C & A Investments, Inc. v. Bonnet Resources Corp.

• Decision Date: 30 April 1997
• Docket Number: No. 05-95-01569-CV,05-95-01569-CV
• Citation: 959 S.W.2d 258
• Parties: C & A INVESTMENTS, INC., Appellant, v. BONNET RESOURCES CORP. and Bank One, Texas, N.A., Appellees.
• Court: Texas Court of Appeals

Page 258

959 S.W.2d 258

C & A INVESTMENTS, INC., Appellant, v. BONNET RESOURCES CORP. and Bank One, Texas, N.A., Appellees.

No. 05-95-01569-CV.

Court of Appeals of Texas,

Dallas.

April 30, 1997.

Rehearing Overruled Feb. 24, 1998.

Timothy A. Duffy, Burleson Pate & Gibson, L.L.P., Dallas, for Appellant.

Jamie King Harrison, Robert J. Clary, Owens Clary & Aiken, L.L.P., Dallas, for Appellees.

Before CHAPMAN, MORRIS and HANKINSON, JJ.

OPINION

HANKINSON, Justice.

C & A Investments is a sophisticated purchaser of real estate assets. It contracted to purchase a loan from Bank One. Bonnet Resources Corporation acted as Bank One's disclosed agent handling this sale. Relying on one statement included in a bid document and several post-contract statements by Bonnet's vice-president, C & A claims that Bank One contracted to deliver a "performing" loan but did not. In this case, we must decide whether C & A may rely on those statements to prove that Bank One breached the contract and committed fraud. The trial court determined it could not and granted summary judgment. Because C & A knew statements about the loan's value might be inaccurate and promised it would independently evaluate the loan's value without relying on any information provided by Bank One and Bonnet, we agree with the trial court and affirm.

BACKGROUND

Bank One acquired a portfolio of commercial real estate loans from the Federal Deposit Insurance Corporation as receiver for certain MBanks. In April 1994, Bonnet, as Bank One's agent, began soliciting bids on loan packages from this portfolio. John Harris, one of Bonnet's assistant vice-presidents, oversaw the loan sale. Initially, Harris sent to all prospective bidders, including C & A certain bid documents: a Purchaser Eligibility Certificate, a Bidder Qualification Certificate, a Confidentiality Agreement, an Invitation to Bid and Instructions and Conditions of Bid, a Schedule of Loans, a Bid Form, and a Loan Sale Agreement.

C & A regularly bids on, and purchases, loans like those offered for sale by Bank One and has bid on more than one thousand loans. After receiving the bid documents from Harris, C & A entered the bid process. According to C & A, the Schedule of Loans it received from Harris "expressly represented that [Loan E was] 'performing'." Relying on this representation, and before doing any due diligence, C & A submitted an irrevocable bid for Loan E that Bank One accepted.

C & A and Bank One executed an agreement entitled "Loan Sale Agreement" in which C & A agreed to purchase Loan E. This agreement obligated C & A to tender earnest money equal to the lesser of one percent of the bid or $100,000. C & A made the required payment. C & A and Bank One then amended the Loan Sale Agreement. C & A tendered an additional $26,578 in earnest money pursuant to this amendment.

After C & A signed the Loan Sale Agreement and the first amendment, Dave Krunic (C & A's vice-president) performed due diligence on Loan E at Bonnet's Dallas office. He met with Harris on June 16, 1994 and asked Harris whether Loan E was in default. Harris told Krunic that Loan E was current as of June 16, 1994. Contrary to Harris's comment, however, the June 1, 1994 loan payment had not been made. No later payments were made either.

One day before closing, Krunic contacted Harris and requested the closing date be extended because C & A had not yet obtained financing. Responding to Krunic's inquiry at a meeting attended by Krunic, Harris, and Harris's supervisor David Wiley, Harris again said that Loan E "remained current." C & A and Bank One then amended the Loan Sale Agreement a second time, extending the closing date, and C & A tendered an additional $26,578 in earnest money.

Yet again, on the day before the scheduled closing, C & A contacted Harris to extend the closing date. After another meeting between the parties' representatives, Bank One and C & A amended the Loan Sale Agreement a third time, extending the closing date and requiring an additional $46,844 in earnest money. Again, C & A paid the additional earnest money.

Krunic later contacted Harris to arrange closing. Krunic claims that only then did Harris disclose that Loan E was not performing. C & A then notified Bank One that it would not purchase Loan E. Relying on its assertion that Bank One failed to advise it accurately of Loan E's status, C & A demanded that Bank One return its earnest money. Bank One refused, notifying C & A that it intended to terminate the Loan Sale Agreement and retain the earnest money as damages.

