Whitney Bank v. SMI Companies Global, Inc.

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    Case: 18-31189 Document: 00515296349 Page: 1 Date Filed: 02/03/2020 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals No. 18-31189 Fifth Circuit FILED February 3, 2020 WHITNEY BANK, Lyle W. Cayce Clerk Plaintiff – Appellant Cross-Appellee v. SMI COMPANIES GLOBAL, INCORPORATED; VAUGHN S. LANE, Defendants – Appellees Cross-Appellants Appeals from the United States District Court for the Western District of Louisiana Before SMITH, DENNIS, and HAYNES, Circuit Judges. JAMES L. DENNIS, Circuit Judge: Whitney Bank, a Mississippi corporation, sued SMI Companies Global, Inc., a Louisiana corporation, and its president and loan guarantor, Vaughn S. Lane, a Louisiana resident, to collect under two loan agreements upon which SMI allegedly defaulted. SMI filed several counterclaims against Whitney for breaches of the loan agreements, negligent misrepresentation, and tortious interference with its business relations. After a bench trial, the magistrate judge 1 required SMI to repay the amount it owed on the first loan plus interest, 1The parties consented to the case being tried before a magistrate judge, pursuant to 28 U.S.C. § 636(c). Case: 18-31189 Document: 00515296349 Page: 2 Date Filed: 02/03/2020 No. 18-31189 totaling more than $1.2 million, but relieved SMI of its obligation to repay the outstanding principal and interest on the second loan. The magistrate judge also ruled in favor of SMI on all of its counterclaims and ordered that Whitney pay SMI $3.5 million in damages on those claims. For the reasons that follow, we AFFIRM in part, REVERSE in part, and REMAND. I. FACTS AND PROCEDURAL BACKGROUND SMI Companies Global, Inc. (SMI) was an equipment fabricator in the oil and gas industry. In December 2012, SMI applied for a loan from Whitney Bank (Whitney) to fund its general business operations. Whitney and SMI initially agreed to a $1 million revolving line of credit (Loan 1), secured by SMI’s accounts receivable and with SMI’s president Vaughn Lane as guarantor. 2 The parties renewed the agreement in 2014 and 2015, and increased the maximum credit amount to $1.5 million. According to the agreement, SMI could borrow up to $1.5 million depending on what its accounts receivable supported, its borrowing base, 3 as evidenced through certificates that SMI was required to submit to Whitney. Loan 1 matured on July 31, 2016, when SMI was required to “pay [the] loan in one payment of all outstanding principal plus all accrued unpaid interest.” In March 2015, Halliburton Corporation offered SMI a $2 million contract to construct eight steel acid tanks. At the time, business at SMI was slow due to the decrease in oil prices, which caused an industry-wide economic downturn. Moreover, the terms of the project were onerous, especially for a 2 Whitney and SMI executed three documents pertaining to this line of credit: (1) a business loan agreement; (2) a promissory note; (3) and a commercial security agreement. Additionally, Lane executed a commercial guaranty, and a guarantor acknowledgement. Collectively, these documents are referred to in this opinion as Loan 1. 3 According to trial …Original document

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