Barney Barnett v. Legacy Bank of Texas and Elaine Edinger ( 2003 )

                                                             11th Court of Appeals

                                                                  Eastland, Texas

                                                             Memorandum Opinion

Barney Barnett

Appellant

Vs.                   No. 11-02-00114-CV B Appeal from Collin County

Legacy Bank of Texas and Elaine Edinger

Appellees

Legacy Bank of Texas brought this action against Barney Barnett seeking to recover for breach of two limited guaranty agreements that Barnett signed in connection with loans that Legacy Bank made to Coppell North Texas Court, Ltd. (Coppell North).^[1]  Barnett filed a counterclaim against Legacy Bank, alleging claims for breach of contract, fraud, negligent misrepresentation, promissory estoppel, quantum meruit, and unjust enrichment.  The trial court granted summary judgment to Legacy Bank on its claims for Barnett=s breach of the limited guaranty agreements and on Barnett=s claims. Barnett filed a third-party claim against Elaine Edinger, an employee of Legacy Bank, alleging claims for fraud and negligent misrepresentation.  The trial court granted summary judgment to Edinger on Barnett=s claims.  In this appeal, Barnett asserts that the trial court erred in granting summary judgment to Legacy Bank and Edinger and in denying summary judgment to him on his claims against Legacy Bank and Edinger.  We affirm.

                                                                Background Facts   

Coppell North, as owner, and Barnett, as contractor, entered into a contract for the construction of the North Texas Family & Sports Center (the Project).  Legacy Bank made two Small Business Administration (SBA) loans to Coppell North to fund the construction.  In connection with the loans, Coppell North signed two promissory notes in the principal amounts of $1,105,000 and $705,000, and Barnett signed limited guaranty agreements guaranteeing payment of a total of 4 percent of the outstanding balance of principal and interest on the notes. 

Barnett began construction of the Project.  Per the agreement of the parties, Barnett submitted periodic Adraw@ requests to Legacy Bank seeking payment for work performed during construction.  Legacy Bank funded the loans to Coppell North by paying Adraw@ requests that it approved.  Barnett=s fourth Adraw@ request included a change order that would increase construction costs for the Project by $354,732.  Coppell North sought additional funding from Legacy Bank to cover the cost reflected in the change order.  Barnett claims that Edinger told him that Legacy Bank had approved the change order and would loan funds to Coppell North to cover the increased cost. Edinger claims that she never told Barnett that Legacy Bank would loan additional funds to Coppell North.  Legacy Bank did not loan the additional funds to Coppell North.   

In the meantime, Barnett continued to work on the Project.  He submitted a total of nine Adraw@ requests. Legacy Bank paid Barnett=s Adraw@ requests until the two loans were fully funded. Legacy Bank paid the first through the seventh Adraw@ requests and a portion of the eighth Adraw@ request but did not pay the remainder of the eighth Adraw@ request or the ninth Adraw@ request. Barnett claims that he could not complete construction of the Project because of Legacy Bank=s failure to pay the remainder of the eighth Adraw@ request and the ninth Adraw@ request.

Coppell North defaulted on the notes, and Legacy Bank sought to foreclose on the property.  On December 6, 1999, Barnett d/b/a Superior Built Construction filed suit against Legacy Bank in the 68th Judicial District Court of Dallas County, Cause No. DF99-09520-C.  Barnett alleged breach of contract and fraud claims based upon Edinger=s alleged representations that Legacy Bank had approved the change order and that the Adraw@ requests would be paid.

On January 10, 2000, Legacy Bank filed this suit. Barnett moved to transfer venue of this cause to Dallas County on the ground that this cause involved the same facts and circumstances as his earlier-filed Dallas County cause.

On June 6, 2000, Legacy Bank foreclosed on the property. The property sold for $1,675,000, resulting in a deficiency to Legacy Bank of over $325,000. 

