NO CV IN THE COURT OF APPEALS FOR THE FIFTH DISTRICT OF TEXAS AT DALLAS. TREVINO & ASSOCIATES MECHANICAL, L.P. Appellant, VS.

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1 NO CV IN THE COURT OF APPEALS FOR THE FIFTH DISTRICT OF TEXAS AT DALLAS 5th Court of Appeals FILED: 8/15/11 14:00 Lisa Matz, Clerk TREVINO & ASSOCIATES MECHANICAL, L.P. Appellant, VS. THE FROST NATIONAL BANK, Appellee. On Appeal from the 14thJudicial District Court of Dallas County, Texas, The Honorable Eric V. Moye, Presiding Cause Number DC-I AMENDED BRIEF OF APPELLANT TREVINO & ASSOCIATES MECHANICAL, L.P. KEVIN B. WIGGINS State Bar No WHITE & WIGGINS, L.L.P. Bank of America Plaza 901 Main Street, Suite 6200 Dallas, Texas (Telephone) (Facsimile) R. JERONIMO VALDEZ State Bar No Valdez Washington LLP 4514 Cole Ave., Suite 600 Dallas, Texas Telephone: Facsimile: ATTORNEYS FOR APPELLANT ORAL ARGUMENT REQUESTED

2 IDENTITY OF PARTIES AND COUNSEL Appellant/Defendant/Counter-Plaintiff: TREVINO & ASSOCIATES MECHANICAL, L.P. Counsel: KEVIN B. WIGGINS State Bar No Bank of America Plaza 901 Main Street, Suite 6200 Dallas, Texas (Telephone) (Facsimile) R. JERONIMO VALDEZ State Bar No Valdez Washington LLP 4514 Cole Ave., Suite 600 Dallas, Texas Facsimile: and- Appellee/Plaintiff/Counter- THE FROST NATIONAL Defendant BANK Counsel: MICHAEL J. QUILLING State Bar No MICHAEL D. CLARK State Bar No Quilling, Selander, Lownds, Winslett & Moser, P.C Bryan Street, Suite 1800 Dallas, Texas

3 TABLE OF CONTENTS IDENTITY OF PARTIES AND COUNSEL TABLE OF CONTENTS INDEX OF AUTHORITIES v STATEMENT STATEMENT STATEMENT OF THE ISSUE OF THE CASE OF FACTS SUMMARY ARGUMENT OF ARGUMENT AND AUTHORITIES A. Frost's No-Evidence Motion for Summary Judgment Should be Denied 1. Appellate Standard of Review 2. Frost was Not Entitled to Summary Judgment as a Matter of Law 3. First Cause of Action: TAM's Claim for Breach of Contract was Supported by Summary Judgment Evidence a. There is a valid contract between TAM and Frost. b. TAM performed, tendered performance of, or was excused from performing its Contractual obligations. c. Frost breached the contract. d. Frost's breach caused TAM's injury. 4. Second Cause of Action: TAM's Claim for Promissory Estoppel was Supported by Summary Judgment Evidence a. Frost made a promise to TAM. b. Frost reasonably and substantially relied on the promise to its detriment. c. TAM's reliance was foreseeable by Frost. d. Injustice can be avoided only by enforcing Frost's promise. 5. Third Cause of Action: TAM's Claim for Negligent Misrepresentation was Supported by Summary Judgment Evidence a. Frost made a representation to TAM in the course of Frost's business or in a transaction in which Frost had an interest. b. Frost supplied false information for the guidance of TAM. c. Frost did not exercise reasonable care or competence

4 B. in obtaining or communicating the information to TAM. d. TAM justifiably relied on Frost's representations. e. Frost's negligent misrepresentation proximately caused TAM's injury. 6. Fourth Cause of Action: TAM's Claim for Fraud was Supported by Summary Judgment Evidence a. Frost made material misrepresentations. b. Frost's material misrepresentations were false when made. c. The misrepresentations were known by Frost's representatives to be false when made or were made recklessly as a positive assertion without knowledge of its truth. d. Frost representatives made the misrepresentations with the intent that they should be acted upon. e. TAM justifiably relied on Frost's representations. f. TAM was injured as a result of Frost's misrepresentations. 7. Fifth Cause of Action: TAM's Claim for Conversion was Supported by Summary Judgment Evidence 8. Sixth Cause of Action: TAM's Claim for Wrongful Setoffwas Supported by Summary Judgment Evidence Frost's Traditional Motion for Summary Judgment as to Damages Should have been Denied CONCLUSION APPENDIX CERTIFICATE OF SERVICE IV

