Opinion
No. 05-16-00345-CV
08-15-2017
JOSEPH MIKE FLOWERS, JEFF STOVER, FRANK REVARD, AND RONALD ABNEY, Appellants v. ZBR HOLDINGS, LLC, RIVERINE INVESTMENTS, LLC, AND JOHN ZERWECK, Appellees
On Appeal from the 44th Judicial District Court Dallas County, Texas
Trial Court Cause No. DC-13-11810
MEMORANDUM OPINION
Before Justices Fillmore, Whitehill, and Boatright
Opinion by Justice Whitehill
Appellees sued appellants and other defendants on claims including fraud, negligent misrepresentation, and fraud by nondisclosure. Appellees won summary judgment against appellants on those three claims.
The principal question that determines this appeal is whether appellees conclusively established that appellants did not disclose certain facts to them. More specifically, the question is whether appellees conclusively established that the matters appellants failed to disclose were true. We conclude that on this record appellees successfully carried this burden and consequently affirm.
I. BACKGROUND
A. Factual Allegations
Appellees' petition alleged the following facts: From September 2012 through May 2013, appellees made a series of loans to three companies called CFI, TCFG, and TC Leasing. The loans, which totaled over $1.5 million, were intended to be short-term bridge loans. They were evidenced by promissory notes, the last maturity date of which was May 31, 2013.
Appellants and others induced appellees to make the loans by misrepresenting and concealing facts. For example, appellants continually told appellees that they were on the verge of obtaining millions of dollars of debt and equity financing that would enable the debtors to repay the loans. Appellants also periodically told appellees that if they did not lend more money, the debtor companies would fail and appellees' loans would be lost.
None of the loans were repaid.
B. Procedural History
Appellees sued six companies, six named individuals (including appellants), and 50 "Doe" defendants. Appellees asserted numerous claims, but the ones involved in this appeal are their claims against appellants for fraud, negligent misrepresentation, and fraud by nondisclosure.
Appellees called the last claim "Concealment," but courts usually call this claim fraud by nondisclosure. See, e.g., Horizon Health Corp. v. Acadia Healthcare Co., Inc., No. 15-0819, 2017 WL 2323106, at *3 (Tex. May 26, 2017); Golfis v. Houllion, No. 05-15-00036-CV, 2016 WL 6236842, at *1 (Tex. App.—Dallas Oct. 25, 2016, no pet.) (mem. op.).
Several months after filing suit, appellees filed a motion for partial summary judgment. The motion did not address the first loan, which involved $450,000 in loaned funds, but it did address all the remaining loans, which totaled about $1.15 million in principal. The motion sought summary judgment against appellants on the fraud, negligent misrepresentation, and fraud by nondisclosure claims. Appellees' motion relied primarily on appellee John Zerweck's affidavit and deemed admissions by each appellant.
Appellants filed a summary judgment response, which was supported by an affidavit from each appellant. Aside from the affiants' names, the affidavits were identical.
A suggestion of death was filed to notify the trial court that Zerweck had died and his estate's personal representative would continue to prosecute the case.
Appellees filed a reply brief and objections to appellants' affidavits.
After two hearings, the trial judge signed an order sustaining appellees' objections to appellants' affidavits and an order granting summary judgment against appellants. The court also granted summary judgment for appellees against two of the business entity defendants, but those defendants have not appealed.
Appellees nonsuited their remaining claims, and the trial court signed a final judgment holding appellants jointly and severally liable for over $1.5 million, which represented the lost $1.15 million in principal plus interest and fees. Appellants timely appealed.
II. ISSUES AND ARGUMENTS PRESENTED
Appellants raise four issues:
1. The trial court erred by rendering a final judgment based on the partial summary judgment order against appellants.
2. The trial court erred by rendering partial summary judgment against appellants.
3. The trial court erred by concluding that appellants did not raise genuine issues of material fact as to essential elements of appellees' claims.
4. The trial court erred by sustaining appellees' objections to appellants' affidavits.
Their supporting arguments fall into three categories:
1. The deemed admissions are flawed and do not conclusively establish all elements of appellees' claims.
2. Zerweck's affidavit is flawed and does not conclusively establish reliance on any statements appellants allegedly made.
