VFS US LLC v. Vaczilla Trucking, LLC et al
ORDER & REASONS that counter-defendant GE Electric Capital Corporation's 67 Motion to Dismiss for Failure to State a Claim is GRANTED. Signed by Judge Eldon E. Fallon on 5/11/16. (dno)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
VFS US LLC
VACZILLA TRUCKING, LLC,
CRYSTAL DITCHARO, AND
SECTION "L" (2)
ORDER & REASONS
Before the Court is General Electric Capital Corporation (“GE”) Motion to Dismiss the
claims asserted against it by Defendants/Plaintiffs-in-Counterclaim. R. Doc. 67. The Court has
reviewed the briefs and the applicable law, and the Court now issues this Order & Reasons.
This case arises out of a contract dispute. Vaczilla was a new firm that sought to enter
the market for servicing water to the oil and gas exploration and production industry in North
Dakota. R. Doc. 57 at 3–4. Vaczilla’s initial foray into the market yielded little revenue. Id. at 4.
In response to this lack of demand, Defendants/Plaintiffs-in-Counterclaim Vaczilla Trucking,
LLC (“Vaczilla”), Mackzilla, LLC (“Mackzilla”) Dominick Ditcharo III, and Crystal Ditcharo
(collectively, “Vaczilla”) purchased several vehicles from Parish Truck Sales, Inc. (“Parish
Truck Sales”) for the purpose of transporting crude. Id. To finance these purchases, Vaczilla
entered into a series of contracts with VFS US LLC (“VFS”) and GE.
As relevant to the instant motion, between 2011 and 2013, Borrowers entered into a
series of loan agreements with GE Capital pursuant to which GE Capital lent money to
Borrowers for Borrowers’ purchase of certain equipment for use in their businesses. Specifically,
the parties entered into the following agreements (with those in italics below being the only
agreements regarding which Vaczilla asserts claims against GE Capital):
Security Agreement, dated October 18, 2011, between Parish Truck Sales, Inc. and
Vackzilla, amended by the Modification Agreement dated February 28, 2013 (the “First
Vaczilla Loan Agreement”).
Security Agreement, dated November 10, 2011, between Parish Truck Sales, Inc. and
Vackzilla, amended by the Modification Agreement dated February 28, 2013 (the
“Second Vaczilla Loan Agreement”).
Security Agreement, dated November 25, 2011, between Parish Truck Sales, Inc. and
Vackzilla, amended by the Modification Agreement dated February 28, 2013 (the “Third
Vaczilla Loan Agreement”).”
Security Agreement, dated December 16, 2011, between GE Capital and Vackzilla,
amended by the Modification Agreement dated February 28, 2013 (the “Fourth Vaczilla
Security Agreement, dated October 2, 2012, between GE Capital and Vackzilla, amended
by the Modification Agreement dated February 28, 2013 (the “Fifth Vaczilla Loan
Security Agreement, dated October 3, 2012, between GE Capital and Vackzilla, amended
by the Modification Agreement dated February 28, 2013 (the “Sixth Vaczilla Loan
Security Agreement, dated July 20, 2012, between GE Capital and Mackzilla (the “First
Mackzilla Loan Agreement”).
Security Agreement, dated July 26, 2012, between GE Capital and Mackzilla (the
“Second Mackzilla Loan Agreement”).
Security Agreement, dated August 8, 2012, between GE Capital and Mackzilla (the
“Third Mackzilla Loan Agreement”).
Security Agreement, dated August 15, 2012, between GE Capital and Mackzilla (the
“Fourth Mackzilla Loan Agreement”).
Security Agreement, dated August 15, 2012, between GE Capital and Mackzilla (the
“Fifth Mackzilla Loan Agreement”).
