Pastrana et al

Filing 31

MEMORANDUM AND ORDER affirming Bankruptcy Court's judgment.(Signed by Judge Keith P Ellison) Parties notified. (aar4)

United States District Court
Southern District of Texas

ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
IN RE:
JPG RENEWABLES, LLC
DEBTOR.
___________________________________
JUAN FERNANDO PASTRANA, et al.,
Appellants,
VS.
BESTRENEWEDOIL, LLC,, et al.,
Appellees.

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January 03, 2025
Nathan Ochsner, Clerk

CHAPTER 7
BANKRUPTCY CASE NO. 23-30628

CIVIL ACTION NO. 4:24-CV-00698

MEMORANDUM AND ORDER
The Court considers the appeal from Bankruptcy Court of an adversary action arising from
a failed investment. The Court has jurisdiction to hear the appeal under 28 U.S.C.§ 158(a)(1), and
it affirms the Bankruptcy Court’s judgment.
I.

THE PARTIES

Plaintiffs-Appellees (“Plaintiffs”) are investors Carlos Ramirez, and Bestrenewedoil LLC.
Defendants-Appellants (“Defendants”) are Juan Fernando Pastrana (“Pastrana”), JPG Renewables,
LLC (“JPG”), and Lub-Line LLC. Defendants conceived and brokered the deal, and they elicited
Plaintiffs’ investment.

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After a bench trial, the Bankruptcy Court found in favor of Plaintiffs. The Court awarded Plaintiffs
actual and exemplary damages.1
II.

THE ISSUES
The Court received an initial round of lengthy briefing and held a lengthy telephonic

hearing. The Court requested supplemental briefing and then held another lengthy telephonic
hearing. During the course of the advocacy, the Court and the parties appeared to agree that the
two principal issues were whether Plaintiffs’ claims were defeated by the applicable statute of
limitations, and whether the disclaimers that Defendants made immunized Defendants’
misstatements from liability.
That Defendants made material misrepresentations to Plaintiffs is not in dispute. As noted in
the Bankruptcy Court’s Memorandum and Opinion, “It is undisputed that the parties signed
confidentiality agreements and that [Defendants] voluntarily disclosed false information that
conveyed a false impression.” Memorandum Opinion of February 7, 2024, at 8 [hereinafter
“Opinion”].
III.

DISCUSSION

Plaintiffs claim that Defendants are liable for fraud and fraudulent inducement committed
while procuring Plaintiffs’ purchase of membership interests in JPG for a collective total of $3.25
million. Plaintiffs further contend that Defendants misappropriated assets belonging to JPG. The
goal of the enterprise was to build an oil recycling facility in Pearland, Texas. The ownership of
the land on which the project was to be built was misrepresented by Pastrana. The project never
broke ground.

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Other named parties originally a part of the case are not involved in the appeal.
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In their opening appellate briefing, Defendant did not challenge the Bankruptcy Court’s finding
that they made false statements of material fact with intent to deceive. Dkt 16 at 32. The
misrepresentations included overstatements of the amount Patrana had invested in the project and
falsehoods concerning the ownership of the land on which the project was to be constructed.
Although they do not deny the falsity of their misrepresentations, Defendants argue that Plaintiffs’
claims are barred by Texas’ four-year statute of limitations. The relevant dates are as follows.
August 28-29, 2014
January 17, 2017
March 13, 2019

Plaintiffs parted with their money.
Meeting between parties at which time Plaintiffs first became aware
that Defendants had made material misrepresentations.
Plaintiffs filed suit.

Four years clearly had run between the time of Plaintiffs’ investment and the time Plaintiff
filed suit. Plaintiffs contend, however, that Defendants’ acts of fraudulent concealment tolled the
statute of limitations such that it did not start running until January 17, 2017, when Pastrana
revealed the perilous financial status of the project. Defendants respond that Plaintiffs, with the
exercise of due diligence, should have been able - - long before January 17, 2017 - - to figure out
that specific information Defendants made available was false.

By similar due diligence,

Defendants argue, Plaintiffs should have been able to determine that other representations
Defendants

made

to

Plaintiffs

were

materially

incomplete

and

incorrect.

This is an audacious argument. Defendants contend that, even though they were lying to
Plaintiffs, it was Plaintiffs’ responsibility to figure out they were being lied to. They also contend
that, because Plaintiffs trusted Defendants, Plaintiffs should bear the huge financial loss that
resulted.
In particular, Defendants claim that the true status of the ownership of the land to be used
for the construction of the oil recycling facility could have been determined by checking county
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deed records. There are at least two major reasons that this argument fails. First, there is some
ambiguity about whether Pastrana had represented that he had transferred the land to JPG, or he
owned the land and would soon transfer it. If the latter, the deed records would not have provided
Plaintiff with an indication that Defendants had made fraudulent misrepresentations. Nor would
the deed records have reflected misrepresentations Pastrana made about his use of other assets.
Secondly, “Texas courts have never held that a purchaser’s failure to search the deed
records would bar his fraud action against the seller.” JPMorgan Chase Bank, N.A. v. Orca Assets
G.P., L.L.C., 546 SW.3d 648, 658 (Tex. 2018).
Defendants also contend that, even though misrepresentations were made, Plaintiffs were
also issued disclaimers that provided ample warning that the information conveyed by Defendants
to Plaintiffs could not be relied on. Bankruptcy Judge Norman provided the correct response to
this argument:
This Court is unwilling to hold that the financial disclosure in the [Private Placement
Memorandum] can in effect be a horrendous lie but that lying is acceptable if you draft a
sufficient disclaimer. This would be an abhorrent result.
Opinion at 6.
Defendants have offered no reason to controvert Judge Norman’s holding. This would, of course,
be an entirely different case if the Defendants were accused only of having make projection about
a business’ future profitability that turned out to be inaccurate. Guevara v. Lackner, 447 S.W.3d
566 (Tex. App. 2014). In this instance, Defendants intentionally made misrepresentations about
existing facts. They are entitled to no relief.
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IV.

CONCLUSION

The judgment of the Bankruptcy Court is AFFIRMED.
IT IS SO ORDERED.
Signed at Houston, Texas on January 3, 2025.
_______________________________
Keith P. Ellison
United States District Judge

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