Court Opinion

ID: 42788
Source: CourtListenerOpinion
Date Created: 2010-04-25 21:29:44+00
Date Added: 2024-06-11T17:16:56.780656
License: Public Domain

United States Court of Appeals
                                                                      Fifth Circuit
                                                                   F I L E D
                    UNITED STATES COURT OF APPEALS
                         FOR THE FIFTH CIRCUIT                      April 19, 2006

                        _______________________                Charles R. Fulbruge III
                                                                       Clerk
                              No. 05-10503
                        _______________________

                IN THE MATTER OF: EBENEZER K. EKUBAN,

                                                                      Debtor.
                       -------------------------

          FIRST UNION NATIONAL BANK, as Indenture Trustee,

                                                                 Appellant,
                                  versus

                           EBENEZER K. EKUBAN,
                                                                   Appellee.

          On Appeal from the United States District Court
                 for the Northern District of Texas
                     Docket No. 3:04-CV-01181-L

Before JONES, Chief Judge, and WIENER and PRADO, Circuit Judges.

PER CURIAM:*

           First Union National Bank (“First Union” or “the bank”)

appeals the district court’s judgment affirming the bankruptcy

court’s grant of summary judgment to Ebenezer Ekuban (“Ekuban”), as

well as the bankruptcy court’s denial of First Union’s motion for

summary judgment.     Because we agree that guaranty documents signed

by Ekuban were unenforceable pursuant to Texas’s statute of frauds,

     *
            Pursuant to 5TH CIR. R. 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opinion should not be published and is not precedent except under the limited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 CIR. R. 47.5.4.
and First Union was not entitled to summary judgment on either of

its claims, we AFFIRM.

                             I.   Background

            Ekuban is a professional football player who was selected

in the first round of the NFL Draft in 1999.               In August 2000,

Ekuban decided to purchase a block of thirty-six condominiums in

Pasadena, TX.     Bayview Financial Trading Group agreed to provide

financing    to   Ekuban,   and   the   company   then   had   Chicago   Title

Insurance Company (“Chicago”) draft the loan documents for the

deal.    Chicago structured the transaction as thirty-six separate

purchases.        On August 14, 2000, Ekuban, in his capacity as

president of EBCO Partners, LLC (“EBCO”),1 executed thirty-six sets

of promissory notes and related closing documents.              The deal was

designed to create a real estate mortgage trust, with First Union

acting as the indenture trustee.            As a result of this structure,

First Union ultimately obtained nominal title to the notes.

            At a separate time, Ekuban received and executed thirty-

six identical guaranty agreements, which stated:

     1
            EBCO was formed as a holding company for Ekuban’s investments.

                                        2
                         Guaranty Agreement
      FOR VALUE RECEIVED, I, EBENEZER EKUBAN, individually, do
      hereby guarantee payment of the hereinabove described
      note, according to the terms thereof, both as to interest
      and as to principal, and I do hereby waive demand, all
      notices including notice of intention to accelerate the
      maturity, notice of non-payment, presentment for payment,
      protest, notice of protest, suit, diligence and any
      notice of or defense on account of the extension of the
      time of payments or change in methods of payments and
      consent to any and all renewals and extensions in the
      time of payment hereof.

Absent from the guaranty agreements was any reference to a specific

loan or account number that would associate the guaranty with the

Pasadena transaction.

           The    Pasadena    investment      performed    poorly,   and    EBCO

defaulted on its loans in the spring of 2002.             Ekuban did not honor

the alleged guaranty, and both EBCO and he filed for Chapter 7

bankruptcy protection on June 10, 2003. First Union filed a timely

Proof of Claim for the money loaned in the amount of $1,641,000.

The bank also filed a complaint seeking to have Ekuban’s loans

declared nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A).

Ekuban moved for summary judgment, on the ground, inter alia, that

the guaranty documents were unenforceable pursuant to the Texas

statute of frauds.       First Union cross-moved for summary judgment

asserting that Ekuban’s fraud was indisputable as a matter of law.

           The bankruptcy court granted Ekuban’s motion for summary

judgment and denied First Union’s motion without considering it on

the   merits.    The   bank   appealed   to    the   district   court,     which

                                     3
affirmed.     This timely filed appeal is considered pursuant to

28 U.S.C. § 1291.

                               II.   Discussion

            In bankruptcy appeals, this court “perform[s] the same

function,    as    did   the   district    court:   Fact   findings     of   the

bankruptcy court are reviewed under a clearly erroneous standard

and issues of law are reviewed de novo.”            Nationwide Mut. Ins. Co.

v. Berryman Prods. (In re Berryman), 159 F.3d 941, 943 (5th Cir.

1998).      This court reviews a grant of summary judgment de novo.

Evans v. City of Houston, 246 F.3d 344, 347 (5th Cir. 2001).

