Manufacturers' Hanover Trust Co. v. Kingston Investors Corp.

• Decision Date: 29 October 1991
• Docket Number: No. 01-91-00769-CV,01-91-00769-CV
• Citation: 819 S.W.2d 607
• Parties: MANUFACTURERS HANOVER TRUST COMPANY, Appellant, v. KINGSTON INVESTORS CORPORATION, E. Peter Krulewitch, William Hitchcock, and Stanley Rothman, Appellees. (1st Dist.)
• Court: Texas Court of Appeals

Page 607

819 S.W.2d 607

MANUFACTURERS HANOVER TRUST COMPANY, Appellant, v. KINGSTON INVESTORS CORPORATION, E. Peter Krulewitch, William Hitchcock, and Stanley Rothman, Appellees.

No. 01-91-00769-CV.

Court of Appeals of Texas Houston (1st Dist.).

Oct. 29, 1991.

Charles R. Haworth, Mikel J. Bowers, Katherine Techmanski, Dallas, for appellant.

Tom Alan Cunningham, Houston, for appellees.

Before TREVATHAN, C.J., and COHEN and O'CONNOR, JJ.

OPINION

TREVATHAN, Chief Justice.

This is an appeal from an interlocutory order granting a temporary injunction pursuant to § 51.014(4) of the Texas Civil Practice and Remedies Code. This Court is asked to determine whether the trial court abused its discretion when it temporarily enjoined appellant, Manufacturers Hanover Trust Company (MHT), from pursuing any court proceedings in the State of New York against appellees, Kingston Investors Corp. (Kingston), E. Peter Krulewitch, William Hitchcock, and Stanley Rothman.

Fact Summary:

In 1983, MHT, a New York banking corporation, extended a line of credit for $500,000 to Kingston, a New York corporation, for the purpose of investing and developing real estate. The line of credit was guaranteed by the sole owners of Kingston, Peter Krulewitch, William Hitchcock, and Stanley Rothman (collectively the guarantors). Kingston executed a $4,860,601.18 note dated April 6, 1990 payable to MHT on demand. The purpose of the note was to renew the line of credit, which had reached a balance of $4,860,601.18. The guarantors each executed unconditional guarantees for full payment of the note. As of the date of the note, the full balance had been advanced to Kingston. The proceeds of the line of credit were used in part to improve real estate in Houston, Texas not owned by Kingston, or any of the guarantors. The property is owned by a separate legal entity, Kingston Houston Partner One Limited, a Texas limited partnership. ¹ MHT has made demand on Kingston and on the guarantors. However, the full principal amount of the note is presently outstanding, and there have been no interest payments made since December 20, 1990.

By letter dated June 7, 1991, MHT offered to negotiate a work-out with Kingston. MHT told Kingston if it did not receive a response by June 14, 1991, it would pursue its legal rights, remedies, and privileges under the terms of the note and of the guarantees. Kingston responded on June 13, 1991, requesting a meeting in an effort to come to a negotiated settlement. MHT allegedly relied on this response, delayed filing an action in New York, and scheduled a meeting with Kingston's president, Krulewitch, on June 27, 1991.

On June 14, 1991, appellees filed an original petition in Texas for damages and injunctive relief, asserting appellant had fraudulently induced them into signing the note and the guarantees. That case will be referred to as the "Texas action." Appellees asserted MHT failed to disclose the financial condition of Alvin Dworman, another customer of MHT, who became involved in the real estate project after the note was executed. Appellees allege MHT, as the chief lender to Dworman and his various companies, knew Dworman would be unable to honor his commitment to provide additional funds and permanent financing for the project. Appellees contend MHT was aware of Dworman's financial crisis long before appellees executed the note and guarantees, and MHT had a duty to disclose this information to them.

The June 27, 1991, meeting failed to resolve the dispute. No mention was made of the petition filed on June 14, 1991. MHT then proceeded to file a notice of motion for summary judgment in lieu of complaint against appellees in a New York state supreme court, to recover amounts due and payable on the note and under the guarantees. Appellees were served with summons on July 1 and 2, 1991. On July 5, 1991, service of citation was made on the Texas Secretary of State for service on MHT.

A hearing was held on August 22, 1991, in the Texas action, where appellees argued MHT should be enjoined from proceeding in New York. On August 23, 1991, the trial court issued its order granting appellees application for temporary injunction. The trial court held the Texas action was the first filed action, that appellees had shown a substantial likelihood of prevailing on the trial of the cause, that appellees would suffer irreparable harm because they would be unable to present their alleged defenses on the note and guarantees in the New York action, and a judgment in New York "might" force the sale of real property in Texas.