Hereinafter, (i) the First Vaczilla Loan Agreement, Second Vaczilla Loan Agreement,
Third Vaczilla Loan Agreement, Fourth Vaczilla Loan Agreement, Fifth Vaczilla Loan
Agreement, and Sixth Vaczilla Loan Agreement are referred to collectively as the “Vaczilla
Loan Agreements;” (ii) the First Mackzilla Loan Agreement, Second Mackzilla Loan
Agreement, Third Mackzilla Loan Agreement, Fourth Mackzilla Loan Agreement, and Fifth
Mackzilla Loan Agreement are referred to collectively as the “Mackzilla Loan Agreements.” For
consideration of entering into the Agreements, Borrowers granted GE Capital a security interest
in the vehicles described therein. The Agreements require that Borrowers repay money lent by
GE Capital pursuant to the payment schedule set forth in each Agreement.
In early 2013, Vaczilla requested that GE modify the payment schedules for several of
the Loan Agreements, and GE agreed to modify the payment terms pursuant to the terms and
agreements set forth in a series of Modification Agreements. The Modification Agreements state,
BUYER HEREBY REAFFIRMS ALL PAYMENT AND
PERFORMANCE OBLIGATIONS TO GE CAPITAL CONTAINED IN
THE CONTRACT AS AMENDED AND ANY AND ALL CREDIT
SUPPORT DOCUMENTS, AND ALL TERMS, COVENANTS AND
CONDITIONS THEREOF, BUYER ACKNOWLEDGES AND
REPRESENTS THAT BUYER HAS NO VALID DEFENSE, SETOFF,
RECOUPMENT, ABATEMENT, OR COUNTER CLAIM TO THE
PAYMENT OF ANY SUMS DUE, OR TO PERFORMANCE OF ANY
OBLIGATIONS, UNDER THE CONTRACT AND CREDIT SUPPORT
DOCUMENTS, OR ANY OF THEM, NOR DOES BUYER HAVE ANY
VALID CLAIMS AGAINST GE CAPITAL OR ITS PREDECESSORSIN-INTEREST OR ASSIGNORS, OR LEGAL OR EQUITABLE
RIGHTS IN REGARD TO ENFORCEMENT OF THE OBLIGATIONS
OF BUYER BY GE CAPITAL UNDER THE CONTRACT AND
CREDIT SUPPORT DOCUMENTS, OR ANY OF THEM, AND BUYER
SPECIFICALLY WAIVES AND RELINQUISHES ANY SUCH
RIGHTS OR CLAIMS.
R. Doc. 67-1 at 6. Vaczilla subsequently defaulted on its payments to both VFS and GE, and
VFS brought the present action against Vaczilla to collect the balances due.
Vaczilla responded by filing a Counterclaim against VFS in August 2015, arguing that its
finance contracts with VFS should be rescinded due to fraud and error. Vaczilla also brought a
Counterclaim for negligent representation against VFS. On September 29, 2015, VFS filed a
motion to dismiss the Counterclaim against it. The Court denied VFS’s motion to dismiss
regarding Vaczilla’s claims for rescission on grounds of fraud and error but granted VFS’s
request to dismiss Vaczilla’s claim of negligent representation. R. Doc. 52. 1
In February 2016, Vaczilla amended its Counterclaim, alleging the same three causes of
action against GE that it had already alleged against VFS: namely, (1) rescission of contracts for
fraud; (2) rescission of contracts for error; and (3) negligent representation. R. Doc. 57. On
April 11, 2016, GE brought the present motion to dismiss the Counterclaim against it. 2
Regarding its request for rescission, Vaczilla alleges that its contract with Parish Truck
Sales was premised on an improper sales method. Vaczilla could not afford to make down
payments, so Vaczilla was charged an excessive price for the vehicles, and in return Vaczilla
received a credit for down payments which Vaczilla never made to Parish Truck Sales. This
arrangement allowed Vaczilla to purchase the vehicles without making the down payments set
forth in the Bill of Sales. This deal appeared favorable to Vaczilla, because Vaczilla did not
have sufficient capital to make the down payments. According to Vaczilla, the company relied
on Parish’s and Brian Bennett’s (“Bennett”) assurances that the arrangement was legally and
fiscally sound, and GE signed off on the Loan Agreements despite being aware that the price
appeared to be suspicious.
