Money Title LLC et al v. Hancock Whitney Bank

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
MONEY TITLE, LLC, et al., 	§
§
Plaintiffs, 	§
§ 	Civil Action No. 3:25-CV-2491-D
VS. 	§
§
HANCOCK WHITNEY BANK, 	§
§
Defendant. 	§
MEMORANDUM OPINION
AND ORDER
This is a removed action arising from defendant Hancock Whitney Bank’s (“HWB’s”)
alleged failure to honor an oral promise to make a bridge loan to plaintiffs Money Title, LLC
and Money Realty, LLC (collectively, “Money Title”) that would have enabled Money Title
to secure the timely closing of a property acquisition. HWB moves to dismiss under Fed. R.
Civ. P. 12(b)(6) and 9(b). For the reasons that follow, the court grants HWB’s motion to
dismiss under Rule 12(b)(6), and also grants Money Title leave to replead.
I
Money Title is a title company and law firm. In March 2024 Money Title entered into
an Asset Purchase Agreement (“First APA”) with [non-party] Professional Land Title, LLC
(“PLT”), to acquire certain of PLT’s assets (the “Acquisition”). 1 Under the First APA, the
1In deciding HWB’s Rule 12(b)(6) motion to dismiss, the court construes Money
Title’s state-court original petition in the light most favorable to Money Title, as the
nonmovant, accepts as true all well-pleaded factual allegations, and draws all reasonable
inferences in Money Title’s favor. See, e.g., In re Katrina Canal Breaches Litig., 495 F.3d
191, 205 (5th Cir. 2007).
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Acquisition was to close on or before May 31, 2024.
To finance the Acquisition, Money Title applied for a Small Business Administration
Loan (“SBA Loan”) from Wells Fargo Bank (“Wells Fargo”). Wells Fargo, however, could
not guarantee funding of the loan by the scheduled closing date. Accordingly, Money Title
contacted HWB. Although HWB could not offer Money Title the same low interest rate that
Wells Fargo had, it did offer Money Title the option of a bridge loan, once the SBA Loan
application was approved. A bridge loan would ensure timely closing of the Acquisition
(i.e., by May 31, 2024) while the SBA Loan was being processed.
On April 4, 2024 Money Title submitted the documents and information that HWB
had requested to begin the application process. HWB informed Money Title that “from this
point forward, it would be ‘10 days to approval . . .’ of [Money Title]’s SBA Loan
application.” Pet. (ECF No. 1-3) ¶ 9 (omission in original). In reliance on this assurance and
HWB’s promise to make a bridge loan, Money Title withdrew its SBA Loan application from
Wells Fargo.
HWB sent Money Title a loan commitment letter (“Commitment Letter”) on May 15,
2024, stating that HWB would loan Money Title the amount it needed for the Acquisition,
“subject to [Money Title’s] meeting SBA’s requirements.” Id. ¶ 11. The Commitment Letter
did not mention HWB’s promise to provide a bridge loan to guarantee the scheduled closing
date.
In late May 2024, the Small Business Administration (“SBA”) notified Money Title
that, although its SBA Loan application had been approved, the SBA could not continue to
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process the loan until PLT resolved some issues relating to its Internal Revenue Service
(“IRS”) transcripts. Soon thereafter, an environmental report on one of PLT’s properties (the
“Property”) flagged a potential issue that would likely delay approval of the SBA Loan.
To prevent further delay, Money Title and PLT signed an Amended Asset Purchase
Agreement (“Second APA”) on July 16, 2024 that removed the Property from the
Acquisition, reduced the purchase price from $3 million to $1.905 million, and rescheduled
the closing date to July 31, 2024.2 Money Title submitted the Second APA and an amended
SBA Loan application to the SBA for approval. Around this time, HWB again promised to
fund the Acquisition through a bridge loan, if necessary, and assured Money Title that “even
with the remaining unresolved IRS Transcripts Issue, the ‘ . . . outside date for closing would
be August 9th.’” Id. ¶ 13 (omission in original).3 Based on HWB’s representations, Money
Title informed PLT that it “ha[d] received preliminary approval for an in-house bank loan
in the event that the IRS transcripts aren’t delivered as quickly as expected,” and that it
should be able to close by the end of August. Id. ¶ 14. But when Money Title asked HWB
about the bridge loan on August 21, 2024, HWB responded on August 28, 2024 that it had
decided not to pursue that option because, at that point, the SBA Loan could be finalized
faster than a bridge loan. 	HWB also told Money Title that it was still waiting for PLT’s
2Money Title and PLT subsequently agreed to defer the closing date to August 30,
2024.
