Affirmed and Opinion Filed April 30, 1997

In The

Qltfurt of Appeals

iTtftlf Ststrtrt at dkxas at Ballas

No. 05-95-01569-CV

C & A INVESTMENTS, INC., Appellant

V.

BONNET RESOURCES CORP. and BANK ONE, TEXAS, N.A., Appellees

On Appeal from the 44th District Court

Dallas County, Texas

Trial Court Cause No. 94-10887-B

OPINION

Before Justices Chapman, Morris, and Hankinson

Opinion By Justice Hankinson

C &A Investments is a sophisticated purchaser of real estate assets. It contracted

to purchase a loan from Bank One. Bonnet Resources Corporation acted as Bank One's

disclosed agent handling this sale. Relying on one statement included in abid document and

several post-contract statements by Bonnet's vice-president, C&Aclaims that Bank One

contracted to deliver a "performing" loan but did not. In this case, we must decide whether

C&Amay rely on those statements to prove that Bank One breached the contract and
fV^^^i^'^ife^^^*^^'**^^

committed fraud. The trial court determined it could not and granted summary judgment.

Because C &A knew statements about the loan's value might be inaccurate and promised

it would independently evaluate the loan's value without relying on any information provided

by Bank One and Bonnet, we agree with the trial court and affirm.

Background

Bank One acquired a portfolio of commercial real estate loans from the Federal

Deposit Insurance Corporation as receiver for certain MBanks. In April 1994, Bonnet, as

Bank One's agent, began soliciting bids on loan packages from this portfolio. John Harris,

one of Bonnet's assistant vice-presidents, oversaw the loan sale. Initially, Harris sent to all

prospective bidders, including C&A, certain bid documents: a Purchaser Eligibility

Certificate, aBidder Qualification Certificate, aConfidentiality Agreement, an Invitation to

Bid and Instructions and Conditions of Bid, aSchedule of Loans, aBid Form, and aLoan

Sale Agreement.

C&Aregularly bids on, and purchases, loans like those offered for sale by Bank

One and has bid on more than one thousand loans. After receiving the bid documents from

Harris, C&Aentered the bid process. According to C&A, the Schedule of Loans it

received from Harris "expressly represented that [Loan Ewas] 'performing'." Relying on

this representation, and before doing any due diligence, C&Asubmitted an irrevocable bid

for Loan E that Bank One accepted.

C&Aand Bank One executed an agreement entitled "Loan Sale Agreement" in

which C&Aagreed to purchase Loan E. This agreement obligated C&Ato tender

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earnest money equal to the lesser of one percent ofthe bid or$100,000. C &Amade the

required payment. C&Aand Bank One then amended the Loan Sale Agreement. C&

A tendered an additional $26,578 in earnest money pursuant to this amendment.

After C&Asigned the Loan Sale Agreement and the first amendment, Dave Krunic

(C &A's vice-president) performed due diligence on Loan Eat Bonnet's Dallas office. He

met with Harris on June 16, 1994 and asked Harris whether Loan Ewas in default. Harris

told Krunic that Loan Ewas current as of June 16, 1994. Contrary to Harris's comment,

however, the June 1,1994 loan payment had not been made. No later payments were made

either.

One day before closing, Krunic contacted Harris and requested the closing date be

extended because C&Ahad not yet obtained financing. Responding to Krunic's inquiry

at ameeting attended by Krunic, Harris, and Harris's supervisor David Wiley, Harris again

said that Loan E"remained current." C&Aand Bank One then amended the Loan Sale

Agreement asecond time, extending the closing date, and C&Atendered an additional

$26,578 in earnest money.

Yet again, on the day before the scheduled closing, C&Acontacted Harris to

extend the closing date. After another meeting between the parties' representatives, Bank

One and C&Aamended the Loan Sale Agreement athird time, extending the closing date

and requiring an additional $46,844 in earnest money. Again, C&Apaid the additional

earnest money.

Krunic later contacted Harris to arrange closing. Krunic claims that only then did

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Harris disclose that Loan E was not performing. C & A then notified Bank One that it

would not purchase Loan E. Relying on its assertion that Bank One failed to advise it

accurately of Loan E's status, C&Ademanded that Bank One return its earnest money.

