Supreme Court of Texas, No. 12-00937 (June 13, 2014)
Justice Willett (Opinion)
When a property is sold at foreclosure for less than the amount still owed on the underlying debt, the borrower and guarantors ordinarily are liable for the amount of that shortfall. But often the lender is the only bidder at a foreclosure sale and has little incentive to bid high. So, the Legislature enacted Texas Property Code § 51.003(c) to protect borrowers and guarantors facing that situation. Under that provision, if a court finds a foreclosure sale has yielded less than fair market value (what the property should have sold for, and the amount for which the borrower and guarantors should have been credited), any deficiency is reduced by the difference between fair market value and actual sales proceeds. When the property at issue sold at foreclosure for less than fair value, Moayedi (the guarantor) sought to apply the § 51.003(c) offset to the deficiency. The guaranty at issue in this case, however, contained a “general waiver of defenses” by which Moayedi agreed the debt and guaranty would not be “affected … by any defense” other than full payment, and that “each and every defense [was] waived.” The Supreme Court held that § 51.003(c) is an affirmative defense to a deficiency claim and that it may be waived. It then went on to conclude that the comprehensive “general waiver of defenses” in the Moayedi guaranty was sufficient to effect such a waiver—even though it did not specifically reference § 51.003. “Just because [a] waiver is all encompassing does not mean that it is unclear or vague,” said the Court. So, in the face of such a waiver provision, the protections intended by the Legislature are of no avail.
