCapital Bank v.
Martin, 459 S.W.3d 550, 557 (Tex. 2015).

       Rutherford argues on appeal that McLeod’s testimony conclusively
established that the market value of the foreclosed property was $4,300,000, an
amount large enough to wipe out the entire deficiency even after accounting for the
first lien. But McLeod’s appraisal was an estimate of fair market value as of the
May 6, 2010 date of his report—almost nine months before the foreclosure date.
In fact, at the time he testified at trial, McLeod was unaware of the foreclosure.
McLeod’s testimony summarized above supports the trial court’s finding that
McLeod “testified that his appraisal value was not correct when taking into
consideration relevant information which he did not have at the time of his
appraisal.” Absent evidence regarding the similarity or dissimilarity of market
conditions between the dates of appraisal and foreclosure, the appraisal is not
relevant. Moore v. Bank Midwest, N.A., 39 S.W.3d 395, 402 (Tex. App.—Houston
[1st Dist.] 2001, pet. denied).2 Because the record evidence does not conclusively
establish that the market value of the property on the date of foreclosure less the
amount of the first lien exceeded the foreclosure sale price, we overrule
Rutherford’s second and third issues on appeal.



       2
         Although the supreme court pointed out in PlainsCapital Bank that the Anti-Deficiency
Statute expressly allows the fact finder to consider a future sales price in determining fair market
value as of the date of foreclosure, 459 S.W.3d at 556, the appraisal here predated the
foreclosure.

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                                    CONCLUSION

      Having overruled all of Rutherford’s issues necessary to resolve this appeal,
we affirm the trial court’s final judgment.




                                       /s/       J. Brett Busby
                                                 Justice



Panel consists of Justices Christopher, McCally, and Busby.




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