5 INDEX OF AUTHORITIES Dallas Independent School Dist. v. Outreach Housing Corporation/DeSoto L Ltd., 251 S.W.3d 152 (Tex. App.--Dallas 2008), reh'g overruled, (Apr. 29, 2008) 11 Reunion Hotel/Tower Joint Venture v. Dallas Area Rapid Transit, 250 S.W.3d 203 (Tex. App.-- Dallas 2008, no pet.) 11 Borrego v. City of El Paso, 964 S.W.2d 954 (Tex. App.--El Paso 1998, pet. denied) 12 Holguin v. Ysleta Del Sur Pueblo, 954 S.W.2d 843 (Tex. App.--El Paso 1997, pet. denied) 12 Carter v. Allstate Ins. Co., 962 S.W.2d 268 (Tex. App.--Houston [1st Dist.] 1998, pet. denied) 12 McMahon Contracting, L.P. v. City of Carrollton, 277 S.W.3d 458 (Tex. App.--Dallas 2009), reh'g overruled, (Mar. 17, 2009) 12,26 Hall v. Huff, 957 S.W.2d 90 (Tex. App.--Texarkana 1997, pet. denied) 12 Yancy v. United Surgical Partners Intern., Inc., 236 S.W.3d 778 (Tex. 2007) 12 Hasty v. Keller HCP Partners, L.P., 260 S.W.3d 666; 669 (Tex. App.--Dallas 2008, no pet.) Saenz v. Southern Un. Gas Co., 999 S.W.2d 490, (Tex. App.v-El Paso 1999, pet. denied) 13 FDICv. Perry Brothers, Inc., 854 F. Supp (E.D. Tex. 1994) 13,23,24 McCamish, Martin, Brown, & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 791 (Tex. 1999) 17 Brownlee v. Brownlee, 665 S.W.2d 112 (Tex. 1984) 14 Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573,577 (Tex. 2001) 21 Hackberry Creek Country Club, Inc. v. Hackberry Creek Home Owners Ass 'n, 205 S.W.3d 46, 55 (Tex. App.--Dallas 2006, pet. denied) 14 Boy Scouts v. Responsive Terminal Sys., 790 S.W.2d 738, 742 (Tex.App.-Dallas 1990, writ denied) 15 FCLT Loans, L.P. v. Estate of Bracher, 93 S.W.3d 469,482 (Tex. App.-Houston [14 th Dist.] 2002, no pet.) 24 v

6 Loomis v. Sharp, 519 S.W.2d 955,958 (Tex. Civ. App. -Texarkana [6 th Dist.] 1975, writ dism'd) 24 Houston Nat 'I Bankv. Biber, 613 S.W.2d 771, 774 (Tex. Civ. App. -Houston [14 th Dist.] 1981, writ ref'd n.r.e.) 24 American Bank of Waco v. Waco Automotive, Inc., 818 S.W.2d 163 (Tex. App. -Waco 1991, writ denied) 25 Bandy v. First State Bank, Overton, Texas, 835 S.W.2d 609 (Tex. 1992) 25 D.S.A., Inc. v. Hillsboro lsd, 973 S.W.2d 662, 664 (Tex. 1998) 26 State Nat 'I Bank of El Paso v. Farah Mfg. Co., 678 S.W.2d 661 (Tex.App.--El Paso 1984, writ dism'd by agreement) 26, 27 Mead v. Johnson Group, Inc., 615 S.W.2d 685,687 (Tex. 1981) 26 Fretz Construction Co., v. Southern Nat 'I Bank, 626 S.W.2d 478,483 (Tex. 1981) 26 Virgil T Walker Constr. Co. v. Flores, 710 S.W.2d 159,161 (Tex. App. -Corpus Christi 1986, no writ) 27 Behring Int'l, Inc. v. Greater Houston Bank, 662 S.W.2d 642 (Tex.App.-Houston [1 st Dist.] 1983, writ dism'd) 27 Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex. 1986) 27 Schindler v. Austwell Farmers Cooperative, 829 S.W.2d 283,288 (Tex.App.-Corpus Christi), aff'd as modified, 841 S.W.2d 853 (Tex. 1992) 27 VI

7 STATEMENT OF THE ISSUE This is an appeal of an Order from the 14th Judicial District Court of Dallas County, Texas, which granted summary judgment in favor of Appellee, The Frost National Bank ("Frost"), thereby dismissing Trevino & Associates Mechanical L.P.' s ("TAM") counter-claims alleging, inter alia, negligent misrepresentation, fraud and breach of contract. (CR 361). The issue on appeal is whether the Court erred in dismissing TAM's claims where TAM's summary judgment evidence, which included an affidavit, deposition testimony and a document which supported TAM's claims, established a genuine issue of material fact as to each counter-claim. STATEMENT OF THE CASE On May 27,2010, Frost filed suit on a business line of credit supported by a promissory note against TAM. (CR 8). Frost expressly told TAM that the previous maturity date was void and that it would extend the maturity date of its line of credit until June 30, (CR ; 292). Notwithstanding this assurance, Frost foreclosed the line of credit and set off TAM's operating account on June 19,2009, thereby forcing TAM out of business based on this conduct. (CR ; 293). TAM asserted six counter-claims against Frost for breach of contract, promissory estoppels, negligent misrepresentation, fraud, conversion, and wrongful setoff. (CR 87). On April 7, 2011, Frost filed its Motion for Summary Judgment only as to damages and No- Evidence Motion for Summary Judgment against TAM's counterclaims (collectively, "Frost's Motion"). (CR 169). On April 28, 2011, the trial court granted Frost's Motion. (CR 361). 7

8 STATEMENT OF FACTS TAM is a mechanical contractor in the business of providing plumbing, heating, air conditioning, piping and duct work on large construction projects. (CR ). It was founded by Miguel Trevino Sr. ("Trevino") in Id. By 2005, TAM was recognized by Hispanic Business Magazine as one of the 100 largest Hispanic-owned businesses in the United States, with over 250 employees and annual revenues exceeding $40 million. In 2005, Frost and Trevino began their banking relationship. Id. Frost provided TAM with a business line of credit which allowed TAM to complete its construction jobs and grow its business. Id. In December 2006, the parties entered a business loan agreement that was secured by a commercial security agreement. (CR ). By the terms of the agreement, Frost extended a $3.5 million line of credit to TAM. Id. The line of credit was vital to TAM's ability to operate and meet payroll. (CR ). Although the line of credit matured over the years, Frost consistently verbally assured TAM that it would renew the line under the same terms and conditions. Id. Frost's words were supported by its actions to renew the line of credit as promised.ld. For example, the business loan agreement entered on December 2006 expired on June 7, 2008, and was renewed on August 28,2008. (CR ). On April 30, 2009, the line of credit was again set to mature. (CR ). In accordance with its prior course of conduct, Frost repeatedly assured TAM it would once again renew TAM's line of credit. (CR ). On May 15, 2009, however, TAM received what appeared to be an automatic notice from Frost stating that TAM's line of credit had matured in April of (CR 291). TAM's line of credit was $3.5 million, with a balance of $2,309, (CR 291). At the time, TAM was working on no less than eight different construction projects, including multi-million dollar projects with Collin County Community 8

