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In re Murchison
Citations: 96 B.R. 74; 3 Tex.Bankr.Ct.Rep. 321; 1989 Bankr. LEXIS 196; 1989 WL 12155Docket: Bankruptcy No. 385-30266-A-11
Court: United States Bankruptcy Court, N.D. Texas; February 14, 1989; Us Bankruptcy; United States Bankruptcy Court
On November 22, 1988, the Court held a hearing regarding the Plan Trustee’s objection to Midlantic National Bank's Administrative Claim. The Court ultimately decided to deny Midlantic’s claim and did not allow amendments to its proof of claim. Midlantic sought an Administrative Priority claim based on a breach of covenant in a General Warranty Deed from MRW, Inc., associated with Mr. C.W. Murchison, Jr., alleging that Murchison misrepresented that the properties conveyed were free of encumbrances. The Plan Trustee argued that only MRW made warranties in the deed, and Murchison had not made such representations. The case also involved an Agreement for Deed In Lieu of Foreclosure, where MRW agreed to transfer properties to Midlantic, leading to the cancellation of MRW’s liabilities on certain notes. Murchison, as a guarantor, was liable for half of the deficiency post-deed transfer, which aimed to streamline the foreclosure process. Notably, the Order Allowing Proof of Claim acknowledged Murchison's guarantor liability at $462,110. The Court's analysis focused on the deed's interpretation, adhering to the doctrine of merger, which treats the deed as the final agreement and the basis for any claims between the parties. The deed explicitly stated that MRW, as the grantor, warranted the property was free of encumbrances, while Murchison's role was strictly as a guarantor. There was no evidence that Midlantic performed a title review before accepting the deed, but after acquisition, it incurred costs to clear discovered encumbrances amounting to $90,115.88. Midlantic has a valid cause of action for breach of the covenant against encumbrances provided by MRW, but it does not hold a claim against Murchison for breach, as Murchison was not involved in the conveyance. The record does not demonstrate a close relationship between MRW and Murchison, and the court maintains the principle of separate legal entities. MRW is a corporation and Murchison an individual, both engaged in distinct reorganization processes. Murchison's pre-petition guaranty is not linked to MRW’s representations in the deed. Midlantic's claim is directed solely at MRW. Midlantic seeks to amend its proof of claim based on paragraph F of the deed, which allows for reinstatement of indebtedness upon breach of warranty. This paragraph specifically conditions acceptance of the deed on MRW's assurance that the property is free from liens. It activates only if MRW breaches its warranty and does not extend to Murchison, who made no warranties in the deed. Therefore, Midlantic cannot reinstate the deficiency for which Murchison was released as a guarantor. The court finds no legal grounds to support Midlantic's amendment request for the entire deficiency linked to Murchison. All prior agreements between the parties are considered merged into the deed, which constitutes the complete agreement. Murchison's lack of interest in the property means he could only potentially provide a quit claim deed, which would not include warranties or representations, thus failing to substantiate any misrepresentation claims by Midlantic.