Southern National Bank of Houston, Houston, Texas v. Crateo, Inc., Formerly Known as Tri Financial Corporation

OF SOUTHERN NATIONAL BANK Texas, HOUSTON, Houston,

Plaintiff-Appellee,

CRATEO, formerly INC., as Tri known Corporation, Financial Defendant- Appellant.

No. 71-1248. Appeals, States Court

United

Fifth Circuit.

March

Rehearing April 19, Denied Dixie, Cogburn, Chris

Edmund L. Tex., Dow, Cogburn Houston, Fried- & Tex., Houston, man, Dixie, Hall, &Wolf defendant-appellant. for Tex., Houston, George Hagle, H. Jones, Andrews, Campbell Kurth, Houston, Tex., plaintiff-appellee. RIVES, AINS- BELL and Before Judges. WORTH, Circuit Judge: AINSWORTH, Circuit (plaintiff-ap- Bank National (defendant-appellant) pellee) and Crateo allegedly con- into enforceable entered upon requiring purchase, tract Crateo to Southern, timely a certain tender negotiable refused note. When fore- purchase, to make that note, alleg- security February closed on the Crateo refused. As a suffering edly liquidated consequence, $200,000 in Southern foreclosed on the damages, hotel, paid Group’s represented the difference off Austin first price lien, $400,000. $600,000 and netted between the contract foreclosure. realized on appeal The issues raised on are: purportedly Additionally, Southern I. Whether the district court erred $43,000 attorneys’ curred fees. some in personal finding jurisdiction in over Asserting diversity jurisdiction, South- “long-arm” Crateo under the Texas ern sued in the United District States statute. Court for the Southern District Texas. II. Whether the district court erred sitting jury, judge, a without in that an enforceable contract $243,000 awarded Southern the entire existed between Southern and Crateo. plus appropriate an of interest. amount III. Whether the district court err- appeals. decision, From that Crateo denying ed in relief Crateo since early 1964, Blakeway, and Ward timely Southern had failed to claim Clark, this none of whom are interest the estate of one of the action, partnership un- formed limited (Mr. Clark) borrowers who had since (Blakeway-Ward der Texas law Enter- died. prises) purpose whose construct was IV. Whether the district court err- in Austin, the Crest Hotel Texas. The denying ed in relief to Crateo since projected project $3,300,- was cost allegedly complied Southern had financing sought Interim provisions with the contractual relat- National Bank. It Southern performance to tender of as a general practice for interim finan- precedent obliga- condition to Crateo’s cier, Southern, and one here followed tion thereunder. negotiate agreement a “take-out” long-term V. Whether the district court or more err- lenders. awarding special damages ed in agreement requires Such an on for attorneys’ completion building pre- fees on accordance original specifications, long- sented. term lender the borrower’s note We find that the district court was from the short-term lender. concluding per correct jurisdiction sonal over Crateo. The rea Blakeway-Ward Enterprises obtained soning support of that conclusion is long-term a commitment from one lend- amply set out in the district court’s er, Group, the Austin amount of in the opinion. Southern Bank National Tri $2,700,000 (de- and another from Crateo Corp., S.D.Tex.1970, Financial 317 F. fendant-appellee) $600,- the amount Supp. 1173, 1191. Group 000. Southern and the ex- Austin effectuating ecuted a contract the take- arrangement The Contract them, out between agreement pre-closed and entered Ward, upon request Mr. Southern’s August per- into on and was permanent commitment for February 4, (exactly formed on financing had, sought Moody, Mr. out closing). months after As vice-president executive and treasurer consideration, Group the Austin receiv- July 1964, Moody Crateo. On ed, purchasing note, after a first telegrams sent letters and to the same completed lien on the hotel. Blakeway effect and Ward com- August 4, 1964, mitting Also on similar lend for 5 agreement years pre-closed purportedly security on the a second lien completed into on entered between hotel. Southern Ward acknowl- Crateo, edged receipt but with to receive a sec- of the commitment taking day, transmitting ond $12,- lien on same in a Southern. When letter performance demanded on 000 commitment fee to A note Crateo. subsequent demands Southern representing executed several those terms was Enterprises, foreclosed the hotel. by Blakeway-Ward as mak- er, payable to Southern. appeal Both at trial and this no contract contended that there was customary would course legal in the between itself sense agreement, loan execute a construction alia, to the follow- owing, inter money re- the construction advance ing allegations: responsibility quired, assume (1) attorneys prepared Upon proper hotel. construction consisting hotel, of a completion tender South- evidencing it had recited specified documents ern of through exhibits, “F,” obligate marked “A” proper six construction would reference; incorporated by $600,000. attached and teo to the note (hereinafter “note- A letter (2) attorneys forwarded Southern’s by agreement”) was drafted exhibits, portion the letter minus reciting copies attorneys “A,” except note, Exhibit Blake- there- were attached such documents way-Ward Enterprises Austin, not to agreement performed to. The to be was Crateo; agreement was within 18 months. Said (3) Kuhlman, Mr. officer of an South- Blakeway Blakeway. forwarded sent ern, by Moody admitted letter it in turn delivered it Ward who signed agreement although one 4, Moody. days August prior A few exhibits, the Construction Loan Moody signed 1964, closing, the date of Agreement (Exhibit “C”), yet had not note-purchase prepared. been and returned it to Ward. Despite allega enumerated above Austin, Texas, closing At the actual tions, judge district concluded August representative of Crateo no Noting contract enforceable existed. appeared. that a contract where unenforceable February negotia 4, 1966, On after any open essential term is left to future note-pur for an tions extension of the negotiations, he concluded that “no es through,1 chase fell agree sential term of the attempted required to tender docu open ment between them been left] [had payment ments to Crateo *." and demanded * * F.Supp. at 317 1180. dis thereon. Counsel for in Texas assuming trict court reasoned that even conferred with counsel for Crateo Moody agreement, never saw of the by phone California in an effort to reach signed he a document which included whereby per a conciliation Crateo would following clause: parties form. The not reach an could examined, has heretofore “[Crateo] accord, day and on that same hereby approves, the form of the per stated tender and demand of its instruments or documents attached by phone. formance tender and Such agrees hereto that de- as exhibits telegrams demand were restated livery to it of said instruments or late afternoon. Crateo re duly form documents such executed note, fused and after by party by required or copy February day 4, 1966, be a of the Exhibit “C” was to was the last agreement. option loan construction Southern could its to com- exercise copy note-pur- pel Exhibit “D” was to be a under the plans specifications agreement. hotel to chase be built. promissory note Exhibit “A” was to be a Exhibit “E” to be the certificate by Blakeway-Ward pay- Enterprises made completion. able to Southern. copy Exhibit “F” to be subordina- Exhibit “B” was to be a tion deed of trust. 692 However, to execute said the defense of mistake

