Hern Family Ltd. P'ship v. Compass Bank

• Decision Date: 26 March 2012
• Docket Number: Civ. No. 4:11–cv–00360.
• Citation: 863 F.Supp.2d 613
• Parties: HERN FAMILY LIMITED PARTNERSHIP and Montreux Investments, Inc., Plaintiffs, v. COMPASS BANK, dba BBVA Compass Bank, Defendant.
• Court: U.S. District Court — Southern District of Texas

863 F.Supp.2d 613

HERN FAMILY LIMITED PARTNERSHIP and Montreux Investments, Inc., Plaintiffs,

v.COMPASS BANK, dba BBVA Compass Bank, Defendant.

Civ. No. 4:11–cv–00360.

United States District Court,

S.D. Texas,

Houston Division.

March 26, 2012.

Mark A. Sanders, Attorney at Law, Houston, TX, for Plaintiffs.

John C. Holmgreen, Jr., Michael A. Mccauley, Timothy P. Dowling, Gary, Thomasson Hall & Marks, Corpus Christi, TX, for Defendant.

MEMORANDUM AND ORDER

KEITH P. ELLISON, District Judge.

Before the Court is Defendant Compass Bank's Motion for Summary Judgment (“Motion”). (Doc. No. 33.) The Court has considered the Motion, all responses and replies thereto, supplemental briefing, and the applicable law. For the reasons explained below, the Court concludes that the Motion should be GRANTED.

I. BACKGROUND

Plaintiff Hern Family Limited Partnership (“Hern”) is a Texas limited partnership that has its principal office in Harris County, Texas. (Doc. No. 6, Amended Compl. ¶ 2.) Plaintiff Montreux Investments, Inc. (“Montreux”) is a Texas corporation that also has its principal office in Harris County. ( Id.) Hern and Montreux (hereinafter, collectively “Plaintiffs”) allege that on or about February 12, 2008, Packery Commercial Development, LP (“Packery”), a Texas limited partnership, executed and delivered to Texas State Bank, in connection with a commercial line of credit, a promissory note in the original principal sum of $5,107,500 (“Note”) and a Deed of Trust. ( Id. ¶ 6.) Packery's 9.118 acre undeveloped tract of land, situated in Neuces County, Texas (“Land”), was given to secure the Note. ( Id.) On that date, Plaintiffs claim, Packery entered into a written Loan Agreement (“Loan”) and Construction Advance Agreement as requested by Texas State Bank, the purpose of which was to acquire and develop the Land. ( Id.) According to Plaintiffs, Texas State Bank was thereafter acquired by BBVA Compass Bank (“Compass” or “Defendant”). ( Id.)

Plaintiffs aver that on or about July 13, 2009, Gary Wilson (“Wilson”), an officer of Defendant, committed to writing that Defendant would renew the Loan and make an additional advance of at least $625,000 to Packery for the express purpose of completing the Land's infrastructure. ( Id. ¶ 7.) Wilson's written promise, Plaintiffs explain, made payment of interest due as a condition of renewal of the Loan. ( Id.) At the time Wilson made the written promise, Plaintiffs insist, he was aware of the project's feasibility, in that he knew Hern had the financial wherewithal to contribute additional funds to Packery to complete the project. ( Id.) Moreover, Plaintiffs contend, Wilson had personal knowledge that Packery's limited partner Hern would be making the interest payment to Defendant to renew the Loan. ( Id.)

According to Plaintiffs, Montreux advanced funds in the sum of $55,236.71 to Defendant in reliance on Wilson's written and oral representations that Packery's commercial line of credit would be renewed and further advances would be made under the Loan. ( Id. ¶ 8.) The $55,236.71, Plaintiffs explain, was voluntarily advanced as payment for accrued interest on the Loan. ( Id.) After Defendant accepted Montreux's advance, however, Defendant allegedly refused to honor its commitment to renew the Loan and make further advances. ( Id.) In further reliance upon Wilson's promise, Plaintiffs aver, Montreux advanced $14,763.29 to Packery as additional consideration for Montreux's becoming a limited partner of Packery. ( Id.) At the time Montreux made these monetary advances, Plaintiffs contend, it had not become a limited partner of Packery. ( Id.) This is because Packery had not yet obtained the written approval of all of the limited partners to admit Montreux, as required by the Packery partnership agreement. ( Id.) Plaintiffs insist that Montreux would not have paid the $55,236.71 to Defendant or the $14,763.29 to Packery but for Defendant's promise to renew the Loan and make further advances. ( Id. ¶ 9.) Instead, Plaintiffs allege, Defendant foreclosed on the Loan, destroying more than two million dollars in equity. ( Id.)

