Tex. Capital Bank N.A. v. Dall. Roadster, Ltd. (In re Dall. Roadster, Ltd.)

• Decision Date: 17 January 2017
• Docket Number: No. 15-41396,15-41396
• Parties: In the MATTER OF: DALLAS ROADSTER, LIMITED; IEDA Enterprises, Inc. Debtors Texas Capital Bank N.A., Appellee-Cross-Appellant-Cross-Appellee v. Dallas Roadster, Limited, Appellant-Cross-Appellee IEDA Enterprise, Incorporated ; Bahman Khobahy, Cross-Appellees Bahman Hafezamini, Cross-Appellee-Cross-Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

846 F.3d 112

In the MATTER OF: DALLAS ROADSTER, LIMITED; IEDA Enterprises, Inc. DebtorsTexas Capital Bank N.A., Appellee-Cross-Appellant-Cross-Appellee

v. Dallas Roadster, Limited, Appellant-Cross-AppelleeIEDA Enterprise, Incorporated ; Bahman Khobahy, Cross-AppelleesBahman Hafezamini, Cross-Appellee-Cross-Appellant

No. 15-41396

United States Court of Appeals, Fifth Circuit.

Filed January 17, 2017

Jason Zendeh Del, Ryan Taylor Snow, Zendeh Del Law Firm, P.L.L.C., Plano, TX, Roger Dickert Sanders, Sanders, O'Hanlon, Motley & Young, P.L.L.C., Sherman, TX, for Appellant.

Nina Cortell, Jason Neal Jordan, Jeremy Daniel Kernodle, Haynes & Boone, L.L.P., George M. Kryder, III, Matthew Walter Moran, Esq., Vinson & Elkins, L.L.P., Kenneth M. Stohner, Jr., Jackson Walker, L.L.P., Dallas, TX, for Appellee Cross–Appellant.

Jason Paul Steed, Bell, Nunnally & Martin, L.L.P., Dallas, TX, Roger Dickert Sanders, O'Hanlon, Motley & Young, P.L.L.C., Sherman, TX, Eric C. Wood, Tommy Chase Garrett, Scheef & Stone, L.L.P., Frisco, TX, for Appellant Cross–Appellees.

Before KING, OWEN, and HAYNES, Circuit Judges.

KING, Circuit Judge:

This case comes to us after more than five years of litigation over loan agreements between a bank and a used car dealership. The borrower, Dallas Roadster, Limited, sought damages, and the lender, Texas Capital Bank N.A., sought certain attorneys' fees after receiving full payment on the loans through the borrower's bankruptcy proceedings. Each contends that the other breached the loan agreements. Following a four day bench trial on the breach of contract issues, the district court issued take-nothing judgments on the borrower's and lender's claims. Both the borrower and the lender appealed, as did one of the borrower's guarantors, who challenges the grant of summary judgment dismissing his counterclaims against the lender. For the following reasons, we AFFIRM in part, VACATE in part, and REMAND.

I. FACTUAL AND PROCEDURAL BACKGROUND

Dallas Roadster, Limited ("Roadster"), which operates a used car dealership, executed several loan agreements with Texas Capital Bank N.A. ("TCB"). While the business relationship proved profitable for both parties over the course of several years, it ended when TCB declared that events of default had occurred, accelerated the outstanding balances on the loans, and sought an ex parte receivership in state court. TCB's actions coincided with a raid by the Drug Enforcement Administration ("DEA") of Roadster and the arrest of Roadster's CEO, Bahman Hafezamini, on money laundering charges.

A. The Contracts

In 2008, TCB and Roadster executed promissory notes evidencing: (1) a $4 million loan that Roadster could use on a revolving basis for purchasing inventory ("Floor Plan Note"); and (2) an approximately $2 million loan that Roadster used to refinance its real estate ("Real Estate Note"). The maturity date of the revolving loan was extended by agreement of the parties several times. As relevant here, the loan was scheduled to mature on December 15, 2011.

In connection with the Floor Plan Note, TCB and Roadster also executed a Loan and Security Agreement ("Floor Plan Loan Agreement"). Hafezamini (Roadster's CEO), Bahman Khobahy (Roadster's President), and IEDA Enterprise, Inc. (a Texas corporation that is the general partner of Roadster and is owned 50% by Hafezamini and 50% by Khobahy) each executed an unlimited guaranty agreement. The Floor Plan Loan Agreement set out various requirements and rights. For example, in § 7.2(o), Roadster agreed to a "Change of Ownership or Control" clause, which provided that Roadster would not "[p]ermit any change in the ownership or control of Borrower, or permit the sale, transfer or conveyance of any shares or other interest in Borrower" without the prior written consent of TCB. Additionally, § 7.1(a) required Roadster to "[a]t all times maintain full and accurate books of account and records" and furnish to TCB certain financial statements and certificates of compliance. Specifically, Roadster was obligated to certify after each calendar quarter that it was in full compliance with each of the covenants in the Floor Plan Loan Agreement and that there were no events of default.