C & A filed this suit to recover its earnest money, alleging that Bank One and Bonnet breached the Loan Sale Agreement by failing to deliver a performing loan as represented in the Schedule of Loans. It also asserted that Bank One and Bonnet committed fraud because C & A relied on the Schedule of Loans and Harris's statements regarding Loan E's condition to enter into the Loan Sale Agreement and each later amendment. Bank One and Bonnet moved for summary judgment on both causes of action. C & A filed no response. The trial court granted Bank One and Bonnet summary judgment. This appeal followed.

DISCUSSION

Preliminary Arguments

According to C & A, two preliminary arguments dispose of this matter. First, C & A contends that the summary judgment must be reversed because Bank One and Bonnet admitted they breached the Loan Sale Agreement and committed fraud. To prove this claim, C & A relies on a statement in Bank One and Bonnet's motion for summary judgment in which they "assume the truth of the allegations set forth in Plaintiff's Second Amended Original Petition." In that pleading, C & A alleges Bank One and Bonnet breached the Loan Sale Agreement and committed fraud. We disagree with C & A's argument because "parties cannot validly stipulate to legal conclusions to be drawn from the facts of the case. Such stipulations are without effect and bind neither the parties nor the court." ¹ Consequently, because they are legal conclusions drawn from this case's facts, we will not give effect to the admissions C & A identifies.

Second, C & A argues that the Schedule of Loan's absence from the summary judgment record precludes a summary judgment ruling that no breach of contract occurred. We disagree because we assume, as we must at the summary judgment stage, the truth of the facts pleaded by C & A. ² Therefore, we assume the Schedule of Loans represented that Loan E was performing. Having disposed of C & A's preliminary arguments, we now review the trial court's summary judgment de novo to determine whether Bank One and Bonnet established their right to prevail as a matter of law. ³ We follow well-established procedures when reviewing this summary judgment. ⁴

Breach of Contract

In its first two points of error, C & A claims the trial court erroneously granted summary judgment for Bank One and Bonnet on its breach of contract claim. To support its breach of contract claim, C & A asserts a two-fold argument. First, C & A claims that the Schedule of Loans, which was part of the invitation to bid package Harris forwarded to it, specifically stated that Loan E was performing. Second, C & A relies on paragraph 25 of the Loan Sale Agreement, which provides that every covenant, term, representation, warranty, and agreement made by Bank One under the Loan Sale Agreement and in all bid documents survives closing and is independently enforceable. From these two provisions, C & A concludes that the statement in the Schedule of Loans was a representation that became a term in the parties' contract, survived closing, and is now independently enforceable. Accordingly, when Bank One (through its agent Bonnet) indicated before the final closing date that it intended to transfer nonperforming Loan E, Bank One and Bonnet breached the Loan Sale Agreement.

Bank One argues instead that the bid documents and the Loan Sale Agreement C & A executed precluded any statements in the Schedule of Loans from becoming a term of the parties' bargain or an enforceable representation. Therefore, the Schedule of Loan's statement that Loan E was performing did not become part of the parties' contract and Bank One did not breach the Loan Sale Agreement by delivering a nonperforming loan. Because neither party claims the Loan Sale Agreement is ambiguous, contract interpretation is a legal question for the Court. ⁵ After reviewing the summary judgment record, we agree with Bank One's interpretation of the Loan Sale Agreement and the bid documents.

The bid documents, circulated with the Schedule of Loans, contemporaneously advised C & A that statements in the Schedule of Loans pertaining to the quality, character, or value of Loan E were not reliable and thus could not become a term of the Loan Sale Agreement. In the Invitation to Bid, which C & A executed and returned to Bank One, C & A expressly acknowledged that information in the Schedule of Loans might be inaccurate:

8. Loan Information and Review Process: A Schedule of Loans is attached hereto as Schedule A. This information has been obtained from the files of the former MBanks or Realty. The information contained on the schedule of Loans may be materially INACCURATE or INCOMPLETE and Bidders are encouraged to review the files related to each loan ... to confirm this and other matters relevant to the value of each loan.

In both the Confidentiality Agreement and the Invitation to Bid, C & A acknowledged that Bank One made no representations, warranties, promises, covenants, agreements, or guaranties regarding the accuracy of any information forwarded to C & A or as to the quality, character, or value of Loan E. And, further, in the Confidentiality Agreement, C & A promised that it did not rely on any warranties or representations. Instead, when it executed the Bidder Qualification Certificate, C & A agreed to rely solely upon its own investigation regarding the quality and character of Loan E and "not on...