On August 3, 2000, Barnett filed a motion to abate this cause asserting that, because the subject matter of this cause was inherently interrelated to the subject matter of the earlier-filed Dallas County cause, the trial court was required to abate this action.  On the same date, Barnett filed his counterclaim in this cause alleging claims against Legacy Bank arising from Edinger=s alleged misrepresentations.  On September 7, 2000, the trial court denied Barnett=s motion to transfer venue and motion to abate.^[2]    

Legacy Bank and Barnett both filed motions for summary judgment.  In separate orders, the trial court (1) granted Legacy Bank summary judgment on its claims for breach of the two guaranty agreements, (2) granted Legacy Bank summary judgment on Barnett=s counterclaims, and (3) denied Barnett summary judgment on his claims.  Barnett then filed a third-party claim against Edinger for alleged fraud and negligent misrepresentation.  Edinger and Barnett both filed motions for summary judgment on these claims.  In separate orders, the trial court granted Edinger summary judgment and denied Barnett summary judgment.  

                                                                  Issues Presented

Barnett presents ten issues for appellate review. In his first eight issues, he complains that the trial court erred in granting summary judgment to Legacy Bank and Edinger for various reasons.  In his ninth issue, he asserts that the trial court erred in granting summary judgment to Edinger because she is personally liable for any tortious conduct that she committed.  In his tenth issue, Barnett asserts that the trial court erred in denying his motion to transfer and consolidate and his motion to abate.

                                                Summary Judgment Standard of Review

Legacy Bank, Edinger, and Barnett filed traditional motions for summary judgment.  We will apply the well-recognized standard of review for traditional summary judgments. We must consider the summary judgment evidence in the light most favorable to the non-movant, indulging all reasonable inferences in favor of the non-movant, and determine whether the movant proved that there were no genuine issues of material fact and that the movant was entitled to judgment as a matter of law.  Nixon v. Mr. Property Management Company, Inc., 690 S.W.2d 546 (Tex.1985); City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671 (Tex.1979).  To prevail as a defendant, the movant must negate, as a matter of law, one or more elements of each of the plaintiff=s causes of action or prevail, as a matter of law, on a defense as to each of the plaintiff=s causes of action.  American Tobacco Company, Inc. v. Grinnell, 951 S.W.2d 420, 425 (Tex.1997).  When a defendant moves for summary judgment based on an affirmative defense, the defendant bears the burden of proving each element of the affirmative defense.  Ryland Group, Inc. v. Hood, 924 S.W.2d 120, 121 (Tex.1996); Swilley v. Hughes, 488 S.W.2d 64, 67 (Tex.1972).  If the movant establishes the defense, then, to defeat summary judgment, the non-movant must come forward with summary judgment evidence establishing the existence of a fact issue (1) on the movant=s affirmative defense or (2) on a defense to the movant=s affirmative defense.   AMoore@ Burger, Inc. v. Phillips Petroleum Company, 492 S.W.2d 934, 936-37 (Tex.1972); Torres v. Western Casualty and Surety Company, 457 S.W.2d 50 (Tex.1970).

                                                     The Summary Judgment Evidence

Barnett=s affirmative defenses and affirmative claims for relief are based on Legacy Bank=s alleged promise to loan additional funds to Coppell North to cover the cost of the change order.  In an affidavit, Barnett asserted: (1) that his fourth Adraw@ request included a change order that increased the total cost of the Project by $354,732; (2) that, in January 1999, Edinger and Steve Young, another employee of Legacy Bank, told him that the change order had been approved; (3) that Legacy Bank subsequently paid the fourth Adraw@ request; (4) that the fifth, sixth, and seventh Adraw@ requests each reflected the change order in the amount of $354,732 and the revised total cost for the project of $2,314,732; (5) that Legacy Bank paid the fifth, sixth, and seventh Adraw@ requests; (6) that, on or about May 15, 1999, Barnett submitted his eighth Adraw@ request in the amount of $72,002; (7) that Edinger represented that there was a slight delay in funding the eighth Adraw@ request because a signature had been mistakenly omitted when the change order had been approved, but that the omission was just a technicality;  (8) that Edinger stated that the Aeighth@ draw request would be paid in a few weeks; (9) that Edinger asked Barnett and his subcontractors to continue construction; (10) that Edinger told him that, if the other lender did not fund the loan, Legacy Bank would provide the additional financing; (11) that, in reliance on Edinger=s representations, Barnett and his subcontractors continued construction; (12) that Edinger stated that the other lender had changed some of the loan terms and that the changes were not acceptable to Legacy Bank and Coppell North; (13) that Edinger stated that a new lender would be found or, if another lender could not be found, that Legacy Bank would provide the additional financing; (14) that his understanding, based upon Edinger=s and Young=s representations, was that Legacy Bank was promising to sign written documents, or had already done so, that would evidence the increased loan amount; (15) that he submitted his ninth Adraw@ request to Legacy Bank in June of 1999; (16) that Edinger represented that Legacy Bank would pay the outstanding draw requests and again requested that he and his subcontractors continue construction; (17) that Legacy Bank only paid him the sum of $20,000 toward the amount due on the eighth Adraw@ request, leaving an unpaid balance of $52,002, and that Legacy Bank never paid the ninth draw request in the amount of $345,265; and (18) that Barnett was forced to stop construction on the Project in July 1999 because of Legacy Bank=s failure to pay the Adraw@ requests.

