JSC Neftegas-Impex v. Citibank, N.A.

specific by means a intent defendant injury

cause substantial or harm to the

claimant.”).

Further, we say cannot the trial

court abused its discretion concluding probative

that the value of this evidence value. See

outweighed prejudicial its relevant,

Tex.R. Evid. 403 (“Although evi- may

dence if probative excluded substantially

value is outweighed by the

danger prejudice, of unfair confusion of the

issues, misleading jury, or con- delay,

siderations of undue or needless evidence.”).

presentation of cumulative

Appellant’s sixth issue is overruled.

IV. Conclusion

We reverse the judgment of the trial respect appellee

court with Townsend

and render judgment that Townsend take

nothing by way of against appel- his suit

lant. The remainder of the trial court’s

judgment is affirmed. NEFTEGAS-IMPEX, Appellant,

JSC

v.

CITIBANK, N.A., Appellee.

Citibank, N.A., Appellant,

v. Neftegas-Impex, Appellee.

JSC

No. 01-07-00397-CV. Texas, Appeals

Court of (1st Dist.).

Houston

Feb.

Lloyd Swann, R. Cunningham, Lori A. Houston, TX, Cunningham Group, Law for Appellant. Keiter,

Aaron Strother Keiter & Muld- er, P.C., Harvin, Andrew R. D. Michael Schimek, Reed, Doyle, Restrepo, Harvin & Robbins, Dove, Christopher Benjamin Leahy, James R. Locke Lord Bissell & LLP, Benoit, Houston, Liddell Brent Alan TX, Appellee.

Panel of consists Chief Justice and Justices RADACK SHARP and TAFT. (“New Nefte- Neftegas to ZAO liabilities REHEARING ON

OPINION entered Neftegas New In gas”). (Retired). TAFT,* Justice TIM another venture with TPS and joint into a in judgment opinion The Court’s phase a later part company 16, 2010. JSC April this case issued (“the joint Project”). This refinery project (“JSCNI”) moved for re- Neftegas-Impex JSCNI, only of the Nefte- venture was (“Citibank”) Citibank, N.A. hearing, and party appeal. to this gas entities that is After due con- that motion. responded of Econ- was the Director Nikolai Kashuro sideration, mo- grants JSCNI’s the Court Nefte- Finance for Old and New omy and opinion its rehearing, withdraws tion for gas. 16, 2010, and April dated judgment TPS, was in- company, a Houston-based judgment in opinion and today’s

issues by facilitating doing terested in business their stead. co-owners were in Russia. Its projects judgment favor juryA rendered a former loan Abji, president Irfan its Karber, Prod- against Citibank; Transcontinental with Peter executive (“TPS”) Services, for fraud Inc. ucts and Manuel San- vice-president; and executive duty. jury fiduciary tos, who, family, were im- along and breach with his of JSCNI judgment favor Karber and also rendered clients of Citibank. portant fraud, knowing Sartan, a Russian-born against Abji met Edward Russia, fiduciary working in TPS’s breach of had been participation American who conspiracy. awarded later TPS’s consultant duty, and who would become the defendants translator for damages against interpreter both and an and actual project the described Neftegas entities for damages against Citibank. exemplary and Abji Kar- introduced and granted part Citibank’s below. Sartan The trial court to Rafikov. non obstante verdicto ber judgment motion for (“JNOV”), rendering take-nothing judg- a development the Project The involved knowing partic- the claims for ment on Siberia, Russia, some- mini-refineries duty fiduciary breach of ipation in TPS’s Rafikov Neftegas desired. thing that Old exempla- award of conspiracy and the Project to TPS. TPS intro- proposed the Both ry damages. JSCNI Citibank Kermath, a to John Citi- duced Rafikov judgment and af- appeal. modify We of these dis- vice-president, part as bank firm it as modified. 1994, Neftegas In June Old cussions. International with Avanti contracted

BACKGROUND (“Avanti”), equip- company, a for Houston (“Old Neftegas”) ment, installation, training Neftegas OAO and related Rafikov, its in 1991 Leonard Avanti-Old Project. founded needed for experienced person an business letters of cred- president, Neftegas required contract Cbnefteprovd Also in June prime who had been the director it from a bank. Minister of to initiate and Deputy Neftegas engaged and the First Prime TPS Old financing Industry of the former Soviet Un- discussions the Oil to conduct financial insti- third-party Project the events rele- with ion. Over the course of The same million. suit, up bank- tutions for Neftegas vant to this Old went $60 month, to structure engaged rights of its rupt assigned certain * Taft, by assignment. participating justice, Court The Honorable Tim retired Texas, Appeals for the First District of financing provide closing the transaction and to on the Phase III operative experience because TPS did not have Houston, contracts took place Texas on The principal to do so itself. August 1997. Present at closing representative interacting with TPS and Kermath, Rafikov, Sartan, were and TPS Neftegas throughout entities representatives, among par- others. The transaction was Kermath. whether, disputed ties at trial before the years, a half

Over the next three and signed, contracts were Rafikov and Ker- Project proposed financing and its under- math negotiated security-deposit sched- three phases: went ule for collateral different from the one contained in the phase signed day, 1. Phase I: this was structured contracts facility with including credit Old Nefte- an security initial deposit of gas as the borrower and with the $550,000. evidence, however, Bank, pursuant Exim to the Oil and showed that this verbal discussion and Agreement Gas Framework agreement parties occurred. The also dis- (“OGFA”) between Russia and the at puted trial whether Kermath represent- States, guarantor. United ed, both at closing and at a post- phase Phase II: this was structured dinner, closing financing would be “pass through” to be a 36-month provided shortly after JSCNI sent Citi- facility1 in revolving credit which $550,000. bank the security deposit first TPS was borrower however, Again, JSCNI’s evidence showed Old Neftegas was TPS’s borrower. that Kermath made such statements. 3. Phase III: phase was struc- The Phase III signed contracts оn Au- joint tured so that venture gust 15 made lessee of the would enter into lease with Project equipment, made TPS the equip-

TPS, which as lessor would assume lessor, ment’s made TPS the borrower of the Avanti contract and be Citi- Citibank, and authorized TPS to pursue three-year, bank’s borrower under a financing on terms and accept- conditions revolving facility. credit able to it. authority, Pursuant to that phases, The transaction’s and the opera- agreed and Citibank to a revolving credit (which tive documents for Phase III is at facility aspects that contained two at issue here), issue are set out in detail later (1) appeal: facility a $40-million opinion. Project’s the Over the three limit, facility which was less than the limits phases, Neftegas periodically the entities (2) II; to, of, in Phases I consisting collateral paid expenses fees TPS and entirely Citibank. of cash investments or United 2010) (2000); Generally revolving Legal speaking, a credit facili- see also Dictionary of goes ty up is "one that and down as needs Language Simplified Terms: Guide to the of Law vary. Typically, of the borrower there is a (3rd ed.1998) (defining revolving credit borrowing maximum if amount and the loan period "renewable a credit over set of time. then is asset based a formula for how much of generally The term refers to credit extended that line is available ... is set forth.... The by a banker or merchant for a certain amount revolving credit line will terminate on a date paid periodically.”). that can be off Random certain; however, within that time frame the Unabridged Dictionary House Webster's may pay borrower down the loan bor- and/or (2nd ed.2001) (defining revolving credit as Ingato Maury row at time.” Robert J. & automatically up prede- "credit available Poscover, Finance, Commercial B. Successful payments periodical- termined limit while are Partnering Counsel, Between & Inside Outside made”). ly (Robert ed„ Haig § 53:21 L. West & ACCA contended below Citi- though JSCNI obligations;2 government States TPS, pretextual, which it has financing bank’s revocation was prerequisite worth, mini- maintain a negative any theory net of recov- appeal had abandoned on $500,000 and an asset- of ery mum net worth on failure to finance based 1:1. to-liability ratio of day, At the end of the Project. fail, Project but TPS reim- only did the 5, 1997, Kermath sеnt On November $100,000 of only bursed JSCNI fi- from TPS a commitment $550,000security deposit. (“the Let- III Commitment Phase nancing ter”). Letter indicated The Commitment suit, alleging Avanti was the first to file on several financing was conditional TPS and Avanti’s against claims Citibank. to the facili- the conditions things. One of disposed ways claims were of in that are funding “initial of at ty’s effectiveness was appeal. to this inter- immaterial $550,000” designated in an account least suit, claims alleging vened Avanti’s III contracts. The evidence the Phase time of against By TPS and Citibank. is that this “initial favorable to JSCNI trial, alleging following JSCNI was security funding” deposit was the initial claims: negotiated Rafikov had that Kermath and (cid:127) TPS, against fraud Citibank and parties All knew August closing. at the (cid:127) $550,000 negligent misrepresentation against security deposit would TPS, because TPS had a come from JSCNI net worth at the time. The Com- negative (cid:127) fiduciary duty against of breach Citi- recited the mitment Letter also $40-mil- TPS, bank and credit-facility limit and the full-eash- lion (cid:127) knowing participation in breach of fi- requirement. TPS solicited collateral Citibank, duciary duty against $550,000 JSCNI, but for- payment from (cid:127) conspiracy. Let- only part warded Commitment it, on which the omitting pages ter to jury trial on all charged court credit-facility limit and full-cash-collateral negligent-misrepresenta- claims except requirement appeared. against tion claims both TPS and Citibank. $550,000 to Citibank. paid found TPS liable for fraud and JSCNI, some of these Unbeknownst fiduciary duty breach of and awarded actu- Santos, spent repayment funds were (70% $450,000) damages al legal advisory payment of Citibank’s $1,181,000for breach of fidu- for fraud and fees, Abji, pay- Karber and draws to ciary duty. found Citibank liable expenses. ment of certain of TPS’s fraud, knowing participation in TPS’s for fiduciary duty, conspiracy breach of 1997, In December Citibank revoked fiduciary duty TPS’s breach of and fraud. Letter, stating that the sole Commitment $135,000 damages of It awarded actual having the revocation was its basis for (30% $450,000) exemplary of for fraud and history. a criminal learned that Karber had damages against million Citibank. $2.25 at trial whether Ker- parties disputed all judgment The trial court rendered on Project’s math knew from the start against the verdict TPS and history, aspects Karber had a criminal but judgment against Al- on evidence showed that he did. rendered Citibank JSCNI’s terminology requirement adopt We JSCNI’s for ease of to the for cash- JSCNI refers government-obligation collat- investment and reference. requirement." eral as the "full-cash-collateral

395 (c) jury’s finding fact, of fraud and the prove related a vital the evidence offered damages. actual The trial granted prove court a vital fact is no more than a (d) scintilla, motion for mere jury’s JNOV on the or the evidence conclu sively findings against it for establishes the knowing partic- opposite of the vital ” Ranch, fact.’ ipation King in TPS’s breach of fiduciary duty, Chapman, Inc. v. 118 (Tex.2003) 742, S.W.3d 751 conspiracy, exemplary and for (quoting dam- Mer Pharms., rell Dow Hamer, ages. Inc. v. 953 (Tex.1997)). S.W.2d JSCNI and appeal, Citibank but TPS does not. In review, our legal-sufficiency

“we must view the evidence in light APPEAL CITIBANK’S support tends to finding of disputed issues, fact disregard In all three evidence argues that it and infer ences to contrary.” Stores, is Wal-Mart take-nothing entitled to a judgment as a Miller, (Tex. Inc. v. matter S.W.3d of law on claim for fraud. 2003). Nonetheless, final test Specifically, “[t]he argues that the trial legal sufficiency always must be whether court erred in denying its motions for di- the evidence at trial would enable reason rected verdict and JNOV this claim able and (1) fair-minded people to reach the because no evidence supports jury’s verdict under review.... [L]egal-sufficien- damages finding because the evidence con- cy review in the proper light must credit clusively proved that disputed favorable jurors evidence if reasonable JSCNI, payment was made not but could, and disregard contrary evidence un (2) a separate entity; no supports jurors less reasonable could not.” City jury’s finding; fraud the verbal Keller, 168 S.W.3d at 827. representations upon which JSCNI’s fraud claim relies support, cannot for various Particularized gen forms of this reasons, jury’s finding judgment. eral standard of review apply certain cases. For example, in “involving cases

Standard of Review party what a why knew or it took a certain course,” When made on an evidentiary a court “cannot review whether basis, rulings on a motion for jurors JNOV and could reasonably disregard a losing directed verdict are party’s reviewed under the explanations or excuses without legal-sufficiency same appellate were,” test as are considering they what although the challenges. no-evidence City See Keller reviewing may ‍​​‌‌​​‌​​‌‌‌​​​‌​​‌​‌​‌‌​​​‌‌​​‌​​‌‌‌‌​​​‌‌​​​​‌‍court nonetheless not Wilson, (Tex. 802, 823, v. 168 S.W.3d “credit a losing party’s explanations or ex 2005). When, here, an appellant at if jurors cuses could disregard them.” Id. legal tacks the sufficiency of an Additionally, adverse at 817-18. “when the cir finding on an issue for which it did not cumstantial evidence of a vital fact is mea “ have proof, is, the burden of ger” must demon when ‘the circumstances —that strate that there support is no evidence to are equally consistent with either of two Croucher, finding. the adverse v. Croucher facts’ ”—we just “must consider not favor (Tex.1983). 55, 660 S.W.2d 58 Such a evidence, no- able but all circumstantial evidence will challenge be sustained when competing inferences as well.” Id. at 813- “ ‘(a) Tubelite, complete Indal, there is a (quoting absence of evi 14 a Div. Inc. of (b) fact, Sons, Inc., dence of a vital 801, the court is barred v. & Risica 819 S.W.2d 805 (Tex.1991)). by rules of law or of giving evidence from “Properly applied, equal weight only to the evidence offered species to inference rule is but a of the no-