3HWB was unable to finalize the SBA Loan by August 9, 2024 due to the unresolved
IRS transcript issues.
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second IRS transcript, and that, once that was received, it would take five days to close.
Following this conversation with HWB, Money Title informed PLT that Money Title
could not close on August 30, 2024 because HWB had not yet received PLT’s second IRS
transcript. PLT responded that it was “disappointing” that the bridge loan “did not pan out,”
because it was PLT’s understanding that HWB “would do an in-house bridge loan to get us
closed,” and that “the in-house loan was our failsafe to ensure we could close by August 30.”
Id. ¶ 16.
HWB received PLT’s second IRS transcript on August 30, 2024. Based on HWB’s
representation that it would take five days to close after it received this transcript, PLT
agreed to extend the closing date to September 13, 2024. HWB, however, was not ready to
close on September 13. 	PLT agreed to another brief extension of the closing date to
September 17, 2024, but HWB was still not ready to close on that date.
The Second APA expired by its terms on September 17, 2024. On September 19,
2024 PLT contacted Money Title to advise that it was still willing to close the Acquisition,
but only if Money Title would agree to modify the Second APA to exclude as an asset a
$371,643.73 fee on a dormant file (“Fee”) that PLT learned on the afternoon of September
18, 2024 had now become payable. 	Money Title agreed to PLT’s demand, modified the
Second APA to carve out the Fee, and closed the Acquisition within the next day.
Money Title then filed the instant lawsuit against HWB in state court, alleging, inter
alia, that HWB’s failure to provide a bridge loan, as promised, significantly reduced the
value of the Acquisition by at least $371,643.73. 	Money Title asserts five claims under
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Texas law: breach of contract, promissory estoppel, fraudulent inducement, negligent
misrepresentation, and negligence. HWB removed the case to this court based on diversity
jurisdiction, and now moves to dismiss under Rules 12(b)(6) and 9(b). Money Title opposes
the motion, which the court is deciding on the briefs, without oral argument.
II
Under 	Rule 	12(b)(6), 	the 	court 	evaluates 	the 	pleadings 	by 	“accept[ing] ‘all
well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.’” In re
Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (quoting Martin K. Eby
Constr. Co. v. Dall. Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004)). 	To survive
HWB’s motion to dismiss, Money Title must allege enough facts “to state a claim to relief
that is plausible on its face.” 	Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). 	“A
claim has facial plausibility when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 	“The plausibility standard is not akin to a
‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has
acted unlawfully.” 	Id.; see also Twombly, 550 U.S. at 555 (“Factual allegations must be
enough to raise a right to relief above the speculative level[.]”). “[W]here the well-pleaded
facts do not permit the court to infer more than the mere possibility of misconduct, the
complaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’”
Iqbal, 556 U.S. at 679 (second alteration in original) (quoting Rule 8(a)(2)). Furthermore,
under Rule 8(a)(2), a pleading must contain “a short and plain statement of the claim
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showing that the pleader is entitled to relief.” 	Although “the pleading standard Rule 8
announces does not require ‘detailed factual allegations,’” it demands more than “labels and
conclusions.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). And “a formulaic
recitation of the elements of a cause of action will not do.” Id. (quoting Twombly, 550 U.S.
at 555). 4
III
The court begins with Money Title’s breach of contract claim, which HWB moves in
part5 to dismiss based on the statute of frauds.
A
Money Title alleges that HWB materially breached its contract with Money Title by,
inter alia, failing to provide a bridge loan to Money Title so that the PLT Acquisition could
4“Rule 9(b) imposes a heightened pleading standard for fraud claims and requires that
a party state with particularity facts supporting each element of fraud.” 	Turner v.
AmericaHomeKey Inc., 2011 WL 3606688, at *2 (N.D. Tex. Aug. 16, 2011) (Fitzwater, C.J.)
(citing Benchmark Elecs., Inc. v. J.M. Huber Corp., 343 F.3d 719, 724 (5th Cir. 2003)), aff’d,
514 Fed. Appx. 513 (5th Cir. 2013) (per curiam). 	“At a minimum, Rule 9(b) requires
allegations of the particulars of time, place, and contents of the false representations, as well
as the identity of the person making the misrepresentation and what he obtained thereby.”