Barnett also presented excerpts from the deposition of David J. Lewis as summary judgment evidence.  Lewis testified that Edinger told him that Legacy Bank had approved the change order and that, if PMC Capital, Inc. would not loan the additional funds, then Legacy Bank would loan the additional funds or find another lender to loan the funds.

In her affidavit, Edinger stated, in part, as follows: (1) that she never represented, stated, or told Barnett that any change order was approved for payment and would be paid; (2) that any change orders required the approval of Legacy Bank=s Officer=s and Director=s Loan and Discount Committees, the SBA, PMC, and North Texas Certified Development Corporation (CDC); (3) that she never indicated, stated, represented, suggested, or implied to Barnett that Legacy Bank was promising to sign written documents, or had already done so, that would evidence an increased loan amount in connection with the Project; (4) that there was a requested change order that resulted from  Lewis of Coppell North telling her that he did not have enough money to complete the Project because of an increase in the cost of concrete; (5) that Legacy Bank was willing to approve the change order arising from the increased cost of concrete, but only subject to approval by (a) the SBA (inasmuch as a portion of this loan was guaranteed by the SBA), (b) PMC, the secondary market lender (inasmuch as PMC had already committed to buy the first lien), and (c) CDC, a privately-owned SBA funding source; (6) that she repeatedly explained to Lewis and Barnett that Legacy Bank=s approval of the change order was subject to these additional approvals; (7) that Legacy Bank did not obtain approvals of the change order from the SBA, PMC, and CDC; (8) that, at the time the change order was proposed, the Project was already in excess of budget, Legacy Bank had funded both notes, and both notes were in default for failure of payment; (9) that she advised Lewis that he would have to come up with approximately $400,000 to finish the Project and that Legacy Bank would not loan additional funds to Coppell North to finish the Project; (10) that she told Lewis and Barnett that Legacy Bank would not loan additional funds to Coppell North; (11) that, throughout the entire process, she repeatedly advised Barnett that Legacy Bank needed secondary market-lending-source approval to loan the additional funds; (12) that Barnett told her that he understood; (13) that, when that approval was not forthcoming, she told Barnett and Lewis immediately; and (14) that the Project was no more than 60 percent complete at the time the loans were fully funded.

                                    Barnett=s Contract Claims and Defenses

In his first issue, Barnett asserts that the trial court erred in granting summary judgment to Legacy Bank and Edinger on his breach of contract claims and defenses.  In his sixth and seventh issues, Barnett argues that the trial court erred in concluding that the statute of frauds barred his contract claims. Barnett claims that Legacy Bank agreed to loan Coppell North an amount in excess of $300,000 to cover the cost reflected in the change order.  The statute of frauds set forth in TEX. BUS. & COM. CODE ANN. ' 26.02(b) (Vernon 2002) provides:

A loan agreement in which the amount involved in the loan agreement exceeds $50,000 in value is not enforceable unless the agreement is in writing and signed by the party to be bound or by that party=s authorized representative.

Thus, the agreement alleged by Barnett is subject to Section 26.02(b) because it was a loan agreement in which the amount involved exceeded $50,000. Barnett asserts, however, that TEX. BUS. & COM. CODE ANN. ' 26.02 (Vernon 2002) does not bar his contract claim for four reasons:  (1) Legacy Bank=s representatives signed a writing complying with the statute of frauds; (2) the statute of frauds does not preclude evidence of subsequent oral modifications to the original loan agreements because the agreements were not integrated; (3) the doctrine of promissory estoppel prevents Legacy Bank from asserting the statute of frauds defense; and (4) the doctrine of partial performance precludes Legacy Bank from asserting the statute of frauds defense.

