RICHARDSON, Texas — Texans Commercial Capital has been charged with breach of contract for allegedly reneging on several loans, according to a claim filed by Realty America Group LLC.
Barnes and Thornburg LLP, the law firm representing Realty America, has filed counts of breach of contract, breach of oral contract, fraud, negligent misrepresentation, interference with prospective business relationships and civil conspiracy against TCC. The plaintiff is seeking $20 million and punitive damages. Charla Houser, a partner with Barnes and Thornburg, said that as of Feb. 11, Texans had not responded to the claim. The credit union has 30 days to respond, she noted.
Realty America and TCC entered into a loan agreement on Dec. 17, 2004 to refinance acquisition debt and develop property in Matteson, Ill, according to the Feb. 4 claim. The Dallas real estate firm said TCC's new name is Credit Union Liquidity Services LLC, the claim noted. The loan in question is referred to as the Lincoln Mall loan.
In early 2004, Realty America sought additional construction financing for the Illinois property that would include a replacement or restructure of the prior loan agreement. Bank of America approved a $57 million restructure with a scheduled closing date of May 15, 2007, according to the claim. TCC and Realty America had discussed the possibility of providing the restructure, but the real estate firm raised concerns about the CUSO's ability to fund the new loan. TCC said it had the wherewithal to fund the loan and on May 4, 2007, issued a letter of intent to loan $44.5 million and a $430,000 loan origination fee. Realty America declined Bank of America's $57 million loan and signed on with TCC.
According to Realty America, TCC failed to fund the loan on May 18, 2007, the scheduled closing date. The commercial lending CUSO said a revised loan in the amount of $39.5 million would have to be approved by the loan committee on May 24, 2007, but the closing and funding would occur five days after that. Realty America said by June 1 TCC had not funded the loan. However, both parties later signed a second amended, restated agreement increasing the loan amount by $2.5 million, which TCC funded, according to the claim. TCC also intended to loan up to $42 million in place of the amended $39.5 million amount. The loan was issued on July 2, 2007, according to Realty America.
Alleged delays with the loans, significant expenses and obligations in connection with the development of the Illinois project were compromised, the real estate firm said.
"Because of TCC's failure to timely fund the loan…many construction invoices became stale, increasing Realty America's costs and otherwise compromising its relationships with its vendors," the claim read.
Realty America accused TCC of making false representations to provide funding in a "Ponzi scheme" to commit to loans in order to garner loan origination fees without the ability to fund them. The real estate firm said several of TCC and Texans Credit Union's executives "participated in and encouraged the scheme." Among them Texans CU President/CEO David Addison, who resigned on Jan. 31, Jay Champion, who was president of TCC at the time and Don Meinkoth, chairman of TCU at the time of the transactions.
"TCC and TCU, with respect to funding borrower disbursement request against unfunded commitments, simply moved cash from borrower to borrower in a crisis, before such harmed borrowers took legal action," Realty America said.
Credit Union Times made several attempts to obtain a response from Texans Credit Union, but the $1.8 billion financial institution chose not to comment on the matter.
Realty America said TCC delayed or did not make several interest payments. Accrued interest in the amount of $145,062 was not paid and was "improperly drawn" against the interest reserve of the Lincoln Mall loan. Interest payments were also delayed on payments in September and October 2007. For the remainder of that year, according to the claim, TCC continued to make delayed or partial payments.
In July 2008, Realty America said it began discussions with TCC to modify the Lincoln Mall loan. Possibilities included obtaining $10 million in municipal bond financing and letters of funding intent from tenants of the Illinois project, according to the claim. TCC allegedly asked for the July 10 interest payment before any modification would take place. Realty America said it made the payment. However, the modification never occurred.
"We know that they are seeking a receiver for the [Illinois] property," Houser of Barnes and Thornburg said.
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