Vernie Caldwell Marshall II and Marsha Marshall v. Enterprise Bank, Herman Duhr, Jr., and James Hudson, Individually ( 2018 )

IN THE
TENTH COURT OF APPEALS
No. 10-16-00379-CV
VERNIE CALDWELL MARSHALL II
AND MARSHA MARSHALL,
Appellants
v.
ENTERPRISE BANK, HERMAN DUHR, JR.,
AND JAMES HUDSON, INDIVIDUALLY,
Appellees
From the 82nd District Court
Falls County, Texas
Trial Court No. 39367-CV
MEMORANDUM OPINION
In six issues, appellants, Vernie Caldwell Marshall II and Marsha Marshall,
challenge the trial court’s granting of a motion to dismiss filed pursuant to Texas Rule of
Civil Procedure 91a by appellees, Enterprise Bank, Herman Duhr, Jr. and James Hudson.
See TEX. R. CIV. P. 91a. By cross-appeal, appellees contend that the trial court abused its
discretion by failing to award appellees their reasonable and necessary attorney’s fees
after granting their Rule 91a motion to dismiss. Because we affirm the trial court’s order
granting appellees’ Rule 91a motion to dismiss but reverse the portion of the order
denying appellees their attorney’s fees, we affirm, in part, and reverse and remand, in
part.1
I. BACKGROUND
In 1985, appellants purchased property in Falls County, Texas, to start their own
stocker-cattle operation. To finance the business, Vernie took out numerous loans from
Enterprise Bank beginning in 2002. In or around 2006, to protect itself against a prior
default by Vernie, the Bank advised Vernie that it would not extend him any additional
loans unless the loans were guaranteed by a third party.
Thereafter, the Bank discovered a program sponsored by the Farm Services
Agency (‘FSA”), which is part of the United States Department of Agriculture. Under the
FSA’s program, a portion of the bank’s loan for certain agricultural purposes would be
guaranteed.2 To obtain the FSA guarantee, the Bank became a certified FSA lender.
On September 25, 2006, Vernie signed an FSA application to guarantee a potential
$400,000 loan with the Bank to fund his stocker-cattle operations and related expenses.
The FSA approved a guarantee for the Bank for this loan. Thus, on January 31, 2017, the
1 In light of our disposition, we dismiss all pending motions as moot.
2Under the FSA program, in exchange for the lender performing certain services to protect the
FSA, the FSA agrees to guarantee payment and reimburse a lender for up to 95% of any losses between the
lending financial institution and its borrower for a qualifying agricultural loan, such as one for stocker-
cattle operations. The FSA guarantee agreement protects the financial institution, not the borrower.
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Bank loaned Vernie $400,000 under a five-year renewable line of credit. And although
he repaid the 2007 loan, Vernie required additional funds to cover a $127,000 operating
loss in 2007. As such, Vernie requested additional sums in 2008.
On March 7, 2008, Vernie renewed the 2007 loan with the Bank for the sum of
$400,000. This sum was once again guaranteed by the FSA. Proceeds from the 2008
renewal were used to pay the $127,000 operating-loss debt, as well as fund an additional
$227,000 purchase of cattle stockers in March 2008. And, as mentioned in appellants’ live
pleading, the Bank advanced additional funds under the 2008 renewal, and that the loan’s
$400,000 credit limit was “maxed out in early 2008.”
In July 2009, the Bank declared the 2008 renewal in default in the sum of
$183,909.60. However, Vernie was able to obtain a new $875,000, five-year renewable
loan for additional operating and living expenses. The funding of this new loan was
“conditioned” on the agreed restructuring and payment of the $183,909.60 default
amount. This new loan was also covered by a guarantee agreement between the FSA and
the Bank, which provided that one of the purposes of the funds from the loan was to
restructure $198,000 of prior loans, providing for payment of the sum over seven years.
