Texas Bank & Trust Co. v. Lone Star Life Ins. Co.
| Citation | 565 S.W.2d 353 |
| Decision Date | 13 April 1978 |
| Docket Number | No. 1115,1115 |
| Court | Texas Court of Appeals |
| Parties | TEXAS BANK & TRUST COMPANY of Texas, Appellant, v. LONE STAR LIFE INSURANCE COMPANY, Appellee. |
Stephen A. Brutsche, Geary, Stahl, Koons, Rohde & Spencer, Dallas, for appellant.
William D. Sims, Jr., Jenkens & Gilchrist, Dallas, for appellee.
This is an appeal from a summary judgment that appellant, Texas Bank & Trust Company, take nothing against appellee, Lone Star Life Insurance Company, for the latter's failure to honor its loan commitment to James C. Hadsell d/b/a Signa Properties.
Appellant alleged that as a result of Lone Star's failure to honor the loan commitment, it was damaged in the amount of $251,250, the sum of $225,000 being the difference between the amount of the commitment by Lone Star and the bid price at the foreclosure sale of the real property which secured its interim loan, and $26,250 representing trustee's fees incurred by Texas Bank in relation to the foreclosure of the real property. Appellant further alleged Lone Star waived any nontransferability provision of the commitment and 60-day notice requirement by its conduct.
Lone Star answered and, at the completion of all discovery, filed a motion for summary judgment asserting that (1) Texas Bank, as opposed to Hadsell, had no cause of action against Lone Star because there was no privity of contract between Lone Star and Texas Bank, (2) conditions precedent to Lone Star's obligation, if any, to Hadsell had not been met, and (3) Hadsell was insolvent at the time for funding the loan commitment.
The trial court granted Lone Star's motion for summary judgment that appellant take nothing against appellee. From this judgment appellant perfects its appeal.
We affirm.
James C. Hadsell testified by deposition that he contacted Texas Bank and Trust in order to obtain interim financing for the purchase of an 11.559 acre tract of land in Euless, Texas. Before making the interim loan, Texas Bank required Hadsell to obtain a commitment for long-term financing. After discussions between all parties concerned, Lone Star Life issued a commitment letter to James Hadsell. The letter, dated September 14, 1972, committed Lone Star Life to lend Hadsell $750,000 between September 1, 1975, and December 31, 1975, and was signed by J. Bryan Sutherlin. We quote this letter as it appears in the record:
"September 14, 1972
Signa Properties
3001 LBJ Freeway
Suite 101
Dallas, Texas 75234
Attention: Mr. James C. Hadsell
Gentlemen:
Re: Application for $750,000 First Mortgage Loan, 11.559 Acre Tract, Euless, Texas.
We are pleased to inform you that Lone Star Life Insurance Company ('Lender') has approved your application for $750,000 First Mortgage Loan. Loan is to be made to James C. Hadsell ('Borrower') and is to be secured by a First Mortgage Lien on the above referenced property and more exactly described in Exhibit A attached hereto.
Funding of the loan by Lender is subject to the following terms and conditions:
(1) The amount of the loan is to be $750,000 for a term of five (5) years at an interest rate of 93/4% per annum. Amortization of the loan and the payment of interest thereon shall be as follows:
(a) Sixty (60) consecutive monthly payments of approximately $15,843.23 with such payments commencing one (1) month after date of closing.
(2) The loan is to be secured by First Mortgage Lien on the property described in exhibit A.
(3) Payment of the loan is to be guaranteed personally by James C. Hadsell.
(4) Borrower will provide to Lender at the date of closing a Mortgagee's Title Policy on form and from company acceptance to Lender in the amount of the loan, showing the fee simple title vested in the named Borrower, naming Lender as insured and guaranteeing that the loan is secured by a valid first lien against the property and any restrictions, easements or reservation must be approved by Lender. As a prerequisite for funding this loan the subject property must be at the time of funding zoned commercial.
(5) All documents required at closing by Lender must be acceptable to Lender's counsel.
(6) All costs of closing, including the cost of Title Policy, surveys, etc., will be borne by Borrower.
(7) Lender will not be obligated to fund the loan prior to September 1, 1975 nor later than December 31, 1975.
(8) Written notice will be given Lender Sixty (60) days prior to the date when Lender will be called upon by Borrower to fund the loan.
(9) This commitment by Lender is non-transferable and will not be binding until the agreed upon commitment and administrative fees are paid to Lender. The agreed upon commitment and administrative fees are $15,000.00 payable, upon acceptance of this Commitment Letter by you, at the home office of the Lender. The agreed upon commitment and administrative fees once paid are non-refundable whether or not the loan is funded by Lender.
If this Commitment Letter embodies terms and conditions agreeable to you, please so indicate by executing the copy of this Commitment Letter provided herewith and returning it to Lone Star Life Insurance Company along with the payment of the $15,000.00 commitment and administrative fee. This Commitment Letter will be null, void and of no further force and effect if not executed and returned prior to October 1, 1972.
For the Investment Committee,
s/J. Bryan Sutherlin
J. Bryan Sutherlin
Agreed and Accepted:
s/James C. Hadsell
James C. Hadsell"
On September 20, 1972, Hadsell executed and delivered to Texas Bank a promissory note in the amount of $750,000.00 with interest at 7% per annum, secured by a first lien on the Euless Tract. This note was due on or before September 20, 1973. After further discussion between the parties, J. Bryan Sutherlin of Lone Star wrote Texas Bank and Trust Company concerning the transferability of the commitment letter. The letter is quoted as it appears in the record:
"September 20, 1972
Texas Bank and Trust Company
One Main Place
Dallas, Texas 75250
Gentlemen:
Lone Star Life Insurance Company from time to time issues mortgage loan commitment letters to various companies or individuals. Recently Lone Star Life has issued such loan commitment letter to James C. Hadsell. Our standard commitment letter states 'this commitment by lender is non-transferable . . ..'. The intent of the non-transferability is that James C. Hadsell cannot assign the commitment letter to another individual or entity and is not intended to prevent Mr. Hadsell from banking the commitment letter. Stated differently, monies advanced to Mr. Hadsell secured by a first mortgage lien on the subject property to which he has title is in no way intended to be excluded within the intent of the non-transferability clause.
Therefore, Lone Star Life stands ready to enter into a note repurchase agreement with Texas Bank and Trust with terms and conditions of such note repurchase agreement following generally the provisions of the commitment letter or letters issued to Mr. Hadsell.
At some point the following language was added to the September 14, 1972 commitment letter:
The Texas Bank note, due on or before September 20, 1973, was never renewed or extended. On September 27, 1973, Signa Land Holdings, Inc., a corporation in which Hadsell was a stockholder, executed and delivered to Texas Bank a promissory note in the principal amount of $750,000.00 and due on or before December 26, 1973. Hadsell signed the note for Signa. On the same date, Texas Bank conveyed to Signa the bank's lien on the Euless tract, and endorsed and assigned the Texas Bank note to Signa without recourse or warranty. Signa, in turn, endorsed the Texas Bank note back to Texas Bank. George Stockwell, who was with Texas Bank from August, 1972, until April, 1975, and handled this transaction for the bank, testified by deposition that the Texas Bank note was collateral for the Signa note, dated September 27, 1973.
By letter dated September 30, 1975, Hadsell and Texas Bank made demand upon Lone Star to fund the loan commitment on November 24, 1975. This notice did not comply with the 60-day notice requirement of paragraph 8 of the loan commitment.
By letter dated November 24, 1975, Lone Star...
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