IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

ASKE GIRMA, §

 §

Plaintiff, §

 § Civil Action No. 3:05-CV-0961-D

VS. §

 §

COMPASS BANK, §

 §

Defendant. §

MEMORANDUM OPINION

 AND ORDER 

In this removed action, plaintiff Aske Girma (“Girma”) sues

defendant Compass Bank (“Compass”) for statutory fraud in

connection with a real estate transaction, under Tex. Bus. & Com.

Code Ann. § 27.01 (Vernon 2002), common law fraud, and breach of

contract arising from his unsuccessful attempt to purchase a gas

station and convenience store. Compass moves for summary judgment

as to all claims. Concluding there are genuine issues of material

fact concerning whether the parties entered into a contract for the

sale of the property, but that there are no genuine issues of

material fact as to the fraud claims and that Compass is entitled

to judgment as a matter of law, the court grants in part and denies

in part Compass’s motion.

I

Compass and Girma entered into a contract on November 22, 2004

(“the first contract”) under which Compass agreed to sell Girma a

gas station and convenience store located in Mesquite, Texas for

 

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1The court recounts the evidence favorably to Girma, as the

summary judgment nonmovant, and draws all reasonable inferences in

his favor. See, e.g., Clift v. Clift, 210 F.3d 268, 270 (5th Cir.

2000).

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$700,000.1 Compass did not at the time have title to the property;

rather, it was the lender on a secured loan. Because the loan was

in default, Compass anticipated that it would foreclose. The first

contract made Compass’s obligation to sell the property to Girma

contingent on Compass’s obtaining title at a December 7, 2004

foreclosure sale and approval of the sale by Compass’s Senior Loan

Committee.

Dan V. Matise (“Matise”) represented Compass in the contract

negotiations as its broker. Hisham Awadelkariem (“Awadelkariem”)

represented Girma as his agent. During the negotiations, Matise

assured Girma that the foreclosure “would be a formality,” P. App.

1, that the outstanding amount due on the note was in excess of

$1.7 million, that no one would bid that amount, and that the

property therefore “‘would be [Girma’s],’” id. at 2.

Out of concern that the gas station and convenience store

would lose its customer base after an extended period of closure,

Girma asked that Compass give him a key to the property so that he

could keep the utilities and security system on, prepare the

property for a certificate of occupancy, and otherwise ready the

property for opening after the purchase. Matise obtained a key for

Girma.

 

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After Compass and Girma entered into the first contract, they

learned of environmental concerns related to the property.

Consequently, Compass postponed the sale. The property was not

sold at the December 7, 2004 foreclosure sale, and Compass’s Senior

Loan Committee did not approve the sale to Girma.

Compass and Girma began additional negotiations, culminating

in Matise’s preparing a second contract (“the second contract”)

with a purchase price of $680,000. Similar to the conditions of

the first contract, the second was contingent on Compass’s

acquiring title to the property at a March 1, 2005 foreclosure sale

and on approval by Compass’s Senior Loan Committee.

The parties dispute whether they entered into the second

contract. Girma maintains that he signed the second contract on or

about February 11, 2005 and that William R. Rosenberg

(“Rosenberg”), a Compass Vice President, had already signed it.

Compass avers that Matise prepared the second contract by making

changes to the sale price of the first contract, changing the dates

on the first contract’s signature page, and attaching the first

contract’s executed signature page to the second contract, with the

intent that both parties would initial each page of the second

contract and its addendum. Compass contends that no employee,

agent, or representative of Compass executed the second contract.

Compass did not acquire title to the property at the March 1,

2005 foreclosure sale; instead, a third party purchased the

 

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2Girma’s breach of contract claim appears to relate only to

the second contract. He does not seek to enforce the terms of the

first contract.

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property for $674,000.

Girma sued Compass in Texas state court, asserting state-law

claims for fraud in connection with a real estate transaction under

Tex. Bus. & Com. Code Ann. § 27.01, common law fraud, and breach of

contract.2 Girma seeks compensatory and exemplary damages and

attorney’s fees. Compass removed the case to this court based on

diversity of citizenship, and it now seeks summary judgment on each

of Girma’s claims.

II

Compass moves for summary judgment on Girma’s breach of

contract claim, contending that no Compass employee, agent, or

representative signed the second contract, and that it is not

enforceable because its conditions precedent were not met.

A

Compass first maintains that it never entered into the

contract because no employee, agent, or representative of Compass

ever executed the agreement. In support of its position, Compass

relies on the affidavits of Matise and Rosenberg.