Vaczilla claims that the excessive price for the vehicles and the accompanying illusory
down payments constitute improper acts which warrant rescission of the contracts. Specifically,
Vaczilla avers that GE “knew or should have known” that the price for the trucks was unusually
Notably, the arguments in the instant motion by GE are similar to those in prior motion brought by VFS.
Accordingly, on occasion, the Court refers back to this prior Order and Reasons granting VFS’s motion in part and
denying it in part.
As mentioned above, the present motion is similar to a prior motion filed by VFS on which the Court
high and should have concluded that an impropriety existed, and that notice of such impropriety
is sufficient in equity to rescind the Loan Agreements on the grounds of fraud, R. Doc. 57 at 1214, as well as error, Id. at 14-16. Vaczilla additionally argues that GE’s actions constitute
negligent misrepresentation, and that said misrepresentation entitles Vaczilla to damages. Id. at
GE moves to dismiss the Counterclaim filed by Vaczilla against GE, on the grounds that
Vaczilla fails to state a claim. R. Doc. 67. GE argues that Vaczilla’s claims fail for two reasons:
(1) assuming arguendo that Vaczilla was fraudulently induced by Parish into purchasing
vehicles, GE is not liable as it neither knew nor should have known of the fraudulent scheme
perpetuated by Parish; and (2) the Modification Agreements effectuate a release of all claims
related to the Loan Agreements that were modified. Id.
CHOICE OF LAW
The Mackzilla Loan Agreements, as well as the Fourth, Fifth, and Sixth Vaczilla Loan
Agreement contain a choice of law provision which designates Texas law as governing the
contract. Courts sitting in diversity apply the substantive law of the state in which the court sits
when analyzing conflict of law principles. See Hyde v. Hoffman-La Roche, Inc., 511 F.3d 506,
510 (5th Cir. 2007). Here, the Court looks to Louisiana law to determine whether the choice of
law provision in the Agreements controls. Louisiana law gives full force and effect to
contractual choice of law provisions, and “Louisiana courts will not invalidate a contractual
choice-of-law provision unless there is legal authority to the contrary or the chosen law is contra
bonos mores.” Enhanced La. Capital II, LLC v. Brent Homes, 2012-2409, 2013 WL 2459435, *2
(E.D. La. 06/06/13). Specifically, it is “well established that where the parties stipulate the state
law governing the contract, Louisiana conflict of laws principles require that the stipulation be
given effect, unless there is statutory or jurisprudential law to the contrary.” Mobil Explor. &
Producing U.S., Inc. v. Certain Underwriters Subscribing to Cover Note 95–3317(A), 2001–
2219 (La. App. 1 Cir. 11/20/2002), 837 So.2d 11, 42–43 (enforcing Texas choice of law
provision). Thus, the parties’ private agreement regarding choice of law will not be challenged,
except to the extent that the chosen law contravenes the public policy of the state whose law
would otherwise be applicable. Id.; see also La. Civ. Code art. 3540 (“[a]ll other issues of
conventional obligations are governed by the law expressly chosen or clearly relied upon by the
parties, except to the extent that law contravenes the public policy of the state whose law would
otherwise be applicable under Article 3537”).
