     Case: 16-60492      Document: 00513956776         Page: 1    Date Filed: 04/18/2017




           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                         United States Court of Appeals
                                                                                  Fifth Circuit


                                    No. 16-60492                                FILED
                                  Summary Calendar
                                                                            April 18, 2017
                                                                           Lyle W. Cayce
                                                                                Clerk
736 BUILDING OWNER, L.L.C.; CYTEC SOFTWARE SYSTEMS,
INCORPORATED; OSCAR DE LEON, Individually,

              Plaintiffs - Appellants

v.

REGIONS BANK,

              Defendant - Appellee




                   Appeal from the United States District Court
                     for the Southern District of Mississippi
                             USDC No. 3:14-CV-222


Before STEWART, Chief Judge, and CLEMENT and SOUTHWICK, Circuit
Judges.
PER CURIAM:*
       This action is before us based on diversity jurisdiction.                  Plaintiffs-
Appellants allege Regions Bank (“Regions”) breached a building development
loan and its duty of good faith and fair dealing when it refused to make




       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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                                   No. 16-60492
additional advances on a line of credit. The district court granted summary
judgment in favor of Regions. We AFFIRM.
                            I. FACTUAL HISTORY
      In July 2008, 736 Building Owner, L.L.C. (“Owner”) executed a
promissory note and loan contract (“Deed of Trust”) with Regions for $2.1
million. The Deed of Trust was to fund the renovation of a building located at
736 South President Street, Jackson, Mississippi (the “Property”). Oscar De
Leon, then a member of Owner, guaranteed the loan.               The Property, an
assignment of rents, and certain assets of Cytec Software Systems, Inc.
(“Cytec”) secured the loan. Cytec’s assets were in accounts managed by Morgan
Keegan.
      The renovation proved more costly than anticipated. By March 2009,
Owner had nearly exhausted its line of credit with Regions. Regions initially
declined to increase Owner’s line of credit, so Owner sought additional funding
from other lenders. During Owner’s search for new lenders, Regions granted
De Leon permission to draw down Cytec’s accounts to pay for some, but not all,
renovations on the Property. After Owner secured a federal historic tax credit
funding commitment letter from Carlisle 2010 Historic Tax Credit Fund II
Limited Partnership (“Carlisle”), Regions agreed to increase its loan
commitment to $2.4 million in June 2010.           The parties entered into the
modified loan agreement (the “Modified Deed of Trust”) in October 2010.
      The Modified Deed of Trust stated that “[Regions’] obligation to make
the Initial Advance and each subsequent Advance under this Agreement shall
be subject to the fulfillment to [Regions’] satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.” It further provided
that Regions “shall have no obligation to make Loan Advances or to disburse
Loan proceeds if: (A) Borrower or any Guarantor is in default under the terms
of this Agreement or any of the Related Documents.” Except as otherwise
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                                  No. 16-60492
stated, the Modified Deed of Trust incorporated all terms of the original Deed
of Trust. The original Deed of Trust required Owner to “pay when due (and in
all events prior to delinquency) all taxes . . . levied against or on account of the
Property.”
   It was not until February 2011 that Owner requested a draw under the
Modified Deed of Trust. Earlier that month, Owner had failed to pay the
Property’s 2010 property taxes. Regions denied the request. After Regions
declined to advance further funding under the line of credit, Carlisle and De
Leon provided the additional funds necessary to complete the renovations.
                        II. PROCEDURAL HISTORY
      In 2014, Owner, De Leon, and Cytec filed suit in Mississippi state court
against Regions for breach of the Modified Deed of Trust and breach of the duty
of good faith and fair dealing. All alleged breaches stemmed from Regions’s
refusal to advance funds in February 2011. Regions removed the action to the
United States District Court for the Southern District of Mississippi.
      Regions ultimately sought summary judgment on all claims, which the
district court granted. First, the district court found that Owner’s failure to
pay its 2010 property taxes put it in default under the terms of the Modified
Deed of Trust. Thus, Regions was under no obligation to disburse additional
funds. Further, the Modified Deed of Trust stated “Upon the occurrence of any
Event of Default and at any time thereafter, Lender may, at its option, . . . do
any one or more of the following without notice to Borrower: . . . (c) Withhold
further disbursement of Loan Funds.”          The district court concluded that
Regions did not have a duty to provide notice of default before withholding
funds. Additionally, the district court found that neither De Leon nor Cytec
was party to the Modified Deed of Trust, nor did they claim to be third-party
beneficiaries, so Regions did not owe either any duties under the contract.
While noting that all contracts in Mississippi are subject to an implied
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                                  No. 16-60492
covenant of good faith and fair dealing, Mississippi court have stated that
breach of this covenant requires breach of the underlying contract. Because
the district court concluded that Regions did not breach the Modified Deed of
Trust, it found that Regions had not breached its duty of good faith and fair
dealing. Accordingly, the district court dismissed all claims.
      Owner, Cytec, and De Leon appealed.
                        III. STANDARD OF REVIEW
      We review a district court’s grant of summary judgment de novo.
Johnston & Johnston v. Conseco Life Ins. Co., 732 F.3d 555, 561 (5th Cir. 2013).
A party is entitled to summary judgment if it “shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a).
                               IV. DISCUSSION
      Owner, Cytec, and De Leon raise three points of error. First, Appellants
contend that the district court erred in granting summary judgment because a
factual dispute remained concerning whether Regions ever intended to release
funds under the Modified Deed of Trust. Second, they allege that Regions did
not provide reasons for failing to advance funds, even though Regions was
required to give notice and an opportunity to cure. Third, they argue that
Regions violated its duties of good faith and fair dealing.
      After considering the parties’ arguments as briefed on appeal and
conducting a thorough review of the record, the applicable law, and the district
court’s succinct, well-reasoned opinion, we AFFIRM the district court’s
judgment and adopt its analysis in full.




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