Id. (quoting Benchmark Elecs., 343 F.3d at 724). More colloquially, a plaintiff must plead
the “who, what, when, where, and how” of the fraud. United States ex rel. Williams v. Bell
Helicopter Textron Inc., 417 F.3d 450, 453 (5th Cir. 2005) (quoting United States ex rel.
Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997)). The
court need not address Rule 9(b) because it is granting HWB’s Rule 12(b)(6) motion to
dismiss.
5Money Title alleges that HWB breached its May 15, 2024 contract by “repeatedly
causing and/or contributing to delays in rescheduled closing dates.” Pet. (ECF No. 1-3) ¶ 22.
Because HWB does not move to dismiss this ground of Money Title’s contract claim, it
remains pending.
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close on May 31, 2024; failing to provide a bridge loan to Money Title so that the PLT
Acquisition could close on any of the subsequently rescheduled closing dates; never initiating
its internal processes for the review and approval of a bridge loan; unilaterally withdrawing
and reneging on its promise and agreement to provide a bridge loan to Money Title to
guarantee the timely closing of the PLT Acquisition; and repeatedly causing and/or
contributing to delays in rescheduled closing dates. Pet. (ECF No. 1-3) ¶ 22.
Under the Texas statute of frauds, “[a] loan agreement in which the amount involved
in the loan agreement exceeds $50,000 in value is not enforceable unless the agreement is
in writing and signed by the party to be bound or by that party’s authorized representative.”
Tex. Bus. & Com. Code Ann. § 26.02(b) (West 2023). It is undisputed that HWB’s alleged
promise to provide a bridge loan involved an amount that exceeded $50,000 and that it was
not in writing or signed by either party. Accordingly, unless one of the exceptions to the
statute of frauds applies,6 Money Title cannot recover for breach of the agreement to provide
a bridge loan.
6In addition to the partial performance exception, discussed below, Texas courts
—under what has become known as the “Moore” Burger doctrine—recognize promissory
estoppel as an equity-based exception to the statute of frauds. 	See Nagle v. Nagle, 633
S.W.2d 796, 799-800 (Tex. 1982) (“[C]ourts will enforce an oral promise to sign an
instrument complying with the Statute of Frauds if: (1) the promisor should have expected
that his promise would lead the promisee to some definite and substantial injury; (2) such an
injury occurred; and (3) the court must enforce the promise to avoid injustice.”) (citing
“Moore” Burger, Inc. v. Phillips Petroleum Co., 492 S.W.2d 934, 934 (Tex. 1972))). Money
Title does not contend that the promissory estoppel exception to the statute of frauds applies
in this case.
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B
Money Title contends that, under the partial performance exception to the statute of
frauds, its claims are not unenforceable. See P. Br. (ECF No. 19) at 2 (“Plaintiffs’ claims are
exempt from the statute of frauds under the partial performance exception.”).
“Under the partial performance exception to the statute of frauds, contracts that have
been partly performed, but do not meet the requirements of the statute of frauds, may be
enforced in equity if denial of enforcement would amount to a virtual fraud.” Exxon Corp.
v. Breezevale Ltd., 82 S.W.3d 429, 439 (Tex. App. 2002, pet. denied) (citation omitted).
“Virtual fraud” arises “when there is strong evidence establishing the existence of an
agreement and its terms, the party acting in reliance on the contract suffered a substantial
detriment for which he has no adequate remedy, and the other party, if permitted to plead the
statute, would reap an unearned benefit.” Brooks v. Wycough, 2025 WL 51842, at *4 (Tex.
App. Jan. 8, 2025, pet. denied) (mem. op.) (citing Breezevale, 82 S.W.3d at 439). “The acts
of part performance must be ‘unequivocally referable to the agreement and corroborative of
the fact that a contract actually was made.’” Williams v. Wells Fargo Bank, N.A., 560 Fed.
Appx. 233, 239 (5th Cir. 2014) (per curiam) (quoting Breezevale, 82 S.W.3d at 439).
“Performance is only unequivocally referable to the agreement when there is no other
possible reason for performance.” Owens v. Specialized Loan Servicing, L.L.C., 694 Fed.
Appx. 950, 956 (5th Cir. 2017) (per curiam).