3. The trial court erred in sustaining appellees' objections to appellants' affidavits, and the erroneously struck evidence raises genuine fact issues on various elements of appellees' claims.
III. STANDARD OF REVIEW
We review a summary judgment de novo. Smith v. Deneve, 285 S.W.3d 904, 909 (Tex. App.—Dallas 2009, no pet.).
When we review a summary judgment for a plaintiff, we determine whether the plaintiff conclusively established every element of its claim. Holmes v. Graham Mortg. Corp., 449 S.W.3d 257, 264 (Tex. App.—Dallas 2014, pet. denied). "A matter is conclusively established if ordinary minds could not differ as to the conclusion to be drawn from the evidence." In re Estate of Hendler, 316 S.W.3d 703, 707 (Tex. App.—Dallas 2010, no pet.). We consider the evidence in the light most favorable to the nonmovant, indulge every reasonable inference for the nonmovant, and resolve any doubts against the movant. Anderton v. Cawley, 378 S.W.3d 38, 46 (Tex. App.—Dallas 2012, no pet.).
We review a trial court's rulings on summary judgment objections for abuse of discretion. Hall v. Douglas, 380 S.W.3d 860, 875 (Tex. App.—Dallas 2012, no pet.).
IV. ANALYSIS
Appellees moved for summary judgment against appellants on three different legal theories: fraud, negligent misrepresentation, and fraud by nondisclosure. Moreover, they contended that they had proved the same damages for each claim: $1,576,080.75. Thus, to win reversal, appellants must show that summary judgment was improper as to all three claims. See Ogg v. Dillard's, Inc., 239 S.W.3d 409, 417 (Tex. App.—Dallas 2007, pet. denied) ("An appellate court must affirm the summary judgment if any one of the movant's theories, which supports the summary judgment, has merit.").
For the following reasons, we conclude that appellants have not shown that the summary judgment on appellees' fraud by nondisclosure claim was erroneous. Accordingly, we need not address appellees' other two claims.
A. Fraud by Nondisclosure's Elements
Fraud by nondisclosure is a subcategory of fraud. Blankinship v. Brown, 399 S.W.3d 303, 308 (Tex. App.—Dallas 2013, pet. denied). Its elements are: "(1) the defendant failed to disclose facts to the plaintiff, (2) the defendant had a duty to disclose those facts, (3) the facts were material, (4) the defendant knew the plaintiff was ignorant of the facts and the plaintiff did not have an equal opportunity to discover the facts, (5) the defendant was deliberately silent when it had a duty to speak, (6) by failing to disclose the facts, the defendant intended to induce the plaintiff to take some action or refrain from acting, (7) the plaintiff relied on the defendant's nondisclosure, and (8) the plaintiff was injured as a result of acting without that knowledge." Id.
B. Did the evidence conclusively prove appellees' fraud by nondisclosure claim?
Only one of appellants' arguments specifically addresses appellees' fraud by nondisclosure claims: appellants contend that appellees did not conclusively prove the truth or the existence of the facts that appellants did not disclose.
Appellants' argument that the trial court erred by sustaining appellees' evidentiary objections also implicitly addresses the fraud by nondisclosure claims to the extent the excluded evidence concerns those claims.
1. What was appellees' evidence that appellants failed to disclose facts?
Zerweck's affidavit says that "Defendants" concealed roughly twenty "material facts" from appellees when the loans were made. These concealed facts included:
• the defendants' actual financial condition;
• the existence of lawsuits and judgments against the defendants;
• that defendants did not own a fleet of heavy equipment; and
• that defendants were in default on other loans from other lenders.
Moreover, each appellant admitted through deemed admissions that as of May 31, 2013, he had not disclosed these and other matters to appellees.
2. Did appellees' evidence conclusively prove that appellants failed to disclose true facts?
Appellants argue that appellees were not entitled to summary judgment on their fraud by nondisclosure claims because appellees produced no evidence that the undisclosed "facts" were actually true.
As an example, appellants point to the deemed admission that they failed to disclose that defendants did not own a fleet of heavy equipment:
Admit that as of May 31, 2013 you did not disclose to any of the Plaintiffs that Defendants did not own a fleet of heavy equipment.
