D&R Constructors, Inc. v. Tex. Gulf Energy, Inc.

• Decision Date: 30 August 2016
• Docket Number: NO. 01-15-00604-CV,01-15-00604-CV
• Parties: D&R CONSTRUCTORS, INC., MICHAEL RUSHING, STEPHANIE RUSHING, PENN RUSHING, AND FLORENCE RUSHING, Appellants v. TEXAS GULF ENERGY, INC., CS BANKERS V, LLC, TEXAS GULF FABRICATORS, LLC, TIMOTHY CONNOLLY, BRIAN G. HENDRY, AND LESTER H. SMITH, Appellees
• Court: Texas Court of Appeals

D&R CONSTRUCTORS, INC., MICHAEL RUSHING, STEPHANIERUSHING, PENN RUSHING, AND FLORENCE RUSHING, Appellants v. TEXAS GULF ENERGY, INC., CS BANKERS V, LLC, TEXAS GULF FABRICATORS, LLC,TIMOTHY CONNOLLY, BRIAN G. HENDRY, AND LESTER H. SMITH, Appellees

NO. 01-15-00604-CV

Court of Appeals For The First District of Texas

August 30, 2016

On Appeal from the 270th District Court Harris County, Texas

Trial Court Case No. 2013-00543

MEMORANDUM OPINION

Appellants, D&R Constructors, Inc. ("D&R") and Michael Rushing, Stephanie Rushing, Penn Rushing, and Florence Rushing (collectively, "the Rushings"), challenge the trial court's judgment, entered after the trial court granted a series of summary judgments, in favor of appellees, Texas Gulf Energy, Inc. ("TGE"), and CS Bankers V, LLC ("CSB"), on their declaratory-judgment actions against D&R and the Rushings. D&R and the Rushings further challenge the trial court's judgment entered against them on their various counterclaims against appellees, TGE, CSB, Texas Gulf Fabricators, LLC ("TGF"), Timothy Connolly ("Connolly"), Brian G. Hendry ("Hendry"), and Lester H. Smith ("Smith"). In seven issues, D&R and the Rushings contend that the trial court erred in granting summary judgment in favor of TGE and CSB on their declaratory-judgment actions; granting summary judgment against D&R and the Rushings on their counterclaims against CSB for wrongful foreclosure, TGF and Hendry to quiet title, TGE, TGF, and Connolly for breach of contract, CSB, TGE, TGF, and Connolly for quantum meruit, CSB, TGE, TGF, and Connolly for fraud, TGE, TGF, and Connolly for negligent misrepresentation, TGE, Connolly, and Hendry for tortious interference, TGE, TGF, and Connolly for breach of fiduciary duty, CSB, TGE, TGF, and Connolly for conversion, and CSB, TGE, TGF, and Connolly for conspiracy; granting relief beyond that requested in the summary-judgment motions; granting summary judgment without an adequate time for discovery; granting TGE and CSB summary judgment on their claims for attorney's fees; and granting Smith's motion for sanctions.

We affirm.

Background

In their first amended petition, TGE and CSB¹ alleged that in the summer of 2012, TGE, needing additional space to conduct its fabrication operations,² was interested in acquiring a fabrication facility at 6314 Wade Road, Baytown, Texas (the "property"), which was owned by D&R, a fabrication company owned by the Rushings. At the time, D&R, carrying a $600,000 tax debt, was in default on a 2004 "Revolving Real Estate Lien Note," which was held by Comerica Bank ("Comerica")³ and secured by a deed of trust on the property.

On July 11, 2012, TGE and the Rushings executed a "Letter of Intent" (the "LOI"), in which they contemplated a joint venture to develop a new fabrication and manufacturing company, Texas Gulf Fabrication, Inc.,⁴ as follows:

1. [TGE] and the Rushing Family agree to form a Marketing Joint Venture to develop new Fabrication and Manufacturing business for Texas Gulf Fabrication, Inc. The ownership of the Joint Venture will be 81% owned by the Rushing Family, . . . [and] 19% owned by [TGE].

2. [TGE] will deposit $100,000 on the execution of the definitive agreement, 10 days from [the] effective date. These funds are intended for the benefit of the Rushing Family . . . .

3. [TGE] will deposit $10,000 per month beginning August 2, 2012 and continue for twelve months, on or about the first of each month, ending with the check on July 2, 2013. . . .

4. [TGE] will issue 5,000,000 of its common shares in the name of the Joint Venture. . . .

5. There will be a 2% Commission paid to the Joint Venture for assistance in developing new business[.] [I]t will be calculated as a product of 2% of gross revenue invoiced by clients attributed to the efforts of the Joint Venture during the first five years from date of inception. It is intended that these funds are for the benefit of the Rushing Family.

. . . .

7. The Managing Board of the Joint Venture will consist of three members, appointed for two year terms, two from the Rushing Family, and one member appointed by the CEO of [TGE]. . . .

8. This agreement will be further refined into [a] comprehensive agreement, fully compliant with laws and regulations, and the Managing Board of the Joint Venture will authorize [its] managing member to execute the comprehensive agreement on behalf of the Joint Venture.