Matise avers that he prepared the second contract by starting

with the first contract, changing the sale price to $680,000, and

attaching the executed signature pages from the first contract to

the second contract, with the intention of having both parties

 

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initial each page of the second contract and the addendum. He

states that he changed the dates on the signature page of the

second contract to reflect a date of February 11, 2005 for Girma

and an open February 2005 signing date for Compass. Matise states:

To my knowledge, neither Compass nor

Girma ever executed or initia[l]ed the [second

contract], as revised. To my knowledge, the

[second contract] was never sent to Chicago

Title Company. . . . In my capacity as

broker for Compass, I never executed nor

initia[l]ed the [second contract].

. . . .

Rosenberg never signed or initialed the

[second contract] in my presence and never

provided me a signed or initialed copy.

Compass never agreed to the [second] contract

attached to the Petition.

D. App. 21-22.

Rosenberg states in his affidavit that, although he did sign

the first contract, he never signed the second. He avers that his

signature from the first contract has been inserted into the

second.

In his response brief, Girma does not explicitly respond to

this ground. Nevertheless, for two reasons, there is a genuine

fact issue concerning whether Rosenberg executed the second

contract. First, Girma’s evidence controverts Compass’s proffered

explanation for the presence of Rosenberg’s signature on the second

contract. Girma avers that he went to Matise’s office and signed

the second contract on or about February 11, 2005. Awadelkariem

 

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states in his affidavit that he accompanied Girma, Girma signed the

second contract, and Matise gave Girma a copy. This testimony

controverts Compass’s explanation because, if the first contract’s

signature page was merely appended to the second contract with the

signatures still in place and only the dates changed, a reasonable

jury could find that Girma’s signature would already have appeared

on the purchaser’s signature line, and he would have been unable to

sign the second contract in the space designated for the

purchaser’s signature. 

Second, a reasonable jury could also find that the signatures

on the signature page of the second contract are slightly different

from the ones on the first contract. Compare id. at 11 with id. at

50. This is inconsistent with the evidence that the second

contract’s executed signature page was merely appended from the

first contract.

Thus a genuine fact issue exists regarding whether Compass’s

explanation for the presence of the signatures on the second

contract is true. Because a reasonable jury could find that

Compass did execute the second contract, summary judgment cannot be

granted.

C

Compass also posits that the second contract is unenforceable

because two conditions precedent were not met: (1) Compass did not

acquire title to the property at a foreclosure sale, and (2)

 

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3

For the purpose of analyzing this ground of Compass’s motion,

the court construes the facts in the light most favorable to Girma

and assumes arguendo that Compass and Girma executed the second

contract. See, e.g., Clift, 210 F.3d at 270.

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Compass’s Senior Loan Committee did not approve the sale of the

property.3

1

“A condition precedent is an event that must happen or be

performed before a right can accrue to enforce an obligation.”

Centex Corp. v. Dalton, 840 S.W.2d 952, 956 (Tex. 1992) (citing

Hohenberg Bros. v. George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex.

1976) (“Conditions precedent to an obligation to perform are those

acts or events, which occur subsequently to the making of a

contract, that must occur before there is a right to immediate

performance and before there is a breach of contractual duty.” )).

Under Texas law, “[a] party seeking to recover under a contract

bears the burden of proving that all conditions precedent have been

satisfied.” Associated Indem. Corp. v. CAT Contracting, Inc., 964

S.W.2d 276, 283 (Tex. 1998). “As a general rule, expressed

conditions must be exactly fulfilled or no liability can arise on

the promise which such conditions qualify.” Regent Int’l Hotels,

Ltd. v. Las Colinas Hotels Corp., 704 S.W.2d 101, 103 (Tex. App.

1985, no writ). But “[w]hen the obligation of a party to a

contract depends upon a certain condition’s being performed, and

the fulfillment of the condition is prevented by the act of the

 

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other party, the condition is considered fulfilled.” Dorsett v.

Cross, 106 S.W.3d 213, 217 (Tex. App. 2003, pet. denied) (citing

Houston County v. Leo L. Landauer & Assocs., Inc., 424 S.W.2d 458,

464 (Tex. Civ. App. 1968, writ ref’d n.r.e.)); see also Miller v.

