The following constitutes the ruling of the court and has the force and effect therein described.
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United States Bankruptcy JudgeCHAPTER 11
JOINTLY ADMINISTERED
FINDINGS OF FACT AND CONCLUSIONS OF LAW Before the court is the above-captioned adversary proceeding (the "Adversary"), which was removed to this court from Tarrant County District Court on April 2, 2010. See docket no.1.1 By the Adversary, Corral Group L.P. ("Plaintiff") brings claims against SMIC, Ltd. ("SMIC"),2 Winterstone Management, Inc. ("Winterstone"), JH & BC Corp. ("JH&BC"), 13:30 Corp. ("13:30"), D. Ronald Allen ("Allen"), Arnold Pent ("Pent"), Stewart Title of North Texas, Inc. ("Stewart"), and Vicki Smith ("Smith") (collectively, "Defendants"). See Plaintiff's 4th Amended Original Petition (the "Petition," at docket no. 137). Plaintiff sued SMIC, Winterstone, JH&BC, 13:30, Allen, and Pent (collectively, "Selling Defendants"), as well as Stewart and Smith (collectively, "Title Defendants"), for civil conspiracy and negligence.3 Id. Plaintiff additionally sued SMIC for breach of contract. Id. Plaintiff also sued JH & BC, 13:30, Winterstone, Pent, Allen, and Title Defendants for tortious interference with contract. Id.
In a prior letter ruling and accompanying order, this court (1) granted summary judgment to SMIC on the issue of breach of contract; (2) granted summary judgment to JH & BC, 13:30, Winterstone, Pent, Allen, and Title Defendants on the issue of tortious interference with contract; (3) granted summary judgment to Defendants on the issue of conspiracy to tortuously interfere with contract; (4) denied Defendants' summary judgment motions on the issues of negligence and conspiracy to breach fiduciary duty; and (5) denied Title Defendants' motion for summary judgment on the issue of breach of fiduciary duty. See docket no. 363 (the "Letter Ruling"); Order on Defendants' Motions for Partial Summary Judgment (the "Summary Judgment Order"), at docket no. 366. Thus, "the claims remaining before the court are Plaintiff's negligence claimagainst [Selling Defendants],4 Plaintiff's breach of fiduciary duty and negligence claims against [Title Defendants], and Plaintiff's claims for conspiracy to breach fiduciary duty against [Defendants]." Summary Judgment Order, at 3. The Adversary has been bifurcated such that only the issue of liability, and not the issue of damages, is currently before the court.
The court held a trial (the "Trial") in the Adversary, which took place at intermittent intervals over the course of two years.5 At the Trial, the court admitted documentary exhibits into evidence6 and heard testimony from a number of witnesses.7 Over the course of the Trial, the court carefully assessed the credibility of the witnesses. The court's findings are made in accordance with its assessment of the evidence.
For the reasons given below, the court reaches the following conclusions:
(1) Selling Defendants are not liable for negligence.8
(2) Title Defendants are liable for breach of the fiduciary duty of loyalty, but not the fiduciary duty of disclosure.
(3) Because Title Defendants breached a duty owed to Plaintiff, they are also liable for negligence.
(4) Both Selling Defendants and Title Defendants are liable for civil conspiracy.
The Adversary will therefore proceed to the damages phase.9
As will be described in further detail below, the court exercises jurisdiction over the Adversary pursuant to 28 U.S.C. §§ 1334 and 157 as well as the parties' consent to this court's entry of a final judgment in the Adversary. See infra Section II.A. The following constitutes the court's findings of fact and conclusions of law pursuant to FEDERAL RULE OF BANKRUPTCY PROCEDURE 7052.
The court, having reviewed the evidence admitted at the Trial, as well as Plaintiff's Proposed Findings of Fact and Conclusions of Law ("Plaintiff's Proposed FF/CL," at docket no. 382) and Defendant's Proposed Findings of Fact and Conclusions of Law: Liability Phase of Trial at docket no. 381, makes the following findings of fact by a preponderance of the evidence. All findings of fact, where appropriate, may be also construed as conclusions of law, and vice versa.
1. Plaintiff is a limited partnership organized under the laws of the State of Texas ("Texas").
2. SMIC is a limited partnership organized under the laws of Texas.
3. Winterstone is a corporation organized under the laws of Texas.
4. JH&BC is a corporation organized under the laws of Texas.
5. Winterstone is the sole shareholder of JH&BC.
6. 13:30 is a corporation organized under the laws of Texas.