When a party challenges a choice of law provision, such a challenge must be made to the
choice of law provision itself, not simply to the overarching contract as a whole. 3 The Fifth
Circuit has addressed this issue in the context of fraud and has held that, where fraud is not
alleged as to the choice of law provisions specifically, the choice of law provisions control. For
example, in Haynsworth v. The Corporation, 121 F.3d 956 (5th Cir. 1997), certain investors in
an underwriting exchange brought an action against the exchange alleging various wrongs,
including fraud and overreaching, and sought to rescind obligations arising from the
underwritten policies. Id. at 959–61. The exchange moved to dismiss on the basis of the choice
of law and forum selection clause in the policies. Id. at 961. On consolidated appeal, the Fifth
Circuit explained the difference between general allegations of fraud underlying the contract as a
Notably, this argument was not presented by VFS in its earlier, similar motion to dismiss and therefore
was not considered by the Court. Consequently, with regard to VFS’s motion to dismiss, the Court rejected the
choice of law provision articulated in the contracts between VFS and Vaczilla. However, having now considered the
present choice of law arguments presented by GE, the Court, as discussed below, is persuaded that the Texas choice
of law provisions control the relevant contracts.
whole, and fraud attaching to the choice of law clause itself. Id. at 963. The Fifth Circuit found
the former to be insufficient in challenging a choice of law provision, stating that “allegations of
such conduct as to the contract as a whole—or portions of it other than the [forum
selection/choice of law] clause—are insufficient; the claims of fraud or overreaching must be
aimed straight at the [forum selection/choice of law] clause in order to succeed.” Id. The Fifth
Circuit continued to state that, “to the extent the plaintiffs claim fraud and overreaching in
aspects of the [policies] other than the [forum selection/choice of law] clause, their allegations
are irrelevant to enforceability.” Id. (emphasis added).
The Fifth Circuit followed the same principle in Life of America Ins. Co. v. Aetna Life
Ins. Co., 744 F.2d 409, 412 (5th Cir. 1984), stating that the parties included a choice of law
provision in their reinsurance agreement and that the plaintiff had “not alleged that the arbitration
or choice-of law agreements were induced by fraud or overreaching so as to negate their validity
and effect.” Id. By contrast, in both cases cited by Vaczilla, Hollybrook and Pratt Paper, the
parties specifically disputed their consent to the choice of law provision at issue. Hollybrook
Cottonseed Processing, LLC v. Carver, Inc., No. 09-0750, 2010 WL 1416781 (W.D. La. 4/1/10);
Pratt Paper (LA), L.L.C. v. JLM Advanced Technical Servs., No. 11-1556, 2013 WL 395815
(W.D. La. 1/31/13).
Vaczilla has made no allegation that the choice of law provision committing them to a
Texas forum is unenforceable and have made no allegation that any purported fraud goes to the
choice of law provision itself. In fact, the choice of law provision is mentioned nowhere in the
Counterclaim. Rather, Vaczilla concedes that they signed the Agreements and allege only
wrongful conduct exclusive to the “down payment refund scheme.” Generalized allegations of
fraud as to the contract as a whole are simply insufficient to avoid application of the choice of
law provision. Thus, the parties’ intent with respect to choice of law governs, and Texas law
controls the Mackzilla Loan Agreements, as well as the Fourth, Fifth, and Sixth Vaczilla Loan
Agreement. The First, Second Vaczilla Loan Agreement, and Third Vaczilla Loan Agreement
are silent with respect to choice of law and, therefore, Louisiana law applies to these three
agreements. Accordingly, the Court will analyze Vaczilla’s claims under both Louisiana and
LAW AND ANALYSIS
Motion to Dismiss Standard
The Federal Rules of Civil Procedure permit a defendant to seek a dismissal of a
complaint based on the “failure to state a claim upon which relief can be granted.” Fed. R. Civ.
P. 12(b)(6). A district court must construe facts in the light most favorable to the nonmoving
party. See Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232–33 (5th Cir. 2009). The court
must accept as true all factual allegations contained in the complaint. Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009). “To survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id. (citation omitted).
Dismissal is appropriate only if the complaint fails to plead “enough facts to state a claim to
relief that is plausible on its face.” Bell Atlantic Corporation et al. v. William Twombly, 550
U.S. 544, 570 (2007). A motion to dismiss under rule 12(b)(6) is “viewed with disfavor and is
rarely granted.” Kaiser Aluminum & Chem. Sales v. Avondale Shipyards, 677 F.2d 1045, 1050
(5th Cir. 1982).