RESPONSE:
Admit/Deny: __________
Appellants argue that this admitted nondisclosure was fraudulent only if defendants in fact did not own a fleet of heavy equipment. According to appellants, however, this admission admits only that those words were not told to appellees without also admitting that they in fact did not own a fleet of heavy equipment. Appellants further assert that, because there is no deemed admission that defendants in fact did not own a fleet of heavy equipment, appellees failed to prove that this "failure to disclose" was fraudulent because they failed to prove that the undisclosed "fact" (that they did not own a fleet of heavy equipment) was true.
Assuming without deciding that this and similar admissions do not themselves admit the truth of the undisclosed "facts," we reject appellants' argument because there is unrebutted evidence that the undisclosed matters were indeed facts. That evidence is found in the Zerweck affidavit's paragraph 209, which reads:
I am informed and believe[] that Defendants actively concealed material facts from Plaintiffs, at or before the time the money was loaned pursuant to the promissory notes described herein, including, without limitation, the following (collectively the "Concealed Facts"):
(a) The actual financial condition of Defendants;
(b) That there were lawsuits filed against Defendants;
(c) That there were judgments against Defendants;
(d) That Defendants were in default under other loans to other individuals and entities, including but not limited to other promissory notes and guaranties;
(e) That Shadek [an individual defendant not a party to this appeal] had a Promissory Note with Maryanne Ingemanson, in the amount of $127,500 that was guaranteed by Shadek and Ron Stover [another defendant not a party to this appeal], that was in default and had not been paid;
(f) That Shadek and Ron Stover were in default as of November 15, 2010 of a loan for $858,140.24 from GC-REOF I, LLC;
(g) That Shadek and Ron Stover were in litigation over the default of a $300,000 Promissory Note issued in 2010;
(h) That Ron Stover was in litigation for default of loans, security agreements, and promissory notes in excess of $1,000,000 made by BETA Capital, LLC, which Shadek and Ron Stover had personally guaranteed;
(i) That Defendants did not own the fleet of heavy equipment represented, and that it was in fact part of the Xtreme Iron bankruptcy estate;
(j) That Defendants did not own the Hickory Creek Real Property at the time it was represented in Oct 2012;
(k) That when Core Iron purchased the Hickory Real Property, it immediately transferred the real property to a third party in a lease back transaction;
(l) That payments were in default on the loan for the Fort Worth Real Property and the property was lost to foreclosure;
(m) That the bankruptcy trustee of Xtreme Iron's bankruptcy estate had claims against TCFG and Ron Stover, including claims of offset against the alleged receivables;
(n) That the bankruptcy trustee of Xtreme Iron had filed an adversary proceeding against TCFG, TC Leasing, Ron Stover, and Jeff Stover in the U.S. Bankruptcy Court for the Northern District of Texas on February 22, 2013, which was amended to add Core Iron, Abney, Flowers, and others on March 25, 2013;(Emphasis added.)
(o) That the transaction with Prophet Equity and New Star was no longer in place or never existed;
(p) That the transaction with John Martin was no longer in place or never existed;
(q) That Defendants did not intend to repay the promissory notes in full;
(r) That Plaintiffs' loans were not collateralized except by the September 21 Security Agreement and the March 7 Security Agreement;
(s) That Defendants did not have multiple sources of collateral to pay the funds back in full . . . .
Appellants did not object to the information and belief language in the trial court and do not complain about it on appeal. Accordingly, we disregard any defect based on this language. See State Bar of Tex. v. Evans, 774 S.W.2d 656, 658 n.5 (Tex. 1989) (per curiam).
A "fact" is "a thing that is indisputably the case" or "the truth about events as opposed to interpretation." Fact, THE NEW OXFORD AMERICAN DICTIONARY (2001); see also Fact, BLACK'S LAW DICTIONARY (10th ed. 2014) ("Something that actually exists; an aspect of reality"); Fact, WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY UNABRIDGED (1981) (defining "fact" as "a thing done" or "something that has actual existence"). Thus, by saying that appellants concealed certain material "facts," Zerweck asserted prima-facially that the undisclosed facts themselves were true. Appellants do not point to any summary judgment evidence that was not struck to controvert Zerweck's affidavit, and they have not attacked Zerweck's affidavit as conclusory. Therefore, appellants' argument that there was no evidence that the omitted facts were true fails.
