MEMORANDUM OPINION AND ORDER ON PLAINTIFF’S MOTION TO DISMISS COUNTERCLAIMS
Before the Court is Plaintiff GMAC Commercial Mortgage Corporation’s (“GMAC” or “Plaintiff’) Motion to Dismiss Defendants East Texas Holdings, Inc., Honey Stop Properties, Inc., and Honey Stop Food Marts, Inc.’s (“Defendants”) Counterclaims Under Federal Rule of Civil Procedure Rule 12(b)(6) (Doc. No. 29).
I. Background
Defendants borrowed funds from Franchise Mortgage Acceptance Company on May 13, 1998 for the purpose of owning and operating gas stations/convenience stores in East Texas. This transаction was accomplished through the execution of several promissory notes, loan and security agreements, and first deed of trust security agreements and fixture filings in favor of FMAC Loan Receivables Trust 1998-C, the secured party. Plaintiff GMAC is the servicer of the loans and the sole Plaintiff in this action.
Defendants defaulted on the loans in September 2001. The parties then entered into a Forbearance Agreement effective January 31, 2002, under which GMAC agreed to forebear from exercising its rights of collection until June 15, 2002, and provided for the entry of an Agreed Judgment of Judicial Foreclosure on the mortgaged property, while at the same time, extinguishing GMAC’s right to seek a deficiency judgment against the Defendants in connection with the debt.
Defendants failed to bring the debt current by the agreed June 15 date and an Agreed Final Judgment of Judicial Foreclosure was entered by the 207th District Court of Harris County, Texas in July or August of 2002.
Defendants allege that, after the entry of the Agreed Final Judgment for Judicial Foreclosure, Plaintiff GMAC could have executed on the Judgment of Foreclosure by foreclosing and selling the mortgaged properties. Plaintiff elected, however, to
pursue! ] a course of dealing with [Defendants] that involved repeated assurances and promises from [Plaintiff] that [Plaintiff] would, despite the entry of the Final Agreed Judgment for Judicial foreclosure^] negotiate a final loan wоrkout/debt restructure agreement with [Defendants] if [Defendants] wouldcontinue to operate, stock and staff the 23 mortgaged properties, perform maintenance on existing equipment and facilities and invest in new equipment for the properties, pay taxes on the properties, allow Long Tex Fuel Company to continue to sell gasoline to each of the properties, maintain the upkeep and appearance of the properties and/or otherwise continue to run the properties that were subject to foreclosure as an ongoing business of [Plaintiff].
(Defs.’ Ans. ¶ 57.)
Defendants further allege that, during the course of the parties’ negotiations, Plaintiff represented to Defendants on at least five separate occasions “that an agreement had been reached for a workout/restructuring of the debt in question with only a final approval required from a ‘committee’ within the corporate structure of the [Plaintiff].” (Defs.’ Ans. ¶ 58.) Defendants continue:
Specifically, it was represented to [Defendants] by the agents of [Plaintiff] who had negotiated the debt restructuring agreements with [Defendants], including Rick Rickard and Larry Rosso-low, that they had never had a deal turned down by the committee(s) if these individuals were in favor of the deal and that final approval by the committee(s) was a mere formality, or words to that effect. However, on each occasion when such representations were made, and after further delay and discussion, final approval of the loan workout/debt restructure agreements by [Plaintiff] was never forthcoming.
(Defs.’ Ans. ¶ 58).
Defendants allege that each time Plaintiff GMAC made this representation regarding the loan workout/debt restructure, Defendants relied on GMAC’s assurances and promises and expended money maintaining and operating the subject proрerties.
Plaintiff brought the original complaint seeking the appointment of a receiver as a means of enforcing the Secured Party’s Agreed Final Judgement for Judicial Foreclosure for $11,578,917.69. In response, the Defendants allege counterclaims for fraud, fraudulent inducement, fraud by concealment or non-disclosure, and negligent misrepresentation in connection with Plaintiffs alleged course of dealing with Defendants over the last several yeаrs. Plaintiff GMAC filed the subject Motion to Dismiss Defendants’ counterclaims on the grounds that statements regarding an intention to enter a contract where no contract is formed are not actionable as fraud, that the Defendants have failed to plead the elements of fraud with specificity, and because the secured party named in the counterclaim is not a party to the present action and is not represented by counsel.
II. Analysis
A. Rule 12(b)(6) Standard
Generally, in appraising the sufficiency of a complaint under Federal Rule of Civil Procedure 12(b)(6), “a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.”
Conley v. Gibson,
Under Texas law, a claim of fraud requires: (1) a material misrepresentation, (2)that was either known to be false when made or was asserted without knowledge of its truth, (3) which was intended to be acted upon, (5) which was relied upon, and (6) which caused injury.
Beverick v. Koch Power, Inc.,
A promise to perform a future act by one with no intention of performing may constitute an actionable misrepresentation where the one alleging fraud presents evidence that the representations were made with an intent to deceive and with no intent to perform.