9 College, Brookhaven Community College, and Texas A&M University. (CR ). After receiving the notice, on or about June 4, 2009, Trevino and Bill Keenen, one of TAM's managers and accountants, met with Frost representatives to discuss TAM's business loan (the "June 4 Meeting"). (CR ). In the June 4 Meeting, TAM advised Frost of its current construction projects and accounts receivable. (CR ). TAM provided assurances to Frost that, as a result of same, its credit balance would be paid down and that TAM would continue its banking relationship with Frost. Id. In response to the assurances provided by TAM, Frost representatives expressly stated to TAM that it was not considering TAM to be in default and it would continue to do so until the new maturity date of June 30, Id. Frost's agreement to extend the maturity date was evidenced by a June 19, 2009 letter Frost sent TAM which memorialized the June 30, 2009 maturity date. (CR 292). Importantly, Frost assured TAM that it knew how critical the line of credit and TAM's operating account were to TAM's survival. (CR ). Frost specifically represented to TAM that Frost would work with TAM, as it had done in the past, and that it would not setoff its operating account and apply removed funds to the credit balance. Id. Furthermore, Frost asked that TAM create a business plan for its review by June 30, 2009, so that the parties could renew the line of credit beyond June 30, Id. Based upon Frost's representations, TAM justifiably believed Frost was not holding TAM in default of its credit line and it had until at least June 30, 2009 to create a business plan. Id. Despite Frost's representations, on June 19,2009, eleven days before the date in which it had previously set for the maturity date of the credit line, Frost wrongfully setoff all of the funds in TAM's operating account against the line of credit. (CR 278). Frost removed $660, from TAM's operating account, which included $348, in collected accounts receivable 9

10 TAM had transferred to its operating account just the day before. Id. (CR ). TAM did not receive notice of the setoff until June 22, (CR 293). In the intervening period, TAM had written several checks that were returned for insufficient funds. (CR ; ). The funds removed by Frost from TAM's accounts receivable effectively destroyed TAM's ability to operate and meet payroll. (CR ). As a result, TAM was forced to lay off all of its employees literally overnight. (CR 259). TAM could also no longer complete the numerous ongoing projects for which it had been contracted. (CR ). Therefore, Liberty Mutual, the surety for the projects, incurred the costs of completion and sued TAM to recover costs associated with same. (CR ). As a direct and proximate cause of Frost's conduct, TAM is no longer in business, and TAM has a judgment against it, with interest, in the amount of $7,055, (CR ). SUMMARY OF ARGUMENT The District Court erred in granting Frost's Motion for Summary Judgment and No- Evidence Motion for Summary Judgment because the summary judgment evidence established a genuine issue of material fact as to each cause of action asserted by TAM against Frost. This case involves Frost's assurances of continuing its business arrangement with TAM as usual, and shortly thereafter prematurely accelerating TAM's line of credit. (CR ). Specifically, during the June 4 Meeting, Frost made several misrepresentations to TAM that TAM relied on to its detriment. Id. The parties entered into a binding oral contract based upon the following representations made by Frost to: 1) extend the maturity date of the note until June 30, 2009; 2) renew the line of credit; 3) not setoff TAM's operating account; and 4) negotiate in good faith while TAM created its business proposal. Id. In exchange, TAM agreed to: 1) negotiate in good 10

11 faith; 2) continue banking with Frost; 3) pledge its retainage to pay down its line of credit; and 4) create a business proposal. Id. Frost's representations made during the June 4 Meeting are evidenced by Trevino's affidavit and deposition testimony which were part of the summary judgment record. Frost's agreement to extend the maturity date of the note is further evidenced by a June 19, 2009 letter that it sent to TAM. (CR 292). In that letter, Frost clearly confirms that the extended maturity date on the note, as agreed, was June 30,2009. Id. TAM's summary judgment evidence illustrated the extent of Frost's improper conduct and, at the very least, raised a fact issue as to each element of the various causes of action asserted by TAM against Frost. Because TAM has created a fact issue as to each element of its causes of action against Frost, this Court should reverse the trial court's final judgment, deny Frost's Motion for Summary Judgment and allow a finder of fact to adjudicate Frost's conduct. ARGUMENT AND AUTHORITIES A. Frost's No-Evidence Motion for Summary Judgment 1. Appellate Standard of Review There is only one standard for reviewing a summary judgment; a reviewing court must examine the entire record in the light most favorable to the non-movant, indulging every reasonable inference and resolving any doubts against the motion. Dallas Independent School Dist. v. Outreach Housing Corporation/DeSoto L Ltd., 251 S.W.3d 152 (Tex. App. Dallas 2008), reh'g overruled, (Apr. 29, 2008); Reunion Hotel/Tower Joint Venture v. Dallas Area Rapid Transit, 250 S.W.3d 203 (Tex. App.--Dallas 2008, no pet.). The purpose of summary judgment is the elimination of patently unmeritorious claims or untenable defenses. It is not intended to 11

