TransPecos Banks v. Strobach

• Decision Date: 23 March 2016
• Docket Number: No. 08–14–00059–CV,08–14–00059–CV
• Citation: 487 S.W.3d 722
• Parties: TransPecos Banks, Appellant, v. Jodi Strobach, Appellee.
• Court: Texas Court of Appeals

487 S.W.3d 722

TransPecos Banks, Appellant,

v.Jodi Strobach, Appellee.

No. 08–14–00059–CV

Court of Appeals of Texas, El Paso.

March 23, 2016

Jody D. Jenkins, Jenkins, Wagnon & Young, P.C., Lubbock, TX, for Appellant.

Richard G. Baker, Baker & Zbranek, P.C., Liberty, TX, for Appellee.

Before McClure, C.J., Rodriguez, and Hughes, JJ.

OPINION

STEVEN L. HUGHES

, Justice

TransPecos Banks sued Jodi Strobach alleging she was personally liable on a 2003 loan the Bank had made to a corporation Strobach had formed and of which she was the president and sole shareholder. The trial court granted Strobach's motion for directed verdict during trial, and entered a take-nothing judgment on the Bank's claims. We conclude Strobach could not be held personally liable for the corporate debt, because the Bank failed to raise a fact issue that Strobach committed an actual fraud on the Bank when she obtained the 2003 loan on the corporation's behalf. Accordingly, we affirm.

BACKGROUND

Strobach Pledges her Land as Collateral for her Father's Loans

The Bank made a series of loans to Strobach's father, Roger Jones. The first loan was made to Jones in 1998 solely in his individual capacity. As collateral for the 1998 loan, Strobach executed a deed of trust to the Bank on a 220–acre tract of farm land she owned. As part of the security agreement for the 1998 loan, Strobach assigned the Bank the right to receive certain farm subsidy payments associated with the land from the United States Department of Agriculture, which included conservation reserve payments (CRP).

The Bank made a second loan to Jones in March 2000, this time in the name of “Roger W. Jones, Jr. DBA Jones Farms.” That loan was secured in part by the same 1998 deed of trust covering the 220–acre tract of land that the Bank had previously accepted as security for Jones's 1998 loan. In August of 2001, the Bank made a third loan to Jones, again as “Roger Jones D/B/A Jones Farms.” The 2001 loan was secured by a separate deed of trust, signed by both Jones and Strobach, deeding to the Bank six tracts of land, including the original 220–acre tract of land referenced in the 1998 deed of trust. The 2001 deed of trust expressly referenced the 1998 deed of trust and recited that all six tracts of land were subject to various deeds of trust that Jones had previously made for the benefit of the Small Business Administration, the Farmers Home Administration, and the Farm Credit Bank of Texas.

The Bank Suggests that Strobach Form a Corporation to Help Refinance Jones's Loans

According to both Jones and Strobach, when Jones fell behind on his loan payments in 2003, a Bank representative, Joseph Keese, agreed to a two-step plan to refinance Jones's various loans. The first step was to have Strobach form a corporation into which she would transfer the original 220–acre tract of land included in both the 1998 and 2001 deeds of trust, along with two other tracts of land she owned, both of which were included in the 2001 deed of trust. The second step was to have the corporation obtain a loan from the Bank, secured by those three tracts of land and by the USDA farm subsidy payments associated with the land. Jones testified that the Bank was responsible for devising the plan, and that the Bank contacted Strobach to ask her to form the corporation as part of the plan. Strobach testified that the Bank prepared all of the documents for her signature, including the warranty deed that she utilized to transfer the three tracts of land to the corporation, explaining that she simply showed up to sign the documents as requested by her father and the Bank. The Bank presented no contrary evidence. Instead, the only Bank representative to testify at trial—the Bank's current president Marshall Coker—acknowledged that he was not affiliated with the Bank when the 2003 transaction took place and had no personal knowledge of what had occurred at that time.

Strobach filed Articles of Incorporation with the Texas Secretary of State in February 2003, forming a close corporation known as Jones–Strobach Farms, Inc. (the JSF Corporation). Strobach and Jones were named directors of the JSF Corporation, with Strobach serving as president, and Jones serving as treasurer and as the registered agent. Strobach maintained 100 percent ownership and control of the JSF Corporation, and Jones had no involvement in the Corporation after it was formed.