MHT raises three points or error, which we will address as one. MHT contends the trial court abused its discretion in granting the temporary injunction for the following reasons:

1. Appellees failed to establish the prerequisites for injunctive relief.

2. Appellees failed to satisfy the requirements for issuance of an anti-suit injunction.

3. The evidence established that appellees should be estopped from asserting that the Texas action should be given priority as the first filed action.

Prerequisites for Injunctive Relief:

At a hearing on an application for temporary injunction, the only question before the trial court is whether the applicant is entitled to preserve the status quo, pending trial on the merits. Davis v. Huey, 571 S.W.2d 859, 862 (Tex.1978). The applicant for an injunction must plead a cause of action, show a probable right to recover the relief sought, and probable injury in the interim. Sun Oil Co. v. Whitaker, 424 S.W.2d 216, 218 (Tex.1968). The applicant must further show that no adequate legal remedy exists. In order for a legal remedy to be adequate, it must give the applicant complete, final, and equitable relief. David v. Bache Halsey Stuart Shields, Inc., 630 S.W.2d 754, 756 (Tex.App.--Houston [1st Dist.] 1982, no writ); King v. Miller, 280 S.W.2d 331, 333 (Tex.Civ.App.--Eastland 1955, writ ref'd n.r.e.).

Because an appeal of an order granting or denying a temporary injunction is an appeal from an interlocutory order, the merits of the movant's case are not presented for appellate review. Our review is strictly limited to whether there has been a clear abuse of discretion. Iranian Muslim Org. v. City of San Antonio, 615 S.W.2d 202, 208 (Tex.1981); Philipp Bros., Inc. v. Oil Country Specialists, Ltd., 709 S.W.2d 262, 265 (Tex.App.--Houston [1st Dist.] 1986, writ dism'd). An abuse of discretion occurs when the trial court misapplies the law to established facts or when the evidence does not reasonably support the conclusion that the applicant has a right to recovery. State v. Southwestern Bell Tel. Co., 526 S.W.2d 526, 528 (Tex.1975); Miller v. K & M Partnership, 770 S.W.2d 84, 87 (Tex.App.--Houston [1st Dist.] 1989, no writ). MHT argues the trial court abused its discretion in granting the temporary injunction. We agree.

a. Probable Right to Recovery:

A review of the evidence reveals appellees did not demonstrate a probable right to recovery, a probable injury in the interim, or that there was no adequate remedy at law. The basis of appellees' lender liability suit is that MHT fraudulently induced them to execute the note and its guarantee by failing to disclose the financial condition of Dworman. The allegation of fraud in the inducement alone, however, is not a defense to a suit on a note and, therefore, does not itself show a right of probable recovery. Town North Nat'l Bank v. Broaddus, 569 S.W.2d 489, 491 (Tex.1978). Appellees were required to clearly demonstrate trickery, artifice, or device to support a defense of fraud in the inducement. Id.; see also Texas Export Dev. Corp. v. Schleder, 519 S.W.2d 134, 139 (Tex.Civ.App.--Dallas 1974, no writ). Appellees made no such allegations and demonstrated no such potential evidence.

Appellees contend MHT knew of their reliance on Dworman for the eventual permanent financing of the Houston project, and MHT had a duty to disclose its knowledge of Dworman's weakening financial condition. However, appellees so far have alleged no facts that would tend to show that any special or confidential relationship existed between them and MHT, other than one of borrower and lender, that would impose a duty to disclose upon MHT. As a general rule, a bank and its customers do not have such a relationship. Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex.1962). It is well settled that the relationship between a borrower and its lender is neither a fiduciary relationship, nor a special relationship. Victoria Bank & Trust Co. v. Brady, 779 S.W.2d 893, 902 (Tex.App.--Corpus Christi 1989, aff'd in part, rev'd on other grounds, 811 S.W.2d 931 (Tex.1991). Moreover, the supreme court has rejected the contention that an implied duty of good faith and fair dealing exist in every contract. English v. Fischer, 660 S.W.2d 521, 522 (Tex.1983). Such a duty is recognized only where the contract between the parties expressly provides such a duty or where there is a special relationship between the parties to the contract. Manges v. Guerra, 673 S.W.2d 180, 183 (Tex.1984). The evidence presented at the temporary injunction hearing made no showing of such a relationship between appellees and MHT. Even if MHT had knowledge of appellees' reliance on Dworman's financing, appellees failed to present any evidence showing MHT had any duty to disclose Dworman's financial condition. Thus, appellees failed to show any probable right of recovery.

b. Irreparable Harm:

The trial court found if MHT continued with the proceeding in New York, appellees would suffer irreparable harm because a judgment "may" be rendered against appellees and that such judgment "might" force the sale of the Houston project at price below its fair market value.

The law is well settled that a trial court abuses its discretion in granting a temporary injunction unless it is clearly established by the facts that one seeking such relief is threatened with an actual irreparable injury if the...