396 verdict is also rule, when the JNOV or directed emphasizing that evidence slight precludes is that proper legal principle evidence so when a circumstantial guess, Davis, is a purely Corp. inference v. any plausible recovery. Masek See John no evidence. But circum- legal is in effect 170, (Tex.App.-Houston 848 S.W.2d 173 not legally evidence is insufficient denied). stantial 1993, To the ex Dist.] writ [1st than more one reasonable merely because based on a ruling ques tent that a is such If cir- may be drawn from it. inference law, aspect of tion we review support will more cumstantial evidence Humphreys, 880 ruling de novo. See In re inference, it is for the than one reasonable (Tex.1994) 402, (“[(Questions of S.W.2d 404 is reason- decide which more jury to always subject law are to de novo re ” Lozano, v. 52 S.W.3d able .... Lozano view.”); Whitten, No. v. 01-02- Elliott (Tex.2001) C.J., 141, (Phillips, concur- 148 (Tex. 00065-CV, 2115420, at *3 2004 WL JJ). joined by 4 dissenting, &ring 23, App.-Houston September Dist.] [1st denied) 2004, pet. (memo.op.). more than a of evi If scintilla jury’s “the supports finding, dence Damages ... must be Mil

jury’s upheld.” verdict ler, at 709. than “[M]ore 102 S.W.3d three, ar Under issue exists scintilla of evidence if the evidence erred in gues denying the trial court would to a level that enable reasоn ‘rises motion no “[t]here for JNOV because is people able and fair-minded to differ expense evidence that incurred [JSCNI] Ford v. their conclusions.’” Motor Co. $450,000 damages attributable of to the (Tex.2004) 598, Ridgway, 135 S.W.3d $550,000 sup In payment” Citibank. Pharm., Merrell Dow Inc. v. (quoting port, evidence that an points 706, (Tex.1997)). Havner, 953 S.W.2d “ entity Group named Sunflower Business that is weak as Conversely, evidence ‘so (“Sunflower”) $550,000, paid that nei than create mere sur do no more ” any obligation ther the payment nor of and, than a is no more scintilla mise’ on the financial appears Sunflower state thus, v. (quoting no evidence. Id. Kindred JSCNI, general ledger ments or of (Tex. Con/Chem., Inc., S.W.2d assignment concerning that no funds 1983)). appears entities in the between the two jury judge is the sole (1) However, record. written in credibility, may and it choose to witnesses’ $550,000 pay struction for Sunflower to another; believe one witness over a re made payment recited that the “in ac may viewing impose court not its own cordance with the terms conditions Keller, contrary. City to the opinion obligation implement taken to function jury’s at 819. Because it is the 168 S.W.3d added) (emphasis ...” agent of financial evidence, province conflicting to resolve we agreement between March 1998 jurors resolved all con must assume that TPS required trans with their verdict. Id. flicts in accordance (not $550,000 fer the back to JSCNI entire Likewise, if is “[e]ven at 819-20. evidence Sunflower) if the loan did close province undisputed, it is March is some 1998. This they draw from it whatever inferences [sic] and that was JSCNI’s wish, long possible as more than one is so agent. paid Sunflower it as JSCNI’s simply Id. at jury guess.” and the must three. We overrule issue 821. Evidentiary Legal Challenges sought exemplary JSCNI actual and dam- Liability ages. charged: one, argues issue Under Citibank jury’s is no evidence to the support “there occurs when: [FJraud finding against of fraud Citibank....” Un- party a. a makes a material misrep- two, argues der issue Citibank that Ker- resentation, verbal representations math’s could not misrepresentation b. the was made support claim JSCNI’s fraud for various with knowledge falsity of its or and, alternatively, reasons that JSCNI recklessly made without knowl- reasonably could not have relied on those edge of the truth as a positive as- representations given application the sertion, the statute of frauds. c. misrepresentation is made with the intention that it should be Allegations, Charge, A. The and Ver- acted on party, other dict d. the other party relies on the mis- alleged that Citibank had com- representation thereby suffers by making mitted fraud false statements of injury.®3 fact, promises performance of future with- Misrepresentation means: out intent to perform, and failure to dis- fact, a. a false statement of information duty close when there was a promise b. a performance future Specifically, alleged disclose. that: intent, made with an at the time the falsely had represented made, promise was not to perform arrange financing that it would promised. as project; You are further instructed that fraud 2. Citibank had terminated its financ- occurs when: ing commitment pretextual rea- party a. a fails to disclose a material e., sons, i. because of Karber’s crimi- knowledge fact within the of that history; nal party, disclose, duty 3. Citibank had a but the party b. knows that the other disclose, following failed to facts: party ignorant is of the fact and (a) financing dependent was still equal does not have an opportunity upon diligence relating due to Kar- truth, to discover the history, ber’s when Citibank c. party intends to induce the Kermath) (through represented had party other to take action some (b) that the deal was done and fact, failing to disclose ways would be used in contrary to inway which Citi- d. the other party injury suffers represented bank had acting knowledge it would result of without (as be used a security deposit). of the undisclosed fact. law, omission, plaintiffs

3. Under the common reli and the trial court overruled the justifiable support objection. sufficiency ance must be a fraud We thus measure See, e.g., Young, against legally claim. Ernst & L.L.P v. Pac. the evidence correct Co., (Tex. charge, qua Mut. Ins. 51 S.W.3d which would include the omitted Life 2001). charge Wolff, "justifiable” Joseph Hosp. omitted the lifier. See St. v. However, (Tex.2002). qualifier. objected to this S.W.3d 398 1997) (2) (1) liable; appellees that (noting Fort Worth found Citibank $450,000 to ground of of damages summary-judgment actual abandoned

awarded JSCNI, responsibility 30% apportioning estoppel by stating appellate collateral ($315,000) ($135,000) and 70% to Citibank “they rely upon brief that do not that (3) TPS; clear and having found to doctrine”), rev’d grounds, on other fraud, awarded ex- convincing evidence of (Tex.1998); Ins. S.W.2d Commercial against damages of million emplary $2.25 Newark, Williamson, v. Co. N.J. of court denied alone. The trial Citibank 796, 797 Antonio (Tex.Civ.App.-San S.W.2d lia- for JNOV on fraud motion Citibank’s writ) (noting appellee no that had it had done bility damages, and actual as ground controvert abandoned sole that his for di- earlier motion denying Citibank’s of ing plea plea privilege to had raised in verdict, on granted but its JNOV rected considering ground court and not that trial damages.4 exemplary need appeal). longer on Because we no to them, challenges reach we overrule those Bases for Fraud Claim B. The of under issues one and two that Citibank’s JSCNI admits that its fraud appeal, On any judgment attack the rendition of on upon misrepre claim “is based $550,000 theory relating to the fraud not informa and failures to disclose sentations security that Citi deposit specifically, — that caused to transmit tion [JSCNI] by having struc bank committed fraud $550,000 security to an initial Citibank as falsely an unfair tured transaction In support for the deposit Transaction.” to having promised arrange financing. theory, only fraud identifies of this JSCNI (1) comprising its claim: three bases Concerning Statements C. Citibank’s made of fact false statements Citibank $550,000 the the Use of Kermath in connection with the through one In the remainder of its issues (2) security the deposit; use of Citi two, legal the suffi- challenges false of fact bank made statements the ciency supporting through Kermath that the transaction reli- jury’s implicit findings of intent and after complete negotiation begin theory ance. We with the that Citi- security deposit amounts at scheduled by misrepresenting committed fraud bank 15, 1997 August closing; $550,000’s use. failed to disclose material infor parties believed the nature of What representations mation that made earlier be, they and how believed further ex misleading untrue. JSCNI used, gauged that it would be must be pressly rejects pursued pursu or is any terms light applicable contractual ing any theory upon based “Citi fraud they agreed. begin with which We thus provide for the funding bank’s failure language of the Phase III pertinent Project.” having We construe agency and of the contract be- appeal theory of fraud contracts abandoned (“the En- $500,000. Neftegas Old thоse tween relating other than to the Martin, Agreement”) turning gagement Martin v. Martin & Rich before See Inc., ards, (Tex.App. remaining 4 n. 1 S.W.2d evidences.5 brief, part ruling exemplary appellee’s relies in granting 4. The JNOV on In its agreements upon terms from from Phases I damages subject separate is of JSCNI's superseded by and II. These contracts were appeal. do Phase III We thus contracts. those contractual terms. consider earlier

399 Agreement Date,” Engagement Deposit The 1994 “Trigger 1. was the within days after two which TPS was to authorize Agree- Engagement June The begin Avanti to construction. Neftegas between TPS and Old en- ment provide an basis to TPS on exclusive gaged paid TPS was to be a “Transaction advisory project for the financial services totaling million—as compensa- $1.8 Fee”— Neftegas, financing being up with to to Old tion for arranging lease financing. initi- empowered million. TPS was to $60 The paid Transaction Fee would be in six to conduct for financ- ate and discussions $300,000 installments, under a schedule ing third-party with financial institutions. starting days after date that an agency, agreement pro- TPS’s As for Deposit Initial by any guaran- was made vided: tor, ie., Trigger Date. With days’ five

Except as in writ- expressly empowered guarantors, written notice to the Neftegas], to do so TPS will ing [Old Deposits any could take from the of the accept any have offer or authority to due, they Transaction Fees as became from, of or enter proposal Financing even without an of event default. The with, any parties commitment third into agreement also provided Neftegas].... behalf of [Old [Old TPS, pay would Costs” to “Transaction defend, Neftegas] agrees indemnify, to any provider, guarantors— credit and the against hold harmless TPS from and in an aggregate of were —which losses, costs, expenses (including at- all attorney’s described as certain fees of fees) torneys’ arising and liabilities in TPS, Citibank, and certain (1) performance with TPS’s connection other transaction costs. Citibank’s refer- of its services hereunder and attorney’s enced were those fees accrued Financing obtained in connection here- “in connection with financing [TPS’s] of with, except to the extent such losses purchase price Equipment” un- negligence the result are оf the sole or obligation the lease. pay der to of misconduct TPS. Transaction “without applied regard Costs to whether the contemplated transactions Agreement Participation The However, hereby are any- consummated.” Participation Agreement The —which requesting payment one these costs had (named JSCNI, TPS, guarantors and the JSCNI, submit its invoices to below) signed provided “Deposits” — right JSCNI had the review and to “Designated be made to a Account” would approve any legal expenses. bills for at “for the benefit of [TPS].” any Agreement any were If the “Deposits” paid Participation defined as sums operative transaction were guarantor under to other contracts terminated occur, TPS, Trigger Date did not “Designated Account” de- because guarantors as “an account maintained then JSCNI and the were re- [TPS] fined indemnify and to Deposits quired and to which the to hold harmless at [Citibank] claims, costs, losses, initially (Emphasis expenses, TPS for all will transferred.” added.) provided damages and incurred as a result agreement also liabilities to the being party Participation Deposit,” aggregate an “Initial $350,000, Agreement operative other con- guarantors which the amount being engaged or its the transac- pay. Deposit This Initial was due tract agreed tion, Date,” still which and JSCNI would be liable for “Deposit on the first (and $100,000. up Transaction September at later Costs then set extended). applied if the termi- of this Initial A similar covenant payment Participation Like the Date, contracts. those Trigger after

