J.P. Morgan Chase Bank, N.A. v. Texas Contract Carpet, Inc.

Appellants J.P. Morgan Chase Bank, N.A., successor by merger to Bank One, N.A., (“JP Morgan”) and Michael Bobinchuck appeal from a trial-court judgment in favor of several parties, including appellees, Texas Contract Carpet, Inc. (“Contract Carpet”); Gypsum Floors of Texas, Inc. (“Gypsum”); and Agape Round Rock Housing, Inc., d/b/a Chandler Creek Apartments, (“Agape”). The dispute arises from the contractual relationships established among the parties for the construction of a low-income apartment complex in Round Rock. The parties’ roles regarding the project were as follows: JP Morgan was the lender; Agape was the owner; Bobinchuck was the vice president of AMHC Construction, which was the general contractor; and Contract Carpet and Gypsum were subcontractors. Agape and several of the subcontractors, including Contract Carpet and Gypsum, filed suit against JP Morgan, Bobinchuck, and various other parties after JP Morgan declined to release funds in response to Agape’s thirteenth draw request. After a bench trial, the trial court ruled in favor of Agape and Gypsum on their claims against Bobinchuck and in favor of the subcontractors on their claims against JP Morgan.

JP Morgan and Bobinchuck raise several issues on appeal. JP Morgan complains that the evidence is legally and factually insufficient to support the trial court’s findings of fact and conclusions of law that JP Morgan (1) served as an agent of Agape and, as an agent, violated a statutory duty to withhold retainage in the construction account; (2) misapplied trust funds under the Texas Trust Fund Act; (3) was negligent and grossly negligent in failing to withhold retainage in the construction account; (4) violated a fiduciary duty to the subcontractors; and (5) converted the subcontractors’ funds. Bobinchuck complains that the evidence is legally and factually insufficient to support the trial court’s conclusions that: (1) he was a trustee and misapplied trust funds under the Texas Trust Fund Act; and (2) his conduct was so egregious as to justify an award of exemplary damages against him.