### I N THE UNI TED STATES COURT OF APPEALS FOR THE FI F TH CI RCUI T

No. 12-11169

839 EAST 19 T H STREET, L.P., Plaintiff-Appellant,
v. CITIBANK, N.A., a National Banking Association, Defendant-Appellee.

Appeal from the United States District Court f or the Northern District of Texas U.S.D.C. No. 3:11-cv-1238

Before STEWART, Chief Judge, and KING and PRADO, Circuit Judges. PER CURIAM: * Plaintiff-Appellant 839 East 19th Street, L.P. (“839”) filed s uit against Defendant-Appellee C itibank, N

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. (“Citibank”) for breach o f contract. The distr i c t c o u rt granted summary judgment in favor of Citibank and dismissed with prejudice 839’s claims. For the reasons stated herein, we affirm. I. In January 2007, 8 39 obtained a loan from Citiban k for the amount of $5,040,000 a nd sign e d a promissory note (“the N o te”) payable to the order of U n i t e d S t a te s C o u rt o f A p p e al s

F i f t h C i rc u i t 

### F I L E D Septem ber 9, 2013 Ly l e W . Cay ce Clerk

* Purs uant to 5 T H C I R

. R. 47. 5, the court has determ ined that this op inion s hould not be p ublis hed and is not p reced ent excep t und er the lim ited circum s tances s et forth in 5 T H C I R

. R. 47. 5. 4. Case: 12-11169 Document: 00512366230 Page: 1 Date Filed: 09/09/2013No. 12-11169

Citibank. The No t e w a s to be repaid in monthly installments over a period of ten y ears. 839 used the loan t o purchase a n apartment property (“the Property”) in Houston, T exas for $6,606,000. 839 paid a pproximately $ 1.5 million in cash toward the p urchase price of the Property. In addition to the Note, 839 signed

a “Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing” (“the Deed”) in favor of Citibank to secure the loan. In accordance with the terms of the D e e d , 8 39 was required to keep the Property in good condition and repair regardless o f the availability of insurance proceeds to cover or supplement the cost of doing so. Additionally, 839 was required to maintain prop e rty all-risk insurance, commercial general liability insurance, and other insurance on th e P r o p e rty a t its o wn expense, with all insurance proceeds assigned and payable t o Citibank in the event of a l oss. The Deed also contained a R estoration Clause which indicated that, in the event of

a loss, 839 would be permitted to propose a plan of restoration and repair of the Property after satisfying a list of enumerated terms and conditions, as long as “no default under the Note

. . . shall have occurred and be continuing.” The Deed further provided that Citibank was entitled to determine i n its reasonable judgment w hether a proposed restoration p l an complied with the listed terms and conditions in the R estoration C l a u s e . F i n a lly, in the event of a default under the Note b y 8 39, the Deed author i z e d C i t ib a nk to r etain any and all insurance proceeds received and to apply them a gainst the outstanding balance owed on the Note. 839 obtained an insurance policy through Lexington Insurance Company (“Lexington”). In September 2008, Hurricane Ike hit and d a maged the Property. 839 filed an insurance claim with L exington. Lexi n g t o n paid approximately $100,000 in proceeds and 839 be g an making repairs but did not restore the

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Property t o its condition prior to the hurricane. 1 Then in May, July, and September of 2009, three fires occurred and d amaged the Property. Once again, 839 submitted insur a nc e claims w ith Lexington. Lexington disbursed insurance proceeds totaling approximately $604,054.77. Of the total p r o c eeds, Citibank ultimately retained $ 450,554.24 and disbursed $153,500.53 t o 839 for its use in

m a k i n g repairs to the Property. 839 was never successful in restoring th e Property to its condition prior to the hurricane and the fires. On October 31, 2009, 839 made its regularly-scheduled payment on the Note but thereafter, made no further payments. Approximately ten days later, Citibank notified 839 via w r i t ten letter that it had breached the terms of the Deed b y failing to maintain the Property in s ubstantially good condit i on and repair. Citibank demanded that 839 make the necessary repairs by December 15, 2009. The repairs were not made. T hen in January 2 010, there were several email exchanges b etween 839 and Citibank regarding potential plans for repairs to the Property. S hortly there a f t e r , Citibank s ent formal n otice through its counsel of record notifying 839 of its default under th e Note for f ailure to pay the

m o nthly i n s t all m ents o w e d for November and December 2009 a n d J a nu ary 2 0 1 0 , in addition to its previous non-monetary default f or fa i ling to maintain the Property in good condition and repa i r . S u b sequently, as per the t e rms of the Note, Citibank provided notice to 839 that the principal balan c e o n t he Note would be acc e l e r ated and due i n full in the event that the three monthly payments owed were not paid by February 8 , 2 010. The amounts were not paid. On M arch 26, 2010, Citibank sent a letter to 839 demanding payment within ten days of the outstanding principal balance on the N o te less the $450,554.24 which

1 A d is p ute a r o s e b etw een 839 and L exington over the am ount of p roceed s p aid as a res ult of the d am age f

rom the hurricane. 839 ultim ately s ued Lexington f or its alleged f

ailure t o p a y the total am ount ow ed und er the p olicy. That law s uit ap p ears to have been recently
s ettled