The Articles of Incorporation stated that the JSF Corporation had the authority to issue 100,000 shares of stock, valued at $1 per share, and that the Corporation would not commence business until it had received consideration for the issuance of the shares in the form of “money, labor done or property” valued at $1,000. A few days after filing the Articles of Incorporation, Strobach signed a warranty deed transferring her interest in the three tracts of land to the JSF Corporation. Strobach testified that although she did not know the exact value of the land at the time of the transfer, she believed they were valued at more than $1,000, even taking into consideration the land's pre-existing encumbrances. The Bank did not present any evidence to establish the value of the land in 2003, with or without the existing encumbrances.

The Bank Makes New Loans to the Corporation and Jones

Shortly thereafter, on March 10, 2003, the Bank made two loans of $160,000 each, one to the JSF Corporation and the other to “Roger Jones D/B/A Jones Farms.” The promissory note on the JSF Corporation's loan, which was signed by Strobach in her capacity as the Corporation's president, was made payable in seven annual payments of $19,018 each, beginning in October 2003, with a balloon payment of $106,616.76 due in October 2010 on the scheduled maturity date of the note. The promissory notes stated that the purpose of both loans was to “refinance debt to coincide with land ownership and CRP payments.” At trial, both parties agreed that the debt to be refinanced was the debt that Jones still owed to the Bank for his prior loans.

Strobach signed a deed of trust in her capacity as the Corporation's president, pledging to the Bank the three tracts of land now owned by the Corporation as security for the JSF Corporation's loan. Shortly thereafter, on March 13, 2003, Strobach signed a security agreement, again as the Corporation's president, pledging to the Bank all of the USDA farm subsidy payments associated with the three tracts of land. In furtherance of the security agreement, the JSF Corporation filed an assignment form with the USDA, which assigned to the Bank its rights to the CRP payments from the USDA, in the total amount of $152,144, with payments of $19,018 annually to be made to the Bank through 2010. These annual payments apparently served to fulfill the JSF Corporation's annual payment obligations under the terms of its 2003 promissory note for that seven-year period. Around the same time, the JSF Corporation also filed an assignment form with the USDA, assigning to the Bank its rights to the “direct and counter-cyclical payments” from the USDA (the cyclical payments), in the total amount of $360,600, with annual payments of $60,100 to be paid directly to the Bank for four years through 2007. These annual payments apparently served to fulfill Jones's payment obligations under the terms of his 2003 promissory note to the Bank.

The Default Proceedings

The record reflects that both of the 2003 loans were kept current at least through 2007 through the Bank's receipt of the USDA farm subsidy payments. According to Coker, problems arose in 2008, when the USDA payments stopped on Jones's 2003 loan. Although the record is not entirely clear, it appears that the last annual cyclical payment was made to the Bank in 2007 on Jones's 2003 loan in accordance with the assignment, but that Jones thereafter failed to make any additional payments on his loan, causing it to go into default.

After the Bank declared Jones's loans in default, the Bank held a foreclosure sale in May 2008, and foreclosed on the 1998 and 2001 deeds of trust that secured those loans. At the foreclosure sale, the Bank purchased all six tracts of land that had been deeded to the Bank for a total purchase price of $550,211.84. The Bank's purchase included the three tracts of land owned by the JSF Corporation, which had been included in the 2001 deed of trust to secure Jones's prior loans, as well in the 2003 deed of trust that was securing the Corporation's 2003 loan.

Because the Corporation's 2003 deed of trust was in a junior position to the 1998 and 2001 deeds of trust, the foreclosure sale effectively extinguished that 2003 deed. In addition, the Bank's purchase of the Corporation's three tracts of land at the foreclosure sale included the purchase of the right to receive the CRP payments that had been financing the Corporation's loan. Therefore, although the Corporation had previously been current on its loan obligations through the use of those CRP payments, the Bank's purchase effectively left the Corporation with no assets and no source of income from which it could meet its obligations under the terms of the Corporation's promissory note to the Bank.

After the foreclosure sale, the Bank sent two written notices to the JSF Corporation, addressed to Strobach as President of the Corporation, warning that the Corporation's loan was now unsecured due to the foreclosure sale, and that the Bank considered the loan in default. The Bank offered the Corporation the opportunity to cure the default by pledging additional collateral to secure the loan, and warned that if the Bank did not receive additional sufficient collateral, it would accelerate the note and demand payment in full. The Corporation did not respond to the notices or to provide any additional collateral to secure the note. In December 2008, the Bank sent one last notice to the JSF Corporation, this time addressed to Jones as the Corporation's registered agent, advising that the Corporation's 2003...