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Mattar v. BBVA Compass Bank, NA

Court of Appeals of Texas, Thirteenth District, Corpus Christi-Edinburg

May 31, 2018


          On appeal from the 103rd District Court of Cameron County, Texas.

          Before Justices Rodriguez, Contreras, and Hinojosa



         This lawsuit concerns a loan issued to George and Virginia L. Eubanks by appellee BBVA Compass Bank, NA ("the Bank").[1] The loan was secured by land associated with the Eubanks family farm in south Texas. Appellants are Virginia's descendants and various entities formed by members of the Eubanks family (collectively, "the Eubanks").[2]

         The Eubanks filed suit against the Bank challenging the family's loan obligations and alleging tortious conduct. Pursuant to a jury verdict, the trial court rendered a take-nothing judgment in favor of the Bank and awarded the Bank attorney's fees. By nine issues, the Eubanks challenge the judgment. We affirm in part and reverse and remand in part.

         I. Background

         The loan that is the subject of this appeal initiated as a short-term loan in December 2004, in the amount of $1, 775, 000. The loan was renewed several times over the years, and Virginia pledged her land as collateral for the renewals. The most recent renewal occurred in 2008, at which time Virginia again executed a deed pledging her land as collateral (together, "the 2008 note"). Virginia passed away in 2008, and her daughter Elayne Mattar began making payments to the Bank.

         After the Bank attempted to foreclose on the family land, the Eubanks filed suit, challenging the validity of the Bank's security interest in the family land. They alleged that the Bank violated its special duty of good faith and fair dealing to Virginia, whom they described as an elderly, vulnerable widow, whose love for her ailing son George was exploited by the Bank. The Eubanks also alleged that the 2008 note: (1) was unconscionable; (2) had already been released; and (3) was executed without authority. The Eubanks' suit was tried before a Cameron County jury in 2016.

         A. The Bank's Witnesses

         1. Tim Gilles

         Tim Gilles testified that he met the Eubanks in 1980, and handled their borrowing as a vice president and later as president of the Bank's predecessor. Gilles testified that Virginia, her husband Jim, and their son George ran a successful farming operation through the family's corporation J&E Eubanks, Inc. Jim handled the decisions concerning planting and harvesting, and Virginia handled crop sales and financing. Virginia held a college degree and was a realtor. According to Gilles, the operation was so profitable that Jim was sometimes able to finance the considerable expenses of running the farm without the Bank's assistance, and the Eubanks-through their family corporation-acquired several hundred acres of land in south Texas. In the event of an occasional crop failure or financial shortfall, the Eubanks would obtain a loan from the Bank, which would be paid off over the course of several seasons. Gilles testified that the Bank viewed the Eubanks as a sound investment, due to their thirty-year record of success.

         According to Gilles, Jim became ill at some point in the 1990's and retired from the farm, leaving George and Virginia in charge. Jim passed away in 2004, at which point Virginia became president of the family's corporation and executor of Jim's estate.

         Gilles testified that between 2003 and 2004, George suffered personally from his father's death, as well as from a costly divorce, a serious car accident, and the failure of two crops. Gilles also testified that Elayne described her brother George as having an alcohol problem.

         Gilles further testified that near the end of 2004, George and Virginia approached him about obtaining a sizeable loan to consolidate the Eubanks' debts and to provide funds for the next year's farming. The Bank was amenable, and it approved the first loan for $1, 775, 000 in December 2004.[3] Gilles testified that the majority of the loan was dedicated to paying George's debts, both business and personal. George and Virginia brought bills, taxes, and debts to the Bank, which the Bank paid with draws from the loan.

         The loan became due in early 2005. It was described as a "bridge loan"-that is, a loan for a short period of time until a longer-term loan could be arranged. George renewed the bridge loan in February 2005 with another short-term bridge loan, and he did so again in April (together, "the bridge loans"). George took personal liability for the bridge loans, and Virginia executed a deed of trust which pledged several hundred acres of her land as collateral for the renewals.

         Finally, a long-term renewal was executed in June 2005, along with a corresponding deed of trust encumbering the Eubanks' collateral (together, "the 2005 note"). Gilles testified that the 2005 note was to be repaid over the course of fifteen years, though it was set to mature and require renewal in 2008 to allow for the adjustment of the interest rate. This time, Virginia pledged additional land in exchange for the 2005 note, amounting to nearly 400 acres in total. Gilles testified that the Bank prepared the necessary documents for the 2005 note, including documents stating that the directors of the family corporation approved the transaction at a board meeting in October 2005.

         Gilles testified that the apparent inconsistency in dates in the 2005 note-which was executed in July 2005, but described a board-approval process that occurred in the future, in October 2005-must have been a typographical error.

