Opinion ID: 552196
Heading Depth: 2
Heading Rank: 4

Heading: Facility Agreement Subversion

Text: 108 Next, Hutton premises several claims on a valid and enforceable Facility Agreement.
109 Haralson promised Hutton that Mercury's and Milam's businesses shall be operated in ordinary course and no debts shall be incurred or other transactions entered into except in the ordinary course of business. Facility Agreement p 2.h. The district court granted Haralson's conclusory motion for summary judgment on Hutton's breach of contract claim, stating that [m]ismanagement was apparently within the S&Ls' ordinary course of business and Hutton knew this when it ratified the facility agreement. 110 But the Participation Agreements only reaffirmed Haralson's obligation to operate the S&Ls in the ordinary course. Even with all that Hutton knew about Aubin and Haralson by June 7, 1985, the record contains no evidence that Hutton encouraged or permitted Aubin and Haralson to lie, cheat, and steal in the ordinary course of their business. Hutton's mere awareness of a possible breach of contract claim and its failure to register disapproval are insufficient to constitute waiver or estoppel. See Union Free School Dist. v. New York State Div. of Human Rights, 43 A.D.2d 31, 349 N.Y.S.2d 757, 762 (1973), appeal dismissed, 33 N.Y.2d 975, 353 N.Y.S.2d 739, 309 N.E.2d 137 (1974). 111 We reject the district court's interpretation of ordinary course, and hold that Haralson obligated himself to operate the S&Ls in accordance with the manner in which honest managers generally operate savings and loan institutions. The parties used ordinary course to protect Hutton's collateral while affording the S&Ls some freedom to make legitimate business mistakes. No other meaning of ordinary course accords with the sense of the remainder of the contract. See Laba v. Carey, 29 N.Y.2d 302, 308, 277 N.E.2d 641, 644, 327 N.Y.S.2d 613, 618 (1971) (as between possible interpretations of an allegedly ambiguous term, that will be chosen which best accords with the sense of the remainder of the contract). Even if Hutton was aware that the S&Ls were mismanaged before March 8, 1985, Haralson agreed to manage with at least the median level of competence thereafter. 112 Whether a transaction is prudent or negligent is not determinative of whether the S&Ls were run in the ordinary course. Especially in present times, commission of one improper or negligent act by a savings and loan employee or agent does not necessarily distinguish the operation of one savings and loan institution from another. However, a pattern of such conduct would distinguish the S&Ls. 113 Hutton contends that the facts found in Haralson v. Federal Home Loan Bank Bd., 721 F.Supp. 1344 (D.D.C.1989) (Haralson's unsuccessful challenge to the FHLBB's takeover of the S&Ls) establish as a matter of law that Haralson did not manage the S&Ls in the ordinary course. Though the record contains abundant evidence of a pattern of unwise, unsound, and negligent transactions, [w]e are fundamentally a court of review, not of first analysis. Isquith v. Middle South Utilities, Inc., 847 F.2d 186, 210 (5th Cir.), cert. denied, 488 U.S. 926, 109 S.Ct. 310, 102 L.Ed.2d 329 (1988). On remand, the district court must consider Hutton's breach of contract claims using our interpretation of ordinary course before we will address the matter. 15
114 Although Aubin may incur no direct liability for breaching the Facility Agreement, as a non-party he could be liable for tortiously interfering with that Agreement. Under Texas common law, the elements of a cause of action for tortious interference with contractual relations are: (1) a contract; (2) an intentional act, calculated to cause damage to the plaintiff, that interferes with the contract; (3) such intentional act proximately causes the plaintiff actual damages; and (4) the lack of any justifiable cause or excuse on the part of the defendant. Gibraltar Sav. v. LDBrinkman Corp., 860 F.2d 1275, 1298 (5th Cir.1988) (footnote omitted), cert. denied, 490 U.S. 1091, 109 S.Ct. 2432, 104 L.Ed.2d 988 (1989); Deauville Corp. v. Federated Dept. Stores, Inc., 756 F.2d 1183, 1194 (5th Cir.1985). 