Condrey v. Suntrust Bank of Georgia

• Decision Date: 10 November 2005
• Docket Number: No. 04-30766.,04-30766.
• Citation: 431 F.3d 191
• Parties: Tommy H. CONDREY; et al., Plaintiffs, v. SUNTRUST BANK OF GEORGIA; et al., Defendants, Harrell Equipment Company, Inc., Defendant-Cross Claimant-Appellant, v. SunTrust Bank of Georgia, Defendant-Cross Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

431 F.3d 191

Tommy H. CONDREY; et al., Plaintiffs, v. SUNTRUST BANK OF GEORGIA; et al., Defendants, Harrell Equipment Company, Inc., Defendant-Cross Claimant-Appellant, v. SunTrust Bank of Georgia, Defendant-Cross Defendant-Appellee.

No. 04-30766.

United States Court of Appeals, Fifth Circuit.

November 10, 2005.

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J. Michael Hart, Monroe, LA, Sedric Earl Banks (argued), Law Offices of Sedric E. Banks, Monroe, LA, for Harrell Equipment Co., Inc.

Bernard S. Johnson (argued), Cook, Yancey, King & Galloway, Shreveport, LA, for SunTrust Bank of Georgia.

Appeal from the United States District Court for the Western District of Louisiana.

Before KING, Chief Judge, and BARKSDALE and STEWART, Circuit Judges.

CARL E. STEWART, Circuit Judge:

Harrell Equipment Company, Inc. ("Harrell Equipment") appeals the district court's grant of summary judgment for SunTrust Bank of Georgia ("SunTrust") regarding a cross-claim brought by Harrell Equipment against SunTrust alleging fraud, conversion, tortious interference with property rights, detrimental reliance, and fraudulent breach of contract. For the following reasons, we affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

Harrell Equipment is a Georgia-based agricultural equipment manufacturer. SunTrust was Harrell Equipment's bank during the following series of events:

In March of 1989, Harrell Equipment granted SunTrust's predecessor-in-interest a first-in-priority security interest in all of its immovable and movable property, both current and after-acquired. For the better part of the next decade, the parties' business relationship remained amicable. In 1997, Harrell Equipment began to experience the slump in the agriculture industry that was occurring. Therefore, SunTrust told Harrell Equipment that in order to receive further financing, Harrell Equipment would have to reduce its outstanding debt, lower its expenses and sell more of its inventory. Harrell Equipment agreed and reduced its outstanding debt by $1 million; SunTrust, however, later refused to grant Harrell Equipment further financing. The agreement, or lack thereof, that resulted from this refusal is the subject of this appeal.

Because Harrell Equipment could not get further financing, it asserts that it considered filing for bankruptcy as its only solution. Harrell Equipment claims that it did not file for Chapter 11 protection because SunTrust branch president, Will Sims, offered, what seemed at the time, a better deal. Pursuant to his offer, Harell Equipment claims that SunTrust fraudulently induced it to forego plans to file for bankruptcy by entering into an oral agreement whereby Harrell Equipment would (1) allow SunTrust to take possession of all its assets; (2) SunTrust would continue to advance additional funds to Harrell Equipment to maintain business as usual; (3) Harrell Equipment would reduce its indebtedness to less than $1 million over the following year; and (4) thereafter, SunTrust would sell the remaining inventory and assets to a third party designated by Harrell Equipment.¹ The parties, however, did not reduce this agreement to writing.

On March 9, 1999, the Superior Court of Decatur County, Georgia issued a writ granting SunTrust immediate possession of all movable property of Harrell Equipment subject to its security interest. Harrell Equipment claims this action was taken in furtherance of its agreement not to file for bankruptcy; SunTrust claims this action was taken in furtherance of its role as a secured creditor. For the remainder of the year, SunTrust controlled all of Harrell Equipment's operations. The parties even executed a lease whereby SunTrust had access to Harrell Equipment's main facility in Vada, Georgia, and all movable property therein. On November 15, 1999, however, SunTrust foreclosed on Harrell Equipment's immovable property, mooting the Vada facility lease.