nation occurred re- Guaranty Agreements apply to all of the agreed Agreement, TPS also although Ac- Designated in the the Initial pay held to Deposits quired guarantors the the repay- to first, things, other among to Deposits count subsequent and all Deposit byit amounts owed for ment of itself Account main- Designated the TPS into Agreement Participation the under JSCNI agree- The at by tained TPS Citibank. Finally, if ter- Lease. Equipment the and Deposits proper- all the dearly made ment the failure of because of mination occurred to authorized TPS was further ty TPS. any operative to precedent all conditions of its payment to the apply Deposits the document, liable would still be then JSCNI Agreement” under thе “Credit obligations Costs, guaran- the the Transaction (which executed), any pay- to never and to hold harmless required were to tors Lease Equipment under the ments due costs, losses, ex- for all indemnify TPS effective), (which never became Agreement claims, in- damages and liabilities penses, Agreement’s Transac- Participation to the being party a to a result of its curred as (which the dependent upon were tion Fees any other Agreement and Participation the occurrence), ac- and to the Date’s Trigger being engaged or its contract operative equipment the under and lease of quisition the transaction. (which transpired). Any never the lease Guaranty Agreements 3.The after remaining Deposits of the portion paid been full obligations such had were execut- Guaranty Agreements The to be Rodos In- terminated were Neftegas, New the lease had been by TPS and ed (“Rodos”), and Donaclove guarantors. Ltd. ternational returned to (“Donaclove”), of which the last two Ltd. Agreement Equipment Lease 4. The way affiliated some companies were Guaranty Agree- Neftegas. The with New Agreement— Lease Equipment The complementary provisions ments contained signed TPS and JSCNI which —likewise contracts’ the other Phase III adopted made any deposit “Deposits” defined Guaranty Agreements definitions.6 terms, TPS could guarantor. a Under as se- guarantor provide, each to required when an “Event Deposit into funds tap obligations, an guaranteed curity for agreement. under the Default” occurred $350,000.7 Security Deposit” of “Initial to this precedent One of the conditions (This the Partic- correspond appears that TPS effectiveness was agreement’s Deposit.) Initial Agreement’s ipation subject to financing “on terms and receive to collater- required were also guarantors (Em- acceptable [TPS].” considerations agree- sales ally assign product certain added.) phasis to make scheduled de- to TPS and ments Letter 5. The Commitment generated under proceeds posits part of one transac- Guaranty "were all executed as signatory to not a 6. JSCNI was part an tion.” Agreements, but this contract party, which JSCNI was structure to overall fur- Agreement, which discussed Participation favorable to JSCNI and the 7. Evidence security-deposit Guaranty sign, required did that the ther below shows Moreover, verbally changed were Agreements Rafikov and amounts be executed. schedule memorial- part Rafikov and were Guaranty Agreements as Kermath and received signed by and TPS. closing, and he admitted ized in a document August later that even this along Equip- evidence indicates agreements, with the Other that these security-deposit was later amended. Agreement, schedule Participation ment Lease authority security deposit, they Pursuant to TPS’s under the believed that it Agreement to obtain fi- Equipment Lease spent only would be for a default under the November nancing, Citibank issued not, example, lease and pay 1997 Commitment Letter to TPS.8 Under legal fees or to fund an account “Collateral,” letter heading provid- for Santos. In later correspondence to pri- ed that Citibank would receive first $550,000, soliciting Kermath de- ority security interest in “one or more scribed as “the initial funding management investment accounts at Citi- ... in the Investment Accounts” .as bank ... owned or shareholders [TPS] latter were defined in the Commitment acceptable to The [TPS] [Citibank].” (TPS Letter in accounts which Citibank letter defined these accounts as “Invest- priority would have a first security inter- ment Accounts.” As a condition to the est, i.e., accounts), collateral and Citibank’s facility’s effectiveness and to the initial internal confirmation of the payment’s re- credit, advance of letters of the letter re- ceipt described payment security as a quired funding that “initial of at least deposit. TPS’s and JSCNI’s November $550,000” “in be made the Investment Ac- 1997 correspondence leading up to the counts”; Trigger that the Date described $550,000 payment described the as a secu- Participation Agreement in the have oc- rity deposit or “the security deposit,” first curred; that pay outstanding “all as did Rafikov’s confirmatory letter to TPS legal expenses and other incurred [Citi- advising payment had been made. in connection with the transaction.” bank] opined Rafikov supposed that “Citibank is added.) (Emphasis Additionally, the Com- to control containing [the accounts the se- provided mitment Letter reason- “[a]ll curity deposits] as its own.” expenses, including legal able expenses, for the account of and Manuel San- [TPS] There was no testimony Citi- paid, providing tos” be ex- that “[t]hose bank representative representa- made oral penses incurred closing and billed before distinguishing tions the nature or use of payable dosing.” (Emphasis are at add- (other $550,000 security deposit than ed.) being its source JSCNI and that it was the Remaining

6. The Evidence deposit) initial from the nature or use of security deposits the other under evidence, remaining either undis- Guaranty Agreements. example, For Ra- puted light or viewed in the most favorable $550,000 fikov that the opined “sup- JSCNI, following. to shows the At the stay in posed to that has been touched [sic] August closing, 1997 Kermath for Citi- grew security until it til million” in total $3 negotiated bank and Rafikov for JSCNI deposits admitted that he did not have the amount and schedule of all of the a discussion with Kermath about security deposits for the transaction.9 The $550,000 security deposit’s use because “it negotiated security deposits included the $550,000, is recorded in the documents” and which Sartan described as “the “Ev- Sartan, Kashuro, security deposit.” erything initial was written.” Rafikov’s testimo- $550,000 ny corresponds August and Rafikov understood the to be to an party 8. JSCNI was not a to the Commitment 9. Kermath denied that this conversation oc- curred, pursuant Letter. Citibank issued the letter to precludes but standard of review authority financing acceptable TPS’s to obtain considering testimony. our his it, authority Equip- and that came from the Agreement, ment Lease which JSCNI had signed. in Phase II to serve that was established Abji that TPS’s sent JSCNI’s schedule payment for “cash Kashuro, receiving point “minimum secu- showing revised Rafi- agreed.”10 amounts as which TPS would rity deposit payments” credit —for the revi- testified through kov and Kashuro million to JSCNI up lend $9 August correspondence Abji’s sions letters of credit—under reimbursement of agreement security-deposit reflected that never came Agreement a Transaction at and Kermath had reached that Rafikov II con- fruition. Because the Phase the Guar- closing, modifying August of Phase superseded by were those tracts deposits.11 Agreements’ antee schedule III, designated pur- it is unclear what the an revised schedule showed attached was when it received pose of this account security deposit” of initial “minimum $550,000, except that it was a Transaction July 1997—with However, the evidence does TPS’s name. $800,000 payable during the same Fee of the collateral In- not indicate that it was fee) (and month million total $1.8 —fol- Account for which the Commit- vestment security more minimum de- by lowed four provided. ment Letter $612,500 of each over an posit payments the One hundred thousand dollars of Rafikov testified that period. 18-month $550,000 ultimately was reimbursed payments together five the scheduled JSCNI, for but the remainder was used security depos- were all equaling million $8 (TPS’s August repayment 27 re- of Santos things its. JSCNI relied on such at trial. security deposit important schedule and an client of Ci- vised shareholder transaction), pay- this apart tibank’s from $550,000 into an ac- deposited was fees, advisory legal ment of Prod- styled count the “Transcontinental Abji, payment of to Karber and draws No. 2” account. An inter- ucts & Services expenses. The evidence certain of TPS’s 19, November nal email dated in most favorable to light viewed that the wired funds had been 1997 stated advised indicates that Citibank # 2 DDA Account” and credited to “TPS pay- TPS to make at least some of these that the funds “will be transferred noted 21, on November example, ments. For today TPS’s Landmark account until into 1997, days payment after of two loan. closing” at of the further distribution $550,000 response in to an internal ac- receiving Kermath believed that for account informa- asking email checking account of TPS. count was collateral,” that will hold However, tion for “accounts the account information instead email Kermath advised internal bank to a TPS account at Citibank corresponds example, spondence was later altered. For contended that this revised 10. Kermath because, that, among oth- Abji according schedule was inaccurate himself testified things, deposit er schedule contravened agreed the Commit- latest schedule before up intended build of cash collateral what the $550,000 issuance, the initial ment Letter’s supposed Kermath also denied was to be. by deposits September, in followed of was due product that the revised schedule was $144,000 through February. And each month discussions, closing August and he denied request internal Citibank’s November 1997 security-deposit at discussions occurred apprоval financing indicates still anoth- of However, closing. of re- the standard later alterations er collateral schedule. These considering testimony precludes his view our security-deposit August to the 15 minimum points. on these agreed by Kermath and Rafikov schedule representations at the affect Kermath's do not minimum 11. The record indicates that closing, fraud August 15 on which JSCNI’s August security-deposit agreed on schedule August Abji’s 27 corre- claim is based. and memorialized “ ” $1,625 in expenses that an ‘Investment Account’ would be and reimburse- part “hold of the ments were opened paid and that it would on November 25 and $550,000” funding (emphasis initial of add- December 19 and The summary also ed), $20,500 money but that “the rest” indicated that would “be account— [Manuel Santos’s] to Manuel in late paid Santos December ” Abji ‘Investment Account.’ testi- although summary another shows this specifically, that it was money fied coming from account. another “Citibank’s”— part Kermath’s—“advice that payments [the total clearly indicated —several $550,000] go to Santos’s account” paid Manuel to TPS representatives —were $185,870.14 that TPS Santos from the reimbursed $550,000. Likewise, according to Karber’s Abji and Karber understood recollection of a 1997 meet- November $550,000 to partial payment pre- be a Citibank, ing between Kermath TPS and payment the total million in $1.8 change stated that “we this 550.”12 need to Transaction Fees the Participation “change” Karber understood that the that Agreement However, allowed TPS. noth- “the money Kermath meant was that ing gave indicates that TPS going to be Citibank” or to retained five-day required notice to guarantors “remain the collateral account.” In- taking security Transaction from the Fees stead, Karber understood deposits. Likewise, testimony Kermath’s $550,000 pay would be to used Citibank’s $550,000, imply could read to that the attorneys, pay TPS’s TPS’s over- to security like all deposits, was useable at head, and to Santos and that reimburse time to pay expenses, that transaction in- money “TPS could use all under ... the fees; cluding attorney’s Citibank’s howev- $550,000 this the bank knew that because er, nothing shows that Citibank submitted we needed the we to money and have had attorney’s fees to JSCNI for bills re- $550,000” understandings the that —all view and as reimbursement Transaction got Karber from Kermath and Roberts.13 Costs, required the by Participation Karber testified that he heard Kermath Agreement. say we going that “this is what are to do Arguments 7. Citibank’s $550,000. summary here” with the A $550,000 argues any represen- some the uses of the indicated Citibank that oral that, $550,000 from TPS’s into which the that the would be account tations held $550,000 sent, $23,842 paid only security was was the as a or deposit would be (on 1997) very day next to cannot sup- November under Citibank’s sole control counsel; $10,000 legal paid was the fraud because port judgment the counsel; legal any December III on 19 to TPS’s Phase ‍​​‌‌​​‌​​‌‌‌​​​‌​​‌​‌​‌‌​​​‌‌​​‌​​‌‌‌‌​​​‌‌​​​​‌‍contracts contradicted such things testimony 12. Karber’s indicates that the refer- other that Karber had testified change $550,000 enced interlineated on the Com- wanted to use mitment Letter. The interlineation corre- fund an account for Santos because Santos sponds the to the insertion of word "initial” way.” "had asked that be done that that phrase "funding before the of at least However, precludes the of review standard $550,000” in that document. The word "ini- considering testimony our of Kermath. tial” was omitted the truncated version from of the Commitment Letter that TPS sent to complain that the 14.Citibank does not JSCNI. payments amount on JSCNI’s sum- shown $135,000, mary equal does not the amount for 13. Kermath Citibank instructed denied that which the found Citibank liable. $550,000’s any TPS on the use for these or Finally, Citibank or scienter Citibank. Citibank Specifically, representations. reliance any represen- that oral argues contends contrary to III contracts tations the Phase allowed Guaranty Agreements 1. given application unreasonable used as author- these funds to be for the statute of frauds and the contracts’ Agreement; Participation ized merger clauses. Participation Agreement provid- 2. deposit become TPS’s

ed that this Discussion 8. upon deposit; property evi parties point us to no Participation Agreement, 3. employee repre dence Guaranty and the Agreements, $550,000 security deposit that the sented Letter allowed TPS Commitment differently, placed treated once would be credit-agree- apply the funds to account, remaining in TPS’s from the secu and to obligations, acquire ment required Guaranty rity deposits under the equipment, pay itself lease It Agreements. appears thus million Transaction Fee and $1.8 only representations by concern Costs; Transaction $550,000’s control ing the use or Citibank’s Fi- “Engagement 4. the June 1994 (1) made No over it were Kermath’s agreement be- nancial Services” 9, 1997 about the correspondence vember Neftegas re- tween and Old Letter Commitment and the Commitment reimburse quired latter to itself, the payment requests Letter out-of-pock- former for all promptly expected convey to Kermath TPS to negotiating expenses et incurred JSCNI, and at Kermath’s statements financing; and mini August closing concerning right no to interfere Citibank had schedule, security-deposit the terms mum with TPS’s of the funds use unless Au Abji’s of which were memorialized in until closed. the transaction In schedule, Kashuro, gust sent regard, urges this last Citibank signed.15 Rafikov focus TPS and We thus misspent even if TPS JSCNI’s representations. on these funds, there no evidence that Citi- is in these Nothing representations indi- TPS bank did so or that it “directed cates that Citibank have sole control would to make distributions” which [the] $550,000 fact, In closing. over the until JSCNI complained. account into were the which the funds reliance Citibank contends that JSCNI’s name, a deposited was this was TPS’s concerning oral statements account other than the Investment $550,000’s over use and control Citibank’s collateral, holding Account for and TPS provi- contractual it that differed from the assign contractually required was not was, law, as a matter of unreason- sions security interest in its funds Citibank that, contends be- able. Citibank further closing. until after cause the Phase III contracts authorized they necessarily use of the when were But this does not insulate TPS’s funds First, materiality liability. there is no from and con- spent, evidence only per- signed, Guaranty Agreements were when the 15. Citibank’s statements to JSCNI documents, writing signed or modifications if in made memorialized these mitted (1) writings signed by We thus chal- which were Kermath TPS. overrule Citibank’s lenges modification to based on the of frauds and the for Citibank a written statute Abji Guaranty Agreements parol rule. that TPS’s assertions, trary the evidence Abji’s to Citibank’s and Karber’s testimony that favorable to does show that $550,000 Citi- was disposable as part of the advised TPS on the nature' of the bank Transaction Fee when the contracts did spend how to For exam- funds and them. not then allow it. Additionally, although advised TPS to use ple, Citibank these the Guaranty Agreements аllowed TPS to was, funds to reimburse Santos —who apply security deposits toward certain obli- along family, very important, -with his gations of JSCNI under other Phase III preexisting independent client of Citibank (credit contracts agreement obligations, pay of this transaction —and to agreement lease obligations, leasing of attorney’s days fees. receiving Within equipment, Fees), and Transaction those money, Abji JSCNI’s Kermath told TPS’s obligations were triggered because the change and Karber “we need to operative events or contracts never oc- dollars, advising 550” thousand TPS on curred or Furthermore, became effective. spend money. how to although Participation Agreement obli-

