Gordon, et al v. Southtrust Bank

United States Court of Appeals
Fifth Circuit
F I L E D
July 28, 2004
Charles R. Fulbruge III
Clerk
In the
United States Court of Appeals
for the Fifth Circuit
___________________
m 04-40060
Summary Calendar
___________________
FALLON T. GORDON, MEDICAL DOCTOR;
JOHN T. HUMBLE, MEDICAL DOCTOR,
Plaintiffs-
Counter Defendants-
Appellees,
VERSUS
SOUTHTRUST BANK,
Defendant-
Counter Claimant-
Appellant.
___________________
Appeal from the United States District Court
for the Eastern District of Texas
m 1:02-CV-657
___________________

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Before SMITH, DEMOSS, and STEWART,
Circuit Judges.
JERRY E. SMITH, Circuit Judge.*
SouthTrust Bank appeals an adverse judg-
ment in a breach of contract suit. The bank
also appeals the denial of its renewed motion
for judgment as a matter of law (“j.m.l.”) or
for new trial. We affirm.
I.
In 1997, plaintiff Drs. Fallon Gordon and
John Humble decided to invest in a corpora-
tion that purported to be building a hospital,
Las Lomas Medical Center, S.A. de C.V.
(“Las Lomas”), in Honduras. Armando Mon-
cada, a physician with whom both doctors
worked, represented to them that he was the
president of the corporation and that Humble
and Gordon, as investors, were directors. Be-
fore November 1998, Humble had already in-
vested nearly $420,000, and Gordon $300,-
000, entitling them to three- and four-percent
shares, respectively. In October 1998, Humble
and Gordon were informed that hurricane
Mitch had destroyed substantial parts of the
center, and Las Lomas needed approximately
$2,000,000 to complete construction.
In November of that year, Humble and
Gordon executed individual promissory notes
to the bank (then operating as First Bank &
Trust) for $400,000 each. The loan Contracts
were signed by plaintiffs under unusual cir-
cumstances. On November 18, 1998, Humble
received a telephone call requesting that he go
to the bank to sign loan documents for what he
believed was a loan to the corporation. Upon
his arrival, however, he was surprised to learn
that he was signing papers for a personal loan.
Pressed for time and on his way to a medical
conference in New York, Humble decided to
sign the paperwork, get the check upon his
return, and then decide whether to lend the
$400,000 to Las Lomas or return the check.
Two days later, Gordon was informed be-
tween surgeries that an emergency at the bank
required his immediate presence. Under the
impression that his signature, as a director of
the corporation, was needed to sign a loan, he
went to the bank. He too was surprised to
learn that the loan was for him personally rath-
er than for the corporation. Unable to reach
the executive vice president of the bank, Steve
Gantham, Gordon contacted Moncada, who
assured him the loan was not personal, but
corporate. Reluctantly, Gordon signed the
paperwork, figuring that if it did turn out to be
a personal loan, he would simply return the
money once he received the check.
Both Contracts consisted of a Promissory
Note, Disbursement Instructions, and a Dis-
claimer of Oral Agreements. Both notes stipu-
lated that, “for the value received, Borrower
promises to pay to the order of Lender . . . the
principal amount [$400,000] . . . plus interest
on the unpaid principal balance at the rate and
in the manner described below.” Pursuant to
these notes, both plaintiffs agreed to make
twenty-four monthly payments of interest on
the principal. At the end of the twenty-four
month term, each was to begin making thirty-
five monthly payments on the principal,
amounting to approximately $12,506.63 each,
including interest.
A merger clause was included in the Prom-
issory Note, and the Disclaimer provided that
* Pursuant to 5TH CIR. R. 47.5, the court has
determined that this opinion should not be pub-
lished and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.

