Metropolitan Life Ins. Co. v. La Mansion Hotels & Resorts, Ltd.

• Decision Date: 09 November 1988
• Docket Number: No. 04-88-00154-CV,04-88-00154-CV
• Citation: 762 S.W.2d 646
• Parties: METROPOLITAN LIFE INSURANCE COMPANY, Brantly Minor, III, Fred Arnholt, and Penny L. Parker, Substitute Trustee, Appellants, v. LA MANSION HOTELS & RESORTS, LTD., LDN, Ltd., and Patrick J. Kennedy, Sr., Appellees.
• Court: Texas Court of Appeals

Page 646

762 S.W.2d 646

METROPOLITAN LIFE INSURANCE COMPANY, Brantly Minor, III Fred Arnholt, and Penny L. Parker, Substitute Trustee, Appellants, v. LA MANSION HOTELS & RESORTS, LTD., LDN, Ltd., and Patrick J Kennedy, Sr., Appellees.

No. 04-88-00154-CV.

Court of Appeals of Texas,

San Antonio.

Nov. 9, 1988.

Rehearing Denied Jan. 5, 1989.

Seagal V. Wheatley, Craig A. Stokes, Donald R. Philbin, Jr., Oppenheimer, Rosenberg, Kelleher & Wheatley, Inc., San Antonio, for appellants.

R. Laurence Macon, G. Wade Caldwell, Cox & Smith, San Antonio, for appellees.

Before CADENA, C.J., and BUTTS and DIAL, JJ.

OPINION

CADENA, Chief Justice.

Defendants, Metropolitan Life Insurance Company (Met), Brantly Minor, III, Fred Arnholt and Penny L. Parker, substitute trustee, appeal from an order temporarily enjoining a trustee's sale of the La Mansion del Norte Hotel (del Norte) located in San Antonio. Plaintiffs are La Mansion Hotels & Resorts, Ltd. (LMHR), LDN, Ltd., and Patrick J. Kennedy, Sr.

MetHotels, Inc., and Doubletree, Inc., wholly-owned subsidiaries of Met, while named as defendants, are not parties to this appeal.

At the outset, we reject defendants' contention that the trial court erred in failing to file findings of fact and conclusions of law. Where the appeal is from an order granting a temporary injunction, no findings of fact and conclusions of law need be filed. TEX.R.APP.P. 42(a)(1); Loomis International, Inc. v. Rathburn, 698 S.W.2d 465, 467 (Tex.App.--Corpus Christi 1985, no writ).

Met is the beneficiary under a deed of trust securing a note which represents money lent by Met for the construction of del Norte. Defendant Parker is the substitute trustee under the deed of trust, while defendants Arnholt and Minor are two employees of Met. Plaintiff Kennedy is the founder of the La Mansion hotel chain; LDN is the current owner of del Norte and principal debtor under the loan documents; and LMHR is the management company which currently operates del Norte. Kennedy is the limited partner in and owns 99% of LDN and LMHR.

Plaintiffs have alleged numerous causes of action against all defendants, including MetHotels and Doubletree, the non-appealing defendants. These allegations include duress, fraud, breach of fiduciary duty, breach of duty of good faith and fair dealing, tortious interference with plaintiffs' contracts and business relationships, civil conspiracy and violation of the Deceptive Trade Practices Act. Since plaintiffs are entitled to injunctive relief if issuance of the injunction is proper under any one of these theories, our discussion will be limited to the evidence concerning the civil conspiracy claim. Insofar as del Norte is concerned, plaintiffs alleged that MetHotels, Doubletree, Arnholt and Minor conspired to interfere with plaintiff LMHR's management contracts and to cause LDN and LMHR to be in danger of losing ownership and management of del Norte.

The only question before the trial court in a temporary injunction case is whether the applicant is entitled to preservation of the status quo of the subject matter of the suit pending trial of the case on its merits. Transport Company of Texas v. Robertson Transports, Inc., 152 Tex. 551, 261 S.W.2d 549, 552 (1953). When the pleadings and the evidence support a finding of probable right and probable injury, an order granting a temporary injunction will not be disturbed on appeal. See Davis v. Huey, 571 S.W.2d 859 (Tex.1978). In reviewing such an order we will draw all legitimate inferences from the evidence in a manner most favorable to the trial court's judgment. Mendoza v. Canizales, 695 S.W.2d 266, 270 (Tex.App.--San Antonio 1985, no writ).

The La Mansion hotel chain consisted of three hotels owned and managed by Kennedy. La Mansion del Rio, in downtown San Antonio was opened in 1968 by a group of investors headed by Kennedy, who took over management in 1970. He constructed and began to operate del Norte in the northern part of San Antonio in 1978. The third La Mansion Hotel was opened in 1981 in Austin.

