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Anarkali Enterprises, Inc. v. BP Chaney LLC

United States District Court, N.D. Texas, Fort Worth Division

October 25, 2019

ANARKALI ENTERPRISES, INC., Appellant/Cross Appellee,
v.
BP CHANEY, LLC, Appellee/Cross Appellant.

          MEMORANDUM OPINION AND ORDER

          MARK T. PITTMAN UNITED STATES DISTRICT JUDGE

         This is an appeal and cross appeal from an adversary proceeding, originally brought in a Chapter 11 bankruptcy case.[1] See BP Chaney, LLC v. Anarkali Enterprises, Inc., Adv. No. 17-04062-mxm (Bankr. N.D. Tex.).[2] Before the Court is Appellant/Cross Appellee Anarkali Enterprises, Inc.'s (“Anarkali”) Brief (ECF No. 5), Appellee/Cross Appellant BP Chaney, LLC's Brief (ECF No. 19), Anarkali's Reply (ECF No. 24), and the Chapter 7 Trustee John Dee Spicer's Reply Brief (ECF No. 30).

         Having considered the briefing and applicable law and having reviewed the bankruptcy record, the Court concludes that the bankruptcy court did not abuse its discretion by denying BP Chaney leave to amend its pleadings and plead the discovery rule. However, because the discovery rule need not be specifically pleaded to be raised in federal court and because BP Chaney pleaded facts that were sufficient to notify Anarkali that it may assert the discovery rule, the bankruptcy court erred by not permitting BP Chaney to assert the discovery rule in response to Anarkali's limitations defense. The bankruptcy court also erred by concluding as a matter of law that the Contract for Deed superseded the Sale Contract and that the Sale Contract was invalid and not enforceable. Therefore, the Court AFFIRMS in part, REVERSES in part, and REMANDS this case for further consistent proceedings.

         I. JURISDICTION

         “A federal district court has jurisdiction to hear appeals-and an aggrieved litigant may appeal as of right-from the ‘final judgments, orders, and decrees' of a bankruptcy court.” Phillips v. Travelers Cas. & Sur. Co. of Am., ADV 10-03075, 2012 WL 3779294, at *1 (S.D. Tex. Aug. 30, 2012) (quoting 28 U.S.C. § 158(a)(1)). Pursuant to 28 U.S.C. § 1134(b), the Court has jurisdiction over the underlying adversary proceeding because it arose in a case brought under Title 11.[3]

         II. BACKGROUND

         A. Factual Background

         Since 2001, Anarkali has owned certain commercial property (“Property”), commonly referred to as 1050 Forest Park Boulevard, Fort Worth, Texas. BK EF No. 142 at 4, ECF No. 2-9 at 303. The Property consists of approximately .25 acres of real estate and a three-story office building. BP Chaney's Br. at 5. In 2006, Anarkali signed a promissory note, security agreement, and deed of trust in favor of Woodforest National Bank in the amount of $2, 400, 000. BK ECF No. 111-3 at 128. As security, Anarkali granted Woodforest a lien on the Property. BK ECF No. 114 at 3.

         In June 2008, Misty Brady (formerly Misty Brady Chaney, referred to herein as “Brady”), contacted Anarkali about leasing space at the Property, and on June 15, 2008, Brady purportedly signed a lease agreement with Anarkali. See BK ECF No. 93 at 9. In written testimony however, Brady denied that her company, BP Chaney, had ever “consummated” the lease, made payments under the lease, or that she had ever seen the lease. BK ECF No. 103-3 at 32.

         In July 2008, Brady began negotiating with Barkat Ali, a principal of Anarkali, regarding the sale of the Property. Id. According to Brady, on August 26, 2008, she entered into a contract of sale with Anarkali on behalf of Chaney Enterprises, LLC-an entity that she testified had been created for the sole purpose of taking title to the Property. BK ECF No. 103-3 at 29.[4] But according to Brady's written testimony, Chaney Enterprises, LLC was never formed: “[I]nstead I created BP Chaney, LLC. That is the reason that the Sale Contract with Anarkali dated August 26, 2008 lists the Buyer as Chaney Enterprises, LLC.” Id.[5]

         The contract entitled, “Commercial Contract - Improved Property” (herein “Sale Contract” or “Initial Sale Contract”), provided that Chaney Enterprises, LLC would purchase the Property for $1, 100, 000 from Anarkali. BK ECF No. 93 at 161-62. The portion of the Sale Contract entitled “Financing, ” had the box checked for “Seller Financing” and provided that Chaney Enterprises, LLC would deliver a $1, 080, 000 promissory note and deed of trust in accordance with an attached Commercial Contract Financing Addendum. Id. at 162. The Financing Addendum further specified that the promissory note would be for a term of 300 months, beginning at October 1, 2008, and bearing an interest rate of “Prime 3%.” Id. at 175. Finally, the Financing Addendum provided that the promissory note would include both personal and corporate liability against the maker in the even of default. Id.

