United States Court of Appeals

for the Fifth Circuit

No. 20-40324

Lockwood International, Incorporated,

Plaintiff,

versus

Wells Fargo, National Association; Trustmark 

National Bank,

Defendants -Third Party Plaintiffs—Appellees,

versus

Michael F. Lockwood, 

Third Party Defendant—Appellant.

Appeal from the United States District Court 

for the Southern District of Texas

USDC No. 3:17-CV-365

Before Stewart, Costa, and Willett, Circuit Judges.

United States Court of Appeals

Fifth Circuit

FILED

August 16, 2021

Lyle W. Cayce

Clerk

Case: 20-40324 Document: 00515979881 Page: 1 Date Filed: 08/16/2021
No. 20-40324

2

Gregg Costa, Circuit Judge:*

Two lenders seek to collect more than $58 million from Michael 

Lockwood. How did Lockwood find himself on the hook for that eye-popping 

sum? He is the sole owner of several companies that took on a $90 million 

revolving line of credit with Wells Fargo and Trustmark National Bank. 

Lockwood’s personal liability arose after his companies began breaching a 

number of the loans’ financial covenants. To avoid acceleration—through 

which the entire loan amount would come due at once—Lockwood himself 

guaranteed the companies’ outstanding debt. The district court held that 

Lockwood breached the guaranty. We agree. 

I.

Lockwood’s companies—Lockwood International, Inc. and its 

affiliates Lockwood Enterprises, Inc., LMG Manufacturing, Inc., and Piping 

Components, Inc.—service the petrochemical, oil and gas, and construction 

industries. These businesses entered into two revolving credit notes in 

September 2015, borrowing $70 million from Wells Fargo and $20 million 

from Trustmark.

By the following year, Lockwood’s companies had already breached 

some of their obligations. The lenders had also grown concerned about the 

borrowers’ “cash burn,” “collateral deterioration,” and “poor accounting 

controls.” To address these issues, the parties modified the loan obligations 

and reduced the total debt to $72 million.

The same day that the lenders and companies amended their credit 

agreement, Lockwood executed a personal guaranty of the debt his 

* Pursuant to 5th Circuit Rule 47.5, the court has determined that this 

opinion should not be published and is not precedent except under the limited 

circumstances set forth in 5th Circuit Rule 47.5.4.

Case: 20-40324 Document: 00515979881 Page: 2 Date Filed: 08/16/2021
No. 20-40324

3

companies had assumed. The lenders required this guaranty to ensure that 

Lockwood, who had “committed to fully re-engage in the business after an 

extended leave of absence,” retained “skin in the game.” At the lenders’ 

recommendation—or insistence, as Lockwood maintains—the borrowers 

also brought on a chief restructuring officer (CRO) to help turn the 

companies around.

But the situation at Lockwood’s companies did not improve. They 

continued to default on loan obligations. And although the borrowers had 

hired a CRO, Wells Fargo was unhappy that they had not granted him “full 

authority to operate the Borrowers” or “to right-size their businesses.” The 

lenders therefore issued an ultimatum: give the CRO such authority within 

48 hours or face possible repossession of collateral and acceleration of the 

loans. Rather than risk acceleration of the sizable debt he had personally 

guaranteed, Lockwood handed over “full authority” to the CRO. But the 

borrowers remained in default, missing a required $5 million loan payment.1

To avoid acceleration, Lockwood and the borrowers executed a 

forbearance agreement with the lenders that imposed financial, operational, 

and reporting obligations on the borrowers. In it, Lockwood acknowledged 

that he owed the debt set out in the amended credit agreement, that the debts 

were “legal, valid, and binding Obligations, enforceable in accordance with 

their respective terms,” and that he had “no valid defense to the 

enforcement of such Obligations.” The forbearance agreement also 

contained a waiver and release of all “setoffs, counterclaims, adjustments, 

1 Lockwood argues that the CRO, who then had full control of his companies, 

should have directed payment of the $5 million owed. The lenders explain in response that 

the money Lockwood claims was available for the periodic payment actually constituted 

proceeds from the fire sale of the lenders’ collateral, which the lenders applied to the debt 

instead.

Case: 20-40324 Document: 00515979881 Page: 3 Date Filed: 08/16/2021
No. 20-40324

4

recoupments, defenses, claims, causes of action, actions or damages of any 

character or nature” against the lenders.

As the agreement was set to expire, and the threat of acceleration 

loomed once again, Lockwood and the borrowers signed another forbearance 

agreement recognizing their continued defaults. Lockwood once again 

acknowledged that he owed the listed debt, retained no defenses to payment, 

and waived all claims and defenses against the lenders.

When the second forbearance agreement expired and the borrowers’ 

defaults remained uncured, the lenders finally followed through on their 

threats of acceleration.