It is not necessary that a contract itself be in writing to satisfy the statute of frauds.  Rather, the statute of frauds requires that there be a written memorandum which is complete within itself in every material detail and which contains all of the essential elements of the agreement, so that the contract can be ascertained from the writings without resorting to oral testimony.  Cohen v. McCutchin, 565 S.W.2d 230, 232 (Tex.1978); Maginn v. Norwest Mortgage, Inc., 919 S.W.2d 164, 167 (Tex.App. B Austin 1996, no writ).  Barnett relies on a written AModification to Loan Application@ that was initialed by two Legacy Bank employees. The AModification to Loan Application@ provided that A[t]his modification is being requested to increase the bank=s total commitment to [Coppell North] by $288,787.@  It also provided that, while Legacy Bank had internally approved the modification to increase the loan amount, the modification was subject to the approval of the SBA, CDC, and PMC.    

In Maginn, borrowers alleged that a lender breached a contract to loan them money.  They asserted that a written memorandum satisfied the statute of frauds.  The court of appeals held that the memorandum did not satisfy the statute of frauds:

The statute of frauds [Section 26.02] requires the written agreement or memorandum to be complete within itself in every material detail and to contain all of the essential elements of the agreement so that the contract can be ascertained from the writings without resort to oral testimony.

The Moss memorandum contains neither a promise, an agreement, nor a commitment to loan....Having examined the Afour corners@ of the document, we conclude as a matter of law that the [writing] does not satisfy the statute of frauds. (Citation omitted)

Maginn v. Norwest Mortgage, Inc., supra at 167.

In this case, the AModification to Loan Application@ did not contain a promise, an agreement, or a commitment to loan.  Rather, it expressly conditioned the loan modification on the approval of the SBA, CDC, and PMC.  It did not satisfy the statute of frauds.  See Maginn v. Norwest Mortgage, Inc., supra at 167.

Barnett relies on Digby v. Texas Bank, 943 S.W.2d 914 (Tex.App. B El Paso 1997, writ den=d), in arguing that the statute of frauds did not apply to Legacy Bank=s agreement to loan additional funds because the original agreements were not integrated.  The Digby court determined that the security agreement and note before it were not integrated and, therefore, did not preclude consideration of parol evidence suggesting the existence of oral modifications made after the original writings.  Digby v. Texas Bank, supra at 928-29. 

Digby is distinguishable from this case for at least two reasons.  In this case, the alleged modification involved an agreement to loan an amount in excess of $50,000.  When a modification encompasses a matter required by the statute of frauds to be in writing, the modification is unenforceable unless it is in writing.  Garcia v. Karam, 276 S.W.2d 255, 257 (Tex.1955).  The alleged modification, standing alone, was subject to Section 26.02(b) and was, therefore, unenforceable.

Additionally, in this case, the original loan agreements were integrated.  Section 26.02(e) of the Business and Commerce Code requires that written loan agreements involving more than $50,000 contain a Amerger@ clause.  See Maginn v. Norwest Mortgage, Inc., supra at 168.  Section 26.02(e) provides:

[T]he financial institution shall give notice to the debtor or obligor of the provisions of Subsections (b) and (c) of this section.  The notice must be in a separate document signed by the debtor or obligor or incorporated into one or more of the documents constituting the loan agreement....The notice must state substantially the following:

This written loan agreement represents the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties.

There are no unwritten oral agreements between the parties.  (Footnote omitted)   

Legacy Bank complied with Section 26.02(e).  It provided the required notice to Coppell North and Barnett. Coppell North and Barnett signed (1) disclaimers of oral agreements in connection with both loans that included the language required by Section 26.02(e) and (2) a construction loan agreement that included the language required by Section 26.02(e).  The  security agreement in Digby did not contain such a Amerger@ clause.  Also, in this case, Section 8.02 of the construction loan agreement provided as follows:

Entire Agreement and Modifications.  The Loan Documents constitute the entire understanding and agreement between the undersigned with respect to the transactions arising in connection with the Loan and supersede all prior written or oral understandings and agreements between the undersigned in connection therewith.  No provision of this Agreement or the other Loan Documents may be modified, waived, or terminated except by instrument in writing executed by the party against whom a modification, waiver, or termination is sought to be enforced.