the form thereof satisfy well-recognized ex fact has certain struments or documents shall ceptions. determining any or to its obli- whether condition conditions gations exceptions applicable or relate to doctrine are hereunder which case, delivery present instru- Court is bound execution such this or principles in Erie to enunciated ments documents.” apply general Texas rule law. As authority clause, of that On the jurisdictions, in other mis Texas and party judge that “a who held agreement, take to an where intending signs a to be bound contract other is not induced acts of the obligated fails read [who] grounds party, will not for re constitute g., Thig according terms, see, to its e. In lief. Morris v. Millers Mutual Fire pen Locke, (Tex.1962); v. 363 S.W.2d 247 Co., Tex.Civ.App.1961, surance 343 S.W. Equip. Hoople Shaw Co. v. Jordan Const. 269; Pipe Keystone Supply 2d Co. v. Co., (Tex.Civ.App.— 835 S.W.2d 671; Kleeden, Tex.Civ.App.1927, 299 S.W. writ); Corbin, Dallas A. Tex.Civ.App.1919, Biggs, Price ed), (1960 Contracts §§ ” question S.W. 236. The thus becomes (Footnote omitted.) . . Id. . . ignorance whether Crateo’s mistake at 1180-1181. as to the in the unseen facts disclosed agreement signed On its face the letter attachments “induced” Southern. by Crateo, attachments, even without the ignorance could Crateo’s be said have purports In be a contract. fact been induced the latter Southern if letter contains facts, misrepresented if it acted necessary valid, all the of a en- elements good faith, less than if it had notice or contract, forceable and to the extent dis- ignorance. g., Crateo’s E. 17 Am.Jr. closed therein it should be enforced. 2d, ap The 146. record Contracts § peal support trying liability not that does avoid under guilty misrepre issue, contract Southern was either of at Crateo assert is senting acting or of in other facts defense of mistake of fact. The good Supreme than Texas faith. Court defined the has “ aptly: defense It ‘an is unconscious However, Southern did know that Cra- ignorance forgetfulness of the exist apprised teo not of all had been the at- fact, past ence or nonexistence of a tendant facts. Such notice can be infer- ” present, material to the contract.’ red from failure forward McCarty, Houston & 1901, T. C. R. v.Co. Crateo the attachments here at issue. 298, 302, 429, 431, quot Tex. 60 S.W. Does that notice on the of Southern ing Pomeroy, Equity Jurisprudence § render the contract We unenforceable? attempting bring itself with Although think not. there much case is definition, contends, this for support validity precept that example, that had it known hotel of the contract doubtful where becomes being totally (that financed the bor party a mistake of fact known is investing any money rowers not other, those are not here cases whatsoever) it would not have entered in apposite. stop inquiry One cannot to the “take-out” with South asking whether financing ern. The terms of the ar knowledge ignorance. Other rangements between legal principles come bear. borrowers were disclosed in one of the Although attachments the facts of which Crateo did not which Cra see. knowledge teo that, avers had no could be said be because the docu affixed, ignorant ments were not “material” insofar it as most businessmen concerned, or mistaken as to the would be it cannot said nature of the bor rowers’ involvement and such facts were to the con as to other ma material Ordinarily, says Crateo, Thus, terial tract as a facts. matter of law. the con legal parties tract is without facts are effect. when material it, attention has called to Here, Crateo was after his been them to be. consider legal mistake, con he not in sense.” of documents aware existence McCarty, su- taining important information, it Houston T. C. R. Co. v. pra, 302, 94 Tex. at at 431. those docu S.W. to examine made effort although noted, par Certainly, it can be said where ments. one court As ignorant appear despite of what to be ma- their would enter into a contract ties (but may ignorance facts, terial certain have conscious discussion), light they been in above seems clear that have concluded inquiry Crateo waived all into them even nonexistence of these the existence or though consequence particular its attention had been called to facts is of no missing by language in the or induce exhibits them and would not influence entering into the them to refrain may contract, they whatever turn Finally, with the consonance Magnolia Harley Petroleum be. general principle underlying McCarty, Co., 378 Ill. 37 N.E.2d 760. propo another Texas case stands signing Moody, Hamilton the con sition that to a contract are Crateo, tract on behalf exhibited chargeable knowledge such same attitude of chose indifference. He ordinary diligence exercise would have rely promise on a from Mr. Ward revealed, may and that a contract perform3 rath would not have ground be avoided on of mistake of investigate er than to the substance appears ignorance fact where it applica the contract for himself. carelessness, fact was the result of in bility of the doctrine of mistake limit difference, or inattention. Ebberts v. ed to situations as Carpenter Co., Tex.Civ.App. Production serting ig unconsciously the defense