12 deprive litigants of their right to a full hearing on the merits of any real issue of fact, and in light of this purpose, summary judgments are not reviewed with the deference to the trial court accorded other final judgments. Borrego v. City of El Paso, 964 S.W.2d 954 (Tex. App.--EI Paso 1998, pet. denied); Holguin v. Ysleta Del Sur Pueblo, 954 S.W.2d 843 (Tex. App.--EI Paso 1997, pet. denied). Instead, the standard of review and presumptions employed favor reversal. Carter v. Allstate Ins. Co., 962 S.W.2d 268 (Tex. App.--Houston [1st Dist.] 1998, pet. denied). On appeal, the movant still bears the burden of showing that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law and an appellate court will strictly construe summary judgment in procedural and substantive matters against the movant. McMahon Contracting, L.P. v. City of Carrollton, 277 S.W.3d 458 (Tex. App.--Dallas 2009), reh'g overruled, (Mar. 17,2009). Thus, on appeal from a summary judgment, the reviewing court may not indulge any presumption in favor of the trial court's ruling. Hall v. Huff, 957 S.W.2d 90 (Tex. App. Texarkana-1997, pet. denied). To the contrary, on appeal of either a no-evidence summary judgment or a traditional summary judgment, an appellate court examines the entire record and all of the evidence in the light most favorable to the non-movant, accepts all of the non-movant's evidence as true, indulges every reasonable inference in favor of the non-movant, and resolves all doubt in the non-movant's favor. Yancy v. United Surgical Partners Intern., Inc., 236 S.W.3d 778 (Tex. 2007). Evidence that favors the movant's position will not be considered unless it is uncontroverted. Hasty v. Keller HCP Partners, L.P., 260 S.W.3d 666; 669 (Tex. App.--Dallas 2008, no pet.). 2. Frost was not entitled to summary judgment as a matter of law. Frost filed a no-evidence summary judgment as to each cause of action filed by TAM. In 12

13 response, TAM filed its evidence, which included, but was not limited, to the affidavit of Miguel Trevino, deposition excerpts of Miguel Trevino, deposition excerpts of Frost representative's Jimmy Locke and Todd Weber, letters from Frost, and a final judgment the Northern District. To defeat a no-evidence motion, the non-movant entered against TAM in is not required to marshal its proof; its response need only point out evidence that raises a fact issue on the challenged elements. Saenz v. Southern Un. Gas Co., 999 S.W.2d 490, (Tex. App.-El Paso 1999, pet. denied). TAM has asserted six claims against Frost arising from Frost's prior conduct: negligent misrepresentation; fraud; breach of contract; promissory estoppel; conversion; and wrongful setoff. Each cause of action can stand alone and is supported by the facts and each cause of action can independently support TAM's damages. See FDIC v. Perry Brothers, Inc., 854 F. Supp (E.D. Tex. 1994)1. 3. First Cause of Action: Breach of Contract The elements of an action for breach of contract are the following: 1. There is a valid contract; 2. The plaintiff performed, tendered performance of, or was excused from performing its contractual obligations; 3. The defendant breached the contract; and The facts and evidence at issue in Perry Brothers were similar in many respects to this case, and therefore, the case is worth noting from the outset. In Perry Brothers, Perry Brothers asserted claims of fraud, conversion breach of contract, promissory estoppel, and wrongful setoff arising from allegations its bank: 1) verbally agreed to extend a line of credit; 2) verbally agreed to negotiate further in good faith during the extension period; 3) and verbally assured Perry Brothers that funds within its operating account would not be used to setoff the line of credit balance. The Eastern District of Texas, applying Texas state law, affirmed the jury's verdict on counter-plaintiffs causes of action against the bank. In doing so, the Court relied solely upon testimony without supporting documentation evidencing the verbal assurances. Here, TAM relied on several representations by Frost that were almost identical to the representations made by the bank in Perry Brothers. The court in Perry Brothers affirmed Perry Brothers' jury verdict for more than six million dollars based upon a judgment incurred against Perry Brothers resulting from its bank's actions. TAM not only entered similar testimonial evidence into the summary judgment record, but importantly, it also presented written confirmation of the oral agreement Frost's misrepresentations. Whereas the Court in Perry Brothers found the evidence sufficient to affirm a jury verdict, the trial court in this instance erred by not finding that the summary judgment evidence raised a genuine issue of material fact as to each cause of action TAM asserted. 13

14 4. The defendant's breach caused the plaintiff injury. Hackberry Creek Country Club, Inc. v. Hackberry Creek Home Owners Ass 'n, 205 S.W.3d 46, 55 (Tex. App. -Dallas 2006, pet. denied). a. There is a valid contract between TAM and Frost. There was an oral agreement entered into by Frost and TAM on or about June 4, Frost agreed to: 1) extend the maturity date of the note; 2) renew the line of credit; 3) not setoff TAM's operating account; and 4) negotiate in good faith while TAM put together its business proposal. (CR ). In exchange, TAM agreed to: 1) pledge its retainage toward the repayment of its line of credit with Frost; 2) continue its banking relationship with Frost; 3) negotiate in good faith; and 4) put together a business plan for Frost. Id. Statements in an affidavit are sufficient to raise a fact issue as to whether the parties formed an agreement, whether the agreement was breached, and whether Appellant sustained damages as a result. See Brownlee v. Brownlee, 665 S.W.2d 112 (Tex. 1984). Trevino's deposition and affidavit testimony, the supporting documents attached to his affidavit and the deposition testimony of Frost's representatives were part of the summary judgment record and support a valid contract. b. TAM performed, tendered performance of, or was excused from performing its contractual obligations. The record revealed that Trevino testified by deposition and affidavit that TAM continued its banking relationship with Frost and continued to deposit money into its Frost operating account following the June 4 Meeting. (CR ). Acting in good faith, TAM was preparing its business proposal, but before it had a chance to present it to Frost, Frost setoff its account. (CR ). As a result, TAM never received the retainage it planned to use to pay down its line of credit. Id. To the extent it was required to perform between June 4, 2009 and June 19,2009, TAM was doing so. Id. 14

