AUSTIN, Texas - April 2, 2004 (as reported in Verdict Search Texas, Vol.4, Issue 26, June 28, 2004):

RESULT After a bench trial, Judge Darlene Byrne found for the defendants on all causes of action. She awarded the defendants $127,375, comprising costs and attorney fees through trial. She awarded the defendants conditional attorney fees in the event of appeals.

DEFENSE ATTORNEYS Wallace M. Smith and A. Lee Rigby of Smith, Robertson, Elliott, Glen, Klein & Bell, L.L.P.

BANK FUNDED LOANS, THEN DEMANDED GUARANTIES

FACTS & ALLEGATIONS In May 2003, plaintiff PlainsCapital Bank refinanced a partnership's $2.05 million real estate note and $500,000 working capital note. The partnership owned and operated a medical imaging clinic. After funding the refinancing, PlainsCapital sought to have certain limited partners sign guaranty documents. These limited partners had guaranteed the prior notes, but refused to guaranty the new notes.

PlainsCapital, seeking a declaratory judgment that it was entitled to guaranties on the new notes, sued Scott Weaver Spann, Thomas Patrick Burns, Newton Earl Hasson, Anand C. Joshi and Gordon Patrick Marshall. The bank asserted equitable subrogation and unjust enrichment.

PlainsCapital alleged that the partnership's management had represented that all the limited partners had agreed to guaranty the refinanced debt; that the limited partners behaved consistently with that agreement; that PlainsCapital did not volunteer, but was obligated, to advance funds when it did, to fund a partner buyout agreement; and that, without any continuing guaranty liability, the defendants would receive a windfall because the buyout increased the value of their interests.

The defendants contended that the refinancing was not approved in accordance with the partnership agreement, and that PlainsCapital voluntarily extinguished, released or paid the loans covered by their prior guaranties.

The defense further argued that PlainsCapital had unclean hands. According to the defendants, PlainsCapital assisted in preparing a letter from the managing partner that threatened the defendants with defaulting-partner status if they did not execute the guaranties. Also, the defense argued that the general partners did not obtain the limited partners' approval of the refinancing, and that PlainsCapital later sought to have the partnership's minutes altered to show otherwise.

The defendants counterclaimed for a declaration that their prior guaranties were extinguished, released or otherwise canceled.

DECISION (D) $127,375 for attorney fees.

POST-TRIAL PlainsCapital's motion for new trial was denied.

PlainsCapital Bank, f/k/a PNB Financial Bank v. Scott Weaver Spann, Thomas Patrick Burns, Newton Earl Hasson, Anand C. Joshi and Gordon Patrick Marshall, No. GN302233, Travis County District Court, 126th, TX

For more information, contact Wallace Smith or Lee Rigby.

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