Woods MFI, LLC and John S. Woods v. Plains Capital Bank
14-15-00655-CV
Tex. App.
Nov 1, 2016

Background

  • In 2011 Woods MFI (owned by John S. Woods) executed loan documents (note, loan agreement, deed of trust) and a $500,000 personal guaranty to borrow $4.125M from First National Bank (FNB) to buy/improve Friar Tuck property.
  • FNB set up a Woods MFI "Friar Tuck" deposit account for payments; FNB's president Hendee testified the account was for automatic debits though monthly debits were handled manually because amounts varied.
  • In Sept. 2013 PlainsCapital acquired the loan and account from the FDIC. Woods MFI stopped mailing payments; PlainsCapital debited the Friar Tuck account for two months but later sent default/acceleration and notice-of-sale letters and sought foreclosure.
  • Woods MFI sued to enjoin foreclosure and asserted breach of contract, fraud/misrepresentation, declaratory relief and constitutional/home-equity challenges; PlainsCapital counterclaimed for breach and guaranty enforcement.
  • Both parties moved for summary judgment. The trial court granted final summary judgment for PlainsCapital, awarding damages and fees, and the Woods Parties appealed arguing (1) they had an auto-debit agreement/tendered payment, (2) guaranty liability depends on borrower breach, (3) trial court granted relief on fraud claims not briefed in the traditional motion, and (4) attorney fees were not segregated.
  • The court of appeals reversed as to breach-of-contract and guaranty claims (finding genuine fact issues about an auto-debit agreement and tender), affirmed dismissal of fraud/misrepresentation, and remanded for further proceedings on damages and fees.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Existence/enforceability of an auto-debit agreement Woods: an express or implied auto-debit agreement (set up by FNB/Hendee and continued briefly by PlainsCapital) obligated lender to debit the Friar Tuck account for payments PlainsCapital: Loan Documents impose writing requirement; no enforceable auto-debit agreement in the record; payments were irregular Court: Disputed fact issue exists (Woods presented affidavits/emails and PlainsCapital debited two months), so summary judgment for PlainsCapital on breach was improper; remand required
Tender/payment via deposits to the Friar Tuck account Woods: wiring funds into the account and prior practice amounted to tender or payment/offset PlainsCapital: deposits to a general deposit account do not constitute unconditional tender; bank pays only on customer's order Held: Woods did not establish legal tender as a matter of law; deposit alone insufficient, but factual disputes about authorization/debits preclude summary judgment on breach
Guaranty liability of John Woods Woods: guaranty only if borrower breached; if borrower paid via auto‑debit or tender, guarantor not liable PlainsCapital: borrower defaulted; guaranty enforces payment and fees Held: Because breach-of-contract summary judgment was improper (fact issue), summary judgment on guaranty (derivative of breach) was also improper; remanded
Whether trial court granted relief on fraud claims beyond grounds pleaded in PlainsCapital's traditional motion Woods: final judgment disposed of fraud claims though PlainsCapital's traditional motion did not assert grounds to defeat them PlainsCapital: had earlier no-evidence summary judgment on fraud claims; trial court orally granted that motion and later confirmed in the written final judgment Held: Court found the record shows the court intended to and did reconsider and confirm its prior oral ruling; summary judgment on fraud/misrepresentation affirmed

Key Cases Cited

  • Ferguson v. Bldg. Materials Corp. of Am., 295 S.W.3d 642 (Tex. 2009) (standard of review for summary judgment)
  • Valence Operating Co. v. Dorsett, 164 S.W.3d 656 (Tex. 2005) (when both parties move for summary judgment, court considers evidence from both sides)
  • Fed. Deposit Ins. Co. v. Lenk, 361 S.W.3d 602 (Tex. 2012) (bank-depositor relationship; offset, and summary judgment principles when both parties move)
  • Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323 (Tex. 2011) (contract construction—give effect to parties' intent)
  • Progressive Cty. Mut. Ins. Co. v. Kelley, 284 S.W.3d 805 (Tex. 2009) (contract interpretation—plain language controls)
  • Hamilton v. Wilson, 249 S.W.3d 425 (Tex. 2008) (definition of genuine issue of material fact)
  • Dallas Cty. Cmty. Coll. Dist. v. Bolton, 185 S.W.3d 868 (Tex. 2005) (each movant bears its own burden when both move for summary judgment)
  • Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844 (Tex. 2009) (movant must show no genuine fact issue and entitlement to judgment as matter of law)
  • Jensen v. Covington, 234 S.W.3d 198 (Tex. App.—Waco 2007) (definition and elements of legal tender)
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