Texas Capital Bank, N.A. v. Dallas Roadster, Ltd. et al
Filing
173
REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE re 46 MOTION to Dismiss First Amended Counterclaims of Bahman Khobahy filed by Texas Capital Bank, N.A., 47 MOTION to Dismiss First Amended Counterclaims of Bahman Haf ezamini filed by Texas Capital Bank, N.A., 44 MOTION to Dismiss First Amended Counterclaims of Dallas Roadster, Ltd. filed by Texas Capital Bank, N.A.. Within fourteen (14) days after service of the magistrate judges report, any party may serve and file written objections to the findings and recommendations of the magistrate judge. 28 U.S.C.A. § 636(b)(1)(c). Signed by Magistrate Judge Don D. Bush on 3/4/15. (cm, ) Modified on 3/6/2015 (cm, ).
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
TEXAS CAPITAL BANK, N.A.
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Plaintiff,
VS.
DALLAS ROADSTER, LTD., ET AL.
Defendants.
Case No. 4:13cv625
REPORT AND RECOMMENDATION
OF UNITED STATES MAGISTRATE JUDGE
Now before the Court are Plaintiff Texas Capital Bank’s (“TCB”) Motion No. 1 to Dismiss
First Amended Counterclaims of Dallas Roadster, Ltd. (“DR”)1 (Dkt. 44), Plaintiff Texas Capital
Bank’s Motion No. 2 to Dismiss First Amended Counterclaims of Bahman Khobahy (Dkt. 46),
Plaintiff Texas Capital Bank’s Motion No. 3 to Dismiss First Amended Counterclaims of Bahman
Hafezamini (Dkt. 47), Defendant/Counter-Plaintiff Dallas Roadster, Ltd.’s Motion for Partial
Summary Judgment (Dkt. 101), and Plaintiff Texas Capital Bank’s Motion for Summary Judgment
on All Claims and Counterclaims (Dkt. 104). The undersigned United States Magistrate Judge
makes the following findings regarding the parties’ claims.
1
As with the parties’ briefing, for ease of reference Defendant and Counter-Claimant
Dallas Roadster and its general partner, Defendant IEDA Enterprise, Inc., both are referred to
herein as “DR” and the Court’s findings extend accordingly.
1
FACTUAL BACKGROUND
For several years, TCB had a business relationship with Dallas Roadster Ltd., a Texas limited
partnership. Sometime in 2008, DR signed two notes and related security agreements. One note was
in essence a revolving line of credit (Exhibit B-1), and the other was for refinancing of certain real
estate (Exhibit B-7). See Dkt. 104-2 at 3 (“Loan and Security Agreement”); Dkt. 104-2 at 79 (“Loan
and Security Agreement”). Over the years there were various extensions of the $4,000,000 line of
credit note. The last extension was to run from September 15, 2011 until December 15, 2011.
(Exhibit B-5). See Dkt. 104-2 at 58 (“Loan Modification, Renewal, and Extension Agreement.”).
Guaranties were obtained from three Guarantors, the general partner, IEDA Enterprise, Inc., and
Bahman Khobahy, and Bahman Hafezamini, all principals in DR. Each guarantor and DR (all of
whom are Defendants herein) made certain representations and warranties in consideration for the
notes.
Under the loan agreement, these representations and warranties survived until all
indebtedness was paid in full to the Lender and all Lender’s obligations to Borrower were terminated
(Exhibit B, Section 10.2). Defendants warranted that they were not in violation of any laws (Section
6.11). See Dkt. 104-2 at 14; 25. There were no existing liabilities (Section 6.9). See Dkt. 104-2 at
14. There were no defaults under the loan documents (Section 6.8). Id. Defendants warranted that
there were no liens on any personal property (Section 6.5). See Dkt. 104-2 at 13.
Defendants also made affirmative covenants. Most notably, each promised to conduct its
business and affairs in compliance with all Laws (Section 7.1(i)).
See Dkt. 104-2 at 16.
Additionally, DR agreed not to incur any indebtedness other than trade payables in the ordinary
2
course of business or make any payments on other debt without TCB’s prior written consent (Section
7.2(b)). See Dkt. 104-2 at 18. DR also agreed not to grant a security interest on any of its assets
(Section 7.2(k)). Id.
In the Unlimited Guaranty Agreements (Exhibits B-2, 3 and 4), the Guarantors waive and
release all claims, causes of action, defenses and offsets for any act or omission of TCB in
connection with TCB’s administration of the indebtedness, except for TCB’s wilful misconduct and
gross negligence (Section 7(e) of the various Guaranty Agreements). See Dkt. 104-2 at 35, 38, 43,
and 51. Guarantors also agree that no defense or discharge of DR as principal affects their
obligations. Id. Section 8(a)(x). Later on, the Guarantors will also release future claims in exchange
for a forbearance of default (Exhibit 6). See Dkt. 104-2 at 76-78.
Under the Default provision of the DR loan agreement, an event of default existed if any
prior warranty or representation made in the loan document is incorrect, false or misleading in any
respect when made or deemed to be made (Section 9.1(d)). See Dkt. 104-2 at 21.
It appears from the summary judgment evidence that TCB knew for some time prior to
accelerating the notes that Hafezamini was possibly violating Treasury regulations. TCB also knew
that the DEA was investigating Hafezamini and DR and that it knew of the cash deals being made
and not reported according to Treasury regulations. Further, it also appears that TCB suspected that
marijuana was in one of the deposit bags brought in by DR. After the fact, TCB learned that DR and
Hafezamini had been in violation of the loan agreement by paying back indebtedness without the
consent of TCB.