is Certainly, 256 S.W.2d Cra questioned norant or mistaken as to the knowledge teo’s lack of about what Here, fact. Crateo was conscious and now asserts be material facts is at purposeful ignorance. in its Crateo was to its tributable own lack of initiative important on notice of existence of and to own its indifference. owing attachments, agree to the letter sum, In Crateo cannot com now specific missing ment’s reference to the plain ignorant that it of material exhibits, sought and should have going to the essence of its contract Accordingly, their content. even if with Southern. Nor can it excused material, unknown facts were can Crateo ordinary for its failure to exercise dili not be allowed to assert of the defense gence. Simply stated, the defense of mistake. “mistake of fact” is not to available who conducts himself did Crateo. We investigate failure to therefore conclude that the contract here brings point a third to fore. Texas at issue is valid and enforceable. point that, law is clear to the “where contract, ignorant into enters III. Release. meaning fact, of a to waive in all Clark, Wilbur one of the of makers quiry it, investigation note, into August waives died on 1965. His July 2, 1964, Moody presumed In a letter elated Ward stat- On this basis that Cra- Crateo, ed perform. However, to teo not would have to by January 1, 1965, “It Moody’s intention our the district court found that ex- present you pectation having perform to with written evidence of not did not goal accomplished Though that we have our of amount to fraud. Crateo assumed obtaining mortgage probability a first of Three Mil- that there was little of its hav- lion, note, Three Hundred Thousand Dollars it would never- ($3,300,000.00), willing or a second lien to sub- theless have been to do so if the * * * * your note-purchase agreement stitute for commitment. were enforceable Furthermore, any guarantee in event we and if demand were made. you perform respect will not have in your (App. 38). commitment.” occurred, that no On release December Nevada. domicile was opined: period statutory district court 17, 1965, against filing the Nevada es- of claims provi- “In of these contractual view ended, according to Nevada law tate and the sions facts and circumstances any that time is not filed within claim contract, surrounding execution of the Southern nor Neither “forever barred.” persuaded I am that to file the failure against a claim on the note Crateo filed proceedings a claim in the Nevada did statu- estate Clark’s Nevada within term constitute ‘release’ as tory period. agree- used * * ment that Southern’s Crateo contends timely failure file a claim in Nevada F.Supp. “released” Wilbur Clark violation can find no fault in the lower We forbidding provision re- the contractual key point court’s conclusion. The thereby any lease and absolved Crateo way no Southern’s failure act duty perform under pursuing foreclosed es- note-pur- applicable The tate of Clark Wilbur in Nevada. Since chase follows: reads as knowledge Crateo claims no lack agrees further “[Southern] upon death, it was incumbent during the term it of this protect by filing own interests any release will not makers contingent claim Nevada. The nor Note release the lien of the much of the the note- makes fact securing same, except Deed of Trust purchase agreement entitle it to did not to the extent that credits [South- compel to turn the note. over upon its loan The ern] evidenced Nonetheless, Crateo aware Note and made as result either of might upon make demand ' payments received thereon note such a any failure reason to [Southern’s] circumstance, would be forced look $600,000.00 advance full sum satisfy of the note makers Note, upon may operation underlying obligation. law constitute such a release or re- light discussion, of the above leases.” we reach conclusion that Southern’s against The district court found against failure to file a claim Clark’s teo, holding transpir- release had operate did Nevada estate as a “re primary ed. The thrust lease” so as to Crateo of its re relieve court’s view was that Crateo had as sponsibility note-pur on the right much to file a claim Nevada as chase did Southern since both claims were con- being tingent, the note not in default IV. Tender. demise; at the time Clark’s The contain- On the record us before there is no stating ed a clause that Crateo would be presume reason to that Crateo un- obligated to the note at South- aware of Wilbur death. Clark’s Nor “subject request, ern’s to fulfillment of point appeal. does Crateo make that on following precedent conditions on or claim, Had Crateo filed Wilbur prior Closing as Date herein- Clark’s Nevada estate would have been * * after defined The “condi- obligations liable to undertake Clark’s precedent” tions itemized as under ap- note. The district court delivery” “tender or docu- of various propriately noted that the contract be- ments. The further defined tween Crateo and Southern contained a “Closing Date” as provision to the effect that Southern duty pursue specified under no by “that to default- date [Southern] Why, then, request maker. its would Southern [Crateo] required contingent be to file a The Note the date claim? which [Crateo]