Rescission of Contracts for Fraud
Under Louisiana law, a claim for rescission of a contract for fraud requires the following
elements: (1) a misrepresentation, or omission of true information; (2) the intent to obtain an
unjust advantage or to cause damage or inconvenience to another, and (3) the error induced by
the fraudulent act must relate to a circumstance substantially influencing the victim’s consent to
the contract. See Nola Fine Art, Inc. v. Ducks Unlimited, Inc., 88 F. Supp. 3d 602, 614 (E.D. La.
2015). Article 1956 of Louisiana’s Civil Code provides for the rescission of a contract on
grounds of fraud by a non-party to the contract “if the other party knew or should have known of
the fraud.” La. Civ. Code art. 1956. Vaczilla must therefore provide facts that plausibly support
the three elements of a claim for rescission of a contract for fraud in addition to facts suggesting
that GE knew or should have known of the alleged fraud. However, fraudulent inducement
“does not vitiate a party’s consent when the party against whom the fraud was directed could
have ascertained the truth without difficulty, inconvenience, or special skill.” La. Civ. Code art.
In its prior Order and Reasons addressing VFS’s motion to dismiss, this Court held that
Vaczilla provided facts that plausibly support the three elements of a claim for rescission of a
contract for fraud. R. Doc. 52. More particularly, this Court held that, for purposes of a motion
to dismiss, Vaczilla sufficiently pled that (1) Parish misrepresented true information when
Bennett proposed the phantom down payments to Vaczilla; (2) Parish and Bennett intended to
obtain an unjust advantage in the form of increased sales by these intentional misrepresentation;
and (3) Parish and Bennett’s misrepresentations and omissions directly resulted in Vaczilla’s
decision to enter into the contracts at issue i.e., the vehicle purchases and associated financing
agreements with GE. Id.
Accordingly, the present issue before this Court is whether Vaczilla plausibly pled that
GE knew or should have known of the alleged fraud. Vaczilla premises its claim that GE knew
or should have known of the alleged fraud on the fact that GE has significant experience with
lending in the commercial trucking industry (purporting to be “the industry-leader” in financing
in the trucking industry) and that it holds itself out as having “collateral expertise.” R. Doc. 57 at
9. The Counterclaim alleges that this experience is more than sufficient for GE to be aware of
the inflated price of collateral that it is financing. Id. at 10.
In its prior Order and Reasons addressing VFS’s motion to dismiss, this Court held that
Vaczilla plausibly pled that VFS knew or should have known that Parish had committed fraud on
the basis of a conversation that occurred over dinner at Drago’s in New Orleans. (R. Doc. 52 at
19). Vaczilla alleges that Dominick Ditcharo, as a representative of Vaczilla, met with Richard
Cluebine, a regional manager for VFS, on or about February 15, 2012, to discuss a grant of
additional financing to Vaczilla. (R. Doc. 24 at 16). Vaczilla alleges further that Mr. Cluebine
noted over the course of dinner that “the sale prices of the trucks and trailers were very high and
further remarked that he had never seen trailer prices that high.” (R. Doc. 24 at 16). Thus,
guided solely by the pleadings, this Court held that Vaczilla plausibly imputed knowledge of the
fraud at issue to VFS. (R. Doc. 52 at 19-20).
However, the instant Motion is distinguishable from the Court’s prior findings in the
Order with respect to whether VFS plausibly knew or should have known of the alleged fraud.
Unlike the Court’s findings with respect to VFS, no alleged meeting took place between
Dominick Ditcharo and a representative of GE Capital in February 2012 or any other time. In
addition, in contrast to the Vaczilla’s contracts with VFS, the Mackzilla Loan Agreements
executed by Vaczilla and GE Capital describe the collateral and the amount borrowed, but do not
include the sale price, down payment amount, or other information relevant to the alleged fraud.