7. JH&BC and 13:30 are co-general partners of SMIC.
8. Allen is an individual residing in Texas.
9. Allen is the president of Winterstone and JH&BC.
10. Pent is an individual residing in Texas.
11. Pent is the president of 13:30.
12. Pent is a licensed real estate broker in Texas.
13. Stewart is a corporation organized under the laws of Texas.
14. Smith is an individual residing in Texas.
15. Smith is an escrow officer and branch vice president employed by Stewart.
16. N3 Development, Ltd. ("N3") is a limited partnership formed under the laws of Texas.
17. Highway 199 & Charbonneau Partners, Ltd. ("Hwy 199") is a limited partnership formed under the laws of Texas. The court will refer to N3 and Hwy 199 collectively as "Purchasers."
18. Purchasers were previously defendants in the Adversary, but they have been released by Plaintiff pursuant to the settlement described below.
19. Plaintiff and SMIC entered into a Contract of Sale Commercial dated July 28, 2004 (the "Contract"). Pursuant to the Contract, SMIC promised to sell to Plaintiff approximately 2.53 acres of real property (the "Property") located near the corner of Highway 199 and Charbonneau Road on the border of the cities of Lake Worth, Texas ("Lake Worth") andFort Worth, Texas ("Fort Worth"). The court will henceforth refer to this transaction as the "Transaction."
20. The Contract contains a flexible closing date subject to extensions and the completion of various contingencies, including the completion of a survey.
21. Allen and Pent signed the Contract on behalf of SMIC.
22. Perales signed the Contract on behalf of Plaintiff.
23. Pent acted as the principal broker for SMIC in the Transaction.
24. Paredes acted as the cooperating broker for Plaintiff in the Transaction.
25. At the time Selling Defendants entered the Transaction, they intended to sell the Property to Plaintiff.
26. Stewart served as the escrow agent for the Transaction.
27. Smith was the escrow officer/agent assigned to the Transaction.
28. The Contract was placed into escrow with Stewart on August 12, 2004.
29. The Contract required Plaintiff to deposit $10,000 earnest money (the "Earnest Money") with Stewart.
30. Stewart received the Earnest Money on August 20, 2004.
31. Smith signed the Contract on Stewart's behalf acknowledging Stewart's receipt of the Earnest Money.
32. Plaintiff planned to construct a Golden Corral Restaurant and a Popeye's Chicken Restaurant on the Property.
33. The Property is adjacent to another tract of real property (the "Adjacent Tract") which was owned and being sold by SMIC and 13:30 to N3 pursuant to a Purchase and SaleAgreement (the "Adjacent Tract PSA") dated July 22, 2004 and amended December 20, 2004.
34. N3 planned to construct a Chase Bank and a Starbucks on the Adjacent Tract.
35. N3's development plans for the Adjacent Tract required access through the Property.
36. Plaintiff intended to finance the Transaction by generating tax benefits in conformance with 26 U.S.C. § 1031's provision for exchanges of property held for productive use or investment (the "1031 Exchange").10
37. Around early 2005, the parties to the Contract began to dispute whose responsibility it was to complete the survey required by the Contract.
38. The court finds that Plaintiff intentionally stalled its efforts to comply with the terms of the Contract, and intended to stall for an indefinite period of time.
39. Selling Defendants therefore began to harbor doubts that Plaintiff would expeditiously close on the Contract.
40. On February 2, 2005, Pent discussed with N3 the possibility of selling the Property to N3 instead of Plaintiff.
41. On March 1, 2005, Selling Defendants entered into a Purchase and Sale Agreement with Purchasers (the "PSA"), effective March 4, 2005, whereby Selling Defendants promised to sell both the Property and the Adjacent Tract to Purchasers. The court will henceforth refer to this transaction as the "Second Transaction."
42. Plaintiff was not a party to the PSA.
43. None of the Defendants informed Plaintiff of the PSA or took any other action to make Plaintiff aware of the PSA in March 2005 or at any time prior to the closing of the Second Transaction.
44. Title Defendants served as the escrow agent to the PSA without withdrawing from their escrow duties under the Contract.
45. Smith signed the PSA on Stewart's behalf and accepted earnest money for the Second Transaction.
46. The court infers that Title Defendants would be compensated depending on whether the Contract or the PSA closed. That is, if the PSA closed instead of the Contract, Title Defendants would receive a commission for its services under the PSA and not the Contract, and vice versa.
47. Defendants understood that the PSA proposed to sell the subject matter of the Contract to a party other than Plaintiff.
48. The PSA included a provision (the "Confidentiality Provision," at Ex. 20 § 7.16) requiring the parties to the PSA to "keep confidential [the PSA], th[e Second Transaction], and all information learned in the course of [the Second Transaction], except to the extent disclosure is required by law or court order
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