Bank of El Paso v. T.O. Stanley Boot Co., Inc., 08-90-00048-CV
| Decision Date | 24 April 1991 |
| Docket Number | No. 08-90-00048-CV,08-90-00048-CV |
| Citation | 809 S.W.2d 279 |
| Parties | The BANK OF EL PASO, f/k/a Cielo Vista Bank, Appellant, v. T.O. STANLEY BOOT CO., INC., T.O. Stanley, James S. Ruby, Lawrence Harmel, Henry C. Tyler, a/k/a H. Tim Tyler, and E. Guy Merrell, Appellees. |
| Court | Texas Court of Appeals |
Thomas E. Kurth, Haynes and Boone, Dallas, Rodney W. Baxter, Hardie, Hallmark, Sergent, Hardie & Langford, William B. Hardie, Jr., Hardie/Sergent, El Paso, W. Alan Wright, Haynes & Boone, Dallas, for appellant.
Bob Roberts, Law Offices of Bob Roberts, Austin, Thomas W. Brady, Pulner & Brady, Warren Pulner, Pulner & Brady, El Paso, Tom Stockton, Law Offices of Tom Stockton, Austin, Corey W. Haugland, Grambling & Mounce, El Paso, for appellees.
Before OSBORN, C.J., and FULLER and WOODARD, JJ.
Appellant Bank sued its borrowers/guarantors who in turn successfully asserted lender liability claims and affirmative defenses against the Bank. We reverse and render judgment for the Bank.
The Bank of El Paso, f/k/a Cielo Vista Bank (BANK) initiated this lawsuit seeking to recover on certain promissory notes and guaranties as well as asking for foreclosure of its security interests on certain collateral (bootmaking equipment). The borrowers successfully defended on the basis of lender liability claims and affirmative defenses. The effect of the jury verdict was to void all indebtedness to the BANK, and in addition, the jury awarded over $6 million to the boot corporation, the individual guarantors plus interest and attorney's fees in the event of an appeal. The trial court entered judgment on the verdict and all post-verdict motions were overruled.
Appellant BANK is before us asserting a multitude of claimed trial court errors. The BANK insists that the trial court should have granted its Motion for Judgment Non Obstante Veredicto and its Motion for New Trial. The Appellant also asserts the trial court erred in entering a judgment for damages resulting from a jury finding of (1) fraud; (2) breach of contract; (3) deceptive trade practice violations; (4) duress; (5) usury; and (6) impairment of collateral. The BANK also asserts that the trial court erred in entering judgment finding that it was not entitled to recovery on its own causes of action.
T.O. Stanley, a bootmaker, purchased a bootmaking company in 1979, incorporating the company under the name of T Bar S Inc. In the fall of 1986, the corporation filed for bankruptcy. At that time, the boot corporation owed the Appellant BANK approximately $66,000.00, the debt being secured by the bootmaking equipment. The equipment was abandoned by the trustee in bankruptcy.
Thereafter, T.O. Stanley acquired some investors and approached the BANK seeking financing for a proposed new corporation as well as acquiring the bootmaking equipment that had been released to the BANK by the trustee in bankruptcy. Financial statements of the investors, projections of cash flow and profits of the proposed new corporation were requested by the BANK.
A new corporation was subsequently formed: T.O. Stanley Boot Co., Inc. (CORPORATION).
Stanley and some of the new investors (STANLEY GROUP) met with Clarke Harvey and Daniel Nasser, officers of Cielo Vista Bank on December 5, 1986, concerning financing for the new corporation. Included in this discussion were start-up costs, capital investments, prospective investors and necessary documents for qualifying for a loan. The group discussed coming up with $250,000.00 in capital with the possible need of a $500,000.00 loan. There was also discussion of Stanley's outstanding personal debt with the BANK for $43,858.82, as well as the equipment previously owned by T Bar S being available for purchase for the amount of the outstanding debt on the equipment of $68,152.30. No documents were prepared or signed at this meeting. Prior to the next meeting, Daniel Nasser, bank officer, sent Clarke Harvey an interoffice memo detailing the T Bar S equipment as well as the notation that he had "requested the personal resumes on the principals of the new firm for the SBA package."
On December 19, 1986, Stanley, Merrell, Harmel and Tyler executed various loan documents with the BANK. The CORPORATION, represented by Stanley, president, executed a security agreement to the BANK in the amount of $68,152.30 pledging equipment and machinery being purchased from the BANK. Harmel, Merrell and Tyler executed guaranties for Stanley's personal note to the extent of $43,858.82 each.