Litigation immediately followed. Lockwood International sued Wells 

Fargo and Trustmark in Galveston federal court, seeking more than $1.5 

billion in damages for negligence, fraud, conversion, and a host of other 

business torts. The lenders counterclaimed and impleaded Lockwood and 

the remaining borrowers and guarantors, alleging breach of contract and 

breach of guaranty. Those third-party defendants, in turn, counterclaimed 

against the lenders, asserting the same tort claims initially lodged by 

Lockwood International.

After much ado—a tangled trip through federal, state, and bankruptcy 

courts—nothing ultimately came of the borrowers’ tort claims against the 

lenders. But the lenders’ breach of guaranty claim against Lockwood 

survived, and the lenders moved for summary judgment. In response, 

Lockwood asserted that fact issues remained as to four of his affirmative 

defenses: fraudulent inducement, duress, unclean hands, and equitable 

estoppel.

The district court granted the lenders’ motion for summary judgment. 

It noted that the underlying breach of guaranty was “not contested,” then 

went on to evaluate Lockwood’s defenses. The court held that the waivers 

Case: 20-40324 Document: 00515979881 Page: 4 Date Filed: 08/16/2021
No. 20-40324

5

and releases Lockwood signed as part of the two forbearance agreements 

foreclosed any claim that he was fraudulently induced into signing the earlier 

guaranty. It also determined that Lockwood’s allegations of intense business 

pressure fell short of establishing duress. Lockwood’s remaining defenses 

failed because they related only to equitable relief no longer at issue. The 

district court ordered Lockwood to pay $58,710,456.26, plus interest, 

attorneys’ fees, and costs.

II.

To avoid enforcement of the guaranty, Lockwood needs a hat trick: 

He must show that the guaranty, the first forbearance agreement, and the 

second forbearance agreement are all voidable. Lockwood attempts to do so, 

arguing that in each case, the lenders obtained his signature by fraudulent 

means or by taking advantage of his dire financial straits. 

Lockwood cannot escape his promise to guarantee the debt. Even if

the guaranty itself is voidable—something we doubt but need not 

resolve—the first forbearance agreement ratified its terms.

Ratification occurs when “a party by its conduct recognizes a contract 

as valid, having knowledge of all relevant facts.” Barrand, Inc. v. 

Whataburger, Inc., 214 S.W.3d 122, 146 (Tex. App.—Corpus Christi 2006, 

pet. denied) (citations omitted). A guaranty otherwise voidable due to 

fraudulent inducement or duress cannot be avoided once ratified. See Harris 

v. Archer, 134 S.W.3d 411, 427 (Tex. App.—Amarillo 2004, pet. denied) 

(citing Rosenbaum v. Tex. Bldg. & Mortg. Co., 167 S.W.2d 506, 508 (Tex. 

1943)) (recognizing ratification as a defense to fraudulent inducement); Lee 

v. Wal-Mart Stores, Inc., 943 F.2d 554, 560 n.11 (5th Cir. 1991) (“Ratification 

is a defense to a claim of economic duress.” (citing First Tex. Sav. Ass’n of 

Dall. v. Dicker Ctr., Inc., 631 S.W.2d 179, 186 (Tex. App.—Tyler 1982, no 

writ))). Ratification “may be determined as a matter of law if the evidence is 

Case: 20-40324 Document: 00515979881 Page: 5 Date Filed: 08/16/2021
No. 20-40324

6

not controverted or is incontrovertible.” Barrand, 214 S.W.3d at 146 

(citation omitted).

The first forbearance agreement ratified the guaranty in no uncertain 

terms. It provides: “The Obligors hereby acknowledge, ratify, and 

confirm . . . the Guaranties . . . and all of their respective debts and obligations 

to Credit Parties thereunder.” So unless Lockwood can invalidate the first 

forbearance agreement, he is bound by the ratified guaranty.

A.

In district court, Lockwood argued that the first forbearance 

agreement was voidable because the lenders fraudulently induced him into 

signing it. He contends that when he executed that agreement, “he was not 

yet fully aware of the full extent of [the lenders’] bait-and-switch scheme,”

by which they promised him control over his companies and then, guaranty 

in hand, stripped him of power in favor of the CRO.2

The district court detected a glaring problem with this theory: the 

timeline of events refutes it. Lockwood learned of the purported fraud—the 

supposed scheme to replace him with the CRO—before he ratified the 

guaranty. By the time Lockwood executed the first forbearance agreement, 

he understood that he would not be in charge of his companies’ operations, 

as he had already relinquished “full authority” to the CRO. By ratifying his 

guaranty via the forbearance agreement after learning of the alleged fraud,

2 It does not appear that the lenders ever represented that Lockwood would remain 

in charge of his companies. The lenders testified that they asked for a guaranty because 

they “wanted [Lockwood] tied to the business personally” and “wanted [Lockwood] to 

have skin in the game.” But neither statement promises that Lockwood would retain full

control.