C
Assuming arguendo that the partial performance exception to the traditional statute
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of frauds applies to § 26.02,7 the court holds that Money Title has not plausibly alleged acts
of partial performance that are “unequivocally referable to the agreement and corroborative
of the fact that a contact actually was made.” 	Breezevale, 82 S.W.3d at 439. 	As stated
above, “[p]erformance is only unequivocally referable to the agreement when there is no
other possible reason for performance.” Owens, 694 Fed. Appx. at 956; see also, Nat’l Prop.
Holdings, L.P. v. Westergren, 453 S.W.3d 419, 426-27 (Tex. 2015) (per curiam) (“[T]he
purpose of the alleged acts of performance must be to fulfill a specific agreement. If the
evidence establishes that the party who performed the act that is alleged to be partial
performance could have done so for some reason other than to fulfill obligations under the
oral contract, the exception is unavailable.”). 	“If the performance does not precisely
establish the specific contract sought, the statute of frauds still applies.” Chase v. Hodge, 95
F.4th 223, 230 (5th Cir. 2024) (citing Nat’l Prop. Holdings, 453 S.W.3d at 426-27). Money
Title’s acts of performance—withdrawing its loan application from Wells Fargo, and not
seeking alternative financing—could be explained by Money Title’s belief that HWB, as
opposed to Wells Fargo or any other bank, would be able to close the Acquisition on time.
See Pet. (ECF No. 1-3) ¶ 11 (“the only condition the parties discussed and agreed upon was
the SBA’s approval of [Money Title]’s SBA Loan application, including, without limitation,
7See Montalvo v. Bank of Am. Corp., 864 F.Supp.2d 567, 592 (W.D. Tex. 2012)
(“[N]o Texas court has clearly stated that the partial-performance exception applies to the
loan-agreement statute of frauds.”); Bank of Tex. v. Gaubert, 286 S.W.3d 546, 554 (Tex.
App. 2009, pet. dism’d w.o.j.) (“No case has expressly held that the equitable exceptions to
the traditional statute of frauds also apply to section 26.02.”).
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guaranteeing the closing of the [Acquisition] by May 31, 2024 by means of a bridge loan, if
necessary.” (emphasis added)). Money Title has not plausibly alleged acts of performance
that unequivocally support the existence of an oral contract to provide a bridge loan.
Moreover, even if Money Title could plausibly plead that the partial performance exception
to the statute of frauds applies, “the doctrine of partial performance also requires that the
party acting in reliance on the agreement suffer a substantial detriment for which there is no
adequate remedy.” 	Breezevale, 82 S.W.3d at 441 (citing cases). 	If Money Title were
successful in establishing that the oral agreement is not subject to the statute of frauds
because of partial performance, it would only be entitled to reliance damages. Sullivan v.
Leor Energy, LLC, 600 F.3d 542, 549 (5th Cir. 2010) (citing Breezevale, 82 S.W.3d at 441);
see also Wade v. XTO Energy Inc., 2013 WL 257361, at *5 (Tex. App. Jan. 24, 2013, no pet.)
(mem. op.) (“When promissory estoppel or partial performance applies to except an
agreement from compliance with the statute of frauds, the party is entitled to only reliance
damages, not benefit-of-the-bargain damages.” (citing cases)). 	But Money Title has not
pleaded that it incurred reliance damages. 	“Reliance damages . . . reimburse one for
expenditures made towards the execution of the contract in order to restore the status quo
before the contract.” Mays v. Pierce, 203 S.W.3d 564, 577 (Tex. App. 2006, pet. denied)
(quoting Hart v. Moore, 952 S.W.2d 90, 97 (Tex. App. 1997, pet. denied)) (providing
examples of damages recoverable for a negligent misrepresentation claim). 	They “are
measured as the out-of-pocket expenditures made by one party in reliance on the actions of
another party, not by the amount of lost profits and sales.” Sterling Chems., Inc. v. Texaco
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Inc., 259 S.W.3d 793, 798 (Tex. App. 2007, pet. denied) (emphasis omitted)). Money Title
alleges that it was damaged by the significant “reduc[tion in] the value” of the Acquisition
by at least $371,643.73. Pet. (ECF No. 1-3) ¶ 23.
Accordingly, because Money Title has not plausibly pleaded an exception to the
statute of frauds, which otherwise applies to render unenforceable HWB’s alleged oral
contract to provide a bridge loan, the court grants HWB’s motion to dismiss Money Title’s
breach of contract claim to the extent it is based on the promise to provide a bridge loan.