When the Bank refused to renew the $875,000 loan due to the non-payment of
principal in the annual payment of the restructured loan balance, appellants filed suit,
asserting causes of action under the Texas Deceptive Trade Practices Act (“DTPA”), fraud
by misrepresentation, fraud by non-disclosure, and negligent undertaking. In response,
Marshall v. Enterprise Bank, et al. Page 3
appellees filed an original answer denying appellants’ allegations, an original
counterclaim for breach of contract, and later a motion to dismiss under Rule 91a of the
Texas Rules of Civil Procedure. In their motion to dismiss, appellees alleged that
appellants’ DTPA, fraud, and negligent undertaking causes of action fail as a matter of
law and must be dismissed in their entirety. With regard to appellants’ DTPA claims, in
particular, appellees asserted that appellants were not “consumers” who purchased or
leased goods or services under the DTPA; and appellants’ claims were exempt under the
DTPA because they form a series of transactions over $500,000. Appellees also argued
that they did not make any misrepresentations to appellants; that appellants failed to
plead facts showing appellees had a duty to disclose certain information to appellants;
and that appellees did not undertake any duty for appellants’ benefit. Rather, any duty
under the guarantee agreements were solely for the Bank’s benefit to protect its ability to
collect in the event of a default by Vernie.
After a hearing, the trial court granted appellees’ Rule 91a motion to dismiss, but
denied appellees’ request for attorney’s fees. On August 16, 2016, the trial court signed a
final judgment reflecting the granting of appellees’ Rule 91a motion to dismiss, as well as
the dismissal of appellees’ original counterclaim with prejudice. Thereafter, appellants
filed their notice of appeal, and appellees filed a notice of cross-appeal.
Marshall v. Enterprise Bank, et al. Page 4
II. STANDARD OF REVIEW
Texas Rule of Civil Procedure 91a allows a party, with exceptions not applicable
here, to “move to dismiss a cause of action on the grounds that it has no basis in law or
fact.” TEX. R. CIV. P. 91a.1. “A cause of action has no basis in law if the allegations, taken
as true, together with inferences reasonably drawn from them, do not entitle the claimant
to the relief sought.” Id. We review the merits of a Rule 91a motion de novo, because the
availability of a remedy under the facts is a question of law. City of Dallas v. Sanchez, 494
S.W.3d 722, 724-25 (Tex. 2016) (per curiam) (citing Wooley v. Schaffer, 447 S.W.3d 71, 75-76
(Tex. App.—Houston [14th Dist.] 2014, pet. denied)).
III. ANALYSIS
A. Time for Motion and Ruling
In their first issue, appellants argue that the trial court’s order granting appellees’
motion to dismiss is void and unenforceable because it was not signed within forty-five
days after the motion was filed. See TEX. R. CIV. P. 91a.3. In response, appellees concede
that the trial court did not sign the order granting their motion to dismiss within forty-
five days of its filing3; however, appellees argue that appellants cannot show any
prejudice from the trial court’s delayed ruling.
3We note that the movant (here, appellees), whom Rule 91a was intended to benefit by the creation
of an early-dismissal procedure, is ordinarily the party heard to complain about a trial court’s non-
compliance with a deadline under the rule.
Marshall v. Enterprise Bank, et al. Page 5
Rule 91a, which became effective March 1, 2013, instructs that a motion to dismiss
filed under this rule “must” be granted or denied within forty-five days of filing. See id.
at R. 91a.3(c). The usage of the word “must” connotes a mandatory duty or obligation.
See Helena Chem Co. v. Wilkins, 47 S.W.3d 486, 493 (Tex. 2001); see also Walker v. Owens, 492
S.W.3d 787, 790 (Tex. App.—Houston [1st Dist.] 2016, no pet.). Here, the record
demonstrates that the trial court did not comply with the forty-five day deadline, and its
failure to do so was error. See Walker, 492 S.W.3d at 790. However, Rule 91a does not
contain a sanction for non-compliance with the forty-five day deadline. See id. Indeed,
several of our sister courts have recognized this. See Reaves v. City of Corpus Christi, 518
S.W.3d 594, 602 (Tex. App.—Corpus Christi 2017, no pet.) (“First, the Legislature
prescribed no ‘consequences for noncompliance’ with the requirement to rule on the 91a
motion with 45 days.” (citing TEX. R. CIV. P. 91a.3(c); Helena Chem. Co., 47 S.W.3d at 495));
Koenig v. Blaylock, 497 S.W.3d 595, 598 (Tex. App.—Austin 2016, no pet.) (“While it is true
that Rule 91a.3 provides that a motion to dismiss ‘must be . . . granted or denied within
45 days after the motion is filed,’ the Rule does not provide any consequences if a court
takes no action on the motion within the prescribed period.”); Walker, 492 S.W.3d at 790-
91 (“Rule 91a, however, does not contain any sanction for non-compliance with the forty-
five day deadline, and we have not identified any Texas authority addressing the effect
of a trial court’s failure to comply.”).