Formosa Plastics,
In the Defendants’ specific allegations of fraud, they indicate that Plaintiff “made material representations to [Defendants] concerning [Plaintiffs] intentions to enter into a loan workout/restructure with [Defendants]” and “led [Defendants] to believe that [Plaintiff] would enter into a final loan workouVdebt restructure agreement” if Defendants would continue to maintain and run the collateral property. Defendants further allege that “[t]hese representations were false in that [Plaintiff] had no intention to enter into a final workout/debt restructure agreement ... and merely used the promise of a final loan work-ouVdebt restructure agreement to induce [Defendants] to expend funds ... on maintaining and improving the properties that [Plaintiff] fully intended to foreclosе on at a time of their choosing.” (Defs.’ Ans. ¶ 62).
Taking the general rule that, when considering a Rule 12(b)(6) motion to dismiss, claims are to be liberally construed in favor of the claimant,
Lowrey,
Plaintiff GMAC arguеs that Defendants’ fraud claim fails because it does not allege a misrepresentation of an existing fact, but only alleges an intention to enter into a binding agreement at some future date without a binding agreement having actually been entered into. GMAC supports its position by citing two federal cases where statements respecting future performance were held not-actionable under a theory of
negligent misrepresentation.
1
Only one of GMAC’s cases, however, actually addressed an independent fraud claim, and that court’s decision turned on the
sufficiency of evidence
presented after a motion for summary judgment.
2
On consideration of a Rule 12(b)(6)
Defendants also allege that representatives of GMAC represented “on at least five separate occasions ... that an agreement had been reached” with only “final approval required from a ‘committee’ within the corporate structure of [Plaintiff].” (DefsAnsJ 58.) These representatives allegedly asserted that “they had never had a deal turned down by the committee(s) if these individuals were in favor of the deal and that final approval by the committee(s) was just a rubber stamp or ... a mere formality, or words to that effect.” (DefsAnsA 58.)
To constitute actionable fraud, false representations must relate to material facts, as distinguished from matters of opinion, judgment, probability, or expectation.
First USA Management, Inc. v. Esmond,
A stated opinion may constitute fraud, however, if the speaker had knowledge of its falsity.
Trenholm v. Ratcliff,
In this case, Defendants allege that GMAC’s representatives, Rick Rickard and Larry Rossolow, each represented to Defendants that they “had nеver had a deal turned down by the committee(s) if these individuals were in favor of the deal.” These alleged opinions, because they purport to have knowledge of facts that will occur or exist in the future or are based on past or present facts, are actionable misrepresentations.
See Trenholm,
It does not appear “beyond doubt” that Defendants can prove no set of facts in support of their fraud claim which would entitle him to relief.
See Conley,
C. Fraudulent Inducement
Defendants also allege a claim against Plaintiff for fraudulent inducement. Fraudulent inducement is a fraud claim in the context of the formation of a contract.
Haase,
Plaintiff argues that Defendants have not alleged the existence of a contract nor havе they pleaded breach of contract. Indeed, Plaintiff argues, the Defendants indicate that the basis of their fraudulent inducement claim is that Plaintiff “had no intention to enter into a loan” agreement. (Defs.’ Ans. ¶ 64).
Defendants respond that they have alleged that FMAC represented to Defendants on several occasions that “an agreement had been reached for a workout/restructuring of the debt in question with only a final approval required from a ‘committee’ within the [Plaintiffs] corporate structure.” (Defs.’ Ans. ¶ 58).
The Defendants do not allege that this constitutes the formation of an enforceable contract, however, but only that it amounts to a misrepresentation of a particular fact: i.e., whether an agreement had in fact been reached and whether committee approval was indeed a “mere formality,” misrepresentations Defendants claim to have relied upon tо their detriment. (Defs.’ Resp. 4.) In other words, Defendants claim that, as a result of Plaintiffs misrepresentations, Defendants believed that an enforceable contract existed when in fact a contract did not exist, and that they acted in reliance on their mistaken belief; Defendants therefore seek damages for that mistaken reliance. 4 Furthermore, Plaintiffs alleged statement that “an agreement had been reached” cannot operate both as a misrepresentation of existing fact and as legally-operative words creating a contract. While Plaintiffs conduct may constitute fraud generally, it is not fraudulent inducement.
Because the existence of an enforceable contract is an essential element of a fraudulent inducement claim, and because the Defendants have not alleged the existence of an enforceable contract, their claim for fraudulent inducеment fails and should be dismissed.
D. Fraud by Concealment or Non-Disclosure
Fraudulent concealment or non-disclosure is a sub-category of fraud that occurs when a party with a duty to
Defendants allege that Plaintiff FMAC failed to disclose its intention not to enter into a loan workout agreement when it urged Defendants to maintain and run the collateral property. Defendants also allege that Plaintiff knew that Defendants were ignorant of its concealed intention and knew that Defendants did not have an equal opportunity to disсover these concealed material facts. (Defs.’ Ans. ¶ 66.) Accordingly, the Court finds that the Defendants have properly stated a claim for fraudulent concealment or nondisclosure.
E. Negligent Misrepresentation
Negligent misrepresentation consists of (1) a representation made by a defendant in the course of the defendant’s business, or in a transaction in which he has a pecuniary interest; (2) the defendant supplies “false information” for the guidance of others in their business; (3) the defendant did not exercise reasonable care or competence in obtaining or communicating the information; and (4) the plaintiff suffers pecuniary loss by justifiably relying on the representation.