IV
The court next considers Money Title’s claims for promissory estoppel, fraudulent
inducement, and negligent misrepresentation, all of which HWB moves to dismiss based on
the statute of frauds.
A
In support of its promissory estoppel claim, Money Title alleges that HWB promised
that it would provide a bridge loan to guarantee the closing of the Acquisition on May 31,
2024; that Money Title substantially relied on HWB’s “promises of a bridge loan to its
detriment,” Pet. (ECF No. 1-3) ¶ 26; and that HWB’s “failure to honor its promise to provide
a bridge loan damaged [Money Title], significantly reducing the value of the [Acquisition]
by at least the amount of $371,643.73,” id. ¶ 28.
“A claim of promissory estoppel generally cannot be used to circumvent Texas’
statute of frauds, which requires certain ‘promises’ to be in writing.” Thompson v. Bank of
Am., N.A., 13 F.Supp.3d 636, 649 (N.D. Tex. 2014) (Boyle, J.) (citation omitted). It is only
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when the promise at issue is “a promise to sign an already existing written agreement that
would itself satisfy the requirements of the statute of frauds,” that a promissory estoppel
claim can survive the application of Texas’ statute of frauds. George-Baunchand v. Wells
Fargo Home Mortg., Inc., 2011 WL 6250785 at *8 (S.D. Tex. 2011) (citation omitted); see
also Leach v. Conoco, Inc., 892 S.W.2d 954, 959 (Tex. App. 1995 writ dism’d w.o.j.)
(“When seeking to estop the assertion of an otherwise valid Statute of Frauds defense, the
oral promise relied upon must be to sign a written agreement that satisfies the statute, or there
must be substantial reliance upon an oral misrepresentation that the statute has been
satisfied.” (citations omitted)).
Here, the promise at issue—to provide a bridge loan—created an oral contract that,
as explained above, is unenforceable under the statute of frauds. See Tex. Bus. & Com. Code
Ann. § 26.02(b). In addition, the promise at issue is not alleged to have been a promise “to
sign an already existing written agreement that would itself satisfy the requirements of the
statute of frauds.” George-Baunchand, 2011 WL 6250785 at *8. Because the allegations
in Money Title’s state-court original petition do not state a claim for promissory estoppel that
could overcome, or circumvent, the statute of frauds, Money Title has not stated a claim for
promissory estoppel on which relief can be granted.
Accordingly, the court grants HWB’s motion to dismiss Money Title’s promissory
estoppel claim.
B
For largely the same reasons, the court grants HWB’s motion to dismiss Money
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Title’s fraudulent inducement claim, which is based on the allegation that HWB fraudulently
induced it to switch its business from Wells Fargo to HWB by falsely or recklessly promising
to provide a bridge loan when it had no intention of doing so. Pet. (ECF No. 1-3) ¶ 30.
“The statute of frauds may bar a claim for fraudulent inducement when a party casts
the complaint in the form of a fraud cause of action, but is actually attempting to recover
damages for breach of an unenforceable oral contract.” 	Garza v. Robinson, 2013 WL
3326465, at *4 (Tex. App. June 27, 2013, no pet.) (mem. op.) (citation omitted); see also
Haase v. Glazner, 62 S.W.3d 795, 799 (Tex. 2001) (“[T]he Statute of Frauds bars a fraud
claim to the extent the plaintiff seeks to recover as damages the benefit of a bargain that
cannot otherwise be enforced because it fails to comply with the Statute of Frauds.”). Here,
Money Title is seeking to recover what it would have gained had the oral promise been
enforced. 	See Pet. (ECF No. 1-3) ¶ 31 (“[HWB]’s fraudulent inducement, i.e., its false
promise to provide a bridge loan to [Money Title] to guarantee the closing date for the
[Acquisition], 	damaged 	[Money 	Title] 	by 	significantly 	reducing 	the 	value 	of 	the
[Acquisition] by at least the amount of $371,643.73.”). In other words, the basis for its cause
of action is the breach of the unenforceable oral promise to provide a bridge loan. Money
Title’s fraudulent inducement claim “cannot, as a matter of law, be used to circumvent, or
displace, compliance with Texas’ statute of frauds.” Austin v. Fed. Nat’l Mortg. Ass’n, 2012
WL 13042515, at *4 (S.D. Tex. Apr. 4, 2012) (citations omitted), rec. adopted, 2012 WL
13042516 (S.D. Tex. Apr. 26, 2012); see also Salazar v. BAC Home Loans Servicing, LP,
2012 WL 995296, at *3 (N.D. Tex. Mar. 23, 2012) (Lindsay, J.) (holding that the fact that
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plaintiff “couch[ed] her claim as a cause of action for fraud does not shield it from the statute
of frauds”); Zaremba v. Cliburn, 949 S.W.2d 822, 827 (Tex. App. 1997, writ denied) (“Texas
courts have uniformly looked with disfavor on litigants seeking to bypass the statute of
frauds by pleading other causes of action.”)
