Court Opinion

ID: 2880690
Source: CourtListenerOpinion
Date Created: 2015-09-07 15:00:24.317989+00
Date Added: 2024-06-11T08:51:29.492325
License: Public Domain

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 & A made 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 E was 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 &A demanded that Bank One return its earnest money.
Bank One refused, notifying C&Athat it intended 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 &A relies 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

                                             -4-
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 &A identifies.
       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 of C&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).

                                                            -5-
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 v Buys 924 S.W.2d 369, 372 (Tex. 1996); Richardson Lifestyle Ass'n v. Houston, 853 S.W.2d 796 800 (Tex.
       £L     L'Jdenied^
  App.-Dallas 1993, writ denied) (dtin.
                                 (citing Praeger
                                         Praeger v. Wilson, 721 S.W.2d 597, 600 (Tex. App.-Fort Worth 1986, wnt ref dn.r.e.)).

                                                              -6-
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: A Schedule 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 a party 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).

                                                              -9-
they argued that because C &A agreed 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&A promised not to rely on their current or future 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).

                                                          -10-
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 of the 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.

                                                •11-
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. But several 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.

                                              -12-
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 a matter 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&Aargues Airborne 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.

                                               -13-
        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 a seventh 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).

                                                               -14-
App. P. 90(a).

       We affirm the trial court's judgment.

                                                                   fe<_<4L»c~_*?1<_>
                                                  DEBORAH G. HANKINSON
                                                  JUSTICE
Publish
Tex. R. App. P. 90
951569F.P05

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