Opinion ID: 1665709
Heading Depth: 2
Heading Rank: 3

Heading: Preclusion of Eagle's Claims

Text: We now turn to the question of whether any of the issues in Eagle's case, Mays, were litigated in the prior action, thereby estopping Eagle from asserting the claims in this action.
Eagle's first cause of action against the Directors is for common law fraud. The elements of actionable fraud are that: (1) a material representation was made; (2) the representation was false; (3) when the representation was made the speaker knew it was false or made it recklessly without any knowledge of its truth and as a positive assertion; (4) the speaker made the representation with the intent that it should be acted upon by the party; (5) the party acted in reliance upon the representation; and (6) the party thereby suffered injury. Trenholm v. Ratcliff, 646 S.W.2d 927, 930 (Tex. 1983); Stone v. Lawyers Title Ins. Corp., 554 S.W.2d 183, 185 (Tex.1977). Eagle bases its actions for common law and statutory fraud [7] on the grounds that the Directors made false representations or material omissions with the intent of inducing Eagle to enter into the salesleaseback transaction and agree to early funding of the letters of credit. First, Eagle alleges that the Directors misrepresented the bank's financial condition. The court in FDIC v. Eagle found that a fiduciary relationship did not exist between Charles Fraser and the individual defendants, that Fraser's disclosures and representations were adequate to inform Eagle and its partners of the bank's financial position and the reasons for selling the building, that Fraser had represented to each Eagle partner that an unfavorable financial report had been received from bank examiners, and that each defendant knew the bank had definite financial problems. FDIC v. Eagle , 664 F.Supp. at 1043-44. Second, Eagle alleges that the Directors misrepresented that Eagle could depreciate the property and that the completed sale would occur in 1982. The federal court found that these representations were only expressions of opinion with legal implications. Generally, misrepresentations as to matters of law are not actionable fraud. Sawyer v. Pierce, 580 S.W.2d 117, 125 (Tex.Civ.App.Corpus Christi 1979, writ ref'd n.r.e.). Such misrepresentations may be actionable between fiduciaries or where the representor has superior knowledge or information and uses it unfairly. The court found, however, that there was no fiduciary relationship between Fraser and First Midland and the individual defendants and that Fraser did not have a decided advantage over them. FDIC v. Eagle , 664 F.Supp. at 1042. Eagle also alleges that the Directors misrepresented the fair market value of the property and the existence of an appraisal in the amount of $75 million. The federal court found that the representation of such an appraisal was false and material, but that none of the defendants who heard the representation relied upon it, in that they did not request to view the appraisal and did not condition their participation on reviewing the appraisal. Furthermore, the court found that the defendants should have taken the precaution of reviewing an appraisal and informing themselves of the value of the properties. FDIC v. Eagle , 664 F.Supp. at 1042-43. Finally, Eagle alleges that the Directors failed to inform them that the SEC and the Office of the Comptroller of the Currency had concerns about the validity of the original transaction. The federal court found, however, that Fraser accurately represented that the OCC viewed the sale as a positive step for the bank. FDIC v. Eagle , 664 F.Supp. at 1044. The court in FDIC v. Eagle held, following its extensive review of the facts surrounding the transaction, that neither Fraser nor First Midland fraudulently induced the defendants to enter into the sale-leaseback transaction, execute the promissory notes, or agree to early funding of the letters of credit. FDIC v. Eagle , 664 F.Supp. at 1045, 1048. We hold that the findings of the federal court collaterally estop Eagle's actions for common law and statutory fraud in Mays.
Eagle also brings claims under the Deceptive Trade Practices Act (DTPA). Based on the same allegations underlying its fraud claims, Eagle alleges that the foregoing representations and omissions violate TEX.BUS. 17.46(b) because they constitute representations or omissions that (1) the real property has characteristics, uses or benefits which it does not have, § 17.46(b)(5); (2) the real property is of a particular standard, quality or grade when it is another, § 17.46(b)(7); and (3) an agreement confers or involves rights, remedies or obligations which it does not have or involve, or which are prohibited by law, § 17.46(b)(12). A defendant may be held liable for the deceptive trade practices described in § 17.46(b)(5), (7) and (12) even if the defendant did not know that the representations made were false or did not intend to deceive anyone. Pennington v. Singleton, 606 S.W.2d 682, 690 (Tex.1980). Subdivisions (5) and (7) are designed to ensure the accuracy of descriptions of goods and services, and covers both general and specific descriptions. Id. Thus, misrepresentations which do not necessarily constitute common law fraud may be actionable under the DTPA. See Smith v. Baldwin, 611 S.W.2d 611, 616 (Tex.1980) (noting that a primary purpose of the DTPA was to provide consumers a cause of action for deceptive trade practices without the burden of proof and numerous defenses encountered in a common law fraud or breach of warranty suit). To the extent that the federal court found that Charles Fraser and First Midland did not misrepresent the bank's financial condition and the position of the OCC regarding the transaction, DTPA claims may not be brought on this basis. However, Eagle is not collaterally estopped from bringing causes of action under § 17.46(b)(5) or (7) based on other allegations, including representations that there was an appraisal justifying the asking price of $75 million, which the federal court found to be false. Eagle also alleges that the failure to disclose certain information about the real estate was intended to induce it into a transaction into which it would not have otherwise entered, § 17.46(b)(23). This subdivision includes an element of intent, and the court in FDIC v. Eagle held that neither Fraser nor the Bank fraudulently induced the defendants to enter into the sale-leaseback transaction, execute the promissory notes, or agree to early funding of the letters of credit. FDIC v. Eagle , 664 F.Supp. at 1045, 1048. Eagle is therefore estopped from bringing a claim under § 17.46(b)(23) of the DTPA. Therefore, summary judgment was proper on the basis of collateral estoppel on the DTPA claims brought under § 17.46(b)(23).
Eagle's final cause of action against the Directors is for negligent conduct in the performance of their duties, thereby breaching a fiduciary duty owed to Eagle. In FDIC v. Eagle , the federal court held that a fiduciary relationship did not exist between Charles Fraser and First Midland and Eagle's partners. FDIC v. Eagle , 664 F.Supp. at 1043-44. Since the Directors did not owe a fiduciary duty to Eagle's partners, and Eagle suing on its own behalf as a creditor cannot maintain a personal action against the Directors of the corporation for breaching their duty to the corporation, see Sutton v. Reagan & Gee, 405 S.W.2d 828, 834-35 (Tex.Civ.App.San Antonio 1966, writ refd n.r.e.), summary judgment was properly granted for the Directors on Eagle's negligent management cause of action.