In this case, the language in the agreements establishes that they were intended to be the final, integrated agreements of the parties. The reasoning of Digby does not apply.       

Barnett raised promissory estoppel as a defense to Legacy Bank=s claim that the statute of frauds bars his contract claim.  The elements of promissory estoppel are: (1) a promise; (2) forseeability of reliance thereon by the promisor; and (3) substantial reliance by the promisee to his detriment.  English v. Fischer, 660 S.W.2d 521, 524 (Tex.1983).  Promissory estoppel precludes a statute of frauds defense in two situations: (1) where the promise to be enforced is the signing of a written agreement complying with the statute or (2) where there is reliance on a misrepresentation that the statute has been satisfied.  AMoore@ Burger, Inc. v. Phillips Petroleum Company, supra at  937; Ford v. City State Bank of Palacios, 44 S.W.3d 121, 139 (Tex.App. B Corpus Christi 2001, no pet=n); Collins v. Allied Pharmacy Management, Inc., 871 S.W.2d 929, 936-37 (Tex.App. B Houston [14th Dist.] 1994, no writ). In the summary judgment context, Barnett had the burden to raise a fact issue on his promissory estoppel defense. See AMoore@ Burger, Inc. v. Phillips Petroleum Company, supra at 936-37; Birenbaum v. Option Care, Inc., 971 S.W.2d 497, 504 (Tex.App. B Dallas 1997, no pet=n). In his affidavit, Barnett stated that, based upon Edinger=s and Young=s representations, his understanding was Athat the Bank was promising to sign written documents, or had already done so, that would evidence the increased loan amount.@ However, there is no summary judgment evidence (1) that any Legacy Bank employee represented that Legacy Bank would sign a written agreement complying with the statute of frauds or (2) that Legacy Bank promised or agreed to sign an agreement complying with the statute of frauds.  Barnett=s statement as to Ahis understanding@ is no evidence that Legacy Bank either promised to sign a written agreement that complied with the statute of frauds or misrepresented that the statute of frauds had been satisfied.  Barnett did not raise a fact issue on his promissory estoppel defense.

Barnett asserts that the statute of frauds does not apply to his contract claims and defenses because he partially performed under the contract. Contracts that have been partially performed, but do not meet the requirements of the statute of frauds, may be enforced in equity if denial of enforcement would amount to a virtual fraud. Carmack v. Beltway Development Company, 701 S.W.2d 37, 40 (Tex.App. B Dallas 1985, no writ).  The fraud arises when there is strong evidence establishing the existence of an agreement and its terms; when the party acting in reliance on the contract has suffered a substantial detriment for which he has no adequate remedy; and when the other party, if permitted to plead the statute, would reap an unearned benefit.  Exxon Corporation v. Breezevale Limited, 82 S.W.3d 429, 439 (Tex.App. B Dallas 2002, pet=n den=d)(citing Carmack v. Beltway Development Company, supra.)  The partial performance must be Aunequivocally referable to the agreement and corroborative of the fact that a contract actually was made.@ Exxon Corporation v. Breezevale Limited, supra at 439 (citing Wiley v. Bertelsen, 770 S.W.2d 878, 882 (Tex.App. B  Texarkana 1989, no writ), and Chevalier v. Lane=s, Inc., 213 S.W.2d 530, 533-34 (Tex.1948)). The acts of performance relied upon to take a parol contract out of the statute of frauds must be such as could have been done with no other design than to fulfill the particular agreement sought to be enforced; otherwise, they do not tend to prove the existence of the parol agreement relied upon by the plaintiff. Exxon Corporation v. Breezevale Limited, supra at 439-40 (citing Teague v. Roper, 526 S.W.2d 291, 293 (Tex.Civ.App. B Amarillo 1975, writ ref=d n.r.e.), and Francis v. Thomas, 106 S.W.2d 257, 260 (Tex.1937)).