Michael Rushing, on behalf of the Rushings, David Mathews, CEO of TGE, and Craig Crawford, executive vice president of TGE, executed the LOI with the word "binding," handwritten in and initialed, next to the title, "Letter of Intent."

On July 13, 2012, CSB, through a Loan Sale Agreement ("LSA"), purchased from Comerica D&R's defaulted note on the property. Comerica assigned the note, deed of trust, rents, and security agreement to CSB. And the president of D&R, Penn Rushing, executed a "Joinder of Debtor," expressly consenting to the LSA. The appended Joinder to the LSA states,

For purposes of inducing Purchaser [CSB] and Seller [Comerica] to enter into this Agreement, which results in a direct economic benefit to the undersigned Debtor [D&R], . . . [D&R] joins in the execution of this Agreement . . . (a) to evidence [its] consent to the transaction . . . (b) to confirm that (i) true and correct copies of the Loan Documents are attached . . . [and] (ii) none of the terms or provisions of the Loan Documents have been modified. . . ."

The Joinder further states that D&R "confirm[s]" that the loan matured on October 28, 2011 and the "Loan Documents are valid and enforceable against [D&R] and the collateral identified therein, prior to Closing, as well as post Closing upon their assignment to Purchaser [CSB]." And D&R acknowledged that "Purchaser [CSB] and Seller [Comerica] . . . would not consummate the sale without [D&R's] Joinder in this Agreement."

TGE and CSB further alleged, however, that after execution of the LOI and LSA, "certain members of the Rushing Family absolutely and unconditionally refused to take any steps in furtherance of the joint venture until they received money above and beyond what [was] contemplated in the LOI." Thus, the parties reached an impasse and did not execute a final agreement.

On September 4, 2012, CSB foreclosed on the note and acquired the property at a trustee's sale. CSB's acquisition, pursuant to the deed of trust, included:

All buildings and improvements located thereon and all goods, equipment, fixtures, inventory, machinery, furniture, furnishings and other personal property that is now owned or hereafter acquired by Grantors and now or hereafter affixed to, or located on, the abovedescribed real estate [the property] and used or usable for any present or future operation of any building or buildings now or hereafter located on said land . . . .

In late December 2012, CSB changed the locks on the property. Days later, a CSB security officer at the facility saw Michael Rushing at the property loading equipment and boxes into trucks. According to TGE and CSB, Michael removed "approximately $50,000 to $100,000 in equipment, machinery and Property belonging to [CSB]." TGE later obtained a temporary injunction, in which the trial court ordered that the Rushings return the property. And "[a]lthough the Rushings subsequently returned the majority of the equipment pursuant to [the trial court's] order," TGE and CSB suffered damages.

TGE and CSB sued the Rushings for conversion, alleging loss of use, loss of value, and lost profits. TGE also sought a declaration that the LOI was "not a binding, valid or enforceable agreement between TGE and the Rushing Family," "TGE [had] no obligation, monetary or otherwise, to the Rushing Family," and "any and all amounts paid by TGE to the Rushing Family [had to] be returned to TGE." Alternatively, TGE alleged that, to the extent the trial court found that the LOI was a "binding and enforceable agreement between TGE and the Rushing family," the Rushings had breached the agreement. CSB sought a declaration thatits foreclosure on the property was proper and valid and it, thus, held legal title to the property. TGE and CSB also sought attorney's fees.⁵

D&R and the Rushings answered, generally denying the allegations and asserting several counterclaims, in which they sought $12,500,000 in damages. In their "Third Amended [Counterclaims]," D&R and the Rushings alleged that in 2012, Mathews, Crawford, and Connolly, who was an executive of TGE and CSB, approached them about a joint venture with TGE, stating that they had an "exorbitant amount of business" and financial support.⁶ And, in May 2012, Mathews, Connolly, Hendry,⁷ and Smith⁸ attended a meeting at Smith's house "to discuss dealings with the Rushings."

On July 11, 2012, D&R and the Rushings executed the "binding" LOI, in which TGE had "promised" the "purchase and subsequent dissolution of the debt" that D&R owed to Comerica on the property. According to D&R and the Rushings, TGE had "promised" that it "and/or Texas Gulf Fabrication, Inc. [the new venture] would purchase the debt and subsequently forgive it as part of their contribution/obligations to their venture." They asserted that the lien on theproperty was then be held by the new venture, Texas Gulf Fabrication, Inc., of which they would own 81 percent. Further, "in preparation for the [joint] venture," D&R executed "a lease"⁹ of the property, the lease payments of which were to cover the monthly amount due on the note. And D&R and the Rushings "never knowingly gave consent" for CSB to purchase the Comerica lien.

D&R and the Rushings further alleged that in the months following the execution of the LOI and lease, they, "[b]ased upon promises" by TGE, TGF, Connolly, Crawford, and Mathews, "ceased their normal business pursuits and started focusing on preparing and handling business for the venture." TGE "hung their sign" at the property, "act[ed] like everything had been done," and "said the money and final paperwork would be...