Second, representations Kermath’s cited gated JSCNI to pay Citibank’s and TPS’s $550,000 indicated that the would be held Costs, Transaction whether or not Phase under same terms as would all other fruition, III came to liability JSCNI’s was security deposits. It was thus reasonable (here, $450,000 limited to total $550,000’s rely being JSCNI to on its spent), given op- JSCNI was security treated the same as the other portunity to review approve and to submit- contracts, deposits under Phase III ted expenses from both Citibank and TPS though even guarantor. JSCNI was not a (which here). did not occur spent Citibank contends that TPS JSCNI’s Third, argues the Com- deposit Guaranty as the Agreements and mitment Letter —between only Citibank allowed, Participation Agreement but TPS, not JSCNI —authorized the use light evidence viewed in the most fa- security TPS, deposit pay vorable to JSCNI shows that TPS did not. Citibank’s, expenses. and Santos’s example, although Participation For Letter Commitment contained a condition Agreement Trigger defined the Date as precedent that TPS pay all reasonable Deposit the date on which an Initial fees) expenses attorney’s (including of it- guarantor, made TPS and Citibank outstanding self and Santos and all legal $550,000 did not treat the date of JSCNI’s and other expenses arising of Citibank payment as the Trigger Date —as evi- However, from the transaction. the by, denced other among things, TPS’s fail- only Commitment Letter established the begin ure to instruct Avanti to construc- obligation pay; it did not establish event, In any Participation tion. the payments from what source those would Agreement did not allow TPS to withdraw Equipment come. If the Lease and its Transaction Fee until days 30 after the (to Guaranty Agreements which JSCNI Trigger Date had occurred.16 The Partic- party) was a direct or indirect did not ipation Agreement thus did not allow TPS security deposit authorize the use of por- to use JSCNI’s funds to this pay itself tion of the Transaction Fee at that time. for such reimbursements at the time that used, jury reasonably could have discredited it was then neither could the Corn- argue being 16. Citibank does not that the amend- due the same month as JSCNI’s $550,000 Guaranty Agreement security deposit payment, ment to the memorial- allowed letter, Abji’s August showing Trigger ized in TPS to withdraw its fee before the the first installment of the Fee Transaction Date's occurrence. intention, de- when made with the already have con- fraud mitment Letter.17 We deceiving, Lease and with no Equipment sign purpose neither the cluded that act.”). au- Guaranty Agreements performing then For nor the intention in this days these disbursements after Kermath sent example only thorized — Moreover, re- regarding Letter, TPS’s manner. only days two the Commitment Santos, imbursement of itself in response, after sent the funds provided also Letter Commitment only days Kermath ad- three before incurred and billed before expenses those $550,000 pay vised TPS to use Citi- payable were not until financing’s closing its important bank’s fees and to reimburse ie., at the closing, they payable were not already client Santos—Kermath was advis- pay TPS to time that Citibank advised (1) part ing by internal email that confirmed that “it is cus- them. Roberts placed in Santos’s of the funds would pay to have the borrower tomary for us account, rather than in an Investment Ac- incurred outstanding expenses for all the transaction, count for the dos- in that transaction at the time the check for the “give would [Citibank] added.) juryA could ing.” (Emphasis very shortly retainer” there- legal fees and reasonably discredited Kermath’s have after. Kermath also testified at trial $550,000 testimony that he believed the net negative if TPS —which he knew had a to be so useable because Commit- $550,000 spent worth at the be- time — then allow it. ment Letter did not it, closing replenish fore and did There was also financing could not close. jury reasonably could have viewed meeting that at the November 24 showing evidence as that Citibank ad- signed at which TPS the Commitment Let- ways vised TPS tо use JSCNI’s funds ter, “change” Kermath indicated that a III then that the Phase contracts did not $550,000 allow, would need to occur and ad- despite representations Kermath’s be used. that the funds would be treated vised TPS how those funds should to JSCNI security deposit reasonably other under the A have believed that could actions, we re- Accordingly, very shortly Phase III contracts. which occurred these Phase ject argument $550,000, re- after Kermath solicited negate, III contracts’ terms as a matter of intent to do other than was prior flected law, reasonable reliance represented, with an intent that Citibank ways would be treated major client be reimbursed before represented. that Kermath 434- any further risk attached. See id. at (“While party’s intent is determined There is also some evidence that Ker- party representa- at the time the made the were of future promises math’s statements tion, may party’s be inferred from the intent, made with the at the performance is subsequent representation acts after the made, they perform time that were not to ‘Slight circumstantial evidence’ ie., there is evidence of scien- promised, made..... fraud, Inc., with the breach Tours, of when considered Spoljaric ter. See v. Percival (Tex.1986) (“A 432, promise perform, sup- to is sufficient to prom- 708 S.W.2d 434 intent.”). port finding actionable of fraudulent ise to do an act the future is when, how, Likewise, purposes what Engagement Agree- specify and for the 1994 $550,000) ment, (like according paid Neftegas signed and which funds JSCNI's which Old used, and we have and ex- to their terms could be allowed TPS to be reimbursed costs JSCNI, already explained how these contracts did not penses speak did of the from source, method, time in this man- timing allow these uses at this or of their reimburse- contrast, ner. ment. the Phase III contracts did In

407 Furthermore, an email from We overrule Citibank’s challenges Citibank’s under the two theory internal credit documents—dated issues one and to this of fraud after but sent August closing liability. Having 15 Kermath found legally sufficient before explained the theory Commitment evidence of one that will support Letter — company “John Kermath tells me the normally fraud we liability, would not need will earn a fee Trans- any [the to examine other supporting theory. [TPS] $1.8MM upon closing However, the the Fee] action the remaining because fraud [final] two over payable deal from which is require [JSCNI] theories discussions relevant ” months.... This indicates that Kermath claims or theories raised in ap- knew before he sent the Let- peal, Commitment we them briefly discuss below. $550,000 part ter that would not form the D. Kermath’s Statements That

of TPS’s Transaction Fee when it was Complete Transaction Was paid. Finally, by internal memo- (after 19, September randum dated theory liability, For of fraud 15 closing but before the Com- August only we need examine justi element of Letter), mitment Kermath advised that presented fiable reliance. fol of the fact light that the TPS transac- “[i]n lowing evidence show reliance Ker- on fruition, coming tion to be we appears 15, math’s oral statements. At the August relationship will reestablish a with Manuel said, Kermath closing, “You send $250,000 deposit via a time [Santos] [sic] money you will transaction —and that will rolled over on a basis periodic be 30 days”; funded within “now arewe but not be available for li- personal will you going give financing”; “we’ve nothing quidity purposes.” Although working years, been it for four want we $550,000 actually that JSCNI’s shows it, finally to close and we are done it.” with independent to establish such an ac- used offices, At a post-closing meeting TPS’s opposed count Santos —as to the funds’ Kermath Rafikov that final told “this is the expendi- use to reimburse Santos for you give money. give issue. You me I Abji advised testified that Kermath tures — project_” whatever. I finance the At $550,000 to estab- deposit TPS to use post-closing celebratory dinner account. A rational could jury lish this every- night, congratulated same Kermath intent, as evidence view this of Kermath’s one, with indicated that he was satisfied Letter, before issuance Commitment completion, the transaction’s and said $550,000 account to use the to establish an finally time we ... it” things like “this did transaction, totally to the unrelated and now the rest of the and “this is done client of important for the benefit of an just Trey projects place.” will fall into Citibank’s. Roberts, Team In- Leader in Finance, any vestment testified that state- of the circumstantial evidence Given all ment on 1997 that the transac- August scienter, reasonably could have complete but tion was Karber’s, Abji’s, discounted payment have been untrue. would testimony implying Kermath’s Howеver, la- undisputed intent. that the money was solicited without such (“Intent question See id. at 434 is a fact ter-issued November Commitment borrower, Letter, signed within trier of as uniquely the realm of the which (and financing credi- thus the Phase depends upon fact because it so the recited that transaction) upon, was conditional weight witnesses and III bility of the the things, testimony.”). among other given to their 408 claim that the of and satis- is inconsistent with the “completion edge

1. Citibank’s deceived, with our due has respects party faction in all defrauded been which investigation,” of reliance diligence the essential element negates on the diligence described representation.”); “[d]ue the truth upon identity corporate documents of Prospect Fund v. High see also Income Participation parties Thornton, 602, all L.L.P., 203 S.W.3d Grant Agreement”; 2006, pet. granted) (Tex.App.-Dallas Date Trigger 2. the “occurrence of the (holding summary judgment that Participation as defined in the because rendered on fraud claim properly Agreement”; was defeated justifiable element of reliance by outstanding third-party all that payment by sophisticated 3. TPS “of evidence knew, purchasing incurred legal expenses plaintiffs other business before bonds, with the in connection that in audits [Citibank] certain statements transaction”; inaccurate). Accordingly, we hold were was no that JSCNI that there 4. the absence a material adverse condition, repre op- relied on oral change justifiably the financial Kermath’s erations, or of TPS since that was com prospect sentations transaction 30, financial state- theory its June thus plete. We hold that ments; and support judgment. fraud cannot af- becoming “not aware under challenge We sustain Citi- any ter the date of information theory of bank’s issues one two to this affecting other matter or the [TPS] liability. fraud in a materi- transactions inconsistent al and with adverse manner Failure to Disclose Vari- E. Citibank’s or other matter such information $550,000 Relating Matters ous prior disclosed to to the date us Payment

hereof.” to Rafi- undisputed It was that TPS faxed that jury was instructed pages that kov—and Rafikov saw—the when fraud occurs containing Letter these Commitment material party a. a to disclose a fails August 17 state- terms Kermath’s after knоwledge fact within of that paid ments and before party, It undisputed to Citibank. was thus the other party b. knows that advised, Kermath’s oral Rafikov was after ignorant fact and party is of the statements, in- the transaction was equal opportunity does not have an complete contingencies because existed— truth, to discover the tran- likely they of how were to regardless ultimate- spire or for what reason Citibank to induce the party c. intends ly funding. refused action party other to take some claim, purposes For of a fraud fact, failing disclose the justifiably rely represen cannot on a party injury as a party the other suffers d. knowl party tation when has actual knowledge of acting result without representa edge before reliance of fact. undisclosed Stewart, falsity. Mayes tion’s See v. if the triggered only element (Tex.App.-Houston The first is [14th S.W.3d denied) (“Actual to disclose legal obligation knowl had a pet. defendant Dist.]

409 See, Vento, e.g., only partial copy the fact.18 v. a of the Commitment Bradford (Tex.2001). 749, Whether Letter to JSCNI. S.W.3d duty question exists is a of law. Id. Ab- responds that duty Citibank’s to or fiduciary sent a formal or informal con- disclose arose because it failed to disclose relationship fidential JSCNI ex- —which the whole truth and to correct a false for pressly appeal disavows on as a basis impression arising from a partial disclo- duty duty to Citibank’s to disclose—a Specifically, sure. JSCNI contends in the speak may following arise situations: 1. that represented “when Kermath (1) voluntarily informa- one who discloses that the Transaction complete truth; duty has a to disclose the whole tion $550,000 solicited from (2) representation one who makes a has a [JSCNI], he failed to disclose to duty he to disclose new information when that the loan [JSCNI]” had been is aware that the new information makes million; reduced to $40 representation misleading the earlier 2. “given that Citibank’s direct com- (3) untrue; partial one who makes a munications with regard- [JSCNI] conveys impression disclosure and a false ing the collateral requirements, Citi- Anderson, duty has a to correct it. Green- duty bank had a to inform [JSCNI] Martin, 212- wood & Co. v. S.W.3d that only it would advance funds (Tex.App.-Houston [14th Dist.] equal to 96% of the value of cash on denied). pet. bank”; deposit with the Arguments 1.The Parties’ upon 3. that Citibank’s direct “[b]ased argues Citibank that it disclosed the representation Neftegas to that the facts which upon JSCNI’s claim was based complete,” transaction was Citibank to in the Commitment Letter and duty had to disclose to that duty, that it was TPS’s as the borrower in financing subject to a satisfacto- agent Phase III and as JSCNI’s for com- ry Karber, investigation of Peter in- Project, convey munications for the to dividually, establishing and TPS is, information to JSCNI. That Citibank $500,000; minimum net worth of duty contends that it had no to JSCNI. 4. “[g]iven representa- that a por- Citibank also notes TPS sent security deposits tions JSCNI, Letter tion Commitment to would be used as collateral for request copy that JSCNI did not a full subject payments and to lease/loan Letter from Commitment Citibank Citibank, the exclusive control Ci- only when it saw that TPS had sent three duty tibank had a disclose pages, of five numbered and that no evi- part of the would used attempted dence showed that Citibank to fund an investment account for conceal the Commitment Letter’s terms Manuel Santos.” Additionally, from urges JSCNI. added.) (Emphasis that there was no evidence that Citibank intended to deceive JSCNI when TPS sent 2. Discussion objected charge on the law either TPS or Citibank. That is a (1) decide, grounds supported no matter the Court to and we believe question’s fraud submission and the fail- including the Court has erred in that as a ure-to-disclose instruction within the fraud duty matter law there was a to disclose.” question should be submitted because objection. The trial court overruled the duty "there a matter of is no disclose as JSCNI, no not Rafikov agree pages that had did concern ac-

