Thomas v. Barton Lodge II, Ltd., PHAM-B

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Writing for the CourtBefore JOLLY, WIENER and PARKER; E. GRADY JOLLY
Citation174 F.3d 636
PartiesGeorge R. THOMAS, Plaintiff-Appellant-Cross-Appellee, v. BARTON LODGE II, LTD., Defendant-Third Party Plaintiff-Counter Defendant-Appellee, v. PHAM Barton Lodge II, Limited Partnership, et al., Third Party Defendants, Ron Beneke, et al., Third Party Defendants-Cross Defendants, v. Ron Beneke;arton Lodge II Limited Partnership; The Paul D. Hinch Family Partnership, Limited; The Discop Company, Incorporated; Alliance/PCA Apartment Portfolio I Limited Partnership; Alliance/PCA Company; HBC Partners Limited Partnership; Hinch Partners, Third Party Defendants-Cross Defendants-Appellees, General Electric Capital Corporation; General Electric Real Estate Equities, Incorporated, Third Party Defendants-Cross Defendants-Appellees-Cross-Appellants, v. David Johnston; David Johnston Corporation, Third Party Defendants-Cross Claimants-Cross Defendants, v. Lee R. Larkin; Arch McNeil, Cross Claimants-Counter Plaintiffs-Appellants.
Docket NumberNo. 97-50412,PHAM-B
Decision Date12 May 1999

Page 636

174 F.3d 636
George R. THOMAS, Plaintiff-Appellant-Cross-Appellee,
v.
BARTON LODGE II, LTD., Defendant-Third Party
Plaintiff-Counter Defendant-Appellee,
v.
PHAM Barton Lodge II, Limited Partnership, et al., Third
Party Defendants,
Ron Beneke, et al., Third Party Defendants-Cross Defendants,
v.
Ron Beneke; PHAM-Barton Lodge II Limited Partnership; The
Paul D. Hinch Family Partnership, Limited; The Discop
Company, Incorporated; Alliance/PCA Apartment Portfolio I
Limited Partnership; Alliance/PCA Company; HBC Partners
Limited Partnership; Hinch Partners, Third Party
Defendants-Cross Defendants-Appellees,
General Electric Capital Corporation; General Electric Real
Estate Equities, Incorporated, Third Party
Defendants-Cross
Defendants-Appellees-Cross-Appellants,
v.
David Johnston; David Johnston Corporation, Third Party
Defendants-Cross Claimants-Cross Defendants,
v.
Lee R. Larkin; Arch McNeil, Cross Claimants-Counter
Plaintiffs-Appellants.
No. 97-50412.
United States Court of Appeals,
Fifth Circuit.
May 12, 1999.

Page 638

Randy Lee, Lee & Healy, El Paso, TX, Robert Keith Whitt, Richard D. Davis, Midland, TX, for Thomas.

Scott Alan Scher, McGlinchey Stafford, Dallas, TX, for Beneke.

David Paul Blanke, John C. Wander, Vinson & Elkins, Dallas, TX, for General Elec. Capital Corp. and General Elec. Real Estate Equities, Inc.

Appeals from the United States District Court for the Western District of Texas.

Before JOLLY, WIENER and PARKER, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

This case involves the alleged malfeasance of numerous parties to a transaction in which the principal asset of Barton Lodge II, Ltd. ("BL II"), a limited partnership, was sold by the general partner to stave off a foreclosure sale. The district court dismissed the case in a series of summary judgment rulings, and three of the parties to the litigation, George Thomas, Lee R. Larkin and Arch McNeil, now

Page 639

appeal. We hold that the district court erred in part when it held that the plaintiffs failed to allege actual damages. In most respects, however, we affirm the district court's summary judgment rulings, including its ruling that the statute of limitations barred various claims and that the case of Newton v. Mallory, 601 S.W.2d 181 (Tex.Civ.App.--Dallas 1980, no writ), applies to bar the largest part of the alleged damages. We therefore affirm in part, reverse in part and remand.
I

The facts regarding the events leading up to the current dispute are contested by the parties. To the extent possible, we will present those facts to which all parties agree, and then turn to the respective versions of events alleged by the defendants and the plaintiffs in this case.

A

BL II is a Texas limited partnership, which was formed on September 1, 1982, to construct and own an apartment project ("the Project") in Austin, Texas. The partnership consisted of a general partner, who contributed $99 in capital to the partnership and 56 limited partners who each contributed approximately $50,000 in capital to the partnership. The general partner of BL II was PHAM-Barton Lodge II Limited Partnership ("PHAM"). PHAM itself was a partnership made up of a number of general partners, one of which, Ron Beneke, is a named defendant in this case. The named plaintiff in this case, George Thomas, was one of the limited partners in BL II.