Bank One refused, notifying C&Athat itintended to terminate the Loan Sale Agreement

and retain the earnest money as damages.

C&Afiled this suit to recover its earnest money, alleging that Bank One and Bonnet

breached the Loan Sale Agreement by failing to deliver a performing loan as represented

in the Schedule of Loans. It also asserted that Bank One and Bonnet committed fraud

because C&Arelied on the Schedule of Loans and Harris's statements regarding Loan E's

condition to enter into the Loan Sale Agreement and each later amendment. Bank One and

Bonnet moved for summary judgment on both causes of action. C&Afiled no response.

The trial court granted Bank One and Bonnet summary judgment. This appeal followed.

Discussion

Preliminary Arguments

According to C&A, two preliminary arguments dispose of this matter. First, C&

Acontends that the summary judgment must be reversed because Bank One and Bonnet

admitted they breached the Loan Sale Agreement and committed fraud. To prove this

claim, C&Arelies on a statement in Bank One and Bonnet's motion for summary

judgment in which they "assume the truth of the allegations set forth in Plaintiffs Second

Amended Original Petition." In that pleading, C&Aalleges Bank One and Bonnet

breached the Loan Sale Agreement and committed fraud. We disagree with C&A's

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argument because "parties cannot validly stipulate to legal conclusions to be drawn from the

facts of the case. Such stipulations are without effect and bind neither the parties nor the

court."1 Consequently, because they are legal conclusions drawn from this case's facts, we

will not give effect to the admissions C &Aidentifies.

Second, C &A argues that the Schedule of Loan's absence from the summary

judgment record precludes asummary judgment ruling that no breach of contract occurred.

We disagree because we assume, as we must at the summary judgment stage, the truth of

the facts pleaded by C&A.2 Therefore, we assume the Schedule of Loans represented that

Loan Ewas performing. Having disposed ofC&A's preliminary arguments, we now review

the trial court's summary judgment de novo to determine whether Bank One and Bonnet

established their right to prevail as amatter of law.3 We follow well-established procedures

when reviewing this summary judgment.4

Breach of Contract

In its first two points of error, C&Aclaims the trial court erroneously granted

summary judgment for Bank One and Bonnet on its breach of contract claim. To support

its breach of contract claim, C&Aasserts atwo-fold argument. First, C&Aclaims that

the Schedule of Loans, which was part of the invitation to bid package Harris forwarded to

1Martinez v. Hardy, 864 S.W.2d 767, 770 (Tex. App.-Hou.ton [14th Dist.] 1993, no writ) (citations omitted).

2See Sasser v. Dantex Oil &Gas, Inc., 906 S.W.2d 599, 604 (Tex. App.-San Antonio 1995, writ denied).

3See American States Ins. Co. v. Arnold, 930 S.W.2d 196,199 (Tex. App.-Dallas 1996, writ denied).

4See Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985).

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it, specifically stated that Loan Ewas performing. Second, C&Arelies on paragraph 25

of the Loan Sale Agreement, which provides that every covenant, term, representation,

warranty, and agreement made by Bank One under the Loan Sale Agreement and in all bid

documents survives closing and is independently enforceable. From these two provisions,

C &A concludes that the statement in the Schedule of Loans was a representation that

became a term in the parties' contract, survived closing, and is now independently

enforceable. Accordingly, when Bank One (through its agent Bonnet) indicated before the

final closing date that it intended to transfer nonperforming Loan E, Bank One and Bonnet

breached the Loan Sale Agreement.

Bank One argues instead that the bid documents and the Loan Sale Agreement C

&Aexecuted precluded any statements in the Schedule of Loans from becoming aterm of

the parties' bargain or an enforceable representation. Therefore, the Schedule of Loan's

statement that Loan E was performing did not become part of the parties' contract and

Bank One did not breach the Loan Sale Agreement by delivering a nonperforming loan.

Because neither party claims the Loan Sale Agreement is ambiguous, contract interpretation

is alegal question for the Court.5 After reviewing the summary judgment record, we agree

with Bank One's interpretation of the Loan Sale Agreement and the bid documents.

The bid documents, circulated with the Schedule of Loans, contemporaneously

advised C&Athat statements in the Schedule of Loans pertaining to the quality, character,

See Buys vBuys 924 S.W.2d 369, 372 (Tex. 1996); Richardson Lifestyle Ass'n v. Houston, 853 S.W.2d 796 800 (Tex.

