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Click here for the full text of this decision FACTS:This is a diversity case in which Plaintiff-Appellee International Interests L.P., a Texas limited partnership, brought a deficiency action against Defendant-Appellant Charles F. Hardy III, an Oklahoma citizen, in federal district court to recover from Hardy the deficiency owing on a note Hardy guaranteed. Hardy, a resident of Oklahoma, was a co-owner of The Concierge of Houston Inc., a Texas corporation in the nursing home business. In late 2002, KeyBank National Association, an Ohio-based national banking association, loaned Concierge $4.82 million so that Concierge could purchase a nursing home in Houston that was in foreclosure. In exchange, Concierge executed a promissory note for that amount payable to Keybank. The note was secured by a deed of trust to the property and was personally guaranteed by Hardy. The promisory note, the deed of trust, and the guaranty were each executed and delivered in Houston. The note was intended to serve as temporary financing until Concierge could secure permanent financing; however, Concierge never secured permanent financing and Keybank accordingly posted the nursing home for non-judicial foreclosure sale, scheduled for July 2, 2003. On June 30, 2003, Concierge filed for bankruptcy under Chapter 11, staying the scheduled foreclosure. Unable to collect on its debt, Keybank sold the note, along with its associated guarantees and collateral rights, to International Interests, a Texas limited partnership. On July 8, 2003, International Interests filed the present suit against Hardy to enforce Hardy’s guarantee, and on July 22, International Interests moved in bankruptcy court to lift the stay of foreclosure so that it could foreclose on the facility under the deed of trust. The bankruptcy court, after affording Concierge time to try to obtain permanent financing or to secure a buyer for the property, granted International Interests’ motion and allowed the foreclosure to proceed. At the Nov. 4, 2003 foreclosure sale, which was conducted in Harris County in accordance with Texas law, The Ireland Limited Family Partnership, the sole bidder, purchased the nursing home for $1 million. After applying this amount to Concierge’s debt, approximately $3,090,476 was still owed on the note. Int’l Interests brought this suit in the court below to recover the deficiency from Hardy pursuant to the guaranty agreement. Hardy filed a counterclaim, alleging that the facility was sold at foreclosure for less than fair market value and seeking, under �51.003 of the Texas Property Code, a determination of the facility’s fair market value and an offset in that amount from any deficiency judgment. International Interests moved for summary judgment, asserting that 1. a choice-of-law provision in the guaranty agreement required that Ohio law � which does not provide a deficiency offset � govern the deficiency action, preventing application of �51.003 of the Texas Property Code, and 2. even if Texas law governed the deficiency action, Hardy in the guaranty waived any right to challenge International Interests’ actions taken to enforce the guaranty. Hardy responded that 1. because the foreclosure was governed by Texas law under the deed of trust, Texas law also governed the resulting deficiency action; 2. he did not waive his right to challenge the actions taken by International Interests to enforce the guaranty; 3. even if Ohio law governed the deficiency action, International Interests was judicially or equitably estopped from pursuing a deficiency under Ohio law because it was seeking attorney’s fees under Texas law; and 4. if the court found that Ohio law governed the deficiency action, it should grant him a continuance to permit him to raise defenses and counterclaims available under Ohio law. The district court granted International Interests’ motion for summary judgment and dismissed Hardy’s counterclaim, concluding that Ohio law governed the deficiency action, that Hardy had no estoppel defense, and that Hardy was not entitled to a continuance. Specifically, with respect to the choice of law issue, the district court made several determinations. First, the district court determined that the law of the guaranty, not the law of the deed of trust, governed the action because “[u]nder Texas law . . . ‘[a]n action against guarantors of a note for a deficiency following foreclosure on real property is an action involving enforcement of the underlying debt.’ Thus, even if Hardy is correct that Texas law governs the deed of trust, it is the Hardy Guaranty, not the deed of trust that creates [Int'l Interests'] right to a deficiency judgment in this case [and accordingly] the law applicable to the Hardy Guaranty that governs [the] deficiency action.” The district court then conducted a choice of law analysis under Texas law and determined that because the parties could have explicitly “agreed, without violating Ohio law, that Hardy would be liable for the full amount of any deficiency judgment with no right of offset,” and because “under Texas law, Hardy could have contractually waived the right of offset provided by section 51.003 of the Texas Property Code,”, the Ohio choice of law provision in the guaranty agreement between the parties was enforceable. Hardy appealed. HOLDING:The court certifies two determinative questions of law to the Supreme Court of Texas: 1. In an action to recover the deficiency owing on a note guaranteed by the defendant where the guaranty agreement between the original parties is governed by Ohio law and the deed of trust to the property that secured the note is governed by Texas law and the property itself is in Texas, does the law of the guaranty or the law of the deed of trust govern the calculation of any deficiency? 2. If the law of the guaranty governs the calculation of the deficiency, should an Ohio choice of law clause in that guaranty be given effect under section 187 of the Restatement (Second) of Conflict of Laws where (1) no party is from Ohio, the property that secured the note is in Texas, the note, deed of trust, and guaranty were all executed and delivered in Texas, and Texas’s foreclosure law, not Ohio’s, was used to foreclose the underlying property and (2) applying Ohio law would prevent application of section 51.003 of the Texas Property Code, which provides for a deficiency offset? OPINION:Harold R. DeMoss Jr., J.; Higginbotham, DeMoss and Owen, JJ.

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