We Citibank not financing cepted explanation that and did then the terms of duty to disclose copy. for complete Letter ask Citibank a Kashu- in the memorialized Commitment that that he did agreed that ro the reason not directly jury to found JSCNI. for complete copy ask a the Citibank agent, not but found Citibank was JSCNI’s in “the Letter was that ordi- III Commitment was. the Phase that TPS Under communication,” nary course of JSCNI which Agreement, Lease Equipment TPS, “its corresponded with who had own to ob signed, TPS was authorized JSCNI dealings with.”19 The Let- Commitment subject “on to financing tain terms all that ter contained information JSCNI (Em acceptable to [TPS].” considerations that to divulge contends Citibank failed added.) authority, phasis Pursuant to that the the except for revelation that funds TPS August closing, and after would be used to reimburse Santos.20 The reached out and Citibank the terms set evidence, or record is devoid of direct cir- sent Letter. Citibank Commitment cumstantial, knew that Kermath TPS TPS, Letter to the entire Commitment JSCNI truncated version of the sent that TPS anticipated which Kermath anyone or that at Commitment Letter Citi- to for would forward JSCNI. TPS then any misleading bank made statements to only part of the Let warded Commitment about JSCNI terms memorialized in Rafikov, realizing ter to that the JSCNI. the Commitment Letter after Kermath Letter that TPS had sent Commitment had that letter TPS. sent TPS, incomplete, agent asked its usual through for communications with Citibank To hold Citibank liable Com- after for Project, complete copy. out Letter’s TPS mitment issuance to would responded omitted that it a duty When TPS be to hold continued to have TPS; agreed general acting when lender to 19. Kashuro “it’s the Citibank was as (2) course of business for to deal with "many [JSCNI] telling Kermath’s Sartan times” TPS TPS and then would deal with [Citi- parties' relationship that over the entire Citi- ...” Sartan also testified that bank]. "98% would look best bank out for JSCNI’s inter- time,” went from TPS communications (or transaction; (3) structuring ests in Sartan, Rafikov) Rafikov or from testifying took Kashuro's that JSCNI “ad- (or Sartan) arrange- Rafikov TPS. This directly vice” from Citibank and Citibank ment corroborated is JSCNI's communi- Moscow, periods. specifying without time directly concerning with cations TPS directly spoke The fact that Citibank with financing. comports with terms of This also about JSCNI certain occasions various Letter, Engagement which the 1994 matters, structuring that Kermath and Ra- agent was made JSCNI’s to initiate and to security deposits fikov discussed at the clos- financing conduct discussions for with third- preclude ing, using does jury party Finally, the financial institutions. channel usual of communication with agent. found that TPS was JSCNI’s communications, TPS, agent points to several in which Citibank instances who was also Citibank's contractual borrow- directly communicated with JSCNI. Several er at the time. III, when a of these occurred before Phase completely different contem- structure was already We have that the held could plated including open an JSCNI would — rationally conclude that committed Citibank, if directly account with escrow misrepresentation fraud affirmative when obtained the Central Bank’s Russian security deposit, it solicited as approval. JSCNI also relies on discus- but later used that sum to reimburse Santos. Citibank and JSCNI about the sions between structure, We thus do not need to examine whether Citi- transaction’s overall when advisor, divulge duty had a this one acting mat- but not concern- bank III, ing the terms of the under Phase ter. loan 4H non-elient, to a to which it had made mis- ists in support of the claim. a ‘When transaction, leading statements even party third knowingly participates in the it had corrected those statements to breach of a fiduciary duty, the third party after designated agent non-client’s for com- joint becomes a tortfeasor and is liable as munications concerning the transaction. such.” Gilchrist, Kastner v. Jenkens & authority cites no P.C., JSCNI that would im- 571, 231 S.W.3d 580 (Tex.App.-Dallas pose duty this kind of 2007, on Citibank in such no pet.) (citing Kinzbach Tool Co. v. circumstances, and recognize we decline to 565, Corp., 574, Corbett-Wallace 138 Tex. one especially parties when the (1942)). 509, 160 S.W.2d 514 here — the transaction were sophisticated busi- people.

ness Pleadings, A. The Charge, Rulings We sustain challenge under pleaded JSCNI that TPS had breached issues one and two theory to this of fraud fiduciary duty to JSCNI. JSCNI also liability. pleaded that Citibank had “knowingly par-

ticipated a breach of fiduciary duty by JSCNI’S APPEAL TPS to [JSCNI].” issues,21 By three argues JSCNI that Although the trial court granted Citi- the trial court in granting erred Citibank’s bank’s directed verdict on the knowing- motion for request JNOV on its for exem- claim, participation the court nonetheless plary damages against Citibank and its submitted the claim to jury: against claims knowing partic- Citibank for If the Question answer to No. 10 is ipation in TPS’s breach of fiduciary duty “yes”, then answer the following Ques- civil conspiracy. tion. Otherwise do not answer the fol-

“We review the grant or denial of a lowing question. motion judgment notwithstanding the QUESTION NO. 18 verdict legal-sufficiency under a standard.” Did Citibank knowingly participate in Baker, Whitney Nat’l Bank v. 122 S.W.3d TPS’s breach of Fiduciary Duty to 204, (Tex.App.-Houston [1st Dist.] [JSCNI]? 2003, pet.). “Generally, no a JNOV can be You are instructed that “knowingly” only rendered when there is no evidence to awareness, ‍​​‌‌​​‌​​‌‌‌​​​‌​​‌​‌​‌‌​​​‌‌​​‌​​‌‌‌‌​​​‌‌​​​​‌‍means actual at the time of support one or more of the jury’s findings conduct, that TPS owed [JSCNI] that are necessary....” Triumph Truck- fiduciary duty, and that TPS wаs ing, Inc. v. S. Corporate Managers, Ins. breaching fiduciary duty. that Actual Inc., 226 S.W.3d 470 (Tex.App.-Hous- may objec- awareness be inferred where denied). 2006, pet. ton [1st Dist.] per- tive manifestations indicate that a son acted with actual awareness.

Knowing Participation in Breach Fiduciary Duty affirmatively. answered one, In issue argues JSCNI The predicate question for the above the trial court erred in disregarding the was an affirmative Jury Ques- answer to jury’s against knowing verdict liability tion No. which was the ques- participation fiduciary in TPS’s breach against tion TPS for fiduciary breach of duty legally because sufficient ex- duty: argument,

21. After oral testimony. abandoned its of certain We reach thus do not five, concerning four and issues the exclusion these issues. participation) on the basis that (knowing No. is Question answer to your If was no evidence that Citibank knew following ques there then answer the “yes”,[22] fiduciary duty to Otherwise, breaching the fol TPS was answer do not tion. intentionally assisted lowing question. breaching duty. Citibank fur- QUESTION NO. $1,181,000 moved for JNOV on ther duty to fiduciary TPS breach its Did (dam- Jury Question on No. awarded [JSCNI]? fiduciary of related to TPS’s breach ages a fidu- agent, TPS owed As [JSCNI’s] no evidence that duty) because there was that prove To ciary duty to [JSCNI]. (as corporate opposed to another JSCNI its TPS must show: duty, with complied and entity) any damages suffered because was question The transaction in a. damages of should have those [JSCNI]; equitable and to fair granted The trial court been excluded. made use b. TPS reasonable of knowing participation JNOV on JSCNI’s placed in that [JSCNI] confidence claim, on the basis of no but denied JNOV [TPS]; damages.23 evidence of good acted the utmost c. TPS in the most scru- faith and exercised B. Discussion [JSCNI]; honesty pulous toward appeal, argues JSCNI that Citibank On placed TPS the interests d. of in the breach knowingly participated own, did not use its [JSCNI] before (1) fiduciary duty TPS committed that gain to advantage position fully fairly to material failing and disclose expense at the any benefit for itself concerning information the transaction to [JSCNI], place itself and did (2) as the participating, JSCNI and trans- any position in its self-inter- where advisor, structuring action’s in the of a obli- might conflict with its est simultaneously transaction unfair fiduciary; as a and gations JSCNI, inequitable did not make and to fully disclоsed all fairly e. TPS and reasonable use of JSCNI’s confidence in to important [JSCNI] TPS, placed TPS’s interests before information concerning the transaction. those of JSCNI. added.) answered (Emphasis jury begin jury the uncontested We with and no

Jury Question affirmatively, No. 10 agent findings that was JSCNI’s challenges finding appeal. on one duty fiduciary it breached its to challenges appellate the affir- JSCNI’s re- moved for JNOV on JSCNI. are based Question lating finding solely No. 18 to the latter Jury mative answer Question cross-point point whether TPS that would have Jury 7 asked issue or 22. No. agent answered pre- was the JSCNI. would have vitiated verdict or that chal- question affirmatively, and no one judgment if vented an affirmance of the finding lenges appeal. on judgment court had ver- trial rendered dict.”). disposition Given of JSCNI’s is- our By cross-point appeal, in 23. two, we have al- sues one and and because concerning reurges grounds dam- its JNOV ready against one of ruled Citibank on these ages affirming on all as a basis the JNOV (that damages appeal in its relat- contentions liability jury’s which JNOV answers on ing payment of the to Sunflower’s 38.2(b)(1) rendered. See P. Tex.R.App. security deposit), need not reach Citi- we (“When judgment not- the trial court renders cross-points appeal. bank's in this withstanding ques- one or more verdict on tions, bring appellee forward must (1) knowing participation on Citibank’s collateral requirement in its Commitment TPS, divulge key failure to information24 Letter TPS’s which agent was JSCNI’s (2) an unfair structuring TPS’s trans- authorized to receive such communications action.25 Project, for the and there is no evidence that Citibank knew that TPS failed to dis- Participation TPS’s Failure close the full letter to JSCNI or that Citi- Fully Fairly to Disclose Certain In- bank instructed TPS to disclose only part formation to JSCNI Likewise, of it. points JSCNI only to argues par that Citibank evidence that Kermath knew of Karber’s ticipated fully fairly TPS’s failure history; criminal point does not require disclose the full-cash-collateral any evidence that Kermath knew that history.26 ment and Karber’s criminal ignorant fact, JSCNI of this that he support, merely reurges In an ar JSCNI same, knew that TPS had not revealed or gument respect akin to that made with to that anything Citibank did that would have fraud-by-failure-to-disclose liability any aided such conduct TPS. already theories that we have addressed: We argument overrule this under prior, that Citibank’s direct communica JSCNI’s issue one. tions with through phases JSCNI certain Participation Structuring in TPS’s duty of the transaction created a for Citi Inequitable an Unfair and Transaction bank to disclose these specific matters di JSCNI, rectly to despite jury’s finding arguments JSCNI’s agent, Citibank not JSCNI’s despite one, In parties’ arrangement usual the remainder of issue agent argues TPS to be JSCNI participated JSCNI’s communica is, substance, tions. in in structuring This a direct- TPS’s an inequi unfair and liability argument table Specifically, based on the failure to transaction. despite disclose various matters an fiduciary inde contends that TPS breached its so, pendent duty argument duty by accepting to do not an the Phase III transac tion vicariously that Citibank can be liable because in the participation violation of another’s (cid:127) the loan would allow TPS to borrow Moreover, duty. authority JSCNI cites no only the lesser of million or the $40 vicarious-liability-by-omission that would support recognizing such a borrowing “clearly base—an amount knowing-par ticip less than the amount needed to fund claim under facts like these. Project” ation (cid:127) event, In as discussed in relation pay JSCNI would TPS and Citibank fees, appeal, undisputed Citibank’s the transaction high would be divulge is that Citibank did the full-cash- “free of risk” for both TPS and Citi- JSCNI, challenge inequitable 24. JSCNI bases this on one of the was unfair and possible findings implicit five that could have TPS did not make reasonable use of JSCNI's it, supported jury's placed affirmative answer to confidence in and that TPS its inter- Question Jury fully No. 10: that TPS did not ests before those of JSCNI. fairly important disclose to JSCNI all sentence, 26.In one JSCNI also mentions the concerning information the transaction. facility $40 decrease of the credit amount to challenge may 25. JSCNI bases this on other the extent that JSCNI million. To possible implicit findings asserting five that could have this as a basis for Citibank’s vicari- supported jury’s liability, reject affirmative answer to ous we it for the same reasons Question Jury 10: that the stated No. transaction herein. surrounding phas- all the circumstances bank, share and TPS would in es, turn to these now. however. We while JSCNI profits, venture’s joint nothing ... receive essentially “would I, was to be a begun Phase $51 ability to borrow its than the other (85% facility of the total million credit money.” own being Old funding), with the borrower Bank, pursuant The Exim Neftegas. argues original.) (Emphasis OGFA, guaranty 100% of the would knowingly participated that Citibank interest. TPS would com- principal and TPS, which lacked breach because without financing by arranging, plete transaction, type in this experience assistance, downpayment a 15% Citibank’s the transaction. hired to structure million) ($9 from a consortium of investors. clarifies that the focus reply brief Neftegas, not The borrower was to be Old advisor, not on its role as is on Citibank’s would consist of an TPS. The collateral role as lender. contract; delivery term oil hard assigned oil currency contracts for the sale of and TPS’s roles (to outside Russia creditworthy purchasers Neftegas Old undisputed It was sales in excess of 150% of represent initiate and to agent TPS as its to engaged accounts, servicing); and collateral at debt with financing for conduct discussions by Exim approved a York bank New up financial institutions to third-party $60 bank, proceeds all would into which oil-sale million and that Citibank knew of pledged. and Citibank was be deposited Citibank, TPS hired and relied on agency. fee a to receive both a commitment it, complex, to advise and to structure this to be reimbursed structuring fee and was because TPS did international transaction expenses. expenses TPS’s were certain experience have the to do so itself. not apart reimbursed. Phase I fell also to be Sartan, According although to “Citibank guaran- the Exim bank would not because advising to going and TPS both were be ty financing. to structure the transaction how [JSCNI] II, begun in was far more Phase funded,” ... it to be “TPS was for roughly took the form of a complex and to facili- just in transaction [the] conduit (Citibank’s from TPS “pass through” loan happen it easier.” tate it to make [and] borrower) (TPS’s Neftegas to Old borrow- supports Abji’s that Santos and The record er). being, into in the words of It came with were a prior connections Kermath, financial “through because some for involvement as a major reason TPS’s equipment of engineering, slow down transaction, had in this as TPS “conduit” oil and an increase crude purchases gas neither in the oil and busi- experience sales, the actual Russian risk the deal inter- structuring complicated nor in ness willing to diminished such that TPS wаs financing. national gap to close the commit more resources an Exim-styled financing an do —without phases three The transaction’s Exim The structure called for guarantee.” revolving facility credit only about the struc- a 36-month complains III; for draw-downs and for would be available financing ture Phase does of letters of credit to I II were Citibank’s issuance complain that Phases Avanti manufacture. to it. One cannot inequitable unfair or “Amount/Availability” was to be the lesser Phase III without understand- understand million “or the Lendable Value Phase III ing preceded the structures that $60 the Collateral ...which was to be com- through letters of credit issued Citi- bank, posed things: of four different would constitute disbursements to Neftegas. Old structure, Given the facility 1. “Investment Accounts” of no less Citibank would issue only letters credit (which than million could include $10 against the collateral accounts. Citibank instruments) securities and owned granted fees, various including an by TPS or acceptable parties third fee, origination fee, a structuring and fees year for the facility, first monitoring the collateral issuing which standard advance rates would letters of credit. TPS’s and Santos’s ex- be used to determine Lendable Val- penses payable were at closing. ue; 2. a “Special Deposit Account” held II Phase failed for several reasons. To with,