On January 16, 1987, the CORPORATION, Stanley as president and Tyler as director and chief executive officer signed a commercial loan application for a draw note and a promissory note in the amount of $85,000.00 with the stated purpose of paying opening expenses and purchase of initial inventory of raw materials. The maturity date was April 16, 1987, with stated interest at prime plus 2 percent. On April 9, 1987, the notes in the amounts of $68,152.30 and $85,000.00 were consolidated into a new note in the amount of $153,570.62.
On June 17, 1987, the CORPORATION, represented by all directors, Harmel, Tyler, Stanley, Ruby and Merrell, signed and approved the U.S. SMALL BUSINESS ADMINISTRATION RESOLUTION OF BOARD OF DIRECTORS OF T.O. STANLEY BOOT CO., INC., with the explicit agreement that all undersigned parties would deliver to the BANK or SBA any and all requested documents including the application for a loan not to exceed $500,000.00 and a promissory note evidencing this loan along with any other instruments or agreements. On that same date, June 17, 1987, the Board of Directors of T.O. STANLEY BOOT CO., INC., held their organizational meeting. Standard business transpired including the acceptance of articles of incorporation, issuance of common shares, election of directors and officers, as well as, ratification of actions of corporate officers, directors and agents. Included was the ratification of: (3) corporate indebtedness of approximately $153,000.00 to Cielo Vista Bank, El Paso, Texas, and (4) application of CORPORATION for SBA loan in the original principal amount of $500,000.00.
On June 24, 1987, Ruby contacted Frank Bashore at the BANK requesting an additional loan of $20,000.00 to purchase leather. Ruby executed a continuing guaranty to accommodate T.O. STANLEY BOOT CO., INC., for an unlimited amount on the same day. Then on June 30, 1987, Ruby contacted the BANK seeking additional funding in the amount of $13,000.00 to cover expenses due to Marvin Company for additional funds to be deposited into the company's checking account. Ruby again signed a continuing guaranty to accommodate T.O. STANLEY BOOT CO., INC., for an unlimited amount on the same day.
On July 8, 1987, the SBA Loan Application was approved by the SBA for a loan of $500,000.00.
On July 17, 1987, Ruby requested an additional $30,000.00 to buy leathers. Ruby signed a blank continuing guaranty to accommodate T.O. STANLEY BOOT CO., INC., with the amount of $300,000.00 being filled in at a later time. Also on July 17, 1987, Stanley, Harmel and Merrell executed a continuing guaranty to accommodate T.O. STANLEY BOOT CO., INC., to the extent of $300,000.00. On July 31, 1987, Stanley, Merrell, Tyler, Ruby and Harmel executed a commercial loan application and a promissory note for a loan in the amount of $216,570.62, which was a consolidation of the previous notes in the amounts of $153,570.62, $20,000.00, $13,000.00 and $30,000.00, with a stated purpose of combining four commercial loans with loan proceeds designated as start-up expenses and purchasing inventory of raw materials. Maturity date was October 29, 1987, with stated interest at prime plus 1.25 percent. On October 29, 1987, the note in the amount of $216,570.62 was renewed with the accrued interest being paid.
On or about September 28, 1987, T.O. STANLEY BOOT CO., INC. and the STANLEY GROUP rejected the $500,000.00 SBA Loan proposal from the BANK. The stated reasons for rejecting the loan were the collateral terms for liens on Ruby's stock and Harmel's real estate.
After rejection of this loan, the BANK declined to make any additional loans to the CORPORATION unless additional collateral was provided by the STANLEY GROUP to secure the loan.
Not until November 3, 1987, in a letter to the BANK, was there any attempt by the STANLEY GROUP to assert a requested line of credit for $500,000.00 with amortization being suggested at a rate of $8,500.00 per month. In the next letter dated November 10, 1987, the STANLEY GROUP asserts that the BANK had lead the group to believe that it would "advance additional funds up to a total commitment of $500,000.00." On November 24, 1987, the CORPORATION, Stanley as president and Ruby as vice president, executed a note in the amount of $236,377.61 with a maturity date of May 22, 1988, and a stated interest rate of prime plus 1.25 percent. This note was a renewal of the existing note of $216,570.62 with interest being "rolled over" into the new note including the additional loan in the amount of $17,969.15 for an advance by Ruby on the interest due.
On February 26, 1988, the combined meeting of the shareholders and directors was held and standard business transpired mainly consisting of election to offices for the calendar year 1988. There was a review and discussion of the financial statements with no action taken. Also at this meeting, Ruby's offer to advance the corporation additional amounts up to $100,000.00 on an "as need be" basis was adopted with such advances being considered indebtedness of the corporation. Ruby continued to infuse funds until May of 1988. T.O. STANLEY BOOT CO., INC., ceased doing business in August 1988.
The BANK note for $236,377.61 matured on May 22, 1988. On or about July 14, 1988, demand was made on the CORPORATION and the STANLEY GROUP for payment of the outstanding note...
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