App.-Dallas £LL'Jdenied^ (dtin. Praeger v. Wilson, 721 S.W.2d 597, 600 (Tex. App.-Fort Worth 1986, wnt ref dn.r.e.)). 1993, writ denied) (citing Praeger

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or value of Loan Ewere not reliable and thus could not become aterm of the Loan Sale

Agreement. In the Invitation to Bid, which C&Aexecuted and returned to Bank One, C

&Aexpressly acknowledged that information in the Schedule of Loans might be inaccurate:

8 Tnan Information and Review Process: ASchedule of Loans

is attached hereto as Schedule A. This information has been

obtained from the files of the former MBanks or Realty. The

information contained on the schedule of Loans may be

materially INACCURATE or INCOMPLETE and Bidders are

encouraged to review the files related to each loan ... to

confirm this and other matters relevant to the value of each

loan.

In both the Confidentiality Agreement and the Invitation to Bid, C & A

acknowledged that Bank One made no representations, warranties, promises, covenants,

agreements, or guaranties regarding the accuracy of any information forwarded to C&A

or as to the quality, character, or value of Loan E. And, further, in the Confidentiality

Agreement, C&Apromised that it did not rely on any warranties or representations.

Instead, when it executed the Bidder Qualification Certificate, C&Aagreed to rely solely

upon its own investigation regarding the quality and character of Loan Eand "not on any

information, statement, representation or promise made or to be made by Bank One or

Bonnet in connection with the Loans." By executing these bid documents, C&A

acknowledged that statements in the Schedule ofLoans may be inaccurate and assented not

to rely on them as binding representations, covenants, or terms of the parties' agreement.

The Loan Sale Agreement reinforces this conclusion. In this agreement, C&A

expressly acknowledged in paragraph 10.7 that, rather than performing, Loan E"may be
subject to adefault, apending foreclosure, or petition seeking relief under the provisions

of the United States Bankruptcy Code." As to any information to the contrary included in

the Schedule of Loans, Bank One informed C&Ain the same paragraph that it "has not

undertaken to correct any misinformation or omissions of information which might be

necessary to make any information disclosed to Purchaser not misleading in any respect."

Knowing these facts, C&Anevertheless agreed to purchase Loan E"on the basis of its own

independent investigation and credit evaluation" and again represented in paragraph 10.8

that it had "not sought or relied upon any representations, information, covenants, or

agreements" of Bank One. Expanding these statements, in paragraph 27, C&Areiterated

that Bank One made no representations or warranties regarding Loan E's value, quality, or

condition; that it did not rely on any representations or warranties regarding Loan E's value,

quality, or condition; and that it agreed to accept Loan E"as is" and "with all faults."

From these documents, we conclude that at the time C&Asigned the Loan Sale

Agreement, it acknowledged that the statement in the Schedule of Loans was not a

representation that could be relied upon; expressly agreed not to rely upon that statement;

and, in fact, did not rely on that statement. Instead, C&Aagreed to buy an admittedly

risky loan and to take that loan "as is" and "with all faults." Thus, despite the statement in

the Schedule of Loans, C&Adid not contract to purchase aperforming loan from Bank

One; therefore, Bank One's failure to tender aperforming loan cannot, as amatter of law,

be a breach of contract.

Nor did the trial court err when it granted summary judgment for Bonnet. As C&
A itself recognizes, Bonnet acted only as Bank One's agent in handling Loan E's sale.

Bonnet did not sign the Loan Sale Agreement in any capacity and is not aparty to the Loan

Sale Agreement.6 Thus, as a matter of law, C&Acannot maintain a breach of contract

action against an entity not a party to the contract.7 Accordingly, the trial court properly

granted summary judgment for Bonnet on C&A's breach of contract claim. We overrule

C & A's first and second points of error.

Fraud

In its third through sixth points of error, C&Aargues that the trial court erroneously

granted Bank One and Bonnet summary judgment on its fraud claim. Advocating its fraud

allegations, C&Acontends that Bank One and Bonnet initially misrepresented Loan Ewas

performing in the Schedule of Loans and that Harris repeated and reinforced this

misrepresentation when he told Krunic on three occasions that- Loan E was current.