The only “facts” alleged in the Counterclaim to support GE Capital’s alleged knowledge are
quotes from “promotional literature,” asserting that GE Capital is an industry leader in financing
commercial trucks. Such generic allegations, however, do not tend to show that GE Capital
knew of should have known of this alleged fraud. Accordingly, there are no facts alleged in the
Counterclaim to support the allegation that GE Capital knew or should have known of the
Rescission of Contracts for Error
Under Louisiana law, error vitiates consent “when it concerns a cause without which the
obligation would not have been incurred and that cause was known or should have been known
to the other party.” La. Civ. Code art. 1949. Louisiana courts interpret Article 1949 to allow for
rescission on grounds of unilateral error. See Nugent v. Stanley, 336 So.2d 1058, 1063 (La. App.
3rd Cir. 1976) (“The jurisprudence . . . establishes that a contract may be invalidated for
unilateral error as to a fact which was a principal cause for making the contract, where the other
party knew or should have known it was the principle cause.”). Article 1950, which defines
error, expressly recognizes errors of law in addition to errors of fact. See La. Civ. Code art.
1950. “Error may concern a cause when it bears on the nature of the contract . . . or the law, or
any other circumstance that the parties regarded, or should in good faith have regarded, as a
cause of the obligation.” Id.
Turning to the facts, the Court finds Vaczilla’s pleading insufficient to survive GE’s
12(b)(6) Motion to Dismiss. Vaczilla alleges error regarding the propriety of the down payment
arrangement in the contract, and further avers that GE knew or should have known of said error.
To support its contention that the error was a cause of the Loan Agreements, Vaczilla alleges that
it would not have entered into the Loan Agreements if Vaczilla had known of the impropriety or
illegality of the down payments. Accepting this pleading as true, Vaczilla satisfies the error
component of its claim. See Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232–33 (5th Cir.
2009) (noting that a district court considering a motion to dismiss must construe all evidence in
favor of non-movant). However, Vaczilla fails to plausibly allege that GE knew or should have
known of the error, and the fact that GE is an industry leader in the commercial trucking
financing industry is insufficient to raise an inference of GE’s knowledge. R. Doc. 24 at 16.
Thus, Vaczilla’s claim is not “plausible on its face.” Bell Atlantic Corporation et al. v. William
Twombly, 550 U.S. 544, 570 (2007).
Rescission of Contracts for Fraud
Under Texas law, rescission is not a cause of action but an equitable remedy that may be
granted upon certain grounds such as fraud. Bank One, Texas, N.A. v. Stewart, 967 S.W.2d 419,
455 (Tex. App. 1998). The most analogous cause of action under Texas Law is fraud in the
inducement. “To bring a claim for fraud in the inducement, a plaintiff must show the elements of
fraud, and must show that she has been fraudulently induced to enter into a binding agreement.”
In re Guardianship of Patlan, 350 S.W.3d 189, 198 (Tex. App. 2011) (internal citations
omitted). “To bring a claim for common law fraud, a plaintiff must show the following: (1) a
material misrepresentation 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 the truth and as a positive assertion; (4) the speaker made the representation with
the intent that the other party should act upon it; (5) the party acted in reliance on the
representation; and (6) the party thereby suffered injury.” Id. Further, the allegations must “relate
to an agreement between the parties.” In re Provider Meds, LP, No. 13-30678-BJH, 2014 WL
4162870, at *5 (Bankr. N.D. Tex. Aug. 20, 2014).
Moreover, some injury must be shown to constitute cause for rescission of a contract for
fraud. Featherlax Corp. v. Chandler, 412 S.W.2d 783, 789 (Tex. Civ. App. 1966). As a remedy
for fraud in the inducement, “[t]he defrauded purchaser is put to an election whether he will keep
the property and recover damages, or rescind the sale and return the property while recovering
the value he has parted with.” Bank One, 67 S.W.2d at 455. To be entitled to rescission, a party
must show (1) he and the defrauding party are in the status quo, that is, he is not retaining
benefits received under the instrument without restoration to the other party; or (2) there are
equitable considerations that obviate the need for the status quo relationship. Id.