Barnett claims that he continued working on the Project based on Legacy Bank=s promise to loan the additional funds.  However, Barnett=s contract with Coppell North required him to perform the construction work on the Project. Barnett=s work could be referable to his contract with Coppell North.  There is no evidence that his services were Aunequivocally referable@ to Legacy Bank=s alleged promise to loan additional funds.  See Exxon Corporation v. Breezevale Limited, supra at 440.  Barnett did not raise a fact issue on his partial performance defense.

The statute of frauds bars Barnett=s contract claims and defenses. Barnett=s first, sixth, and seventh issues are overruled. 

                         Barnett=s Fraud and Negligent Misrepresentation Claims and Defenses

In his second issue, Barnett asserts that the trial court erred in granting summary judgment to Legacy Bank and Edinger on his fraud and negligent misrepresentation claims.  The elements of a cause of action for fraud are: (1) a material representation was made; (2) which was false; (3) which was either known to be false when made or was asserted without knowledge of its truth; (4) which was intended to be acted upon; (5) which was relied upon; and (6) which caused injury. Formosa Plastics Corporation USA v. Presidio Engineers and Contractors, Inc., 960 S.W.2d 41, 47 (Tex.1998); De Santis v. Wackenhut Corporation, 793 S.W.2d 670, 688 (Tex.1990).  To establish a fraud claim based on a promise of future performance, a party must prove that the promise was made with no intention of performing at the time it was made.  Formosa Plastics Corporation USA v. Presidio Engineers and Contractors, Inc., supra at 48 (citing Schindler v. Austwell Farmers Cooperative, 841 S.W.2d 853, 854 (Tex.1992)).

The well-established standards for reviewing a summary judgment require that we take Barnett=s affidavit as true, indulge every reasonable inference in his favor, and resolve any doubts in his favor.  Nixon v. Mr. Property Management Company, Inc., supra at 548-49. Barnett=s fraud claim is based on Edinger=s representations that Legacy Bank had approved the change order and would loan the additional funds to Coppell North to cover the cost of the change order if the other lender would not loan the funds.  Legacy Bank=s alleged promise that it would loan additional funds if another lender did not loan the funds was a promise of future performance.  There is no summary judgment evidence that Edinger, or any other Legacy Bank employee, made a promise to loan additional funds with no intention of performing the promise at the time that it was made.  Barnett did not raise a fact issue on the third element of his fraud claim. 

The elements of a cause of action for negligent misrepresentation are: (1) a representation was made by a defendant in the course of his business or in a transaction in which he has a pecuniary interest; (2) the defendant supplied Afalse information@ for the guidance of others in their business; (3) the defendant did not exercise reasonable care or competence in obtaining or communicating the information; and (4) the plaintiff suffered a pecuniary loss by justifiably relying on the representation.  Federal Land Bank Association of Tyler v. Sloane, 825 S.W.2d 439, 442 (Tex.1991). Significantly, the sort of Afalse information@ contemplated in a negligent misrepresentation case is a misstatement of Aexisting fact,@ not a promise of future conduct. Allied Vista, Inc. v. Holt, 987 S.W.2d 138, 141 (Tex.App. B Houston [14th Dist.] 1999, pet=n den=d)(citing Airborne Freight Corporation, Inc. v. C.R. Lee Enterprises, Inc., 847 S.W.2d 289, 294 (Tex.App. B El Paso 1992, writ den=d)). Barnett=s negligent misrepresentation claims and fraud claims are based on the same representations.  Edinger=s alleged representation that Legacy Bank would loan additional funds if another lender did not loan the funds was a promise of future conduct.  There is no summary judgment evidence that any Legacy Bank employee misstated an existing fact.  Barnett failed to raise a fact issue on the Afalse information@ element of his negligent misrepresentation claim.  Barnett=s second issue is overruled.   

