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RWI Construction, Inc. v. Comerica Bank

Court of Appeals of Texas, Fifth District, Dallas

April 12, 2019

RWI CONSTRUCTION, INC., RWI ACQUISITION, LLC, LONE STAR OPPORTUNITIES FUND V. LP, and RWI CONSTRUCTION HOLDINGS, LLC, Appellants
v.
COMERICA BANK, Appellee v.

          On Appeal from the 134th Judicial District Court, Dallas County, Texas Trial Court Cause No. DC-18-01217

          Before Justices Brown, Schenck, and Pedersen, III

          OPINION

          SCHENCK, JUSTICE

         In this interlocutory appeal, we must determine whether the trial court erred in granting appellee Comerica Bank's request for a temporary injunction. In a single issue, appellants Lone Star Opportunities Fund V. LP ("Lone Star"), RWI Construction, Inc. ("RWI Construction"), RWI Acquisition, LLC ("RWI Acquisition"), and RWI Construction Holdings, LLC ("RWI Holdings") claim the trial court abused its discretion in entering the injunction because Comerica Bank did not establish that it would suffer an irreparable injury for which the remedy at law would be inadequate. We reverse in part and affirm in part the trial court's temporary injunction order. We remand the case to the trial court for entry of a temporary injunction in accordance with this opinion.

         FACTUAL AND PROCEDURAL BACKGROUND

         Lone Star is a private equity fund that acquires, holds, and sells other companies like RWI Acquisition. RWI Acquisition in turn owns RWI Construction. The assets of Lone Star are limited primarily to its investment in the companies in its portfolio and to the subordinated debt the portfolio companies owe to Lone Star. Comerica Bank is a limited partner in Lone Star[1] and has, over the years, extended loans to some of Lone Star's portfolio companies. Lone Star itself has a revolving credit loan with Texas Capital Bank. Comerica Bank is a participant in that loan.

         At issue in this case are a loan Comerica Bank made to RWI Construction and RWI Acquisition in excess of $8 million and the respective guaranties of RWI Holdings[2] and Lone Star.[3]RWI Construction's and RWI Acquisition's accounts receivable, inventory, equipment, fixtures, and other personal property serve as collateral for the loan. It is undisputed that RWI Construction and RWI Acquisition failed to pay their indebtedness to Comerica Bank at maturity and, in May 2017, Comerica Bank demanded payment from appellants on the notes and the guaranties. No payment was made.

         On January 30, 2018, Comerica Bank filed suit against appellants for breach of their agreements and sought injunctive relief enjoining appellants from dissipating certain funds deposited into an account at Texas Capital Bank in response to a capital call issued by Lone Star. Comerica Bank anticipated that Texas Capital Bank would distribute the proceeds of the capital call in excess of the amounts required to fully satisfy its revolving loan ("Excess Proceeds") to Lone Star and asserted that, unless enjoined, Lone Star would dissipate, hide, secrete, or otherwise make the Excess Proceeds unavailable to Comerica Bank. The trial court entered a temporary restraining order enjoining appellants from hiding, secreting, or dissipating the Excess Proceeds.

         On February 13, 2018, the trial court conducted a hearing to determine whether to grant Comerica Bank a temporary injunction. During that hearing, the trial court took judicial notice of the testimony and exhibits from an earlier hearing on appellants' motion to reconsider the temporary restraining order and the parties called various witnesses to testify.

         The record from the temporary injunction hearing includes the testimony of a representative of a valuation firm Comerica Bank hired to value RWI Construction's fleet of trucks, a Vice President in Comerica Bank's special asset group, and the managing partner of Lone Star. The record also includes numerous documents admitted into evidence during the hearing on appellants' motion to dissolve the temporary restraining order and the hearing on the application for temporary injunction.

The evidence presented by Comerica Bank indicated the following:
• The RWI entities have ceased operating and are insolvent.
• The outstanding balance on the loan at issue is approximately $9.4 million.
• RWI Construction's equipment, which is collateral securing the loan, has a forced liquidation value of approximately $2 million.
• The deficiency following the sale of RWI Construction's equipment is estimated to be at least $6 million and potentially more than $7 million.
• In October 2017, RWI Construction received a payment of $800, 000 in settlement of an account receivable owed by Oxy USA WTP LP ("Oxy"). That receivable and its proceeds are collateral for Comerica Bank's loan. Comerica Bank demanded that RWI Construction turn over that payment. RWI Construction did not turn over that payment to Comerica Bank but instead transferred it to Lone Star. Lone Star, like RWI Construction, has refused to turn over those funds to Comerica Bank.
• Lone Star purchased a receivable from RWI Construction in the amount of $1, 445, 094.32. That receivable secures RWI Construction and RWI Acquisition's debt to Comerica Bank. If collected, those funds would belong to Comerica Bank, and are not an asset available to Lone Star to pay on its guaranty, unless ...

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