Case: 20-40324 Document: 00515979881 Page: 6 Date Filed: 08/16/2021
No. 20-40324

7

Lockwood “waive[d] any right to assert the fraud as basis to avoid the 

agreement.” Harris, 134 S.W.3d at 427 (citation omitted). 

The fraudulent inducement defense to the first forbearance 

agreement fails.

B.

On appeal, Lockwood focuses not on his temporally challenged fraud

defense but instead on his defense of duress. Lockwood argues that economic 

duress compelled him to enter into all three agreements. For the first 

forbearance agreement we are discussing, he says that duress came about 

when the lenders improperly threatened him with loan acceleration, which 

would subject his companies to “financial ruin,” if he did not turn over “full 

authority” to the CRO.

No doubt Lockwood feared the looming prospect of the banks’ 

demanding the tens of millions of dollars that he and his companies owed. 

The banks used that leverage to seek something they wanted: a transfer of 

authority to the CRO. But using leverage is what negotiation is all about. 

And difficult economic circumstances do not alone give rise to duress. See

Dicker Ctr., 631 S.W.2d at 186. If they did, then many loans would be 

voidable. People and businesses often need loans because they are facing

financial challenges. Borrowers who seek to modify their loan agreements

after failing to make payments are even more likely to be feeling the squeeze. 

Opportunities to modify—and potentially stave off financial disaster—would

be few and far between if a borrower could later void the modification because 

of the economic pressure that prompted it in the first place.

Duress requires more. Wright v. Sydow, 173 S.W.3d 534, 544 (Tex. 

App.—Houston [14th Dist.] 2004, pet. denied) (“The victim’s plight alone 

will not suffice; it must be coupled with the bad acts of the transgressor.” 

(citation omitted)). It exists only when a party can prove three things: “(1) a 

Case: 20-40324 Document: 00515979881 Page: 7 Date Filed: 08/16/2021
No. 20-40324

8

threat to do something a party has no legal right to do, (2) an illegal exaction 

or some fraud or deception, and (3) an imminent restraint that destroys the 

victim’s free agency and leaves him without a present means of protection.” 

Id. To overcome summary judgment, Lockwood must show a fact issue on 

each of these elements. Id.

Lockwood’s duress defense falters at the first step because he has not 

proven that the lenders threatened to take any unauthorized action. Id.; see 

Windham v. Alexander, Weston & Poehner, P.C., 887 S.W.2d 182, 185 (Tex. 

App.—Texarkana 1994, writ denied) (“Implicit in the term duress is that the 

threat is unlawful, improper, or unjust.”). The compiled credit agreement 

permitted the lenders to accelerate the loans upon the borrowers’ default.3

 

In the June 2017 notice of default, the lenders communicated to Lockwood 

that they would consider exercising this right unless he acted within 48 hours 

to give full control of his companies to the CRO. Lockwood has not shown

that the lenders had “no legal right” to demand he empower the CRO. 

Wright, 173 S.W.3d at 544. Nor are we aware of anything that bars a lender 

from seeking a change in management as a condition of a loan modification.

3 Lockwood argues for the first time on appeal that because the compiled credit 

agreement in the summary judgment record is redlined and unsigned, a fact issue exists on

whether the lenders had authority to accelerate the borrowers’ debt in the manner or 

amount they threatened. This argument isforfeited because it was not raised in the district 

court. Stewart Glass & Mirror, Inc. v. U.S. Auto Glass Discount Ctrs., Inc., 200 F.3d 307, 

316–17 (5th Cir. 2000). Regardless, the compiled credit agreement setting out the debt that 

Lockwood guaranteed was amended several times and appears in the record as Annex A to 

the February 27, 2017 amendment. Because the borrowers signed the February 

amendment, and that amendment “plainly refers” to the compiled credit agreement 

attached as Annex A, it does not matter that Annex A was unsigned. Owen v. Hendricks, 

433 S.W.2d 164, 166 (Tex. 1968); id. (“It is uniformly held that an unsigned paper may be 

incorporated by reference in the paper signed by the person to be charged.”). 

Case: 20-40324 Document: 00515979881 Page: 8 Date Filed: 08/16/2021
No. 20-40324

9

Lockwood has not established that the lenders perpetrated any “bad 

acts” to obtain his signature on the first forbearance agreement. Id. at 544. 

The duress defense fails. 

* * *

Because Lockwood cannot invalidate the first forbearance agreement 

on the grounds of fraudulent inducement or duress, his ratification of the 

personal guaranty stands. The judgment of the district court is 

AFFIRMED.

Case: 20-40324 Document: 00515979881 Page: 9 Date Filed: 08/16/2021