Baum, 400 F.2d 176, 178 (5th Cir. 1968) (“Under the law of Texas,

‘where two parties enter into a contract and consummation of said

contract is dependent upon occurrence of a future event, the

promissor should do nothing to prevent the occurrence of such

future event.’” (quoting Huckleberry v. Wilson, 284 S.W.2d 205, 206

(Tex. Civ. App. 1955, writ dism’d w.o.j.))); cf. Rhodessa Dev. Co.

v. Simpson, 658 S.W.2d 218, 220-21 (Tex. App. 1983, no writ)

(holding, where contract to purchase property was contingent on

zoning change, purchaser had implied duty to exercise due diligence

to obtain zoning change); Willeford v. Walker, 499 S.W.2d 190, 192

(Tex. Civ. App. 1973, no writ) (holding, where contract to purchase

property was contingent on purchaser’s obtaining financing,

purchaser had implied duty to apply for loan).

2

The second contract provided: “Purchaser agrees and

understands that performance of this Contract of Sale by [Compass]

is specifically contingent upon [Compass’s] receiving Title to the

Subject Property at a foreclosure sale presently posted for a March

1, 2005 sale in Dallas County.” D. App. 49. It also stated:

 

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The Buyer acknowledges that prior to the

Closing, the Seller must obtain approval from

its Senior Loan Committee. The acceptance of

this Contract by the Seller prior to receipt

by the Seller of the appropriate approval is

subject to the potential rejection of this

Contract by the Senior Loan Committee. If

this Contract is rejected or not approved by

5:00 PM February 17, 2005, the Contract shall

automatically terminate and the Earnest Money

shall be returned to the Buyer [and] neither

party shall have any further rights or

obligations under the Contract.

Id. at 53. By their terms, these provisions are conditions

precedent to Compass’s obligation to sell the property to Girma

under the second contract.

The parties do not dispute that Compass did not acquire title

to the property at the March 1, 2005 foreclosure sale. Instead, a

third party purchased the property for $674,000. It is reasonable

to infer from the $674,000 sale price that Compass did not bid a

higher amount at the sale. If Compass’s own failure to bid up to

the $680,000 contract price caused the condition precedent to be

unsatisfied, then under Texas law the condition is deemed met. See

Dorsett, 106 S.W.3d at 217. On the present record, it is unclear

whether Compass would have been successful in acquiring title to

the property had it bid up to the $680,000 contract price at the

foreclosure sale——i.e., the third party may nevertheless have

outbid Compass had it bid up to $680,000. Thus a fact issue exists

concerning whether Compass’s own conduct——its failure to bid up to

$680,000——caused the condition precedent to be unsatisfied, thus

 

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4

In his response brief, Girma contends that Compass should be

estopped from denying its obligation to bid up to the outstanding

amount due on the note at the foreclosure sale because Matise

assured Girma that the bank would do so. In its reply brief,

Compass objects based on the parol evidence rule to the portions of

the affidavits of Girma and Awadelkariem in which they aver that

Matise assured Girma that Compass would actually obtain title to

the property at the foreclosure sale. Because the court does not

reach Girma’s estoppel argument and does not rely on these portions

of Girma’s evidence in deciding the summary judgment motion, the

objections are overruled as moot.

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precluding summary judgment on this ground.4

3

Compass also maintains that the contract is unenforceable

because Girma did not meet the condition precedent of Senior Loan

Committee approval of the sale of the property to him. Girma

maintains that Compass has failed to present any evidence showing

that this condition precedent was not met.

Girma’s contention is technically correct. In support of

Compass’s position that neither contract was ever approved by its

Senior Loan Committee, Compass cites portions of Matise’s and

Rosenberg’s affidavits in which they aver that the Senior Loan

Committee did not approve the first contract, but they do not refer

explicitly to the second contract. But the affidavits do state

that, on or about February 18, 2005, Compass decided not to sign

the second contract. It is reasonable to infer from these

averments that the Senior Loan Committee did not approve the second

contract since Compass decided not to go forward with it.

Nevertheless, Compass is not entitled to summary judgment on this

 

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5Under § 27.01(a), fraud in connection with a real estate

transaction consists of a

(1) false representation of a past or existing

material fact, when the false representation

is

(A) made to a person for the purpose of

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basis.

To the extent that Compass’s argument about the lack of Senior

Loan Committee approval is a necessary corollary of its contention

that it did not execute the second contract——i.e., Compass decided

not to execute the second contract, so it follows that the Senior

Loan Committee never approved the contracted sale——the court has

already concluded that there are genuine issues of material fact

that preclude summary judgment based on the assertion that Compass

did not execute the second contract. And to the extent the

condition precedent was unmet because Compass did not submit the

second contract to the Senior Loan Committee for approval, there is

a genuine fact issue as to whether this condition is deemed

satisfied on the basis that Compass prevented its fulfillment. See

Dorsett, 106 S.W.3d at 217. 