Kennedy obtained permanent financing for del Norte from Met in 1978. The loan was refinanced with Met in 1981 to increase the principal amount to $11,250,000.00. Kennedy executed a promissory note, payable to Met, which was secured by a deed of trust and security agreement. He also guaranteed payment of the note in an amount up to $1,300,000.00. At the time of such refinancing, Kennedy was unaware of the fact that Met was in the process of acquiring a 20% interest in Doubletree, which was actively engaged in the hotel business. Kennedy said he would not have executed the 1981 refinancing documents had he known of Met's purchase of an interest in Doubletree.

The business of La Mansion hotel flourished until 1985, when Kennedy began experiencing financial difficulties. In 1986, Kennedy hired a real estate investment consultant who was to find persons who would invest in the hotels while agreeing to retain LMHR as the management company. The retention of management rights was essential to enable and to insure the continued viability and growth of the hotel chain. The efforts to locate investors bore no fruit.

In the summer of 1986, Kennedy formulated a plan to restructure the debt of all three hotels. This plan required the cooperation of several lenders. In order to realize over one million dollars in tax benefits, the restructuring had to be accomplished no later than December 31, 1986.

In furtherance of his plan, Kennedy, still ignorant of Met's ownership interest in Doubletree, first met with Met representatives, including Arnholt and Minor, in November, 1986, when he laid out the complete financial picture of all three hotels. Met's initial reaction was positive.

Immediately after this meeting Arnholt told James Schmidt, president of Doubletree, of the negotiations with Kennedy. Schmidt's memorandum of this conversation with Arnholt recites: "[Arnholt] is playing hardball, even though [Kennedy] is a 'nice guy.' Possibility of foreclosure. We would be interested in taking over immediately."

At about this time rumors began to circulate that a Doubletree takeover of del Norte was imminent. These rumors, said Kennedy, caused a "tremendous disruption of employee morale and business" at del Norte and had a "devastating impact" on the operation of the hotel into 1987.

On December 15, 1986, Kennedy met with Mary Beth Kayle, a Met employee, who indicated that there would be no problem with Kennedy's continued management of del Norte. She suggested a "cash flow mortgage" as a means of helping Kennedy. Under this proposal, Kennedy would pay the net cash flow from del Norte or a fixed minimum payment, whichever was greater. The next day Kennedy submitted a plan for a cash flow mortgage.

Met purchased the remaining 80% interest in MetHotels and Doubletree on December 18, 1986. On December 19, 1986, Minor told Kennedy by telephone that Met rejected the cash flow mortgage proposal and would make no counter-proposal. Kennedy testified that with only eleven days left until his December 31 deadline, this rejection threatened the entire restructuring plan for the three hotels. According to him, his only alternative was bankruptcy.

On the following Monday, December 22, Kennedy and his financial consultant met with Arnholt and Minor in Houston. By this time Kennedy had learned, from the newspapers, of Met's purchase of MetHotels and Doubletree. During this adversarial meeting Arnholt expressed pleasure over the existence of Kennedy's personal guarantee because Met could pursue him in the event of a deficiency at foreclosure. However, the evidence supports the conclusion that Kennedy's equity in del Norte exceeded the amount of the debt by 3 or 4 million dollars so that there would be no deficiency. Arnholt also threatened to terminate LMHR's management contract and substitute Doubletree as manager of del Norte.

As Arnholt was leaving the meeting he outlined what Met "might do if they would do anything." According to Kennedy, since only nine days were left in 1986, he had no choice other than to accept this proposal, which became the first of two new agreements signed by the parties.

The first agreement, executed on December 31, 1986, provides that Met would forebear from posting del Norte for foreclosure for six months if Kennedy complied with the terms of this agreement. This agreement recites that Met had accelerated the note because of Kennedy's failure to make the payments due in October, November and December, 1986. Plaintiffs insist that no default had occurred because Met had agreed not to insist on such payments, and that they were coerced into accepting the default language because of the necessity of resolving the restructuring plan by December 31, 1986. This agreement reduced LMHR's management fee and, according to Kennedy, contained oppressive reporting requirements. According to the agreement, the parties contemplated that at the end of six months the note would have been brought to a current status and the original terms of the note would be reinstated. The purpose of this agreement was to provide additional time for Kennedy to seek an investor for del Norte.

Meanwhile, Arnholt continued to keep Doubletree's management informed of the negotiations with Kennedy. A memorandum from Peter Bidstrup, Doubletree's chief executive officer, to Schmidt relates that on December 22 Bidstrup indicated that there was a high probability that Met would acquire del Norte, but that the acquisition would not occur until July rather than February. An Arnholt memorandum of the same date reflects that he promised to keep Schmidt informed concerning a possible foreclosure by Met. A memorandum from Schmidt detailing a January 5, 1986, conversation with Arnholt states: "They've worked out a 'program' wherein they may get [del Norte] on July 1. Meanwhile, owners will try to sell it for sure. Could be sold. Maybe not. Could be bankruptcy...