3
TCB sent all Defendants its final notice of default on November 15, 2011. See Dkt. 104-3
at 81. In that notice, TCB stated that, although Hafezamini had represented that no financing would
be obtained from American Finance Corporation (AFC), TCB was in receipt of a letter from AFC
indicating that it had or expected to acquire a purchase money interest in all of DR’s properties and
assets. Further, TCB stated that it had recently learned that AFC had filed a UCC financing
statement with the Secretary of State. TCB then went on to state that it had been advised that several
recent model vehicles had appeared on the dealer lots which were not financed by TCB.
TCB deemed itself to be insecure under the loan documents and also contended that one or
more of Defendants had suffered a material adverse change in its business or financial condition. As
to the AFC financing agreement, the evidence demonstrates that TCB knew such financing was not
going forward, but it is unclear when TCB actually found out about the blanket financing statement
filed by AFC. TCB was well apprised that the issue regarding AFC’s potential financing was a
nonissue particularly since TCB would not sign an Inter Creditor Agreement. However, TCB also
deemed itself insecure as a reason for notice of default. This is tempered by the fact that TCB must
in good faith deem itself insecure.
By DR’s account it was a good customer and all payments were timely made. The genesis
of the parties’ unraveling relationship appears to begin with a grand jury subpoena issued on TCB
concerning DR and one of its principals, Hafezamini. Sometime in the fall of 2010, well over a year
before the fallout occurred, TCB was on notice that the DEA was investigating DR and Hafezamini
4
for drug money laundering. It appears that the DEA was tipped off to irregularities in the dealership
as early as 2008.
Thereafter, TCB became more vigilant in monitoring DR’s activities, going to the
extraordinary measure of putting two of its own auditors on site to monitor DR’s activities. TCB
also reminded Hafezamini that he was required to follow certain regulations when taking in large
cash deposits for the purchase of cars. Hafezamini denies that TCB informed him of this.
In June 2011, TCB notified DR that it was in default for failure to furnish Annual Reviewed
Financial Statements but agreed to forebear further action if the default was cured. DR apparently
cured the default because no further action was taken on the June letter.
Then, in October 2011, TCB notified DR that, if it had obtained financing from AFC, it was
in potential default. TCB requested that DR respond in writing that it had not obtained the financing.
According to written discovery, it appears that TCB was told by AFC that no financing would take
place without a Inter Creditor Agreement which TCB refused to give. For some reason, DR did not
respond in writing, but it appears one of the principals informed TCB that no such financing had
been obtained. In this same time period, AFC also filed financing statements with the Texas
Secretary of State. It is unclear exactly when TCB was aware of this even though no financing had
been obtained.
By early November 2011, TCB knew that the DEA had its sights on DR. The DEA sent TCB
a Secured Party Indemnity Agreement. This agreement purportedly protected TCB and its collateral
from sale, if seized. On November 9, 2011, the DEA met with TCB representatives to inform them
5
that an indictment against Hafezamini and another employee of DR had been returned and that the
DEA was going to arrest Hafezamini, as well as seize vehicles, on November 16, 2011. For some
period of time going back several months, TCB had been cooperating with the DEA in its
investigation and furnishing records when requested.
On November 15, 2011, TCB sent all Defendants a notice of acceleration and cross default
and acceleration in reference to the $4,000,000 line of credit and the real estate note in the sum of
$2,067,945.00. In the letter TCB referenced the October 26, 2010 letter but also mentioned that
several vehicles appeared on Borrowers’ lots which were not financed under the credit agreement.
TCB also mentioned that the documents allowed it to accelerate the loan if it deemed itself to be
insecure. TCB also demanded immediate possession of all vehicles and collateral. Notice was also
given to all Guarantors.
On November 16, 2011, TCB filed its Original Petition and Emergency Application for
Appointment of a Receiver in state court. This was filed at 9:06 a.m. See Dkt. 104-19.
Approximately an hour later, the state court district judge signed the order for receivership. See Dkt.
104-20. Defendants contend that the receivership was obtained in bad faith. In his deposition,
Noonan stated that TCB had a “feeling of insecurity” for months but the November 10 meeting was
the catalyst for TCB’s actions. Noonan testified that at the meeting the DEA informed him of the
indictments and the upcoming seizure of DR’s property including vehicles. Defendants also took
the deposition of the DEA agent involved, and he denies telling TCB that all property including
vehicles would be seized.
6
Three search warrants were obtained. One was obtained in the Northern District of Texas,
and two were for property in the Eastern District of Texas. The indictment also sought a general
forfeiture of all assets of DR related to the criminal activity.
Ultimately, DR and IEDA filed for voluntary chapter 11 bankruptcy, and the dispute with
TCB became an adversarial proceeding therein. This case is pending in this Court by virtue of an
order withdrawing the order of reference.
