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Credit Suisse Ag v. Claymore Holdings, LLC

Court of Appeals of Texas, Fifth District, Dallas

February 20, 2018

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH AND CREDIT SUISSE SECURITIES (USA) LLC, Appellants
v.
CLAYMORE HOLDINGS, LLC, Appellee

         On Appeal from the 134th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-13-07858-G

          Before Justices Lang-Miers, Brown, and Boatright

          MEMORANDUM OPINION

          ELIZABETH LANG-MIERS JUSTICE.

         In this appeal, we determine whether, under New York law, disclaimers in a contract between appellants/cross-appellees Credit Suisse AG, Cayman Islands Branch and Credit Suisse Securities (USA) LLC ("Credit Suisse") and appellee/cross-appellant Claymore Holdings, LLC ("Claymore") relieved Credit Suisse of liability for an allegedly fraudulent real property appraisal. We also consider whether the trial court erred in its award of damages to Claymore in the final judgment. In Claymore's cross-appeal, we consider whether the trial court erred in its award of prejudgment interest or by failing to award damages for unjust enrichment. For the reasons we explain below, we conclude that the trial court did not err in its rulings on these issues. We affirm the trial court's judgment.

         BACKGROUND[1]

         In 2007, Claymore[2] invested $250 million in a refinancing of real property in Las Vegas. Credit Suisse acted as "administrative agent" for the refinancing deal. In that capacity, Credit Suisse procured an appraisal of the property. After a series of tolling agreements between the parties expired, Claymore sued Credit Suisse alleging it manipulated the appraisal to inflate the value of the property, and that Claymore's entire $250 million investment was lost because of Credit Suisse's fraud and breaches of contract. Claymore's fraud claims were submitted to a jury. The jury awarded Claymore $40 million on one of its fraud claims. Claymore's breach of contract claims were tried to the court. The trial court's final judgment awarded Claymore $211, 863, 998.56 in damages, prejudgment interest of $75, 644, 154.22, court costs, and post-judgment interest.

         The contract at issue is an amended and restated credit agreement dated June 22, 2007 ("Credit Agreement"). In the Credit Agreement, the parties refer to Credit Suisse as "Administrative Agent." Claymore is a "Lender." Section 2.3 of the Credit Agreement required Credit Suisse to make the loan proceeds available to the borrowers "[u]pon satisfaction or waiver" of specified "conditions precedent." In its operative petition, Claymore alleged that Credit Suisse breached this provision by failing to satisfy one of the specified conditions precedent, to receive a "Qualified Appraisal" of the property "in a form reasonably acceptable" to Credit Suisse, as required in section 3.1(H)(vi) of the Credit Agreement. "Qualified Appraisal" was defined in section 1.1 of the Credit Agreement:

"Qualified Appraisal" means any real estate appraisal conducted in accordance with the Financial Institutions Reform Recovery and Enforcement Act ("FIRREA"), the Uniform Standards of Professional Appraisal Practice ["USPAP"] (as promulgated by the Appraisal Standards Board of the Appraisal Foundation) and all requirements of Applicable Law applicable to Administrative Agent undertaken by an Appraiser, and providing an assessment of the Appraised Value (Land Only) and the Appraised Value (All Collateral), the form and substance of such appraisal to be reviewed and approved by the Administrative Agent in its reasonable judgment

(Emphasis added).

         At trial, Claymore offered evidence that

• Claymore agreed to participate in the refinancing only if Credit Suisse obtained an as-is market value appraisal of the property that complied with FIRREA;
• The appraisal Credit Suisse received did not include an as-is market value appraisal of the property that complied with FIRREA, and therefore was not a "Qualified Appraisal";
• Credit Suisse knew the appraisal was not a "Qualified Appraisal, " because Credit Suisse and the appraiser CBRE, Inc. manipulated the valuation of the property before the appraisal was finalized and provided to Claymore;
• Prior to the execution of the Credit Agreement, Credit Suisse represented to Claymore that the appraised "FIRREA value" of the property, based on CBRE's appraisal, was $891 million; and
• An appraisal that complied with FIRREA would have revealed the as-is market value of the property to be less than $540 million, the total amount of the loan.