115 The district court dismissed Hutton's tortious interference claim on several grounds, all of which we find improper. First, during summary judgment hearings the court held that, as Haralson's agent, Aubin was privileged to interfere with the Facility Agreement. But an agent is privileged to induce a principal to breach a contract only when the agent acts qua agent. If an agent is motivated by personal animus or greed, then under Texas law, the agent can indeed be held liable for inducing his principal to breach a contract. B. Inc. v. Miller Brewing Co., 663 F.2d 545, 553 (5th Cir.1981). Fact issues are raised on Aubin's inducement of a breach and the role in which he acted. 116 Next, the district court found that Aubin's interest in the S&Ls' sale proceeds gave him the privilege to interfere with the Facility Agreement. Aubin cites us to Sterner v. Marathon Oil Co., 767 S.W.2d 686, 691 (Tex.1989) (one is privileged to interfere with another's contract ... if he has an equal or superior right in the subject matter to that of the other party). Aubin points to his 50% interest in the S&Ls' sale proceeds as evidence of his equal interest in the Facility Agreement's subject matter. But in the March 11, 1985 Release Agreement, Aubin transferred to RBI his interest in the S&Ls' sale proceeds to the extent required to satisfy RBI's obligation to Hutton. That agreement and documents associated with the Southmark negotiations conclusively demonstrate that, according to Aubin, 50% of the S&Ls' sale proceeds amounted to approximately $50 million. These facts considered in light of RBI's obligations under the Facility Agreement mean that Aubin's interest amounted to no more than $2 million. This amount being significantly less than Hutton's, Haralson's, or RBI's interest in the S&Ls, Aubin may not use the equal interest privilege to defeat Hutton's tortious interference claim. 117 Hutton claims that Aubin interfered with the Facility Agreement by keeping Haralson from operating the S&Ls in the ordinary course of business and by imposing conditions on the S&Ls' sale that turned buyers away. During summary judgment hearings, the district court was troubled by the fact that the Facility Agreement does not obligate RBI or Haralson to sell the S&Ls. While this fact is true, 118 [i]nterference embraces within its scope all intentional invasions of contractual relations, including any act injuring or destroying property and so interfering with the performance of the contract itself, regardless of whether breach of contract is induced. 119 State Nat. Bank v. Farah Mfg. Co., 678 S.W.2d 661, 689 (Tex.App.--El Paso 1984, writ dism'd by agr.). By preventing a sale of the S&Ls, Aubin could have intentionally interfered with RBI's ability to pay Hutton. All parties to this lawsuit understood that such prevention would proximately cause RBI to default on the Promissory Note. Therefore, we remand Hutton's claim for Aubin's tortious interference with the Facility Agreement.
120 Caren C. Grant was a director and officer of Mercury, Milam, IBR, and RBI while the Facility Agreement was executory. Hutton asserts a claim against her and Aubin for conspiracy to induce breach of the Facility Agreement. In Texas, the elements of this civil conspiracy variant are: (1) the existence of an enforceable contract; (2) two or more non-parties' agreement to induce a party to breach a contract; (3) a party to the conspiracy commits an overt act in furtherance of the conspiratorial objective; (4) the overt act proximately causes the plaintiff actual damages; and (5) the conspirators lack justifiable excuse or privilege. Schlumberger Well Surveying Corp. v. Nortex Oil & Gas Corp., 435 S.W.2d 854, 856-57 (Tex.1968); MacDonald v. Trammell, 351 S.W.2d 89, 92 (Tex.Civ.App.--Austin 1961), writ dism'd w.o.j., 163 Tex. 352, 356 S.W.2d 143 (1962). 121 We understand the district court to have dismissed Hutton's conspiracy claim because Hutton produced insufficient evidence of collusive intent and conduct on Grant's part. Or, the court dismissed Hutton's claim because, as an agent of RBI and the S&Ls, Grant was privileged to interfere with the Facility Agreement. We believe that a fact issue is presented on this Hutton conspiracy claim. 122 Hutton's evidence of the following raises an issue that Aubin and Grant agreed to induce Haralson and RBI to breach the Facility Agreement: 123 --As an officer and director of Mercury and Milam, Grant had some influence over whether the S&Ls were run in the ordinary course of business from March 8, 1985 to March 14, 1986. 