TCB’s First Amended Complaint asserts the following claims: (1) breach of contract against
DR; (2) breach of the guaranties against IEDA, Khobany, and Hafezamini; and (3) breach of the June
2008 loan agreement and the guaranties against Hafezamini and Khobahy. Dkt. 36. DR and IEDA’s
First Amended Counterclaims assert the following claims against TCB: (1) breach of contract; (2)
negligent misrepresentation; (3) wrongful receivership; and (4) a declaration of common law
partnership or its equivalent. Dkt. 38. In addition to adopting all causes of action alleged by DR,
Hafezamini asserts the following claims in his First Amended Counterclaim: (1) malicious
prosecution of civil and/or criminal proceedings; (2) abuse of process; (3) intentional infliction of
emotional distress; (4) tortious interference with existing contracts and prospective relations; (5)
fraud/fraud in the inducement/deceptive trade practices; (6) promissory estoppel; (7) wrongful
receivership; and (8) Equal Credit Opportunity Act violations. Dkt. 39. Khobahy asserts the
following counterclaims against TCB: (1) breach of contract; (2) tortious interference with existing
contract and prospective relations; (3) wrongful receivership; (4) conversion; (5) fraud; (6)
intentional infliction of emotional distress; (7) negligent misrepresentation; (8) defamation/business
7
disparagement; (9) promissory estoppel; (10) unjust enrichment; (11) money had and received; (12)
Texas Theft Liability Act violations; and (13) Equal Credit Opportunity Act violations. Dkt. 33.
Pending before the Court are several dispositive motions addressing the claims raised herein.
In its motion to dismiss DR’s counterclaims, TCB argues that: (1) TCB is immune from
liability for its alleged disclosures to law enforcement authorities; (2) no claim for “wrongful
receivership” can be stated; (3) DR expressly waived consequential damages and cannot re-litigate
the receivership order under the guise of a contract claim; (4) DR has not plausibly pled fraud or
negligent misrepresentation; (5) DR fails to plausibly allege a common law or equitable partnership;
and (6) DR expressly waived a jury trial and its improper jury demand must be stricken. See Dkt. 44.
In its motion to dismiss the counterclaims of Khobahy, TCB argues: (1) Khobahy improperly asserts
claims that belong exclusively to DR under its bankruptcy plan; (2) Khobahy lacks standing to bring
the claims he asserts; (3) TCB is immune from liability for his alleged disclosures to law
enforcement authorities; (4) Khobahy’s variously-labeled counterclaims all fail. See Dkt. 46. In its
motion to dismiss Hafezamini’s counterclaims, TCB argues: (1) TCB is immune from liability for
its alleged disclosures to law enforcement authorities; (2) Hafezamini lacks standing to sue over
actions toward DR because such claims belong exclusively to DR under its bankruptcy plan; (3)
Hafezamini lacks standing to complain that DR was harmed; and (5) Hafezamini’s variously-labeled
counterclaims all fail. See Dkt. 47. Defendants have filed responses in opposition.
In its motion for summary judgment, TCB asks the Court to dismiss all counterclaims against
it with prejudice and/or render summary judgment thereon in its favor and to render summary
8
judgment on all of TCB’s affirmative claims.2 Specifically, TCB argues: (1) DR defaulted under and
materially breached the loan agreement and thus TCB is entitled to summary judgment on it's
affirmative claims and on DR’s breach of contract claim; (2) the counterclaims fail for lack of
recoverable damages; (3) claims based on TCB’s alleged disclosures to law enforcement authorities
are barred by statutory immunity and fail for lack of evidence; (4) wrongful receivership is not a
recognized claim and any receivership-based claims are time-barred; (5) Hafezamini and Khobahy
lack standing to bring individual claims based on the default, acceleration, or receivership; (6)
Defendants expressly waived all claims against TCB as a condition to TCB’s forbearance from
default remedies; (7) numerous claims fail for complete lack of evidence on one or more elements
and because of claim-specific defects; and (8) all other counterclaims have been abandoned. See
Dkt. 104. In its motion for partial summary judgment, DR seeks summary judgment finding that
there was no default related to DR’s efforts to secure financing from AFC and finding that TCB had
no basis to accelerate the Note in relation to any claimed Automotive Finance Corporation-related
default. See Dkt. 101. The summary judgment motions have also been responded to.
At a hearing in this case, the Court having raised the similarity in the arguments raised, the
parties agreed that a ruling on the motions for summary judgment would render the motions to
dismiss moot. Therefore, without finding that any claims have been stated or that the arguments
raised in the motions to dismiss lack merit, the Court addresses the parties’ motions for summary
judgment.
2
TCB also requests a hearing on its motion. The Court has held numerous hearings and
telephone conferences regarding the parties’ claims herein. See, e.g., Dkt. 144, 170.
9
SUMMARY JUDGMENT STANDARD
Rule 56 of the Federal Rules of Civil Procedure mandates the entry of summary judgment,
after adequate time for discovery and upon motion, against a party who fails to make a sufficient
showing of the existence of an element essential to the party’s case, and on which that party will bear
the burden at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265
(1986); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc); see also Baton
Rouge Oil & Chem. Workers Union v. ExxonMobil Corp., 289 F.3d 373, 375 (5th Cir. 2002).
For summary judgment, the initial burden falls on the movant to identify areas essential to
the non-movant's claim in which there is an “absence of a genuine issue of material fact.” Lincoln
Gen. Ins. Co. v. Reyna, 401 F.3d 347, 349 (5th Cir. 2005). The moving party, however, need not
negate the elements of the non-movant's case. See Boudreaux v. Swift Transp. Co., 402 F.3d 536,
540 (5th Cir. 2005). The moving party may meet its burden by pointing out “‘the absence of
evidence supporting the nonmoving party’s case.’” Duffy v. Leading Edge Prods., Inc., 44 F.3d 308,
312 (5th Cir. 1995) (quoting Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 913 (5th Cir. 1992)). If
the moving party meets its initial burden, the non-movant must go beyond the pleadings and
designate specific facts showing that there is a genuine issue of material fact for trial. Littlefield v.