Relevant to this appeal, the Floor Plan Loan Agreement also contained an "Events of Default and Remedies" section, which listed fifteen events of default. The occurrence and continuance of an event of default would allow TCB to exercise various remedies. Although during the period at issue, there may have been other events of default, the primary focus here is on two of the fifteen events: § 9.1(n)—if TCB, "in good faith, shall deem itself insecure," and § 9.1(o)—if Roadster or any of its guarantors "suffers a material adverse change in its business or financial condition." The Floor Plan Loan Agreement provided various default remedies that TCB could exercise if an event of default occurred. For example, TCB could accelerate the outstanding balance immediately and seek the appointment of a receiver.

The Floor Plan Loan Agreement also included a non-waiver clause, which stated, in part, that no waiver "shall ever be effective unless it is in writing and signed by" TCB. Additionally, the Floor Plan Loan Agreement contained covenants requiring Roadster to pay TCB's expenses and attorneys' fees under certain circumstances.¹

In connection with the Real Estate Note, TCB and Roadster also executed a Loan and Security Agreement ("Real Estate Loan Agreement") and a Deed of Trust. Similar to the Floor Plan Loan Agreement, the Real Estate Loan Agreement contained various obligations on the part of Roadster, a list of events of default, and remedies that TCB could exercise. Moreover, the Real Estate Loan Agreement included a "cross-default" provision, which stated that a default under any other loan agreement between TCB and Roadster, such as the Floor Plan Loan Agreement, would also constitute an event of default under the Real Estate Loan Agreement.

B. DEA Investigation

In September 2010, the DEA notified TCB that it was investigating Roadster and Hafezamini, among others. As part of the investigation, the DEA conducted four undercover operations in which government agents purchased vehicles from Roadster, each time using more than $10,000 in cash. Although Roadster was required to file a form with the Internal Revenue Service anytime more than $10,000 in cash was used for a purchase, Roadster failed to do so after each of these undercover purchases.

Throughout the investigation, TCB cooperated with and was regularly kept up to date by the DEA. For example, after the first undercover purchase, the DEA met with TCB to review a large cash deposit by Roadster. The DEA also communicated with TCB about potential arrests. For example, on November 9, 2011, the DEA emailed TCB that a federal grand jury had indicted Hafezamini on money laundering charges and that the DEA intended to implement searches and arrests on November 16, 2011. The next day, the DEA met with and told TCB that a search of Roadster would occur on November 16, 2011.

On November 16, 2011, the DEA executed its search warrants and seized books, records, computer equipment, and currency from Roadster. Hafezamini was also arrested on November 16. His indictment was later dismissed after he agreed to a pretrial diversion agreement in July 2012.

C. TCB's Actions After Becoming Aware of the DEA Investigation

In late 2010, after being alerted to the DEA investigation, TCB started to take steps to protect itself. Specifically, TCB hired a monitor who conducted daily audits on Roadster's premises. TCB also asked Roadster to start looking for alternative financing, a prompt that may also have been occasioned in part by the approaching maturity date of the Floor Plan Note. At least by late June 2011, TCB had retained counsel to prepare for the filing of a receivership. During this time, however, Roadster continued to operate efficiently. Indeed, an email from a TCB employee in May 2011 recognized that "Dallas Roadster appears to be operating more efficiently than ever."²

On October 26, 2011, TCB sent a Notice of Default to Roadster, IEDA, Hafezamini, and Khobahy claiming that Roadster was in default under the loan agreement because Roadster had sought financing from Automotive Finance Corporation ("AFC"). TCB requested that Roadster notify it in writing if Roadster had not entered into a financing agreement with AFC. Although Roadster did not respond to TCB in writing, Roadster did inform representatives of TCB in person that it had not entered into a credit facility with AFC.³

On November 15, 2011, the day before the DEA raided Roadster and arrested Hafezamini, TCB sent a Notice of Acceleration and Notice of Cross-Default and Acceleration to Roadster, IEDA, Hafezamini, and Khobahy. The letter was not actually delivered until the next day, November 16. In the letter, TCB once again based its default claim on Roadster's pursuit of alternative financing from AFC. Additionally, TCB cited two other events of default under the Floor Plan Loan Agreement as independent grounds for exercising its default remedies: § 9.1(n) (when TCB, in good faith, deems itself insecure), and § 9.1(o) (when Roadster or any guarantor suffers a material adverse change in its business or financial condition). The letter concluded that this was not intended to be an exhaustive list of potential events of default.

On November 16, 2011, soon after the DEA raid had begun, TCB filed its Original Petition and Emergency Application for Appointment of a Receiver in Texas state court against Roadster and its guarantors (IEDA, Hafezamini, and Khobahy). The suit alleged (1) default under the Floor Plan Note, (2) breach of contract, (3) liability on the guaranties, and (4) entitlement to attorneys' fees. Additionally, as part of the emergency application for receivership, TCB "request[ed] that the Court appoint a receiver to take control of and manage the property ... and to provide for...