         According to Anarkali, the Sale Contract did not obligate Anarkali to transfer title unless and until Chaney Enterprises obtained financing. Id. at 6. Indeed, the Sale Contract had the portion reciting that the seller would deliver a deed or instrument conveying title struck through and it appeared to be initialed by Brady and Barkat. Id. at 167. In an email chain on September 22 and 23, 2008, in which the closing attorney sent Brady and Barkat closing documents for their review, Barkat informed the closing attorney that “the language is missing that, Misty Chaney will arrange her financing within 6 months to 2 years from the date of this agreement, unless she cannot than [sic] Anarkali will continue for 25 years payments [sic] plan.” Id. at 142. The closing attorney responded that she would “put some language into the contract for deed about that, ” but then she warned to “keep in mind though that that portion of your agreement has no legal teeth-meaning the way that you guys made that agreement is not truly legally enforceable under the law.” Id. at 141. In a different November 4, 2008 e-mail exchange between Brady and an escrow officer apparently involved in preparing some aspects the closing documents, the escrow officer sent proposed changes from Barkat's son (who is an attorney). Brady responded as follows: “I do not want to make any of these changes. We already have an agreement in place, and have been honoring that original agreement since September. I just want to leave everything as is with the agreement that Barkat and I have already made.” BK ECF No. 111-4 at 120.

         On November 18, 2008, Chaney Enterprises, BP Chaney, and Anarkali executed a “Release of Earnest Money” contract. BK ECF No. 103 at 39. The Release of Earnest Money contract provides that the parties were being released from all liability under “the contract.” It is not clear what “the contract” is in reference to. See id.

         According to Anarkali's principal, Anarkali and BP Chaney then decided to enter into a contract for deed. BK ECF No. 93 at 6-7. BP Chaney disagrees. According to Brady, she believed that on November 18, 2008, which she considered the closing, she executed, inter alia, a Note, Security Agreement, and Acknowledgment of Sale, all of which had nothing to do with a contract for deed and instead consummated the sale of the Property. BK ECF No. 103-3 at 30.

         Then on December 30, 2008, BP Chaney and Anarkali executed a Contract for Deed. BK ECF 93 at 7. The Contract for Deed obligated BP Chaney to, inter alia, make a down payment of $20, 000, pay the principal balance of $1, 080, 000 plus interest in monthly installments over a 25-year term. Id. at 117. Brady provided affidavit testimony that Anarkali had informed her that the Contract for Deed was merely a closing document that had been overlooked at the November 18, 2008 closing. BK ECF No. 103-3 at 30. She expressly testified that “explicit representation was made [by Anarkali] that nothing was changing regarding the sale transaction that had already occurred.” Id.[6]

         Subsequently, there arose several disputes concerning insurance proceeds, BP Chaney's September and October 2015 payments, and Anarkali's refusal to provide an escrow accounting upon request from BP Chaney. BK ECF No. 103-3 at 3-16. BP Chaney made a partial payment to Anarkali in January 2017, but BP Chaney has not made a payment since. BK ECF No. 93 at 37.[7]

         B. Procedural History in Underlying Bankruptcy Case

         On July 3, 2017, BP Chaney filed the underlying voluntary petition for Chapter 11 bankruptcy. In re BP Chaney, LLC, No. 17-42793 (Bankr. N.D. Tex.). Several days later, BP Chaney filed the underlying adversary proceeding against Anarkali and Vista Bank (“Defendants”). See BK ECF No. 1. BP Chaney asserted claims for breach of contract for deed, conversion, violations of the Texas Deceptive Trade Practices Act (“DTPA”), and fraudulent transfer and sought a declaratory judgment. See Id. Nowhere in BP Chaney's Original Complaint was there any allegation that the Contract for Deed was not binding and enforceable. See id.

         On August 9, 2017, Defendants filed separate answers and counterclaims. BK ECF Nos. 7 & 8. Anarkali brought a breach-of-contract counterclaim and sought a declaratory judgment. BK ECF No. 7. Although Anarkali raised a host of affirmative defenses, it did not raise limitations. See BK ECF No. 7 at 7-8. Anarkali eventually filed a Motion for Leave to file an Amended Answer, which the Court granted on January 1, 2018. BK ECF Nos. 25 & 46. In Anarkali's First Amended Answer and First Amended Counterclaim, it asserted that BP Chaney's claims “are barred in whole or in part by the statute of limitations[.]” BK ECF No. 25-1 at 8.