695 concerned the strict rent conditions are purchase The obligated to be shall ordinary applicable to an pay of tender rules [Southern], Note from by wayside. precedent fall condition therefor, provided con- [Southern] obliga- are involv- conditions Where concurrent precedent to [Crateo’s] ditions ed, only a readiness “tender theretofore, [means] or have been tion shall * * * be, willingness perform, contemporaneously therewith shall * * so, ability present to do and [with] with *.” performed satisfied party notice the other of such readi- (Emphasis supplied). Williston, The Law of Con- ness.” February Austin, Texas, on At (3d ed.). tracts § closing denominat- date 1966, the actual then, inquiry, The whether seminal is appear. Southern, Crateo failed ed contemplated or the contract concurrent that South- contended At trial Crateo precedent find dis- conditions. We pro- and to it out failure seek ern’s ques- court’s determination pres- trict specified in its documents duce the tion to correct —that the contract en- be ineffec- “tender” made Southern’s ence compassed conditions. Ac- concurrent pur- permitted not tual hy- tually, countered, a concurrent condition is the note. chase precedent. As form of a condition brid by telephone and arguing that tender said: Professor Williston has telegram sufficed. telephone concurrency and tele- “The indicated Whether Southern’s messages satisfy require- phrase condi- graphic ‘concurrent condition or concurrency depends the con- time ment of “tender” tions’ agreed provi- proposed performances given the contractual struction or delivery” prom- promisors, If “tender two mutual sions. concurrency requires precedent,” promisee, law not a “condition isor and performance tender” an “absolute Southern. (cid:127) liability liability persons Failing tender, other. If two such give concurrently, one a Professor Wil- are bound to attached Crateo. never price, fol- and the other the neither tender as book liston defines absolute performance until will be liable lows : has either been made or tendered of- must be an “There unconditional though may But other. tender coupled perform, a mani- fer to conditional, absolute, it need be ability carry offer, fested receiving subject is, concur- production subject and a mat- performance rent from the other side. * * ter the tender *.” obligation party, each there- fore, subject prece- to the condition Williston, The Law Contracts § liability per- (Rev. 1938) (emphasis supplied, dent to thereon of either ed. formance, or omitted). Clearly, absolute or conditional footnote tender, by the other Concurrent “tender” since side. does rise level not then, conditions, do differ documents to be delivered were precedent placed According- presence. conditions the relation in Crateo’s ly, happening point time which of the con- taken would be well duty dition the liability bears to of immediate ma- never performance They on the contract. terialized. are, indeed, prece- mutual conditions However, court, district the dent.” construing issue, the contract at de Williston, The of Contracts 5 Law § delivery” termined that “tender or (3d (footnotes omitted). ed.) 666A precedent, a condition Tex.Civ.App. Miller, duty In Echols v. or de make tender 1920, 48, livery rec duty 218 the Texas courts and the S.W. Crateo’s ognized validity of “mutual condi note were It concurrent conditions. By precedent.” principle tions the terms of well-settled where concur- 696 by contracting parties delivery” forced of “tender