By the end of 1999, Harrell Equipment reduced its debt to under $1 million and claims it did so pursuant to the parties' previous oral agreement. Thereafter, abiding by the terms of the alleged agreement, Harrell Equipment selected Vada Investors Corporation ("Vada") as the third party purchaser of its inventory and assets. SunTrust, however, disagreed and instead sold Harrell Equipment's assets and inventory to LMC Bainbridge on January 19, 2000.²

On February 13, 2001, Tommy H. Condrey filed suit against SunTrust, LMC Bainbridge and Harrell Equipment in the United States District Court for the Western District of Louisiana. Condrey had developed a cotton handling feeder system in the late 1980s; he called this system Modtrack. After receiving his first patent for Modtrack, Condrey entered into a licensing agreement with Harrell Equipment. This licensing agreement, and the copyrighted blueprints of the Modtrack system, formed the basis of his lawsuit. See Condrey v. SunTrust Bank of Ga., 429 F.3d 556, 2005 WL 2857452 (5th Cir. Nov. 1, 2005). In response to Condrey's allegations, Harrell Equipment filed a cross-complaint against SunTrust asserting that SunTrust: (1) fraudulently induced Harrell Equipment to agree to the March 1999 deal because SunTrust never intended to follow through with the agreement; (2) caused Harrell Equipment to partially perform and thus detrimentally rely on SunTrust's oral promises; (3) fraudulently converted Harrell Equipment's property because SunTrust's foreclosure proceedings involved violations of state law duties regulating professional conduct in foreclosure proceedings; (4) breached its contract with Harrell Equipment when it failed to sell the assets to Vada, the third party purchaser selected by Harrell Equipment; (5) tortiously interfered with Harrell Equipment's business opportunities during its daily operation of Harrell Equipment; and (6) concealed and destroyed evidence that would support Harrell Equipment's claims.

In response to these claims, SunTrust filed for summary judgment on April 3, 2002. United States Magistrate Judge Karen L. Hayes filed a report and recommendation granting the motion on April 10, 2002, finding that all of Harrell Equipment's claims failed because it had suffered no damages. Further, she found that no matter to whom the assets and inventory were sold, Harrell Equipment would, nonetheless, have no interest in the assets. The fact that Harrell Equipment would rather have had Vada than LMC Bainbridge purchase its assets did not create a claim. Further, the magistrate judge found that Hugh Harrell's interest as Harrell Equipment's largest shareholder in having Vada purchase Harrell Equipment's assets and inventory and his purported loss as a result of LMC Bainbridge's purchase was immaterial, as he was not a party to the lawsuit.³

Even though the absence of damages rendered all of Harrell Equipment's claims meritless, the magistrate judge considered the remainder of its claims. On the fraud claim, she found that, according to Georgia law,⁴ an action for fraud cannot be based on a promise that is unenforceable at the time it is made. Because the parties' agreement involved (1) a surety agreement; (2) the sale of land; (3) a commitment to lend money; and (4) the sale of goods exceeding $500 and because Georgia's statute of frauds specifically requires that these kinds of agreements be in writing, the magistrate judge recommended that the fraud claim be dismissed.

In dissecting the part performance allegation, the magistrate judge determined that the statute of frauds forbids such an investigation because part performance requires that SunTrust's actions be consistent with the existence of an alleged oral agreement and inconsistent with the lack thereof. Though the magistrate judge found that the evidence may be consistent with the oral agreement asserted by Harrell Equipment, she also found that SunTrust's actions were also consistent with what a secured creditor would do in the case of a defaulting debtor. Therefore, she determined that the doctrine of part performance did not apply because evidence was not inconsistent with the lack of an oral contract. Logically, the magistrate judge then found if the doctrine of part performance does not apply, Harrell Equipment's breach of contract claim must also fail because no contract existed for SunTrust to breach.

Additionally, because the Superior Court of Decatur County, Georgia issued a writ granting SunTrust all of Harrell Equipment's property, the magistrate judge found that the conversion and tortious interference with property rights claims were improper collateral attacks on the underlying state court judgments; those judgments terminated Harrell Equipment's interest in its assets and inventory. The magistrate judge also found the promissory estoppel claim failed because the alleged agreement was too vague to enforce. Finally, the magistrate judge determined that the spoliation of evidence claim also failed; Harrell Equipment did not claim or show that any documents were missing or that these "missing" documents would contain necessary information supporting Harrell Equipment's allegations.

On June 19, 2003, the United States District Court, Judge Robert G. James, adopted the magistrate judge's recommendation and granted SunTrust's motion. Harrell Equipment now appeals the district court's judgment.⁵

II. DISCUSSION

A. Standard of Review

This court reviews a district court's grant of summary judgment de novo, applying the same legal standards as the district court. Fierros v. Tex. Dep't of Health, 274 F.3d 187, 190 (5th Cir.2001). "Summary judgment is proper when the pleadings and evidence demonstrate that no genuine issue of material fact exists and the movant is entitled to judgment as a matter of law." DIRECTV, Inc. v. Budden, 420 F.3d 521, 529 (5th Cir.2005). The initial burden to demonstrate that no genuine issue of material fact exists is on the movant. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91...