A bank sued several borrowers and guarantors seeking recovery on two promissory notes and a purchasing card agreement after the borrowers defaulted on their respective payment obligations. The first note obligated the borrowers to repay $2.5 million and was secured by a security interest granting the bank a first-priority security interest in substantially all of the borrowers’ assets. Several borrowers guaranteed repayment of that note. The second note, executed later, obligated one borrower to repay $1.5 million and was secured by a security interest covering that borrower’s assets and supported by additional guarantees. The borrowers also entered into a purchasing card agreement requiring repayment of charges incurred under the account, which was guaranteed by two borrowers. After the borrowers failed to make the required payments under the loan documents and the purchasing agreement, the bank demanded payment and subsequently filed suit. Although the court deferred ruling on the bank’s motion for summary judgment to allow the borrowers an opportunity to respond, the borrowers ultimately filed no response.
In Hancock Whitney Bank v. Kingdom Health Holdings, LLC, No. 4:24-cv-864, 2025 WL 3460934, 2025 U.S. Dist. LEXIS 229097 (E.D. Tex. 2025) (opinion not yet released for publication), the court granted the bank’s motion for summary judgment. First, the court addressed the procedural effect of the borrowers’ failure to respond. Because the borrowers had filed no response, the court treated the bank’s evidence as undisputed. Second, the court held that the bank was entitled to summary judgment on its breach of contract claims because the evidence as to all elements of breach was undisputed, finding that the bank performed its contractual obligations, that the borrowers breached those agreements by failing to make required payments, and that the bank sustained damages as a result of the breach. Third, the court concluded that summary judgment was appropriate to enforce the promissory notes. “To prevail on a motion for summary judgment to enforce a note, a plaintiff must establish that (1) a note exists, (2) the plaintiff is the legal owner and holder of the note, (3) the defendant is the maker of the note, and (4) a certain balance remains due and owing on the note.” Pathfinder Oil & Gas, Inc. v. Great W. Drilling, Ltd., 574 S.W.3d 882, 890 (Tex. 2019). The bank satisfied these requirements by presenting uncontroverted evidence establishing the notes, its ownership of them, the borrowers’ obligations under the notes and guaranties, and the outstanding balances. Fourth, the court held that the bank was entitled to judicial foreclosure through proof of the debt and fixing the lien. The court found that the bank established that the obligations were secured through filed UCC-1 financing statements. Because the borrowers’ defaults were undisputed, the court authorized foreclosure on the collateral securing the notes. Finally, the court addressed the bank’s request for attorney’s fees. The court found that the loan documents permitted recovery of attorney’s fees, and Texas Civil Practice and Remedies Code § 38.001 allows prevailing parties to recover fees in breach-of-contract actions. The court therefore entered judgment in favor of the bank, awarded damages on the notes and guaranties, authorized foreclosure on the collateral securing the debt, and granted attorney’s fees.
By Landon Womack [email protected]
Edited By Conor Doris [email protected]
Edited By Hayden Mariott [email protected]