         Credit Suisse, in turn, relied on the Credit Agreement's extensive disclaimers and exculpatory provisions. Section 8.3 provided:

The Agents shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. . . . The Agents shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements, or other terms or conditions set forth herein or therein or the occurrence of any Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Section 3 or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Agents.

         Section 8.8 provided:

Each Lender acknowledges that it has, independently and without reliance upon any Agent . . . and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the [sic] any Agent . . . and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

         Additionally, section 8.4 of the Credit Agreement provided that Credit Suisse would not incur liability for relying on any "certificate . . . believed by it in good faith to be genuine."

         Relevant to Claymore's fraud claims, Claymore agreed in a separate "Assignment and Assumption Agreement" ("A&A"), under which the actual loans were made, that it had "received a copy of the Credit Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and to purchase the Assigned Interest on the basis of which it has made such analysis and decision . . . ." Claymore also agreed that "it will, independently and without reliance on Administrative Agent . . . and based on such documents and information as it shall deem appropriate at that time, continue to make its own credit decisions in taking or not taking action under the Credit Documents . . . ."

         The trial court concluded that neither section 8.3 nor section 8.8 of the Credit Agreement relieved Credit Suisse of liability for breach of contract or fraud. In its detailed findings and conclusions, the trial court explained that the Credit Agreement's express requirement that Credit Suisse review and approve a Qualified Appraisal was an exception to the exculpatory provisions in section 8.3. Conclusion of Law ("C.L.") 24 (Credit Suisse had express duties regarding Qualified Appraisal in sections 2.3, 3.1, and 8.3 of Credit Agreement that fell within section 8.3's exception for duties or obligations "expressly set forth herein"). The trial court also concluded that section 8.8 "does not expressly disclaim the conduct that Credit Suisse has been proved to have engaged in here." C.L. 25. Although the trial court did not make an express conclusion regarding section 8.4, its findings of fact that Credit Suisse knew of the errors in the appraisal would support a conclusion that Credit Suisse did not "believe . . . in good faith" that the appraisal was "genuine."

         Each party now appeals the trial court's judgment.

         Discussion

         I. Standards of review

         The Credit Agreement provides, and the parties agree, that New York law applies to their substantive claims. Procedural issues, however, are governed by Texas law. McAfee, Inc. v. Agilysys, Inc., 316 S.W.3d 820, 824 (Tex. App.-Dallas 2010, no pet.) ("In applying a contractual choice-of-law provision, Texas courts apply the substantive law of the choice-of-law provision but apply Texas law to matters of remedy and procedure."). Procedure includes standards of review. Id. We review the trial court's findings of fact and the jury's verdict under the same standards. Fulgham v. Fischer, 349 S.W.3d 153, 157 (Tex. App.-Dallas 2011, no pet.). When an appellant challenges the factual sufficiency of the evidence on an issue, we consider all the evidence supporting and contradicting the finding. Id. The finder of fact is the sole judge of the credibility of the witnesses. Id. We set aside the finding for factual insufficiency only if the finding is so contrary to the evidence as to be clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam).

         A party who challenges the legal sufficiency of the evidence to support an adverse finding on which he did not have the burden of proof at trial must demonstrate that there is no evidence to support the adverse finding. Fulgham, 349 S.W.3d at 157. When reviewing a "no evidence" point, we determine "whether the evidence at trial would enable reasonable and fair-minded people to reach the verdict under review." City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). We credit favorable evidence if reasonable jurors could, and disregard contrary evidence unless reasonable jurors could not. Id. at 827. We sustain a no evidence point only if there is no more than a scintilla of evidence proving the elements of the claim. St. Joseph Hosp. v. Wolff, 94 S.W.3d 513, 520 (Tex. 2002).

         We review a trial court's conclusions of law de novo. Fulgham, 349 S.W.3d at 157. And conclusions of law may not be reversed unless they are erroneous as a matter of law. Id. at 158. The issue of whether a contract imposes a particular duty on a party is most often a legal question we review de novo, although whether a party has failed to perform under the contract is a factual matter that we review under the traditional evidentiary sufficiency standards. Vast Constr., LLC v. CTC Contractors, LLC, 526 S.W.3d 709, 718 (Tex. App.-Houston [14th Dist.] 2017, no pet.). Similarly, under New York law, we construe the trial court's interpretation of the contract de novo. Duane Reade, Inc. v. Cardtronics, LP, 54 A.D.3d 137, 140, 873 N.Y.S.2d 14, 16 (N.Y.App.Div. 2008). And we review a trial court's ruling granting equitable relief for abuse of discretion. Wagner & Brown, Ltd. v. Sheppard, 282 S.W.3d 419, 428-29 (Tex. 2008).