Citibank Moscow for Neftegas, begin Old although the Russian Central to which a 98% advance rate would Bank issued a license to Old Neftegas, applied to its “funds” to deter- that license did not allow Neftegas Old Value; mine Lendable hold accounts in its name outside Russia. Also, the Phibro contract 3. that was to fund account into which TPS received the collateral account was never any payment from executed Neftegas, Old price because sale agreed. could not be which a 98% advance rate would be Additionally, various tax applied to its issues arose dur- “funds” to determine ing Phase II: Value; a value Lendable added tax (“VAT”) 20%, of about 15% to in JSCNI’s pledge promissory non-bank, (2) borrower; a was the TPS, one for million and the $51 an million, excise tax of about which $12 million, other for which were not $9 Abji testified that Old Neftegas would assigned Lendable Values. have to if pay purchased it equipment the is, That facility the made available the directly; and a newly enacted customs lesser of million or the $60 Lendable Value tariff that opined JSCNI’s counsel could (some rate) funds, at a 98% advance of have led to an increase of about 25% in securities, and in instruments certain project’s the initial cost. To avoid these pledged Neftegas accounts. Old contem- taxes, possible joint a venture involving plated executing and pledging to TPS an Old or New Neftegas and TPS and lease export-sales agreement company with a structure with TPS as lessor were dis- Phibro, called Neftegas under which Old Furthermore, cussed. around January oil, would sell to million of crude $200 $250 1997, the Russian taxing authorities seized part with of proceeds from those sales Neftegas’s Old Russian bank accounts to being deposited into one of these accounts. satisfy liability imposed by retroactively structure, Under this TPS would commit new taxation Finally, laws. around June to lend monies to Old Neftegas pur- to Neftegas Old bankruptcy, declared months, chase equipment over 18 followed at a time when it still had about mil- $25 by seven-year “fully amortizing payback lion in outstanding. Neftegas loans New period.” TPS would in turn borrow was formed in response mid-1996 in to against the cash in build-up the Collateral problems, some of these but no had against Account and to million $10 $20 activity until 1997. investment management accounts Santos and his family pledge. would implementation Phase III saw the Avanti, TPS’s payments individual to joint both the venture and the lease struc- transaction, well, indicating “any outlays to in as point At this in the ture. fully by memo- are advance supported of an internal Citibank [Avanti] the words from randum, had “evolved facility affiliates on deposits made [JSCNI] ” cash secured [a] trade finance structure behalf of the Joint Venture.... underlying financing The facility.” closed, financing If the had out have been set transaction documents have fee origination would received an above, terms important but some are detail $50,000, fees, a collateral letters-of-credit financing, here. As for summarized fee, and the undrawn monitoring fees on Letter to the according Commitment of the portion of the commitment amount fi- Phase Ill’s signed, TPS and Citibank facility. three-year revolving nancing involved a facility for lesser of million credit $40 revolving facility million credit $40 Base,” was de- “Borrowing which brief, By opening one sentence in its Value,” which as 96% of “Loan fined contends that TPS breached defined “market value times turn as facility fiduciary duty seeking a credit rate” of collateral. The 4% advance million, only that was an amount $40 on the Loan Value “accommo- discount than “clearly less the amount needed (a reserve collateral interest datefd] Project,” the transac- rendering fund up days past due reserve for brief, interest).” fundamentally By reply tion unfair. The collateral was to consist supports argument by brief this of T-bills maturities less than entirely with citing correspondence between 12 months or cash Kermath investments. and the Overseas Private Investment Cor- re- TPS of full-cash-collateral advised (“OPIC”) poration in Phase II to demon- early again May as 1997 and quirement expendi- knowledge strate Citibank’s in the Commitment Letter. the loan’s tures would be million within $56 Guaranty Agreements, Under first seven months. of the collateral was intended source guarantors’ security deposits, which facilities in had been prior phases for, permitted to use the contract million, Ker- respectively. and $60 $51 among things, obligations other its under financing preliminary math’s Phase III agreement.27 deposits any credit correspondence April with TPS in and of oil- supported by proceeds were to be financing May 1997 likewise indicated that be as- and-gas sales contracts that would million. would be the amount of $60 signed to TPS. witnesses that million opined JSCNI’s $60 buy III to was still needed even in Phase only issued

Letters of credit could be and infrastruc- equipment to build the months, facility’s within the first 27 and Rafikov million ture. testified $48 would draws under letters of credit be just as required equipment, a un- automatically reimbursed with draw contracts with reflected. The evi- Avanti facility. credit would der the No letters of light in the favorable to JSCNI by dence most fully supported be issued unless Base, i.e., pursued have of the collateral shows that JSCNI would not Borrowing 96% financing if it had that the correspondence value. Internal Citibank deal known only May requirement, facility from out this million. sets $40 joint-venture partic- refers to of these funds as and Donaclove was 27. JSCNI all its not money,” guarantors "own but the were New ipant. Rodos, Donaclove, JSCNI, Neftegas, and Nonetheless, ing fiduciary duty the above evidenсe con- JSCNI re- equip- questing sums needed for that facility cerned the total amount.

ment, contrast, In building, and fees. allocation, The risk fees to Citibank only why revolving evidence of credit TPS, and what JSCNI facility amount was reduced to million $40 received (1) is that that was the amount that was any at expected outstanding to be one The crux of the remainder of JSCNI’s time, projections from the that TPS pro- challenge is that the structure of Phase III Citibank, reducing vided the facili- was unfair to required JSCNI because it ... ty money to that amount “saved on the full cash or government-obligation collater- al, which charged unused fee made the borrowing only [on Citibank] base 96% of collateral, against facility gave the amount of percentage large fees to TPS and is, Citibank, them, all that is not used.”28 That because this removed risk to allowed TPS to revolving facility, was a the total share in 15% of letters profits from the underlying transaction. credit that Citibank would issue could sur- In support, JSCNI contends that it “essen- pass depending million over time $40 tially nothing receive[d] ... other than repayment, but could not exceed mil- $40 ability money.” borrow its own lion at time. one (Emphasis original.) correspondence contends that JSCNI In support complaint of its that Citibank between Citibank and OPIC indicates Citi- knew that the structure of Phase III was knowledge expenditures bank’s would unfair because the structure gave TPS million within the loan’s first seven $56 profits “15% of the Project,” from the generated months. This schedule was May joint-ven- JSCNI relies on the II, points Phase not Phase III. ture agreement among New Neftegas, equivalent no evidence from Phase III. TPS, Nothing and Donaclove. shows that Moreover, credit-ap- internal Citibank, the agreement was drafted proval application adopted a collateral Neftegas’s and it was Old counsel showing schedule direct-product pro- sale proposed joint venture. agreement security deposits ceeds and that would ex- property profits among divided infrastructure, ceed equipment, costs for TPS, participants: three 15% to 45% to at design Finally, costs all times. Donaclove, Neftegas. and 40% to New earlier, although discussed there is evi- does not direct us to evidence that dence that TPS withheld the new mil- $40 determined how profits would bе by failing lion amount from JSCNI to fax among joint-venture shared partici- page of the Commitment Letter that pants. Additionally, participants all three change, memorialized that there is no evi- profit agree- received shares under their dence that JSCNI did so or knew that receiving ment —with TPS the smallest TPS did. explain share. does not how the circumstances, unfair; agreed Under these Citibank’s division to which it agreeing says nothing why joint-venture par- million about it was unfair for a $40 (TPS) of whether knowledge ticipant profits, TPS was breach- receive a share of complaints facility." Reducing revolving 28. One of JSCNI’s about of the credit structure is that borrowing transaction’s under Com- $40 base million have less- would Letter, paid mitment Citibank would be fees ened that fee. borrowing "on the the term unused base for majority opined great in that the share was the small- when that especially financed transactions that Citibank did charged est; could be or how Citibank require- this full-cash-collateral employ shows nothing when any with unfairness ment, employed but instead marketable agree- joint-venture that it drafted estate, securities, real business assets ment. he that although explained as collateral— arguments, other for JSCNI’s As had used the full-cash-collateral Citibank relies shows the fol- on which it The Phase III con- requirement before. III, would not lowing. In Phase Citibank tracts, II, undisput- those in Phase as had without cash or any letters of credit issue and TPS ably provided for fees to Citibank as collateral to back government securities closing. after the transaction’s upon and the “transac- opined Kermath them. gone through, III Had the Phase deal was structured to avoid [Citibank’s] tion would have earned hundreds of ... trade finance risk.” taking any kind of in fees for collateral thousands of dollars that “on a like this we opined Roberts deal and issuance of letters of management going weren’t to take credit risk other credit, and TPS would have earned its by cash and marketable fully than backed Transaction Fee and a success fee that it never securities” and that Citibank “was split have with Citibank. As for would credit, ... underwriting interested in Abji payable closing, fees before estimated against any foreign kind of assets or cash $50,000 paid for its in flows” because of the risks Russia. structuring advising project. on the memоran- Similarly, an internal Citibank This evidence must nonetheless be un- re- supporting credit-approval dum undisputed derstood in the context of would “essen- quest recited evidence, especially background because large part tially prepaying complex highly lengthy concerns a purchase,” financing term equipment and Citibank’s intent and transaction negotiated ... “[Citibank] Keller, knowledge. City See 168 S.W.3d family in to reduce risk TPS/Santos First, at 817-18. the evidence undis- internal memo- transaction.” The same in putably demonstrated the financial risk randum indicated: conducting business in Russia at this time: “typi- The current structure resembles application of tax laws that had retroactive trade finance with a cal” transactions seizures; in asset already resulted several company selling manufacturing domestic 1990s, in devaluations of the ruble equipment equip- cross-border. The in which would result 1998 alone a loss produce product ment is then used to Neftegas to New of about in ac- buyers. to be sold to off-shore counts; high interest periodic rates and from proposed transaction differs “tradi- 1991; newly emerging inflation since and a tional” trade finance deals in the fact system. not li- free-market JSCNI was percent that this transaction will be 100 censed to hold funds its name outside by Treasury secured and short-term Russia, in accounts in and its funds held York) (in Government New obligations already Russia had been seized once “typical” whereas trade finance transac- January Neftegas gone 1997. Old had tion are reliant on cash flows from [sic] in at a time when it had bankrupt subject equipment repay- in loans and outstanding, about million $25 menf/collateral. activity no until 1997. Neftegas New had Furthermore, consistently Lynch, Managing Robert Senior as JSCNI has below, nega- here and TPS had a Banking Director for Credit and Services observed net worth. recognized tive Citibank also that Citibank intentionally aided in TPS this fact because the same internal Citi- what it knew was a breach of the latter’s bank documents on which in JSCNI relies own fiduciary duty. Against above, of its issue one support neg- discuss TPS’s undisputed backdrop, JSCNI did not show worth, ative net having no financial this. It is clear that Phase Ill’s financing transaction, capacity outside of the and the was structured Citibank, to avoid risk to to “specter insolvenсy resultant possi- and reduce risk to TPS and the Santos family, ble conveyance fraudulent claims” involv- and to require high collateral, quality (this ing being the stated reason for which was unusual unprecedented. but not $500,000-neb-worth and l:l-asset-lia- But the record also indicates that TPS had bility-ratio precedent conditions to financ- no net worth risk, and was a financial no ing). It was also undisputed that there Exim bank guarantee or Santos family was no Exim guarantee at Phase III. Ad- available, collateral was and the Russian ditionally, Citibank documents revealed economy and taxation system were risky family that the Santos expressly had de- at the time. It is also clear that Citibank clined, transaction, for the first time in the structured Phase III as a lease under guarantors in Phase III. Citibank’s guarantors’ which the payments became “way identified out” in case of default was property, TPS’s for pledge to Citibank as solely liquidation of collateral —not the collateral. But the again record explains success, transaction’s not TPS’s net worth why this was so: JSCNI could not hold (because none), it had and not recourse to collateral in accounts under its name out- (because the Santos family family (as side Russia had been contemplated in would no longer guarantee financing). Ad- II), Phase its funds held inside Russia ditionally, it undisputed that Avanti subject were to risky economy and taxa- required prime letters of credit from a system, tion a leasing joint-ven- and bank accept and would not other forms of ture prevented VAT, structure high excise payment. The facility credit at all stages tax, import tariffs that would have Neftegas enabled the various entities to project’s increased the significantly. cost comply aspect with this of their contract Against the undisputed backdrop, Citi- Furthermore, with Avanti. JSCNI does bank’s cited actions are no evidence that it not complain appeal that similar Citi- knew that structuring Phase III bank fees to which it agreed Phase II unfair, way that it violating were nor did assisted TPS in argue does here that Moreover, facility any duty the Phase II credit that it had to limited JSCNI. issuance of letters of credit the amount pre-closing some fees that Citibank funds, collateral the form of securi- received arose in phases predating Phase ties, fully pro- and instruments —so as III, phases about which JSCNI does not upon tect Citibank issuance of the letters complain, and Citibank could not have re- of credit —was unfair. Finally, leasing contingent ceived fees upon Phase joint-venture structures that Citibank Ill’s success because the deal failed. Fi- established in Phase III allowed JSCNI nally, complaint JSCNI makes no VAT, tax, heavy and TPS to avoid excise requirement from Phase II that issuance import tariffs. fully by high- of letters of credit be backed (cash, securities, quality collateral in- jury’s