Forney Indep. Sch. Dist., 268 F.3d 275, 282 (5th Cir. 2001) (internal citation omitted). “An issue
is material if its resolution could affect the outcome of the action. A dispute as to a material fact is
genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”
DIRECTV Inc. v. Robson, 420 F.3d 532, 536 (5th Cir. 2005) (internal citations omitted).
10
In deciding whether a genuine and material fact issue has been created, the court reviews the
facts and inferences to be drawn from them in the light most favorable to the non-moving party.
Reaves Brokerage Co. v. Sunbelt Fruit & Vegetable Co., 336 F.3d 410, 412 (5th Cir. 2003). The
non-movant’s burden is not met by mere reliance on the allegations or denials in the non-movant's
pleadings. See King v. Dogan, 31 F.3d 344, 346 (5th Cir. 1994) (holding that unverified pleadings
do not “constitute competent summary judgment evidence”). Likewise, “conclusory allegations” or
“unsubstantiated assertions” do not meet the non-movant’s burden. Delta & Pine Land Co. v.
Nationwide Agribusiness Ins. Co., 530 F.3d 395, 399 (5th Cir. 2008). Instead, the nonmoving party
must present specific facts which show “the existence of a genuine issue concerning every essential
component of its case.” Am. Eagle Airlines, Inc. v. Air Line Pilots Ass’n, Int’l, 343 F.3d 401, 405
(5th Cir. 2003) (citation and internal quotation marks omitted). In the absence of any proof, the court
will not assume that the non-movant could or would prove the necessary facts. Little, 37 F.3d at
1075 (citing Lujan v. Nat’l Wildlife Fed'n, 497 U.S. 871, 888, 110 S.Ct. 3177, 111 L.Ed.2d 695
(1990)).
The Court may make no credibility determinations or weigh any evidence and must disregard
all evidence favorable to the moving party that the jury is not required to believe. See Chaney v.
Dreyfus Serv. Corp., 595 F.3d 219, 229 (5th Cir. 2010) (citing Reaves Brokerage Co., 336 F.3d at
412–13). The Court is not required to accept the non-movant’s conclusory allegations, speculation,
and unsubstantiated assertions which are either entirely unsupported, or supported by a mere scintilla
of evidence. Id. (citing Reaves Brokerage, 336 F.3d at 413).
11
ANALYSIS
TCB first argues that DR defaulted under and materially breached the loan agreement
entitling it to summary judgment. Because of the indictment TCB argues that it was entitled to deem
itself insecure under the loan agreement. Further, TCB argues that there was a material adverse
change in DR’s business. These are noted events of default under Section 9.1 of the loan agreement
(Exhibit B-1). See Dkt. 104-2. Although the meaning “material adverse change “ is not defined, one
common meaning of “material” is “being of real importance or great consequence.” Webster’s Third
New International Dictionary 1392 (2002). “Adverse” means having an opposing or contrary
interest. Black’s Law Dictionary 10th Ed. “Change” means to become different. Webster’s Third
New International Dictionary 373-374 (2002).
TCB points to a number of other situations where it claims that DR was in default, although
these matters were not known to TCB at the time that it declared DR in default and subsequently
filed suit for breach of contract and for a receivership. On written questions, the Assistant U.S.
Attorney who handled the case stated that Hafezamini, in his pretrial diversion, unconditionally
admitted to committing a felony (Exhibit O). See Dkt. 104-17. In the Pre-Trial Diversion
agreement, Hafezamini admitted that he was aware that failure to file the required reports was a
crime. He admitted that, on 15 occasions, he had failed to file the required reports.
“It is a well established rule that a party to a contract who is himself in default cannot
maintain a suit for its breach.” Dobbins v. Redden, 785 S.W.2d 377, 378 (Tex. 1990). Under the
“well-established principles of Texas contract law” exemplified by Dobbins, materially breaching
12
the terms of the Mortgage by failing to make timely payments “would normally [with an exception
not relevant here] prevent [Plaintiffs] from maintaining a breach-of-contract claim.” Thomas v. EMC
Mortgage, 499 F. App’x 337, 341 (5th Cir. 2012) (unpublished). Federal district courts applying
Texas contract law have invoked that “well-established rule” to bar actions for breach of contract
by borrowers who were themselves in breach. See Manns–Rice v. Chase Home Fin., LLC, No.
4:11–CV–425–A, 2012 WL 2674551, at *5 (N.D. Tex. July 5, 2012) (holding that where the
“summary judgment record shows that plaintiff admitted she became delinquent in the payment of
her mortgage loan payments .... [her] failure to perform her contractual obligations warrants
summary judgment on her breach of contract claim on that basis alone”); Chavez v. Wells Fargo
Bank, N.A., No. 4:11–V C–864–Y, 2013 WL 3762894, at *4 (N.D.Tex. July 9, 2013) (dismissing
borrower’s breach of contract claim because borrower’s allegations demonstrated that he was in
default under the deed of trust); Williams v. Fed. Nat’l Mortg. Ass’n, No. 2:11–CV–157–J, 2012 WL
1853170, at *2 (N.D.Tex. May 21, 2012) (granting lender summary judgment when “Plaintiffs
present no evidence to contradict either their [not responded-to requests for] admissions or the
notices of default that show that, at the time of foreclosure, Plaintiffs owed a significant balance due
on their mortgage and were in default.”).
Defendants maintain that there was no material breach of the agreement because TCB was
always in a secure position given the collateral it had. Texas cases generally address the issue of
breach in terms of materiality. See Allied Capital Partners, LP v. Proceed Technical Res., Inc., 313
S.W. 3d 460 (Tex. App.– Dallas, 2010 no writ ). If a non breaching party treats the contract as
13
continuing after a breach, the party is deprived of any excuse for termination of its performance.