         Gilles testified that the Eubanks made payments on the 2005 note in 2006 and 2007. During that time, Virginia sold a portion of her land and used the profit to pay down the debt, as Gilles testified that she had planned. As a result, the 2005 note was on track to be paid off in eight years rather than the fifteen years originally anticipated. Gilles attested that he left the Bank before the 2005 note matured, but before his departure, he recommended that the renewal be approved.

         Gilles explained that when the 2005 note matured, Virginia renewed the 2008 note on her own, taking sole personal liability for the first time, and executed a deed reaffirming that much of her land was encumbered by the 2008 note. The 2008 note had a principal amount of $1, 294, 500, and it obliged Virginia to repay that sum with interest by February 2011. George did not sign the 2008 note, but he did sign the 2008 deed of trust. Virginia passed away in May 2008.

         2. James Roberson

         James Roberson testified as the Bank's representative, and he corroborated much of Gilles's testimony. Roberson stated that from the Bank's perspective, the 2005 loan seemed reasonable in light of the Eubanks' history of success, the strength of their collateral, and the seemingly temporary nature of the farm's problems. He further stated that, given Virginia's financial status and reputation as a prominent realtor, the Bank viewed Virginia as creditworthy rather than vulnerable. Under that perspective, Roberson believed there was no need to warn Virginia against pledging her land.

         B. The Eubanks' Witnesses

         1. The Milams

         Virginia's grandsons Matthew and Mark Milam testified concerning their experience working at the family farm. Matthew began working at the farm in October of 2003, and Mark began in 2004. The Milams testified that when they started, Virginia had no role in managing the farm, but that their uncle George handled many aspects of the family business. However, both Milams soon realized that George had problems with substance abuse. According to the Milams, George's behavior became erratic and aggressive, often disappearing from the farm for days. The Milams attested that the farm's affairs were neglected, and its accounts with vendors went into arrears.

         Matthew stated George was seriously injured in a 2004 car accident, and with George often absent, he began to forge George's signature on payroll checks. Matthew testified that Gilles approved of this practice, and the Bank never returned any of the forged checks.

         Matthew testified that in the fall of 2004, he attended a meeting where Gilles proposed to George and Virginia that they should take out a large loan to pay off and consolidate their outstanding debts, with Virginia committing real estate as collateral. Matthew testified that in December of 2004, he forged George's name on the documents for the first bridge loan. He testified that he did so based on Gilles's instructions and based on his fear that the farm would soon fold without operating capital.

         According to Matthew, George abruptly fired him from his position as office manager in January 2005, and Mark assumed that job. Mark testified that toward the end of 2005, he began to assume greater responsibility over the farm's managerial decisions. Throughout these years, the Milams testified that much of the planting and related labor was run by the farm's foreman Joe Rodriguez.

         Mark explained that in 2006, during a visit to the Bank, he told Gilles of George's worsening condition. Mark explained that George would not show up at the farm for weeks at a time, and Virginia was attempting to get him psychological help for his substance abuse.

         Mark further testified that he updated Gilles on George's condition in 2007. He explained that George was no longer allowed to drive due to the family's fear that George, who was heavily medicated, would get into another collision. Mark also stated that he witnessed George behaving strangely at the Bank's attorney's office when Virginia signed the 2008 note renewal. Nevertheless, he agreed that no one had ever attempted to have George declared incompetent or removed as trustee of the family's trust.

         2. Elayne

         Elayne testified that in 2004, her brother George's declining health and deepening substance abuse impaired his ability to oversee the farm. She testified that after George's car wreck, he moved into Virginia's house, and Virginia took care of him until her death in 2008, at which point Elayne took care of him. According to Elayne, the car wreck limited his mobility and allowed him to visit the farm only occasionally.

         Elayne testified that before her death, Virginia was generally unequipped to oversee the farm herself. She explained that throughout her youth, Virginia had virtually no role in managing the farm; instead, she was a school librarian during her early career and later a realtor, but never a farmer.

         Elayne did not dispute that Virginia was generally healthy and had mental capacity to sign the 2005 and 2008 notes. Instead, Elayne testified that she questioned the wisdom of Virginia's decisions, stating that her mother was mistaken in believing that by helping George with his debt, the farm would resume successful operation. However, she agreed that Virginia had a right to pledge her finances to assist with George's debt.

         3. George

         George offered a similar assessment of Virginia: that she was overly optimistic concerning the farm's prospects, but that she certainly had mental capacity, good health, and self-sufficiency up until her death. He assessed Gilles much differently than the other Eubanks: he testified that he worked with Gilles for twenty years and viewed Gilles as an honest man. George was not aware of the Bank having done anything wrong during the transactions at issue in this lawsuit.

         As to his own situation, George agreed that personal problems-including his injuries and substance abuse-prevented him from managing the farm effectively, which led Virginia and Mark to take a greater role in managing the farm's finances. George testified that he gave Mark authority to sign checks on his ...

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