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no prior, contemporaneous, or subsequent oral
agreements could modify the obligations of the
Contract. The Disbursement Instructions
provided, respecting the obligation of the bank
“to disburse” proceeds of the Promissory Note
in the form of a cashier’s check “in the follow-
ing manner: PROCEEDS PAID DIRECTLY
TO CUSTOMER $400,000.00.” Each Con-
tract identified Gordon and Humble as the
“customer,” respectively.
The bank issued cashier’s checks in the loan
amount to each plaintiff. The bank’s loan
secretary, Graff, made those funds payable to
Moncada and deposited them in his business
account. The bank issued a check payable to
Las Lomas (with Moncada as the remitter) for
$1,900,000, combining Gordon’s and Hum-
ble’s loan proceeds with the loan proceeds of
five other doctors. The check was deposited
into Las Lomas’s account at Banco Atlantida
in Tegucigalpa, Honduras, on November 23,
1998.
Confused by these developments, Gordon
contacted Moncada, who continued to main-
tain that the loans were for the corporation.
Because, however, the corporation was unable
to make the interest payments on these loans,
Moncada requested that Gordon make the first
month’s interest payment. Gordon did so.
Humble, on the other hand, was assured by
Moncada that the interest notice was a mis-
take, so Humble did not make the first month’s
payment, and the interest was paid by the cor-
poration. When Humble received notice for an
interest payment in the second month, Mon-
cada successfully convinced him to make
payments for the corporation for the remainder
of the year, claiming Las Lomas could not af-
ford to do so.
Gordon received no notice for interest in
the second month and was assured by Monca-
da that the corporation would pay it. But, in
the third month, Gordon was asked by Monca-
da to resume payments on the interest, main-
taining that all the money had been spent
building the hospital and that the corporation
would not be able to make payments until the
hospital opened and began to generate cash
flow.
By late summer 1999, Humble and Gordon
were growing wary of Moncada. In October
1999, while attending a stockholders’ meeting
in Honduras, both doctors learned that their
stock was worthless under Honduran law.
Distressed, they tried to salvage their invest-
ment and create a modern, American-style
hospital for the country. They cont inued to
make interest payments on the loan from the
bank while attempting, along with the other
shareholders, to salvage the project.
By spring 2001, the bank (which had been
wholly purchased by SouthTrust Bank in the
Fall of 1999) began demanding that Gordon
and Humble begin to pay on the principal or to
enter into other terms for extension. Ulti-
mately, in hopes of avoiding a legal dispute,
both men entered into Extension Agreements
and subsequently entered into a second, and
even a third, each. They contend that each
Extension Agreement contained a provision al-
lowing them to sue on the ground that they
had never received the $400,000.1 Pursuant to
1 The last of the three Extension Agreements
reads, in pertinent part, that “. . . execution of this
Extension by “Bor rower” does not and shall not
compromise, diminish, waive, or release “Borrow-
er’s” alleged defenses to such claim, including but
not limited to, the defense that “Borrower” never
(continued...)

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the final two Extension Agreements, both were
obligated to make their first principal payments
of approximately $12,168.77 each, including
interest, in August 2002. Neither made these
payments, and the bank declared the Promis-
sory Notes in default.
II.
Humble and Gordon sued for a declaratory
judgment that they are not liable under the
Promissory Notes because of want of consid-
eration. They also sued for breach of contract
for the failure to disburse $400,000 each to
them pursuant to the terms of the Contract.
The bank counterclaimed, seeking money dam-
ages under the Promissory Notes.
The bank unsuccessfully moved for sum-
mary judgment, and the suit proceeded to trial.
The bank’s motion for judgment as a matter of
law (“j.m.l.”) at the close of plaintiffs’ case
was denied. The jury found that the bank had
breached the Contracts, and plaintiffs were
awarded the amount of interest payments
made by each between December 1998 and
July 2002. Plaintiffs were granted reasonable
attorneys’ fees pursuant to TEX. CIV. PRAC. &
REM. CODE § 38.001, and prejudgment and
post-judgment interest of 6% and 1.36%,
respectively.
III.
We review the district court’s legal conclu-
sions, including its interpretation of contracts,
de novo. See Taita Chem. Co. v. Westlake
Styrene Corp., 246 F.3d 377, 385 (5th Cir.
2001). We apply a sufficiency of the evidence
standard in reviewing jury decisions. See
Chem. Distribs., Inc. v. Exxon Corp., 1 F.3d
1478, 1483 (5th Cir. 1993). The verdict must
be upheld unless the facts and inferences point
so strongly and overwhelmingly in favor of
one party that reasonable men could not arrive
at any verdict to the contrary. W. Co. of N.
Am. v. United States, 699 F.2d 264, 276 (5th
Cir. 1983).
IV.
The bank appeals the final judgment and the
denial of the motion for j.m.l. We affirm.
A.
Ambiguity in a contract is a question of law
for the court to decide by looking at the con-
tract as a whole, in light of the circumstances
present when the contract was entered. See
Coker v. Coker, 650 S.W.2d 391, 394 (Tex.
1983). If the contract is found to be ambigu-
ous, its interpretation is left to the jury. Id.
Having determined that the Contracts were in-
ternally inconsistent, the district court found as
a matter of law that the Contracts were am-
biguous and submitted the cause to the jury.
The dispute is whether the bank breached
the Contracts’ provision for disbursement.
The bank maintains that the Promissory Notes
were executed appropriately, that the Con-
tracts were not breached, and ipso facto, that
plaintiffs owe the bank monetary damages for
recovery on the principal. Plaintiffs claim
there was no such oral agreement and that the
terms of the Contracts required that the loans
be paid directly to them. As a result, plaintiffs
argue that the Contracts were materially
breached by the bank, absolving them of
liability.
Finding no error of law with respect to the
district court’s decision to declare the contract
ambiguous, we proceed to a review of the
jury’s findings. There is sufficient evidence to
support the finding that the bank breached the
1(...continued)
received the proceeds reflected in the Note . . . .”