15 c. Frost breached the contract. The record further revealed through Trevino's affidavit and supporting documents, as well as his deposition testimony, that Frost breached every element of the contract it entered into with TAM. Frost did not renew TAM's line of credit, it setoff TAM's operating account, extended TAM's maturity date and then denied it was extended, and did not negotiate in good faith because it never allowed TAM to submit its business proposal. (CR ). There was more than a scintilla of evidence presented to the trial court that Frost breached the contract with TAM. d. Frost's breach caused TAM's injury. As a direct and proximate result of Frost's breach, TAM has a judgment against it for over seven million dollars. (CR ). The final judgment entered against TAM was part of the record. (CR ). When Frost swept TAM's account, TAM was unable to make its payroll and ceased operations. (CR ). Its business was ruined because it could not finish the jobs it was currently under contract to complete. Id. As in Perry Brothers, TAM's injury was manifested in the judgment taken against it resulting from Frost's destruction of its business. See Perry Brothers, 854 F. Supp Second Cause of Action: Promissory Estoppel The elements of an action for promissory estoppel are the following: 1. The defendant made a promise to the plaintiff; 2. The plaintiff reasonably and substantially relied on the promise to its detriment; 3. The plaintiff s reliance was foreseeable by the defendant; and 4. Injustice can be avoided only be enforcing the defendant's promise. Boy Scouts v. Responsive Terminal Sys., 790 S.W.2d 738, 742 (Tex.App. -Dallas 1990, writ denied). 15

16 a. Frost made a promise to TAM. At the June 4, Meeting Frost promised TAM that it would: 1) extend the maturity date of the note; 2) renew the line of credit; 3) not setoff TAM's operating account; and 4) negotiate in good faith while TAM put together its business proposal. Trevino's deposition testimony, affidavit testimony, the supporting documents attached to his affidavit, and the deposition testimony of Frost's representatives are all evidence of the promises made, were part of the summary judgment record, and together they raise a genuine issue of material fact concerning the existence of promises. b. Frost reasonably and substantially relied on the promise to its detriment. The record revealed that Trevino testified by deposition and affidavit that because of Frost's promises, TAM continued its banking relationship with Frost and continued to deposit money into its Frost operating account. (CR ). Acting in good faith, TAM was preparing its business proposal, but before it had a chance to present it to Frost, Frost setoff its account. Id. There was no evidence in the record to suggest TAM should not have relied on the promises. Instead, the parties' prior actions lent credibility to Frost's words at that time. c. TAM's reliance was foreseeable by Frost. The record further revealed that Trevino testified by deposition and affidavit that Frost knew that TAM's operating account was the life source for its business. (CR ). Frost knew that TAM was currently working on three large construction projects. Id. Frost knew that TAM was developing a business proposal for Frost's review. Id. Frost knew that a setoff of TAM's operating account would cause TAM to cease operations. Id. Frost knew that it had a history of renewing TAM's line of credit. Id. It is therefore foreseeable that TAM would rely on Frost's promises when Frost made them, the summary judgment evidence supported same. 16

17 d. Injustice can be avoided only be enforcing Frost's promises. This is a shocking case where a nervous bank forced a long time successful company out of business overnight. Frost had no right to setoff TAM's account and made false promises to TAM to collect as much money as it could as fast as it could. Frost should not be allowed to get away with such an unjust act. TAM was a loyal customer who relied on and trusted its bank to its severe detriment. Frost is still in business; TAM will never be in business again according to the record evidence which includes Trevino's affidavit. (CR ). 5. Third Cause of Action: Negligent Misrepresentation Under a negligent misrepresentation theory, one who, in the course of their business or in any transaction in which a pecuniary interest is involved, supplies false information for the guidance of others in a business transaction, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information. McCamish, Martin, Brown & LoejJler v. F.E. Appling Interests, 991 S.W.2d 787, 791 (Tex. 1999)(citing Restatement (Second) of Torts Section 552(1)). Moreover, to establish negligent misrepresentation, a plaintiff must prove proximate causation. Id. TAM's summary judgment evidence raises at least a genuine issue of material fact as to each element of its negligent misrepresentation claim. a. Frost made a representation to TAM in the course of Frost's business or in a transaction in which Frost had an interest. The first element of a negligent misrepresentation has two prongs; first that a representation was made, and second, that it was done so in the context of a financial interest. Frost's representations were made during the June 4 Meeting. (CR ). Frost representatives Jimmy Locke and Todd Weber were in attendance at the meeting with TAM. (CR 253). The purpose of the meeting was to discuss payment of TAM's line of credit with 17

18 Frost. (CR 274). Frost had an interest in collecting as much money as possible from TAM as a payment on its line of credit. Frost's interest in conducting the meeting and in making its representations was to ensure payment. (CR 274). Frost's interest during the June 4 Meeting is apparent. In the June 4 Meeting, Frost representatives made false representations to TAM that it would: 1) not hold TAM in default of the credit line and would do so until June 30, 2009; 2) renew the line of credit; 3) not setoff TAM's account; and 4) negotiate in good faith while TAM put together its business proposal. (CR ). The affidavit and deposition testimony of Mike Trevino, which was entered into the summary judgment record, affirms the existence of the representations. Moreover, the June 19 th letter from Frost, which was also part of the summary judgment record, supports the allegation that the representations were made by restating the extension to which TAM alleges Frost agreed upon during the June 4 Meeting. (CR 292). Cumulatively, this summary judgment evidence, at the least, established a genuine issue of material fact regarding the existence of the representations and Frost's interest. b. Frost suppliedfalse information for the guidance of TAM. In the June 4 Meeting, Frost representatives made false representations to TAM that it would: 1) extend the maturity date of the note; 2) renew the line of credit; 3) not setoff TAM's account; and 4) negotiate in good faith while TAM put together its business proposal. (CR ). All of these representations were false, as evidenced by Frost's contradictory actions, including Frost's premature termination of TAM's line of credit and the setoff of TAM's operating account. (CR 293). Frost supplied TAM information for its guidance, extended TAM's credit maturity date, then revealed the falsity of its prior statements by prematurely accelerating the debt and failing to allow TAM to submit its business plan as further discussed 18