Marshall v. Enterprise Bank, et al. Page 6
Nevertheless, “the court’s non-compliance with the mandatory language of the
rule will not result in reversal if the error is found to be harmless.” Walker, 492 S.W.3d at
791 (citing Lorusso v. Members Mut. Ins. Co., 603 S.W.2d 818, 820 (Tex. 1980); C.E. Duke’s
Wrecker Serv., Inc. v. Oakley, 526 S.W.2d 228, 233 (Tex. Civ. App.—Houston [1st Dist.] 1975,
writ ref’d n.r.e.)). On appeal, appellants do not identify any prejudice suffered as a result
of the trial court’s failure to rule on appellees’ Rule 91a motion to dismiss within forty-
five days. Furthermore, the record reflects that the parties did not engage in any
discovery or further the litigation process between the hearing date for the motion to
dismiss and the date the order was eventually signed. Accordingly, we conclude that the
trial court’s failure to rule on appellees’ Rule 91a motion to dismiss within forty-five days,
while error, was not harmful to appellants. See Walker, 492 S.W.3d at 791. We therefore
overrule appellants’ first issue.
B. Were Appellants Consumers under the DTPA?
In their second issue, appellants argue that the trial court erred in granting the
motion to dismiss because the pleadings establish that they are consumers under the
DTPA, and thus, their DTPA claim is not baseless in law. In particular, appellants claim
consumer status under the DTPA, asserting that they sought “loan servicing” from
appellees.
“To meet the DTPA’s standing requirement, a complaining party must plead and
prove that he or she is a ‘consumer’ under the Act.” Jones v. Star Houston, Inc., 45 S.W.3d
Marshall v. Enterprise Bank, et al. Page 7
350, 356 (Tex. App.—Houston [1st Dist.] 2001, no pet.) (citing Farmers & Merchants State
Bank of Krum v. Ferguson, 617 S.W.2d 918, 919 (Tex. 1981)). “To establish DTPA consumer
status, a complaining party must show that (1) it ‘has sought or acquired goods or
services by purchase or lease,’ and (2) ‘the goods and services in question must form the
basis of the plaintiff’s complaint.’” Id. (quoting Thompson v. Deloitte & Touche, L.L.P., 902
S.W.2d 13, 19 (Tex. App.—Houston [1st Dist.] 1995, no writ)). Whether one is a consumer
under the DTPA is a question of law. Reule v. M&T Mortg., 483 S.W.3d 600, 614 (Tex.
App.—Houston [14th Dist.] 2015, pet. denied) (citing Holland Mortg. & Inv. Corp. v. Bone,
751 S.W.2d 515, 517 (Tex. App.—Houston [1st Dist.] 1987, writ ref’d n.r.e.)).
Generally, “where the underlying transaction is a loan, consumer status is not
conferred because money is neither a good or service.” Id. (citing Riverside Nat’l Bank v.
Lewis, 603 S.W.2d 169, 173-74 (Tex. 1980)). Here, the evidence demonstrates that
appellants sought loans of money from the Bank to support their stocker-cattle
operations—general inventory—and not for any specific goods or services from the bank.
In an analogous case, Central Texas Hardware sought a loan from a bank—First
City Texas-Bryan, N.A.—and a separate agreement from the Small Business
Administration (“SBA”). Cent. Tex. Hardware, Inc. v. First City Tex.-Bryan, N.A., 810
S.W.2d 234, 236 (Tex. App.—Houston [14th Dist.] 1991, writ denied). Central Texas
Hardware asserted claims under the DTPA against First City, alleging that because First
City did not secure the SBA guarantee agreement as promised, Central Texas Hardware
Marshall v. Enterprise Bank, et al. Page 8
was unable to obtain inventory and was forced to close its business. Id. On appeal, the
Fourteenth Court of Appeals held that Central Texas Hardware was not a consumer
under the DTPA because the loan proceeds sought were to purchase general inventory
instead of a specific good, and that “[t]o the extent that appellants complain about the
bank’s negotiations with the SBA, these ‘services,’ for which no fee was charged, were
merely ancillary to the processing of the loan application itself and thus not ‘services’
under the DTPA.” Id. at 236-27.
Despite the foregoing, appellants cite a litany of cases that we do not find
persuasive. In particular, appellants rely on one case more heavily than the others—Scott
v. Commercial Services of Perry, Inc., 121 S.W.3d 26 (Tex. App.—Tyler 2003, no pet.).