contract itself against performed maintain or to defend an action simultane- could Southern person, recover, by ously a third entitled to payment Crateo. These ishe with time,” party breaching contract, from duties “concurrent were attorneys’ expenses phrase Put other incur Williston. fees and borrow a Corbin, language litigation. simply, red in such in the contract 5 Con establishing only ed.); (1964 tracts concur- 25 Dam can be read 1037 C.J.S. § ages 50e; Vaughan Atkinson, precedent. 4 rent v. § conditions 813, 1961, Cir. on F.2d rev’d other particularly note the lan- One should grounds 369 U.S. 8 L. S.Ct. defining “Closing guage provision in the 888; Ed.2d Chittim Texas Pacific Date.” court found that district Coal Co., & Oil 10 Cir. F.2d clause, prece- “provided the conditions bar, * * * case at we are bound dent have been thereto- shall by apply the Erie doctrine to the sub fore, contemporaneously shall be stantive law the State Texas. performed” be, and therewith satisfied Though yet no Texas court has faced the phrase, modified the shall be “[Crateo] question party litigation * * * third ex obligated pay penses damages as an element log- appears for” the note. That be a case, breach of contract the court below reading ical of the contract. Such an in- noted dispute that “the do not terpretation fact does in establish con- recoverability amounts claimed current conditions. Since Southern by properly if es such are [Southern] ready, willing evinced that it was damages.” F.Supp. tablished as at tender, able make an absolute the law require actually would not do so. Its tender was conditional sufficient Thus, presented issues are three liability. fix Crateo’s respect attorneys’ award fees