Summary judgment is appropriate if “the pleadings, depositions,

answers to interrogatories, and admissions on file, together with

the affidavits, if any, show that there is no genuine issue as to

any material fact and that the moving party is entitled to judgment

as a matter of law.”       FED. R. CIV. P. 56(c); see also Celotex Corp.

v. Catrett, 477 U.S. 317, 312-33, 106 S. Ct. 2548, 2552-53 (1986).

     A.     Statute of Frauds

            In order to satisfy the Texas statute of frauds which

applies here, an agreement must be “complete within itself in every

detail, and . . . contain[] all the essential elements of the

agreement.”       Cohen v. McCutchin, 565 S.W.2d 230, 232 (Tex. 1978).

            The    guaranty    agreements   in   the   instant   case   cannot

satisfy the statute of frauds because they lack the “essential

elements” of a guaranty.             The essential terms of a guaranty

                                       4
agreement are “(1) the parties involved, (2) a manifestation of

intent to guaranty the obligation, and (3) a description of the

obligation     being          guaranteed.”            Material    P’Ships       v.       Ventura,

102 S.W.3d 252, 261 (Tex. App. 2003); Park Creek Assocs., Ltd v.

Walker, 754 S.W.2d 426, 429 (Tex. App. 1988, writ denied).                                  While

these guaranty agreements manifest Ekuban’s intention to guarantee

an obligation, they are in every other aspect deficient.                                     Save

Ekuban himself, the guaranties do not identify the parties involved

in the transaction or their roles.                     Nor do the agreements provide

a   description          of    the    note     to    be   guaranteed      or        such    basic

information as dates and the amount of the loan.

              First Union argues that this court should look beyond the

text of the guaranty agreements to determine whether the agreements

satisfy the statute of frauds.                      We decline to do so, noting that

although the Texas Supreme Court has in the past looked to multiple

documents to determine whether a contract comports with the statute

of frauds, it has only done so where, “[a]ll of the instruments

were a necessary part of the same transaction, without any one of

which   the    transaction            was     not    complete.”         Jones       v.     Kelley,

614 S.W.2d 95,    98    (Tex.       1981)(quoting        Great    S.        Life    Ins.,
239 S.W.2d at 809).              First Union asserts that the guaranty was

necessary     to    effectuate          the    transaction,       but    as     a    matter     of

contractual interpretation, the Pasadena transaction was complete

without a guaranty.                  Further, the guaranty agreements make no

                                                5
reference to the closing documents, and the closing documents do

not contemplate the existence of a guaranty.                   To construe the

guarantee agreements as part of the larger financial transaction

would thus violate the principle that “where an oral contract is

memorialized in more than one writing, one of the writings must

refer to the others in order for the writings to be read together.”

Conner   v.    Lavaca   Hosp.   Dist.,     267 F.3d 426,    435   (5th   Cir.

2001)(applying Owen v. Hendricks, 433 S.W.2d 164, 166 (Tex. 1968)).

The bank’s contention that the guaranties were an indispensable

part of the transaction finds no support within the language of the

contracts themselves.

              First Union argues in the alternative that the guaranty

agreements qualify for the “main purpose” exception to the statute

of frauds, an exception whereby a guarantor may be bound as a

principal obligor.      The bank, however, cites no authority for its

novel position that written contracts are subject to the main

purpose rule; indeed, what limited case law exists on the main

purpose rule applies the exception to oral contracts only.                     A

sophisticated party like the bank cannot point to deficiencies in

its own writings as a reason why it should not be bound by the

statute of frauds.2      Because the guaranty documents do not satisfy

      2
            Even assuming arguendo that the main purpose rule extended to written
contracts, because in the instant case the guaranty agreements do not provide any
evidence that Ekuban intended to become primarily liable for specific loans, the
main purpose rule is still inapplicable. Butler Aviation Int’l, Inc. v. Whyte (In
re Fairchild Aircraft Corp.), 6 F.3d 1119, 1127 (5th Cir. 1998).

                                       6
the statute of frauds, and the main purpose rule does not apply

here,   the    lower   courts    did   not    err   in   determining   that   the

guaranties were unenforceable as a matter of law.

     B.       First Union’s Claims

              First Union alleges that the lower courts erred in

denying its motion for summary judgment against Ekuban without

considering it on the merits.          However, the only “Basis for Claim”

before the bankruptcy court was for the “money loaned” by First

Union to Ekuban.       The lower courts rejected “any contention by the

bank that the debt is based on fraud;” because the lower courts

correctly      determined       that    the     guaranty     agreements       were

unenforceable, dismissal of the complaint was proper.

              Similarly, once the lower courts determined that the

guaranty agreements were unenforceable, the bank was not entitled

to summary judgment as to its 11 U.S.C. § 523 (a)(2)(A) claim.                The

bank must first have a “debt” owed to it before it can make a case

for nondischargeability under § 523, and once the issue of the

guaranty agreements had been resolved, no such debt existed.

Summary judgment in favor of Ekuban was therefore appropriate.
                                CONCLUSION
              For the foregoing reasons, the judgments of the district

and bankruptcy courts are AFFIRMED.

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