Anderton v. Cawley
| Decision Date | 28 August 2012 |
| Docket Number | No. 05–10–00693–CV.,05–10–00693–CV. |
| Citation | 378 S.W.3d 38 |
| Parties | Lew ANDERTON and Anderton Development Partnership, LP, Appellants, v. William R. CAWLEY, Individually and as Trustee of the Bill Cawley 1997 Revocable Trust; Cawley–Cascade GP, LLC; Cawley–PB Funding, LP; Cawley Finance, LLC; Cawley Finance II, LLC; Bot Real Estate, LLC; COT Real Estate, LLC; Lonnie A. Eichinger as Trustee of the Christopher Cawley 1998 Irrevocable Trust; Lonnie A. Eichinger as Trustee of the Kelly Cawley 1998 Irrevocable Trust; and Marcus D. Hiles, Appellees. |
| Court | Texas Court of Appeals |
OPINION TEXT STARTS HERE
D. Brent Lemon, Law Office of D. Brent Lemon, Dallas, TX, Edward Slayton Cox, The Cox Law Firm, Bedford, TX, for Appellant.
James Robert Krause and Ryan Lurich, Friedman & Feiger, L.L.P., Kirsten M. Castaneda and Mike A. Hatchell, Locke Lord Bissell & Liddell LLP, Dallas and Austin, TX, for Appellees.
Before Justices MOSELEY, FITZGERALD, and MARTIN RICHTER.
Appellant Lew Anderton and appellee William R. Cawley were partners in two partnerships formed for the purpose of developing real estate. Appellants sued appellees, alleging that appellees committed various torts and breaches of contract that ultimately destroyed the value of Anderton's partnership interests. Appellee BOT Real Estate, LLC (“BOT”) counterclaimed against Anderton, alleging that he was liable on a personal guaranty. The trial judge disposed of the case by summary judgment, ordering appellants to take nothing on their claims and awarding BOT roughly $8.6 million in damages and prejudgment interest against Anderton. Appellants appealed. We affirm in part, reverse in part, and remand.
The following facts are taken from the summary-judgment evidence.
In 2002, Anderton and Cawley formed two partnerships in order to develop about 500 acres of land near Bellwood Lake in Tyler, Texas. They formed a partnership called Cascades Properties, Ltd. (“Cascades Ltd.”) to develop the part of the land that would be turned into a residential development. Cawley contributed most of the start-up capital for this partnership. Anderton and Cawley formed a separate partnership called Bellwood Lake Partnership, Ltd. (“Bellwood Ltd.”) to acquire and improve an existing golf course that adjoined the intended residential development. The original managing general partner of both Cascades Ltd. and Bellwood Ltd. was Cascade Properties GP Corp., an entity “headed by” Anderton.
During Phase 1 of the development, Cawley told Anderton that the cost of building roads and other infrastructure exceeded his personal financial abilities, and he recommended that Cascades Ltd. borrow additional funds from Park Cities Bank, where Cawley was a 10% shareholder, director, and member of the loan committee. Cawley promised that the Bank would work with the partnership if the development ran into trouble. Anderton consented to Cascades Ltd.'s borrowing $3 million from the Bank in July 2003, which was refinanced into a $5.5 million line of credit in March 2004. Shortly after the partnership obtained the first loan, Cawley told Anderton that the Bank demanded that one of Cawley's companies serve as construction manager on the project. It took Cawley over two years to complete the Phase 1 improvements.
Phases 2 and 3 of the development both commenced in 2005. Around this time, Cawley unsuccessfully sought to buy Anderton out of the partnerships. Cawley also told Anderton that he did not intend to put any more money into the development and would not fund the Phase 2 and Phase 3 improvements, or the construction of a planned new clubhouse for the golf course. After Anderton made his own unsuccessful attempt to buy Cawley out, Cawley began to propose various means of raising the capital for Phases 2 and 3. Anderton agreed to allow Cascades Ltd. to borrow $6.5 million from Park Cities Bank in April 2006 to fund Phase 2 and Phase 3 improvements. Later in 2006, Cawley arranged for the Bank to make a $13.325 million loan to Bellwood Ltd. Most of the loan proceeds—$7.325 million—was put into a CD at the Bank in Cawley's name, to be pledged as collateral for the loan. The rest of the money was to be used to fund part of the construction of a new clubhouse. The record contains a $13.325 million promissory note, made by Bellwood Ltd., signed by Anderton, and dated November 3, 2006. The record also contains Anderton's personal guaranty of that note.
Appellee Marcus D. Hiles became involved in the development in 2006. He was a building contractor. He entered into a joint venture with Cascades Ltd. to build homes and condominiums in the development. Hiles was also hired to build the golf course's clubhouse.