19 for the continuation ofthe banking relationship. (CR ). As stated above, these facts were supported by the affidavit of Trevino, Mr. Trevino's deposition testimony, and the Frost letters attached to his affidavit. Importantly, Frost's June 19 and June 22 letters contain the terms ofthe false information and confirms the existence of same. (CR ). This evidence would be strong evidence for a jury to consider, and is overwhelming in the context of defeating a summary judgment on this element. c. Frost did not exercise reasonable care or competence in obtaining or communicating the information to TAM. Trevino testified in his deposition and by affidavit that he communicated to Frost how vital TAM's business line of credit was to its operation. (CR ). It was unreasonable for Frost to represent that it was going to negotiate with TAM in good faith and that it would not setoff TAM's account because Frost knew that TAM's operating account was vital to the life of its business. Id. Frost also knew that TAM had ongoing jobs and Frost did not exercise reasonable care when it represented that it would extend the maturity date on the note and renew TAM's line of credit. Id. If the Frost representatives were unable to do what they told TAM with full knowledge of the implications of the alternative, then they should not have induced TAM to rely upon the statements. Doing so was, at a minimum, failing to communicate information with reasonable care. d. TAMjustijiably relied on Frost's representations. Trevino testified in his deposition and by affidavit that TAM completely relied on Frost's representations based on a previous history with Frost of renewing the line of credit. (CR ). TAM previously entered into a commercial security agreement that secured a business line of credit in the amount of $3.5 million. (CR ). That business loan matured on June 7, 2008.!d. The loan was renewed on August 28, (CR ). Therefore, TAM was 19

20 justified in relying upon Frost's representations because Frost had exhibited a willingness to follow through on such intentions in the past to extend the line of credit. TAM was additionally justified in its reliance because Frost knew the importance of TAM's operating accounts to the survival of its business, thereby underscoring the seriousness with which TAM received such information regarding the line of credit and operating account. (CR ). TAM was also justified in relying on Frost's representations because Frost knew that TAM's outstanding invoices on current construction projects would provide the money needed to pay down the line of credit. (CR ). This information was provided to Frost in the June 4, Meeting as evidenced by Trevino's affidavit and deposition testimony. The cumulative effect of the circumstances known to TAM at the time indicates a clear basis for it to justifiably rely upon express representations made by its long time banking partner. e. Frost's negligent misrepresentation proximately caused TAM's injury. Trevino testified by affidavit and in his deposition that Frost's misrepresentations put TAM out of business (CR ). TAM operated in a manner from June 4,2009 in which the business relied upon Frost's statements. (CR ). When Frost acted contrary to its intentions and drained TAM's operating account without warning, it effectively and directly shut down TAM. TAM was prevented from completing its ongoing construction projects by Frost's misrepresentations. (CR ). TAM has incurred substantial liability because of Frost's misrepresentations and continues to incur damages in excess of seven million dollars.!d. 6. Fourth Cause of Action: Fraud For common-law fraud, the plaintiff must prove (1) a material misrepresentation; (2) that was false when made; (3) that was known by the speaker to be false when it was made or that was made recklessly as a positive assertion without knowledge of its truth; (4) the speaker made 20

21 it with the intent that it should be acted upon; (5) the party justifiably relied on the representation; and (6) the party was injured as a result. See Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573,577 (Tex. 2001). a. Frost made material misrepresentations. As discussed above, Frost made four material misrepresentations to TAM that were supported by Trevino's affidavit. First, at the June 4, Meeting, Frost represented to TAM that it would extend the maturity date of TAM's note on its line of credit. (CR ). In fact, the extension was evidenced by a letter sent by Frost to TAM that was attached to Trevino's affidavit and that was a part of the summary judgment record. (CR 292). The June 19, 2009, letter clearly shows a maturity date of June 30, Id. Second, Frost represented that it would renew TAM's line of credit under the same terms and conditions as it had done previously. (CR ). Third, Frost assured TAM that it would not setoff its accounts because Frost understood the critical importance of those accounts to TAM's business. Id. And fourth, Frost represented to TAM that it would continue to negotiate in good faith while TAM put together a business proposal. Id. h. Frost's material misrepresentations were false when made. Frost's statements were false when made. Frost representative's testified by deposition that they had no intention of extending the maturity date of the note or renewing the line of credit. (CR 264). They also testified that setoff of TAM's account was always an option. (CR 278). In addition, they testified that Frost never gave TAM a chance to present its business proposal. (CR 277). Such testimony categorically established the existence of a fact issue as to the falsity of Frost's representations. 21

