B. Gregg Price, P.C. v. Series 1 - Virage Master, LP

• Decision Date: 29 July 2021
• Docket Number: 01-20-00474-CV
• Parties: B. GREGG PRICE, P.C. AND B. GREGG PRICE, Appellants v. SERIES 1 - VIRAGE MASTER, LP, Appellee
• Court: Texas Court of Appeals

B. GREGG PRICE, P.C. AND B. GREGG PRICE, Appellants v. SERIES 1 - VIRAGE MASTER, LP, Appellee

No. 01-20-00474-CV

Court of Appeals of Texas, First District

July 29, 2021

On Appeal from the 215th District Court Harris County, Texas Trial CourtCase No. 2019-74357

Panel consists of Chief Justice Radack and Justices Landau and Countiss.

MEMORANDUM OPINION

Sherry Radack, Chief Justice

AppellantsB. Gregg Price, P.C.("Law Firm") and B. Gregg Price("Price"), challenge the trial court's summary judgment in favor of appellee, Series 1-Virage Master, LP("Virage"), in Virage's suit against the Law Firm for breach of a promissory note and against Price for breach of a guaranty.In four issues, the Law Firm and Price contend that the trial court erred in granting summary judgment, in striking their summary-judgment response, and in denying their motion for new trial.

We affirm.

Background

In its petition, Virage alleged that it is in the business of providing business-development and litigation funding to attorneys and law firms.The Law Firm is a firm located in Sulphur Springs, Texas, and Price is its sole owner and principal.On July 21, 2015, Virage and the Law Firm executed "Business Expense Note Number 946"(the "Note"), pursuant to which Virage loaned the Law Firm $3, 250, 647.05.In exchange, under the terms of the Note, the Law Firm agreed to remit certain portions of the proceeds from its cases to Virage and to provide quarterly updates on the status of its cases.Along with the Note Virage and Price executed a guaranty agreement (the "Guaranty"), pursuant to which Price guaranteed the Law Firm's obligations under the Note.

Subsequently the Law Firm failed or refused to repay the loan in accordance with the terms of the Note.Virage alleged that the Law Firm had settled cases on behalf of its clients and had either retained the entirety of the proceeds or had failed to remit the portion owed to Virage.In addition, the Law Firm had ceased, after October 2018, to provide any quarterly status updates on its cases to Virage.Accordingly Virage notified the Law Firm and Price of the default and of its acceleration of the maturity of the Note.After the Law Firm failed to pay, and Price failed to cure the default Price sued the Law Firm for breach of the Note and sued Price for breach of the Guaranty.Virage alleged that the Law Firm entered into the Note, that it breached the Note by defaulting on its terms, and that such breach damaged Virage.Virage asserted that, as of the date of suit, October 9, 2019, the entire principal balance of the loan, i.e., $3, 250, 647.05, remained outstanding.Virage asserted that Price breached the Guaranty by failing to cure the default.

The Law Firm and Price filed an answer, generally denying the allegations.In a verified plea, Price asserted that he was not liable in the capacity in which he was sued on the Guaranty because his signature was not on the Guaranty.

Virage filed a motion for summary judgment, arguing that it was entitled to judgment as a matter of law on its claims against the Law Firm and Price because there were no genuine issues of material fact.Virage asserted that its evidence established that the Law Firm executed the Note; that Price executed the Guaranty; that Virage provided the loan as agreed; that the Law Firm failed to repay the loan as agreed; that, after demand and the Law Firm failed or refused to pay, Virage accelerated the maturity of the Note; that Price, who had unconditionally guaranteed payment of the Note, failed, after notice, to cure the default; and that Virage suffered damages in the amount of $3, 250, 647.05, plus interest and fees.

To its summary-judgment motion, Virage appended the affidavit of its Managing Director, Martin Shellist.In his affidavit, Shellist testified as follows:

5.On or about July 21, 2015, the [Law Firm] executed a promissory note for the principal sum of $3, 250, 647.05 pursuant to a "LitCap Business Expense Note, NoteNo. 946"(the "[Note]").Under the terms of the [Note], the [Law Firm] agreed to use the loan proceeds for the limited purpose of funding the prosecution of the [Law Firm's] ongoing litigation cases.(See[Note], §1.1; Ex. B).The [Law Firm] agreed to repay the [Note] using attorney's fees generated by its cases.Id. at §2.3.

6.[Price] personally guaranteed the [Law Firm's] obligations under the [Note].

7.Pursuant to Section 3.2(b) of the [Note], the [Law Firm] was required to provide Virage with quarterly "case status" updates.Despite Virage's repeated requests, however, the [Law Firm] has refused to provide any case updates since July 1, 2019.The [Law Firm's] refusal to provide these quarterly case status updates constitutes an "Event of Default" under §4.1 of the [Note].