Accordingly, the court grants HWB’s motion to dismiss Money Title’s fraudulent
inducement claim.
C
Money Title’s negligent misrepresentation claim also fails. As with Money Title’s
fraudulent inducement claim, “a claim of negligent misrepresentation may not be used to
circumvent the statute of frauds.” Fed. Land Bank Ass’n of Tyler v. Sloane, 825 S.W.2d 439,
442 (Tex. 1991). Therefore, when a negligent misrepresentation claim has its “nucleus in
an alleged oral contract which is unenforceable under the statute of frauds, the statute of
frauds” bars the negligent misrepresentation claim as well. Hua v. Wells Fargo Bank, Nat’l
Ass’n, 2014 WL 5877909, at *2 (S.D. Tex. Nov. 11, 2014) (quoting Foster v. Bank One Tex.
NA, 54 Fed. Appx. 592 (5th Cir. 2002) (per curiam)); see also Weakly v. East, 900 S.W.2d
755, 759 (Tex. App. 1995, writ denied) (“Even if the Weaklys justifiably relied on East’s
statement that he would purchase their property, they are precluded from proving that East
agreed to do so because of the statute of frauds. This tort, like the others, has as its nucleus
East’s unenforceable oral contract to buy their property.”); Collins v. Allied Pharmacy
Mgmt., Inc., 871 S.W.2d 929, 936 (Tex. App. 1994, no pet.) (“Where a plaintiff is seeking
to recover what he would have gained had the promise been performed, the gist of his cause
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of action is the breach of the unenforceable promise, and is barred by the statute of frauds.”
(citation omitted)).
Money Title’s negligent misrepresentation claim is based essentially on the same
factual allegations as its contract claim.8 And the damages it seeks to recover—the
“significant[] reduc[tion in] the value of the [Acquisition] by at least the amount of
$371,643.73,” Pet. (ECF No. 1-3) ¶ 36—are clearly tied to HWB’s alleged breach of the
unenforceable promise to provide a bridge loan. 	Although Money Title asserts that it
“justifiably relied” on HWB’s misrepresentation regarding the availability of a bridge loan,
id. ¶ 34, it does not seek reliance damages. 9 Accordingly, the court holds that, because the
statute of frauds bars Money Title’s contract cause of action (to the extent based on the
alleged oral promise to provide a bridge loan), it also forecloses Money Title’s negligent
misrepresentation claim.
8Money Title alleges, inter alia, that HWB represented that it would provide a bridge
loan to Money Title to guarantee the closing date of the Acquisition; that HWB’s “offer of
a bridge loan to [Money Title] as part of the complete lending services being offered to
[Money Title] to guarantee the scheduled closing date for the [Acquisition] was false
information provided by [HWB] to [Money Title] for its guidance in deciding whether to
continue working with Wells Fargo to obtain an SBA Loan or switch to [HWB],” Pet. (ECF
No. 1-3) ¶ 33; that it justifiably relied on HWB’s representations, including the availability
of a bridge loan; and that HWB’s negligent misrepresentation proximately caused damage
to Money Title by significantly reducing the value of the Acquisition by at least $371,643.73.
9“Texas courts adopt the Second Restatement’s view that plaintiffs may recover
reliance damages for negligent misrepresentation because these damages are distinct from
‘economic losses recoverable under a breach of contract claim.’” Container Store, Inc. v.
Fortna Inc., 2021 WL 1250334, at *6 (N.D. Tex. Apr. 5, 2021) (Boyle, J.) (citing cases).
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V
HWB moves to dismiss Money Title’s negligence claim based on the economic loss
rule.10
A
“The economic loss rule generally precludes recovery in tort for economic losses
resulting from a party’s failure to perform under a contract when the harm consists only of
the economic loss of a contractual expectancy.” 	Chapman Custom Homes, Inc. v. Dall.