22 c. The misrepresentations were known by Frost representative's to be false when was made or were made recklessly as a positive assertion without knowledge of its truth. Record evidence contained in the deposition testimony of Frost's Special Assets Senior Executive Vice President, Jimmy Locke, and Vice President of Special Assets, Todd Weber, revealed that they attended the June 4 Meeting and were the only two Frost members that made representations to TAM at that meeting. (CR 253; 273). They were the Frost representatives with the decision making authority to make those representations and to know that they were false when made. (CR 278). They were false when made because the representations were never acted upon by the same two representatives who had the exclusive decision making authority to: 1) extend the maturity date of the note; 2) renew the line of credit; 3) not setoff the account; and 4) negotiate in good faith while TAM put together its business proposal. In fact, Frost did the opposite of its representations, just a few weeks after it made them to TAM. (CR 293). Frost never renewed the line of credit, instead it setoff TAM's operating account before the line of credit on the note matured and before TAM was able to provide Frost with a business plan. Id. d. Frost representatives made the misrepresentations with the intent that they should be acted upon. Frost's representatives made the false representations to TAM so that TAM would continue to do business with Frost. Frost's behavior was designed to maximize its return on its line of credit with TAM, evidenced in part by Frost's employees testifying by deposition that they never intended to act upon their representations, as well as the timing of when money deposited by TAM into its operating account was removed by Frost. (CR 264; 275). The evidence discussed herein establishes at least a fact issue that Frost wanted TAM to continue to deposit money into its operating account so that TAM could setoff the account, which it did, as soon as TAM made a substantial deposit. 22

23 e. TAMjustifiably relied on Frost's representations. TAM completely relied on Frost's representations based on a previous history with Frost of renewing the line of credit, which was explained by Trevino in his affidavit. (CR ). The history was further evidenced by the business loan agreements attached as evidence. TAM previously entered into a commercial security agreement that secured a business line of credit in the amount of$3.5 million. (CR ). That business loan matured on June 7, Id. The loan was renewed on August 28,2008. (CR ). Therefore, TAM was justified in relying upon Frost's representations because Frost had exhibited a willingness to follow through on such intentions in the past to extend the line of credit. TAM was additionally justified in its reliance because Frost knew the importance of TAM's operating accounts to the survival of its business, thereby underscoring the seriousness with which TAM received such information regarding the line of credit and operating account. (CR ). TAM was also justified in relying on Frost's representations because Frost knew that TAM's outstanding invoices on current construction projects would provide the money needed to pay down the line of credit. Id. In Trevino's affidavit, he testified that this information was provided to Frost in the June 4, Meeting. Id. The cumulative effect of the circumstances known to TAM at the time indicates a clear basis for it to justifiably rely upon express representations made by its long time banking partner. f. TAM was injured as a result of Frost's misrepresentations. As evidenced by Trevino's deposition testimony and affidavit, Frost's misrepresentations put TAM out of business. (CR ). TAM operated in a manner from June 4,2009 in which the business relied upon Frost's statements. Id. When Frost acted contrary to its intentions and drained TAM's operating account without warning, it effectively and directly shut down TAM. 23

24 Id. TAM was prevented from completing its ongomg construction projects by Frost's misrepresentations. Id. TAM has incurred substantial liability because of Frost's misrepresentations and continues to incur damages in access of seven million dollars. Id. 7. Fifth Cause of Action: Conversion To prove an action for conversion, the plaintiff must establish that at the time of conversion it was: 1) the owner of the property; 2) the legal possessor of the property; or 3) a person entitled to immediate possession of the property. FeLT Loans, L.P. v. Estate of Bracher, 93 S.W.3d 469, 482 (Tex. App. -Houston [14 th Dist.] 2002, no pet.). While ordinarily it is true that the non-possessory plaintiff must establish that he or she demanded return of his or her property and that the defendant refused to return it, such demand and refusal are not necessary when the defendant-possessor's acts manifest a clear repudiation of the plaintiffs rights. See Perry Brothers, Inc., 854 F. Supp. at 1274; see also Loomis v. Sharp, 519 S.W.2d 955, 958 (Tex. Civ. App. -Texarkana [6 th Dist.] 1975, writ dism'd). Frost's wrongful setoff of TAM's account amounted to an act manifesting the bank's clear repudiation of TAM's rights to the money it deposited in its operating account to make payroll and constituted an act of conversion. See Perry Brothers, Inc., 854 F. Supp. at Frost converted $660, of TAM's property on June 19, 2009 when Frost exercised unauthorized dominion and control over TAM's readily identifiable funds in its operating account. Id.; CR 293 see generally e.g. Houston Nat 'I Bank v. Biber, 613 S.W.2d 771,774 (Tex. Civ. App. -Houston [14 th Dist.] 1981, writ refd n.r.e.)(recognizing that an action will lie for conversion of money when its identification is possible and there is an obligation to deliver the specific money in question or otherwise particularly treat the specific money). This fact was uncontroverted and supported by the summary judgment evidence which included the deposition 24

25 testimony of Frost representatives Jimmy Locke and Todd Weber and the June 22, 2009 Frost letter. (CR 293). 8. Sixth Cause of Action: Wrongful Setoff The relationship of a bank to a depositor is contractual; it is that of a debtor-creditor arising from the depository contract. See American Bank of Waco v. Waco Automotive, Inc., 818 S.W.2d 163 (Tex. App. -Waco 1991, writ denied). The nature of this relationship authorizes a bank to setoff a debtor's deposits against a debt. See Perry Brothers. Inc., 854 F. Supp. at Setoff is not allowed unless there is actually a mature or past due debt owed by the depositor to the bank. See Bandy v. First State Bank, Overton, Texas, 835 S.W.2d 609 (Tex. 1992). In addition, the bank must provide at least contemporaneous notice of the setoff to the depositor in order for the bank to avoid violating the depositor's rights. Perry Brothers, Inc., 854 F. Supp. at The note owned by Frost matured on June 30, 2009, pursuant to the agreement entered into between the parties and was supported in the record by the Frost letter sent to Trevino on June 19, (CR 292). Frost setoff TAM's account on June 19,2009. (CR 293). Frost setoff TAM's account 11 days before the note matured, which was supported by the June 22, 2009 Frost letter that was part of the summary judgment evidence. (CR 292; 293). And Frost did not give contemporaneous notice to TAM that it setoff TAM's account, waiting until June 22,2009 to do so. (CR 293). Therefore, Frost documents entered into evidence showed that Frost wrongfully setoff TAM's operating account in two separate ways; because it setoff TAM's account before the note matured and because it did not give at least contemporaneous notice to TAM of the setoff. Thus, Frost was not entitled to judgment as a matter of law. 25