In order to finance the Project, BL II obtained a loan from University Savings Association ("USA") for $8.75 million in exchange for a security interest in the Project. In 1986, BL II defaulted on the mortgage. In 1990, the Resolution Trust Corporation (the "RTC"), which had inherited the mortgage from USA, posted the Project for a May 1, 1990 foreclosure sale.

On April 2, 1990, PHAM sent a letter ("the April 2 letter") to the limited partners proposing a sale of the project. The letter stated:

Although you have thirty days within which to make your decision under the terms of the partnership agreement, an immediate response is requested because the general partner has been informed by the current holder of the project indebtedness that unless these consents are received in time to permit the project to be sold on April 30, 1990, in the transaction described herein, it is likely that the project will be foreclosed by the holder of the mortgage indebtedness as soon as legally possible after May 1, 1990.

The letter went on to describe the proposed transaction:

The General Partner proposes to sell the Project in a simultaneous two step transaction. In the first phase, the Partnership would sell the Project to David Johnston Corporation ("DJC"), which is a corporation owned by David Johnston who is affiliated with members of the General Partner, in exchange for $10,000 cash and subject to the outstanding indebtedness on the Project at the date of the sale.... The purchaser also will agree to pay the Partnership 70.175% of any sums it receives, if, as and when received, pursuant to contract rights granted to the purchaser in the second phase of the transaction. These contract rights will include 35.625% of any (i) Net Dispositions and Refinancing Proceeds and (b) Net Cash Flow (each as hereinafter defined) from the Project. Since the Partnership will be receiving 70.175% of the purchaser's 35.625% contract rights, the Partnership will actually receive 25f such amounts generated from the Project.

DJC intends to ask the Resolution Trust Corporation ("RTC"), which currently holds the mortgage indebtedness on the Project, to reduce the total payoff for the outstanding indebtedness on the

Page 640

Project to $6,800,000. Because DJC intends to use the proceeds from the second phase of the transaction to pay off the outstanding indebtedness on the Project and because such payoff will remove a non-performing asset from the RTC's portfolio without the need for foreclosure or the advance by the RTC of further funds, the General Partner believes that the RTC will agree to accept the reduced payoff from DJC. However, there can be no assurance in this regard.

After paying off the reduced debt on the Project, DJC will sell the Project to Alliance/PCA ("Alliance"). The sales price will be (a) $6,844,000 in cash, (b) 35.625% of any Net Disposition and Financing Proceeds (as described below) that Alliance receives when and if it refinances or disposes of the Project, and (c) 35.625% of all Net Cash Flow from the Project, meaning operating income less debt service and preferential return on capital (including any accruals thereof) and expenses of operating, managing, repairing, maintaining and improving the Project. It is highly unlikely that there will be any Net Cash Flow from the Project. Alliance is a joint venture whose members include affiliates of General Electric Capital and a company to be owned by partnerships and/or trusts for the benefit of the members and/or families of members of the General Partner.

The acquisition cost of the Project will be financed through loans and/or equity contributions from affiliates of General Electric Capital and/or Alliance/PCA (the "Acquisition Advance"). The Acquisition Advance is estimated at $6,995,000 including closing costs of $25,000 plus a one point brokerage fee to the Melody Company, one point to General Electric Capital Affiliates and one-half point to PCA affiliates.

On April 26, 1990, Thomas sent a letter to PHAM refusing to consent to the proposed sale. In that letter he stated:

I believe the General Partner on this proposed sale is looking after his own interest at the expense of the limited partner and the limited partner is left "holding the bag."

There may also be mismanagement and incompetence, as well as conflict of interest in negotiating with the lender and the proposed buyer, and I am planning to consult my attorney about legal remedies.

On April 30, 1990, the Project was sold in a two-step transaction, first to David Johnston Corporation ("DJC"), then to Alliance/PCA Apartment Portfolio I Limited Partnership ("A/PCA Portfolio"). A/PCA Portfolio is a limited partnership made up of a general partner, Alliance/PCA Company, and two limited partners, HBC Partners ("HBC") and General Electric Real Estate Equities, Inc. ("GE Equities"). The transaction effectively took place pursuant to the description in the April 2 letter. DJC paid the proposed $10,000 to BL II and received the Project subject to the mortgage indebtedness. DJC also agreed to pay BL II 70.175% of its 35.625% contract rights under the sale of the project to A/PCA Portfolio. DJC then sold the Project to A/PCA Portfolio in exchange for $6,795,000 and its 35.625% contract rights. The RTC released DJC of the mortgage indebtedness in exchange for $6,750,000. In order to purchase the Project from DJC, A/PCA Portfolio borrowed approximately $6,900,000 from General Electric Capital Corporation ("GE Capital").