Materiality is generally a question of fact. Henry v. Mason, 333 S.W. 3d 825 (Tex, App.– Houston
(1st Dist.) 2010, writ denied).
DR maintains that there was no reason to declare default since TCB was sufficiently
collateralized. DR maintains that the indictment was not a material adverse change in DR’s
business. This issue should proceed to trial, since the evidence unequivocally shows that TCB was
well aware of Hafezamini’s actions for well over a year but never declared default and even went
so far as to extend the line of credit only two months before it declared default.
In addition, what the DEA conveyed to TCB is a matter of dispute. None of the default
notices given to DR mention Hafezamini’s criminal misconduct. Yet, TCB was clearly on notice
of the same for almost a year and was furnishing the DEA information.
The undersigned cannot make credibility determinations on summary judgment, and there
is enough conflicting evidence on breach to be submitted to the trier of fact. There is a genuine issue
of material fact as to the breach of contract claims between DR and TCB. The question for the
District Judge is whether there was a material breach by DR and whether TCB had a good faith basis
for its “insecurity.”
TCB argues that, in any event, DR waived consequential damages. In the loan document
DR waived any right to sue for consequential damages. The parties differ on the meaning of
consequential damages.
Actual damages are those damages recoverable under common law.
Brown v. American Transfer & Storage Co., 601 S.W.2d 931, 939 (Tex.), cert. denied, 449 U.S.
14
1015, 101 S.Ct. 575, 66 L.Ed.2d 474 (1980). Under common law, actual damages are either “direct”
or “consequential.” Henry S. Miller Co. v. Bynum, 836 S.W.2d 160, 163 (Tex.1992) (Phillips, C.J.,
concurring); see RESTATEMENT (SECOND) OF TORTS § 549 (1977) (outlining measure of damages
for fraudulent misrepresentation). Direct damages are the necessary and usual result of the
defendant's wrongful act; they flow naturally and necessarily from the wrong. See Southwind
Aviation, Inc. v. Avendano, 776 S.W.2d 734, 736 (Tex.App.– Corpus Christi 1989, writ denied);
Anderson Dev. Corp. v. Coastal States Crude Gathering Co., 543 S.W.2d 402, 405 (Tex. Civ. App.–
Houston [14th Dist.] 1976, writ ref’d n.r.e.). Direct damages compensate the plaintiff for the loss
that is conclusively presumed to have been foreseen by the defendant from his wrongful act. See
Bynum, 836 S.W.2d at 163 (Phillips, C.J., concurring); Coastal States, 543 S.W.2d at 405;
Anderson, Incidental and Consequential Damages, 7 J.L. & Com. 327, 328 (1987).
Consequential damages, on the other hand, result naturally, but not necessarily, from the
defendant’s wrongful acts. Haynes & Boone v. Bowser Bouldin, Ltd., 896 S.W.2d 179, 182 (Tex.
1995); Moore v. Anderson, 30 Tex. 224, 230 (1867). Under the common law, consequential
damages need not be the usual result of the wrong, but must be foreseeable, see Mead v. Johnson
Group, Inc., 615 S.W.2d 685, 687 (Tex. 1981), and must be directly traceable to the wrongful act
and result from it. Airborne Freight Corp., Inc. v. C.R. Lee Enters., Inc., 847 S.W.2d 289, 295
(Tex.App.– El Paso 1992, writ denied); El Paso Dev. Co. v. Ravel, 339 S.W.2d 360, 363 (Tex. Civ.
App. – El Paso 1960, writ ref’d n.r.e.). Still, if damages are too remote, too uncertain, or purely
conjectural, they cannot be recovered. See White v. Southwestern Bell Tel. Co., Inc., 651 S.W.2d
15
260, 262 (Tex. 1983); see also Bynum, 836 S.W.2d at 164 (Phillips, C.J., concurring). Arthur
Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812 (Tex. 1997).
DR pleads the following direct damages: warranty sales, bank commissions, interest income,
document fees, and late fees. To the extent it can show these damages and demonstrate a breach,
those are recoverable. To the extent it seeks foreseeable profits from other business opportunities
lost as a result of the perceived wrongful default, such are consequential damages and may not be
recovered. See Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W. 2d
41, 49 n.1 (Tex. 1998). In addition, to the extent that DR seeks either damages for loss of credit or
credit damage and inability to obtain refinancing, such damages are consequential damages and are
excluded by DR’s contract with TCB. See Mead v. Johnson Group, Inc., 615 S.W2d 685 (Tex.
1981). The above enumerated damages appear to be the only damages pled by DR. Therefore,
TCB’s motion as to waiver as to consequential damages should be granted.
DR has also sued for negligent misrepresentation, wrongful receivership, and a declaration
that TCB through its conduct was in a common law partnership with DR. As to wrongful
receivership, there was no appeal of the order and any suit for damages is an impermissible collateral
attack on the receivership ordered by the Court. Loomis Land & Cattle Co. v. Diversified Mortg.
Investors, 533 S.W.2d 420,423 (Tex. Civ. App. – Tyler 1976, writ ref’d n.r.e). The undersigned has
addressed much of this in a prior report, and the parties are aware of the Court’s position on this
issue. See Dkt. 168.