         On October 31, 2017, BP Chaney filed a Motion for Leave to file an Amended Complaint, in which BP Chaney attached its proposed First Amended Complaint to its Motion for Leave. BK ECF No. 24. The proposed First Amended Complaint that was attached to BP Chaney's Motion for Leave sought to clarify certain allegations, but it did not add any parties or challenge the enforceability of the Contract for Deed. See BK ECF No. 24-1. Although the Court granted the Motion for Leave (BK ECF No. 36), it is not clear from the record whether the bankruptcy clerk filed the Amended Complaint as a separate docket entry.

         On January 18, 2018, BP Chaney filed a First Amended Complaint. See BK ECF No. 60. However, the actually-filed First Amended Complaint contained different allegations than the proposed First Amended Complaint that had been attached to the Motion for Leave. Compare BK ECF No. 60 with BK ECF No. 24-1. Namely, the actually-filed First Amended Complaint sought to challenge the enforceability of the Contract for Deed and alleged that the Contract for Deed had been represented as an “additional closing document, ” and included new claims for fraud and breach of contract, as well as additional declaratory judgment requests. See BK ECF No. 60 at 7, 10, 12-14.

         On January 23, 2018, the parties appeared for a hearing (MSJ Hearing) on several pending matters, including Anarkali's Motion for Summary Judgment. MSJ Hearing, BK ECF No. 175. At the MSJ Hearing, the issue of the actual-filed First Amended Complaint came up, and BP Chaney's counsel acknowledged that despite obtaining leave of court to file the proposed First Amended Complaint that was attached to BP Chaney's Motion for Leave, BP Chaney had in fact filed a different First Amended Complaint:

THE COURT: So, I hear -- so I think what I hear you saying is that you admit that you probably should have filed a motion for leave to file what you actually filed. I mean, because [the actual-filed First Amended Complaint] was well beyond what the Court authorized the first time.
[BP CHANEY'S TRIAL COUNSEL]: I would not contest that. I would --I did look at the order, you know, to make sure that it wasn't any sort of, you know, it wasn't prohibited, but it -- but I certainly admit that it was not what was attached to the motion for leave. And I would, to the extent that the Court views that as incorrect and is inclined to strike it, we would certainly ask that the Court at least consider what's there and allow us to refile or file a complete new motion for leave to file an amended complaint.

MSJ Hearing at 10. Although there was some confusion whether the bankruptcy court would strike the actually-filed First Amended Complaint, the bankruptcy court did not and eventually clarified that the “actual live complaint is the Plaintiff's First Amended Complaint filed at ECF No. 60.” ECF No. 1-1 at 11.

         On January 31, 2018, BP Chaney filed another motion for leave to file a Second Amended Complaint to add Defendants. See BK ECF No. 74. On February 8, 2018, the bankruptcy court entered an order denying BP Chaney's motion for leave. See BK ECF No. 84. On March 24, 2018, BP Chaney filed a third motion for leave to amended complaint for the limited purpose of asserting the discovery rule. See BK ECF No. 108. On May 15, 2018, the bankruptcy court entered an order denying the motion. See BK ECF No. 115.

         Anarkali eventually filed an Amended Motion for Summary Judgment. See BK ECF No. 89. The bankruptcy court granted the Amended MSJ as to all of BP Chaney's claims and Anarkali's request for declaratory judgment. BK ECF No. 114 at 37. The bankruptcy court then entered an order clarifying its summary-judgment order, in which the bankruptcy court granted Anarkali's declaratory judgment counterclaim. See BK ECF No. 132. On August 7, 2018, the parties proceeded to trial solely on the amount of Anarkali's claims against BP Chaney and they agreed that rather than present live testimony, they would submit post-trial motions with exhibits regarding fees and costs. BK ECF No. 154 at 3. After filing said post-trial motions, the bankruptcy court issued its Final Order (BK ECF No. 154) and Final Judgment (BK ECF No. 155). The Final Judgment was “for [BP Chaney] in part, and for Defendants, in part.” BK ECF No. 155 at 2. Thus pursuant to the Final Order and Final Judgment, BP Chaney took nothing on all its claims, and Anarkali was awarded $931, 998.68 for its counterclaim. BK ECF No. 154 at 22. Neither party was awarded costs or attorney's fees. Id.

         III. ISSUES ON APPEAL

         BP Chaney appeals from the Final Judgment (BK ECF No. 155), Final Order (BK ECF No. 154), Order Granting Anarkali Enterprises' Motion for Clarification (“Clarification Order”) (BK ECF No. 132), Order Granting Motions for Summary Judgment (BK ECF No. 114), and Order denying BP Chaney's Motion for Leave to File Second Amended Complaint to add Defendants (BK ECF No. 84). BP Chaney raises twelve issues on cross appeal (BP Chaney Br. at 3-4), which are as follows:

1. Did the bankruptcy court err by denying BP Chaney's Motion for Leave to Amend?
2. Did the bankruptcy court err by concluding that the Sale Contract was unenforceable and that the Contract for Deed was the controlling ...

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