No one contests the finding struments), very a term Citibank was not similar to the full- agent and thus did not fiduciary duty directly requirement breach a cash-collateral of Phase III show, then, it. What JSCNI had to about which complain. JSCNI does 420 in persons or entities involved or more

C. Conclusion performed have conspiracy must not err court did that the trial We hold further the some act or acts to con- claim on rendering in JNOV JSCNI’s spiracy. in TPS’s knowingly participated Citibank affirmative. jury The answered in the overrule fiduciary duty. We of breach one. issue jury’s on the moved for JNOV 19, Jury Question arguing to No. answer Conspiracy Civil was of of the that there no evidence two, asserts that issue In its elements. jury’s disregarding

trial court erred The Law B. a part of civil finding that Citibank was “ evi- sufficient conspiracy legally because is a deriva conspiracy ‘Civil Spe- claim. support of this dence exists premised underlying action on an tive contends that Citibank cifically, JSCNI Assocs., Gary E. & tort.’” Patterson P.C. (1) matters: with TPS on two conspired Holub, 180, (Tex.App. 264 204 v. S.W.3d $550,000 security deposit to acquiring denied) (cit 2008, pet. Houston [1st Dist.] (2) “procuring their own uses and divert to Houston, v. Title ing Gonzales Am. Co. of con- fees and while payment expenses of 588, (Tex.App.-Houston 104 594 S.W.3d information from cealing important denied)). 2003, “The re pet. [1st Dist.] to a transac- in order structure [JSCNI] conspiracy elements a civil are quired of risk-free, extremely but tion that [was] (2) (1) object an two or more to persons; TPS,” ie., they lucrative, for Citibank and (3) meeting accomplished; a unfairly at structured the transaction action; on the or course object minds Phase III. (4) unlawful, acts; one or more overt damages as result.” Id. A proximate Verdict, Charge, Motion A.The “ conspiracy requires specific ‘civil intent’ jury as fol- charged The trial court pur ‘to an unlawful agree accomplish lows: purpose by or to a lawful pose accomplish ” Question you “yes” If answered No. Airington, unlawful means.’ v. 936 Juhl 10,29 Question No. then answer (Tex.1996)

1 or (quoting Tri S.W.2d Otherwise, Question.' do not following Communications, Riley, Inc. v. plex following Question. (Tex.1995)). answer S.W.2d

QUESTION NO. 19 Acquisition and Use of the C. part conspiracy of a Was Citibank $550,000Security Deposit that damaged with TPS [JSCNI]? of a same evidence discussed part conspiracy, To be of, respect theory with the fraud knowledge must had above and TPS have to, misrepresentations on and intended common based Kermath’s agreed $550,000’s supports that re- use the elements of objective or course of action conspiracy. example, One a civil For both TPS damages ‍​​‌‌​​‌​​‌‌‌​​​‌​​‌​‌​‌‌​​​‌‌​​‌​​‌‌‌‌​​​‌‌​​​​‌‍to [JSCNI]. sulted Question parties questions, although commit- do address in Jury No. 1 asked if TPS Question challenge Jury one of the means of against No. whether ted fraud JSCNI. duty committing fiduciary duty fiduciary on breach if TPS breached its asked (unfairness jury "yes” to which the instructed both JSCNI. The answered transaction) challenges supported the evi- questions. predicate No one predicate dence. appeal jury’s answers to those represented and Kermath before the E. Conclusion $550,000 paid security it was a We hold that the trial court erred in jury rationally and the could have deposit, granting on the jury’s JNOV answer to believed that meant that it would be this Jury Question No. only but to the security deposit treated as other un- extent of fraud liability based on the der the Phase III contracts. Internal Citi- $550,000 security deposit. We hold that support bank documents an inference that the trial court did not err in granting Kermath intended to in use these funds jury’s JNOV on the Jury Ques- answer to ways other than this and that he had dis- tion No. 19 to the extent that it was based payment cussed the legal fees on TPS’s breach fiduciary duty. We with TPS. The use of the funds benefitted sustain in part in part overrule representatives both TPS and its and Citi- JSCNI’s issue two. Furthermore, major bank and its client. the funds’ use was not in accordance with Exemplary Damages the Phase III contract’s terms for use of security three, deposits. Against backdrop, In issue JSCNI contends that the the jury rationally could have viewed trial court rendering erred in JNOV on the accusing jury’s TPS’s and Citibank’s the other of finding exemplary damages having against decided instructed how the funds Citibank.

would be used as par- evidence that both ways

ties had in conspired use the funds A. The Law both, only point beneficial to them Section 41.003 of the Texas Civil Prac- finger at the party other when the deal fell tice and Remedies Code allows for the is, evidence, through. That from this exemplary damages award of if the claim- rational could have discerned a meet- proves by ant convincing clear and evi- ing of the minds between Citibank and that the harm respect dence with to which ways TPS to obtain the for use in from, recovery he seeks among resulted their contrary representations and con- things, other fraud. Tex. Civ. Prac. & Rem. trary terms, to the Phase III contracts’ 41.003(a)(1) (Vernon 2008). § Ann. Code i.e., use, to harm JSCNI the funds’ so “ convincing’ ‘Clear and means the meas- they would be reimbursed with degree proof produce ure or that will money expenses that were not the mind of the trier a firm of fact belief or then allowed. conviction allegations as to the truth of the 41.001(2) sought § to be established.” Id. D. The Structure of the Transaction at (Vernon 2008). Phase III conducting legal-sufficien In very relies on the same cy jury finding review of a made on clear in support theory evidence of this of con evidence, convincing employ we an spiracy support knowing- as did of its elevated standard of review: claim. participation already We have held review, that that support legal sufficiency evidence is insufficient to In a a court knowing participation claim for in TPS’s should look at all the in the fiduciary duty. breach of For the light finding same most favorable to the discussion, reasons stated we determine whether a reasonable trier of hold that the trial court properly rendered fact could have formed a firm belief or judgment theory on this of civil conspiracy. finding conviction that its was true....

422 sufficiency review must consider all the

If, conducting legal its sufficien- after (not evidence, favoring just record a court evidence that the ver- cy review dict) no reasonable factfinder ... punitive that in cases of reviewing determines firm belief conviction cases, form a or again, could damages. In such evidence that must is proven the matter that contrary be disregard- to a verdict cannot true, court must that then that conclude ed.”) (emphasis original). legally is insufficient.

the evidence Verdict, Charge, Garza, B. The Motions Bell Tel. Co. v. 164 Southwеstern (Tex.2004) 607, In re (quoting 627 S.W.3d jury charged: The (Tex.2002)) (con- 256, J.F.C., 266 96 S.W.3d you “yes” Question If No. answered jury of sidering legal-sufficiency review 5,[30] Question. following then answer upon malice made clear and finding of the following do not answer Otherwise evidence). “This intermediate convincing Question. the preponderance falls between standard NO. 6 QUESTION the rea- proceedings of civil standard money, any, of if if pro- paid sonable doubt standard criminal What sum of cash, ceedings.” Citizens Nat’l Bank v. Allen now in assessed against should be Invs., 459, (Tex.App.- Rae 142 S.W.3d Citibank and awarded to [JSCNI] 2004, pet.). Fort no Worth if exemplary damages, any, the con- “ Question response duct found [sic] appropriate deference to the give ‘To No. 5? conclusions and role of a factfinder’s review, conducting legal sufficiency a court You that “exemplary are instructed light evidence in most looking at the damages” you means an amount judgment means that a favorable to your as a may penal- discretion award must assume the fact- reviewing court ty by way punishment. of disputed favor of finder facts in resolved if a reasonable factfinder could finding jury million in response awarded $2.25 J.O.A., 336, do so.’” In re 283 S.W.3d question. to this (Tex.2009) J.F.C., (quoting In re 96 S.W.3d “ entry judgment of JSCNI moved for 266). corollary to this requirement at ‘A award, exemplary-damage seeking