16
There is no allegation that, in the few short weeks of the receivership, the receiver acted
outside the parameters of the court order or made false statements to DR’s customers. While DR
has devoted much effort to discredit TCB and its officers, to the extent it alleges out right perjury,
it has not shown any wrongful conduct in the operation of the receivership. Further, any claim about
how the receivership order was obtained would lie in an abuse of process claim which it did not
plead.
Elements of a claim for the tort of abuse of process include: (1) an illegal, improper, or
perverted use of the process, neither warranted nor authorized by the process, (2) an ulterior motive
or purpose in exercising such use, and (3) damage as a result of the illegal act. Graham v. Mary Kay,
Inc., 25 S.W.3d 749, 756 (Tex.App.– Houston [14th Dist.] 2000, pet denied). Abuse of process is
the malicious misuse or misapplication of process in order to accomplish an ulterior purpose.
Baubles & Beads v. Louis Vuitton, S.A., 766 S.W.2d 377, 378 (Tex.App.– Texarkana 1989, no writ)
(citing RESTATEMENT (SECOND) OF TORTS § 682 (1977)); W. Keeton, Prosser and Keeton on The
Law of Torts § 6 (5th ed.1984)).
However, the critical aspect of this tort remains the improper use of the process after it has
been issued. Graham, 25 S.W.3d at 756. Abuse of process exists where the original process is used
to accomplish an end other than that which the writ was designed to accomplish. Bossin v. Towber,
894 S.W.2d 25, 33 (Tex.App. – Houston [14th Dist.] 1994, writ denied); see also Baubles & Beads,
766 S.W.2d at 378; Martin v. Trevino, 578 S.W.2d 763, 769 (Tex. Civ. App. – Corpus Christi 1978,
writ ref’d n.r.e.). Where process is used for the purpose for which it is intended, even though
17
accomplished by an ulterior motive, no abuse of process has occurred. Baubles & Beads, 766
S.W.2d at 379. “If wrongful intent or malice caused the process to be issued initially, the claim is
instead one for malicious prosecution.” Bossin, 894 S.W.2d at 33. DR alleges neither abuse of
process, nor malicious prosecution.
As to DR’s request for a declaration of common law partnership or its equivalent, DR was
merely a debtor in its dealings with TCB. A debtor creditor relationship alone does not create a
fiduciary relationship. See Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex. 1963). The Court agrees
that excessive lender control or influence in the borrower’s business activities could result in a
fiduciary relationship. See Bank One, Texas, N.A. v. Stewart, 967 S.W.2d 419,442 (Tex. AppHouston [14th Dist.] 1998, pet. denied). DR, however, has not pled breach of fiduciary duty but
rather a common law partnership based on TCB’s actions, which it describes as wrongful. There is
no summary judgment evidence to demonstrate a partnership and TCB’s motion should be granted
as to that claim.
In regard to its negligent misrepresentation claim, DR contends that TCB made material,
false representations shortly before and in furtherance of two extensions of the line of credit. DR
maintains that, as early as March 15, 2011, it was told to find another lender because TCB was
getting out of the car business. However, as admitted by DR, TCB extended the line of credit in
March for six months, as it had represented it would. DR contends that it was led to believe that,
with the extension, everything was well with its relationship with TCB. It is DR’s position that TCB
could have done much more at less expense to DR to protect itself.
18
In regard to the three-month credit extension in September 2011, DR alleges that TCB told
it that it was willing to extend for three months but that the actions of TCB caused DR to believe that
everything was satisfactory in the relationship. DR points to the fact that during this time TCB was
working with outside counsel to file suit on DR. DR states that, if TCB had not told DR that things
would work out, DR could have taken steps to pay down the note or make other arrangements to pay
it off. DR also points to the securing of the ex parte order and false or misleading statements made
by Noonan in the petition for a receivership.
The language of the September extension agreement provides as follows:
This Agreement and the other Loan Documents represent the final agreement
between the parties, and this Agreement and the other Loan Documents may not
be contradicted by evidence of prior, contemporaneous or subsequent oral
agreements between the parties. There are no unwritten oral agreements between
the parties.
Dkt. 104-2 at 66 (Section 9 of Exhibit B-5).
The Court finds that any fraud or negligent misrepresentation claims cannot succeed since
its pleadings fail to satisfy F.R.C.P. Rule 9(b) and moreover there is no evidence that it relied on any
statement made by TCB. Any complaint as to fraud or negligent misrepresentation must allege when
the representations were made, who made them, and to whom specifically they were made.
Encompass Office Solutions, Inc. v. Ingenix, Inc. 775 F.2d 938 (E.D. Tex. 2011). Therefore, the only
issue remaining between TCB and DR is whether there was a material breach of contract by either
party and if so the amount of direct damages flowing from said breach.
19
TCB has sued the Guarantors under their unlimited guaranties. Essentially, the Guarantors
agree that TCB may proceed against them without pursuing DR and without regard to whether it
pursues its options as to any collateral. It is a very broad but enforceable guaranty. Based on the
plain language of the documents before the Court, summary judgment for TCB should be granted
as to those claims.
Bahman Khobahy has filed a counter claim asserting breach of contract; tortious interference
with existing contracts and prospective relations; wrongful receivership; conversion; fraud;
intentional infliction of emotional distress; negligent misrepresentation; defamation; promissory
estoppel; unjust enrichment; money had and received; Texas Theft Act violations; and discrimination
under the Equal Credit Opportunity Act.
Bahman Hafezamini adopts those causes of action asserted by DR and also sues for malicious
prosecution; abuse of process; intentional infliction of emotional distress; tortious interference with
existing contracts and prospective relations; fraud/fraud in the inducement/deceptive trade practices;
promissory estoppel; wrongful receivership and violations of the Equal Credit Opportunity Act.