Accordingly, we reject appellants' argument that appellees failed to prove fraud by nondisclosure's first element, that appellants did not disclose certain facts to appellees, and address whether appellants presented controverting evidence raising a genuine fact issue regarding whether the undisclosed facts were true.
3. Did appellants' evidence raise a genuine fact issue as to the element that they failed to disclose facts to appellees?
Appellants do not argue expressly that their summary judgment evidence raised a genuine fact issue on the element of whether they failed to disclose the subject facts to appellees. But they do argue that the trial court erred by sustaining objections to their summary judgment affidavits. We review this argument to the extent it bears on appellants' premise that appellees failed to conclusively prove that appellants failed to disclose certain facts to appellees, because that is the only fraud by nondisclosure element that appellants challenge on appeal.
These paragraphs in each appellant's affidavit concern whether they failed to disclose facts to appellees:
18. I never concealed any fact from Plaintiffs, material or otherwise.
. . . .
20. I never concealed or misrepresented any facts to or from Plaintiffs to induce Plaintiffs to forbear from exercising their creditor rights against Defendants.
. . . .
34. I did not actively, intentionally, or otherwise conceal any material facts from Plaintiffs, at or before the time any of the Loans were made (either because such facts were not valid at the time or because I did not conceal such facts, or because I had no intention to conceal such facts), including but not limited to the following facts:
1) The actual financial condition of Defendants;
2) That there were lawsuits filed against Defendants;
3) That there were judgments against Defendants[.]
. . . .
46. I have read through the Requests for Admission served on m[e] by the Plaintiffs in this case. To the extent that I have admitted any fact that says that I did not disclose a certain matter (an "Undisclosed Matter"), I deny that [sic] the substance and correctness of the Undisclosed Matter. For example, if an admission is deemed that I did not disclose that the Defendants did not own a fleet of heavy equipment, it is because the Defendants did, in fact, own a fleet of heavy equipment.
Appellees asserted three objections to each of these paragraphs: (i) the paragraph did not raise a genuine issue of material fact, (ii) the affiant lacked personal knowledge, and (iii) the paragraph was conclusory. The trial court sustained the objections.
On appeal, appellants first raise a global argument that appellees' objections failed to describe their grounds with enough specificity. Then they argue about appellees' specific objections. However, they do not address the lack of personal knowledge objection as to any of the above-quoted paragraphs.
"[W]hen an appellee urges several objections to a particular piece of evidence and, on appeal, the appellant complains of its exclusion on only one of those bases, the appellant has waived that issue for appeal because he has not challenged all possible grounds for the trial court's ruling that sustained the objection." Cantu v. Horany, 195 S.W.3d 867, 871 (Tex. App.—Dallas 2006, no pet.). Thus, appellants have forfeited any complaint about the order excluding the above-quoted paragraphs from evidence.
Therefore, we conclude that appellants adduced no evidence to raise a genuine fact issue on the element of whether they failed to disclose facts to appellees.
C. Conclusion
Appellants have not shown that the trial court erred by granting appellees summary judgment on their fraud by nondisclosure claim. We overrule all of appellants' issues to the extent they address that claim. We need not address their other arguments. See TEX. R. APP. P. 47.1.
IV. DISPOSITION
For the foregoing reasons, we affirm the trial court's judgment.
/Bill Whitehill/
BILL WHITEHILL
JUSTICE 160345F.P05
JUDGMENT
On Appeal from the 44th Judicial District Court, Dallas County, Texas
Trial Court Cause No. DC-13-11810.
Opinion delivered by Justice Whitehill. Justices Fillmore and Boatright participating.
In accordance with this Court's opinion of this date, the judgment of the trial court is AFFIRMED.
It is ORDERED that appellees ZBR Holdings, LLC, Riverine Investments, LLC, and John Zerweck recover their costs of this appeal and the full amount of the trial court's judgment from appellants Joseph Mike Flowers, Jeff Stover, Frank Revard, and Ronald Abney and from their cash deposits in lieu of supersedeas bond. After all costs have been paid, the clerk of the district court is directed to release the balance, if any, of the cash deposits to appellees ZBR Holdings, LLC, Riverine Investments, LLC, and John Zerweck. Judgment entered August 15, 2017.