Plumbing Co., 445 S.W.3d 716, 718 (Tex. 2014) (per curiam) (citations omitted). Not all tort
claims, however, “arising out of a contractual setting” are precluded by the rule. 	Id. 	To
determine whether the economic loss rule bars a tort claim, the court must “analyze[] both
the source of the duty and the nature of the remedy.” 	Formosa Plastics Corp. USA v.
Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 45 (Tex. 1998). If “the duty allegedly
breached is independent of the contractual undertaking and the harm suffered is not merely
the economic loss of a contractual benefit,” the economic loss rule does not apply. Chapman
Custom Homes, 445 S.W.3d at 718 (citations omitted); see also Sullivan v. PS Funding Inc.,
2021 WL 3556958, at *2 (N.D. Tex. July 15, 2021) (Toliver, J.) (“[I]f the defendant’s
conduct would give rise to liability independent of the fact that a contract exists between the
parties, the plaintiff may bring a tort claim in addition to a claim for breach of contract.”),
10
HWB moves to dismiss Money Title’s negligent misrepresentation on this same
ground. Because the court concludes that Money Title’s negligent misrepresentation claim,
as pleaded, is barred by the statute of frauds, it does not address whether the economic loss
rule also bars Money Title’s negligent misrepresentation claim.
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rec. adopted, 2021 WL 3553483 (N.D. Tex. Aug. 11, 2021) (Kinkeade, J.).
B
In support of its negligence claim, Money Title alleges that HWB owed it a “legal
duty of reasonable care to accurately and fully represent the type and availability of the
lending services being offered[,] to competently conduct its due diligence[,] and to timely
handle, process and close the loan represented to [Money Title] and described and offered
in the Commitment Letter.” 	Pet. (ECF No. 1-3) ¶ 38. 	Money Title asserts that HWB
breached this duty by
(i) promising [Money Title] that it would provide a bridge loan
to guarantee closing of the [Acquisition] on scheduled closing
dates but never initiating its own internal process for review and
approval of a bridge loan for [Money Title]; and (ii) causing
and/or contributing to delays in closing the [Acquisition] by
making last minute demands for additional documents and
information that [HWB] either had in its possession or should
have acquired earlier.
Id.
HWB moves to dismiss Money Title’s negligence claim on the ground that it is based
on an alleged oral promise to extend a bridge loan and the only injury alleged is economic
loss to the subject of the alleged contract. Money Title responds that the economic loss rule
does not bar its negligence claim because it is “based on Defendant’s independent duties to
avoid making false representations and to exercise reasonable care in communications
regarding loan approval and funding.” P. Br. (ECF No. 19) at 5. Money Title cites Sloane
for the proposition that the Supreme Court of Texas “adopted the Restatement (Second) of
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Torts’ duty of reasonable care and applied it to a bank’s duty when providing information
to customers or potential customers,” Id. Money Title argues that “negligence and negligent
misrepresentation are viable alternative claims if no contract existed,” id. at 5-6.
C
To the extent that Money Title bases its negligence claim on HWB’s alleged failure
to initiate its own internal process for review and approval of a bridge loan, the court raises
sua sponte11 that Money Title has not plausibly alleged that HWB had a legal duty to initiate
such a process.
One of the essential elements of a negligence claim under Texas law is the existence
of a legal duty. A negligence claim under Texas law “consists of three elements: 1) a legal
duty owed by one person to another; 2) a breach of that duty; and 3) damages proximately
resulting from the breach.” 	Greater Hous. Transp. Co. v. Phillips, 801 S.W.2d 523, 525
(Tex. 1990) (citations omitted). “The existence of duty is a question of law for the court to
decide from the facts surrounding the occurrence in question.” Centeq Realty, Inc. v. Siegler,
899 S.W.2d 195, 197 (Tex. 1995) (citation omitted).
Money Title seems to suggest in its response brief that an unenforceable oral contract
11
A district court has the authority to consider the sufficiency of a complaint and
dismiss a claim sua sponte, as long as the procedure it employs is fair. See, e.g., Biggers v.
BAC Home Loans Servicing, LP, 767 F.Supp.2d 725, 733-34 n.7 (N.D. Tex. 2011)
(Fitzwater, C.J.) (noting that district court has authority to consider sufficiency of complaint
and dismiss action on its own motion as long as procedure employed is fair, raising ground
for dismissal sua sponte, and concluding that procedure was fair because court was granting
leave to replead). Here, because the court is granting Money Title leave to replead, it can
raise Rule 12(b)(6) dismissal sua sponte.
