First Bank v. Brumitt
519 S.W.3d 95
| Tex. | 2017Background
- DTSG sought an SBA loan from First Bank to buy Southway; closing was repeatedly delayed and the sale never completed, leading to Southway’s failure.
- DTSG (through Oprea) and Brumitt (Southway’s seller, later intervenor) claimed First Bank repeatedly promised closings then gave excuses; DTSG sued First Bank and Brumitt intervened claiming third‑party‑creditor beneficiary status of three written loan‑commitment letters.
- The jury found First Bank liable for breach of contract and misrepresentations; trial judgment awarded Brumitt over $1.8 million.
- The court of appeals affirmed breach‑of‑contract liability to Brumitt as a third‑party beneficiary but reversed misrepresentation damages.
- Texas Supreme Court considered whether the written loan‑commitment letters made Brumitt a third‑party beneficiary, whether that is a question for the court or jury, and whether extrinsic evidence or an oral agreement could create beneficiary status.
Issues
| Issue | Plaintiff's Argument (Brumitt) | Defendant's Argument (First Bank) | Held |
|---|---|---|---|
| Whether Brumitt is a third‑party beneficiary of the written loan‑commitment letters | The letters were intended to benefit the seller (Brumitt); he may enforce them as an intended beneficiary | The letters are unambiguous and do not clearly and unequivocally express intent to make Brumitt a beneficiary | Court: Letters are unambiguous and do not make Brumitt a third‑party beneficiary; judgment for First Bank on contract claim rendered |
| Whether third‑party‑beneficiary status is a question for the jury or the court | If factual context supports it, jury may determine beneficiary status | Where contract is unambiguous, beneficiary status is a legal question for the court | Court: Determination is a question of law when contract is unambiguous; trial court erred submitting it to jury |
| Whether extrinsic evidence can be used to establish beneficiary status under an unambiguous written contract | Extrinsic evidence can show intent to benefit a third party or evidence an oral agreement | Extrinsic evidence is irrelevant where the written contract is unambiguous; parol‑evidence rule bars adding terms | Court: Extrinsic evidence cannot add terms or create ambiguity; trial court erred allowing jury to consider it |
| Whether an oral agreement created third‑party‑beneficiary rights | Oral modification or prior oral agreement relieved Brumitt’s guarantee and made him a beneficiary | Brumitt did not plead an oral‑agreement claim; parol‑evidence rule and statute of frauds issues; evidence does not clearly show intent to make Brumitt a direct beneficiary | Court: Rejects oral‑agreement basis—procedural and substantive barriers; any benefit to Brumitt would be incidental, not direct |
Key Cases Cited
- Phila. Indemn. Ins. Co. v. White, 490 S.W.3d 468 (Tex. 2016) (parties generally free to contract as they wish)
- Royston, Rayzor, Vickery, & Williams, LLP v. Lopez, 467 S.W.3d 494 (Tex. 2015) (contract terms are determined by the parties)
- Stine v. Stewart, 80 S.W.3d 586 (Tex. 2002) (third‑party beneficiary requires contracting parties’ intent to secure a direct benefit)
- MCI Telecomms. Corp. v. Tex. Utils. Elec. Corp., 995 S.W.2d 647 (Tex. 1999) (presumption parties contracted for themselves; intent must be clear)
- Corpus Christi Bank & Tr. v. Smith, 525 S.W.2d 501 (Tex. 1975) (third‑party beneficiary must be intended claimant on breach)
- Tawes v. Barnes, 340 S.W.3d 419 (Tex. 2011) (doubts resolved against third‑party beneficiary status)
- Basic Capital Mgmt. v. Dynex Commercial, 348 S.W.3d 894 (Tex. 2011) (contract may clearly spell out third‑party benefit even if third party not named)
- Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407 (Tex. 2011) (mere incidental benefit or knowledge that a third party benefits is insufficient)
- Coker v. Coker, 650 S.W.2d 391 (Tex. 1983) (construction of an unambiguous contract is a question of law)
- Anglo‑Dutch Petroleum Int’l, Inc. v. Greenberg Peden, P.C., 352 S.W.3d 445 (Tex. 2011) (may consider surrounding circumstances to determine ambiguity but cannot use extrinsic evidence to alter unambiguous terms)