is that a court should all evi- disregard amount of actual fraud could dence that a reasonable factfinder —twice damages against awarded Citibank —so as found have disbelieved or to have been “ ” statutory cap. comply with the See Tex. Id. ‘This does mean that incredible.’ not 41.008(b)(1) § & Rem.Code disregard all Prac. Ann. court must Civ. ” (Vernon 2008). moved JNOV support finding.’ not Id. “Disre- does Jury Ques- on the to both jury’s answers sup- facts garding undisputed that do tion Nos. on the basis that there 5 and 6 port finding analysis could skew the or, alternatively, no fraud evidence of convincing whether there is clear and evi- Id.; Keller, fraud did not meet the City evidence of dence.” see also (“[W]e proof. clear-and-convincing have burden of legal S.W.3d at 817 held that Question allegations Jury jury sought if to be established.” Jury No. 5 asked the found Question convincing predicated on an affirma- evidence that No. 5 was clear and Question 2, Jury No. which resulted from "Clear tive answer to harm to JSCNI fraud. against fraud convincing if had committеd evidence” was defined as "the asked Citibank "yes” proof degree produces JSCNI. The answered both measure or predicate questions. these firm belief or conviction of the truth of granted trial court Citibank’s JNOV mo- *10 (Tex.App.-Houston Apr. [1st Dist.] jury’s tion on the exemplary award of pet.) no (memo.op.) (upholding clear damages. and convincing evidence of fraudulent in- tent not perform in future when defen- C. Discussion dant repeatedly promised repay plain- tiff, wrote checks for which already We have in funds were discussed insufficient, moved funds among detail the evidence accounts supporting jury’s to ensure insufficient funding checks, for finding of fraud under the theory did not use line of $550,000’s pay credit to misrepresented Citibank checks use despite having done so parties with other security deposit, as a concluding that there past, changed and trial testimony when was some evidence more than a scintilla to inconsistencies); confronted with Citizens support theory this of fraud.31 This hold Bank, Nat’l 142 S.W.3d at 483 (upholding ing pursuant was made to the review stan finding of clear and convincing evidence of for findings proved by dard a preponder fraudulent nondisclosures based on much evidence, ance of the under which standard more evidence); extensive circumstantial “any evidence that not merely does create Fauber, Gibson v. 12-02-00249-CV, No. surmise or suspicion can be used to show 2002560, 2004 WL at *9-10 (Tex.App.-Ty- something likely is more than not.” 8, denied) 2004, ler Sept. pet. (memo.op.) Garza, 164 S.W.3d at 621. “But when (same, regarding fraudulent intent to in- proof allegation of an must be clear and plaintiff duce payment). into convincing, even evidence that does more than raise suspicion surmise and will not We hold that the trial court properly suffice unless it is capable producing of a granted Citibank’s motion JNOV on the firm belief or conviction that the allegation jury’s exemplary damages finding. We is, is true.” Id. “Evidence of lesser quality thus overrule JSCNI’s issue three. effect, in legal no evidence.” Id. To be Liability Joint and Several for Interest exemplary entitled to damages, JSCNI had the burden of showing by clear and ^[38] On rehearing, argues that, convincing evidence among other when we modified the judgment to incor- things, Kermath intended to defraud porate the jury’s civil conspiracy finding, JSCNI at the that he time solicited the we should have made jointly security as a deposit. Although severally liable both for damages the fraud (which did) circumstantial evidence against viewed awarded we light most favorable to JSCNI that we pre-judgment interest awarded (which discussed above constitutes more than a against TPS on damages those we not). of scintilla evidence that Kermath intended did Although JSCNI did not ex- to defraud repre JSCNI at the time of his pressly mention in opening its brief that it sentations, simply is not capable pro sought joint liability and several on this ducing a firm belief or interest, conviction of that pre-judgment we conclude that Compare, Matrut, intent. e.g., v. request such a implicit in its challenge Mustafa 01-08-00985-CV, 1492419, No. 2010 WL at to reverse the JNOV rendered on its con- already (2) 31. We have also August sustained Citibank’s closing that Citi- legal-sufficiency challenges to the other fraud bank failed to disclose material information theories appeal— on which JSCNI relies on representations misleading that made earlier falsely that Kermath stated that the trans- or untrue. These fraud theories thus cannot complete negotiation action was after support exemplary damages. the award of security deposit scheduled amounts of at Finally, argues rehearing v. Marathon also claim. See Sterner spiracy (Tex.1989) Co., judg- 767 S.W.2d modify Oil we further should appel- (instructing liberal construction joint expressly ment recite fair, just, in order to obtain challenges late liability post-judgment and several litigants’ adjudication of equitable deny interest for TPS is liable. We which Tex.R.App. 38.1(f), P. 38.9. see rights); also trial court request this because the to make modify judgment thus We very post- adopted judgment its liable for jointly severally judgment-interest provision that JSCNI award. one pre-judgment-interest entry proposed, and that motion for on which two of the cases distinguish We not ex- judgment requested, which did pre argue to that JSCNI’s Citibank relies liability interest pressly recite that for this requests too late judgment interest comes joint would be and several. because, them, in interest pre-judgment in the court. See was not trial requested Conclusion Luna, Pac. v. 730 S.W.2d Transp. S. Co. court holding Based on our that the trial 1987) 36, (pre (Tex.App.-Corpus 40 Christi in find- granting jury’s erred JNOV on the re requested not until judgment interest conspired that with TPS to ing Citibank Court), Supreme from rev’d mand Texas $550,000 security of its defraud JSCNI (Tex. grounds, 724 S.W.2d 383 on other judg- we the deposit, modify trial court’s 1987); Lighting Pow. Co. v. Houston & that, jury provide ment to based on that (Tex. 761, Reynolds, 712 S.W.2d 773-74 severally finding, jointly 1986) (op. on App.-Houston Dist.] [1st (1) with the actual liable TPS for reh’g) (pre-judgment request interest not TPS’s damages against awarded TPS for rehearing on rev’d appeal), ed until on (2) $244,744.50 prejudg- fraud and the (Tex.1988). grounds, other 765 S.W.2d 784 against ment awarded TPS on the interest contrast, In asked the trial court to JSCNI damages. judg- those fraud We affirm judg this award interest motion for ment as so modified. ment, only and the reason that the trial that it ren request court denied the SHARP, to dissenting. Justice Dissent only finding that could dered JNOV on follow. (civil supported conspiracy). have We Washington v. distinguish also Walker SHARP, Justice, dissenting. JIM County relies and in which Citibank —on join opinion I for panel’s except this held could party which Court not- portions affirming judgment those request the denial of a for challenge (“JNOV”) verdict on withstanding the rehearing— first prejudgment interest (1) request exemplary for dam- already we because have construed JSCNI ages and claims based on the unfair implicitly to have raised this issue its III, specifically, those structure of Phase 493, opening brief. See 708 S.W.2d conspiracy knowing participation 1986, (Tex.App.-Houston writ [1st Dist.] fiduciary duty. the extent in breach To n.r.e.). Moreover, failed ref'd Walker upon judgment Court’s is based in pre-judgment brief his entitlement opinion, respectfully I portions these instance, here, terest the first whereas dissent. challenge concerning JSCNI briefed its conspiracy, had as natural conse which Exemplary Damages A. quence joint liability several both for dis- interest, majority opinion thoroughly damages which pre-judgment jury’s supporting had cusses requested below. theory ty of fraud under the finding to believe or to disbelieve any witness $550,000 n evaporate just does not because the bur- misrepresented use proof heightened. den of is See In re security deposit showing, as a —evidence J.F.C., (Tex.2002) (not- 96 S.W.3d example, representations Kermath’s that, ing heightened even under standard the funds would be held as review, court disregard should “[A] all security deposit, other his communica- evidence that a reasonable fact-finder rep- tions to others before and after those could have disbelieved or found to have instructing resentations that the funds be incredible.”). been differently, and his used advice that TPS jury’s Neither does the ability to draw to benefit use funds Citibank and its reasonable inferences from the evidence important agree holding client. I with our evaporate. Wilson, See City Keller v. that the cited evidence was some evidence (Tex.2005) (“Even 168 S.W.3d if support theory of fraud under a the evidence undisputed, is it is prov preponderanee-of-the-evidence burden. ince to draw from it whatever wish, they inferences long so as more than majority, But unlike the I would further one possible is and the jury must not hold that this same evidence was also suffi- T.N., simply guess.”); In re 180 S.W.3d cient for a reasonable trier fact to have 376, 2005, 382 (Tex.App.-Amarillo pet.) no a firm formed belief or conviction that (concerning appellate judgment review of including fraud had that Ker- occurred— rendered on clear-and-convincing proof, represen- math intended at the time of his providing, reviewing “The court must re $550,000 tations that at least some of the call that the trier of authority fact has the not be used he would as said. evidence, to weigh the draw reasonable therefrom, inferences and choose between jury simply The could have disbelieved inferences.”). conflicting The evidence Kermath’s and the representatives’ here —whether disputed or not—allows for belief, which by stated was contradicted several reasonable concerning inferences other credible evidence or the Phase III (1) intent, e.g., Kermath’s intent to defraud themselves, contracts that their actions extant at the time of his representations, with comported the Phase III contracts. (3) later, intent to defraud arising reasons, jury For the same could also mistake no intent to defraud at have testimony discredited Kermath’s that jury time. The inference that drew he never advised TPS how to use funds those, here was one of and the evidence the security-deposit or discussed schedules it, circumstantial, underlying albeit August closing.1 jury’s at the 15 abili- sufficient for reasonable trier of fact to example, directly testimony 1. For three con- have believed witnesses their that Kermath testimony represented security tradicted that he did Kermath’s that the was a security-deposit deposit, discuss the at the an internal de- schedules Citibank document Moreover, August closing. jury 15 even if the it and as Kermath indicated scribed reasonably could not have believed these wit- Commitment later reference to the Letter’s testimony agreed placement nesses’ Kermath at the funds' in an Investment Account. August closing security- jury reasonably 15 to the minimum could furthermore have deposit by Abji's Abji's testimony schedule memorialized Au- believed and Karber's because, gust example, Kermath advised them on how to use the letter — $550,000, including delayed ways such a would that the Phase III schedule have collateral allow, build-up re- then for the benefit of under full-cash-collateral contracts did not client, consistently quirement important that Kermath advised and its and discred- Citibank contrary testimony. TPS was needed—the could nonetheless ited Kermath’s on JSCNI’s claims firm belief or conviction JNOV rendered formed a have intent. See Hubicki fraudulent Kermath’s the unfairness of predicated upon were Festina, (Tex.App. v. 156 S.W.3d civil con- Phase Ill’s structure JSCNI: 2005) (under heightened standard -Dallas knowing participation spiracy review, holding that sufficient fiduciary duty. breach of exem finding underlying supported fraud light in the What the evidence viewed finding when damages award plary most favorable to JSCNI showed is that evidence that de on circumstantial based not to at time of perform intended taking fendant TPS were almost no Citibank and testimony plain was that representation: except making the “risk” of not hun- risk — never intended tiff believed that defendant if the dreds of thousands of dollars fees long-standing based on promise fulfill financing deal failed to close—in the Pro- parties, plaintiffs relationship between ject. own words are the best prac of defendant’s business knowledge intent: in its internal docu- evidence of its tices, made defendant and statements ments, admitted that TPS promise), to fulfill rev’d on refusing when the unusual term that negotiated (Tex.2007). grounds, 226 S.W.3d other “prepay[ large part ] JSCNI would in holding court noted As the Hubiclci (i.e., the full-cash- equipment purchase” evidence in that case the circumstantial exactly requirement) collateral because burden, clear-and-convincing met family they, sought “to reduce TPS/Santos virtually always proved intent is fraudulent risk in the transaction.” evidence becausе it sim by circumstantial Id.; proof. to direct susceptible ply is reasons. important This is for three Tours, Inc., Spoljaric v. Percival 708 see First, Manuel Santos was a co-owner of (Tex.1986) (“Since 432, 435 intent S.W.2d TPS, were family and the Santos members susceptible is not to direct to defraud apart clients from this important Citibank invariably proven by must be proof, Second, knew transaction. Citibank that evidence.”). If the circum circumstantial agent Project for the TPS was JSCNI’s sufficed, evidence in Hubiclci then stantial is, obtaining funding, Citibank why produced I fail to see the evidence should have known that TPS had fiducia- here does not. Third, they ry duty to JSCNI. even as reasons, For these I would hold that risk-minimizing structure negotiated this supporting the the same evidence themselves, TPS and knew also sufficient fraud-liability finding was guarantors and its affiliate firm convic- for the to form a belief or all initial up would be the ones putting I that fraud had occurred. would thus tion Project, in since TPS had a hold that the trial court erred collateral for further JNOV motion on the granting Citibank’s negative net worth at the time. damages finding. To the jury’s exemplary produce sup- All that JSCNI had to majority’s judgment extent that the does of its claims was some evidence that port so, dissent. respectfully not do I fair-minded would allow reasonable and Conspiracy Knowing ju- reach the verdict that these people Par- B. Civil Fiduciary ticipation Keller, in Breach of at City did. See 168 S.W.3d rors Duty of Phase Based on Unfairness burden, high and I 827. This is not Ill’s Structure met it. First believe the above evidence foremost, it is some evidence majority’s I further dissent from meeting of the and TPS had a to the extent that it affirms the Citibank judgment minds to establish a structure that shifted LP, Prop- onto BULLSEYE PS III

all of the risk order to erty (or Property important minimize their own their Owners and the client’s) risk, Owners, though Appellant, even TPS was agent. Gary See E. & Patterson v. Assocs., Holub, 180, v. 264 S.W.3d P.C. HARRIS COUNTY APPRAISAL 2008, (Tex.App.-Houston pet. [1st Dist.] DISTRICT, Appellee. denied) (setting out elements of claim for conspiracy). civil It is also is some evi- No. 01-09-01139-CV. dence ‍​​‌‌​​‌​​‌‌‌​​​‌​​‌​‌​‌‌​​​‌‌​​‌​​‌‌‌‌​​​‌‌​​​​‌‍that knowingly helped Texas, Court of Appeals of fiduciary duty to breach its as JSCNI’s (1st Dist.). Houston agent in order to minimize Citibank’s own potentially risks in the lucrative transac- 16, June 2011. Gilchrist, tion. See Kastner v. Jenkens & 3, Rehearing Aug. Overruled P.C., (Tex.App.-Dallas S.W.3d pet.) no (explaining liability for knowing participation breach of anoth- fiduciary duty).

er’s reasons,

For these I would hold that

sufficient supported jury’s

findings that conspired Citibank and TPS

to structure a transaction that was unfair

to JSCNI and that Citibank knowingly

participated in TPS’s breach fiduciary

duty arising from such a structuring. I

would thus further hold that the trial court

erred in granting Citibank’s JNOV motion jury’s

on the Jury affirmative answers to

Questions 18 and 19 and would reach Citi- cross-points.

bank’s relevant To the ex-

tent that the majority judgment on rehear- so,

ing does not I respectfully do dissent. SHARP, dissenting part.

Justice two notes opinion, counsel’s which applied because Neftegas Old would issue to TPS,

Case Details

Case Name: JSC Neftegas-Impex v. Citibank, N.A.

Court Name: Court of Appeals of Texas

Date Published: Feb 10, 2011

Citation: 365 S.W.3d 387

Docket Number: 01-07-00397-CV

Court Abbreviation: Tex. App.