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can create a legal duty that is sufficient to support a “viable” alternative negligence cause of
action under the Supreme Court of Texas’ decision in Sloane. P. Br. (ECF No. 19) at 5-6.
But Sloane does not stand for the proposition, as Money Title argues, that a plaintiff can rely
on an alternative negligence claim to recover for the breach of an oral agreement that is
unenforceable under the statute of frauds.12 As pleaded, the only possible source of a legal
duty to initiate HWB’s internal process for review and approval of a bridge loan is its
unenforceable oral promise to do so. Because Money Title has not plausibly alleged another
source of a duty, the court grants HWB’s motion to dismiss Money Title’s negligence claim
based on the failure to initiate HWB’s internal process for review and approval of a bridge
loan, albeit on the basis, raised sua sponte, that Money Title has not plausibly pleaded that
HWB had a legal duty to do so.
D
To the extent that Money Title bases its negligence claim on HWB’s causing and/or
contributing to delays in closing the Acquisition by making last minute demands for
additional documents and information it either had in its possession or should have acquired
earlier, the court holds that this claim is barred by the economic loss rule.
As set out above, the economic loss rule “generally precludes recovery in tort for
12 Moreover, the court in Sloane held that the plaintiffs could recover “for damages
suffered in reliance upon [the] negligent misrepresentation, but not for the failure to obtain
the benefit of the bargain.” Sloane, 825 S.W.2d at 443. As currently pleaded, the damages
that Money Title seeks in this case are the reduction in the value of the Acquisition by at least
$371,643.73, which allegedly would not have occurred had it received the benefit of the
bargain.
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economic losses resulting from the failure of a party to perform under a contract.” Lamar
Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1, 12 (Tex. 2007). “In operation, the
rule restricts contracting parties to contractual remedies for those economic losses associated
with the relationship, even when the breach might reasonably be viewed as a consequence
of a contracting party’s negligence.” Id. at *12-13 (citing Jim Walter Homes, Inc. v. Reed,
711 S.W.2d 617, 618 (Tex. 1986) (“When the injury is only the economic loss to the subject
of a contract itself, the action sounds in contract alone.”)).
In its state-court original petition, Money Title alleges that HWB had a duty “to
competently conduct its due diligence and to timely handle, process[,] and close the loan
represented to [Money Title] and described and offered in the Commitment Letter.” Pet.
(ECF No. 1-3) ¶ 38. In other words, the duty that HWB allegedly breached is its contractual
obligation (presumably as set out in the Commitment Letter), not an independent tort duty.
Money Title has not plausibly alleged, nor does it argue in its response brief, that HWB’s
causing and/or contributing to delays in the Acquisition breached any duty independent of
the parties’ contract. Nor does Money Title dispute that its alleged injury, i.e., “damage to
[Money Title caused] by substantially reducing the value of the [Acquisition] by at least the
amount of $371,643.73,” id. ¶ 39, is contractual in nature.
Accordingly, to the extent that Money Title brings a negligence claim based on
HWB’s causing and/or contributing to delays in closing the Acquisition, the court grants
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HWB’s motion to dismiss based on the economic loss rule. 13
VI
In its response to HWB’s motion to dismiss, Money Title requests leave to amend its
pleadings to cure “any deficiencies identified.” 	P. Br. (ECF No. 19) at 8. 	“Because the
court’s usual practice when granting a motion to dismiss is to permit a plaintiff at least one
opportunity to replead, the court will give [Money Title] an opportunity to amend [its]
complaint.” Shah v. Univ. of Tex. Sw. Med. Sch., 54 F.Supp.3d 681, 707 (N.D. Tex. 2014)
(Fitzwater, C.J.) (citing In re Am. Airlines, Inc., Priv. Litig., 370 F.Supp.2d 552, 567-68
(N.D. Tex. 2005) (Fitzwater, J.)). Money Title must file its first amended complaint no later
than 28 days after the date this memorandum opinion and order is filed.
* 	* 	*
For the reasons explained, the court grants HWB’s motion to dismiss, and also grants
Money Title leave to replead.
SO ORDERED.
January 5, 2026.
_________________________________
SIDNEY A. FITZWATER
SENIOR JUDGE
13
As noted, the court is not dismissing the component of Money Title’s breach of
contract claim that is based on HWB’s allegedly repeatedly causing and/or contributing to
delays in rescheduled closing dates. See supra note 5.
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