Texans Credit Union said a federal bankruptcy court in Dallas ruled that a realty firm owes its commercial real estate lending CUSO more than $40 million in a suit involving a defaulted Illinois property loan.

The $1.5 billion CU said the $40 million will be repaid by four Dallas real estate investors with Realty America Group LLC, who had guaranteed a Credit Union Liquidity Services LLC loan for the redevelopment of the Lincoln Mall project in Cook County, Ill. Previously known as Texans Commercial Capital, CULS provides commercial real estate loan servicing and asset management for Texans and other CUs.

When the loan went into default, CULS demanded that the guarantors honor their obligations. Litigation soon followed, with the guarantors alleging that CULS, Texans and a number of officers and directors associated with both CULS and Texans were guilty of, among other things, breach of contract and orchestrating "a loan Ponzi scheme," Texans said.

The court found there was no validity to the Ponzi scheme or the other allegations made by the guarantors and made it clear in its ruling that CULS had met all of its obligations under the loan agreement, according to Texans.

"The guarantors’ allegations were nothing more than a desperate attempt to avoid honoring their obligations to CULS," said Ted Daniel of Fulbright & Jaworski LLPP, counsel to CULS and Texans CU. "CULS honored its obligations by fully funding the loan at issue. It was the guarantors who refused to honor their obligations. The court has confirmed that in Texas, one must honor their contracts."

In a Feb. 1 statement, Mark Morganfield, president/CEO of CULS, said, "We are very pleased with the court’s ruling. We were confident throughout this process that the facts would clearly show that we did everything properly, met our obligations and that the allegations were without merit."

When asked how likely it is that CULS would be able to recover the $40 million from the real estate investors, Morganfield said, "We intend to aggressively pursue our remedies under the ruling but cannot predict the outcome at this time." The next step is for the bankruptcy court to enter a final judgment against the guarantors, which should happen sometime the week of Feb. 8, he added. CULS will be in position to commence collection efforts at that time.

According to a Feb. 4, 2009, claim, Dallas-based Realty America Group filed suit against CULS for breach of contract, breach of oral contract, fraud, negligent misrepresentation, interference with prospective business relationships and civil conspiracy. The company was seeking $20 million and punitive damages.