                         Barnett=s Unjust Enrichment and Quantum Meruit Claims and Defenses

In his third issue, Barnett argues that the trial court erred in granting summary judgment to Legacy Bank and Edinger on his unjust enrichment and quantum meruit claims and defenses.  A party may recover under an unjust enrichment theory when another party has obtained a benefit from it by fraud, duress, or the taking of an undue advantage.  Heldenfels Brothers, Inc. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex.1992).  The party seeking to recover under an unjust enrichment theory must show that the benefit or profit to the other party was Aunjust@ under principles of equity.  Zapata Corporation v. Zapata Gulf Marine Corporation, 986 S.W.2d 785, 788 (Tex.App. B Houston [1st Dist.] 1999, no pet=n). Barnett asserts that the additional construction work that he performed in reliance on Edinger=s representations increased the value of the property and, therefore, that Legacy Bank received more for the property at the foreclosure sale.  Thus, Barnett contends that Legacy Bank was unjustly enriched as a result of his work. However, the foreclosure sale resulted in a deficiency in excess of $325,000 to Legacy Bank.  In light of the substantial deficiency, Legacy Bank was not unjustly enriched.  Additionally, even if Legacy Bank benefitted to some extent from Barnett=s services, the benefit was not Aunjust@ under the principles of equity.

Quantum meruit is an equitable theory of recovery which is based on an implied agreement to pay for benefits received. Heldenfels Brothers, Inc. v. City of Corpus Christi, supra at 41 (citing Vortt Exploration Company, Inc. v. Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex.1990)).  To recover under a quantum meruit theory, the plaintiff must establish that: (1) valuable services or materials were furnished, (2) to the party sought to be charged, (3) which were accepted by the party sought to be charged, and (4) under such circumstances as reasonably notified the recipient that the plaintiff, in performing, expected to be paid by the recipient.  Heldenfels Brothers, Inc. v. City of Corpus Christi, supra. 

Barnett=s contract with Coppell North required him to build the Project.  Barnett claims that his construction work benefitted Legacy Bank by increasing the value of the property.  Although his construction work may have benefitted Legacy Bank to some extent, such a benefit would not permit Barnett to recover against Legacy Bank under a quantum meruit theory.  It is well settled that:

No one can legally claim compensation for...incidental benefits and advantages to one, flowing to him on account of services rendered to another by whom the [services provider] may have been employed.

Bashara v. Baptist Memorial Hospital System, 685 S.W.2d 307, 310 (Tex.1985)(quoting Landman v. State, 97 S.W.2d 264, 265 (Tex.Civ.App. B El Paso 1936, writ ref=d)).  Any benefits flowing to Legacy Bank from Barnett=s services to Coppell North were incidental.  Barnett=s third issue is overruled.

                                         Barnett=s Claims Against Edinger

In his ninth issue, Barnett asserts that Edinger is personally liable on his fraud and negligent misrepresentation claims. Because we have held that the trial court=s grant of summary judgment to Legacy Bank and Edinger was proper on Barnett=s fraud and negligent misrepresentation claims, Barnett=s ninth issue is overruled.

                                            Venue and Abatement Issues

In his tenth issue, Barnett argues that the trial court abused its discretion in denying his motion to transfer venue and consolidate and his motion to abate this cause because the subject matter of this cause is inherently interrelated to the subject matter of his earlier-filed Dallas County suit.  To succeed on his plea in abatement, Barnett had the burden to allege and prove: (1) the Dallas County suit was commenced first; (2) it was still pending; (3) the same parties were involved; and (4) the controversies were the same.  In re Sims, 88 S.W.3d 297, 303 (Tex.App. B San Antonio 2002, no pet=n)(citing Southern County Mutual Insurance Company v. Ochoa, 19 S.W.3d 452, 468 (Tex.App. B Corpus Christi 2000, no pet=n)). 

When the subject matter of two suits is inherently interrelated, the trial court is required to grant a timely plea in abatement in the later-filed action.  Wyatt v. Shaw Plumbing Company, 760 S.W.2d 245, 247  (Tex.1988).  Courts consider two factors in determining whether the subject matter of two suits is inherently interrelated: (1) whether the claim alleged in the second suit could be classified as a compulsory counterclaim to the first action and (2) whether the parties in the second action were Apersons to be joined if feasible.@ Wyatt v. Shaw Plumbing Company, supra at 247; City of Irving, Texas v. Dallas/Fort Worth International Airport Board, 894 S.W.2d 456, 463 (Tex.App. B Fort Worth 1995, writ den=d).  If the claim in the second suit is not a compulsory counterclaim to the first action, the trial court is not required to abate the second action. City of Irving, Texas v. Dallas/Fort Worth International Airport Board, supra at 463.    