. See 839 East 19th Street, LP v . Lexi ngton Ins. Co. , N o. 4: 10–cv–1181 ( S. D

. T ex. ) (June 4, 2012) ( “Joint Stip ulation of D is m is s al”)

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i t had retained i n insurance proceeds f rom L exington, o r approxima t e l y $4,876,063.84. The amount demanded was not paid. Then o n April 12, 2010, 839 notified Citibank that it was ready t o restore and repair the Property to its ori gi n a l c ondition and r equested r e ceipt of the $ 4 5 0 , 5 5 4

. 2 4 i n insurance proceeds being held in escrow by Citibank to co m m e n c e repairs. Citibank replied that i t had no obligation to rele a s e a n y insurance proceeds to 839 o n acco u n t o f 8 3 9 ’s breach of the terms of the Note and Deed. About a month later, 839 submitted a p roposed plan f o r restoration of the Property. Then on May 2 6, 2 0 1 0 , i n accordance with the terms of the Note permitting i ts a ssignment and transfer by Citibank, Citibank entered into a Note Purchase Agreement (“Purchase Agreement”) wherein it agreed to sell the Note to JRG C apital Investors I, L

. L

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. ( “J R G ”). Two days later, on May 28, 2010, Citibank r ej e cted 839’s proposed restoration p lan, citing 8 39’s breach of the terms of the Note and the Deed as grounds for the rejection. As per the Purchase Agreement, JRG purchased the Note from Citibank for the total amount of $1,650,000. S chedule 2 to the Purchase Agreement provided that Citibank was entitled to keep the insurance proceeds paid as a result of the three fires in 2009 at the Property. The Agreement f urther stated that: (1) the total amount of insurance proceeds th a t Citibank was entitled to retain would b e capped a t $750,000 , ( 2 ) Citibank had already received $450,554.24 in proceeds which would be applied against the t otal amount owed

on the Note, and (3) Citibank expected to receive approximately $190,000 in additional insurance proceeds. T h e Agreement then p rovided various details relating to wire transfers of the proceeds between Citibank and JRG when the payments were received f rom Lexington. On June 4, 2010, Citibank applied the initial proceeds of $450,554.24 to the bala n c e o w e d on the Note; JRG and Citibank closed i n accordance with the terms of the Purch a s e A g r e e ment; and JRG became the owner of the Note.

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In July 2010, JRG initiated non-judicial f oreclosure proceedings on the P r o p erty. JRG was the highest bidder at the foreclosure sale and bought th e Property for $1,650,000. Later, in January 2011, Lexington dispensed a check to Cit ib a n k o f “additional proceeds” in the amount of $190,208.01. Citibank retained and deposited the c h e c k in accordance w ith the Purchase Agreement with JRG. Approximately $ 160, 0 00 of the additional proceeds were applied against the balance owed on the Note. 2 In May 2011, 839 filed suit in federal district court a s s e rting several

causes of action, a ll of which were ultimately dismissed with the exception of its breach o f contract claim. T hen in October 2012, the district court r endered summary j udgment in favor of Citibank and dismissed 839’s remaining claims with prejudice. I n its memorandum opinion and order, the district court explained that C itibank had a contractual entitlement via th e d eed of trust to retain the $450, 5 5 4

. 2 4 in initial insurance p roceeds and the $ 190,208.01 in additi o n a l p r o c eeds. It further noted that Citibank was entitled to apply both sets of insurance proceeds a g a i n s t the outstanding balance owed on the Note because 8 39 was in m onetary default of the Note. Additionally, reasoning that the Restoration Clause in the Deed was only available to 8 39 i n the event of nondefault, the district court declined to reach the issue of whether Ci t ibank was unreasonable in r ejecting 8 39’s proposed r estoration plan, which w as submitted post-default. M oreover, i n light of its f inding that 839 was in monetary default, the district court also declined to address the issue of whether 839 was in nonmonetary default f

o r its failure t o maintain the Property in the condition required by the Deed. On appeal, 839 advan c e s two primary arguments. First, i ts argues that Cit ib a n k h a d no right, contractual or otherwise, to retain the $190,208.01 in

2 Citibank p aid $29, 412. 48 of the ad d itional proceed s to its ad jus ter. 5 Case: 12-11169 Document: 00512366230 Page: 5 Date Filed: 09/09/2013No. 12-11169

additional insurance proceeds that were dispensed by L exington after Citibank sold the N ote to JRG. Second, 839 asserts that Citibank unreasonably refused to approve its proposed restoration plan for the Property. II. This court reviews a district court’s grant of summary judgment de novo. Nat’l Cas. Co. v. W

. World Ins. Co. , 669 F.3d 608, 6 12 (5th Cir. 2 012). The parties do not dispute that Texas law applies in these proceedings. I II. After considering the briefs, the record, a nd the applicable statutory and

case law, we AFFIRM the dis tri c t court’s summary judgment in f avor of Citibank and adopt its analysis in full.

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