According to C&A, it relied on these misrepresentations when it originally entered the

Loan Sale Agreement and when it agreed to each amendment. Absent these

misrepresentations, C&Aargues it would not have deposited any escrow funds with Bank

One and Bonnet. C&Aclaims these actions constitute fraud.8

Bank One and Bonnet moved for summary judgment, asserting two grounds. First,

6See Shank, Irwin, Conant, &Williamson v. Durant, Mankoff, Davis, Wolens &Francis, 748 S.W.2d 494, 499 (Tex.

App.-Dallas1988, nowrit).

7See Bernard Johnson, Inc. v. Continental Constructors, Inc., 630 S.W.2d 365, 368 (Tex. App.-Austin 1982, writ refd

n.r.e.).

8See Tilton v. Marshall 925 S.W.2d 672, 684 (Tex. 1996) (orig. proceeding) (stating the elements of fraud).

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they argued that because C&Aagreed to purchase Loan E "as is" and "with all faults," as

a matter of law, none of their actions could have caused C & A damage.9 Second, they

argued that because C & A knew the information in the Schedule of Loans was not

trustworthy, and because C&Apromised not to rely on their current orfuture statements

regarding Loan E's value, C & A could not have justifiably relied on the identified

statements. The trial court, without stating its reasons, granted summary judgment. We

affirm if either ground supports the judgment.10

In its fourth point of error, C &A argues that Bank One and Bonnet failed to

establish as a matter of law that it did not justifiably rely on the statement in the Schedule

of Loans and on Harris's statements. But both the bid documents and the Loan Sale

Agreement expressly informed C&Athat any current or future statements by Bank One

and Bonnet regarding Loan E's condition or value were neither trustworthy nor reliable.

Further, when C&Aexecuted these documents, it contractually agreed not to rely on any

statements of this kind. Consequently, the contractual documents C&Asigned vitiated any

reliance C&Amay have placed on statements attributable to Bank One and Bonnet.

We agree with Bank One and Bonnet that Airborne Freight v. C.R. Lee Enterprises,

Inc.,11 compels this conclusion. In Airborne, the plaintiff contracted with Airborne Freight

to provide delivery services. The parties executed awritten agreement that contained a

9See Prudential Ins. Co. v. Jefferson Assocs., Ltd., 896 S.W.2d 156, 161-63 (Tex. 1995).

10 See State Farm Fire &Cas. Co. v. S.S., 858 S.W.2d 374, 380 (Tex. 1993).

11 847 S.W.2d 289 (Tex. App.-El Paso 1992, writ denied).

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clause allowing Airborne to terminate the agreement on thirty days' written notice without

cause. The plaintiff also contractually agreed that "no representations have been made . .

. about the duration ofthe Agreement" and then disclaimed "any reliance on any definite

duration of this Agreement."12 During the course of the contractual relationship, one of

Airborne's agents promised the plaintiff that "as long as you do your job, you'll have ajob."

Relying on this statement, the plaintiff expanded his business, incurring debt. When

Airborne exercised its contractual right to terminate the agreement with thirty days notice,

the plaintiff sued, arguing that the agent's statements constituted fraud.

After a trial, the jury found Airborne defrauded the plaintiff. But the El Paso Court

of Appeals reversed, concluding that the "written contract signed by [plaintiff's president],

vitiated any reliance [plaintiff] might have placed in the sweeping, off-hands statement of

[defendant's agent]."13 Significantly, the court recognized that "[t]he written contract

contained ample cautionary language which would preclude exclusive reliance by a

reasonable businessperson on verbal statements contradicting the written agreement," and

that "the disclaimers contained in the contract clearly gave notice that any conditional or oral

promise would not control."14 Concluding that "a binding written agreement was entered

by the parties and controlled their actions," the appellate court held that "[t]he terms of the

12 Id. at 291-92.

13 Id. at 297.

14 Id.

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written contract simply belie any reliance on [defendant's agent's] verbal assurance."15

So, too, in this case do the terms of the parties' agreement belie reliance on the

statement in the Schedule ofLoans and Harris's statements. We have already summarized

the controlling documents' provisions that: informed C&Athat Bank One and Bonnet's

statements should not be relied upon; contractually obligated C&Anot to rely on any of

these statements; and assured Bank One and Bonnet that, in fact, C&Adid not rely on

these statements. Butseveral provisions deserve more attention.