Plaintiffs insist that Wilson had personal knowledge that the payment made by Montreux was intended for the benefit of Hern; that Montreux was created for the purpose of making the interest payment to Defendant; and that Montreux would become a new limited partner of Packery. ( Id. ¶ 10.) To make matters worse, Plaintiffs contend, Hern lost its entire equity investment of $250,000 due to the Defendant's wrongful acts. ( Id. ¶ 11.) According to Plaintiffs, the economic damages to Montreux and Hern were foreseeable to Defendant. ( Id.) Nevertheless, Plaintiffs complain, Defendant acted with intent to defraud Montreux of its money and in reckless disregard of Montreux's rights. ( Id.) Plaintiffs allege that their actual damages amount to $320,000, and their consequential damages equal at least $200,000. ( Id.) Plaintiffs filed this lawsuit, bringing claims against Defendant for breach of contract, as third-party beneficiaries, for fraud, for fraud in the inducement, for promissory estoppel, and for negligent misrepresentation. ( Id. ¶¶ 12–17.)

Defendant thereafter filed a Motion to Dismiss. (Doc. No. 11.) In its Motion, Defendant argues that Plaintiffs fail to state a claim for the following reasons: (1) Plaintiffs' claims in their Amended Complaint are derivative of alleged injuries to Packery, and as alleged limited partners of Packery they have no standing or legal capacity to sue; (2) even if a limited partner of Packery had the requisite standing and legal capacity, Plaintiff Montreux cannot recover as a limited partner of Packery, because it was in fact not a limited partner of Packery at the time Defendant's relevant conduct occurred; (3) Plaintiffs cannot recover on any claim due to the Statute of Frauds contained in § 26.02 of the Texas Business & Commerce Code; (4) the economic loss rule bars Plaintiffs' tort claims; (5) Plaintiffs cannot recover on their breach of contract, fraud, fraud in the inducement, negligent representation, or promissory estoppel claims because the alleged written agreement that Plaintiffs rely on was between Defendant and Packery, and not with either of Plaintiffs; (6) Plaintiffs cannot satisfy the elements necessary for promissory estoppel recovery; and (7) Plaintiffs are not third-party beneficiaries who Texas law recognizes as entitled to recover for breach of any agreement between Defendant and Packery. (Doc. No. 11, Mot. Dismiss ¶ 7.) Defendant utilized extrinsic evidence in its Motion to Dismiss, and Plaintiffs cited to extrinsic evidence in their response. As such, the Court issued an order converting the Motion to Dismiss into a Motion for Summary Judgment. (Doc. No. 20.) Both parties submitted additional briefing on the Motion for Summary Judgment.

II. LEGAL STANDARD

To grant summary judgment, the Court must find that the pleadings and evidence show that no genuine issue of material fact exists, and therefore the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. The party moving for summary judgment must demonstrate the absence of any genuine issue of material fact; however, the party need not negate the elements of the nonmovant's case. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994). If the moving party meets this burden, the nonmoving party must then go beyond the pleadings to find specific facts showing there is a genuine issue for trial. Id. “A fact is material if its resolution in favor of one party might affect the outcome of the lawsuit under governing law.” Sossamon v. Lone Star State of Texas, 560 F.3d 316, 326 (5th Cir.2009) (quotations and footnote omitted).

III. ANALYSIS

The Court finds that summary judgment against Plaintiffs is appropriate because Plaintiffs' claims are owned by the bankruptcy estate. Even if the bankruptcy estate did not own the claims, however, Plaintiffs' claims would not survive the Motion for Summary Judgment. The breach of contract and third-party beneficiary claims are precluded by the Statute of Frauds. These claims must also fail because the evidence is insufficient for Plaintiffs to overcome the presumption that the parties to the alleged contract—Packery and Defendant—were contracting for themselves. There is no genuine issue of material fact as to the remaining tort claims, as the evidence shows that Plaintiffs were not justified in acting in reliance upon the July Email. There is no genuine issue of material fact as to Plaintiffs' fraud claim because there is no evidence that Defendant intended to deceive them or did not intend to perform, or that Defendant made any statements recklessly or without knowledge of their truth or falsity. Plaintiffs' fraudulent inducement claim must fail because there was no binding agreement. Plaintiffs cannot prevail on their promissory estoppel claim because there was no promise to sign a particular existing written agreement. As to Plaintiffs' negligent misrepresentation claim, there is no genuine issue of material fact that Defendant supplied false information; furthermore, Defendant's alleged promise was to act or not act in the future. For all of these reasons, the Court must grant Defendant's Motion.

A. Ownership of Claims by Bankruptcy Estate

Defendant argues that Plaintiffs have no standing to bring their claims because they belong to Packery's bankruptcy trustee. (Doc. No. 33, Def.'s Brief in Support of Summ. Jgmt ¶ 27.) According to Defendant, Plaintiffs have no legal interest in the partnership property of Packery, including its claims. ( Id. ¶ 28.) Moreover, Defendant contends, Plaintiffs' claims are the same as Packery's. ( Id. ¶ 29.) Defendant points out that Plaintiffs' claims arise from a July 13, 2009 email (“July Email”), sent by Wilson to Craig Guidry (“Guidry”), Packery's general partner, that provides as follows:

It is our intention to renew the current credit facility and advance...