in this case: Attorney’s V. Fees. A. Whether a sufficient evidentia- Subsequent the foreclosure of ry basis existed to warrant the dis- Texas, Austin, hotel in several law suits judge’s trict conclusion that both the legal expenses numerous attorneys’ fees incurred in Texas and by curred can Southern. As best be de- those incurred proxi- in Nevada were appeal termined from record on mately breach; caused Crateo’s Kurth, Andrews, Campbell law firm of B. Whether a sufficient eviden- & Jones billed for Southern nine items tiary basis existed to warrant the dis- expense incurred as a result Texas judge’s trict conclusion that no allo- Furthermore, the foreclosure. various charged cation necessary other respect law firms for Southern prosecution against of a the Estate suit giving incidents and suits rise to of Wilbur Clark in Nevada. charged fees An- Although judge’s opinion drews, Kurth, Campbell Jones; & wholly attorneys’ clear, is not fees seem Assuming C. the district court following have been awarded validly could conclude that the suit charged basis: the fees against Estate Wilbur Clark in by Andrews, Kurth, Campbell proximately Nevada was caused Jones, plus $6,143.40 the fees breach, charged whether sufficient various other law evidentiary firms for services rendered in existed to connec- basis warrant against tion with the Nevada suit judge's the district allocation of attor- Estate of Wilbur Clark. neys’ admittedly fees where some the monies billed Southern were general principle may As a be arising in said connection a that where a of with suit breach contract has against Specifically, wholly Crateo. the suit to the trans- of unrelated sought recovery against scrutiny.4 Estate here under Clark’s action deficiency remained after on which the Although on the burden the hotel the foreclosure on Austin damages, g., plaintiff prove e. the recovery ($285,000) on another and Farms, County v. Wa Bildon Inc. Ward unpaid by Clark unrelated note left 2, Improvement No. Tex. ter District any ($320,000). little if testi- There was showing of 415 S.W.2d mony tend to show how to which would proximate not rise to the level cause need attorneys’ $13,041.41in fees the allocate proving defendant’s of breach that Apparently there the trial involved. damage. g., of E. was the sole cause following judge employed the formula: Maxwell, 1910, Co. Houston T. C. R. Yet, Tex.Civ.App. 80, 128 S.W. 160. $16,041.41 * 320,000 285,000 + judice, in there uncon sub case carry troverted which would evidence $6,143.40, awarded the sum Thus, weighty on an even that burden. attorneys’ as fees in this case. record, we conclude examination of the seeking Granted, the one at adequate upon an basis there was torneys’ damage fees as element of $36,- judge trial could award only need introduce evidence best fact, Being question of the de prevail. in order to Bildon obtainable proximate of cause termination Farms, County Inc. v. Ward Water Im not be district court should reversed provement 2, Tex.1967, No. District showing absent a clear error. of Nonetheless, S.W.2d 896-897. regard contrary, To to the support record fails to attorneys’ $6,143.40 award in of fees introduced best evidence curred in connection with respect litigation it could with to the in litigation against the Estate Wilbur testimony concerning Nevada. In-his Nevada, Clark think al- we justified. $36,875 award, one Southern’s attor location An was not award neys way noted most that the accurate two-step requires that amount determining percentage of that analysis. First, it must be shown that sum attributable to each cause of action litigation with the Clark Estate was involved would to look at time be proximately caused breach. attorneys sheets of the involved. Simi Following reasoning the same line of larly that would seem to be the most above, we find that Southern satisfied appropriate allocating method aspect proof. this its burden respect charged litigation fees against Clark’s Nevada Estate. If no However, unlike award with re- time records or if are available the Ne spect $36,875 attorneys’ fees presented only legal vada is suit above, discussed element second is here despite comprised factually sue involved. It was admitted claims, perhaps unrelated then the most $13,041.41 was billed a total in con- method accurate would to allocate litigation against nection with the Clark money on the in basis of the sums Furthermore, Estate in Nevada. it was aspects volved distinct two litiga- admitted that some of that But, testimony suits. no was in such tion was attributable to a cause of ac- reason, question troduced. For that wholly tion unrelated Southern’s claim agreed respect litigation, 4. With “take note which Nevada charged $13,041.41 $320,- over”), Southern was note attor- but also on another neys’ payable litigation fees for Clark and with the made Wilbur Estate against of Wilbur indebtedness had Clark. The suit Southern. The bar, sought recovery at Estate no relation con- to the suit for the deficiency entirely separate fi- Clark’s cerned an and distinct Wilbur note for way transaction, sums involv- borrowed in connection with the nancial funding Austin, (the of the hotel Texas ed Crateo. by duly litigation uments such form executed attorneys’ awarded fees party required by the or against re- estate is Nevada Clark’s form instru- de- thereof execute said proceedings further manded satisfy any or proper alloca- ments documents shall method of termine obliga- condition or conditions to its tion. hereunder which relate