Accordingly, the court denies Compass’s motion for summary

judgment on Girma’s breach of contract claim.

III

Compass next moves for summary judgment on Girma’s claim for

fraud in connection with a real estate transaction, under Tex. Bus.

& Com. Code Ann. § 27.01.5

 Girma’s § 27.01 claim is based on his

 

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inducing that person to enter into a

contract; and

(B) relied on by that person in entering

into that contract; or

(2) false promise to do an act, when the false

promise is

(A) material;

(B) made with the intention of not

fulfilling it;

(C) made to a person for the purpose of

inducing that person to enter into a

contract; and

(D) relied on by that person in entering

into that contract.

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allegation that, before he executed the first contract, Matise

misrepresented to him that, absent someone’s bidding the full

$1,751,000 outstanding on the note, Compass would obtain title to

the property at the foreclosure sale. Girma alleges that, relying

on Matise’s misrepresentation, he repaired and improved the

property and expended money on brokerage fees, lender finance fees,

and environmental studies.

Compass contends it is entitled to summary judgment because

§ 27.01 requires the existence of an enforceable contract, but the

first contract’s conditions precedent were not satisfied and the

parties never entered into the second contract. Compass also

asserts that Girma disclaimed reliance on Matise’s statements.

Addenda to both the first contract and the second contract

provide:

 

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The Buyer agrees with and represents,

warrants, guarantees and promises to the

Seller as follows:

. . . .

c) The Buyer has not relied, and is not

relying, upon any information, document,

sales brochures, or other literature,

maps or sketches, projection pro forma,

statement representation, guarantee or

warranty (whether expressed or implied,

oral or written, material or immaterial)

that may have been given or made by, or

on behalf of the Seller.

. . . .

h) The Seller is not liable or bound in

any manner by any verbal or written

statement, representations or information

pertaining to the Property furnished by

any broker, agent, employee, servant or

other person, unless the same or

specifically set forth or referred to in

this Contract.

P. App. 19-20; D. App. 14-15.

The court holds that a reasonable jury could only find that,

when Compass and Girma entered into the first contract, Girma

explicitly disclaimed reliance on Matise’s representation, thereby

precluding Girma’s § 27.01 fraud claim as it relates to the first

contract. See Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171,

182 (Tex. 1997) (holding that disclaimer of reliance precludes

§ 27.01 fraud claim).

The parties dispute whether they entered into the second

contract. If, at trial, the jury finds that they did, then Girma’s

disclaimer of reliance in the second contract will preclude his

 

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§ 27.01 fraud claim as it relates to the second contract. See id.

If the jury finds that the parties did not, then Girma’s § 27.01

fraud claim is still precluded because § 27.01 requires the

existence of a contract involving a real estate transaction. See

Nolan v. Bettis, 577 S.W.2d 551, 556 (Tex. Civ. App. 1979, writ

ref’d n.r.e.) (“An examination of § 27.01 shows that it is

concerned with misrepresentation of material fact made to induce

another to enter into a contract for the sale of land or stock.

Because there was neither a contract nor a sale of land between the

parties involved in this case, § 27.01 is inapplicable.”); see also

Evans v. Wilkins, 2001 WL 1340356, at *3 (Tex. App. Nov. 1, 2001,

no pet.) (unpublished opinion) (“Courts have consistently

interpreted this requirement strictly, holding that for a fraud in

a transaction to be actionable under § 27.01, the contract in

question must actually effect the conveyance of real estate between

the parties . . . .” (collecting cases)). Thus regardless whether

the parties entered into the second contract, Girma cannot prevail

on his § 27.01 claim.

Accordingly, the court grants Compass summary judgment

dismissing Girma’s § 27.01 claim for fraud in connection with a

real estate transaction.

 

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IV

The court next addresses Compass’s motion for summary judgment

on Girma’s common law fraud claim. This action is based on the

same alleged misrepresentation as is his statutory fraud claim:

Matise’s averment that Compass would obtain title to the property

at the foreclosure sale absent another person’s bidding the full

$1,751,000 outstanding on the note.

The elements of common law fraud in Texas are

(1) a material representation was made; (2) it

was false when made; (3) the speaker either

knew it was false, or made it without

knowledge of its truth; (4) the speaker made

it with the intent that it should be acted

upon; (5) the party acted in reliance; and (6)

the party was injured as a result.