However, like before, we are not persuaded by appellants’ reliance on Scott. Specifically,
the plaintiff in Scott did not allege a DTPA violation, but rather, argued that, among other
things, the bank breached a loan-servicing agreement. Id. at 28. The Tyler Court of
Appeals concluded that the trial court erroneously granted summary judgment for the
bank on Scott’s breach of the loan-servicing agreement claim because the bank did not
“negate at least one element of the cause of action for breach of its duty to service the
loan, nor did it assert any defense thereto.” Id. at 31. The Scott Court did not address the
DTPA, much less consumer status under the DTPA. Therefore, we do not find the Scott
case to be persuasive in our analysis of appellants’ assertion that they are consumers
under the DTPA. Accordingly, based on the foregoing, we cannot say that appellants
Marshall v. Enterprise Bank, et al. Page 9
were consumers within the ambit of the DTPA. As such, we overrule appellants’ second
issue.
C. Did Appellants’ Claims Exceed the $500,000 DTPA Threshold?
In their third issue, appellants assert that the trial court erred in granting the
motion to dismiss on the grounds that the loan transactions, which serve as the basis of
appellants’ DTPA claim, involve monies in excess of $500,000 and that any such claim is
exempt under the DTPA. At the outset, we emphasize that our resolution of the DTPA-
consumer-status issue against appellants renders this issue immaterial. See TEX. R. APP.
P. 47.1, 47.4. In other words, because appellants were not consumers under the DTPA
with regard to the loan transactions, the monetary threshold of the DTPA is irrelevant to
this matter. See TEX. BUS. & COM. CODE ANN. § 17.49(g) (West Supp. 2017) (“Nothing in
this subchapter shall apply to a cause of action arising from a transaction . . . involving
total consideration by the consumer of more than $500,000, other than a cause of action
involving a consumer’s residence.” (emphasis added)); see also Henry v. Cullum Cos., 891
S.W.2d 789, 794 (Tex. App.—Amarillo 1995, writ denied) (“In order to recover under the
DTPA, a plaintiff must initially establish that he or she qualifies as a ‘consumer’ as
defined by the statute. The threshold question of whether or not a plaintiff is a consumer
is a question of law to be determined by the trial court. Failure to qualify as a consumer
under the DTPA will defeat a plaintiff’s claim in that regard.” (internal citations
omitted)). Accordingly, we overrule appellant’s third issue.
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D. Purported Misrepresentations Made by Appellees to Appellants
In their fourth issue, appellants complain that the trial court erred in granting the
motion to dismiss because appellees made material misrepresentations regarding the
loan transactions. Specifically, on appeal, appellants claim that:
In the meeting in Appellee Hudson’s office toward the end of 2007,
Appellee Hudson told Appellant VCM that the loan balance was $127,000,
that they were requiring the entire pre-existing non-guaranteed term loan
to be paid (instead of the $53,000 annual payment the bank had told the
FSA the bank would accept (in order to obtain the guarantee loan
approval)[)].
However, this contention was not made in appellant’s live pleading and cannot serve as
the basis for error on appeal. See In re E.M., 494 S.W.3d 209, 229 (Tex. App.—Waco 2015,
pet. denied) (“In order to preserve error for appellate review, a party’s argument on
appeal must comport with its argument in the trial court.” (citing In re D.E.H., 301 S.W.3d
825, 829 (Tex. App.—Fort Worth 2009, pet. denied))).
In any event, in their live pleading, appellants claim that Hudson filed a false
written statement with the FSA in February 2008 that the $400,000 loan had been fully
paid; represented to the FSA that the reason for the loan extension was for more time to
fatten stockers; and “did not advise the FSA that the bank had paid the $127,000 first year
loss claimed by the bank by carrying the loss forward and charging it to the second year
loan.” None of these purported misrepresentations were made directly to appellants by
appellees or indirectly with the intent that it be made to a third party and relied upon by
appellants. See Exxon Corp. v. Emerald Oil & Gas Co., 348 S.W.3d 194, 217 (Tex. 2011)
Marshall v. Enterprise Bank, et al. Page 11
(stating that in order to prevail on a fraud claim, a plaintiff must, among other things,
allege that the defendant made a misrepresentation either directly to the plaintiff or
indirectly to a third party knowing that the plaintiff would receive and rely on the
representation); Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 578 (Tex.