tions affirm plus breach. judgment torneys’ Bank damages interest light that The fees for Southern’s awarding CONCLUSION part $36,875 for from the date of award of the above ($200,000 $6,143.40 in at- attorneys’ discussion, liquidated litigation National court’s fees) we who ^[*] ments the district execution be The rule “On the is ^[*] bound obligated signs or documents.’ * .'"1 binding or authority a contract judge delivery according [who] one to an held that of such instru- fails intending that ‘a clause, terms party read presented is Nevada estate va- he Wilbur Clark’s which is to him but which proper cated, question al- applied not read does has been where attorneys’ $13,041.40 against recovery location of is whom sought part fees billed connection never saw of the so-called litigation principle that remanded for further It is a well-settled by court. consideration the district that a contract is unenforceable where material terms are omitted. omis- The part part Affirmed in and in vacated alleged my cured, sions here be cannot and remanded. opinion, general reference to the as- says merely surance which that Crateo RIVES, Judge (dissenting): Circuit * * * “examined has the instruments Regretfully myself I find unable to or documents attached hereto as exhibits First, persuaded concur. I am not that * * (Emphasis supplied.) an enforceable contract existed between short, such a statement not run does Southern and Crateo to the extent that which exhibits were neither nor in then obligated perform Crateo was where appropriately future attached totally Second, the hotel was financed. made known to Crateo. Southern could obligated even if Crateo was rely upon representation such a when circumstances, in such there has been no it knew that Crateo had not seen showing Southern, though willing, that crucial attachments. required was able to tender docu- Nonetheless, majority willing February 4, ments 1966. theory enforce the contract aon that 1. The Contract. materiality Crateo waived the of know- majority reasoning follows the totally the hotel was financed. correctly the district court agree failing I inquire, states as follows: signifi- teo to some extent waived the “The district court reasoned even missing cance of the facts. Ebberts Cf. assuming Moody never saw Carpenter Co., Production Tex.Civ. agreement, signed a document he App.1953, 601; 256 S.W.2d Houston & following which included the clause: T. C. R. McCarty, Co. v. 94 Tex. “ agreed examined, heretofore S.W. has ‘[Crateo] hereby bound approves, all included the form of terms instruments attached documents agreement, agrees Moody actually de- did hereto as exhibits see, and in livery effect to it doe- to be bound of said instruments or upon meaning this case turns the true is “ob Note under rule Crateo ligated according terms,” those terms. to its is the signed I terms of the think that contract. acquiring land. missing the to cost attach- related the of disclosed the facts short, to failed they not In the letter did extent ments to the agree- project “total- portion was to be vary that the of the disclose ly from the letter determining were financed”—that the borrowers In which facts ment. investing capital. of, A reasonable man knowledge be- it therefore teo waived reading phrase, Loan carefully peruse the “Construction important the to comes language provi- Agreement,” along Moody other with the saw the letter which of suspect missing letter would not signed. ex- sions of the Each the and of to of loan in issue was cursorily let- the in the described hibits was expenses cap- and the commit- cover the land portion the ter of precise waived knowl- important ment fees. Crateo tion. The exhibits edge specifics of the “Construc- Trust,” and the “Deed of certain “Plans Agreement” hotel, not to such tion Loan but Specifications” proposed for the agreement might Agreement.” an extent Loan a “Construction and description in the letter. its transcend failing particu- By inquire to the to as did not establish silent Crateo’s waiver documents Crateo of each of those lars agreement whereby acceptance of contents, knowledge its waived nothing to contribute and borrowers were essence, only to a limited extent. loan the so-called construction was by any Crateo became bound the costs of construction cover which disclosed each document terms but also the cost of the land and position in Crateo’s a reasonable man ($33,- $72,000 in fees some commitment scope anticipate within the could in- 000 to itself to secure in the letter. as described exhibit financing per- plus $39,000 terim example, to ac- For was bound manent lenders secure the take-out reasonably cept building pur- any agreements). ported “hotel.” Whether be a completed every hotel conformed with Crateo had reason believe that Specifications” set “Plans it would obtain a second lien both on a hotel, was waived Crateo. Sim- the construction exhibit costs of which knowledge ilarly, piece $3,300,000, waived amounted to and on a precise although value, of Trust.” of the “Deed of land of some the ac- terms value of the land was unknown tual However, of the “Construc- the terms Crateo, and Crateo lack waived of such Agreement” tion Loan require, are crucial knowledge by its failure to make finding think, I on the facts reality quiry. Crateo received sec- Moody’s to in- this case that failure costing building $2,628,000 ond lien on a quire particulars into not bind did parcel costing $600,000. land accept Crateo to the terms of that ex- portion duty note- It was to inform Cra- hibit. The purchase agreement Southern’s Moody signed Agree- teo that the “Construction Loan any encompassed not in un- did manner disclose ment” a loan for some- Agreement,” thing der the “Construction Loan other than that which would be money merely implied by meaning plain Southern would lend of its title pay building the cost hotel but construed in connection with all purchase price also to cover the terms of the letter contract. Admitted- ly, prepare did land some commitment a document actually project per- which fees for the interim and the disclosed both financing. totally contrary, However, at financed. manent To signed by “C,” saw least one of the letter never the document. Exhibit Agreement,” Moody land costs “Construction Loan would indicate that and, (2) Blakeway assume, contemplated. sent to we were not In section expectation Blakeway (e) particularized letter, through expenses would channel it nature of construction Ward to Crateo. Blakeway expenses Neither nor be incurred. Ward was an None those delivery agent ei- remand such that the case to the district court for of Crateo delivery ability ther of them was tantamount as to Southern’s necessary prior should make the Crateo.2 bear tender Thus Southern expiration Only consequences failure ac- of Crateo’s contract. if such ability tually Loan existed could the contract en- to see the “Construction Agreement.” representa- forced. At trial two time tives of prior testified at no summary, some contract while ex- expiration of the note- Crateo, isted between Southern and purchase agreement had Crateo received reasonably contract, terms of that con- copy Agree- of the “Construction Loan strued in accordance all of the then testimony ment.” unchal- That went existing circumstances, obligate did not