         II. Credit Suisse's Issues

         In its first issue, Credit Suisse challenges the trial court's findings and conclusions that it breached the Credit Agreement. Credit Suisse contends that Claymore's contract claims arise from obligations that were expressly disclaimed in the Credit Agreement. Specifically, Credit Suisse contends that under the Credit Agreement, it had no responsibility for (1) "verifying a professional appraiser's certification" that its appraisal complied with FIRREA, (2) ensuring the substantive accuracy of the appraisal, or (3) verifying that the appraiser independently evaluated the assumptions and limiting conditions supporting the appraisal.

         In its second issue, Credit Suisse contends that Claymore's fraud claims are barred as a matter of law by the Credit Agreement's "clear contractual language disclaiming any reliance" by Claymore on loan documents provided by Credit Suisse. Credit Suisse also argues that the key assumptions underlying the appraisal were disclosed within the appraisal itself, so that Claymore could not have justifiably relied on any representation by Claymore that the appraisal was compliant with FIRREA.

         In its third issue, Credit Suisse challenges the trial court's award of damages. Credit Suisse contends the trial court erred by supplanting the jury's verdict with its own damages calculation. We address the first two issues together.

         A. Contractual disclaimers

         The trial court concluded that the disclaimers in sections 8.3 and 8.8 did not exculpate Credit Suisse from liability in either tort or contract. As we have explained, we review this conclusion de novo. Vast Constr., LLC, 526 S.W.3d at 718, Duane Reade, Inc., 54 A.D.3d at 140, 873 N.Y.S. at 16.

         Contractual disclaimers are enforceable when sophisticated parties agree to them. Bank Brussels Lambert v. Chase Manhattan Bank, N.A., No. 93 Civ. 5298(LMM), 1996 WL 609439, at *5 (S.D.N.Y. Oct. 23, 1996) (mem. & order). But an express disclaimer will not be given effect "'where the facts are peculiarly within the knowledge of the party invoking it.'" Id. (quoting Banque Arabe et Internationale D'Investissement v. Maryland Nat'l Bank, 57 F.3d 146, 155 (2d Cir. 1995)). In Bank Brussels, the court concluded there were issues of fact precluding summary judgment on the plaintiff's fraud and breach of contract causes of action even though the parties' contract included broad disclaimers of reliance. Id. at *5-7. Claymore argues that under Bank Brussels, the broad disclaimers in paragraphs 8.3 and 8.8 of the Credit Agreement do not bar its recovery in either contract or tort.

         1. Contract claims

         "In construing a contract, the document must be read as a whole to determine the parties' purpose and intent, giving a practical interpretation to the language employed so that the parties' reasonable expectations are realized." Snug Harbor Square Venture v. Never Home Laundry, Inc., 252 A.D.2d 520, 521, 675 N.Y.S.2d 365, 366 (N.Y.App.Div. 1998). The parties disagree about the scope and extent of Credit Suisse's duties with respect to the property appraisal required as a condition precedent to Claymore's loan under the Credit Agreement.

         The "Conditions to Effectiveness" in section 3 of the Credit Agreement included a requirement that Credit Suisse "shall have received" a "Qualified Appraisal" on or prior to the Credit Agreement's effective date. A "Qualified Appraisal" would meet the following requirements:

• it was conducted in accordance with FIRREA;
• it was conducted in accordance with USPAP;
• it was conducted in accordance with applicable law;
• it provided an assessment of "Appraised Value (Land Only)" (defined as "As Is with No View Premium Consideration") and "Appraised Value (All Collateral)" (defined as "As Is with Deferred Sale & Premium Consideration");
• it included a breakdown of appraised value among the subject parcels;
• it was "otherwise in a form reasonably acceptable to Credit ...

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