26 B. Frost's Traditional Motion for Summary Judgment as to Damages Frost moved for a traditional summary judgment on the question of damages and argued that TAM suffered no damages. In reviewing a grant of summary judgment, the appellate court must consider all the evidence in the light most favorable to the non-movant, indulging all reasonable inferences in favor of the non-movant, to determine whether the movant proved that there were no genuine issues of material fact and that it was entitled to judgment as a matter of law. McMahon Contracting, L.P. v. City of Carrollton, 277 S.W.3d 458 (Tex. App.-Dallas 2009), reh'g overruled, (Mar. 17, 2009). The summary judgment record contains evidence of damages in Trevino's affidavit; the final judgment entered against TAM, which included the underlying pleadings; and the deposition testimony of Trevino. Frost did not offer any evidence to controvert TAM's damages. Instead, Frost argued that TAM did not incur any damages. At best, this creates a genuine issue of material fact. The damages incurred by TAM are recoverable under any of the causes of action brought by TAM against Frost. Damages for breach of contract are those losses that are the "natural, probable, and foreseeable consequence of the defendant's conduct." Mead v. Johnson Group, Inc., 615 S.W.2d 685, 687 (Tex. 1981). The law's remedial goal in the area of promissory estoppel is to allow the victim to recover those damages which have arisen by vice of the detrimental reliance by the victim on the promisor's averments-i.e., those restitutionary measures necessary to put the victim back in the position he or she would have been in had the victim not relied on the broken promise in issue. See Fretz Construction Co., v. Southern Nat 'l Bank, 626 S.W.2d 478, 483 (Tex. 1981). In an action for negligent misrepresentation, the plaintiff can recover actual damages. D.S.A., Inc. v. Hillsboro lsd, 973 S.W.2d 662, 664 (Tex. 1998). The law's objective in fraud cases is to compensate the defrauded party for his or her injuries. State 26

27 Nat '1Bank of El Paso v. Farah Mfg. Co., 678 S.W.2d 661 (Tex.App.-El Paso 1984, writ dism'd per parties settlement agreement). The true damage measure in every fraud case is that which gives the defrauded party the actual amount of his or her pecuniary loss which has directly and proximately resulted from the fraud practiced upon him or her. Id. As a tort, conversion allows damage awards for the value of injuries proximately caused by the defendant's act(s) of conversion and are measured by the sum of money necessary to compensate the plaintiff for all actual losses or injuries sustained, not merely the reasonable market value of the property. Virgil T. Walker Constr. Co. v. Flores, 710 S.W.2d 159, 161 (Tex. App. -Corpus Christi 1986, no writ). As wrongful setoff of a depositor's account is a breach of a banking contract, it gives rise to the proximately-caused, contract-type damages already identified. See e.g., Behring Int'l, Inc. v. Greater Houston Bank, 662 S.W.2d 642 (Tex.App.-Houston [1 st Dist.] 1983, writ dism'd). And it may also give rise to tort damages. See Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex. 1986); Schindler v. Austwell Farmers Cooperative, 829 S.W.2d 283, 288 (Tex.App.- Corpus Christi), aff'd as modified, 841 S.W.2d 853 (Tex. 1992). As part of the summary judgment record, a judgment against TAM along with the underlying pleading was entered into evidence and Trevino testified by deposition and affidavit as to facts supporting TAM's damages. As a direct and proximate result of Frost's conduct, TAM has a judgment against it for over seven million dollars. (CR ). When Frost swept TAM's operating account, TAM was unable to make its payroll and ceased operations virtually overnight. (CR ). At the time, TAM was working on three large construction projects with expected revenue from retainage of well over a million dollars. Id. Trevino testified that Frost knew that sweeping TAM's operating account would put it out of business. Id. And it did. Without the money TAM deposited in its operating account, TAM could not finish the 27

28 jobs it was currently under contract to complete. Id. The surety, Liberty Mutual, had to step in and complete those jobs. Id. Liberty Mutual then obtained a judgment against TAM for $7,055,493.91, which were the costs it incurred to complete the jobs that TAM could not complete because of Frost's conduct. (CR ). The final judgment was attached as summary judgment evidence along with the Original Complaint and Summary Judgment filed by Liberty Mutual as additional evidence of the damages incurred by TAM. Id. CONCLUSION Based on the summary judgment evidence presented to the trial court, as a matter of law, Frost was not entitled to summary judgment because a fact issue exists as to each of the elements of TAM's breach of contract, promissory estoppel, negligent misrepresentation, fraud, conversion, and wrongful setoff claims. In Trevino's affidavit alone, there is more than a scintilla of summary judgment evidence that Frost made several misrepresentations and promises to TAM that it neither honored nor intended to honor. Because more than a scintilla of evidence was presented as to each of TAM's claims and because the only summary judgment evidence in the record supports TAM's damages, TAM should be allowed to bring its claims before a trier of fact. Accordingly, this Court should reverse the summary judgment entered by the trial court, deny Frost's summary judgment and remand the matter to be set for a trial on the merits. PRAYER For the foregoing reasons, Appellant respectfully prays that this Court reverse the decision at the trial court, and remand this matter for a decision on the merits. 28