First, in the Bidder Qualification Certificate, C&A's promise not to rely on "any

information, statement, representation or promise" made by Bank One or Bonnet regarding

Loan E extended not only to then-existing statements but also to any statements "to be

made" in the future. Thus, C&A's promise covered statements that existed when it

executed the bid documents—like the one in the Schedule of Loans—as well as to

statements made after it executed the Loan Sale Agreement-like Harris's statements.

Second, in the Invitation to Bid and the Loan Sale Agreement, C&Alearned that the

information in the Schedule of Loans might be inaccurate and misleading and that Bank

One and Bonnet had not undertaken to correct any erroneous information. Third, in the

Loan Sale Agreement, C&Aagreed to rely only on its own evaluation and investigation

of Loan E's value. Fourth, and finally, C&A, in multiple documents, promised not to rely

on any Bank One or Bonnet statements when it agreed to purchase Loan E"as is" and "with

15 Id. at 298.

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all faults." As in Airborne, these documents contain ample cautionary language precluding

any reliance C & A might have placed on the statement in the Schedule of Loans or on

Harris's statements.

Nevertheless, C & A argues Airborne does not apply because it "was not a summary

judgment case." In making this point, C&Aignores the essential fact that the appellate

court found no evidence supported the jury's fraud finding. Consequently, after reviewing

the evidence, the court determined that "as amatter oflaw" the plaintiff could not justifiably

rely on Airborne's agent's comments.16 We perform essentially the same analysis here.

Thus, this distinction lacks merit.

In another attempt to distinguishAirborne, C&Aclaims that case applies only when

the oral representations contradict the written materials. Since in this case the statements

involved do not contradict the Loan Sale Agreement, C&AarguesAirborne does not apply.

We disagree because the fact that the representations contradicted the written contract was

but one factor the Airborne court considered. In that case, the court relied more on the

portion of the parties' contract that warned the plaintiff not to rely on oral statements.

Here, as in Airborne, the Loan Sale Agreement and other bid documents contain equally

compelling cautionary language. Consequently, we find the El Paso court's reasoning

persuasive in this case and conclude, as amatter of law, that C&Acould not justifiably rely

on any statements by Bank One or Bonnet. We overrule C&A's fourth point of error.

16 Id. at 297.

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In C & A's fifth point of error, it argues that the trial court erroneously granted

summary judgment for Bonnet because fact issues exist as to whether Bonnet independently

defrauded C &A. In its sixth point of error, C & A argues Bank One should be liable

vicariously for its agent's independent fraud. To support both points of error, C&A

maintains that Bonnet cannot claim the protection of the contractual provisions already

discussed because it is not a party to the Loan Sale Agreement. Notwithstanding this fact,

C&Acontractually agreed that the quoted contractual provisions protect not only Bank

One, but also Bonnet. Bank One, aparty to the Loan Sale Agreement, obviously included

in the agreement contract terms intended to benefit its agent, Bonnet. Thus, Bonnet need

not be aparty to the Loan Sale Agreement to claim its protection.17 We overrule C&A's

fifth and sixth points of error.

Finally, in addition to the six points of error in which C&Aargues specifically why

the trial court erroneously granted summary judgment, it asserts aseventh omnibus point

of error. In this point of error, C&Aclaims generally that "[t]he trial court erred in

granting the motion of Bank One and Bonnet for Summary Judgment" and, as support,

incorporates its earlier arguments. We overrule point of error seven for the same reasons

we overruled C&A's earlier points of error. We need not reach C&A's third point of

error, which challenges the summary judgment ground that, as amatter of law, Bank One

and Bonnet's alleged wrongful conduct could not have caused C&Adamage. See Tex. R.

17 See Corpus Christi Bank &Trust v. Smith, 525 S.W.2d 501, 503-04 (Tex. 1975) (recognizing that under certain

circumstances, contract terms may inure to benefit of entity not aparty to the contract).

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App. P. 90(a).

We affirm the trial court's judgment.

Publish

Tex. R. App. P. 90

951569F.P05

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fe<_<4L»c~_*?1<_>

DEBORAH G. HANKINSON

JUSTICE