2001) (same); see also Scott, 121 S.W.3d at 30 (concluding that the borrowers received the
loans they applied for and any misrepresentation was between the bank and the FSA; as
such, the borrowers could not assert a fraud cause of action.”). Moreover, appellants
admit in their live pleading that they fully knew of the $127,000 deficiency that formed
the basis of their fraud claim, which undermines the justifiable-reliance element of
appellants’ fraud cause of action. See Exxon Corp., 348 S.W.3d at 217. Therefore, based
on the foregoing, we overrule appellants’ fourth issue.
E. Duties Owed by Appellees to Appellants
In their fifth and sixth issues, appellants complain that the trial court erred in
granting the motion to dismiss because appellees purportedly engaged in fraud by
nondisclosure, and because appellees’ actions were negligent. However, in making these
arguments, appellants do not cite any authority in support of their contentions, nor do
they include citations to the record. Accordingly, we conclude that these two issues are
inadequately briefed. See TEX. R. APP. P. 38.1(i). We overrule appellant’s fifth and sixth
issues.
Marshall v. Enterprise Bank, et al. Page 12
F. Appellees’ Request for Attorney’s Fees
In their sole issue on cross-appeal, appellees argue that the trial court abused its
discretion by failing to award reasonable and necessary attorney’s fees after granting
their Rule 91a motion to dismiss. We agree.
An appellate court reviews a trial court’s decision on the award of attorney’s fees
for an abuse of discretion. Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998). “Whether to
award attorney’s fees, and to which party, is a decision that is solely within the trial
court’s discretion and will not be reversed absent a clear abuse of that discretion.”
Sammons v. Elder, 940 S.W.2d 276, 284 (Tex. App.—Waco 1997, writ denied). “The test for
an abuse of discretion is not whether, in the opinion of the reviewing court, the facts
present an appropriate case for the trial court’s action, but ‘whether the court acted
without reference to any guiding rules and principles.’” Cire v. Cummings, 134 S.W.3d
835, 838-39 (Tex. 2004) (quoting Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241
(Tex. 1985)).
Texas Rule of Civil Procedure 91a.7 provides that, with exceptions not applicable
here, “the court must award the prevailing party on the motion all costs and reasonable
and necessary attorney fees incurred with respect to the challenged cause of action in the
trial court. The court must consider evidence regarding costs and fees in determining the
award.” TEX. R. CIV. P. 91a.7. As we noted earlier, the usage of the word “must” connotes
a mandatory duty or obligation. See Helena Chem. Co., 47 S.W.3d at 493; see also Walker,
Marshall v. Enterprise Bank, et al. Page 13
492 S.W.3d at 790. Indeed, other Texas courts have concluded that Rule 91a.7 mandates
an award of attorney’s fees to a prevailing party, and the award is not discretionary. See
Weizhong Zheng v. Vacation Network, Inc., 468 S.W.3d 180, 187 (Tex. App.—Houston [14th
Dist.] 2015, pet. denied) (“Undisputedly, the rule mandates an award of attorney’s fees
to a prevailing party, and the award is not discretionary.”); In re Butt, 495 S.W.3d 455, 467
(Tex. App.—Corpus Christi 2016, orig. proceeding); see also Drake v. Chase Bank, No. 02-
13-00340-CV, 2014 Tex. App. LEXIS 12572, at *5 (Tex. App.—Fort Worth Nov. 20, 2014,
no pet.) (mem. op.).
Here, the record reflects that the trial court granted appellees’ Rule 91a motion to
dismiss, but declined to award appellees their attorney’s fees. Because appellees are the
prevailing party, and because Rule 91a.7 mandates an award of attorney’s fees to the
prevailing party, we reverse the portion of the trial court’s judgment denying appellees
their attorney’s fees and remand this proceeding for a hearing to determine and award
appellees their reasonable and necessary attorney’s fees under Rule 91a.7. See TEX. R. CIV.
P. 91a.7; Koenig, 497 S.W.3d at 601 (remanding a case to the trial court for a determination
of the amount of reasonable and necessary attorney’s fees and costs to be awarded under
Rule 91a.7). Accordingly, we sustain appellees’ sole issue on cross-appeal.
IV. CONCLUSION
Based on the foregoing, we affirm the portion of the trial court’s order granting
appellees’ Rule 91a motion to dismiss; however, we reverse the portion of the order
Marshall v. Enterprise Bank, et al. Page 14
denying appellees their reasonable and necessary attorney’s fees and remand for
proceedings consistent with this opinion.
AL SCOGGINS
Justice
Before Chief Justice Gray,
Justice Davis, and
Justice Scoggins
Affirmed, in part, reversed and remanded, in part
Opinion delivered and filed September 5, 2018
[CV06]
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