lenged. purchase Crateo to note. the $600,000,, judgment If correct, that is should be sum, though extent some judg- reversed with directions enter knowledge specific terms waived ment for Crateo. obli- If contract missing attachments, that waiver gated $600,000 Crateo to encompass did not the terms “Con- note, then the case should be remanded actually Agreement” Loan struction ability for a as to Southern’s drafted Southern. Since necessary make tender before the apprise failed to the hotel expired. contract being totally since this funded and obviously risk fact was material to the respectfully I dissent. agreeing to ac- assumed cept Crateo in mortgage security, Cra- a second obligate pur- it to

teo’s did not contract

chase note.

2. Tender. agree reasoning

I with the of the ma-

jority required that if contract $600,000 note, ten-

teo’s Dudley In the Matter of Richard MITCH- delivery specified der and docu- Ruby Donelson, ELL and Della d/b/a not a condition ments precedent. Southern was Marby’s Style Partnership, Shop, a contract embodied Since the Bankrupts-Appellees, concurrent rather than a conditions strict precedent, condition was obli- SHEPHERD MALL STATE BANK and gated ready, to show it was Administration, Small Business willing and able to make tender. South- Respondents-Appellant. messages telephone telegraphic ern’s No. 71-1342. day to Crateo on the last the con- Appeals, United States Court of February 4, 1966, term, tract’s evinced Tenth Circuit. willingness necessary to make the April 14, 1972. my opinion, tender, not, but there ability proof sufficient of Southern’s

make the actual tender before the end day.

of that Thus, accept if even I could ma-

jority’s valid, view that a enforceable obligating pur-

contract existed Crateo to $600,000 note,

chase I would vote to Blakeway, agent. 2. The district if court stated Ward was not Crateo’s Rath- agent er, they independent parties— was the of either Southern or Cra- third teo, agent lie was an It Crateo. seems mere conduits. Ward, clear and for that matter

Case Details

Case Name: Southern National Bank of Houston, Houston, Texas v. Crateo, Inc., Formerly Known as Tri Financial Corporation

Court Name: Court of Appeals for the Fifth Circuit

Date Published: Apr 19, 1972

Citation: 458 F.2d 688

Docket Number: 71-1248

Court Abbreviation: 5th Cir.