Fluorine On Call, Ltd. v. Fluorogas Ltd., 380 F.3d 849, 858 (5th

Cir. 2004) (quoting Coffel v. Stryker Corp., 284 F.3d 625, 631 (5th

Cir. 2002)). Compass argues that it is entitled to summary

judgment because the terms of the second contract preclude Girma’s

reliance on any misrepresentation, the summary judgment evidence

shows that Compass made no misrepresentation to Girma, he cannot

prove that any reliance on his part resulted in any damages, and he

cannot show that any misrepresentation was made recklessly or with

knowledge of its falsity or made in anticipation of reliance on it.

Because Compass will not have the burden at trial on this

claim, it can obtain summary judgment by pointing the court to the

absence of evidence to support it. See Celotex Corp. v. Catrett,

 

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477 U.S. 317, 325 (1986). If it does, Girma must go beyond his

pleadings and designate specific facts showing there is a genuine

issue for trial. See id. at 324; Little v. Liquid Air Corp., 37

F.3d 1069, 1075 (5th Cir. 1994) (en banc) (per curiam). Summary

judgment is mandatory where the nonmoving party fails to meet this

burden. Little, 37 F.3d at 1076. 

 The court grants Compass summary judgment on Girma’s common

law fraud claim because Compass has asserted that Girma “cannot

show that such misrepresentation was made recklessly or with

knowledge of its falsity,” D. Br. 20, and Girma has not adduced

evidence that would permit a reasonable jury to find that Matise

made the misrepresentation with the knowledge of its falsity or

without knowledge of its truth. This failure as to one essential

element is sufficient to warrant the entry of summary judgment on

the entire claim. See, e.g., Edgar v. Gen. Elec. Co., 2002 WL

318331, at *4 (N.D. Tex. Feb 27, 2002) (Fitzwater, J.) (“The

summary judgment nonmovant’s failure to adduce proof as to any

essential element of his cause of action renders all other facts

immaterial.” (citing Celotex, 477 U.S. at 323)).

In his response brief, Girma addresses Matise’s knowledge of

falsity in this conclusory statement, unsupported by any citation

to the summary judgment evidence: “There is at the very minimum a

material fact issue as to whether or not Matise knew such

representation to be false when he made it or, as required by the

 

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6

Compass also posits that it is entitled to summary judgment

on both Girma’s statutory fraud claim and his common law fraud

claim because Girma has not pleaded fraud with the requisite

particularity mandated by Rule 9(b). The court need not reach this

argument because it concludes on other grounds that Compass is

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law, asserted such a misrepresentation without knowledge of its

truth.” P. Br. 4. Beyond this, Girma does not direct the court to

proof that would permit a reasonable jury to find that Matise knew

the statement was false. The court is not required to “sift

through the record” in search of a genuine issue of material fact.

Doddy v. Oxy USA, Inc., 101 F.3d 448, 463 (5th Cir. 1996); see also

N.D. Tex. Civ. R. 56.5(c) (“A party whose . . . response is

accompanied by an appendix must include in its brief citations to

each page of the appendix that supports each assertion that the

party makes concerning the summary judgment evidence.”). Girma’s

conclusory assertion, made without any citation to evidence, is

insufficient to withstand summary judgment. See, e.g., Ramsey v.

Henderson, 286 F.3d 264, 269 (5th Cir. 2002) (“[C]onclusory

allegations, speculation, and unsubstantiated assertions are

inadequate . . . .” (quoting Douglass v. United Servs. Auto. Ass’n,

79 F.3d 1415, 1429 (5th Cir. 1996) (en banc))). Because Girma has

failed to adduce evidence demonstrating the existence of a genuine

issue of material fact that Matise knew of the falsity of his

representation at the time he made it, or made the representation

without knowledge of its truth, Compass is entitled to summary

judgment on Girma’s common law fraud claim.6

 

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entitled to summary judgment on both fraud claims.

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V

Compass also contends that it is entitled to summary judgment

dismissing Girma’s request for exemplary damages and attorney’s

fees. Because the court has dismissed Girma’s tort claims and only

an action for breach of contract remains, Compass cannot be held

liable for exemplary damages. Because the court has denied summary

judgment, however, as to Girma’s breach of contract claim, he can

recover attorney’s fees if he proves his breach of contract action

at trial.

* * *

Compass’s December 30, 2005 motion for summary judgment is

granted as to Girma’s statutory and common law fraud claims and

denied as to his breach of contract claim.

SO ORDERED.

May 31, 2006.

_________________________________

SIDNEY A. FITZWATER

UNITED STATES DISTRICT JUDGE

 

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