The Guarantors, including Hafezamini and Khobahy, have signed multiple documents
waiving various claims. As noted previously, the Guarantors waived and released all claims, causes
of action, defenses, and offsets for any act or omission of TCB in connection with TCB’s
administration of the Guaranteed indebtedness except for TCB’s wilful misconduct and gross
negligence (Exhibit B-3). See Dkt. 104-2 at 46. None of the Guarantors have pled gross negligence.
20
The term “wilful misconduct” is not defined. Wilful has sometimes been defined as
“heedless and reckless disregard’ and means “that entire want of care which would raise the belief
that the act or omission complained of was the result of a conscious indifference to the right or
welfare of the person or persons affected by it.” Wheeler v. Yettie Kersting Mem. Hosp., 866 S.W.2d
32, 50 n. 25 (Tex.App. – Houston [1st Dist.] 1993, no writ) (citing Burk Royalty Co. v. Walls, 616
S.W.2d 911, 916–20 (Tex. 1981)). The court in Burk said that the term is synonymous with “gross
negligence.” Burk Royalty, 616 S.W.2d at 920. If, on the other hand, “willful” means “intentional,”
then such arises out of an intentional tort. RESTATEMENT (SECOND) OF TORTS § 8A (1965). Black’s
Law Dictionary defines wilful misconduct in terms of recklessness and intentional (Black’s Law
Dictionary 8th Ed. 2004). However, the loan agreement contemplates that the guaranties may be
amended, which happened at least twice.
Exhibit 5 is the Guarantors’ consent to the last extension of credit. See Dkt. 104-2 at 67-69.
The Guarantors agree that there are no claims or offsets against or defenses or counterclaims to, the
indebtedness and other obligations created or evidenced by the loan documents or guaranty
agreement and each guarantor hereby waives and releases any such claims, offsets, defenses or
counterclaims. In June 2011, DR acknowledged that it was in default and asked for a thirty-day
forbearance period to cure the default. In consideration, all Guarantors released all present and
future claims in part relating in any manner to the extension, negotiation, or administration of the
loan. See Dkt. 104-2 at 76-78. TCB argues that the Guarantors have released all counterclaims
raised against it.
21
To release a claim effectively, the releasing instrument must “mention” the claim to be
released. Keck, Mahin & Cate v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 20 S.W.3d 692, 698
(Tex. 2000) (discussing Victoria Bank & Trust Co. v. Brady, 811 S.W.2d 931, 938 (Tex. 1991)).
But the parties need not anticipate and identify each potential cause of action relating to the subject
matter of the release. Id. Rather, “a valid release may encompass unknown claims and damages that
develop in the future.” Id. Further, the “mention” requirement does not bar general, categorical
releases, but such releases are to be narrowly construed. Brady, 811 S.W.2d at 938; see also Duncan
v. Cessna Aircraft Co., 665 S.W.2d 414, 422 (Tex. 1984).
Exhibit 6 is a broad release but it specifically mentions future claims based upon any act,
event or relationship occurring or existing at any time through the date the letter is executed and
relating in any manner to the extension, negotiation or administration of the loan. See Dkt. 104-2
at 77. At the time the letter was executed, TCB and all Guarantors had a relationship and all claims
relate to TCB’s administration of the loan. For example, most of Hafezamini’s claims for
defamation occurred prior to June 22, 2011. Claims relating to interference with prospective
business relations are based on TCB’s relationship with DR and the Guarantors and the notice of
default and receivership which relate to the administration of the loan. Therefore, the Court finds
that all counterclaims are barred and TCB is entitled to summary judgment thereon.
Notwithstanding the Guarantors three separate releases, the Court finds that Khobahy and
Hafezamini could not prevail on their counterclaims. Primarily, Khobahy and Hafezamini’s
wrongful receiverships claims fail for the same reasons DR’s does.
22
As to any interference with contract claims, Hafezamini’s declaration is conclusory and does
not sufficiently describe how and to the extent he was damaged. See Dkt. 117-12. He only blames
that TCB’s actions in part forced him to sell his interests in Azar and miss out on other deals. See
Dkt. 117-12 at 2. Of course, he takes no blame for his own conduct, which he admitted under the
penalty of perjury was criminal.
Khobahy’s declaration again makes vague references to loss of business opportunities
without specifying or identifying what the lost opportunities were. See Dkt. 117-47. He does allege
that the actions of TCB resulted in a loss of his investment in Azar Capital, but TCB states that such
arose out of another lawsuit between the parties on separate guaranties.
As to interference with prospective business relations, there must be an independent tort. As
the Texas Supreme Court has noted, the historical limitation of the tort to unlawful conduct serves
this purpose. Wal-Mart Stores Inc., v. Sturges, 52 S.W.2d 711 (Tex. 2001). The court, in citing to
the Restatement (Second) of Torts, noted that the actors’s conduct is characterized by violence, fraud
or defamation. Id. At 726. There has been no showing that TCB acted with violence or made
defamatory comments to Hafezamini’s and Khobahy’s prospective customers. Further, whether
TCB had a good faith belief that it was insecure is not tantamount to fraud. Actions that are merely
sharp or unfair are not actionable. Id.