On September 7, 1990, PHAM sent a letter to the limited partners stating that the Project had been sold on April 30, 1990. In December 1990, A/PCA Portfolio sold the Project to Clayton, Williams & Sherwood for $8,839,500. Under its contract rights, DJC received $407,046. DJC then paid $285,645 to the limited partners and retained $121,402. The overall consequences to the limited partners of the transaction were that they received a final payout of approximately $5,000 on an initial

Page 641

investment of $50,000 and they received approximately $45,000 in reportable capital earnings for tax purposes.
B

We now proceed to the version of events presented by the defendants in this matter. We note that what we iterate now essentially amounts to allegations made by the defendants. For purposes of this appeal, we pass no judgment as to the relative truth of these allegations.

According to the defendants, BL II, like many real estate ventures from that period was simply a business failure. In the mid-80s it became increasingly apparent that BL II's revenues from leasing apartments simply...

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121 practice notes
  • Williams v. J.B. Hunt Transp., Inc., No. Civ. A. H–13–2510.
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • 22 d2 Setembro d2 2015
    ...the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Thomas v. Barton Lodge II, Ltd., 174 F.3d 636, 644 (5th Cir.1999), citing Celotex, 477 U.S. at 322, 106 S.Ct. 2548, and Liberty Lobby, 477 U.S. at 249–50, 106 S.Ct. 2505.Allegations in a p......
  • In re Enron Cor. Sec., Dervivative & "Erisa" Lit., No. MDL-1446.
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • 30 d4 Novembro d4 2006
    ...the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Thomas v. Barton Lodge II, Ltd., 174 F.3d 636, 644 (5th Cir.1999), citing Celotex, 477 U.S. at 322-23, 106 S.Ct. 2548, and Liberty Lobby, 477 U.S. at 249-50, Page 632 106 S.Ct. 2505.3 The ......
  • Ford v. Houston Indep. Sch. Dist., Civ. A. H-13-2598
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • 18 d3 Março d3 2015
    ...the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Thomas v. Barton Lodge II, Ltd., 174 F.3d 636, 644 (5thPage 5Cir. 1999), citing Celotex, 477 U.S. at 322, and Liberty Lobby, 477 U.S. at 249-50. Allegations in a plaintiff's complaint are ......
  • Monge v. Rojas (In re Monge), CASE NO. 09-30881-hcm
    • United States
    • United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Western District of Texas
    • 5 d5 Setembro d5 2014
    ...investigation wouldPage 163have led the Monges to discover the actions of which they now complain. See Thomas v. Barton Lodge II, Ltd., 174 F.3d 636, 640-47 (5th Cir. 1999) (holding that district court did not err in holding statute of limitations applied where general partner communicated ......
  • Request a trial to view additional results
121 cases
  • Williams v. J.B. Hunt Transp., Inc., No. Civ. A. H–13–2510.
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • 22 d2 Setembro d2 2015
    ...the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Thomas v. Barton Lodge II, Ltd., 174 F.3d 636, 644 (5th Cir.1999), citing Celotex, 477 U.S. at 322, 106 S.Ct. 2548, and Liberty Lobby, 477 U.S. at 249–50, 106 S.Ct. 2505.Allegations in a p......
  • In re Enron Cor. Sec., Dervivative & "Erisa" Lit., No. MDL-1446.
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • 30 d4 Novembro d4 2006
    ...the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Thomas v. Barton Lodge II, Ltd., 174 F.3d 636, 644 (5th Cir.1999), citing Celotex, 477 U.S. at 322-23, 106 S.Ct. 2548, and Liberty Lobby, 477 U.S. at 249-50, Page 632 106 S.Ct. 2505.3 The ......
  • Ford v. Houston Indep. Sch. Dist., Civ. A. H-13-2598
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • 18 d3 Março d3 2015
    ...the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Thomas v. Barton Lodge II, Ltd., 174 F.3d 636, 644 (5thPage 5Cir. 1999), citing Celotex, 477 U.S. at 322, and Liberty Lobby, 477 U.S. at 249-50. Allegations in a plaintiff's complaint are ......
  • Monge v. Rojas (In re Monge), CASE NO. 09-30881-hcm
    • United States
    • United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Western District of Texas
    • 5 d5 Setembro d5 2014
    ...investigation wouldPage 163have led the Monges to discover the actions of which they now complain. See Thomas v. Barton Lodge II, Ltd., 174 F.3d 636, 640-47 (5th Cir. 1999) (holding that district court did not err in holding statute of limitations applied where general partner communicated ......
  • Request a trial to view additional results

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