124 --Grant received over $27,000 in gifts from Aubin between the date the Facility Agreement was signed and the date the FHLBB placed the S&Ls in conservatorship. 125 --When the S&Ls were insolvent, Grant voted for the S&Ls to give herself and ten other S&L employees expensive cars. 126 --In April 1985, Grant and other directors approved the renewal of a $1 million note from Aubin's Wichita Land & Cattle Co. The TS&LD complained to Mercury that this renewal violated the Supervisory Agreement. 127 --As an officer of IBR, Grant transferred liens against and stock powers of the S&Ls to Aubin's companies in exchange for loans from Aubin to Haralson. 128 --After a conservator was appointed for the S&Ls, Grant accepted an extremely lucrative position with Aubin's companies. 129 The existence of a conspiracy is usually proved with circumstantial evidence, and our assessment of the record is that Hutton has adduced enough such evidence to survive summary judgment. See Zervas v. Faulkner, 861 F.2d 823, 836-37 (5th Cir.1988). 130 To the extent that the district court's summary judgment was premised on Grant's having agent immunity from Hutton's contract interference claim, we disagree. A jury could find that Grant, like Aubin, acted out of personal greed and therefore receives no immunity. See B., Inc., 663 F.2d at 553. 131 During summary judgment hearings, there was some confusion as to whether it was possible for Grant, an officer and director of RBI, to interfere with RBI's promises under the Facility Agreement. Not finding any contrary authority, we hold that Grant may interfere with RBI's promises while acting in a capacity other than RBI's agent. Thus, Grant's actions as an officer and director of Mercury and Milam could further a conspiracy to induce RBI to breach the Facility Agreement and Note. 132 Grant tries to avoid Hutton's conspiracy claim by explaining that Hutton cannot prove whether Aubin used S&L funds to purchase her gifts. But such expensive gifts to an unrelated party could reasonably signal a quid pro quo regardless of where the money for them originated. Next, Grant explains that RBI could not have been induced to breach the Facility Agreement because there is no evidence that RBI engaged in any transaction other than the Facility Agreement. But actual inducement is not an element of Hutton's conspiracy claim. Grant also cites the testimony of the TS&LD official who continuously monitored the S&Ls' affairs until the FHLBB placed them under conservatorship. While the TS&LD official may not have known of any transgressions by Grant, such ignorance is only evidence in her favor. It does not conclude Hutton's claim as a matter of law. 133 For these reasons, we reverse the district court's summary judgment on Hutton's claim of conspiracy to induce breach of contract and direct the court to reconsider this claim on remand.
134 RBI makes two attempts to avoid the district court's summary judgment on its absolute and unconditional Promissory Note in Hutton's favor for $48,072,882.51 plus interest. 135 First, RBI offers evidence that Hutton's Deputy Controller, Richard Carborne, did not base his affidavit establishing the amount that RBI owes Hutton on personal knowledge. See Fed.R.Civ.P. 56(e). But RBI admitted the amount that it owed Hutton in its trial pleading and the Participation Agreements. 16 Furthermore, Haralson admitted on deposition that Hutton advanced approximately $48 million under the Note. This evidence of the amount due Hutton on the Note supports the district court's summary judgment independent of Carborne's affidavit. 136 Next, RBI invokes the Uniform Commercial Code's Section 9-504 17 to argue that Hutton may not obtain a deficiency judgment against RBI before proving proper disposition of collateral, which in this case was Mercury's stock. But RBI offers no evidence that Hutton has disposed of Mercury's stock. Hutton still has the stock certificates. We reject as frivolous RBI's contention that Hutton destroyed the stock's value by making disparaging statements about Mercury to regulators and therefore disposed of the stock within Section 9.504's meaning. Even if Hutton made such statements, it was Aubin and Haralson's mismanagement of the S&Ls, not Hutton's statements, that caused the FHLBB to place the S&Ls in conservatorship. The district court's summary judgment against RBI is affirmed.