Here, the Counterclaim fails to properly plead fraud in the inducement, and, considering
Vaczilla’s theory of the case, leave to amend the Counterclaim to assert causes of action under
Texas law would not affect this Court’s ruling. Vaczilla’s theory of the case is that Parish, not
GE, induced Vaczilla into purchasing certain vehicles. No allegation is made that GE, or any of
its representatives, made any representations, false or otherwise, regarding the Loan Agreements
or the propriety of the alleged scheme. Additionally, no person is alleged to have made any
representations regarding the Mackzilla Loan Agreements, and none of the alleged
misrepresentations relate to an agreement between the Vaczilla and GE.
Moreover, assuming arguendo that Vaczilla could amend the Counterclaim to allege
fraud in the inducement with respect to the respective bills of sale, Vaczilla is not entitled to the
equitable remedy of rescission of the Loan Agreements. Vaczilla does not allege that it is able or
willing to return the money loaned to them to purchase the vehicles. Thus, Vaczilla alleges no
facts to show that they are entitled to rescission, and accordingly, GE is entitled to judgment as a
matter of law on the rescission for fraud claim. See Siens v. Trian, LLC, No. A-11-CV-075AWA, 2014 WL 1900737, at *5 (W.D. Tex. May 13, 2014).
Rescission of Contracts for Error
Similar to rescission of contracts for fraud, rescission of contracts for error is not a cause
of action under Texas law. The most analogous cause of action under Texas Law is a claim for
relief from a unilateral mistake, which is available when the conditions of remediable mistake
are present. Ross v. Union Carbide Corp., 296 S.W.3d 206, 219-20 (Tex. App. 2009) (citing
James T. Taylor & Son, Inc. v. Arlington Indep. Sch. Dist., 335 S.W.2d 371, 372–73 (Tex.
1960)). “These conditions generally are: (1) the mistake is of so great a consequence that to
enforce the contract as made would be unconscionable; (2) the mistake relates to a material
feature of the contract; (3) the mistake was made regardless of the exercise of ordinary care; and
(4) the parties can be placed in status quo in the equity sense, i.e., rescission must not result in
prejudice to the other party except for the loss of his bargain.” Id. at 220. The remedy, however,
is not available to a party mistaken as to the law, as opposed to a fact. Oak Hills Properties v.
Saga Restaurants, Inc., 940 S.W.2d 243, 246 (Tex. App. 1997) (“A mistake of law does not
relieve a party to a contract from being bound by its terms.”).
Here, the Counterclaim fails to properly plead relief from a unilateral mistake and leave
to amend would be futile as no mistake of fact exists with respect to the Loan Agreements. The
amount borrowed is the amount described on the face of the Loan Agreements. None of the facts
plead in the Counterclaim could lead to the conclusion that enforcement of the Loan Agreements
would be unconscionable; the alleged mistake relates to the propriety of the underlying
agreement regarding the sale of vehicles, an agreement where GE neither knew or should have
known of the alleged error.
Vaczilla has agreed that its negligent misrepresentation claim against GE is the same
materially as its prior claim against VFS, which was already dismissed. Accordingly, for the
same reasons elaborated in the Court’s prior Order and Reasons addressing VFS’s motion to
dismiss, this Court finds that Vaczilla’s Counterclaim likewise fails to state a claim for negligent
misrepresentation against GE.
For the foregoing reasons, IT IS ORDERED that GE’s Motion to Dismiss for Failure to
State a Claim is GRANTED.
New Orleans, Louisiana, this 11th day of May, 2016.
UNITED STATES DISTRICT JUDGE
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