A counterclaim is compulsory if it meets the following elements: (1) it is within the jurisdiction of the court; (2) it is not, at the time of filing the answer, the subject of a pending action; (3) the action is mature and owned by the pleader at the time of filing the answer; (4) it arises out of the transaction or occurrence that is the subject matter of the opposing party=s claim; (5) it is against an opposing party in the same capacity; and (6) it does not require for its adjudication the presence of third parties over whom the court cannot acquire jurisdiction.  TEX.R.CIV.P. 97(a); Wyatt v. Shaw Plumbing Company, supra at 247.

Legacy Bank asserts that the two suits did not arise out of the same transaction or occurrence.  Generally, the courts apply a logical relationship test to determine what constitutes a transaction or occurrence.  A counterclaim is compulsory under this test if the same essential facts are significantly and logically relevant to both claims.  See Community State Bank v. NSW Investments, L.L.C., 38 S.W.3d 256, 258 (Tex.App. B Texarkana 2001, pet=n dism=d w.o.j.); Jack H. Brown & Company, Inc. v. Northwest Sign Company, Inc., 718 S.W.2d 397, 400 (Tex.App. B Dallas 1986, writ ref=d n.r.e.).  The issue whether two lawsuits arise out of the same transaction or occurrence is largely left to the trial court=s discretion.  White v. Rupard, 788 S.W.2d 175, 178 (Tex.App. B Houston [14th Dist.] 1990, writ den=d).

In the Dallas County suit, Barnett sought to enjoin Legacy Bank from foreclosing on the property.  He alleged breach of contract and fraud claims against Legacy Bank based on Edinger=s alleged representations that Legacy Bank would provide additional funding to pay his Adraw@ requests. In this suit, Legacy Bank sought to recover on the two promissory notes and the guaranty agreements related to those notes.  Barnett did not dispute that Legacy Bank funded these notes.  Rather, Barnett=s claims in the Dallas County suit were based on representations that he alleged occurred months after the execution of the promissory notes and guaranty agreements. In his brief, Barnett asserts that his Adefenses, counterclaims and third party claims arise from the Bank=s and Edinger=s activity separate from and independent of Barnett=s guaranty obligations arising from his 4% limited guaranty.@  Barnett=s claims are based on different facts and occurrences than those of Legacy Bank.  Therefore, Legacy Bank=s claim against Barnett was not a compulsory counterclaim.  See Goins v. League Bank and Trust, 857 S.W.2d 628, 630 (Tex.App. B Houston [1st Dist.]1993, no writ).

Because Legacy Bank=s claim could not be classified as a compulsory counterclaim, the  subject matter of the two suits was not inherently interrelated.  Thus, the trial court was not required to abate this cause.  City of Irving, Texas v. Dallas/Fort Worth International Airport Board, supra at 463.  The trial court did not abuse its discretion in denying Barnett=s motion to transfer venue and consolidate and motion to abate.  Barnett=s tenth issue is overruled.

                                                             Barnett=s Other Issues

In Barnett=s fourth, fifth, and eighth issues, he argues that the trial court erred in granting summary judgment because: Legacy Bank failed to seek the additional approvals for the loan; the waiver provision in the guaranty agreements that Barnett signed does not apply to his claims and defenses; and Barnett did not have to be in privity with Legacy Bank to recover on his fraud and negligent misrepresentation claims.  We need not address these issues because they are not necessary to the final disposition of the appeal. See TEX.R.APP.P. 47.1.

                                                                This Court=s Ruling

The judgment of the trial court is affirmed.

W. G. ARNOT, III

CHIEF JUSTICE

October 16, 2003

Not designated for publication.  See TEX.R.APP.P. 47.2(a).

Panel consists of: Arnot, C.J., and

Wright, J., and McCall, J.

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     ^[1]Legacy Bank also alleged claims against Coppell North and five other guarantors or unlimited guarantors of the notes, including NTC Lewis, Inc.; North Texas Gymnastics Academy, Inc.; David J. Lewis; Wanda M. Lewis; and Sang Cha.

     ^[2]Later, Legacy Bank settled with Coppell North, NTC Lewis, Inc.; North Texas Gymnastics Academy, Inc.; David J. Lewis; and Wanda M. Lewis.  Legacy Bank obtained a default judgment against Sang Cha.  Thus, Barnett remained as the only defendant.