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terms of its agreements with Gordon and
Humble with respect to its disbursement of the
checks.
Firstly, read alone, the terms of the Con-
tracts support the jury’s finding. The plain
meaning of the Contracts best supports the
interpretation accorded to them by the plain-
tiffs. The Disbursement Instructions provide
that “Borrower hereby instructs Lender to dis-
burse the initial or complete proceeds from the
Promissory Note in the following manner:
PROCEEDS PAID DIRECTLY TO CUS-
TOMER $400,000.” “To disburse” suggests
something to be done in the future, and evi-
dence at trial suggested that neither Humble
nor Gordon had received the loans when the
Notes were signed. Payment “directly to
customer” further indicates that the checks
were to be made out to Humble and Gordon,
respectively.
Although the checks were indeed made out
to plaintiffs, instead of being given directly to
them, they were deposited into Moncada’s
business account. Evidence indicates, there-
fore, that neither Gordon nor Humble was ever
in direct control of the loan, and they had not
been “paid directly.”
The bank argues that this arrangement was
per an oral agreement made by the parties at
an earlier date. The merger clause and Dis-
claimer of Oral Agreements in each of the
Contracts represent, however, that the entirety
of the agreements consisted of the Promissory
Notes themselves. In fact, the Disclaimer ex-
plicitly notes “THERE ARE NO UNWRIT-
TEN ORAL AGREEMENTS BETWEEN
THE PARTIES.” Reading the Contracts in
their plainest meaning supports the jury’s find-
ing that the bank’s disbursal of the funds to
Moncada constituted an unauthorized con-
version of plaintiffs’ funds and was in breach
of the Contracts.
Secondly, there was sufficient evidence for
a jury to find that there was no oral agreement
that clarified the “ambiguous” terms of dis-
bursal. The district court, in ruling the Con-
tracts to be ambiguous, found that the alleged
oral agreement did not, as a matter of law,
necessarily contradict the terms of the Con-
tracts, because the Disbursement Instruction
was so vague as to encompass bot h sides’
interpretations. Because the alleged oral
agreement did not contradict the plain meaning
of the Contracts, it could not automatically be
excluded under the Disclaimers of Oral Agree-
ment signed by both sides.
Relying on testimony, the jury found that
the bank’s version lacked credibility. Grant-
ham’s testimony at deposition and at trial con-
tained enough inconsistencies that a jury might
easily find the existence of an oral agreement
incredible. Moreover, Grantham’s testimony
conflicts in several important respects with
Graff’s, casting further shadow on the bank’s
claim. Additionally, Humble, Gordon, and
even Moncada flatly stated that no such oral
agreement existed, and the bank was unable
successfully to impeach that testimony.
Thirdly, the bank’s behavior contradicted
its own internal policies. A reasonable jury
could very well be disturbed by the bank’s pro-
cess. Neither Gordon nor Humble had done
business with the bank before, and neither
owned accounts there. Neither requested a
personal loan, and both were called in on
“emergencies” and asked to sign the papers in
a rush. Neither was informed that the checks
would be made out to him but then directly
signed over to Moncada and deposited into his
corporate account. Grantham’s deposition