8.Additionally, the [Law Firm] has received settlements and/or favorable judgments in other cases that, under the [Note], trigger the [Law Firm's] obligation to pay a portion of the settlement or judgment (an amount equal to at least 50% of its earned attorney's fees and 100% of reimbursed expenses in those cases) to Virage.On or about July 1, 2019, the [Law Firm] admitted through email correspondence that it received a "Recovery" in over 40 "Litigation Matters" for which it failed to remit any payment to Virage.The [Law Firm], however, has repeatedly refused to make these required payments, thereby constituting another Event of Default under the [Note].

9.On February 13, 2020, and as permitted by the [Note], Virage issued a Notice of Acceleration to the [Law Firm] declaring the balance of the [Note] and all accrued interest to be immediately due and payable....The Notice of Acceleration also demanded that [Price], as guarantor, satisfy the balance.To date, Defendants have refused to pay the [Note].

10.As of March 12, 2020, the balance of the loan is $3, 250, 647.05 in principal and $2, 788, 590.20 in accrued interest, for a total of $6, 039, 237.25.

Virage also appended a copy of the Note and Guaranty, which reflect that Virage agreed to provide the Law Firm with litigation funding in the amount of $3, 250, 647.05.And, in exchange, the Law Firm agreed to provide payment and status reports to Virage as follows, in pertinent part:

2.1 Payment of Principal and Interest....Borrower agrees to make payment(s) under this Note as follows: Within ten calendar days following the end of the month in which any Recovery(ies) is received by Borrower, Borrower will pay to Holder, in accordance with Section 2.3[Treatment of Funds], Borrower's interest in such amounts until Holder has received payments of such Recovery(ies) such that the principal and interest due under this Note has been paid in full.

. . . .

3.2 Additional Covenants.Borrower and Attorney hereby represent, warrant and covenant that, so long as this Note remains unpaid or any other obligation is due and payable to Holder under this Note, Borrower and Attorney shall comply with the following:

. . . .

(b)Status Reports.Borrower or Attorney shall notify Holder and LitCap of the status of each Litigation Matter by providing to Holder a status report quarterly on or before the last day of the month following the end of each calendar quarter . . . .Each quarterly update will describe the current status of each Litigation Matter, the minimum amount in controversy in respect thereof, the anticipated date of any Recovery Event in connection therewith and any material developments arising after the date of the last quarterly update report. . . .

The Note provides that a failure to pay as agreed or to provide status reports constituted a default and allowed Virage to accelerate the maturity of the Note without notice or demand.

The Guaranty reflects that Price, "As Attorney," unconditionally guaranteed the Borrower Law Firm's payment obligations under the Note, as follows:

IN CONSIDERATION OF HOLDER ENTERING INTO THIS NOTE, ATTORNEY HEREBY UNCONDITIONALLY AGREES TO GUARANTEE THE PAYMENT OBLIGATIONS OF BORROWER UNDER THIS NOTE, AS DEFINED IN ARTICLE 2 OF THIS AGREEMENT, AND AGREES TO PAY HOLDER PROMPTLY WHEN DUE THE FULL AMOUNT OF ALL INDEBTEDNESS DUE TO HOLDER FROM BORROWER AS AND WHEN SUCH IS DUE AND PAYABLE, AND HEREBY WAIVES PRESENTMENT, NOTICE OF DISHONOR OR PROTEST.THIS IS A GUARANTY OF PAYMENT AND NOT OF COLLECTION, AND IN CASE BORROWER FAILS TO PAY ANY INDEBTEDNESS WHEN DUE, ATTORNEY AGREES TO MAKE SUCH PAYMENT OR TO CAUSE SUCH PAYMENT TO BE MADE PUNCTUALLY AS AND WHEN THE SAME SHALL BECOME DUE AND PAYABLE ON THE MATURITY DATE, WHETHER SUCH MATURITY DATE OCCURS BY ACCELERATION OR OTHERWISE . . . .

(Emphasis added.)

Virage also presented a copy of its February 13, 2020 Notice of Acceleration to the Law Firm and Price, declaring the outstanding "principal ($3, 250, 647.05) and the accrued interest ($2, 734, 976.79) under the Note to be immediately due and payable to Virage."And, Virage appended the affidavit of its counsel, Ashish Mahendru, in support of its request for attorney's fees.

It is undisputed that Virage's summary-judgment motion was set for a hearing on April 2, 2020 and that the Law Firm and Price received notice of the hearing.

On April 1, 2020, the day before the hearing, the Law Firm and Price filed a summary-judgment response.They asserted that the electronic signatures on the Note and Guaranty were "not the signatures of the maker, B. Gregg Price, P.C.[the Law Firm] or Mr. Price" and thus that "the Note and Guaranty cannot be enforced against the Defendants."They asserted that, "[f]or an electronic signature to be binding, there must be a showing of an intent by the parties to be bound by the Uniform Electronic Signature ActTex. Bus. Com. Code §322.005(b)."And, there was "no evidence presented . . . that the parties...