As work on the development continued in 2007, Anderton and Cawley discussed ways to raise the money that would be needed to finish the development. Cawley proposed to have a company that he owned, appellee Cawley–PB Funding, LP (“Cawley–PB Funding”), lend the partnerships $25 million—$15 million in January 2008, and $10 million a few months later. Anderton testified in his summary-judgment affidavit that Cawley made several misrepresentations in connection with this loan. He attested that Cawley misrepresented that Cawley–PB Funding had $25 million available to lend, when in fact Cawley–PB had access to only $15 million of credit from an entity called Palm Beach Multi–Strategy Fund. He also attested that Cawley misrepresented that the full $25 million would be loaned by Cawley–PB Funding, but only $15 million was ever funded. Finally, he attested that Cawley misrepresented that a $1 million fee that was paid to the managers of Palm Beach was a fee for the full $25 million loan, when it was actually a fee for the managers of Palm Beach to seek out $10 million of financing in addition to the $15 million that was already available. In January 2008, Anderton executed a loan agreement and a $25 million promissory note by Cascades Ltd. in favor of Cawley–PB Funding. The note was secured by a deed of trust on the partnership's real and personal property. Then Cawley–PB Funding assigned its interest in the loan to The Bank of New York Trust Company for the benefit of Palm Beach Multi–Strategy Fund, L.P.
Around the same time that the Cawley–PB Funding loan to Cascades Ltd. closed, Anderton and Cawley executed amended partnership agreements for both Cascades Ltd. and Bellwood Ltd. Also around this time, Park Cities Bank approved a release to Cawley of the $7.325 million CD associated with, and previously pledged as collateral for, the Bank's $13.325 million loan to Bellwood Ltd.
In 2008, Hiles voiced complaints about Anderton's management of the development, which Anderton attributed to Anderton's attempts to enforce restrictive covenants and minimum building standards in the development. In March 2008, Cawley attempted to exercise his rights under a buy-sell clause in the new Cascades Ltd. partnership agreement. Anderton filed this lawsuit in or about May 2008. On June 17, 2008, Anderton resigned from his position as the principal of the general partner of the two partnerships. Appellee Cawley–Cascade GP, LLC (“Cawley–Cascade”), which was controlled by Cawley, became the general partner of Cascades Ltd.
Anderton and Cawley executed a letter agreement on September 30, 2008, that contemplated the execution of a future settlement agreement to resolve their disputes. In the letter agreement, Anderton acknowledged and agreed that “Cascades does not have the ability to pay upcoming debt service” and that Cawley or his affiliates might need to repurchase the debt then owed ultimately to Palm Beach Multi–Strategy Fund. And in December 2008, Cawley–PB Funding did in fact acquire and become the holder of Cascades Ltd.'s debt.
Anderton testified by affidavit that Cawley misapplied revenues from “Cascade property sales” and caused the loan to go into default at the end of 2008. In February 2009, Cawley, as manager of Cawley–Cascade, made a capital call on the partners of Cascades Ltd., but no contributions were made. On or about February 26, 2009, Cawley–PB Funding gave Cascades Ltd. notice of default and notice of acceleration of the debt. Cawley–PB Funding instigated a foreclosure sale, and in June 2009 it purchased “the Cascade property” by bidding the amount of the outstanding debt on the loan. Thus, Cascades Ltd. was divested of all its assets, destroying the value of Anderton's interest in that partnership.
Anderton also testified by affidavit that Cawley simultaneously orchestrated a scheme to divest Bellwood Ltd. of its assets via the $13.325 million loan from Park Cities Bank. In February 2009, the Bank gave notice that Bellwood Ltd. was in default on the $13.325 million note, both as to interest payments and for failure to pay property taxes for 2008. On June 30, 2009, the Bank paid $114,456.46 to Smith County for Bellwood Ltd.'s 2008 property taxes. The next day, the Bank demanded reimbursement of the $114,456.46 from Bellwood Ltd. and its guarantors and gave notice of its intent to accelerate the entire debt. Several days later, on July 13, the Bank assigned the Bellwood Ltd. note and related liens and guaranties to BOT, a limited liability company of which Cawley was a manager and which Cawley had created for the purpose of purchasing the Bellwood Ltd. debt. In or about August 2009, BOT foreclosed on Bellwood Ltd.'s collateral. BOT's credit bid was only $4 million, purportedly leaving a deficiency of almost $8.4 million owed by Bellwood Ltd. and guaranteed by Anderton. Anderton contends that this whole sequence of events was fraudulent because the evidence shows that on June 30 BOT secretly paid the Bank the amount of property taxes owed by Bellwood...
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