As to fraud and negligent misrepresentation, Khobahy and Hafezamini argue that they were
“set up.” They allege that TCB misrepresented the reason for auditors to be on site. They allege that
TCB misrepresented the basis for seeking a modification during the audit process and that TCB was
23
aware of the sting operation. At a minimum, Rule 9(b) requires allegations of the particulars of time,
place and contents of the false representations, as well as the identity of the person making the
misrepresentation and what he obtained thereby. See DT Apartment Group, LP v. CW Capital ,
LLC, 2012 WL 6693192 (N.D. Tex. 2012). Khobahy and Hafezamini’s pleadings fall short of the
heightened pleading standard, and, as stated previously, they have waived such claims.
Neither can Khobahy and Hafezamini recover for intentional infliction of emotional distress.
This “gap filler” tort is not available as a cause of action unless the actor intended to cause severe
emotional distress, or such distress is a primary risk of the conduct at issue. See Conley v. Driver,
175 S.W.3d 882 (Tex. App.– Texarkana, 2005, pet. denied). As Khobahy and Hafezamini admit,
the actions were directed toward DR and its default and TCB’s request for a receivership. There is
no allegation that TCB intended to cause Khobahy and Hafezamini emotional distress.
As to defamation and business disparagement, Khobahy has admitted in his deposition that
he was not aware of any defamatory statements made by TCB as to him.
As to promissory estoppel, Khobahy and Hafezamini allege that certain promises were made
by TCB. They allege that TCB alleged that the auditors were in the business as a routine matter, that
the relationship with TCB was solid, and that there was no reason to seek alternative financing. To
show promissory estoppel, a party must show a promise, foreseeability of reliance, and substantial
reliance to his detriment. G.D. Holdings, Inc. V. H.D.H. Land &Timber, L.P., 407 S.W.3d 856 (Tex.
App.– Tyler, 2013, no writ). Promissory estoppel does not create a contract right that does not
otherwise exist. See Sun Oil Co. (Delaware) v. Madeley, 626 S.W.2d 726, 734 (Tex. 1981). And
24
the law in Texas is clear that when the contract comprises the disputed promise, recovery is
precluded under promissory estoppel. Thaver v. Zapata Off-Shore Co., 903 F.2d 381, 385 (5th Cir.
1990).
Neither has Khobahy shown what personal property which belonged to him was confiscated
by TCB. He cannot recover on his unjust enrichment, conversion, or money had and received claim.
As to the claim of malicious criminal prosecution, to the extent not waived, there is summary
judgment evidence indicating Hafezamini, in his pretrial diversion, unconditionally admitted to
committing a felony. See Dkt. 104-17. He has not demonstrated a fact issue as to his innocence
See Martinez v. English, 267 S.W.3d 521, 527 -528 (Tex. App.–Austin 2008, no pet.) (to
successfully assert a claim of malicious prosecution, a plaintiff must show he was innocent of the
charges). For this reason, his abuse of process claim also fails.
Khobahy and Hafezamini have also abandoned their claims for Texas Theft Liability Act,
malicious civil prosecution and ECOA by failing to respond to such in his response to the motion
to dismiss or in response to TCB’s motion for summary judgment.
RECOMMENDATION
Defendant/Counter-Plaintiff Dallas Roadster, Ltd.’s Motion for Partial Summary Judgment
(Dkt. 101) should be DENIED in its entirety, Plaintiff Texas Capital Bank’s Motion for Summary
Judgment on All Claims and Counterclaims (Dkt. 104) should be GRANTED as to all claims except
TCB’s breach of contract claim and DR’s breach of contract counterclaim and DENIED as to the
breach of contract claims; Khobahy and Hafezamini should take nothing by their counterclaims and
25
those claims should be dismissed with prejudice; DR should take nothing by its counterclaims of
fraud, negligent misrepresentation, wrongful receivership, and the claim seeking a declaration of
common law partnership or its equivalent and those claims should be dismissed with prejudice.
Further, given the rulings on the summary judgment motion, Plaintiff Texas Capital Bank’s
Motion No. 1 to Dismiss First Amended Counterclaims of Dallas Roadster, Ltd. (Dkt. 44), Plaintiff
Texas Capital Bank’s Motion No. 2 to Dismiss First Amended Counterclaims of Bahman Khobahy
(Dkt. 46), and Plaintiff Texas Capital Bank’s Motion No. 3 to Dismiss First Amended Counterclaims
of Bahman Hafezamini (Dkt. 47) should otherwise be DENIED as MOOT.
The only claims remaining should be TCB’s breach of contract claim against DR and DR’s
breach of contract claim against TCB and any applicable claims for attorney’s fees. All other claims
for relief are DENIED.
Within fourteen (14) days after service of the magistrate judge’s report, any party may serve
and file written objections to the findings and recommendations of the magistrate judge.
28 U.S.C.A. § 636(b)(1)(c).
A party is entitled to a de novo review by the district court of the findings and conclusions
contained in this report only if specific objections are made, and failure to timely file written
objections to any proposed findings, conclusions, and recommendations contained in this report shall
bar an aggrieved party from appellate review of those factual findings and legal conclusions accepted
by the district court, except on grounds of plain error, provided that the party has been served with
notice that such consequences will result from a failure to object. Id.; Thomas v. Arn, 474 U.S. 140,
26
.
148 (1985); Douglass v. United Servs. Auto Ass’n, 79 F.3d 1415, 1417 (5th Cir. 1996) (en banc),
superseded by statute on other grounds, 28 U.S.C. § 636(b)(1) (extending the time to file objections
from ten to fourteen days).
SIGNED this 4th day of March, 2015.
.
____________________________________
DON D. BUSH
UNITED STATES MAGISTRATE JUDGE
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