Federal Land Bank Ass’n of Tyler v. Sloane,
The type of false information contemplated in a negligent misrepresentation case is a misstatement of an existing fact, not a promise of future conduct.
Swank v. Sverdlin,
As noted above, Defendants’ claims of fraud and negligent misrepresentation stem from “repeated assurances by [Plaintiff] and [its] agents that a final loan work-oufrdebt restructuring agreement would be reached.” (Defs.’ Ans. ¶ 59.) Defendants also claim that Plaintiff represented on several occasions “that an agreement had been reached for a workout/restructuring of the debt in question with only a final approval required from a ‘committee’ within the [Plaintiffs] corporate structure.” (Defs.’ Ans. ¶ 58.) Plaintiffs representatives, Rick Rickard and Larry Rossolow, allegedly indicated that “they had never had a deal turned down by the committee(s) if these individuals approved of the deal” and that final approval “was just a rubber stamp ... a mere formality, or words to that effect.” (Defs.’ Ans. ¶ 58).
The Court finds that these allegations are sufficient to support a claim for negligent misrepresentation. Specifically, Defendants allege a misrepresentation of an existing fact or facts — i.e., that an agreement had been reached, and that
Plaintiff argues that the facts alleged in this case are similar to those in
Clardy Manufacturing Co. v. Marine Midland Businеss Loans, Inc.,
where bank customer applying for a loan was told by a bank officer that the plaintiff would have a commitment letter on a loan “by Friday or the following Monday or Tuesday,” that the plaintiff “ ‘expected’ a letter of commitment to be issued within the next two to five days,” and that from the bank’s point of view “everything looked good.”
Plaintiff also argues that this case is similar to
5636 Alpha Road v. NCNB Texas National Bank,
in which a bank officer told the plaintiff that the plaintiffs loan would be extended at the end of several months and that the loan was a “done deal.”
In
Clardy Manufacturing
and
Alpha Road,
however, the bank officers merely predicted future, unknown events and did not make concrete statements of existing fact — i.e., they did not indicate that the loans had been approved. In this case, however, GMAC’s representatives indicated that “they had never had a deal turned down,” that committee approval was a merе formality, and that the parties had actually reached an agreement. These are more than guesses as to future, unknown events,
see Sergeant Oil & Gas,
F. Failure to Plead with Speciñcity
Rule 9(b) of the Federal Rules of Civil procedure provides that “[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” Fed. R. Civ. P. 9(b). Under this rule, a party must plead each of the elements of fraud with particularity.
Shushany v. Allwaste, Inc.,
In this case, the Court finds that Defendants, while stating causes of action for fraud, fraud by concealment or nondisclosure, and negligent misrepresentation generally, have failed to meet Rule 9(b)’s heightened pleading requirement.
G. The Secured Party
Finally, Plaintiff notes that the Defendants have asserted their counterclaims against the secured party, FMAC Recеivables Trust 1998-C (“FMAC”), which is not a party to this action. Rule 13(h) provides that persons other than those made parties to the original action may be made parties to a counterclaim or cross-claim in accordance with Rules 19 and 20 of the Federal Rules of Civil Procedure. Fed. R. Civ. Pro. 13(h). Defendants ask that the Court allow them to formally join FMAC as a party to this action and ask the Court to stay ruling on GMAC’s motion to dismiss until FMAC is joined. The Court is of the opinion that, becausе at least two of the Defendants counterclaims generally state causes of action for fraud, leave to join the secured party as a party to this action should be granted, and is done so by separate order entered this day.
III. Conclusion
For the above stated reasons, the Court is of the opinion that Plaintiff GMAC’s Motion to Dismiss should be GRANTED as to Defendants’ counterclaim for fraudulent inducement, but should be DENIED as to Defendants’ counterclaims for fraud, fraud by concealment or non-disclosure, and negligent misrepresentation. It is therefore
ORDERED that Defendants East Texas Holdings, Inc., Honey Stop Properties, Inc., and Honey Stop Food Marts, Inc.’s counterclaim for fraudulent inducement is DISMISSED. It is further
ORDERED that Defendants are granted leave to file an amended counterclaim that conforms with Rule 9(b) of the Federal Rules of Civil Procedure. Such amended counterclaim must be filed within 20 days of receipt of this order. If Defendants fail to file an amended counterclaim within that time, the Court will dismiss the Defendants’ remaining counterclaims for failure to comply with Rule 9(b) of the Federal Rules of Civil Procedure.
It is so ORDERED.
Notes
. Plaintiff cites
5636 Alpha Road v. NCNB Texas National Bank,
. In
Clardy Manufacturing Co.,
the Fifth Cir
. Indeed, the
Clardy Manufacturing
court noted that "[a] promise to do an act in the future ... is fraud 'only when made with the intention, design and purpose of deceiving, and with no intention of performing the act.’ ”
Clardy Manufacturing,
. Though a party alleging fraudulent inducement may recover compensatory damages,
see, e.g., Ludlow v. DeBerry,