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testimony amounts to a virtual admission of
the bank’s failure to comport with its own
policies regarding disbursal, and the evidence
is sufficient for the jury to have found that the
bank acted inappropriately.
Finally, the terms of the Extension Agree-
ments do not preclude the jury’s findings in
light of partial performance on the part of the
plaintiffs. Partial performance is an exception
to the statute of frauds whereby an oral agree-
ment may be enforced if a failure to do so
would amount to virtual fraud. Exxon Corp.
v. Breezevale Ltd. 82 S.W.3d 429, 439 (Tex.
App.SSDallas 2002, pet. ref’d). For partial
performance to prove contractual obligation,
the alleged performance must be “unequivo-
cally referable to the agreement and corrobo-
rative of the fact that a contract was actually
made.” Conner v. Lavaca Hosp. Dist., 267
F.3d 426, 436 (5th Cir. 2001).
With respect to the preservation of plain-
tiffs’ claims, the jury analyzed the Extension
Agreement signed by the doctors and quite
reasonably concluded that it was written to
preserve all of their defenses to the bank’s
claims, including their right to sue for breach
of contract. Plaintiffs never acknowledge re-
ceipt of money or the fulfillment of the Con-
tracts. Especially noteworthy is their insis-
tence that the term “Borrowers” be placed in
quotation marks in the Extension Agreements.
The Extension Agreements, in explicitly stat-
ing that they waived none of their rights, do
not constitute adequate evidence that plaintiffs
assumed their contractual duties by undertak-
ing these new agreements.
The doctors’ regular monthly payments on
the interest cannot be considered to bind them
to the terms of the Contracts, because no ac-
tion on the part of the doctors during that peri-
od of time is demonstrative of a waiver of their
claim. Evidence that they continued to make
those payments based on Moncada’s misrepre-
sentations and a desire to avoid costly litiga-
tion is sufficient to support the jury’s finding
that interest payments did not bar plaintiffs’
cause.
B.
Under Texas law, “reasonable attorneys
fees from an individual or corporation, in ad-
dition to the amount of a valid claim and costs,
may be awarded if the claim is for . . . (8) an
oral or written contract.” TEX. CIV. PRAC. &
REM. CODE § 38.001. To recover, the party
(1) must be represented by an attorney; (2)
must present the claim to the opposing party
or to a duly authorized agent of the opposing
party; and (3) must not have received payment
for the just amount owed before expiration of
the thirtieth day after the claim is presented. §
38.002.
The bank argues that plaintiffs are not en-
titled to attorney’s fees because they did not
seek affirmative relief in enforcement of the
Contracts.2 This flatly contradicts court rec-
ords. Plaintiffs’ original petition contains two
causes of action: a declaratory judgment and,
if the Contracts are ruled enforceable, a breach
of contract claim seeking damages. With the
delaratory judgment denied, plaintiffs instead
brought a breach of contract suit. Therefore,
as claimants in a suit in law rather than in equi-
ty, they are eligible for attorney’s fees.
2 To recover attorney’s fees under § 38.001, a
party who seeks only to defend itself against an-
other’s contract claim cannot recover. See Ener-
gen Res. MAQ, Inc v. Dalbosco, 23 S.W.3d 551,
558 (Tex. App.SSHouston [1st Dist.] 2001, pet.
denied).

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The bank also contests plaintiff’s present-
ment of the claim within thirty days. Adequate
presentment for plaintiffs’ monetary claims can
be found in the Extension and Amendment
Agreements. A demand letter sent to the bank
dated June 3, 2003, also presents the claim for
fees. Both these claims were presented within
the thirty days before trial established by
§ 38.0001. Thus, as a matter of law, plaintiffs
were eligible for relief under § 38.001.
Mindful that it is within the district court’s
discretion to award attorney’s fees, we may re-
view the reasonableness of those fees. B-M-G
Inv. Co. v. Continental/Moss Gordin, Inc.,
437 F.2d 892, 893 (5th Cir. 1971). The stan-
dard of review is abuse of discretion. See
Johnson v. Ga. Highway Express, Inc., 488
F.2d 714, 717 (5th Cir. 1974). In determining
reasonableness, a court should, among other
factors, consider the customary fee for similar
work in the community. Id. at 718. Two pri-
mary attorneys represented plaintiffs, one
charging $240 per hour and the other $175.
Evidence was presented that plaintiffs’ choice
of lawyers was appropriate, given the difficulty
of the case. The district court, after hearing
extensive testimony and with years of experi-
ence, determined that reasonable fees would
be $200 and $175 per hour, respectively.
Both these fees are lower than that suggested
by a prominent and well-respected local law-
yer, who testified that $225 was reasonable.
There is no evidence to suggest that the court
acted inappropriately in awarding fees.
C.
There also is sufficient evidence to support
the award of prejudgment interest.3 The dis
trict court was correct in finding that interest
began to accrue on the date the lawsuit was
filed, rather than on October 21, 2002 (when
the bank claims it first became aware of the
breach of contract claim), because the original
petition includes t he claim as well as the re-
quest for declaratory judgment. The award
was not excessive.
D.
The bank contends that its substantive right
to a trial on all the issues was abridged by the
exclusion of testimony and evidence regarding
plaintiffs’ separate trial against Moncada. We
review evidentiary rulings for abuse of discre-
tion. See In re Air Crash Disaster at New
Orleans, La., 795 F.2d 1230, 1233 (5th Cir.
1986). The district court did not abuse its
discretion in excluding the evidence, because
the bank was given a jury trial on all the issues.
The trial against Moncada regarded different
issues, although it arose from the same set of
circumstances and facts. Plaintiffs’ claims
against Moncada dealt with his allegedly
fraudulent actions regarding the stock that was
sold to the doctors and not regarding the loans
to plaintiffs.
AFFIRMED.
3 Contrary to the opinion of the bank’s counsel,
we review prejudgment interest for abuse of dis-
(continued...)
3(...continued)
cretion, not de novo. See Reyes-Mata v. IBP, Inc.,
299 F.3d 504, 507 (5th Cir. 2002).

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